Is the use of credit cards socially responsible? January 31, 2010

There are times at work when I spend hours in the lab.  These are perfect times to listen to my iPod.  And so I’ve been catching up on some old podcasts.  And like the nerd that I am, I listen to quite a few finance podcasts.  I’ve been going back and listening to my backlog of Marketplace Money, a personal finance podcast from American Public Media.  Anyway, they talk about credit cards quite a bit, and how different people use them.  Many people have chosen to go the Dave Ramsey route and go debt free, including not using credit cards.  Some use credit cards, but pay them off every statement.  Others carry a balance, and, in the most severe cases, have had to go to Debtors Anonymous or through credit counseling to dig themselves out of massive amounts of debt.

At any rate, they got me thinking about the use of credit cards.  In this discussion, they laud the benefits of using a debit card, since it is much more difficult to go into debt, as you can’t spend more than you have (ignoring overdraft fees/protection).  But they also point out that there are some benefits to using credit cards, or even selecting the credit option when performing a debit card transaction, as credit cards provide more financial protection against theft/loss.  And they do also sometimes offer other benefits, like an extended warranty on the purchased items.  They also discussed the differences between the two in a much earlier show.

During this discussion about the differences between using credit cards/selecting credit when you swipe your debit card, vs. selecting PIN/debit, I recalled hearing that different transaction fees are levied on the seller depending on what option you select.  And here’s the thing:  These fees really add up.  Another marketplace story discussed how many merchants are loath to accept credit cards for purchases.  The fees they must pay eat into their very thin profit margins in many cases.  I’ll agree (and the article also mentions) that sometimes companies would lose business if they didn’t accept credit cards/debit cards, since some people might not have enough cash on hand for their purchase.  But I think I’m like many people in the personal finance world (and the teacher interviewed here) that will basically use credit for every purchase possible.  It’s all about the points.  (Which always makes me think of this clip from Home Movies).  We figure if we’re spending money, we might as well get something from it.  Whether it’s for cash back, airline miles, or donations to a charity, it seems that our money is better spent if we’re getting something extra out of the deal.  For smaller purchases, I still use my credit card for that very reason, even if I have cash on me.

So, while people often chose to use credit even when they have other options, it’s costing the vendor money.  This extra cost will either hurt the vendor directly by eating up their profits, or hurt the consumers (i.e. us!) if the extra expenses are passed on to the customer.  And it seems that this problem affects some more than others.  The employees/owners are hurt by a decreased income, and/or the higher prices will make it harder for the least fortunate to afford the goods they need.

So, here’s the thing.  If transaction fees were eliminated, I’d be super keen on using credit for even the small purchases.  And if none of my credit cards came with rewards, I’d be more likely to use cash.  But I honestly don’t know if I’d be willing to give up using my credit card for everyday small purchases.  Does that make me a bad person?  I want to earn those points, and be able to easily track purchases online.

How do you feel about this?  I mean, I think most of us would agree that credit card companies make quite a bit of money even without imposing hefty fees on each purchase.  But I don’t know if anything will change.

Notes from Suze Orman January 12, 2010

As I mentioned in my recap of the Massachusetts Conference for Women, I was going to go into further detail about what Suze Orman said in her keynote speech.  I figured that, what with it being pretty good advice, as well as this being a personal finance blog, it would only be right to include it here for others to check out.

Suze Orman has written plenty of books.  In fact, she’s the author of one of the  books I read early on in my quest to learn about personal finance.  I remember reading Young, Fabulous & Broke, which was a good start into the personal financed world.  I also read The Wealthy Barber, which conveys the importance of paying yourself first and starting early (and other advice) through a story.  And most recently, I’ve finished reading Ramit Sethi’s book, I Will Teach You To Be Rich.  All pretty good books for getting yourself started on your way towards financial freedom!

I’ve heard most of what she said before, but it was good to be reminded to continue doing what needs to be done.  I’ve sorted out her advice into the separate topics she covered.

