Aren’t vacations great? Giving yourself a week off from work and school is therapeutic for the body and soul. But when you get back from your dream vacation and your next credit card bill comes around and you’re shocked to find that you went over your budget by $250.0! Maybe next time you should consider not drinking so much at the extremely expensive bars. After recovering from the panic of seeing your bill you decide to take my advice. Save for trips now, and have a better vacation later on.

When you plan a vacation start a separate online savings account.
*Example*: You are planning to go on a one week cruise to the Caribbean in March, 2007 and all your expenses will be ~$1000.0. If you start saving in August 2006 you will need to put in $125.0 a month into your savings account. Let’s just make the amount $130.0 to make the numbers easy. In March after eight months of saving you will have $1040.0 and ~$18.0 in interest.

If you save for your trip early and you go over your budget by $250.0 then it wouldn’t be such a financial burden. Instead of paying $1250.0 ($1000.0(budget) + $250.0(too much partying)) you will only need to pay the extra $250.0 because you already paid off your trip. You can apply this principle to anything whether it’s a trip, a new TV, car, or a down payment for a house. Save on a monthly basis and get bigger and better things in the future.

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Finally, you are done with school, you got a great job, and your parents cut the financial umbilical cord. You’re finally on your own, but those student loans that you took out for “school necessities” want their money back. Now it’s time to prepare a smart plan to pay back your debt. What are your options? What are the terms that you quickly signed? How much money will it really cost you? These are relevant questions that I will answer and some of the best ways to get started on your student loan pay-back journey.

First, I must say that student loans are usually a great debt to have if you used the money wisely. This loan is one of the best investments you will ever make. Some of you might be saying “Jeremie, what do you mean? I took out a loan. How can that be a great investment?” The reason why student loans are such a great investment is because you invested the money in your education. In other words, the money you will receive having a college degree is higher than just having a high school diploma. According to the Census Bureau, college graduates receive over one million dollars more than a high school graduate. Now isn’t that a great return on investment? There are many other advantages to higher education. Check them out here.

Your options after taking out the loans could take many hours of reading so I picked out the real important ones. One of the first things you do is decide whether or not to consolidate your student loans. This is a no brainer. If you consolidate all of your Federal Stafford loans (the most common student loan) you will lock in a good interest rate, good repayment options, and save a ton of money.

Choosing your repayment schedule is a very hard thing to decide when you consolidate. The terms are usually ten to thirty years. The shorter the term, the higher the payments, but the less interest you will pay over the life of the loan. If your loan has a longer term, you will have lower payments and pay more interest over the life of the loan.

Example: Loan amount $35,000/ Interest 4.25%/ Term 10, 20& 30 years.
10 years your monthly payment would be $358.53 and total interest would be $8,024
20 years your monthly payment would be $216.73 and total interest would be $17,016
30 years your monthly payment would be $172.18 and total interest would be $26,984.

You will have to decide whether or not you can afford the larger payments. I recommend going for the 20 year term and paying it off in 15 years if you can.

*This example was taken out of one the best personal finance books for younger people. “Suze Orman’s The Money Book for the Young Fabulous & Broke” This is a MANDOTORY must read. She’s one of my favorite authors and coaches, so please buy the book and start watching her show.*

Do you have a huge student loan over $50,000.0 and you just can’t afford the monthly payments? Do you feel like you are drowning in debt, and you feel like you cannot get out? Well, unfortunately you cannot file for bankruptcy and get rid of this debt. It stays with you till the day you die. So pay it off. This is an contract you signed when you agreed to the terms of the loan. Be good to the student loan people and they will be good to you. If you cannot afford the payments call and ask if there is a flexible payment plan that they can qualify you for. *Remember if you took out a loan have the common courtesy to pay it all back.* If you don’t think you are ready to get yourself in that kind of debt do not get a student loan.

Here are some great ways to save even more money with student loans. Have them auto debit your checking account to save .25% If you also make three years of consecutive on time payments your interest rate will drop a whole percentage point. That’s a 1.25% reduction for doing almost nothing. Another thing to remember is that a lot of the interest on your student loan is tax deductible. Make sure you talk with your tax advisor to see if you qualify for this incredible deduction. *Most people will qualify for this deduction unless you make over $50,000 *

This should lead you in a good direction on how to handle student loan debt. Like I said before, read Suze Orman’s book “The Money Book for the Young Fabulous & Broke” and actually use the advice she gives in the book. If you apply the tactics she writes about correctly, there is almost no chance you will retire broke. Remember there are three organizations you don’t mess around with. The IRS, the Mafia (ha), and The Student Loan Lenders.

