MoneyWiseWomen

The Anti-Gift Holiday

Switching focus from gift giving to others to giving to yourself, is the best way to feel some relaxation and peace during the holiday season. You may think others might feel neglected, when in fact, they will feel more peace and happiness as well.

For the past several years, my family and I have not engaged in the wrapped-and-bowed gift giving tradition. of the year-end holiday season. We started this because none of us could think of a gift we truly wanted; then we’d each be scrambling to think of something, anything, since not giving a box with a bow was unacceptable. We all got tired of this dynamic, and since my sister and I no longer lived with my parents, it became harder and harder to tease out other each other the things we wanted as the holiday season drew near. One year, we said, forget it, let's enjoy the other elements of the holiday season--this way, the pressure is off, and we can relax and enjoy the season without killing ourselves with gift giving.

Remember when college only cost $96,000?

Do you remember the days that higher education was actually affordable? Yea, neither do I.

The rising cost of higher education is redefining what it means to be a broke college student, and I can’t help but remember what college costs were like in my day.

A handful of years ago, the total cost to attend my four-year public university rang up to the tune of $96,000, and that’s a conservative estimate (one semester, books alone cost me over $600). Today, a college degree at the same university—where students faced three tuition hikes in the last two years—now costs $126,000. That’s a 31% increase in less than a decade.

While it’s always been a struggle for every generation to pay for college, this is getting ridiculous.

How will the next generation of prospective college students cope with the reality that access to higher education may not be for everyone after all? It’s for those who can pay it, or at least afford to pay back education debts for the next 20 years.

Reality of college costs

With college costs outpacing middle-class families’ monthly paycheck, parents are less likely to be able to carry the entire financial burden of college, forcing students to take out more loans to pay their own way to college. In fact, 2 out of 3 college students graduated with debt in 2008 as compared to less than half in 1993, reports FinAid.org. And college costs have only jumped higher since 2008.

Students head back to campus this fall facing greater challenges to pay for college expenses due to tuition hikes as well as scarcer financial resources. According to the latest report from CreditKarma.com, the average consumer is shouldering $29,985 in student loan debt, a 6% increase since last August. In fact, the total national amount of student loan debt outpaced credit card debt for the first time in history last year.

It’s not too far off to worry that student loans could be the next financial bubble. Moody’s Analytics reported that student loan growth, unlike other lending, accelerated during the recession. “Like the mortgage debt from 2005, student loans are driven by artificially low interest rates with a promise of a high return on investment,” comments Ken Lin, CEO of CreditKarma.com.

For students, the return on investment is becoming unpredictable. Lin adds, “While many college students are fixated on the potential for higher incomes after graduation, few acknowledge the potential pitfalls of taking on student loans, such as debts far in excess of their salary and debt obligations that don’t discharge after a bankruptcy.”

What does it all mean? With college students graduating with thousands of dollars in debt and facing limited job prospects, the balance of risk and rewards of a college diploma is shifting slightly towards more risk than reward.

Reality for college grads

They call us the “Millenials,” born in the 80’s and 90’s and known as the most technologically connected generation in history. Millenials are also the hardest hit by the recession. Among consumers aged 18 to 29, unemployment is the highest it’s been in over three decades, and amongst all age groups, Millenials had the highest drop in full-time employment since 2006, reports the Pew Research Center.

No wonder they also peg us as the “lost generation,” coming of age in the Great Recession with high hopes and high degrees, and stunted with limited professional experience, reduced earning potential, and dimmed confidence.

With the job market so bleak, many Millenials are heading back to school with1 in 4 undergrads opting for grad school. Yet graduate students are facing even tougher financial circumstances than undergrads.

The Budget Control Act of 2011 will cut off government subsidies of lower interest graduate student loans starting July 2012. The budget cut will cause students to opt for higher interest loans, which will result in an incremental $7,000 in interest on federal student loan debt for the typical borrower, estimates FinAid.org.

For many 20-somethings, graduating will be a time to start digging out of deep debt while juggling financial independence. While past generations likely put 5%-7% of their first job’s paycheck toward debt after graduation, Millenials are putting in 20% or more.

One graduate of the Class of 2010 compared paying off student loans to having a hole in his paycheck. “It’s like paying for weekly rounds of drinks every month that you don’t even remember buying,” he stated.

Another recent graduate puts the dismal outlook of student loans in perspective: “Well, I can make the payments. Luckily.” More than 20% of her current paycheck goes straight to student loans; it would’ve been a bigger chunk if she hadn’t worked part-time while schooling in order to pay some expenses. “It makes me slightly depressed, because it’s a huge mountain to climb. But I keep telling myself it is doable.”

At the alarming rate of higher education cost hikes, this generation’s student debt hangover will last well into their 30s.

Is college still worth the price?

This generation of college graduates will be our next business leaders, industry game changers, and ground-breaking entrepreneurs. Is it fair that they’ll be starting their careers over $100,000 in debt?

