Monthly Archives: October 2012

Happy Halloween!

At the time of year when witches, ghosts, and spooky stories are on everyone’s mind, it seems only appropriate to bring up some scary financial decisions that many Americans make. When words like mortgage, investment, vacation, and retirement come to mind, people understandably begin to panic. For me, the spookiest financial decision I have ever made was to go to an expensive private university. With college prices increasing annually at rates exponentially faster than other commodities, it is sure to be on the forefront of many people’s minds.

Happy Halloween!

Although there are undeniable benefits to a college education, does an education from an expensive, private university get you much further than education from a more affordable state school? Am I guaranteed a starting salary equivalent to the yearly cost of my education? Am I willing to pay off loans for the next 25 years of my life?

These questions prove overwhelming to think about in the long run. For me, the decision to attend an expensive university was a calculated choice. However, in hindsight, I felt like I did not have all of the facts. For instance, where you go for an undergrad degree does not really matter if you don’t know exactly what you want to do. I, for one, am content to study everything from anthropology to Spanish, either of which I could study at any decent state university. Other financial factors include geographical location; if you choose a far away school, you must consider air fare. If you are lucky enough to receive financial aid, know that it may vary greatly year to year since you must submit a yearly application. Text books at any university cost hundreds of dollars per semester, something that people forget to consider as an included cost when they choose the expensive university. Scholarships, if you are lucky enough to get them, may have very strict retention clauses, and may be awarded only for a limited number of terms.

That being said, investing in education is an investment in your future. I have made an effort to use as many resources offered by my fancy private university as possible to ensure a stable future, especially given the historical state of the job market into which I will shortly be entering. The hundreds of thousands of dollars in interest and principal I will be paying off for several decades only give me a greater incentive to create a stable and lucrative future for myself.

College is a terrifying monetary commitment, one which couples begin saving for before they are even parents. Fortunately or unfortunately, a bachelor’s degree is becoming a prerequisite for innumerable careers. The question should not be should you go to college, but rather, are you willing to cope with the consequences of paying off 4 years of education for the next 25 years of your life? Now that is something only you can answer.

Smart Online Shopping, Part 1: Security

Online shopping has become so mainstream that much of the early hysteria over the potential identity theft associated with online purchases has waned. In place of this hysteria, though, many have adopted a rightfully placed healthy fear of having their purchasing data compromised. There are always risks associated with making online purchases, but there are also many ways to protect yourself and your financial data from being misused.

Sticking to secure websites and transactions for your online shopping can significantly reduce your risk of compromising your financial information. A simple way to see if the website is secure is to look for some sort of symbol and logo along the top or bottom of the website indicating that the company has protected it’s purchasing process. Often times, you’ll see a padlock, a key, a checkmark or some other symbol indicating that the company has secured it’s website for the protection of their customers.

Not all websites advertise their security, though. Another way to see if the website is secure is to look to the URL, that is, the address bar at the top of your Internet browser. Most URLs you see start with “http,” but some will start with “https.” The “s” stands for “secure,” and that little “s” means you can trust the security of the transaction you’re about to make, even if the website is not otherwise labeled as protected or secured.

But the presence of an “https” or a logo with a lock and key is never a guarantee of security. If you’re looking for added security, or if the website you’re dying to shop on doesn’t display the security indicators above, there are other methods for protecting your purchasing information.

Many banks offer alias cards for your credit or debit accounts. These cards, also called “virtual accounts” or “secure cards,” allow you to make online purchases without having to enter your actual credit or debit card information. Alias credit cards or accounts often have single-use numbers that wouldn’t work if someone tried to re-use their information maliciously. In the case of alias debit cards, you can transfer money to the alias account before making your purchase. Should the debit card number become compromised, the would-be thief would not have access to your full account, but would instead be limited to the amount you had transferred for the purpose of the purchase.

