Why Some College Students Manage Their Finances Better than Middle-Aged Adults

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Certainly there are many college students, who enamored by the offer of a “free” t-shirt or some other token gift, start digging themselves into debt by signing up for a credit card and using it without concern with how they are going to pay for their purchases. But there are also many college students who live quite “spartan”, living in a cheap apartment, with no car or credit cards, living off their earnings from working a part-time job and going to school. Many only spend cash, and when they run low , look for creative ways to feed and entertain themselves.

On the other hand, there are many recent college graduates who, upon graduating and getting a job, suddenly change the way they were living. This is understandable, as eating ramen noodles every day for a week gets old after a while. But why do many recent graduates suddenly move into a nicer apartment, sign up for credit cards to furnish it completely, buy a new car, start eating out lunch every day and going out for cocktails at an expensive trendy new club, and continue to do so for many years to come? Some people continue to live like this for most of their adult lives, racking up credit card debt for things they don’t need and can’t really afford.

Because they stopped living like college students!

I know this is the case, because I did it myself. For some reason, you start trying to live how you perceive an adult should, with all the trappings, toys, and expenses, even though you normally start out a relatively low salary right out of college. You may be tired of your 8 year-old car and are looking to impress your friends or new co-workers, or that 1 bedroom apartment in the cheap part of town no longer fits the perception you have in your head of how you should live as a young new professional.
Even if you are a medical doctor, right out of school you are not going to be making as much as a surgeon with 15 years of experience. So why try to live like one? The smarter way, to keep yourself out of debt and start building wealth at an early age is to continue to live like a college student, or at least make smart decisions with your money.

Some tips for living like a college student for recent grads or adults with lifestyle inflation:

  • Keep your old car as long as possible. Take care of it, and it can last you a very long time. If you don’t have a car, by a used one, don’t finance a new one for 5 + years.
  • Don’t move into a high priced apartment or saddle yourself with a condo or house note right away. Even better- move back home for a while. When you do buy a house, buy less than you can afford.
  • Don’t furnish your entire apartment with new furniture, art work for the walls, etc, or replace it every two years. Keep your old furniture as long as possible.
  • Don’t get caught up in the “young professional” hype- You don’t have to eat out everyday for lunch and dinner or go out for drinks 3 times a week after work.
  • Don’t try to impress people with things, or by throwing money around in social situations. It doesn’t really work and is not worth it anyway.
  • Max out your 401k or retirement plan. You didn’t have the money before, so you won’t miss it. if you start maxing out your 401k when you first start working, you will not have to worry about saving enough for retirement, I promise you.
  • Only replace things that really need to be replaced. No offense to Apple, but you don’t have to have the latest I-gadget, whether it is an ipod, iphone, or whatever the next one will be. Cheaper alternatives will work just fine.

I am in my mid-thirties, and it took me quite a few years to realize that my “perceived lifestyle” was a little to high for my salary early on. Now that I am making more money, I am finally getting to the point where I can pay for my past mistakes. However, it is all the more difficult for some, as many people have gotten married and started having children, like myself. If only I had lived like a college student a little while longer.
Now, where are those ramen noodles…..

Image by Hey joe….

Popularity: 2% [?]

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If You Use GEICO for Your Car Insurance- Are You Eligible for a Discount that You Don’t Know About?

I recently received a letter in the mail from a professional organization I belong to, telling me that if I signed up with GEICO for my car insurance, I would be eligible for a discount of up to 8% on my car insurance premiums.
Wait a minute, I already have my car insurance through GEICO! How did I miss this extra discount?

I am not sure how I missed this in the past, but apparently there are well over 100 “partnering organizations”, which, if you are a member of one, you may be eligible for a discount of up to 8% as well.

There are categories of partnering organizations, including:
Accounting Organizations
 Alumni Associations
 Attorney Organizations
 Credit Unions
 Educational Organizations
 Engineering Organizations
 Federal Organizations
 Financial Organizations
 Medical Organizations
 Military Organizations
 Professional Development Organizations
 Scientific Organizations
 Student Organizations
 Technical Organizations
 Other Organizations
That’s just the list of categories, it appears there are over 200 groups which are listed.

Check out the full list of Partnering Organizations to find out if you belong to a group eligible for a discount.

Looking around the GEICO website, there are several other discounts available that you want to make sure you are getting if they are your insurance company. Check out the main GEICO discount page .

There are other companies, such as most cell phone companies, which offer discounts if you work for a certain company or are a member of a certain group. Are you getting all of the discounts you are eligible for?

Popularity: 2% [?]