Opening Remarks:

• To be powerful, you need a solid platform, which includes an 8 month emergency fund and no credit card debt (Debt=bondage)
• If you have credit card debt, get a balance transfer to a credit union credit card.  She encouraged us to get away from “Big Banks”.  She recommends checking out credit unions here.  I’ve heard discussion recently on the topic.  The last thing I saw about it was at the Move Your Money project.

Retirement:

• If there is a matched 401(k) or 403(b) available to you, you can’t afford not taking advantage of it, as getting matched contributions means you’re immediately getting returns of 50-100% (depending on the match you are receiving).  If your employee-sponsored retirement fund is matched, contribute up to the match.
• 401(k)s are protected during bankruptcy, so if you are going to declare bankruptcy, don’t take money out of there to pay debts, it will be money you can use later.
• If your 401(k)/403(b) is unmatched, or if you contribute to the maximum match, your next step is to open up a Roth or Non-deductible/traditional IRA.
• Her view is that we’ll likely be in a higher tax bracket in the future; we’re currently at a low rate right now at ~35%.  She mentioned this because she wagers that the government is likely to raise tax rates to pay for a lot of what’s going on right now (I guess she threw a little politics into the mix).  Also, if the rates are this low, there’s a good chance they’ll go higher.  But I think the other reasoning is that you’ll be making more money later in life, and presumably have such a large retirement portfolio by the time you retire that you’d also be in a higher tax bracket.  Regardless, she mentioned this because she encourages everyone that is eligible to open a Roth IRA.
• If your income level is too high for a Roth IRA, she encourages you to open a traditional IRA and then convert it to a Roth.
• Regarding Roth IRAs:  Give up the tax write-off, so you can grow your money tax-free.  The benefits of Roths include:  You can take out your principle if you need to, you don’t have to start taking distributions when you reach retirement age, and you can leave your Roth to your children, and it remains tax-free for them.
• NEVER TAKE A LOAN FROM YOUR 401(k)!!! You essentially get taxed twice, you will pay a penalty, you’ll owe income tax, and, you still have to pay it back.  And as mentioned above, your 401(k) is protected during bankruptcy.

Wills and Living Revocable Trusts

• A will describes where your assets will go upon your death.
• A living revocable trust will include an incapacity clause.
• Both are important to have.
• You can use her Will & Trust Kit to prepare your will/trust.

Life Insurance

• The only type you should look to get is Term (she was very adamant about this).

The Stock Market

• “Anything can happen at any time”,  so only invest in the stock market if you don’t need that money for at least 10 years.
• If you’re young, now is the perfect time to invest.  Take advantage of Dollar Cost Averaging (buy more when the stocks are “on sale”, buy fewer when the stocks are pricier)
• Other things to invest in:  High yield dividend funds (3-5% returns) and Exchange Traded Funds (ETFs)
• Your investment portfolio should be 80% United States, 20% international
• If you’re older, stay away from bond funds.  Instead, invest in bonds with a specified (and desired) maturity date.

Buying a House:

• If you have your emergency fund, and are able to afford a 20% down payment, you can buy a house.  Those are the minimum requirements she gives.
• If the administration gives incentives, and then extend them, they are afraid that ending the incentives will send the markets back down
• If you are looking to own, but are waiting it out, be careful; it’s very difficult to time the market

Children (specifically, sending them to college):

• Don’t put yourself on the back burner:  if you love your children, teach them it’s okay to put mom first.  Don’t feel guilty putting yourself first.
• Your children can always get scholarships/loans/grants for their education; you can’t get those for your retirement.

Gift giving/the holidays:

• Give the gift of time or money for the less fortunate.

Long Term Care insurance:

• Speaking from experience with her mother, long term care can be very expensive, so it’s a good idea to look for long term care insurance, either for yourself, or for your aging parents (depending on the age)
• She recommends getting long term care insurance through Prudential.

