Expanding Your Context

By: Roshawn Watson

For those of you who are avid readers of business-related news, there are several great content sources that you already are or should be aware of. Some of the biggest players are Business Week, NY Times Business, Bloomberg, and the Wall Street Journal. Incidentally, I just found out that LIBOR is offering discount subscriptions to the Wall Street Journal and Barron's. For example, online-only subscribers can get the WSJ for $1.99 per week while print subscribers can get it for $2.29 per week. Thus, if you are in the market for a quality business news publication, you can partake in some savings.

Disclaimer: I am not a WSJ affiliate. 

Regardless of which newspaper you decide to go with, it is vitally important to realize that there is value in just reading business and personal finance news even if you choose not to pay for a subscription. Robert Kiyosaki referred to this as a context-expanding activity. In other words, even if you don't read any information that you can directly apply, reading business news affects the paradigm through which we see the world. This can be beneficial because it opens up your mind to opportunities that you might not have previously noticed. If you are aware of such opportunities, you can capitalize on them.

Let me give you an example from Thomas Stanley's The Millionaire Mind.

Mel thought of himself as a "big city boy," but he was drafted into the army and was stationed in the rural South. Instead of lamenting his fate like the rest of his comrades, he chose to study the area for economic opportunities. What he found was an up and coming community with the right infrastructure to support commercial real estate. He took his first foray into real estate investing by getting his dad to cosign on a loan for a commercial building that cost $7500 . He continued buying and ended up with a net worth in excess of $10 million and a cash flow of over $750,000 annually. His expansion of context allowed him to capitalize on opportunities rather than complaining about his fate.
 
Do we live in world of barely enough or a world or plenty? Our answer to this simple question reveals the lens through which we see the world. Whereas one may just see unemployment and a global financial crisis, someone else will focus on the abundance of opportunities. Both are a reality, but we often choose the our focus and reality.Life is choice-driven, so don't focus on the reality that you don't want.

Uncommon Money News (Vol. 72)

By: Roshawn Watson

In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!

This week, I participated in the Carnival of Financial Planning - Edition #108 hosted by: The Skilled Investor. We have the following posts included in this carnival: Should You Buy A House Outright? and The Rich Get Poorer. Additionally, Should You Buy A House Outright? was also included in the Carnival of Twenty Something Finances hosted at How I Save Money. Last week, I participated in the Carnival of Financial Planning # 107 hosted by Intelligent Speculator and the Carnival of Financial Planning # 106 hosted by My Wealth Builder. The following posts were included in last week's edition The Rich Get Poorer and Should You Buy A House Outright?

To my readers: I am so honored by your support. Thank you for reading, subscribing, and for voting for articles from this site on social bookmarketing sites such as stumbleupon, reddit, delicious, digg, propeller, twitter, and yahoo buzz. Together, we are telling thousands of the importance of financial literacy. I absolutely could not do it without you. You are vital this this site, and I appreciate your help so much! Thanks.

Business

Isn't that special: 30,000 employees of Goldman Sachs to earn on average $700K. Thanks taxpayers!

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Ten Big Companies That Are Veering Toward Bankruptcy

Colleges Find Creative Ways to Cut Back

Retailers Ready For Fight On Credit Card Fee

The World's 10 Most Valuable Brands (Updated) view!

Cash4Gold Threatened Jail For Not Removing Negative Comments

2 banks change rules on overdraft fees (in a good way)

US Economy and Real Estate Money News

Bernie Madoffs Penthouse Hits the Market Steal at $9,900,000

Bernanke says recession is "very likely" over

Seniors racking up credit card debt

60% of Americans living paycheck to paycheck

Entertainment Money News
Netflix awards $1M prize to improve movie picks

Salary Declines For Generation Y

By: Roshawn Watson

The employment outlook for recent college grads has not been great this year. Unemployment, underemployment, and now salary declines have made this job season quite challenging. Generation Y have unfortunately found themselves as expendable shock troops in a campaign of corporate “downsizing.”