If your banking company doesn’t offer an alias card or virtual account, you can still use a single-use gift card for your purchases. These gift cards are often sold at grocery stores or gas stations, and are most commonly Visa or American Express cards. This is probably the safest way to purchase online, as the cards are not in any way linked to your actual banking information. Just like with the alias debit cards, any would-be thief who obtained the card number would be limited to the amount of damage they could do. In this case, the only thing compromised would be whatever amount remains on the gift card.

With so many easy ways to protect your purchasing information, there’s no reason to be afraid of online shopping. And, if you’re going to move forward with shopping online, check out “Smart Online Shopping, Part 2: Saving” for tips on getting the most bang for your now-protected buck!

What is a Cafeteria Plan?

A cafeteria plan is an employee benefit plan that allows an employee to choose where he wants his money to be invested. Also sometimes known as or a business plan, it is called a cafeteria plan because it allows the employs to have certain budget to spend in line with the facilities available or that the company has options in.

The benefits can vary; different forms include cash, health insurance, adoption assistance, paid leave and other benefits. The employee gets to choose between different types of benefits and to create a mix and match sort of plan that can include cash and/or a qualified benefit plan.

Most cafeteria plans today are operated through a salary reduction agreement. This enables the plan to be able to include a tax saving opportunity that can be enjoyed by both employer and employee.

The cafeteria plan is easy to set up; all that is needed to start a formal cafeteria plan is a document summary and a plan description.

This starts by reviewing a company’s cafeteria plan policy and helps to outline the expenses that are eligible for reimbursements. For instance if an employee is considering child daycare to cater for their child while they are at work, they can work out or estimate the daily out of pocket expenses which would usually help to cover up the daycare expenses. These are then multiplied by the weekly charge and by the number of weeks the child is the system, inclusive of holidays and vacations.

It is important to note that all the deductibles are exhausted during the year. After this, include the respected annual expenditure you believe you will claim and divide the final figure by the number of disbursement intervals that the company has planned for it’s financial year. This final figure will be taken out of your paycheck every period.

As long as you are in an eligible year, you then get to send the eligible expenses you incurred. These are filled in against a reimbursement claim form, after which a copy is made and then it can be sent either by fax or mail to the cafeteria plan provider for reimbursements.

While the cafeteria plan reduces on income tax payments for employees and employers, it is not a benefit that you will find typically with every firm. This is because it is not a federally enforced requirement for employers. As a result, not all companies offer a cafeteria plan or have a cafeteria plan policy but it is suitable for a wide range of businesses; even small business enterprises are eligible for this kind of policy.

However, it does pay to have one, apart from the usual tax savings advantages it offers; a job prospect certainly appears more competitive when a cafeteria plan is an option.

$100 Invested in Politics

Forever Stamps Investment
($100 invested in politics)

Investment Idea: $100 invested in Barack Obama for President.

Total Investment: $100

Total Time Cost: 00:05:00

Extra Costs: $0

Total Time Spent on Investment: Five minutes going to and donating.

Research and Preparation:

To complete this investment I just had to find where I could donate to the Obama campaign. I typed in And was welcomed by a great splash page. Simple and to the point it asked for my email and zip code the two most crucial things to any political campaign.
(Clean and sleek if it had asked for my SS number I’d have given it)
Obama since 2008 has been great at the splash pages and the sign up forms. The little details matter. Note the green “Donate now” button. It isn’t red for a reason. If it were red people actually would not want to press it as often (Think stop signs and red lights).

Since I had found what I needed I went ahead and filled in my email and zip code and pressed donate now.

The next page I was taken to had all types of denominations you could chose from or enter your own. I chose $100

$100 donation selected
($100 donation selected)
Note again that my selected “$100” donation is highlighted in green not red. Also note that the lowest amount on the selectable donations was $15. $15 isn’t quite $20 so it seems like a bargain but at the same time it is still at least an amount of money that could make a difference in this campaign. The central amount on the selectable donations was $250. A nice round number not too outrageous but which could actually do some good in the scheme of the campaign.

