Personal Finance 
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Roundup: McCain vs. Obama, Taxes & Other Good Stuff(tm)

If you want to compare the economic policies and plans of Presidential hopefuls John McCain and Barack Obama, CNN Money has a good comparison between the two on a variety of issues from Social Security to Personal Taxes.

Jeremy at Generation X Finance has a very good explanation of why the GAO report of 2/3rds of companies paying zero tax is political hogwash. Besides Jeremy’s good points, famous United States Court of Appeals for the Second Circuit judge Learned Hand once said – “Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.”

SVB tackles the question of saving for college, a question I’m going to put off for a little while.

Nickel’s favorite cashback credit card is the Blue Cash from American Express, a card I don’t have. It seems to have a lot of great features, like a comparison of your cashback performance, and good cashback categories as well.

The Consumerist confirms once again why I love Southwest in publishing it’s top 3 most and least “fee crazy” airlines. Southwest was they’re #1 least fee crazy airline.

Flexo wrote about a study that says sleep makes you smarter.

Have a great long weekend!


 Personal Finance 
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7 Deadly Sins of Personal Finance: Being Penny Wise, Pound Foolish

7 Deadly Sins of Personal FinanceIt’s fitting that the sixth deadly sin of personal finance would be this one, after making a case for adequate insurance in the 5th deadly sin. Sometimes, in the quest to be frugal, we make decisions that can be short-sighted. These decisions, which may be beneficial in the short run, end up costing us big dollars in the long run because of unintended consequences or unforeseen circumstances. This is why the sixth sin of personal finance is …

Being Penny Wise, Pound Foolish

The simplest and most relatable example I can think of is buying 12-packs of Diet Coke at the super market. At normal prices, a 12-pack costs about four bucks a piece, for a unit price of thirty-three cents each. When it’s on sale, you can get a 12-pack for only $2 a piece (5 for $10 deals in the summer happen about once a month). I would only buy packs when they were at the $2 price… and then find myself spending $1.39 for 16 oz. bottles whenever I had an urge for Diet Coke. Penny wise… pound foolish.

That was a simple example, how about a more realistic one? Let’s say you’re a young professional looking to buy a car and trying to find easy ways to some extra money. You stumble onto my post about credit card offers and think about signing up for a few cards for their bonuses. Bad idea. In the short term, you might get a few hundred bucks signing up for cards and spending the required amount but in the long term, you lower your credit score. That lower credit score will result in a car loan with a high interest rate. If you’re planning on buying a house in the next year, avoid these types of things!

Finally, here’s one that I grappled with while I was in school: working during college. My dad and I often discussed whether I should work while I was in college. His reasoning was that I was going to school to get a degree, not to work a part-time job that would distract me from the primary goal. I understood my Dad’s position, why work for $10/hr when I was paying $30,000 a year for tuition?

But I was impetuous and eager to earn my own way in the world, so I took some odd jobs and did some things on the side. Fortunately none of the jobs ever detracted from my study time (while my grades weren’t stellar, I could claim graduating early which saved a good chunk of change) but it could have. While I’m not saying you shouldn’t work in school, make sure you’re working for the right reasons. Working at a research assistant in your field of study is a smart move, working anywhere because you need the money to pay for school is a smart move, working at the local coffeehouse so you have some beer money is probably not the best.

To make sure you’re not committing this deadly sin of personal finance, weigh both the long term and short term impacts of the decisions you’re making. You don’t want to be too heavily emphasized in either direction.


 Career 
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US News & World Report’s Best Colleges of 2009

While these types of lists are about as valuable as lists for the top paying jobs, they sure are fun to read, aren’t they? I put even less stock in these types of lists since they’re far more generic than top job lists and less quantifiable. It’s like when the coaches are polled to get the rankings of the NCAA Division I football teams… I can’t remember the last time a pre-season #1 ended up with the trophy that next January (I don’t follow much college football though, I did go to Robocup powerhouse Carnegie Mellon).

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 Devil's Advocate 
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Don’t Go To A Private University

Devils Advocate Logo
This is a Devil's Advocate post.

All throughout high school, the importance of going to college was everywhere. If it wasn’t my parents, it was my teachers. If it wasn’t my teachers, it was the guidance counselor. Everyone stressed the importance of college. In fact, they were even more specific. They stressed the importance of getting into a good college, which in guidance counselor terms meant a college that was good in the field you were interested in. In many many cases, that college was a private university. While safe advice, it’s not necessarily true.