Generation Y Particularly Vulnerable in Recession

With the stock and real estate crashes, plummeting consumer confidence, and mass layoffs, Gen Y has been significantly impacted by this recession. Perhaps this comes as no surprise since recent college grads are typically hit harder during recessions, as they are amongst the first to be laid off and may have difficulty competing against laid-off workers with years of experience. The Bureau of Labor Statistics recently reported that more than one million college graduates over the age of 25 lost their jobs in FY09, pushing the unemployment rate for their cohort to 4.8% in June, precisely double the rate of June, 2008. Note that the unemployment rate for those new graduates currently seeking jobs is already at 10.8%. Additionally, the National Association of Colleges and Employers said Tuesday that those who graduated with bachelor's degrees in 2009 received a $48,633 average starting salary offer, down 1.2% from last year, according to a survey of 140 college and university career-services offices. This represents a stark change from 2008, when the average starting salary was 7.6% higher than those offered to the class of 2007 (WSJ).

Of course, estimates of unemployment are subject to some errors. For example, the unemployment data have a number of problems that lead to an understatement of unemployment. For example, the data count as employed all people who are working part time but who would like to work full time. Since these people represent unused labor effort that is available, the unemployment rate understates the extent of unemployed resources in the economy. Another problem that causes the unemployment rate to understate the extent of unemployed resources is the "discouraged-worker" effect. If someone wants to work but becomes so convinced that there are no jobs available that he makes no effort to find work, he will be counted as "not in the labor force." Since there will be more discouraged workers the more severe the recession, this factor will tend to dampen the fluctuations in the unemployment rate. No statistic is perfect, but it is important to keep these factors in mind when evaluating unemployment data.

Another consideration is that the salary data is based on surveying by university of recent graduates, which may be subject to all sorts of biases. A look at the actual survey question(s) and some demographics of the respondents would be helpful in interpreting this data. For example, it would be helpful to know whether there any differences in salary based on race, gender, geographical region, major in school, previous job experience and a variety of other factors that may potentially confound the interpretation of the data. It may be that they have corrected for these factors; however, it is not stated. It would also be helpful to see other summary statistics such as the median salary, as the average salary can be skewed by some of the higher earning students.

The psychological and financial impact of being a new graduate in the present job market can be staggering. Often, we forget that Generation Y may be particularly unprepared in this challenging job market. Although there are definitely signs of economic recovery, preliminary 2010 statistics show that employers still intend to cut hiring of new graduates by 7%. Although you definitely have to use your available resources (intellectual, social and economical) to find the right employment in today's economy, the old mantra of work hard and everything will work out fine does not always immediately materialize in the present.

Save For Retirement or Avoid Student Loans

By: Roshawn Watson

Student loans are just terrible. As the costs of colleges continue to rise disproportionately to incomes, many graduates keep loans around now almost as long as mortgages. According to Kiplinger's Personal Finance, the price of tuition and fees at some four-year public institutions have increased by 35% since 2001; CNN reports that the costs of college has soared 439% since 1982. Many students work to help ease the burden of paying for school. If a student is working and has acquired some cash, should he or she use that money to avoid future student loans or invest the money for retirement?

Image Credit: SBA73

Surprising Wisdom From an 18-year old

Recently, WSJ published an article asking this very question. The son of the chief of the Wall Street Journal's San Francisco bureau wants to use the money he earns for writing a column to avoid student loans. At eighteen, he already has a Roth IRA. His parents want him to take a federally-guaranteed student loan of $5,500 for the first year and invest his money in his Roth IRA. With his parents' plan, Isaac would end up with close to $30,000 in debt upon graduation. He lamented in the column...

I can see it all like a bad dream: I finish up college and, after the flurry of graduation celebrations are over, I'm left out in the real world with my education, aspirations and a massive pile of debt.

For years, it would hang over me, taking a large chunk of my paychecks hostage and forcing me, while job hunting, to always consider first how well a job pays before thinking of how much I would learn from, or enjoy, the work. Working for a nonprofit, traveling the world or going to graduate school would all be mostly out of the picture.