The next steps were simple putting in my address and credit card information. Straightforward and simple. The last step was bit odd I had to put in my employer and job.

Enter employer
(Political donations require your employer and job information)
This step came with a note:
“If you are retired, please enter “retired” in both fields.

Federal law requires us to use our best efforts to collect and report the name, mailing address, occupation, and employer of individuals whose contributions exceed $200 in an election cycle.”

I wonder how many people wrote down Bain Capital as their employer.

And that was that. I had just invested $100 in the campaign for Barack Obama for president. Good luck Barack!

Reason for Investment:

With the upcoming presidential election just two weeks away and with the end of the debate series last night I decided it was finally time to take out my wallet and give to a cause I believed in. In this day of Super PAC’s and billion dollar campaigns its now more important to give what you can to make sure the outcome is what you want and what you think is best. Since an investment at its purest is a bet on risk and an attempt to make sure you are safest, I believe Barack Obama will keep this country safest. He will make sure this country continues to grow not just the wallets of Republican billionaire cronies.

Obama’s policies on education (cough student loans cough), ending of the middle east wars, tough on banks, and universal health care are the exact things we need most to grow and maintain our dominance as the worlds last super power.

We don’t need more ships in our navy, I’m not rich enough to benefit from any capital gains BS, and cuts to education sounds horrible.

Take a step FORWARD, binders full of women is so 1940’s.


Super rare and collectible bumper sticker.

Forever Stamps Investment
($100 bumper sticker)
This investment also helps to provide peace of mind that I could help in some way to make sure this country doesn’t return to the Bush era war spending and tax cutting.

As well this is an investment in this country continuing its course of recovery over the next four years to make sure my other investments continue to grow.

To find an up to the minute price of this investment and my other investments click here!

Should I Participate in My Companies Employee Stock Purchase Plan?

Employee Stock Purchase Plans, ESPP are frequently offered as a perk by many large-scale, publicly traded companies. With employee stock purchase plans, companies offer employees the chance to own a part of their future, as well as their place of employment through stocks. An employer will usually offer a discounted price for shares in the company. Often, companies will also allow the payment on the cost of the stock to be deducted directly from a paycheck, eliminating the hassle of paperwork, as well as spreading the cost over a span of time.

Stock purchase plans benefit everyone involved. The employer gets the boost in revenue shares through the employees buying stocks. This allows the company more assets to innovate and expand. The employer also gets to tout the fact that the company is employee owned thus attracting the best and brightest talent who are enticed by the possibility of owning a portfolio. The price of the employer’s stock may also rise if enough of the employees buy enough shares to force a price hike. The employee gets a discounted share in the company, a vote in the share-holders’ meeting, and the pride of owning a portfolio. There is also the distinct possibility that the stock may mature and grow which would net the employee a tidy little profit.

Of course, there are downsides to this form of employee compensation. As a stock can rise dramatically leading to exponential profit, it can also decline sharply eliminating your stock purchase or at the very least rendering them almost worthless. This is a continuing source of anxiety for investors. If your company’s CEO resigns and the stock that you just purchased drops, there is a real potential that you may instantly lose money. If that hypothetical were to happen your company could also lose much money in the blink of an eye as the price of their shares also drops.

This demonstrates the need to be conservative when playing the market, even when it comes to employee stock purchase programs. Only invest in the employee stock program if you truly believe in the company that you work for. If you really believe that they will not only be around in five years but also will be posting a profit, then by all means, invest in your workplace. If you think that management is incompetent and the products are shoddy, then don’t waste your time or money. Other red flag warnings to decline on an ESPP include recent scandals, deficits, and reduction of other benefits. These can be indicators that the company is not on stable financial ground and needs to raise funds.

A good rule of thumb to follow when it comes to the employee plans is this; Would I invest in this company even if I didn’t work for it? If the answer is yes, then go see Human Resources and fill out the paperwork. If the answer is no, then ignore the discount being offered and leave your money in your wallet.

