Personal Finance on TV

ABC will be airing a one-hour special called "Un-Broke: What You Need to Know About Money" tonight at 9 pm EST. The special featuring celebrities like Will Smith, Samuel L. Jackson and Oscar the Grouch will focus on personal finance topics. Be sure to watch it tonight and check back with us next week for our review!

You can visit ABC's website here to learn more about the special.

Enjoy your weekend,
Savvy Student

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Making Extra Money

Living independently, in a dorm room or an apartment, comes with a new set of financial issues. How does one afford to eat, have fun, and pay bills while focusing primarily on school? Working part-time is an option, but with most jobs available to college students paying minimum wage or slightly higher, the time one spends at work could have a higher opportunity cost than pay rate. For example: if working 10 hours a week at a wage of $8.50 per hour yields a weekly paycheck of $85 (without taking taxes into consideration, of course), working for one semester (typically 15 weeks) yields $1,275. Nice chunk of change, right? But what if you failed a course because you were too busy working to study? A four-credit course can cost $4,500, so failing is virtually the same as throwing money in the trash, not to mention the value of your time wasted on attending a class without getting any credit for it.

Working part-time works for some students, but for others it may be easier to make money more flexibly without using up a ton of scheduled time. Check out our suggestions and start making some extra cash today!

• Scour your closet for gently used clothes you haven't worn in the last three months and don't forsee yourself wearing. There are a few venues where you can sell gently used clothing. If you have some designer jeans take them to a consignment shop. Consignment shops will not pay you up front for your clothing, but once they sell you'll receive a check. You can try online auction sites, but considering the fees placed on most sales and the cost of shipping the item, this may only be a good option for those with very valuable goods to sell. Of course, there's always good ol' Craigslist.
  
• Get crafty! So many young people have done fairly well for themselves by polishing up a hobby and creating goods. Knitting, jewelry making, pottery, and sewing are hobbies that many of us have already, so why not make money from them? Crafting provides serious flexibility, though you'll have to be prepared to make trips to the Post Office if your business operates online. Visit local dollar stores to score great deals on mailers, bubble wrap and packing tape to save a few bucks at the Post Office. Etsy.com is a great place to sell handmade goods. Craft fairs and flea markets are also great options if you don't like the idea of selling online. Besides setting up shop outdoors on a nice day is far more fun than working indoors at a part-time job.
  
• Make a list of things you like to do and are good at. Determine if someone would be willing to pay for your services. If you're a musician, parents may be willing to pay you to give music lessons to their young children. If you're an artist, try creating an online portfolio of your work and offer your services through commissioned work or the sale of completed work. If you excel in academics, try putting up flyers around town offering tutoring to younger students. Be sure to charge well below what a professional music instructor, artist and teacher would charge. Your main draw is that you can perform these services but for a significantly reduced rate.

Have you had success in starting a small business or making money from a hobby? Leave us a comment or send us an email and tell us about it! We'll post your stories in a forthcoming post.

Thanks for reading,

Savvy Student

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Paying off Debt

While in school students will undoubtedly accrue debt, but knowing this fact and understanding the responsibility that comes along with debt is key to obtaining financial independence. It is far too easy for students to get a $4,000 refund check and spend it carelessly on new clothes, a concert or new video game system. One student even admitted to spending $2,400 on a tattoo. College for many, is the first opportunity to be independent, make decisions and be in charge of finances. When students support themselves it is often due to loans or credit cards, money that seems to be free flowing with just a signature. The responsibility that comes along with debt does not actually hit home until the student receives their first bill, and for many this occurs long after graduation. Our goal is to intervene in this process and help students finance their education with as little damage as possible to their credit.

For students that find themselves in this boat we suggest reading some personal finance blogs. Generally these are much easier to relate to (they tend to come from financially secure individuals of modest means) and contain a glimmer of entertainment value. We particularly enjoy blogs that follow an individual's progress in paying down debt. We love MFA or Bust because the blogger updates her progress towards her financial goals on the right side of the blog. We admire her because she managed to pay down over $7,000 in credit card debt-- and continues to never hold a balance on her credit cards.