But this is avoidable for me. I've received a large windfall from writing this column, in addition to the money left over from my high-school job. In total, it's enough to significantly reduce the debt I'll need to take on, or to avoid it altogether. That is, only if I don't do something else with the money, like putting it aside for retirement. By deciding to go to college, I piled a heaping mound of financial obligation on my plate. Dealing with this should be my first priority. I don't quite understand my dad's obsession with saving for retirement...

Although the dad admits that he is obsessive about saving for retirement, he still sticks to his stance on his son taking out a student loan to invest for retirement because "our youth can't count on Social Security or old-style pensions, so they need to start thinking about retirement earlier than we did." To be fair, depending on Social Insecurity is not a great idea for any of us, and 401Ks and IRAs have replaced "old-style" pensions for most. However, that still doesn't mean that it's in his son's best financial interest to invest his money rather than avoiding student loans.

I know that the dad is trying to teach a lesson here, but I'm not sure if I
agree with the lesson: invest for the long-term even when it's to your
short-term financial detriment.

Perhaps a better lesson is invest for the long-term after you have built a good financial foundation (not based on debt).

An Expense The Son Cannot Afford
This scenario is pretty interesting since many traditional students do not have the luxury of being able to invest anything for retirement while in school because the money just isn't there. I would suggest that neither does this young man. By investing the money and taking out a loan instead of paying the school bills directly, he is functionally borrowing to invest. The problem is, as he pointed out, debt equals risks.

Unfortunately, we generally leave out risk in our financial calcuations.

Although we all hope that everything will go perfectly in school, suppose he doesn't graduate or doesn't get a good job after school for some unfortunate reason or because he wants to attend graduate school. He would then have student loan debt and possibly little or limited means to pay it back. Unlike many other debts, you cannot bankrupt student loans, so they really can stay with you forever. This is one of the many reasons why you should build a firm foundation prior to investing, which means avoiding and eliminating debt first. Note that this strategy only works if you plan to get out of debt quickly. Additionally, part of the whole college experience centers on nurturing independence. By encouraging him to graduate with a overwhelming amount of debt, the parents may be prolonging his financial dependence on them.

Agree With The Son With An Caveat
Surprisingly, I almost unequivocally side with the young man with the exception that he needs to reevaluate his timetable for investing. While he definitely should NOT plan on waiting "one of two decades," as he mentioned, to start investing, waiting until he is done with school and done with student loans is definitely reasonable, especially if it means that he avoids or minimizes student loan debt. This assumes that he quickly pays off his student loan debt though. For example, if he invested the typical student loan payment from age 22 to age 65, he would still be a multimillionaire. Fortunately, the father and son seem to have come to some resolution: the parents will increase their contribution to the school and the son will be able to invest. That works too, but for the rest of us I agree with his grandmother: get your education, then invest aggressively.

Lastly, if you like this post, please subscribe (see upper right-hand corner), Mixx it, Propel it, Stumble it, and tag it on Delicious. Also, click here to get my eBook FREE.

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Selecting A Debt Consolidation Company

I have been away but wanted to share this guest post by Robin Williams. It is about how to select a debt consolidation company. Remember, debt consolidation is not the answer to debt. Getting a handle on the psychological problems (out of control spending) and life circumstances (i.e. job loss) is the real answer. There are many situations where one may consider consolidating his debts. For this reason, it is important that you have the necessary tools to make a wise decision in choosing a company. Read this informative post, and feel free to leave comments, visit their site, and write questions for the author.

Author: Robin Williams

There are thousands of debt consolidation companies that are competing for your business, but selecting a dependable non profit debt consolidation company can truly become an intimidating task. While exploring non profit debt consolidation companies, you must take some important factors into consideration.

A lot of debt consolidation companies claim they are non profit, but in reality they earn in millions. These companies apply the “non profit” tag simply to attract consumers. Consumers believe that these debt consolidation companies are working for their best interests. Other debt consolidation companies apply the “non profit” tag to infringe telemarketing regulations from which charitable institutions are granted relief. Request for evidence of non-profit 501(c)(3) status prior to doing business with any such company.

