After reading an article on SmartMoney on what a student needs financially for college, I thought I’d give my own thoughts about the things you’ll need to establish a solid foundation and succeed financially in college. Before I do that, in a future article (ha! tricked you), I wanted to explain how I dealt with finances in my “formative years,” i.e. college. Personally, my financial situation was largely unchanged between the time I entered college and the time I left from a liquid asset perspective. My bank account balance when I started in 1998 and when I finished in 2003 was probably very close numerically. In looking back, I’m glad that I didn’t fall victim to credit card debt and the other traps of our consumerism culture. That’s not to say I didn’t spend money, I certainly did, but I’m glad I didn’t spend in excess – which is the difference. It also helped that Pittsburgh, PA is an inexpensive town to live in.

Now, I said it was largely unchanged from a liquid asset perspective; from a non-liquid perspective, I was in the hole about twenty thousand dollars because of student loans but I think that’s acceptable because it’s being financed at 3.5% (all consolidated Stafford loans). From a retirement aspect, my father told me about Roth IRAs so I had one of those as soon as it was possible, though it was still recovering from the 2001 burst like everyone else’s.

Entering College
When I went to college, I did not have a credit card. All I had was an ATM from a bank account at home, a checkbook, and my wits. I soon signed up for an AT&T Universal card that no longer exists and used that card for approximately 7 years, earning 0% cashback but also paying no annual fee – which was good enough back then. I didn’t get a local bank account until my sophomore year and basically withdrew enough money on my trips home to cover me the couple months until I would go back.

Earning Income in College
I think my entrepreneurial spirit was fostered in my time-abundant college years because throughout high school I had believe that hard work in school is what you needed because it would get you into college and get you a good paying job. While I still believe that, I think that the idea that I could sell something on eBay and earn as much as I did doing a work-study at minimum wage (or slightly above it) really turned my world upside down. While I continued to work during the summers and winters, during the school semester I would instead sell items on eBay or work on side projects rather than take on a time consuming job. With summer internships, I was learning valuable knowledge and gaining work experience that would translate into something that would extend beyond my job. With a semester work-study, I learned nothing and so it was nothing more than a paycheck… well I might as well get paid working fewer hours and doing things that were fulfilling in other ways. So, my earning of income was from summer internships, winter jobs, and odd projects during the school year.

Spending in College
The limited amount of cash I kept on-hand and the “poor student” mentality reinforced the fact that I couldn’t be spending like crazy, which was good, because if I spent all my cash then I’d be in trouble until my next visit home (this would only be true for my freshman year but it was enough to reinforce that mentality forever really). What helped a lot in curbing spending was the fact I didn’t have a car, which meant no maintenance bills but also meant I was going to malls to buy clothes or things like that. My spending was basically on food, alcohol, surprise surprise, and electronics like an XBox, computers, and other gadgets. Since I didn’t make any big purchases and Pittsburgh was so cheap, it wasn’t that hard to not spend a whole lot of money.

Saving in College
Heh, didn’t really do that outside of a Roth IRA. I can’t say I was financially prudent besides spending less than I earned though even that wasn’t a conscious decision as much as it was a product of not spending what wasn’t in my wallet.

Leaving College
By the time I left college I probably had two or three credit cards, relying primarily on a Discover card because it offered double cashback ($20 cashback became a $40 gift certificate). Discover was my main card for that reason and I used it so often, mostly for online purchases that I would resell, that I had memorized the card number. Other than the credit cards, my financial “evolution” wasn’t really as far as my writing today would indicate. I didn’t learn much about financial topics until much much later so if you’re going into college or just leaving college and find yourself clueless, don’t fret – I didn’t know much either (not that I know a ton now but writing for this site gives me ample opportunity to learn and get corrected when necessary).

Ultimately, I think I certainly made many financial mistakes while in college but the fact that I lived in a cheap city and because of my situations, the mistakes were minor or practically non-existent. The credit card I had was pretty much worthless except in emergency situations and I was pretty much on a financial island, but I didn’t know that and luckily it didn’t hurt me. Pittsburgh was inexpensive so even if I didn’t have a budget (though I admit right now I still don’t have a budget), my subconscious kept my spending in check enough that I didn’t get into any trouble. Knowing what I know now, I probably could’ve left college with a few more dollars saved while still having as much fun as I did and in a future article I’ll write what my ideal financial college setup would’ve been.