So, that’s what she said, in a relatively large nutshell.  I know there are other opinions on these matters (life insurance, investment choices, etc.), but I think this information, along with the info you can get in the books I mentioned and the blogs I link to will get you on the path toward financial independence!

Anything I missed from her speech?  Do you agree or disagree with her advice?

Tracking no-spend days with Twitter January 4, 2010

Well, it’s 2010!  And we’re all coming out with our resolutions, our big plans for the new year.  I’m still working out what my short-term and long-term goals are going to be, but in the meantime, I decided to start small by working on no-spend days.  I like the fact that my desire to finish a day without spending money can prevent me from spending money unnecessarily.  And I’ve heard that it’s easier to stick to your goals if you must be accountable to others.  And so I’ll be tweeting about my daily expenses.

My rules of the game are:

-Anything I pay for in cash, credit card, or even check will be included

-Excluded are expenses via transfer:  Rent, utilities, contributions to retirement/savings accounts.  This is because they’re automatic and are mostly unchanging

I already avoided spending money the other day, even though there were a few things I wanted to buy.  That seems like a good help.  So, I’ll be tweeting about my expenses, either at the end of the day saying that I made it through the day, or during the day if I fail at my goal.  Follow me if you’d like, @stephtheblogger.

What do you think?  A good idea?  Or oversharing?

Variations on a Theme: Rudolph the Red-Nosed Reindeer December 24, 2009

Well, it’s Christmas eve.  And like many others today, we’ve been listening to quite a few Christmas songs.

One of the songs I’ve heard a few times on the radio this year is “Rudolph the Red-Nosed Reindeer”.  It’s a classic, especially among children.  And something I think many children learned with this song was the “echo” that came after each line.

Growing up in Buffalo, my sisters and I learned one version of it.  When we moved to NJ, we discovered that my new friends had learned different echos back in the day.

I’m curious what lyrics you use(or used to use).  I’m including what I know (in parenthesis), and you can comment with your differences.  The ones I usually hear differently I’ll bold:

Rudolph the Red-Nosed Reindeer (reindeer)
Had a very shiny nose (like a light bulb)
And if you ever saw it (saw it)
You would even say it glows (like a light bulb)

All of the other reindeer (reindeer)
Used to laugh and call him names (like Pinocchio)
They never let poor Rudolph (Rudolph)
Join in any reindeer-games (like Monopoly)

Then one foggy Christmas Eve
Santa came to say,
“Rudolph with your nose so bright
Won’t you guide my sleigh tonight?”

Then how the reindeer loved him (loved him)
As they shouted out with glee, (with glee!)
“Rudolph, the Red-Nosed Reindeer, (reindeer)
“You’ll go down in history!” (like George Washington!)

How different are your lyrics, and what are they?  And where did you grow up?  I’m pretty sure it varies by region, though it could vary by elementary school or music teacher, for all I know.

Anyway, just thought this would be fun.  Merry Christmas!

Brief recap of the Massachusetts Conference for Women December 20, 2009

If you follow me on twitter, you may have noticed I was using the #masswomen hashtag recently.  On Thursday, December 10th, I, along with approximately 5,000 women(!) attended the Massachusetts Conference for Women.

To be honest, I wasn’t really sure what to expect.  Was it going to be “rah rah women!”/”girl power”/”girls rule, boys drool”?  Or more of, “how to be a woman in a man’s world”?  Will I be told that there’s a chance for a work-life balance, or is that just a myth sold to today’s women?  Overall, I think each presenter had a different take on guidance.

I’m going to attempt to recap the conference, though I wont be doing any of the presenters/speakers justice…which is why you should go to this event next year!

The opening keynote speakers included:

-Tory Johnson, of Women for Hire, who suggested we try to reach out and meet at least three new people at this and future conferences.

