Graduation Speech Part 8: Who is Ira Roth?

Published by
Michael
at July 3, 2008 in Graduation Speech and Retirement. 0 Comments

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 8. To see the entire speech released so far, click here and read from the bottom up.

Rule 7: Ira Roth is not your congressman

Ira Roth is also not the random guy who knows your name and though you really ought to know his, it’s been like two years since asking him to remind you of his name wouldn’t have incredibly embarrassed both of you.

A Roth IRA is the greatest thing since, well, plastics! Actually, it’s even better because, to the best of my knowledge, profits on plastics were never tax-free. With a Roth IRA, your money can grow and grow and grow, for the next forty years (or more), without you ever having to pay taxes on the account. New grads earning at least $5,000 this year can contribute up to that amount in a Roth IRA. Do so.  This year. No one ever gets into trouble during retirement because they saved too much when they were younger.

At this point, I’m guessing that you wish I would simply turn the conversation back to sex.  You’re thinking: “Sitting down with my parents to have ‘the talk’ was so uncomfortable” or “Man, I totally remember Kenny! That guy was crazy!” But the sex part of today’s talk is over.  Sorry about that.

<CLEAR THROAT>

You’ve perhaps debated whether size matters or if performance counts. Well, of course, it turns out the same thing is true with sex. I hear rumbling – were you already thinking I was referring to sex again? You people!  This is a money talk. No, we’re not going to talk about Eliot Spitzer either!

[To be continued]

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Universities that “accept” credit cards

Published by
Michael
at July 2, 2008 in Carnivals and Debt management. 0 Comments

Two carnivals to tell you about this week, including the Carnival of Money Stories hosted by My Good Cents.  All the articles are real-world experiences people have had with money.  Check it out.

This week’s Carnival of Personal Finance, hosted by Greener Pastures, featured dozens of useful articles including a section of my hypothetical graduation speech about the varying importance for new grads of health, renter’s, and life insurance.

This week, I’m going to have agree with the carnival host and recommend her top choice as my top choice too (I don’t think I’ve ever done that before.)

I’m confident that you’ve long since figured out how expensive your free pizza or tee-shirt actually was. You know, the one that was “free” along with the credit card application you completed during your freshman year? What you may not know is how much of the aggressive credit card marketing is not just ignored but in many schools supported by the university administration.

What’s new? Now there are hearings. Sound familiar? I think so too. Speculation to be sure, but quite possibly this could be the second-coming of the student loan scandal. Read CreditCard.com’s post Congressional testimony: Student credit card issuers under investigation and you’ll see why they were so effective in getting you the card with the picture of campus on it. The one you may still be paying off.

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Graduation Speech Part 7: Take advantage of your benefits or you’re being kind of dumb.

Published by
Michael
at July 1, 2008 in Benefits and Graduation Speech. 0 Comments

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 7. To see the entire speech released so far, click here and read from the bottom up.

Rule 6: Take advantage of your benefits or you’re being kind of dumb.

Don’t like total candor? Sorry, wrong number.

Every company in America that pays you a wage will withhold Social Security taxes. They have to. It’s the law. Theoretically, Social Security is a retirement plan. I hope that works out for you.

As you’ll quickly learn, the Social Security tax you pay each paycheck isn’t actually saved for your retirement, it’s used. Immediately. Shocked? This doesn’t have a thing to do with Democrats or Republicans—this is the U.S. federal government we’re talking about. Bipartisan silliness.

While most of the Social Security tax money you pay goes to current retirees (likely including your grandparents), so far there’s been plenty extra for the feds to spend on things like bridges to nowhere, interest on the national debt, missiles, farm subsidies, and so forth. But way before you retire, Social Security taxes paid by workers in a given year will be far less than the benefits promised to retirees during the same year. Like I said, good luck with your retirement benefit from Social Security.

Many employers offer a 401(k) plan. A 401(k) plan is also retirement plan. But it’s very different than Social Security. With a 401(k) plan, any money saved goes into an account with your name on it. It’s there for your future. If it’s not there, it’s because you took it out, not because of government mismanagement.

Ironically, you must choose to participate in a 401(k) plan. Social Security, that the government make you do (I’ve looked for the opt-out form but can’t find it). The 401(k) plan though; your participation is up to you. Be sure to take advantage of your 401(k) plan. You can end up at retirement with a ton of money if you do. With Social Security, I don’t know. Do you?