How did she do it? She mentions that she uses the debt-snowball method of repaying debt- she tackles those credit cards or loans that carry the lowest balance and pays them off first. This method of repayment has its benefits and detriments, however, and relies heavily on proponent Dave Ramsey's opinion that personal finance is "20% head knowledge and 80% behavior." This means that while you may end up paying more over time by tackling the accounts with the lowest balances regardless of interest rates, small wins like finally paying off one card completely, is a motivator. Here's how the snowball method works:

Our fictional friend Mike has three credit cards with balances. To make things simple, let's say that card A has a balance of $100, card B has a balance of $200, and card C has a balance of $300. He would make a list of his debts from the least amount owed to the highest amount owed. Then, he would make the minimum payment for each credit card each month. Any extra money he can put toward debt repayment would be funneled towards the card A entirely because it has the lowest balance.

But what if card B has the highest interest rate? Wouldn't it be more mathematically and financially sound to pay off that card first? This would be an entirely accurate assessment if we took the human element out of the equation. The truth is, some people can't move forward with serious debt repayments if there are no obvious rewards. Psychologically speaking, short term rewards like being free of one credit card company are more motivating than the long term reward of reducing interest payments over time.

Repaying debt is a journey, no one source can tell you how best to handle your debts. Your best option is to explore as many venues as possible. Just remember that like saving, paying off debt requires not only a goal but a source of motivation.

Keep up the good work,

Savvy Student

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New Rules for Credit Card Companies

And there is light at the end of the tunnel...

Credit cards are for many people, a way to help supplement their income. For college students it is also a way to afford books and help finance their education. Unfortunately, credit card companies have gotten out of hand forcing the federal government to step in. For years, students as young as 18-years old have been approved for amounts they simply can not afford. Credit card companies make money off of the unfortunate consumers who purchase things on borrowed money and fall behind in their payments due to lack of financial responsibility or part in parcel to the ever rising interest rates. Well, the good news is that Barack Obama and team are working to put forth new restrictions on the credit card industry.

On Wednesday, May 20th the House voted 361-64 to a measure already approved by the Senate in a 90-5 vote. Highlights of the Credit Card Accountability, Responsibility and Disclosure Act are featured in a news release from the Board of Governors of the Federal Reserve System.

The act will provide protection to consumers with high debt from unfair credit card practices and overdraft services. It will give consumers a reasonable amount of time to pay their bill and will clarify when a payment is considered on-time . Cardholders will no longer see charges for paying by phone or surprise charges for such things as being over the limit. The bill will also restrict the number of young adults being approved for credit. Adults under the age of 21 will be required to prove they can repay the money or be forced to add a co-signer. Consumers will also be given 45 days advance notice before interest rates are raised.

Feel free to check out an article on the new restrictions from the Boston Herald here.

It is still up to you, the student to be responsible for your financial well being. It is very easy to get into debt, but it is not so easy to repair all the damage that is done to your credit. At least with these restrictions in place, students with no income will be more protected from falling into an unhealthy pattern.

You can expect Barack Obama to sign the act today, it will go into effect in nine months.

Thanks for reading,

Savvy Student

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Another Way to Save: Roth IRA

Retirement may be far away for those of us who haven't even secured our first job out of college, but the benefits of saving for retirement are quite relevant to even the youngest contributors. Opening a Roth IRA, for example, benefits college students because the sooner you start investing, the more time your money has to grow. We must emphasize that while Roth IRAs are used to save money, they also involve investing which can certainly have its risks. As such, we intend to explore the ways in which starting early in any investment scheme can be incredibly beneficial. The way you invest is ultimately your choice, and we hope that the following resources will help you in your research, whether or not you decide to open a Roth IRA.

The Department of the Treasury has a comprehensive guide to all types of IRAs available on the web here. Make sure you read up on any investment strategy through a trusted entity before reading editorials or user feedback. One of the most important skills you gain in college, distinguishing primary sources from secondary sources, will help you make prudent decisions with your finances.

Before we give you examples of how the Roth IRA works, we'll define some terms to make you more familiar:

1) Contributions vs. Earnings
When we say that you can withdraw contributions from the Roth IRA without penalty, we are only referring to those cash amounts you have actually contributed. Contributions do not include the interest earned on the cash amounts.

2) Seasoning Period
The "seasoning period" refers to the first five years the account is open. A Roth IRA will not allow you to withdraw contributions without taxes or penalties until the seasoning period is over. Whenever we refer to the benefit of withdrawing contributions or earnings, please keep in mind that it only applies to the time period following the seasoning period.