-Marcus Buckingham, who wanted us to be happy.  He said that women are especially hard on themselves, and encouraged everyone to “build on their strengths, and manage around their weaknesses”

-Ruth Simmons, the president of Brown University, who reminded us that we don’t have to do or be the same as those who came before us.  She wants us to continue to learn, whether it’s through formal education or other means.  We must have a questioning attitude, and build an excellence in communication, since brilliance cannot be shared if we are unable to communicate.

Each of the three sessions that day had many different presentations available with a range of topics.  I’m just going to discuss the sessions I attended.

The first session I attended was “Live from the Corner Office:  What I Know Now about Success”, moderated by Ellyn Spragins, author of What I Know Now:  Letters To My Younger Self and If I’d Known Then:  Women In Their 20s and 30s Write Letters to Their Younger Selves (sensing a theme?).  Ms. Spragins shared examples from her books, where successful women contributed letters full of advice that they wish they had received when they were younger.

Two women were there to read their personal letters, answer questions, and share their advice:

-Trudy Sullivan, CEO of Talbots, wanted her 39-year-old self to know that failure gives you experiences, and that you can’t take failure personally.  You must move on, and not allow yourself to be over-invested emotionally.

-Trish McEvoy, founder of Trish McEvoy Cosmetics, wanted her 18-year-old self to know that “who is in your life determines your life”, that you must find something in common with everyone, and connect with others by becoming interested in others.

Session II was “Enhancing Executive Presence”, where Susan Colantuono, CEO of Leading Women, and author of No Ceiling, No Walls, discussed the difference between personal and executive presence.  Personal presence is the “ability to comfortably draw and hold attention while delivering a message”.  The only difference with executive presence is that you are delivering a business-savvy message.  There was plenty more discussed, including learning the language of power, and the power of language.  Overall, confidence and self-worth are very important parts of your personal and executive presence.  You can check her handout about enhancing executive presence here. (and see other handouts from other presentations here)

The lunchtime guest speakers included First Lady of Massachusetts, Diane Patrick, as well as the Be The Change Award winner, Brittany Bergquist, co-founder of Cellphones for Soldiers.  The most energetic of the speakers, by far, was the lunchtime keynote speaker, Suze Orman.  The crowd was pretty excited to hear from her.  She gave a lot of personal finance advice, and made sure we wrote it all down.  For the sake of not going on too long here, I’ll post those pointers in a separate post.

The last session of the day was “Emerging Leaders on the Cusp”.  They shared advice about how to get noticed and recognized as new and upcoming talent and how to present yourself as a leader within your company.

Overall, I thought the event was pretty great.  I think I learned a lot (even if I haven’t gotten that point across well enough in this post).  (By the way, the executive presence lecturer would not approve of my discounting of the quality of this post).  Hopefully I can go again next year.

Other attendees, I encourage you to share your experiences here in the comments, or link to your own reviews.  And if anyone wants more information about any of the sessions/speakers, let me know, and I can expand on it.

For recaps of the event from other bloggers, check out:

Our Roaring Twenties (and Beyond…)

Anali’s First Amendment

JQ Lounge

Downtown Women’s Club

Our roaring twenties (and beyond…)

Graduated Learning: Now on Facebook! December 7, 2009

I’ve done it.  I’ve created a Facebook profile for my blogging persona.  I know a few other personal finance bloggers that have blog-specific accounts.  Let me know if there’s any other things I should do with this account (for example, should I add it to Networked Blogs or other Facebook applications?).  It’s another way I can keep in touch with readers, and share ideas.

So “friend” me!  You can find me at http://www.facebook.com/graduated.learning.

[Edit 12/9/09:  I've also added a page on networkedblogs, as I had originally debated doing.  Follow me at http://apps.facebook.com/blognetworks/blog/graduated_learning_life_after_college/]

Can you have too many LinkedIn contacts? November 23, 2009

A while back I was talking to a colleague during a company softball game.  I pointed out that we’re now officially “linked in”, since I got an email from LinkedIn saying she accepted my invite.  She commented that she was surprised to see how many contacts I have on that site.  Last I looked, I had 307 contacts.  I agree, that seems like quite a few!