[To be continued]

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Stimulus payments - a braggy uncoordinated mess?

Published by
Michael
at June 30, 2008 in Ranting and Tax. 0 Comments

Last week, Nickel of 5centnickel wrote of Some Stimulus Payments Diverted to Pay Outstanding Debts.

This got me to thinking about my own personal experience with the stimulus, which I posted on that blog and have provided below:

Whatever you do, just don’t count on knowing when or how you’ll get your money. Since the stimulus was announced, I (and presumably millions of others) have been told:

  1. Although I owed money with my 1040, I’ll receive my stimulus payment in early May via direct deposit, so long as I indicate my direct deposit info on my 1040. (I have a very “low” last two digits of my SSN.)
  2. Early May comes and goes and I get a letter (this one from my Congresswoman; the first was from the IRS) telling me how wonderful it is that I am getting a stimulus. How much did this mailing cost? More or less than the first? How about the check and less self-congratulations about sending me my own money back.
  3. I get another letter last Friday saying that–no matter that I had indicated my direct deposit info on my 1040–since I owed taxes on my 1040, I would be receiving my stimulus via check in about 6 weeks. Thank you for this additional unsolicited letter at a cost to the government, ahem, me, of how much?
  4. My entire stimulus payment is direct deposited into my account earlier this week.

I’m thrilled I never called to ask the IRS what was going on (although it was nearly two months late according to the schedule they voluntarily published.)

Does anybody really believe someone would have told me the answer and be doing anything other than guessing? And my situation is about as straightforward as they come. No liens, no moves, no new accounts, on-time tax filing.

# # #

What’s been your experience with the stimulus payment so far? Get it? Still waiting? How does it compare to what you were told to expect? Did your Congressperson rent a hot air balloon to tout his/her “accomplishment?”

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Graduation Speech Part 6: Use Protection

Published by
Michael
at June 27, 2008 in Graduation Speech and Insurance. 0 Comments

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 6. To see the entire speech released so far, click here and read from the bottom up.

Rule 5. Use Protection

Was it Mom, Dad, an older sibling, or perhaps Kenny at sleep-away camp? Who first taught you about the birds and the bees? Whoever it was, they probably told you about the importance of protection as part of that same conversation. At least I hope so. If you don’t know what I’m talking about, well, let’s just say I don’t believe you.

Protection is important in the real world, and not just the kind they sell at the truck stop restrooms. No, I’m talking about insurance.

Insurance can be made to be very confusing, but it boils down to one simple rule: never risk a lot for a little. For the newly graduated, that means getting health insurance (even if you get a plan that covers little more than a catastrophe). Get renter’s insurance too since, for a couple hundred dollars a year, you protect everything you own, including the CDs you don’t use anymore thanks to Mr. Jobs and his partially eaten fruit.

And, despite what some people would have you to believe, life insurance will likely be important one day in the future when you have a kid or two who depend on your income. However, when the most dramatic financial impact felt by your untimely demise would not be your spouse or child, but rather by the owner of the convenience store where you get your midnight fix, you don’t need life insurance.

[To be continued]

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That time of the month? You know, for spending?

Published by
Michael
at June 26, 2008 in Carnivals and Saving Strategies. 0 Comments

This week’s Carnival of Personal Finance, hosted by Mrs. Micah, featured dozens of useful articles including a section of my hypothetical graduation speech.

Continuing my weekly theme of brevity and usefulness, if you’ve got time for just one additional article this week, I strongly recommend Patience Will Keep Us from Spending Unnecessary Money by Money Ning. This article throws some interesting ideas about ways to control impulse spending. While $75 and 7 days works for Money Ning, your numbers might be different. No matter, the point is to put some program in place if you’re finding yourself short of money and long on stuff you don’t really need.

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Generation X Finance blog reviews Beyond Paycheck to Paycheck

Published by
Michael
at June 25, 2008 in Media. 0 Comments

Jeremy, the author of the popular Generation X Finance blog, reviewed Beyond Paycheck to Paycheck on Monday.

It was a very favorable review (obviously not a shock, since I’m posting a link to it from my blog). My favorite part is:

What really stands out is the conversational approach. You almost get the feeling that you’re sitting down and talking with Michael directly. I think this approach has many advantages over more conventional books that can come off as a bit preachy. I think this goes a long way in making sure that people who read it actually go on to take action.