In college, I never considered whether or not it was worth it; going to college was a no-brainer. I wonder if future generations will feel the same. Looking at the price I’d be paying today for education, honestly, it’s a harder call to make.

One optimistic graduate remarked, “I have my degree, and I have a job. One day, it will all work out.”

For the next college-educated generation to whom I will one day say, “I remember when college only cost me $96,000!” I sure hope so.

 

 

 

 Justine Rivero is the Credit Advisor and resident Credit Rockstar for CreditKarma.com, the pro-consumer credit advocate that helps more than 3 million consumers realize the everyday cost savings of having great credit health.

 

 

 

Dad’s Foolproof Car-Buying Tips (and Other Secrets of Life)

Image via Wikipedia

Some Dads teach you how to tie your shoe, ride your bike, even how to parallel park. My Dad gave me the crash course on how to get anything I want in life, starting the day I bought my first car.

I’ve mentioned before that my Dad’s “foolproof” car-buying secrets helped me buy my first car at a $3,000 price drop. Those financial tips have helped open a few other  doors, including getting my dream job and landing the right relationship.

This Dad-patented method isn’t just about negotiating a sticker price. It’s really about the approach and attitude you have when achieving your goals. Dad always drilled that getting what I want in life isn’t magic; it’s more strategy than serendipity.

There is a formula for getting what you want in life. My Dad knew it well, and now, you will too.

 

1) Stick to a clear purpose.

“What do you need a car for?”
“Well… getting groceries, to get to work, and… to visit you of course, Dad!”

Dad’s question came up often as I researched cars. I was on the fence about whether I should buy a new or used car, so Dad asked me again. When I remarked that the Mini Cooper has superior handling as clearly demonstrated in The Italian Job, Dad asked. While contemplating whether to get Dyno Blue Pearl or Alabaster Silver Metallic, Dad still asked. It was his understated way of reminding me why I needed a car in the first place: errands and commuting. In the end, practicality won over flashy and I selected a 2007 used Honda Civic.

Having a clear purpose helps simplify hard or complicated decisions. It’s a philosophy I’ve fallen back on again and again. At the crossroads of every major relationship, I’ve played my Dad’s card. “What is this relationship really for?” My answer: to make me happy. That reminder always made the next move painfully clear. When faced with a decision, like a major career move or handling a personal conflict, go back to your singular purpose and stick to achieving that. Other priorities and details will fall into place.

2) Know your opportunities and timing.

 “Let’s wait until the end of the month to look for your car.”
“But Dad, that’s 3 weeks from now.”
“…. Let’s wait until the end of the month.”

Luck, schmuck; Dad knew that a great deal doesn’t just happen. Many dealerships slash prices at the end of the month to meet their sales goals, so if you’re looking to cut a deal, they’re most flexible around this time. Also, knowing the price at other dealers and even private sellers helps establish a competitive baseline for you to negotiate price. Dad’s formula for getting a great deal is 10% good timing and 90% strategy. Strategy is all about knowing where opportunities are and seizing them.

Dad’s approach to car-buying also helped me find my perfect job. With a think-outside-the-box strategy, I started looking in the financial industry for a creative job because financial services need writers too, right? I landed this dream job at Credit Karma because I looked for the right opportunities in unlikely places. The out-of-the-box opportunities are often the worthwhile ones, so be open-minded yet aim strategically.

3) Seek out the right person.

“Dad, where are you going? The front door is this way.”
“The back door leads to where the dealership’s offices are.”
“But that’s not where the cars are Dad…”

Dad never stepped foot on the sales lot with the shiny cars and giant inflatable gorillas. He sought out the dealership’s other entrance and went straight to the offices of the Internet Sales Manager or General Sales Manager’s office. These managers knew the inventory and they could make the final decision when we negotiated price. My Dad doesn’t waste time, so getting face-to-face with the decision-makers is how he cut through the sales pitch and worked directly with people who had authority to stamp the deal.

Doors can open more easily if you approach the right person with the keys. Submitting your resume straight to the hiring manager, asking for the store manager to get issues resolved, or in my experience, contacting the right editor to get something published, proves to be more successful efforts to getting what you want. So who is the “right person”? Whoever has the power to make what you want happen; just find that back door.

4) Know when to walk away.

“Dad, I really want this car.”
“What’s your price?”
“I want to pay under $15,300.But he won’t budge on the price.”
“Well you don’t really need this car today, do you?”

My Dad spent a whole decade working to get promoted and transferred to the United States, so even though patience isn’t a virtue I inherited from him, he did teach me not to go for the easy wins and to shoot for the long-term payoffs. On occasion, that means knowing when to walk away. Two weeks later, I sealed a great deal to buy the car I wanted under $15,000and in Alabaster Silver Metallic.

Dad’s most important lesson was that, sometimes, you don’t get what you want. But that doesn’t mean giving up. If means knowing there are other alternatives and choices, and to come back to it when it’s the right time, place, and budget. Maybe that means saving up more money to buy the home of your dreams or waiting till next year to take your once-in-a-lifetime vacation.