Going to a public university gives you a better shot at success than a private university. You don’t have to go to a private university to succeed. In fact, going to a private university gives you no advantage over a public university. To take it to an extreme, going to a private university puts you at a disadvantage in life because you are paying significantly more for your education, thus saddling you with debt obligations, with no benefit.

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 Devil's Advocate 
55
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Don’t Pay Your Children’s College Education

Devils Advocate Logo
This is a Devil's Advocate post.

You should not sacrifice your retirement, your savings, or your future financial stability in order for your children to attend college. They are fully capable of supporting themselves, just as generations have before them.

The average cost of a year at a private four-year college institution in 2007-2008 was $23,712. The cost of a year at a public four-year college institution was $6,185. Both were increases of over 6% from the prior year and don’t even include room and board! [CollegeBoard.com]

Bottom line (a surprise to no one): College is expensive.

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 Personal Finance 
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My Best Financial Moves in College

When Patrick at Cash Money Life tagged me for this meme, he said that I probably had a couple little “hustles” going on the side when I was in college. I have no idea how he knew, though I had hinted about them in the past (selling stuff on ebay, online poker and blackjack), I don’t think I ever really wrote them all out in their full glory. I had some pretty lucrative things going, in college student terms, and it certainly easily sustained my lifestyle. However, the number one best financial move in college made the rest pale in comparison.

The number one best financial move I did in college was to graduate a semester early. That one move alone saved the cost of one semester’s tuition at Carnegie Mellon University, located in Pittsburgh, PA; which amounted to somewhere in the neighborhood of $15,000 plus room, board, food, whatever. I was able to do that because I always loaded myself up with classes, with AP classes in high school and then regular classes in college, and always pushed myself to the limit for those three and a half years. I don’t think all my little side projects, in total, earned close to that.

Of course, that financial move isn’t at all interesting and is borderline boasting (“oh look how smart Jim is!” we won’t go into what my grades were, shhhh!), so let me tell you about the most interesting of the side jobs I had:

Selling on eBay: eBay had started to get big and the whole “Buy Hot Deals from Fatwallet and resell on eBay” was still in its nascent stages. Whenever I see someone trying to make money, I try to figure out how that person is making money and then try to do it and then improve on it. So I saw these great deals on eBay for brand new products and so I investigated where they must be getting these great deals. Some were getting them wholesale (I didn’t want to get a tax ID and go through that process so I skipped it) but some were just buying stuff that was cheaper after rebate and then selling it on eBay. I did that a couple times before I realized the effort wasn’t worth it.

Eventually, I realized that what you needed to do was find products on sale where the eventual buyer wouldn’t be searching the Fatwallet forums or other deal sites. Computer and electronics shoppers are savvy enough to search the forums for a deal so eBay margins on those items is much lower. If you want DVDs, hats, and sports jerseys… those shoppers go to eBay first. Over the course of a year or so I sold maybe a eighty Michael Jordan Wizards jerseys, fifty John Deere hats (this was after Ashton Kutcher made them popular on Punk’d), and who knows how many DVD sets (my fiancee likes telling the story about how we ripped open a package from Canada of Band of Brother Gift Sets and then shoving them into packages for the post office because I was late on shipping them).

Eventually it got to the point where I was tired of looking at the eBay completed sale pages to try to figure out how much something could sell for and I put that Carnegie Mellon Computer Science education to good use. It took a few hours but I put together a Java application that went onto the eBay website and screen scraped the text off the completed auction pages. It collected the last two hundred auctions and then ran some simple statistic numbers. It told me percentage sold, average sale price, standard deviation, range, and who knows what else. I just wanted to know, in a few seconds, whether I could make money with a deal. It eventually started collecting the names of bidders, repeat bidders, losing bidders, and other information that would tell me how many people out there still want this stuff. So if someone was a losing bidder many times, I know at least one person is going to probably want this.

I actually sold the tool, after converting it from a Java app with a GUI to strictly command line, to a PhD candidate friend of a friend for $500, the first, and only, time I had sold a piece of software for money. It was pretty cool! Now eBay’s systems make the tool useless as they now require login, sanitize much of the bidder information, and otherwise make data collection difficult for people who don’t use their API. It was still a ton of fun though and I learned quite a bit from doing it.

So there you have it, both the smartest and the most interesting financial move I made in college. The smartest overall move, of course, was meeting my lovely wife! :)


 Credit 
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How To Start A Credit History

When you’re young, have little or no income, and want to build a credit history, it’s really difficult. The current credit environment has made it much more difficult so here are a few methods I’ve used, or have seen recommended, in the past in order to build your credit history.