States With Upcoming Tax Free Holidays in 2008

 I recently got an email from a co-worker listing the dates of an upcoming tax-free holiday here in Louisiana for the purchase of hurricane preparedness items, and after doing a little research on the internet I came across a list of tax-free holidays in 2008 for quite a few different states. Here is a list of the states, along with the dates, what items are eligible, and the maximum purchase amount for each transaction, I believe.  For additional details, I would recommend visiting each state’s individual tax department website listed, also listed below. I hope this helps you plan ahead for any purchases you may be making this year.

Alabama
3 Days-August 1-3 
http://www.ador.state.al.us/salestax/SalesTaxHol.htm
clothing - $100   
computers - $750    
school supplies - $50    
Books - $30

Connecticut
7 Days- August 17-23
http://www.ct.gov/
clothing and footwear - $300  
    
District of Columbia
9 Days-August 2-10
http://otr.cfo.dc.gov/otr/
clothing - $100   
school supplies -  $100 
17 Days-Nov. 21 - Dec. 7
clothing - $100 

Iowa 
2 Days-August 1-2 
http://www.iowaccess.org/tax/
clothing - $100 
  

Louisiana
2 Days-August 1-2 
all TPP - $2,500   
http://www.rev.state.la.us/
2 Days-May 24-25
hurricane preparedness items - $1,500

  
Missouri 
3 Days- August 1-3 
http://www.dor.mo.gov/tax/
clothing - $100  
computers - $3500    
school supplies - $50 

   
New Mexico
3 Days-August 1-3
http://www.state.nm.us/tax/ 
clothing - $100  
computers - $1,000    
school supplies - $15 
   
North Carolina 
3 Days-August 1-3
http://www.dor.state.nc.us/
clothing - $100  
school supplies - $100    
computers - $3,500    
other comp. - $250    
sports equip - $50
    
Oklahoma
3 Days-August 1-3
http://www.tax.ok.gov/
clothing - $100 
 
South Carolina 
3 Days-August 1-3 
http://www.sctax.org/ 
clothing
school supplies  
 computers    
 other 

 Tennessee
3 Days-April 25-27
http://tn.gov/revenue/
clothing - $100  
school supplies - $100    
computers - $1,500 
3  Days-August 1-3
clothing - $100  
school supplies - $100    
computers - $1,500 
   
Texas 
http://www.window.state.tx.us/
3 Days-August 15-17 
clothing and backpacks - $100  
3 Days-May 24-26  
energy star products   
air conditioners - $6,000; other - $2,000
    
Virginia 
7 Days-May 25-31
hurricane preparedness items - $60
 http://www.tax.virginia.gov/
3 Days-August 1-3
clothing - $100  
school supplies - $20    
4 Days October 10-13 
energy efficient products - $2,500
  
West Virginia 
7 Days-September 1-7
http://www.state.wv.us/taxdiv/
energy efficient products - $2,500  
   

Popularity: 3% [?]

Will the Slow Economy Cause People to Give Up Their Lattes and Bottled Water?

starbucks_coffee.jpg As prices for food, gas, and a multitude of other goods and services continue to rise, I found myself noticing recently how many people I see walking around in the mornings with a cup of coffee in their hands from the local Starbucks or other coffee shop. Occasionally, someone will starting telling my how $3.50/gallon gas is killing them will sipping on a $4 16 oz. latte that cost the equivalent of over $30 per gallon. Bottled water still seems to be quite popular as well, and if a 16 oz. bottle of water costs $1 to $1.50 at a convenience store , the equivalent for a gallon would be $8+. Coffee is one of my favorite drinks, but I usually drink it at at the office, where it is free, or at home. I drink a lot of water as well, but I rarely drink bottled water; my wife on the other hand likes to take a bottle with her whenever she leaves the house. Even buying water by the case form Walmart or Sam’s Club, it still costs more than it does coming out if the tap, which is free. Let’s face it, Americans, as a whole, spend a lot of money on bottled water, as well as in coffee from coffee shops. Here are the numbers from 2006.

  • Bottled Water Industry- $15 Billion in 2006. (Source)
  • Coffee Shop Industry-appx. $11 billion in 2006. (Source)

So in the U.S., Americans spent about $25 to $26 billion on coffee from coffee shops and bottled water in 2006, or about $85 for every man, woman, and child in the U.S. This number has increased over the last two years, as well. That seems like a huge number to me. Do you think that the economic situation in the U.S., whether it is a recession, stagflation, or just a weak economy will have any effect on people’s purchases such as these? Will people start brewing their own coffee and bringing it with them, or start drinking tap water? Or is a morning Starbucks too important or too difficult for the average American to give up? I know Starbucks recently reported lower than expected earnings, but from what I recall their sales growth was still positive, only lower than expected. So it does not appear, as of yet, that rising gas prices or the weak economy has cause a decrease in these types of purchases. But will it in the future? Are people really embracing frugality, or are some things just untouchable when it comes to cutting back? I am not sure. What do you think?