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Is the point of credit cards ruining people’s lives, or are people’s lifestyles ruining the point of credit cards. Most people say that credit cards are destructive pieces of plastic that can dig you deeper and deeper into a hole of never-ending debt. This is not always so - personally, credit cards gave me a wonderful credit score that allowed me purchase a house when I was 20 without a huge down payment. If used correctly, credit cards can be your best friend. They will help you save money, build credit, and give you perks if you use the card for legitimate purchases.

Credit cards wield a powerful affect on your credit score. They make up a huge portion of the over all score; therefore you should not mess up with credit cards. They can either make or break you. There are many credit cards out there that have all sorts of benefits and perks. To pick out the best credit card for you go to Creditcard.com and select what attributes you want in a credit card. If you want to use a credit card, but think you will abuse its power (buy now - pay later) think of it as a debit card for the first year. When you make a purchase pay it off immediately when you get back home. This system worked for me, and it made me realize that my credit purchases directly affect my checking account. When your checking account is depleted, don’t go off buying a ton of stuff. There are good purchases and stupid purchases. Be wise and stay safe.

10 bad habits that lead to debt disaster according to Bankrate (along with Jeremie’s input):

1. Misusing balance transfers. - Moving credit card balances over to prevent you from having to pay the balance in full is an awful idea. Pay it off when you get the bill.

2. Not checking credit reports. – Always check your credit reports yearly. They allow you to see it for free at Annual Credit Reports so check it out. If you find any mistakes - correct them ASAP.

3. Failing to alert creditors about a financial hardship. – Make sure you talk to someone if you have a life changing event that will prevent you from making payments such as: job loss, personal injury, death in the family, ect.

4. Thinking of “budget” as a dirty word. – Budgets work for some people, but I believe in the “pay yourself first” method, so budgets are not on the top of my priority list.

5. Using retail store credit cards to make use of discounts. – Using retail cards for discounts is sometimes a great thing on big purchases, but do not open a credit card at every retail store, and remember the extremely high interest rates on those cards.

6. Procrastinating on creating an emergency fund. – Always have a six to eight month emergency fund to protect yourself from job loss, or personal injury.

7. Paying bills in no particular order. Pay your important bills first. Mortgage, rent, and utility bills always come first. Credit comes second.

8. Charging purchases instead of paying in cash or with a debit card. – I believe in the total opposite. If you can afford it pay in credit, then pay off your balances. This builds your credit, and, depending on your card, can give you cash back.

9. Making credit card payments late. – This will not happen to you, because you’ve registered to pay your bills online, RIGHT? Late payments can ruin your credit, and you lose a ton of money in late fees.

10. Making the minimum payments only. – This will make you so poor. If you had a $5000.00 balance at 13.5%, it would take you 28 years paying the minimum payment. Pay your balances in full!

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I know that we have talked about this topic before, but when you see the statistics (current 401(k) stats) it makes me want to talk about it some more. When an employer offers you a 401(k) that matches your contribution you need to take the offer. A lot of people think that if you’re in debt you should stop contributing; which in my book is a lie unless your interest rate is over 30%.

Example of why you should contribute:

My former employer offered a 100% match on 4% of my income in their common stock if I contributed 6% of my pay. *Let’s just make the numbers easy by saying I make $1000.0 every two weeks* When my employer takes out 6% of my pay (before taxes) which is $60.0 they will match $40.0 in their common stock. Instead of saving $60.0, I earned a $100.0. That is an immediate ~67% return on your money! Can you believe people pass up this offer?

If your employer only offers the match with their company stock, I recommend allocating your contribution to other mutual funds inside of your 401(k) for diversification purposes. Diversification just means not putting all your eggs in one basket. The reason why I don’t suggest putting all your money in your company’s stock can be explained by looking at Enron, Delta, WorldCom, and Tyco.

Here is a great calculator that displays how easy it is to get rich having a 401(k) as a retirement savings vehicle. Do not be part of the 30% of American workers not contributing to their employer matching 401(k) plans. So be rich the easy way. Contribute today!

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Try some of these tips to really save your money on fuel.