One tip that has been removed from lists like these is the Authorized User tip. In the past, a parent could add a child onto one of their accounts as an authorized user and the child would see credit history benefits. Many people took advantage of that by “renting” out these authorized user slots and so FICO responded by cutting that link. Now, it appears, that authorized users have no bearing. This is the case of people trying to subvert the system for profit and the system, rightfully, punishing everyone. You can read more about the whole authorized user practice here.

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 Career 
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8 Job Tips for New Graduates

This is a guest post by Anna Ivey, more on her at the end of this article.

The working world is a completely different beast from the college world, and the transition can be a bumpy one. There’s been a lot of talk about how Gen Yers demand meaningful responsibility on the job, and I’m all in favor of internships and starter jobs that offer opportunities for challenge and increased responsibility. However, you have to earn those things, and prove you can handle them.

I’ve also noticed a fundamental lack of respect by many twenty-somethings for the people they work for. That lack of respect can manifest itself in something as small as addressing an email or consistently refusing to follow — or even acknowledge — instructions. (And even if your boss is a drooling idiot, it’s in your interest not to reveal your contempt.)

The following eight tips might seem completely obvious to some people, but I’ve seen this behavior often enough that I’ll list the most common issues here, as simply and bluntly as I can.

1. Respect the English language.

If you can’t be bothered to spell properly when you’re writing to your boss or a customer, what does that say about you? We all fall victim to typos, and there are certainly different standards for text messages or wiki postings (or blog postings!) and more formal kinds of communications. But… ignoring the “shift” key altogether, when you’re writing to someone you’re supposed to impress? Not good. Same goes for proper grammar and precise vocabulary. Language is power. Don’t believe me? Read Orwell’s Politics and the English Language (“the slovenliness of our language makes it easier for us to have foolish thoughts”).

2. Banish “hey.”

Banish “hey” from your written communications (and spoken communications, for that matter).

Your colleagues are not your BFF’s (“hey dwight”), or even your MySpace/Facebook friends. They might turn into friends, but don’t impose that casual familiarity unless and until the relationship warrants it. Posting a message on someone’s Facebook wall and writing an email to your boss are two completely different things. (I remember calling someone a few years back to offer him a job, and thinking how badly I wanted to retract the offer when he told me how “stoked” he was. Argh.)

3. Follow directions, and don’t make your boss ask twice.

If your boss asks you to put the customer name in a header for all of your project documents, don’t send him a document without the customer name in the header. Simple, right? And if your boss has to remind you, don’t make him remind you again.

4. Don’t ask for clarification of perfectly unambiguous instructions.

If you’re asked to get the TPS reports on your boss’s desk by the afternoon, don’t ask him, “When do I need to get you those reports?” Or if you’re asked to restrict your report to 5 pages, don’t send him an email asking, “Is that a hard limit?” Your boss’s time has value, and stupid questions tend to waste his time. (Contrary to the brainwashing you’ve received in school, there is such a thing as a stupid question.)

5. Just OK is not enough.

Every day that you show up at work is another day you need to justify your employment. If you’re not doing your best, why should they keep you? Your job is not pass/fail, and the job interview never really ends. Don’t wait until your first performance review to shape up.

6. Tell your parents to butt out.

Don’t ever — EVER — let your parents contact your employers. If you want to be respected as a mature, independent professional, act like one and leave mommy and daddy out of it. Expecting your employers to deal with your parents is beyond lame. They hired you — not your parents — and it’s not a package deal.

7. Get used to grunt work.

I don’t care how smart or “entrepreneurial” you are, or how impressed you are with yourself, or how great your parents think you are. When you’re starting out in the working world, you’re going to do a lot of grunt work. It’s the only way to learn the ropes, and nobody is above it. Nobody. If you think you deserve to be entrusted with matters of importance in a starter job, you have delusions of grandeur. Plus, true entrepreneurial types do plenty of grunt work, and they don’t complain about it, because they know it needs to get done if the overall project or venture is going to succeed.

8. Understand your role.

As long as you’re reporting to someone, understand that your job is to make her life easier, not the other way around.

Anna Ivey, a recovering lawyer, decided the fates of thousands of applicants as former dean of admissions at a top-ten law school and now works with high school students and twenty-somethings to help them make smart choices in school, at work, and in life. Anna has appeared on CNN and Fox News Channel, and has been featured in the New York Times, the Wall Street Journal, the Boston Business Journal, Fortune.com, Smart Money, and Marie Claire. Anna speaks at colleges around the country and publishes The Ivey Files, a blog for twenty-somethings, the parents who love them, and the bosses who manage them. Learn more about Anna at www.annaivey.com.


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