There seem to be a few main purposes to having a profile and storing your connections with LinkedIn.  It’s easy to keep all your business contacts in one place.  You can still keep in touch with people, even if you only have their old email address.  And there are plenty of ways to network and find new opportunities for yourself or others.

But can you have too many LinkedIn contacts?  When I first joined LinkedIn, I went a little bit overboard with the invites and connection requests.  I think I just wanted my colleagues (mostly fellow classmates at that time) to get involved in the site and see what it’s about.  Now that things have settled down, I tend to get or send a few invites every few months.  But I’ve started to wonder if all these contacts should remain on my list.

How closely connected in real life do we have to be for me to consider you a LinkedIn-quality contact?  Is it better to have more people you’re aren’t very close to on there so you’re connected to and via more people?  Or do you want to pare it down, since you’re likely to be judged by the company you keep?

I’m thinking of removing people who I added mostly from name recognition (classmates that I met once or twice), and keeping actually friends and colleagues on there.

What do you think?  The more, the better?  Or keep only the best?

I just started a Down Payment Fund! November 6, 2009

Well, I decided to do something with my checking account balance.  Most personal finance people I know have the bare minimum in their checking accounts, keeping as much money as possible in interest bearing accounts/investments or using excess to pay off debts.  I’m a bit of a nervous nelly, so I keep more in checking than I need to.  I suppose if I watched all of my accounts very closely, I could figure out the minimum amount to keep in there.  But I think I just need to pare it down.  I’ve decided to do something about that.

I opened a “sub-account” with ING Direct.  To be honest, it’s not actually a sub-account at all, it’s a new account with the bank (and I already had a savings account with them).  But I hear a lot of people referring to them as sub-accounts.  Anyway, I transferred $1000 into my new account (named Down Payment!), and have set up monthly automatic contributions from my lame-o checking to my awesome down payment fund

Why a down payment fund?  Because I realized I have just been saving for the sake of saving, and if I have an actual “goal” in mind (i.e. buying a house), I might be more motivated to save.  And, well, my older, married sister just closed on a house today.  And that’s pretty darn exciting.  I know I don’t want to buy a house just yet, but I don’t want money (or lack thereof) to be the sole reason for my decision in the future.  Granted, I’ll probably need a pretty high goal amount.  If I want to put 20% down on houses around here (which are at least $250k), I’ll need to stash away $50k.  Well, it’s a start!

Yes, the interest rates on savings accounts aren’t what they used to be.  But just moving that money to an account that provides some interest, and getting into the habit of putting money towards that big goal in the distance is a good start.

(As always, if you’re interested in opening an account with ING Direct, let me know.  I do still have ING referrals. If you open an account with at least $250, you get an extra $25, and I get an extra $10. Free money! Leave me a comment or shoot me an email if you want one!)

My Personal Finance Confessions October 30, 2009

I have a confession to make.  I’m not a perfect person.  I know.  It’s hard to believe.

But seriously.  I know there are so many rules that you’re supposed to follow when it comes to personal finance.  And I think I do a pretty good job at following most of them.  I spend less than I earn.  I transfer money automatically to my savings account every month.  I contribute to my 401(k) up to the company match.  I fully fund my Roth IRA every year.

There’s one thing that I don’t really do.

I don’t budget.

There.  I’ve said it.

I was talking to a friend the other day, and she was lamenting how her mother was so impressed with her sister, because her sister budgets and has a vacation fund.  This friend was unemployed, but had been staying above water thanks to her savings that she’d built up.  She wanted recognition from her mother on this fact.  I commended her!  I’m very impressed by her high level of savings.  I assured her that, once she got back to work, she could start a vacation fund if that’s something that is important to her.  And that’s when my admission came out.  I told her that I don’t have a budget, either.