Roth IRAs aren't just used to save for retirement. Once a Roth IRA account is past the seasoning period, individuals may withdraw up to $10,000 of their earnings if they are purchasing a primary residence for the first time. This means that you can simultaneously save for your first home and your retirement. As we've emphasized before, having short and long term goals are important in motivating you to save money, and we think that owning a home and securing a comfortable retirement are excellent goals to have.

Just to exemplify how starting early can result in larger returns, consider our fictional friend Mike in his Roth IRA endeavor:

At the age of 19, Mike decides to open a Roth IRA. He vows to contribute $1,000 per year every year until he retires. If the standard return rate is 7%, Mike will find himself with $229,632 at the age of 60. If he waits until later in life to retire, this amount will increase.
Mike's older brother Max decides to join him in his endeavor. He too opens a Roth IRA, but because he makes considerably more money a year at the age of 30, he contributes $2,000 per year and doesn't touch the balance until he retires. At the age of 60, Max comes out with $202,146.
This example demonstrates that contributing less to a Roth IRA earlier in life has its benefits. Even though Max contributed more over his lifetime ($19,000 more, to be exact) and more per month, he ended up with less than his younger brother.
Check out this website to calculate Roth IRA returns with different numbers. To see how much you could earn on a Roth IRA after a few years, try this site.

We'll be sure to update our "Another Way to Save" series with more investment and saving options. Always remember to do your research and consult an expert if necessary before investing! If you have any suggestions or want to know more about the Roth IRA or other investment/saving venues, leave us a comment with your questions.

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MFF- Money Fun Facts

So, the song with lyrics "Money, Money, Money" is not an original by Donald Trump for his show "The Apprentice", but can you name the artist and song title? What bills are currently in circulation and do you know what material they are made from? If you are tired of hearing about how to budget and save like we think you are, we thought it would be fun to take a different approach and talk about money instead of how to handle it.

Did you know:

• According to the Bureau of Printing and Engraving the $100 bill has been the largest denomination of currency in circulation since 1969.
  
• The ink on a bill never actually dries, so if you crumble it up and wipe it across a blank sheet of paper it will leave a mark.
  
• Bills are made from 25% linen and 75% cotton.
• The $1, $2, $5, $10, $20, $50 and $100 bills are currently in circulation. However, the $2 bills are no longer printed.

Can you name (from memory) which President is on which bill? Neither can I, but you should look at each bill in your wallet because the pictures, both front and back are pretty amazing. There is said to be an owl in the upper right hand corner on the face of the $1 bill. Can you see it? Check for it next time you have a $1 bill in your wallet.

"The Apprentice" theme song, "For the Love of Money" by The O'Jays was a #1 hit in 1973. If this was before your time and you are now asking "Who are the O'Jays?" click here.

According to the Children's Museum of Indianapolis, ( and yes, I realize you are an adult, but this is cool) if you laid pennies side by side from coast to coast it's $2.5 million wide. Also, if you have three quarters, four dimes and four pennies, you have $1.19. You also have the largest amount of money in coins possible without being able to make change for a dollar.

Guess what else?

• A stack of currency one-mile high would contain more than 14 million notes.
  
• A stack of bills destroyed in a single year would measure 200 miles high. Mt. Everest, the tallest mountain on Earth, is a mere 19,035 feet, or slightly more than 3 miles high.

I bet you won't look at money the same way again. Wish I could tell you how to multiply it or grow it on a tree, but that is what our other posts are for.

If you have any fun facts or want to add your thoughts, drop us a line.

'Till next time,

Savvy Student

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Living Off-Campus: Beginning Your Apartment Search

Moving into an off-campus apartment requires much more than simply finding a place and making monthly rent payments. Knowing what questions to ask and what to look for is essential when choosing your future home. As such, Savvy Student is here to provide helpful information, as well as suggestions for making your first apartment an inexpensive, hassle-free place to call home.

Aside from square footage, you will need to determine what utilities or amenities are included with rent. Utilities such as electricity, heat and hot water may or may not be covered. If you are required to pay for some or all of the utilities this will increase the actual amount of money you are spending monthly on the apartment. Amenities such as a fitness center or pool are also nice if you use them, but many times rent for an apartment with access to these features is much higher.