Image by Bizmac

Popularity: 14% [?]

Weekend Roundup-Mom’s Day Edition

Happy Mother’s Day to all of the mothers out there. I will be spending Mother’s Day with the wife, kids, my mother and grandmother, so I am really lucky to have them all still in my life and living close by. If you are fortunate enough to have your mother or grandmother still in your life, make sure to tell them how much you appreciate them today.

I participated in 4 carnivals/festivals over the last week.

The Carnival of Money Stories # 58, Dollar Coins Edition was held at Free From Broke, and included my article “The Health Savings Account (HSA) and Can I Do Better than the Insurance Companies”.

My favorite articles from the Carnival of Money Stories :

$6000! Save Your Hard Earned Money! at Fire Finance- If you really take a good look at all of the little things you spend money on, you will likely be amazed.

Free Time or More Money-Which is it? at Greener Pastures:Personal Finance- I think about time vs. money quite a bit, and it is very true, the older you get , I believe, time becomes more and more important.

Kimberly at the Alpha Consumer Blog on U.S. News and World Report hosted The Carnival of Personal Finance #151-Bloggers on Surviving the Squeeze and included my post “Finding Great Deals on the Internet and How to Avoid Buying Things You Don’t Need”.

My favorites from the COPF:

A Practical Investing Guide for Beginners at Moolanomy. A great place to start learning @ investing.

Going Green to Keep More Green in Your Pocket- at Accumulating Money. Saving money and helping Mother Earth.

Frugal for Life hosted the Festival of Frugality #124 and included my post “30 Ways to Save on Your Grocery Shopping and Food Bill”.

My favorites from the FOF:

Save Money with Refurbished Electronics by Cash Money Life explains the ins and outs of refurb’d electronics and where to find them, and what to look for. Great guide!

My Dollar Plan presents 10 Ways to Eat Out for Less- Some good tips for cutting costs without giving it up completely.

The Money Hacks Carnival # 11, Ebb and Flow Edition was hosted by Save and Conquer, and included my post ” Two Online Tools to Help You Find Cheaper Gas Near Home or While Travelling”

My favorites from the MH Carnival:

Going to the Game is Expensive- by the Writer’s Coin. I am a sport’s fan, but even now I don’t go to too many games b/c of the cost. But not making mortgage payments and still holding on to season tickets? Not me.

Do I really Need Long Term Care Insurance in my 30’s at Can I Get Rich on a Salary. Maybe not yet, but the sooner you start thinking about it the better prepared and informed you will be.

Thanks to all of the hosts for their hard work, there are some great articles included so be sure to check them out!

Popularity: 14% [?]

Less Than Two Weeks Left to Sign Up for the Diamond Class Action Lawsuit Settlement from DeBeers

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Just a friendly reminder, if you purchased a diamond ring, diamond jewelry, or a loose diamond between January  1st, 1994 and March 31st, 2006, you are eligible to sign up as part of the settlement for the diamond class action lawsuit settlement from Debeers.  The deadline to be eligible for part of the settlement, whatever it may be, is May 19, 2008. The amount of money you may receive is dependent on how many people sign up, it could be up to 32% of the purchase price, although it also could be quite small, but hey,  it is free money. Go to  https://diamondsclassaction.com/ to sign up for your piece of the action.

Image by odalaigh

Popularity: 16% [?]

May 2008 I Bond Fixed Rates Go to 0.0%, Total Rate 4.84%-What Does This Mean?

sbimlk1.jpgThe new rates for I Bonds came out last week, and I think many people, including myself were quite surprised that the fixed rate portion went from 1.20% to 0.0%. The inflation rate went up to 2.42%, for a composite rate of 4.84%. I think most people were expecting it to drop fairly significantly and the inflation indexed portion to go up, but I don’t think too many people thought the fixed rate component would go to zero. As I have explained previously about I bonds, the total rate is the fixed rate plus 2x the semiannual inflation component plus the semiannual inflation rate x the fixed rate.