Why don’t I have a budget?

I don’t have a budget because it would be really boring and not very useful.  I have many consistent expenses every month (rent, utilities, car payment, student loans payment, etc.) which I know will happen each month.  Most of those costs are pretty non-negotiable, though I would consider paying more towards my loans to lower the principle.  The expenses I have every month that aren’t exactly the same each month are things like food (grocery store, lunches, dinners) and gas.  But in those cases, I have a total that I try to stay under.  I keep my grocery spending under $100 a month, and also keep my dining out to once a week, maximum, (and trade-off who pays with my boyfriend when we go out), and try to keep those expenses below $100 as well.  I’m trying to cut down on how much I spend at the cafeteria (i.e. trying to bring my lunch more often, buying cheaper options) but I try to keep my expenses in the cafeteria below $30 a week.  Yes, when you add up all this money over a year,  it’s quite a bit of money.  But I like going out to eat every once in a while.  And I need to have groceries.  I tend to spend less than any of the budgets.  But I don’t actually budget the money, i.e. figure out what money I have available to spend, then divide it between all of my expenses.  And I’m not really sure where I can lower any of my expenses (outside of the variable food), since I rarely go shopping.

So, am I making a big mistake by not budgeting?  I know where my money goes by tracking my expenses (after the fact) with Mint.  But I don’t plan things out.  I just inherently know my limits, and try to avoid spending money when possible.

Layoff Survival Guide: Back to work! September 20, 2009

So, let’s say you’ve gotten a job offer.  Congratulations!  But now you may be wondering what to do about all those changes you had to deal with when you got laid off.  What do you do about your health insurance coverage now?  And how do you stop collecting unemployment?  What are all the things you have to deal with when you’re starting a new job?

A friend of mine asked me to write about this subject.  Well, one friend complained that my Layoff Survival Guide was too depressing, so my other friend (who is still looking for a new job) suggested this would be a happy twist to the posts.

So, with my first post, I talked about 401(k)s.  At your new job, you’ll likely be given the option to enroll in their 401(k) program (or similar program for non-profits, government jobs, and the like).  Sometimes you’ll have to wait to enroll, or wait for them to match or somehow contribute to your account.  I recommend signing up for a 401(k).  If they provide a matching contribution, I would strongly encourage you to sign up.  There are usually a few different options for funds you can invest in.  Don’t let that part intimidate you!  If you’re not sure, there’s often someone you can call at  the company running your 401(k) (or even in you HR department)  that can give you some general guidance.  And while I’m not a certified financial adviser, I would suggest you look into a “life cycle fund”, one that invests in funds that are more aggressive if you’re not retiring for many decades, and become more conservative as you get closer to retirement.  That’s what I’m doing with my IRAs.  For my 401(k), I’ve tried to make a diversified portfolio with assorted styles of funds, and only looking at the funds with low or no expense ratio.

Next I told you about COBRA and transitioning your healthcare coverage.  Now that you’re at a new job, you’ll likely have access to a discounted (or free) health insurance program (depending on what your company offers).  If the new insurance available is, in your opinion, better (cost-wise, or cover-wise, or other factors important to you) than what you’d been on while unemployed, you should sign up!  Confirm that your new health insurance is officially started, then get in touch with your former company’s HR person in charge of health insurance, and/or your previous insurance company, and let them know that you’re on a new plan.

Finally, I discussed collecting unemployment.  At least for me, in Massachusetts, I didn’t have to call to cancel.  I just stopped filing claims.  Hopefully, that’s what I was supposed to do!  I had asked a friend what she did when she got a new job, and she said she did the same thing.  It may differ from state to state, so check in with your state’s Office of Labor to confirm.

Hopefully this has given you a good idea of what you can look forward to once you get a new job.  As always, feel free to comment or email me if you have any questions.