Consider the following as it relates to the utilities:

• Will you be paying for gas, oil, or electric heat? Electric heat can be considerably more expensive than gas heat, so be sure to take this into consideration when choosing your apartment.
• How will you be billed for [insert utility] by the company, or by the landlord? This question is essential because if your landlord plans on billing you for utilities, you'll need to know how often to expect the bill so you can budget accordingly.

Location is a huge factor when looking for an apartment. Consider the distance to campus or the grocery store. An apartment which is centrally located may be cheaper and more convenient than renting an apartment further away. If campus is not within walking distance from the apartment, you will need to seek out information about local transportation such as the bus or train. Purchasing a monthly ride pass will ultimately add to the expense of renting an apartment, and if you are unable to walk or use public transportation you may have to drive. Owning a car means paying for gas and insurance, so you will need to decide if having a car is too much of a financial burden.

If you are not able to afford an apartment on your own consider living with roommates. Rent and utility costs will be reduced when you have someone to help share the responsibility. However, roommates can also create additional stress, so be sure to create some ground rules that both you and your roommate are comfortable with.

Here are some ideas to get you started:

• Determine if you will be sharing groceries, or buying them separately.
• Decide if you be splitting the bills equally or dividing the utilities.
  
• Make an official guest policy. Some people are uncomfortable with frequent overnight guests, so it is important to understand your roommate's feelings before you decide on living together. If you know that your best friend or significant other will be staying over often, let your roommate know and encourage them to do the same. Communication is crucial to pleasant roommate relations.
• Divide the responsibilities. One of the most common roommate disputes involve chores. If you tend to be messy or disorganized and your roommate likes organization, you'll have to compromise in order to avoid arguments.

When you sign the lease many times you are required to pay your first month's rent, last month's rent and security deposit all at once. Be sure to find out ahead of time what will be due and have the funds available up front. If you find an apartment through a broker, you may also be charged a "finder's fee" due when you sign your lease. Try to avoid these by dealing directly with the landlord or use only the brokers whose fees are paid by the company or landlord, not you.

Lastly, it is in your best interest to acquire renter's insurance. Many large properties actually require that you carry a policy. If your apartment is ever broken into or if the building you live in has a fire or flood renter's insurance will cover the damages, usually with a small deductible. Renter's insurance can run around $20 per month, so budget accordingly.

Do you have any tips or suggestions to share? Let us know! We'll post your advice in Part II of our apartment living series. Check back next Monday for advice on furnishing and decorating your apartment both frugally and stylishly.

Thanks,

Savvy Student

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Featured Blogs

Finals season is officially over, and Savvy Student understands that industrious Brandeisians could use a break. Instead of linking you to articles written by financial experts or accountants, we want to share some of our favorite financial blogs by college students and recent graduates. We recognize that articles written by experts can often be difficult to relate to, so check out two of our favorite personal finance blogs, Poorer Than You and College Finance 101.

Poorer Than You
This blog follows recent RIT grad Stephanie through her financial struggles and triumphs. She takes readers through her initial financial mistakes, including the misuse of credit cards, and her subsequent triumphs, including paying off her debt, creating savings, and budgeting. Most useful about this blog is the detail and the number of updates Stephanie makes regarding her financial situation. Her blog exemplifies the steps one can take while in college to not only take care of mistakes, but also come out ahead upon graduation.

College Finance 101
Founded by two recent grads from Ohio, College Finance 101 offers a wider perspective than Poorer Than You because of their extensive team of writers. This blog provides advice and warnings about general financial topics including credit cards, student loans, and banking. Readers may also sort the postings based on topic using the tabs at the top of the page, making it easier to find specific information. We like this blog because it not only provides tips geared towards students, but it also links to articles about the economy to help this year's grads learn more about the current financial climate.

Do you have a favorite finance blog you'd like to share? Leave us a comment or send us an email to sfs@brandeis.edu. We'll post your suggestions next week.

Have a relaxing summer,

Savvy Student

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Money Management Center

Our goal at Savvy Student is to provide tips and tools for students to become financially independent while in school and long after graduation. That being said, when we find a great resource for students we want to share it. The University of North Texas offers free consultations, workshops and online training for their students and they encourage students from other universities to take part and enjoy the resources they have provided. Please check out the webpage for UNT's Money Management Center here.