1. Keep your car maintained. Your fuel efficiency will increase by 25% over a poorly maintained vehicle.
2. Don’t get high octane gas unless you have a high performance vehicle. Most automobiles run fine on the regular octane with a $6.00 gas booster (which needs to be added every six months).
3. Check the pressure. Make sure your tires are at the pressure your manufacturer recommends. This will increase fuel efficiency by 30%.
4. Think of a driving plan. Make sure your daily errands are properly designed. If you are overlapping your driving routes, change it.
5. Stop beating people off the line. Accelerate your car at a regular rate. Think of it this way. Every time you speed up at a red light you lose 25% of your fuel versus accelerating slower, and when you accelerate quickly at a traffic light people make fun of you. Trust me. They do…
6. Slow down, speed racer. If you obey the speed limit you will have your car running at maximum efficiency. You will also save money by never having to pay a speeding ticket ever again!
7. Try to cruise. Using your cruise control feature (if your car has it) can save you from constantly accelerating, and decelerating. Avoid slower cars, and anticipate future traffic so you slow down slowly instead of hitting the brakes and smashing your head on the steering wheel.

If you would like some more tips. Go to Bankrate and Wiki and remember an inefficient car is an expensive car.

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Is getting a huge refund check really a good thing? Most people think that it is, but you need to stop looking at it as a big payout and begin viewing it from a different angle. When you get a huge refund that means you’ve been paying too much in taxes over the past year. This also means the government has been getting some good interest on your money. If you are receiving, or paying more than $500.00 a year on taxes, consider going to your payroll department to change your tax withholdings.

Example: if you were supposed to get a $2500.00 tax check, have your payroll department help you modify your tax withholdings so that you get an extra $208.33(2500/12) per month. After you change your tax withholdings, you put the additional money into your savings account (avg. of 5%), and at the end of the year you will receive an extra $75.00. Do yourself a favor and stop giving more money away than you have to.

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Every news station you watch these days will always have something new about illegal immigrants. On Fox News you will always hear how illegals are ruining America because they are not paying taxes, yet they are using our health care facilities, America’s oil, and stealing lower class jobs. Have you heard any real positives about illegal immigrants?

Let me tell you a quick lesson in history. Ever since the beginning of civilization, societies with the most power were able to use cheap labor efficiently which gave them a huge advantage when it came to their economics. Egypt had slaves, Rome had the lower class and slaves, England had the Irish and Scottish, and early America had immigrants in the North and slaves in the South.

Now that most civilized nations have made the use of slaves illegal, how are developed countries able to survive against growing countries like India, China, and Indonesia without exploiting cheap labor? Lower class? I think not. There are too many labor laws which make it harder for businesses to decrease their prices for goods and services. What about outsourcing? This scenario can sometimes work for big businesses, but for small and medium businesses it just isn’t cost efficient. Illegal immigrants? They aren’t “technically” protected by any labor laws, they are in desperate need of work, and they increase the margin of profit for businesses by lowering down wage expenses.

I think that exploiting illegal immigrants as sub-human, paying them much less then the average day laborer, and not giving them any kind of benefits is immoral. On the other hand, letting illegal immigrants live in the U.S. without paying taxes, living the American lifestyle (best medicine, better neighborhoods, cheap energy, ect.), and letting their children go to public schools on the taxpayer dollar is also extremely wrong.

I do believe that President Bush’s Immigration Plan is a positive step to control immigration. But how can we make the “‘they don’t pay any taxes’ people” happy? Well, I am a strong believer in tax reform and the Fair Tax Plan is a great way to make most people content. The tax plan (in summary) makes any one, whether they are Americans, illegal immigrants, or just people visiting America, pay the same amount of taxes.

Immigration will have a serious affect if America wants to be number one in the global market. Many other developing nations do not have the same labor laws as the U.S. and Canada which makes it a struggle to compete. Hopefully, in the future India and China will have the same labor laws which will make the world a level playing field.

Please read the Fair Tax Plan and if you think it will benefit America get involved by learning more about the plan, writing your representative, and signing the petition.

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Continuation of Social inSecurity�

I know many of you might not be looking at the day you retire, but maybe by planning now you could be very rich later on. Most people when they are young (high school ’til graduation year in college) have most of their things purchased and paid for by their parents such as: car, insurance, cell phone, medical, rent, clothing, and probably some other things. This is the perfect time in life to begin saving the most you can. There are three saving methods that people age 18-25 should consider. They are easy, flexible, and will benefit you in the long run.

First being an IRA (Individual Retirement Accounts), specifically the Roth IRA. This retirement account is aimed directly at younger people trying to save money while they are working. *Go to this website for the specifics* The most important benefit about the Roth IRA is that the money that is put into the account will grow TAX-FREE for life by using after tax money. This is the only true savings vehicle that you will never have to pay taxes on EVER as long as you follow the guidelines properly.