Some debt consolidation companies mention religious connections in their names or on their official websites. Some agencies indisputably have connections with a religion, however, some agencies are simply making use of the name in order to make you rely on them. You must not allow a religious connection or membership to affect your choice – select the agency that is appropriate for you.

Fees
Not every non profit debt consolidation company comes to you free of cost and the genuine non profit agencies must have minimum monthly fees and establishment fees. Some of them make publicity for voluntary fees but subsequently compel you for paying the total fee even though it’s quite costly for you. If an agency has exorbitant fees, is ambiguous regarding their fees, or compels you to pay a voluntary charge, which is not within your means, you should go for another agency. Be careful about the fact that with numerous agencies, the payment for the first month would probably be directed to the debt consolidation agency and not to your creditors.

You fell into debt in no time, but it would require a lot of time to come out of debt. Don’t rely on an agency that assures that you would become debt free within one or two months. Similarly, you must ensure that the non profit debt consolidation agency is giving time for you. The National Foundation for Credit Counseling (NFCC), which is a non-profit community organization, gives at least one hour on the telephone or personally on a discussion to determine whether you require consolidation. If an agency offers you a strategy within a short time period, then it has not given sufficient time analyzing your expenditures. Utilize a debt consolidation agency that gives a lot of time to investigate your finances.

Better Business Bureau
The Better Business Bureau (BBB) utilizes a Reliability Report to maintain documents on businesses in order to ensure that consumers can select the most reliable agencies. The BBB keeps details about products and services together with a history of grievances and accolades. Companies get an acceptable or unacceptable record on the basis of how they manage customer-related matters. Prior to making a decision on a company, check it with the BBB and only pick an agency with an acceptable rating.

The Better Business Bureau is one of the smartest means to check the trustworthiness of a debt consolidation company over the Internet. Nevertheless, be cautious when you’re typing. Just missing one letter such as “a” in “bureau” can take you to fraudulent sites. Take the help of their official website – BBB.org.

It might be difficult to select a non profit debt consolidation company when there is a plethora of choices. However, with some perseverance and plenty of research, you can select an agency that is suitable for you. You can have a lasting smile since you’re one of those debt-free people.

Uncommon Money News (Vol. 71)

By: Roshawn Watson

In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!

This week, I participated in the Carnival of Financial Planning #105 hosted by: The Skilled Investor. We have the following posts included in this carnival: Have We Stopped Saving Already? and The Rich Get Poorer. Additionally, Have We Stopped Saving Already? was also included in the Economy and Your Finances Carnival hosted at One Mint. Last week, I participated in the Carnival of Financial Planning # 104 hosted by Four Pillars. The following posts were included in last week's edition The Rich Get Poorer and Outrageous Law Transfers Parents’ Debt To YOU.

New post Should You Buy A House Outright? was included in the Festival of Frugality hosted at Canadian Finance Blog, the Money Hacks Carnival hosted at Automatic Finances, and the Carnival of Everything About Personal Finance hosted at Nil 2 Million. Thank you, thank you, thank you. Please look through the carnivals if you would like to read plenty of other interesting posts in the blogosphere!

Also, I wanted to send a special thanks to Marshall Brain of How Stuff Works (I subscribe to this site) for linking to Should You Buy A House Outright? under their interesting reads section. This is so appreciated, and they do a wonderful job on this site.

To my readers: I am so honored by your support. Thank you for reading, subscribing, and for voting for articles from this site on social bookmarketing sites such as stumbleupon, reddit, delicious, digg, propeller, twitter, and yahoo buzz. Together, we are telling thousands of the importance of financial literacy. I absolutely could not do it without you. You are vital this this site, and I appreciate your help so much! Thanks.

With your help this week, we made the front page of multiple social media with the post Should You Buy A House Outright? !!! Thanks for your OVERWHELMING SUPPORT and also thanks for all the comments!!!!