At Brandeis we are in the process of initiating some of our own workshops. We will include information on avoiding credit card debt, debt management, understanding your student loans and various other topics. If you are interested in learning more about workshops at Brandeis or to hear about a specific topic please send an email to sfs@brandeis.edu.

Thanks again,

Savvy Student

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Student Loan Options

In the midst of an economic crisis, parents are more concerned than ever with finding ways to afford college tuition. Financial aid counselors are being buried under mountains of paper work sifting through tax returns to determine eligibility with the hope that they can ease these concerns. In many cases, scholarship or grant money is not enough to bridge the gap, so students and parents must look to loans as a way to afford tuition. Graduate and undergraduate schools alike offer federal Stafford and PLUS loans, federal Perkins loans and institutional loans where your school is essentially the lender. Depending on the situation, and of course interest rate, families often consider private loan options instead.

With so many different options available, choosing the right loan can be very confusing. With private loans especially, it can be challenging to figure out the terms of the loan, knowing when payments are required and what the total balance will be over the life of the loan. Finaid.org's Loan Calculator is a simple tool that will allow you to calculate the amount of interest that will accrue on your loan.

We have also included a link to Financial Aid Finder to help you better understand the different loan options a family has, and to weigh in on the advantages and disadvantages of each. If you would like to view this page click here.

Please let us know if you found this information helpful. You may also write in with suggestions on other topics you would like us to consider.

Bye, bye!

Savvy Student

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Frugal Friday: Grocery Shopping 101

Sticking to a budget at the grocery store can be very difficult, especially when you go on an empty stomach. As a college student, it is also challenging to find healthy food at a price you can afford. As a result, your cart is filled with inexpensive and often unhealthy choices. If this sounds familiar please keep reading.

Take a look at some of the tips and resources we've compiled to help you begin saving on your most basic necessity: food.

• Pick inexpensive but nutritious food.
• Stay away from processed foods. Products like fruit snacks, sugary cereals, and microwave dinners are packed with sodium and sugar. These items will make you feel full for a short time but ultimately do nothing for your appetite and your health. These products do not offer enough nutrition for the price, so your money is better spent elsewhere.
  
• Some of the most nutritious and inexpensive foods are beans (black beans and garbanzo beans are good choices), whole grain rice in bulk, frozen vegetables or fresh vegetables that are currently in season, and lentils. These foods can be used in various dishes together. Try combining black beans, frozen corn, and a cup of salsa in a pan. Saute until heated through and tender, and serve over brown rice. Another option is a vegetarian fried rice dish using brown rice and frozen vegetables sauteed in soy sauce and rice wine vinegar. Come up with more combinations before you go shopping to ensure that you maximize the number of meals you can prepare within your budget. For inspiration, check out the postings on Thrifty Fun for suggestions from other frugal eaters here.
  
• Know where and when to shop.
  
• Find out where the local markets are. Markets will sell better quality produce for less than the supermarket. Waltham hosts a variety of ethnic grocery stores, from Indian specialties to Italian delis. Indian markets will sell bulk bags of rice for less than the supermarket, as well as cheap spices and vegetables to enhance your cooking.
  
• If you are partial to supermarkets, make sure you go at the beginning of their sale cycle. Check out the circulars to determine when items are put on sale. Doing so will ensure you get the freshest products for the best possible price. However, do not just buy items because they are on sale or you have a coupon-- coupons are generally intended for processed foods and are worthless if you're looking to maximize nutrition.
• Be creative and try new things!
• Too many students fill their diet with the same foods-- frozen pizzas, waffles, pop tarts, and other convenience foods are some examples. The markup on junk foods is enormous and generally only 10% of the cost of the product is related to the actual food in the package. Branch out from these items by buying fresh and learning how to cook creative and tasty meals. Make cooking fun by inviting friends over for a pot luck party.
  
• If you're still craving pizza and waffles, try making your own. The ingredients you purchase will likely cost less than buying one unit of frozen pizza or one box of frozen waffles, and you'll get many more servings. Investing in small appliances like a waffle iron or a toaster oven will help you start cooking even in the smallest of spaces.
  

For more tips about grocery shopping, check out GetRichSlowly.com's list here. Sites like Thrifty Fun and Cheap Cooking will also provide some inspiration for cheap meals.

Do you have any cooking or shopping tips to share? Leave us a comment or send us an email as sfs@brandeis.edu.

Bon appetit,

Savvy Student

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