If you want to share your college financial war stories, good, bad or ugly, please do!

While traveling abroad will always require a passport, there are many countries that won’t require a visa if you’re visiting for only a short period of time? In the near future I’ll be making a short trip to Taiwan for family reasons and so I was concerned that I wouldn’t have enough time to apply for a visa and get it in time for my trip. Luckily, if you are a US Passport holder and the trip is for less than thirty days, a visa is not required. This saves me the headache of applying for and hoping its approved in time plus the fees (which are in the neighborhood of $50-100, I’m not sure).

So, if you’re planning a trip, Wikipedia’s US Passport entry has a list of countries and stay periods where a visa is not required. You can save yourself some time and some money by skipping the visa. With the US dollar as weak as it is, you’ll probably want to save that money so you can spend it on your trip!

For a quick reference, in European Union countries the stay period is 90 days, England’s period is 6 months, and for most other places its 30-90 days.

By everyone I mean random people who reach the site via Google, but they’re common questions that I read or hear all the time so they make for a quick Q&A article. If you think any of my responses are off target, certainly give your opinion as well because I may very well be wrong!

Should I put more into my 401k or open Roth IRA?
The general consensus is that you should contribute enough into your 401k in order to earn the company match, if one is offered, otherwise maximize your Roth IRA contributions first. The logic behind this is that the Roth IRA is a powerful tool but not as powerful as free money (the match). This also has the added bonus of diversifying the tax burden of your retirement assets. So, get the match, max the Roth, then go back to the 401K.

Should I use my IRA account to pay off debt?
Noooooooooooooooooooo! Actually, you can do whatever you want but considering that you can’t put the money back into your IRA, I think it’s a bad idea. Don’t pilfer your retirement assets to pay off the debt, it may be better for you to pay off the debt in lieu of additional contributions or perhaps ratchet back your spending.

How much money should I put in my 401k?
If you can afford to, the maximum. Save for the future! Actually, what you should do is put as much as you can afford to while maintaining a reasonable lifestyle. You don’t want to max out your 401k at the cost of enjoying life now but you shouldn’t be making weekend trips to Paris and ignoring your 401k. If you want to make an error in either direction, then err on the side of caution and pump up the 401k now because time will be on your side. Waiting even five years to start contributing can result in a difference of tens of thousands when retirement comes around the corner.

What do companies match on 401k?
They will generally match your contributions up to a percentage. At my former job, if you contributed 6% of your salary then the company would contribute 3%. If you contributed 10%, then they still would kick in only 3%. If you contributed 1%, they gave you 0.5%.

Can a college student open a Roth IRA?
Anyone with income can open a Roth IRA and there are no rules for where the money has to come from. For example, if you had a summer job and earned $2,000 but blew it all on movies, diners, and dates then your parents can give you $2,000 to contribute to your Roth IRA. The only thing that matters is how much you earned. Also remember the contributions are after taxes so it’s not your gross income, it’s your take-home income that limits you.

If my investment became less can I put more than $4,000 in IRA?
Unfortunately no you cannot. The value of the Roth IRA contribution isn’t your limiting factor. So if you contributed $4,000 and because the market tanked the Roth IRA is only worth $1,000, then you cannot contribute another $1,000.

A few weeks ago I talked about how we handle our coupled finances but didn’t mention the alternatives that we decided against and why. In many instances we’re talking 1A and 1B, none of these alternatives are clearly or totally inferior to our system in any way, shape, or form; it’s merely that we decided to go with the system that we’re working with now. I’ll break down coupled finances as we did before, into the three systems of Where The Income Goes, How We Pay Bills, and How We Save and detail the alternatives that we didn’t go with.

(Click to continue reading…)

When I read this question about “fake” engagement rings, I was pretty surprised. Essentially a young man wants to get his girlfriend a nice engagement rings but can’t afford a “real” diamond yet so he was going to buy her a synthetic diamond and then make the swap later. What he wants to know is whether he should tell her or just make the Indiana Jones type swap when she’s not paying attention. Okay, I may have laughed when I read how ludicrous of a question this was, in part because of the deception and in part because of the emphasis on “real” vs. “fake” (synthetic).

