Comments on: Money Advice for the College Student - Part III http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/ Talking about money, without being boring. Fri, 05 Dec 2008 00:42:44 +0000 http://wordpress.org/?v=2.6.5 By: Stephanie http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-51539 Stephanie Wed, 21 May 2008 14:43:37 +0000 http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-51539 @Nick - It's true that credit cards aren't for everyone. But the reason I suggest them is that they ARE a good way to establish a credit history. In fact, I saw this happen just the other day: a friend of mine is very lucky, he's getting through college and now grad school with absolutely no loans! This also means he has <i>absolutely no credit history</a>. Banks aren't willing to touch him with a ten foot pole - we found this out when he tried to get a credit card (to establish a credit history!). He was denied for having <i>no credit history</i>. Luckily, the second time around, he was approved for a student card. Of course, it DEFINITELY matters that he is the type of person who will be very careful with his card, and never spend what he can't pay off immediately. Dave Ramsey has some great philosophies, and I know he disagrees with me on this topic. But if you don't have any other loans to establish a credit history, you could end up screwed. @Nick - It’s true that credit cards aren’t for everyone. But the reason I suggest them is that they ARE a good way to establish a credit history. In fact, I saw this happen just the other day: a friend of mine is very lucky, he’s getting through college and now grad school with absolutely no loans! This also means he has absolutely no credit history. Banks aren’t willing to touch him with a ten foot pole - we found this out when he tried to get a credit card (to establish a credit history!). He was denied for having no credit history.

Luckily, the second time around, he was approved for a student card. Of course, it DEFINITELY matters that he is the type of person who will be very careful with his card, and never spend what he can’t pay off immediately.

Dave Ramsey has some great philosophies, and I know he disagrees with me on this topic. But if you don’t have any other loans to establish a credit history, you could end up screwed.

]]> By: Nick http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-51493 Nick Wed, 21 May 2008 05:56:27 +0000 http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-51493 I don't think the whole using credit cards thing is a good idea. I also don't think there is such thing as "good debt"; all debt is ultimately just a way for banks to make money off of you! I ended up with so many credit cards; one was for my parents to use and pay, one was for emergencies, one was for me to buy what I needed and then my parents would pay off the balance, one was a great introductory rate, blah, blah, in the end I filed for Ch7 bankruptcy. If you get a credit card, you are doing business with a multi-billion dollar industry. Do you really think you'll get ahead? Even after a bankruptcy, probably because of my student loans, I still have a credit score that's 700+. There goes the "you need credit cards to build your credit score" theory. Check out Dave Ramsey's site, he has some good words. I don’t think the whole using credit cards thing is a good idea. I also don’t think there is such thing as “good debt”; all debt is ultimately just a way for banks to make money off of you! I ended up with so many credit cards; one was for my parents to use and pay, one was for emergencies, one was for me to buy what I needed and then my parents would pay off the balance, one was a great introductory rate, blah, blah, in the end I filed for Ch7 bankruptcy.

If you get a credit card, you are doing business with a multi-billion dollar industry. Do you really think you’ll get ahead? Even after a bankruptcy, probably because of my student loans, I still have a credit score that’s 700+. There goes the “you need credit cards to build your credit score” theory.

Check out Dave Ramsey’s site, he has some good words.

]]> By: Stephanie http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-22468 Stephanie Thu, 08 Nov 2007 18:13:05 +0000 http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-22468 <b>Fred</b>: The compounding I wrote about was compounded annually, not daily. 10% compounded daily would be a very high risk investment, indeed! It's true, inflation is usually around 2-4%. And while that does eat into a 10% investment, it doesn't cancel it out or mean you shouldn't do it. Also, this doesn't have a whole lot to do with banks, but as far as them "offing your account," they won't, so long as the account is FDIC insured. There are some accounts that aren't FDIC insured (Money Market Accounts, for example), where this could happen. That's why you should always be aware of whether your bank account have FDIC insurance or not. But in general, what I'm talking about with the 10% interest rate is stock investments. I know it's something I haven't covered in detail - if you're interested in the subject, I highly suggest this book: The Bogleheads' Guide to Investing Fred: The compounding I wrote about was compounded annually, not daily. 10% compounded daily would be a very high risk investment, indeed!

It’s true, inflation is usually around 2-4%. And while that does eat into a 10% investment, it doesn’t cancel it out or mean you shouldn’t do it.

Also, this doesn’t have a whole lot to do with banks, but as far as them “offing your account,” they won’t, so long as the account is FDIC insured. There are some accounts that aren’t FDIC insured (Money Market Accounts, for example), where this could happen. That’s why you should always be aware of whether your bank account have FDIC insurance or not.

