College Articles

How much rent or house payment can you afford and still live comfortably?

You must decide between a couple of places, the cost is only a couple of hundred different a month and one place is so much bigger. Should you spend the extra money for the extra space or not? Will you end up putting yourself into a bind down the road if you face unexpected bills? This is often a question faced by many people who are moving out on their own for their first time and or buying their first home. Banks have guidelines as to how much money they would be willing to lend you based upon your current earning power and other criteria, but as we’ve seen that hasn’t worked out so well for the banks and many borrowers. Along the same lines, some renters are required to pass certain criteria to qualify for renting. Predatory lending and variable ARMs on loans were partly the culprit for the current economic crisis, and banks sacrificed short term profits at the expense of long term sustainability, but we’ll save that talk for another day, it will get us nowhere fast.

So how much money should you spend when looking at housing or when deciding which apartment to rent? Below, I will make it easier for you to devise a smart plan for yourself, so you don’t have to count on someone else telling you a magical debt to income ratio you should abide by.

Step 1: Determine how much money you take home after taxes.

This should be a fairly easy task, how much money are you taking home, not grossing? Look at your paycheck and sum all paychecks for the month. Take into account how often you’re paid. Some months there will be four weeks, while others there will be five. If you’re paid monthly, you know you will be paid the same amount. Some folks are paid bi-monthly, and it works out the same way. However, those folks paid weekly may have fluctuations in their monthly take home pay and should take this into consideration.

Step 2: Calculate your monthly expenditures that are not housing or utility related.

Calculate how much money you will spend on a monthly basis on items such as food, gas to get to work, bus or taxi fare, clothes, car insurance, renters insurance, cell phone, and so on. If you’ve got credit card bills and other bills include these here too. Don’t forget about spending money for entertainment either.

Step 3: Calculate your monthly expenditure related to housing and utilities for each of your new options.

While non housing goods are probably going to be fairly stable (with the exception of gasoline), you must calculate how much your utilities will cost for each option. Ask the current owners or renters or landlords what the bills for each place run each month. A place twice as big will likely cost twice to heat and cool, while water maybe constant. Don’t forget about cable, internet, trash, and other utilities like your phone.

Step 4: Determine how much money you should be saving and investing.

You must pay yourself and save and invest in your future. If you’re not calculating saving at least 10% of your pay (and have an emergency fund equal to living expenses for how long it will take you to find a job if you lose yours – you’re setting yourself up for failure otherwise) you are saying you don’t care about your own future, and want to work for the rest of your life for money, instead of having money work for you.

Step 5: Combine the numbers and see which option makes cents.

Here’s an example of a 22 year old kid (we’ll call him Freddy) that makes $30,000 per year, paid weekly, and he’s planning on moving out of his parents house at the end of December.

Freddy’s After Tax Pay = $462 per week. ($30,000 less 20% taxes = $24,000 per year after tax, you can calculate this by taking $30,000 times .8 or $30,000 times .2 = $6,000, then take $30,000 less $6,000 = $24,000) ($24,000 divided by 52 weeks = $462 per week).

This means in January, a five week month, Freddy takes home about $2310. While in February, Freddy only takes in $1848. It’s important to take this into account as you can see it’s a big difference.

Let’s look at those two months, Jan. and Feb.:

Freddy is considering renting two different places Option A and Option B, one Option A costs $750 per month, and Option B costs $1000 but is twice the size. He really wants the second place but is not sure he can afford it or not.

For Jan. and Feb Freddy estimates the two different options to determine what makes sense:

Clearly, you can see why it’s important to do this type of analysis. You don’t know what is the best option until you crunch the numbers. It wouldn’t make sense to take on more than you can afford in option B. Freddy wouldn’t be able to cover his bills more less savings goals in February with option B, even though he could it in Jan.

In general, it doesn’t make sense to back yourself into having 0 dollars left over at month end. What if your car breaks down and or you have to buy a gift for someone. I would suggest you leave an additional cushion of around 10% to cover unexpected costs that may come up. After you’ve gotten comfortable doing this for a year or two and you’re certain you can manage your finances properly you can take more risk in leaving a cushion, perhaps by then you will have built a couple of emergency funds to cover potential unemployment and or other financial emergencies like car repairs.

Hope this helps!

Save thousands in college tuition and graduate early, here’s how.

Tuition costs for high school graduates entering college have gone through the roof, and there are no signs that this will change any time soon. What can you do to save hundreds if not thousands on college credit hours and give yourself or your kid a head start in graduating early? Below, I will discuss the numerous benefits to high school students who participate in earning college credit hours (also known as Transfer credit, credit transfer or advanced standing) and how you can go about enrolling yourself or your kids in a similar program at your local high school. Moreover, I will provide some other tips to keep the cost of college tuition as low as possible.