Obviously the experts tell him to be truthful with his girlfriend, you had to have seen that coming (especially since it’s a column about ethics), but I want to address the idea of synthetic diamonds. By synthetic diamonds, I mean diamonds that are lab created and not nature created; I don’t consider actually fake diamonds, like QVC’s Diamonique®, to be synthetic. Lab created diamonds are actual diamonds except they are absolutely perfect and generally cheaper than naturally occurring diamonds.

Considering that the concept of the diamond engagement ring was a creation of De Beers, does it really matter, I mean when it really comes down to it, how much it costs? That’s really the only distinguishing feature between a synthetic diamond and a real diamond – the cost. Does your love mean any more or less because the diamond was created by a guy in a lab coat or eons of pressure? Probably not.

Your fiancee’s (or your) friends will still oogle over the ring, oblivious to its actual origin (no one will ask for the diamond’s birth certificate because no one will care) because that doesn’t matter. Most are just caught up in the excitement of another engagement and ultimately, the ring is only a small part of the bigger picture.

Personally, I didn’t get a synthetic diamond because it never entered my mind as an option, probably because De Beers and the diamond cartel has me, along with a whole bunch of other people, thoroughly brainwashed.

This weekend me and five or six of my friends will be heading down to Norfolk, VA to participate in the Ghent Bar Tour in support of the Make A Wish Foundation. I wanted to give a special thank you to FMF, NCN, and Mapgirl for their generous donations (especially FMF) to the cause and anyone else who donated but didn’t email me. While the response to the FMF and my offer to match dollar for dollar donations was less than spectacular, we both decided to send our full amounts in anyway. Anyway, it should be a great time, I look forward to seeing the event for the first time (if you can make it, let me know!), and I hope you all have a great weekend.

• JLP asked if employers should reduce 401(k) options.
• MBH is going through something most eBay sellers go through, the fear of losing a perfect feedback score. So, MBH thought about it and asks how far you’d go to keep a perfect feedback score.
• Flexo asked if Wal-Mart back to school sales are newsworthy.
• FMF discusses the idea of blending index funds to improve your returns.
• Nickel analyzes his net worth figures and starts to account for his home equity.
• Lazy Man has started looking at 529 plans. Thinking about paying for college can give anyone shudders.
• Jeremy asked if it’s better to buy a stock before or after it splits. From a theoretical standpoint, it shouldn’t matter but maybe it does!
• Ben wonders if minimum wage is too low. Personally I think the market should dictate wages, the government has enough to worry about. This may be a departure from my earlier thinking though and I reserve the right to change my opinion at any time.
• SVB looks at the science behind spending in quite possibly the longest url ever.
• Sun looks at the tradeoffs with paying off debt vs. investing.
• Golbguru has published his fifth tip on buying a car.
• Be wary of retirement investing scams, if it looks too good to be true, it probably is.
• I started another blog about foreclosures, in the event some associates and I decide to start some real estate investing, so one of the topics I reviewed was the difference between deeds of trust and mortgages.
• Beyond getting a security system, there are some smart tips to keeping your home safe.

Two days ago, as my fiancee and I were leaving a meeting with a wedding caterer, one of us noticed that my front passenger tire was a little low. I had been noticing a little sluggish handling as of late but nothing surprising but I only a few hundred miles away from when I needed the tires rotated and balanced so I brought it into Costco for some service.

For those that don’t know how tires work at Costco, you might pay a little bit more for the tires but what you get is a “lifetime warranty” against any sort of problems and you get lifetime rotating and balancing. The lifetime warranty means they’ll repair any damage absolutely free and if something bad really happens, then they will prorate you the cost of the tire based on remaining tread.

Also, Costco uses dry nitrogen to fill the tires, which they claim is better. The reasons aren’t good enough to convince me to use nitrogen if it cost any more than regular air, at Costco it doesn’t cost more. In fact, I erroneously though that you couldn’t top off a tire filled with nitrogen and that’s part of the reason why I brought it in. Luckily I did because they found a nail in the tire!

All told, balancing and rotating, including the repair of one tire, took approximately thirty minutes and cost me absolutely nothing. When I priced out tires before, the difference in cost between Costco and another place was less than ten dollars a tire so I saw the increased price as sort of a warranty, a really good warranty.