Amen, Jeremy!

While of course many of you have already read the book Beyond Paycheck to Paycheck–

You: There’s a book too? I thought this was a blog.

I guess I should be less subtle. But I won’t be.

You: Who should read the review?

  • Those who have not yet read Beyond Paycheck to Paycheck.
  • Folks wishing to recommend Beyond Paycheck to Paycheck to a friend or loved one who have not yet found the way to broach the topic.
  • People who have already mentioned it once or twice to that guy who really needs it, but find that your “special” friend needs multiple reminders from multiple sources.

If any of those sound familiar, check out the review. Then, send you-know-who over there to read the review too. One day, you’ll be thanked.

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Graduation Speech Part 5: Taxes are taxing

Published by
Michael
at June 24, 2008 in Graduation Speech and Tax. 2 Comments

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 5. To see the entire speech released so far, click here and read from the bottom up.

Rule 4: Taxes on taxes are taxing

In the real world, you’re going to pay real taxes. You may have already paid some taxes, but you probably haven’t paid real taxes. You will pay far more taxes than you ever expected. It doesn’t matter how much money you make. Even those making way less than the class average; if it’s the first time you’ve had a job, you’ll be shocked at how much you will pay. Of course, the more you make, the more you pay; yet the initial shock still won’t go away.

There’s no incredible lesson here, so quit waiting for it. Sure there are strategies available to legally lower the impact of taxes, but quite honestly the most important thing for you, a new graduate, to understand about taxes is that you will pay them.

So when you’re shopping for a new car or apartment and you think about how much money you’ll be making once your job starts, be careful. If your salary is to be $36,000 a year, you won’t have three grand a month available to you. Not even close. It will be more like two grand. Crazy, but true. Far better to go in with your eyes wide open than to make the all-too-common mistake of a major irreversible financial commitment during that first summer only to find yourself struggling as your new debt starts to really suck . . . your money away from you. All this while despite you’re successfully keeping your day-to-day spending in check. Taxes are real and they can be very taxing, especially if you’re not prepared.

See, number four was quick. Not too much longer until you can throw your cap in the air and catch someone else’s

[To be continued]

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Graduation Speech Part 4: Debt sucks (your money away)

Published by
Michael
at June 19, 2008 in Debt management and Graduation Speech. 2 Comments

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 4. To see the entire speech released so far, click here and read from the bottom up.

Rule 3: Debt Sucks (your money away)

It turns out there really isn’t such a thing as free lunch: if something looks too good to be true, it probably is. So when the credit card company “gave” you the tee shirt or pizza along with the card with their logo on it, they weren’t being generous – they were being greedy.

Bummer.

Turns out that credit card is really expensive. That debt? You do have to pay it back. APR isn’t an abbreviation for “Any Particular Reason,” so you can’t say “I was going to pay for it later” and hope the bills will simply go away. As you will learn, the bills will quite simply go away when you quite simply just pay them off.

And the sooner the better. Every day you continue to owe that expensive debt is another day’s worth of interest you owe. It gets more difficult, not less, to pay back expensive debt, because it adds to itself. This is compounding interest in its evil form. You know pure evil, right? You’ve seen your arch-rival dance on your emblem at midfield or, worse, steal your girlfriend or boyfriend. Compounding interest is a wonderful thing when it’s working for you, but against you can be devastating. Choose to have it work for you. The less debt you have, the less it sucks.

[To be continued]

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A Carnivalistic IQ Test

Published by
Michael
at June 18, 2008 in Carnivals. 0 Comments

This week’s Carnival of Personal Finance was prepared by Consumerism Commentary. It is the third anniversary of the carnival and featured my post Graduation Speech Part 1: You’re even. Now.

As I know Beyond Paycheck to Paycheck readers are always quite busy, I’ll once again provide you a link to the one article from the carnival I recommend ahead of the others. This week, it’s by Moolanomy who provides a fun financial IQ test that serves at least two purposes. First, it’ll show you where you are (which can give you the motivation to improve or a deserved sense of accomplishment). Second, no matter where you stand, it’s bound to give you some new ideas for ways to further improve your financial trajectory.

Enjoy.

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