Here is a real example on what can happen if you put $150.00 a month into an Roth IRA at age 18 at 10% compounded yearly. At 50 years old you will have $421,250., and at the tender age of 59� you will have 1,117,325. Why such a huge jump in nine years? The incredible miracle of compound interest. It is what makes starting to save early such a wonderful thing. This website shows you how powerful a retirement account can be. Even if you end up having a hundred million dollars in interest you will NEVER pay any kind of taxes. INGDirect, Sharebuilder, Scottrade, and Fedelity are great companies that will offer you some great deals on IRA’s. Check them out and start as early as you can.

Saving for a home of your own should be a priority in most people’s lives. I don’t know many people that want to live in their parent’s house or an apartment till the day they die. Most people make the mistake of saving much too late for their homes and have to take out a bigger mortgage then originally planned. Saving early in a high yield savings account through INGDirect can really help you make the transition from an apartment to a house much easier. Usually, you want to have either 10-20% of the purchase amount in cash when buying a house. Realistically, 10% is a great down payment, so aim for 10%. For example, if your first house costs $130,000 you will need $13,000 to purchase it unless you have wonderful credit. Remember your first house doesn’t have to be your dream house, so DO NOT buy a house that you know you cannot afford, even if the mortgage company says you can. Houses make some of the best long-term investments possible. Read “ The Automatic Millionaire Homeowner” if you really want to start jumping in the real estate market.

The final savings vehicle usually will only be offered if you work for a medium or large company, but this savings program alone will make you want to work for corporate America. It is called the 401(k) plan (or 403(b) if you are working for non-profit). If you’re company offers a matching contribution plan, you CANNOT pass up this golden opportunity to make a ton of money. When you purchase in to the 401(k) Plan, most companies will match a certain amount, usually 4-6%, of your eligible contribution. For example if you were to make $2000 a month and you put 5% of your pay into the 401(k) plan (a hundred dollars a month) your company would usually match that contribution of $100. That is a direct 100% return on your money. You can’t get much better than that. So if you work for a company that offers a matching contribution (do not enroll unless they offer a matching program - I will talk more about this in a later discussion) enroll in it today!

These savings vehicles will make you so completely rich that you will not have to worry about Social Security at all. Remember if you want to be rich follow my advice, but if you want to work ’til you’re eighty and live paycheck to paycheck be my guest. Just don’t complain when all your friends are sitting at the beach while you are still working because they read this post and started saving.

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Buying “quality” instead of “quantity” is something that people just don’t do much anymore. They would rather something cheap and hope that it will last as long as a high-quality item (it never does). Your average person will buy something like a computer, for instance, and believes that the $300.00, bottom of the line computer will last as long as the $700.00 one. What they don’t understand is that you will probably end up buying nearly three of them while the $700.00 computer just needs some minor tweaking over the years.

You can usually apply this concept to nearly anything you buy. Instead of always buying the cheapest equipment, consider reading consumer reports and reviews of items before you make a purchase. Sometimes investing in a more expensive item might save you a ton of money in the future. Stop being “economical/extremely cheap”, and become an educated buyer.

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Even though this topic applies to an older audience, this will be heavily debated subject in the next two decades. As a young man I know that this social program will probably be depleted by the time I retire, but most people my age that do not save for their retirement still believe the government will support them in the years they can no longer work.

According to USA Today, “Last year, that rate sank to -0.5%. Households spent $41.6 billion more than they earned. The rate’s last dip into negative territory was in 1933, when banks were closed and breadlines were long. In January, the savings rate fell further, to -0.7%.” This seems like a scary statement, but it draws a vivid picture of our future. How is the younger generation supposed to save when our parents spend more than what they make?

Another scary statistic is that the percentage of households putting money into their savings fell to 56.1% in 2004, down from 59.2% in 2001. It gives me shivers down my spine thinking about what long-term effects this will have on America. Unless this cycle is broken, and our generation starts to save, our country will be in financial ruin.

This program was created to help the retirees have financial benefits post retirement. The big problem is that the government did not predict some huge factors contributing to the downfall of the plan such as: women in the workplace lowering the birth rate (the biggest factor), men and woman living past the age of 60, inflation, and the rapid development of foreign countries. President Bush tried to put together a plan to reform Social Security that would update the program, but of course was shot down. This program MUST be reformed so that our generation of non-savers will still have a forced savings plan.

Even though I personally think the government should not have a huge role in our retirement, many people do. I also think that when you look at the program itself it looks like an illegal Pyramid Scheme. That is just my opinion. Read what the SEC describes as a pyramid scheme and then you cannot tell me there aren’t any similarities between both programs. In conclusion, I think that we need to save for ourselves and hope others will catch on before they have to retire. Finish rich by early saving and let the wonder of compound interest take its course.

I will address how to save for retirement correctly in a future financial post.

To be Continued….

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