Nashawn recently asked on my post about opening a Roth IRA right this minute for some advice as to how she should invest $500 with a Roth IRA. She’s looked at Vanguard’s mutual fund accounts and ran into the minimum balance requirement for each of the funds. At Vanguard, the STAR Fund has the lowest minimum balance with $1,000 – a good $500 more than what Nashawn has at the moment. If I were her, this is what I’d do…

Wait Until April 15th Next Year
You have until tax day next year to contribute to your Roth IRA this year. That is, you have until April 15th, 2008 to contribute to your Roth IRA for 2007, giving our heroine a good nine months to try to get her balance up to $1,000. This is predicated on the fact that you are sold on Vanguard’s mutual fund accounts.

Consider Another Brokerage
You don’t have to go with Vanguard and you don’t even have to go with their mutual fund account, with a regular brokerage account your account balance minimums are lower than $3,000. TradeKing, Sharebuilder and Zecco are atypical brokerages that don’t have account minimums and both are known for their cheap/free trades. That’s crucial for a balance of $500. TradeKing has no custodial fee but Zecco charges $30/yr and Sharebuilder charges $25.

When it comes to the bigger brokerages, your pickings get slimmer. Fidelity will waive their minimum of $2,500 if you can commit to a $200/month contribution (Fidelity has no annual fee). If you can commit to that, you might as well wait a few months and go with Vanguard (if you wanted).

Summary: If you’re sold on Vanguard and can wait, wait; otherwise there are plenty of other options out there whether you want a discount brokerage like TradeKing or a more traditional name like Fidelity, just keep an eye out.

If you know of any brokerages with low account minimums and low annual fees for Roth IRAs, please share!

We were cleaning around the house a couple weeks ago when my fiancee noticed that the wall by the shower was showing some water damage. When we cut out the piece of drywall, we also noticed that some of the tile on the floor were raised and uneven and popped them up as well. While the water damage wasn’t severe, you always want to catch these types of things as early as possible because mold growth and the like is something that can be handled easily when small, not so easily when much larger. We also weren’t happy with the existing tile anyway so ripping those up didn’t cause any heartache. The only part of the process that gave me some concern was the part about removing and reinstalling the toilet… mostly because it’s gross. (anyone who has ever done this can attest to it, that wax ring ceases to be a “ring” and ceases to look like anything but the epitome of grossness)

The tiles came up pretty easily, we cleaned up the subfloor nicely, and as we were going to install the tile, I quickly learned that the little tile cutting device I had was terribly inadequate. It was one of those hand scoring and cracking devices but with 12″ x 12″ tiles, the cracks would make it straight about two inches and then bent off on some weird angles. Anyway, I borrowed a friend’s wet saw (which must be used outside!) and was able to make some nice cuts with that.

The project itself, once we got going, took about three hours to complete with some waiting in between but now the bathroom looks spiffy! The old tiles were this dingy dirty inch by inch white tile that comes in sheets and the new ones are just painted ceramic (like the $1.50 a square foot variety from Home Depot) but they make all the difference. The bathroom is pretty small, maybe about five feet by five feet, but the project was fun (even the toilet part) and didn’t cost us a pretty penny.

Hedge funds have been getting a ton of notoriety lately because of their gigantic returns and people are going nuts over them and their fantastic returns. The short description of a hedge fund is that a limited number of individuals (accredited investors) are allowed to invest in a hedge fund and, because they are open only to accredited investors, they aren’t regulated by anyone such as the SEC. As such, they are basically free to invest whatever they want (subject to whatever agreements they made with investors) and they’re paid based on asset size and performance and they’re paid very handsomely. They’re generally riskier than a mutual fund but usually you don’t care because you want the rewards.

With risk, comes reward. And for the poor souls who invested in Bear Stearns’ High-Grade Structured Credit Enhanced Leveraged Fund and High-Grade Structured Credit Fund, they were told last week that they done. Finished. The High-Grade Structured Credit Enhanced Leveraged Fund was now worthless, losing essentially all $638 million, and the High-Grade Structured Credit Fund lost 91% of its $925 million – all because they were highly leveraged in the sub-prime lending industry. For those of you keeping score at home, that’s over $1.4 billion dollars lost. One point four billion dollars.

With risk comes reward… but don’t forget the risk.

Accredited Investor: In the US, for someone to be an accredited investor, they must satisfy some qualifications according to the Securities Act of 1933. The qualifications are that you must have net worth of $1M or have made at least $200k each of the last two years ($300k if you’re married) and can expect to earn that much this year.