 

Of course, not all of Dad’s advice applied neatly to the grand scheme of life. For example, he told me in grade school that I could learn a thing or two from watching more football. Most recently, he advised me to be more like my Mom in the way I cook, and less like her in the way I drive.

Above all, Dad always reminded me, “You’re always learning.” Whether it’s buying a car or tackling your bucket list, that’s the most valuable trick to getting what you want.

 

Justine Rivero is the Credit Advisor and resident Credit Rockstar for Credit Karma, the pro-consumer credit advocate that helps more than 2.6 million consumers realize the everyday cost savings of having great credit health.

 

Growing Pains: Money Lessons We Should Have Learned

If only our earliest encounters with money, like getting a quarter for cleaning our room or a whole dollar from the Tooth Fairy, taught us what we would need to know about personal finance. Instead, we learned the hard way by growing up.

A lightbulb flickered in my head in fifth grade when I realized my $10 weekly lunch allowance didn’t need to be spent on cafeteria pizza. By saving $2 a week for two months, I could buy my first Backstreet Boys CD. It was a moment I’d never forget, for it finally dawned on me exactly what money was worth—anything I wanted.

Over the years, I traded school lunch for CDs, birthday money for movie tickets, and even college textbook money for new boots. The exchange value of money, as I like to call it, grew larger and grander as I moved into my early 20’s. I likely “exchanged” thousands of dollars before I graduated college, yet still hadn’t learned how to manage my finances. By the time I got my first job, I spent more on food and happy hour than on rent and found myself in serious credit card debt. Obviously, I still didn’t have a clue about money management.

As children we learn to spend and as adults we learn to save. Along the way, did we ever learn how to manage our day-to-day personal finances? Unfortunately, for most of us the answer is no.

Luckily, I’m older, wiser, and in less debt, and in the spirit of good karma, I’m sharing the five money lessons I wish I knew—and we all should’ve learned—growing up:

Dump Your Debt and Reward Yourself

According to a recent article in USA Today, 63% of Americans worry about debt 1 – 3 hours a day; 22% of Americans worry about debt 4 or more hours per day and only 15% of Americans don’t worry at all. If you’re spending any time worrying about debt, it’s time to dumb your debt and reward yourself.

My husband and I just returned from two weeks in Hawaii and we flew free. We’ve been rewarding ourselves with annual trips to Hawaii courtesy of Alaska Airlines for many years. You’re probably thinking “What has this got to do with dumping your debt?” Before you reward yourself with a credit card that offers “rewards” of any kind it’s important to create a debt reduction plan and pay off your existing credit card debt. There’s nothing free or rewarding about paying interest to your credit card company every month.

Grocery Sale Ads and Coupons: Financial Blessing or Burden?

by Cheryl Hackett, Moms In Need of Mercy

I would love to interview Caroline Ingalls (of Little House on the Prairie) about the way she shopped for her family's food.  (Granted she grew most of their food and Mr. Ingalls hunted for the meat). Whenever I watch episodes of Little House, I see her stretching what she has on hand, and only buying the bare necessities—the staples—from Olsen’s mercantile I can’t see her getting sucked into any clever specials: buy 5 pounds of sugar, get one pound free. Maybe she would take advantage of the deal if she needed the item and had the money to buy it, but maybe she would say she only needed one pound of sugar and that was that.

We all grocery shop, and many of us pride ourselves on how much we can save. Smart shopping strategies teach the importance of watching the grocery store sale ads and taking advantage of the loss-leaders, those items that the store sells below cost to get you in the door and spend more on other items. Several months ago, though, I started wondering if I spend more in the long run by paying such close attention to the sale ads (and coupons available online) and shopping by them. Sure I save lots of money, but would I save more if I paid little attention to the ads and coupons and just bought only what I absolutely needed at the time--even if it meant paying the going price for it (or buying it, and only it, when it’s on sale)?

The grocery stores are brilliant at devising clever marketing schemes that get you in the door for a loss-leader item that you often have to purchase several of (or mix and match) to get the savings. These smart campaigns get you to pay more upfront under the guise of saving. You are saving, but you are also spending more than you would have originally.

Saving for College

Since State Farm* has entered into the field of financial services, I'm talking with more families about planning for the future. While families almost always want to talk about retirement, their most immediate concern is saving for their children's college education.

This is wise. College education will, in most cases, be a family's second largest expense after home ownership, so it deserves careful planning. rising college costs make saving even more important.

Teaching Kids About Money

After every Money Wi$e Women Forum women ask me why the schools aren't teaching financial issues to kids. Actually, lots of schools are teaching kids about money basics. And, there are lots of programs out there dedicated to providing financial education to kids. The Jump$tart Coalition for Personal Financial Literacy is a national organization dedicated to preparing youth for life-long financial decision-making. Financial institutions also have programs to teach today's youth. In Washington state Boeing Employee Credit Union takes their financial seminars to schools. Topics include start saving now, building your budget, invest in you, get good credit and many more topics. I'm sure there are plenty of other financial institutions that have programs on financial basics for students. Check with your bank or credit union.