How Does a Credit Score Work?

A credit score is a number that is arrived at after an individual’s credit files or reports have been statistically analyzed based on particular criterion that are used to determine that person’s creditworthiness, or the risk involved in extending that person further credit. Unknown to a lot of people is the fact that this score is not only determined by how faithfully you keep to repayment deadlines or fulfill your debt obligations but also how often you successfully apply for credit services and fulfill their obligations.
credit card

Legally, credit bureaus are mandated to collect this information. Companies then involved in extending credit seek this information from credit bureaus and are furnished with it. It is against this information that the decision to extend an individual credit is made.

Credit scores have several functions as a financial tool within an economy, both at micro and macro-economic levels. They help credit and financial institutions decide the credit worthiness of an individual or a firm, and the risk involved in extending them credit, thereby allowing them to make informed, calculated decisions. They also act as a form of control, helping individuals monitor their own credit performance or worthiness while at the same time letting them know that any indiscreet behavior will be noted. Credit scores can also help at a fiscal policy level in determining whether measures and tools in place to govern the credit provision industry are actually effective, or working, and to actually inform fiscal decision makers what credit levels the economy is operating at.

Typically banks and credit card companies use this information but several other firms, like government departments, utility companies, mobile phone companies, landlords and the hotel and leisure industries all source this information from credit bureaus.

The calculation of credit scores varies from bureau to bureau but some general rules of thumb exist, and a typical simplified format is outlined below:

35 – Payment History
30 – Credit to Debt Ratio
15 – Credit History
10 – New Credit
10 – Credit Types in Use

Thus the credit score or credit rating is calculated as a percentage of 100. The break-down above implies that if you excel in one area and lack in another, only fixing the areas which you lack are going to improve your score.

The advantages of having a good credit score are about as obvious as the ones resulting from having a bad credit score. With a good credit score, it is easier to get credit extended to you, at lower interest rates, and with simpler terms. Bad credit scores often imply that requests for credit are either ignored or end up having credit extended at high interest rates with additional built-in costs like insurance and stringent terms to guard against bad debt.

Different scoring systems are used, but in the United States, the most commonly utilized system was designed by a company called the Fair Isaac Company and runs under the acronym FICO; a resultant score derived when using this system is called a FICO score. FICO controls the greatest percentage of the credit score market in the United States and Canada although there are several other competing firms that collectively share a very small percentage of the market as well. In the US, FICO scores range from 300-850, with 723 being a median score as of 2010. This figure reflects the likelihood that a consumer will go 90 days past due or more in the subsequent 24 months after the score has been calculated. The higher the consumer’s score, the less likely he or she will go 90 days past the due date in those subsequent 24 months.

It is important to note that different services recognize different limits of scores below which they are not willing to operate, depending on the economic situation and their own financial situation. The risk, indeed, varies from credit service (mortgage, credit cards) to companies as well.

Car Insurance

After college or before it many people start to find themselves owning their first car. Something that many people have trouble deciding is what insurance they need for their car. It is important to consider a few things while buying insurance. The amount of coverage you are required to have, the amount of coverage you actually want, and what company fits your needs best.

Car Insurance
Don’t even ask what car insurance on a car like this is!

By law you are required to at least have a minimum of coverage and car insurance to legally drive a vehicle. The coverage varies by state and it is important to look at what your state requires for a minimum of insurance coverage. This is meant to protect all people on the road.

You may indeed want to buy more coverage than is required and this may be the best thing for you to do. Minimum coverage does mean minimum cost, but it also means minimum protection. Some minimum coverage’s might not protect your car or you well enough. It is important to look at different coverage plans and determine which things you want covered such as personal liability coverage, which helps to protect you from lawsuits in case of an accident.

It is also important to shop around and get quotes from different companies, and to always checkout reviews about the companies you get quotes from. If you get the exact same coverage from one company for a cheaper price than it would be from another, than it is probably a good idea to choose them.