Before we get started, let’s look at exactly how fast tuition costs are rising with these staggering facts from finaid.org:

“A good rule of thumb is that tuition rates will increase at about twice the general inflation rate. During any 17-year period from 1958 to 2001, the average annual tuition inflation rate was between 6% and 9%, ranging from 1.2 times general inflation to 2.1 times general inflation. On average, tuition tends to increase about 8% per year. An 8% college inflation rate means that the cost of college doubles every nine years. For a baby born today, this means that college costs will be more than three times current rates when the child matriculates in college.”

By participating in the high school college credit courses you can gain college credit hours for the courses you already have to complete while in high school. There’s typically no additional work! However, some of the courses offered are Advanced Placement courses. When I was in high school I was able to earn 15 college credit hours through basic level courses that were a required part of my high school curriculum, thus saving a couple thousand dollars. Not to mention, that’s over a semester head start. Instead of taking 4 or more years to graduate, you can graduate college in 3 to 3 and half years. The cost of the courses are typically half the cost of the University or College, and many are free.Not to mention, you don’t have to pay for books!

It helps to know which school you or your child will attend in the future to make certain they will accept your coursework. The high school guidance counselor should be able to help you or son or daughter lay out a simple plan that’s best for them. In addition, you should consider dual enrollment in which they can attend the community college or local University in conjunction with their high school classes to earn additional college credits. You could potentially knock off a year or more of college! If you’re having trouble getting help from the high school counselor, go to the University or college they believe they will attend in the future, the admissions department should be able to help.

Along the same lines, students should seriously consider the savings to be had in attending a local community college for their liberal arts studies. In essence, with a four year degree, the first two years (associate degree) are dedicated to basic studies across all areas (to make a more well rounded individual), it really doesn’t make sense to waste money at a prestigious school with hiked tuition rates to take basic level courses. Instead, get your basic course requirements fulfilled for half or even a quarter of the cost at larger universities. Then take your major and minor related courses at the bigger and more well known Universities. One of the major perks to attending community college is the chance to try it out, so many people waste a ton of money going to school for a year, just to quit. State Universities offer significant value as compared to the private Universities. Think of it this way, if you’re going to go to some private Ivy league school on the East Coast, and move back to the Midwest to work after school, many people won’t know or care that you spent 5 to 10 times on your education, only that you have the degree needed for the position. On the other hand, if you’re going to stay around the area you went to school, it may make sense to pay for the “better known” name and schooling.

Choose a career that will allow you financial freedom

Quite often college kids are too concerned with finding a career they believe will be fulfilling and rewarding, even if it means they won’t make as much money as some of their peers. The problem with this philosophy, you’re probably going to be at home more often than work (there’s 168 hours in a week, and you’re only at work 40-50 hours). By putting yourself into a career where your earning potential is lower, you’re basically centering your life’s happiness around work, instead of on your free time. Let me explain a little more blunt, you may be happy at work, but if you’re broke, that’s all you’ll have. Instead, if you bite the bullet, get an education in the road more challenging, like medicine, finance, accounting, or something similarly mundane, the work will certainly be boring, but the pay will be much greater – and you’ll be able to enjoy life outside of work because of your financial freedom. Not to mention, your chances of early retirement will likely increase – allowing you to enjoy life after work much longer than others.

More important, medicine, finance, accounting type jobs are in far greater demand and are quite often more stable in times of recession. You see the marketing folks being laid off much quicker than the accounting folks from my experience when the tough gets going. Granted, it’s not always about the money, and money certainly doesn’t guarantee happiness, however, it makes living and doing what you want much easier. Also, when considering a career, think about where we are going as a country (hint, our population is aging and we’re about to have more people entering retirement than ever before). Now, top levels in certain careers can pay extremely well (like marketing), but it can take a very long time and extraordinary talent to reach those levels – instead of choosing marketing as your major (if that’s what you like), take it as a minor – and pursue a change down the road after you’ve learned the other higher paying aspects of the business).

Having said the above, here’s my list of careers you should consider and those you should avoid, if you care about having the money to do what you want outside of work and to have a chance for early retirement:

Good Career (major) choices (challenging careers):

• Accounting/Finance
• Engineering
• Law
• Medicine
• Nursing
• Pharmaceutical/Pharmacology

Bad or Poor Career(Major) choices (easy fields):

• Art (you can practice Art when you get home)
• Marketing/Sales
• Culinary
• Carpentry/Plumbing (it’s going to suck to get old)
• Economics
• Real Estate (you don’t need a college degree to do this)
• Any other major you consider to be an easy-degree

Your retirement or your kids college?

So, you’ve come to the point in time where you’re debating whether you should save for your own retirement or divert those investments to the future well being of your children. The truth is, research has shown nearly 15% of investors with children under 18, choose to invest in their children over themselves. Is this the right move or not? The answer may surprise you.