Here’s how the composite rate for I bonds issued May 2008 - Oct. 2008 was set:

Fixed rate = 0.00%
Semiannual inflation rate = 2.42%

Composite rate = [Fixed rate + (2 x Semiannual inflation rate) + (Fixed rate x Semiannual inflation rate)]
Composite rate = [0.000 + (2 x 0.0242) + (0.0000 x 0.0242)]
Composite rate = [0.000 + 0.0484 + 0.0000000]
Composite rate = [0.0484]
Composite rate = 0.0484
Composite rate = 4.84%

 So what does this means for I bonds purchased now or in the next 6 months?

For many people I would surmise they have become less attractive, because if you purchase I bonds when they have a higher fixed rate (or any fixed rate, as it is now 0%), you are guaranteed a certain minimum fixed return in addition to whatever the semiannual inflation rate. However, the inflationary rate went up to 2.42%,  so the composite or total rate of return is currently 4.84%, which is not too bad, considering that most high-yield savings accounts currently return around 3.0% or less.  But that rate is only guaranteed for 6 months and then the rates will change again. If the inflation rate portion begins to trend down, and your fixed rate is 0%, your returns could end up dropping significantly. So, now may not seem like a great time. Remember, you are required to hold them a minimum of 1 year (really 11 months if you purchase them at the end of the month), and you lose 3 months interest if you cash them in before 5 years. So, if you were to cash them in after 1 year, your effective rate would be 0.75 x 4.84% (although your real rate will depend on the change in November 2008 as well) = 3.63%, which is still not too bad and still better than most liquid investments such as high yield savings accounts. Even though you will have to pay tax on the earned interest, it is deferred until you cash it in, which is also better than most liquid investments where you will pay tax on the earned interest every year.

What’s my take?

I still think I bonds can be a good high yield alternative to savings accounts, even after you look at the puzzling change in the fixed rate. One explanation to the change could be that the U.S. Government is trying to peg the I bond rate entirely to inflation, which may not make them as attractive in the future, although when inflation may start coming down is anyone’s guess. I bonds have averaged a 4.5% return over the last 10 years, and even with the change in the fixed rate to 0%, this is still the case. They are appropriate for a medium range investment, something you will not need for at least a year, and preferably 5 years so you don’t lose any earned interest. They are also tax-free if used for education, which is another positive. I recently started buying I bonds on a monthly basis, in small amounts, and am going to continue to do so. As the rates change over the future semiannual (6 month) periods, I will evaluate my strategy.

Popularity: 17% [?]

The Easy Way to Budget for Irregular Expenses Using A Separate Checking Account

2054207669_758125d938_m.jpgOne thing that has plagued me over the years is paying for irregular expenses. Whether it be car maintenance items, kid’s summer camp fees, semi-annual or irregular insurance payments, or a multitude of other irregularly scheduled expenses, I have always had trouble remembering to think ahead for these types of expenses and put money aside for them. These expenses should be budgeted for, but when they occur infrequently, it is hard to keep the money separated in your checking account as untouchable. Another problem is that frequently,  I have dipped into my emergency fund to pay for these expenses when I should have budgeted for them. They were not emergencies. As an example, having to replace two tires because you hit a curb and blew them out would be considered an emergency fund item; replacing your tires because they were worn and needed replacing is not an emergency, in my book. Here is an easy way to start capturing these items within your budget by setting up a separate checking account.

Brainstorm and make a list all irregular expenses you can think of.

Over a period of several days, think about all of the irregular expenses in your life. Whether it is oil changes every 3 or 4 months, semi-annual car insurance payments, school registration fees, summer camp for your kids, annual donations you make to a charity, etc. By taking a few days to think of them all, you can capture most all of them. Alternatively, you can look through your bank transactions from last year to get an idea of your irregular payments.

Total them up and divide by the number of paychecks you receive.

Take all of your irregular expenses, total them up, and divide by the number of paychecks you receive every year. For simplicity’s sake, lets assume you are paid twice a month, and the total of your irregular expenses is $2400.
$2400/24 = $100 .

Transfer that amount to a separate checking account.

Open up a separate checking account, and transfer that amount per paycheck into the separate checking account. For me, I have chosen a Capital One Direct Banking High Yield Money Market Account (not an affiliate link).  I actually set this account up before I set up my irregular expenses budget, but it works great. They offer a 3.0% APY, no minimum balance, free ATM card and free checks, and you can transfer in and out from a primary checking account as well.  There are different transactional limits on this account compared to a normal checking account, you are limited to 6 withdrawals per month, but only 3 can be by check. So, depending on the frequency of your irregular expenses, it may not be for you and you may want a more traditional account. This works out fine for me as I don’t need to write more than 3 checks a month for my irregular expenses, and I can write checks for the bills directly from this account.