Posts Of The Week

The Article Cash4Gold Doesn't Want You To Read

The Four-Day Workweek Is Winning Fans

Audi President: GM's Volt a car for idiots

American pharmaceutical giant Pfizer Inc. agrees to pay $2.3 billion for illegal promotion of products, the largest health care fraud settlement in U.S. history

Vanity Fair's The Establishment List 2009

Business

The Article Cash4Gold Doesn't Want You To Read (POW)

The Four-Day Workweek Is Winning Fans (POW)

Audi President: GM's Volt a car for idiots (POW)

How Craigslist still rules with 90's web design (Wired)

American pharmaceutical giant Pfizer Inc. agrees to pay $2.3 billion for illegal promotion of products, the largest health care fraud settlement in U.S. history (POW)

Economy

What Underwear Says About the Economy

Entertainment Money News

Final Destination claimed the No. 1 Spot, but which high profile movie came in second

Could Susan Boyle Already be Bigger Than Whitney Houston, New Moon & the Beatles?

Vanity Fair's The Establishment List 2009

Offbeat & Other
Why the Rich Clip More Coupons Than the Poor

Image credit: Bert Kommerji

Congrats to Kevin from No Debt Plan for reaching a net worth of six figures

Being A Landlord By Default

By: Roshawn Watson

With decimated real estate markets across the country, many homeowners are facing some very difficult financial decisions. Although choosing to become a landlord can be financially rewarding, many homeowners are finding that this option is not all that it is cracked up to be.

Why the Increase in Reluctant Landlords

Homeowners who have relocated due to new jobs but can't sell their homes or those who want their home values to return before they sell are becoming landlords to offset their mortgages and other expenses. Allstate, the U.S. second largest home insurer, reported that there is a 27% increase in homeowners who converted their homeowners insurance to landlord policies compared to the same quarter last year. In many cases, these homeowners are just looking for some relief from their mortgages and related expenses.

However, many homeowners are unprepared for the additional burdens of finding and retaining quality tenants, the stress of maintaining the property professionally, and the increased responsibility for bookkeeping. Renting out a property is functionally similar to running a small business, yet reluctant landlords are often lacking and unwilling to learn the necessary tools required to do it effectively. After all, being a landlord is just a "temporary fix" for many. One way to make sure that the property is managed correctly is to hire professional property managers, which typically costs 3 to 12% of rental income. Unfortunately, this often erodes any potential profits, but for these default landlords making profits is not their primary motive anyway.

Leasing the Property to Tenants May Not Solve Problem

Becoming a landlord by default is definitely not a panaceas. Even with rental income, these new landlords may still find themselves in negative cash flow positions after you factor in the mortgage, insurance, taxes, and other related expenses. In some U.S. markets, the demand for rental units isn't that strong. Note that the vacancy rate for rental units is the highest in two decades and rents are falling, which is good news for good tenants and bad news for landlords. Additionally, renting out the house may only be delaying the inevitable loss of a property. This is particularly true in cases where the owners owe substantially more on their homes than they are worth. These buyers would benefit from a short sale with no recourse (meaning the lenders agree not to pursue the balance between the value of the mortgage and the actual selling price). Although you definitely take a credit hit for these, you can legally and ethically wash your hands of the property and get out of the financial trap. That's why it is important to be honest with yourself in these situations. The prices for many properties, especially those in areas hit hard by the real estate crunch, may not climb back to mid-2000s levels anytime soon. Thus, holding on to a property by renting where you are operating at a loss each month is not a particularly good strategy in such circumstances.

Being a reluctant landlord is a option that many of us may face at one point of our lives. I have read numerous times that many landlords are indeed reluctant. After all, who wants the call to fix the toilet in the middle of the night or to deal with late payments and ungrateful tenants. Sure there are rewarding aspects, such as providing housing to families and income for yourself, but that doesn't change the fact that there is unpleasantness associated with being a landlord. Perhaps the important lesson is that if you are going to do it, then immersing yourself into the business of being a landlord may turn an unfortunate situation, such as being financially-tied in a house you're trying to unload, into a blessing in disguise.

Lastly, if you like this post, please subscribe (see upper right-hand corner), Mixx it, Propel it, Stumble it, and tag it on Delicious. Also, click here to get my eBook FREE.

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