How will your kids be able to afford college if you don’t do something for them now? Will they hate you if you don’t do anything for them? Is it your responsibility to do something for them, and forget about your needs? Below, I will walk through the reasons you should consider holding off investing in your child’s education, and instead focus on your own retirement needs.

Too many people allow their emotions to control their mind, and they make poor financial decisions as a result. Just because you think and or know it’s your responsibility to fund your kids educational needs, doesn’t mean you have to do it now, and at the sacrifice of your retirement.

There are alternative means to help them down the road, instead of investing the little you can on them now, you should be putting that aside for your own retirement. Case in point, your kids can take out loans (and or you can take out parental loans on behalf of your child to pay for their education), but you can’t take out a loan to fund your retirement.

Parents should first focus on building their own nest egg, only when they feel comfortable that their needs for retirement have been met should they move to funding educational accounts for their children, such as 529 plans, or Coverdell Savings Accounts. It’s not that you don’t care about them, it’s the smarter financial decision.

A better idea would be to take the opportunity to fund these investments for them instead of buying them toys or other crap for birthday gifts or Christmas or other holidays.

Just because something seems like the best thing to do, it doesn’t mean it always is – you must weight the pros and cons and determine what is the best possible financial decision you can make – and stick to it.

Teach your kids how to manage credit with a prepaid credit card

“My daughter hates me. Well that’s how it seems most of the time these days. She is 18, just off to college and totally rejecting of all my good fatherly advise. She is beautiful and bright as a button but refuses to make a budget and to stop spending any money that comes within her reach. I’ve solved all my daughter-money problems with a Vision Premier Prepaid Visa card.”

Ding, Ding Ding: Now entering the ring: Vision Premier Prepaid Visa, the answer for fathers and mothers trying to teach their children credit card responsibility.

Get a Prepaid Visa Card – No credit check. Quick approval. Shop online, pay bills, use ATMs

Thank heavens that she came of age just at the same time as these relatively newish, prepaid cards. I would be in serious trouble without it and so I bet would most other fathers and mothers of college aged kids attempting to teach their children how to manage their credit. The Vision Premier Prepaid Visa card looks just like a real credit card but is an improvement on those ‘prepaid gift cards’ that so many stores have had for a while. Prepaid payment cards are the reins for headstrong girls and guys and the answer to parents’ prayers. They might not like it, but dads and moms everywhere rejoice.

You see, you can send them a monthly cash allowance on the same day each month, because the Vision Premier Prepaid Visa card is linked to your Internet bank if you so choose. A prepaid card is a payment card that can be topped up with my money by you or even someone else. No money orders or Western Union hassle and no dangerous cash carrying for your child. They can use it to pay their bills and even buy CDs and stuff online. Best of all is that it won’t let her spend more than their prepaid allowance, so no potential credit card problems. They have to budget their money or go without when there is too much month left and the money runs out.

Certainly it’s only a phase, but they can maintain the social acceptance factor of their peers by having their own “credit card”. So, score some points there because the Vision Premier Prepaid card looks just like a normal credit or debit card. Its got the works, with a card number, signature strip and company logos. But it just isn’t a credit card and there is no line of credit. There is also no debt to be had from an overdraft facility as she could get with a normal debit card. They simply cannot borrow money with a prepaid card – they can only spend the money that is loaded onto it. She won’t lose face and you won’t lose cash when they hand their card over to the cashier at the till or reads out the card details over the phone. The can even use their Vision Premier Prepaid Visa card to pay for downloaded music on the Internet. In fact, their card will be accepted anywhere Visa is accepted, which is just about everywhere.

When they use their prepaid card, the cash is instantly taken from the sum loaded onto the card, rather than from a line of credit from a bank or finance company. As long as they control their spending and have money available, they can continue to use their prepaid card to buy whatever they need. Upon arrival of the card, they will need to activate the card by following the instructions from the card provider. You reload the card when you want to, each month with an on-line transfer. You could do this at the bank if you prefer, safely and securely. The real beauty of the Vision Premier Prepaid Visa card is that there’s no danger of your son or daughter going overdrawn and straying unknowingly into debt. Once again, once the money you load onto the card has been spent, they can’t spend any more until you or they reload it.

Many parents wish the Vision Premier Prepaid Visa card could bring back their loving little girl or son once more, but it can’t. What it will do however, is make them manage their money without having to acknowledge the wisdom of your advise while keeping them financially secure.

You should seriously consider the fact that most kids have never managed money on their one, especially credit cards. Most college kids get themselves into credit trouble because they see themselves spending credit, not cash. This card will help them tremendously while preventing them from doing something that will hurt their credit for 7-10 years. You could call it a trial period, before they take the big leap and responsibility a true credit card requires.

Get a Prepaid Visa Card – No credit check. Quick approval. Shop online, pay bills, use ATMs