Use this account to pay irregular expenses.

Now that you have it set up, when your irregular expense comes along, pay for it out of this account.

Once you set up this account, it can start helping you pay for irregular expenses even if you don’t have the entire amount in the account. Suppose it is July, you have $1200 in your account, and you have to replace your tires. (Again this should be budgeted, not an emergency!) You spend $600, so you are only left with $600, and the next month (August) you have to pay $1000 dollars for school. Even though you are down $400, you are much better off than if you hadn’t budgeted for these expenses at all, as you still have $600 to put towards the payment, instead of trying to scrape up the entire $1000.

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Popularity: 19% [?]

Weekend Roundup-Working on the Weekend Edition

It was a pretty busy weekend for me, I had to go in to work yesterday and today to work on a project that is due in a few weeks. I think we are reaching the home stretch and will be getting things wrapped up soon, which will give me a little free time for a few months, I hope.

I participated in 4 carnivals/festivals over the last week.

The Carnival of Debt Reduction # 137- Graduation Edition was hosted by the Broke Grad Student, and he included my post “Emergency Fund 101: A Crucial Step on the Road to Financial Well-Being”.

The Carnival of Money Stories # 57 was held at the Carnival of Money Stories website, and included my article “Why I’m Not Buying a New Lawnmower this Year Either”.

Lazy Man and Money hosted The Carnival of Personal Finance #150, and must have worked pretty hard as their were 115 articles included! The Lazy Man selected my post “Lies We Tell Ourselves While Spending Money” as an editor’s pick.

The Money Hacks Carnival # 10, Your Money, Your Life was held at the aptly named Money Hacks, and included my post ” How to Simplify Your Finances: Start Small with Automatic Bill Payments”

Thanks to all of the hosts for their hard work, there are some great articles included so be sure to check them out!

Also, congrats to Steve at Bripblap and NCN at No Credit Needed for adding new members to their families recently, and as Steve put it, a new tax deduction.

Popularity: 18% [?]

Finding Great Deals on the Internet and How to Avoid Buying Things You Don’t Need

One of the great things about the internet is that everything is right at your fingertips. Instead of going to a mall or a bunch of different stores and shopping around for hours, you can search the internet, and in a matter of minutes, find a half-dozen places offering what you are looking for and comparison shop to find the best deal. There are several websites, such as the ones listed below, which aggregate the best deals on the net,  have people posting “hot deals”, or specialty sites that offer one really good deal a day. They list good deals at major online merchants from around the web, closeouts, coupon codes, how to stack coupons with sales both online and offline, where to find things the cheapest, and a myriad of tips and techniques on finding the best deals both online and offline.

Slickdeals

A forum type website where people can post their “great deal” finds from around the net. The site even has a “hot deals” section, which is supposedly the best great deals with items at a much lower price than can be found elsewhere, including free.

Fatwallet

Another forum type site, where people post their deal findings from around the net.

Deals of America

An aggregation site, listing the best deals to be found from merchants around the web.

Woot

A “deal of the day” website, one item is offered each day, usually at a good price, until it is sold out. The next item is not available until the next day.

One of the problems I have has in the past with these types of websites is that sometimes the deals seem so good that they are hard to pass up! I have, and I am sure others have as well, purchased things that I never ended up using or really didn’t need. It is very easy, when you see something on the internet at what you consider a ridiculously low price, to pass it up when you know it will sell out in short order. They can be useful, however, when you are looking for something in particular, or shopping for Christmas or other gifts, but you must be careful with the “double-edged sword” of these types of websites. You should also be careful with credit card usage with these types of sites, because even if you are getting a great deal, if you buy too many things your total amount spent can still be quite high-much higher than you realized.

Below are several ways to navigate online purchases to avoid buying things you don’t need, even when they are cheap:

Avoid browsing the websites for fun- Similar to avoiding going to the mall for fun, if you find yourself ordering things you don’t really need, try to avoid these on a regular basis. Recreational shopping, whether online or at a physical store, usually leads to buying unnecessary items.

Make a list- Make a list of things you really need or were planning on purchasing anyway, and don’t buy anything unless it is on the list. If you miss a super deal because that item wasn’t on the list, too bad.

Checkout the freebies section- Both Slickdeals and Fatwallet have freebie sections where you can get items for free, such as free samples or giveaways, both online and offline. Check these out to satisfy your hunger for a great deal. What’s better than free after all?

Wait- If you are unsure about a purchase, wait a few days. You will lose out on some of the deals, but not all of them. It will also help you deterimine if you really want something rather than making spur of the moment purchases.

Popularity: 23% [?]