But in general, what I’m talking about with the 10% interest rate is stock investments. I know it’s something I haven’t covered in detail - if you’re interested in the subject, I highly suggest this book: The Bogleheads’ Guide to Investing

]]> By: Fred http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-22392 Fred Thu, 08 Nov 2007 03:27:21 +0000 http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-22392 of course The inflation rate in any nation is usually around 2-5% so a 10% interest rate would normally be a good thing. But of course the banks KNOW this which is why they make the account HIGH RISK meaning if the bank starts going south and having to pay out your account gets offed first. of course The inflation rate in any nation is usually around 2-5% so a 10% interest rate would normally be a good thing. But of course the banks KNOW this which is why they make the account HIGH RISK meaning if the bank starts going south and having to pay out your account gets offed first.

]]> By: Fred http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-22391 Fred Thu, 08 Nov 2007 03:25:01 +0000 http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-22391 This is interesting, but you leave out the most important thing about investing money into a HIGH RISK account. First off it is a HIGH RISK account if you want 10% interest compounded daily (you don't need to compound your account any more often than that). Second - in order to come out on top in the end your interest needs to beat the inflation rate. If inflation is growing at 12% while you have a 10% interest account then you are losing money by about 2% every year off of the value of the money when you first put it in. If it were to continue like that then it's like putting $1000 into the bank and it becoming $500 instantaneously. This is interesting, but you leave out the most important thing about investing money into a HIGH RISK account. First off it is a HIGH RISK account if you want 10% interest compounded daily (you don’t need to compound your account any more often than that). Second - in order to come out on top in the end your interest needs to beat the inflation rate. If inflation is growing at 12% while you have a 10% interest account then you are losing money by about 2% every year off of the value of the money when you first put it in. If it were to continue like that then it’s like putting $1000 into the bank and it becoming $500 instantaneously.

]]> By: Karen http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-37 Karen Mon, 19 Feb 2007 19:59:00 +0000 http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-37 Stephanie:<BR/><BR/>Thanks so much - I've gone ahead and gotten YF&B. After that I'll read the other book and hopefully my tax law class will even come in handy! lol<BR/><BR/>I'm very excited to get going on this whole thing...........<BR/><BR/>Cheers!<BR/><BR/>Karen Stephanie:

Thanks so much - I’ve gone ahead and gotten YF&B. After that I’ll read the other book and hopefully my tax law class will even come in handy! lol

I’m very excited to get going on this whole thing………..

Cheers!

Karen

]]> By: Stephanie http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-38 Stephanie Sun, 18 Feb 2007 21:34:00 +0000 http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-38 <B>Karen</B>: I must admit, you've stumped me. I haven't read any books targeted towards Canadians (although I still maintain that Rochester is close enough to the border, and that we carry enough Canadian change here that we ought to be considered Canadian), so I can't give any real recommendations. Maybe someone else who reads these comments can help? My suggestion would be to grab YF&B anyways - although some of the specifics might not be relavent, the broader topics of the book still are. After you've read it, you will want to read something like the <A HREF="http://www.amazon.com/gp/redirect.html?ie=UTF8&location=http%3A%2F%2Fwww.amazon.ca%2Fexec%2Fobidos%2FASIN%2F0130893587%2F&tag=poothayou-20&linkCode=ur2&camp=1789&creative=9325" REL="nofollow">Complete Idiots Guide To Personal Finance For Canadians</A>, which will give you specific information about Canadian accounts and taxes and laws.<BR/><BR/>I hope this helps some - if I find out anything more, I'll do a post about it, so watch the blog for that. Karen: I must admit, you’ve stumped me. I haven’t read any books targeted towards Canadians (although I still maintain that Rochester is close enough to the border, and that we carry enough Canadian change here that we ought to be considered Canadian), so I can’t give any real recommendations. Maybe someone else who reads these comments can help? My suggestion would be to grab YF&B anyways - although some of the specifics might not be relavent, the broader topics of the book still are. After you’ve read it, you will want to read something like the Complete Idiots Guide To Personal Finance For Canadians, which will give you specific information about Canadian accounts and taxes and laws.

I hope this helps some - if I find out anything more, I’ll do a post about it, so watch the blog for that.

]]> By: Karen http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-39 Karen Sun, 18 Feb 2007 19:46:00 +0000 http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-39 Hello:<BR/><BR/>I'm a 26 year old law student - months away from graduating. I'd love to find a book that will help me get my finances in order and pay down my student loans stat! <BR/><BR/>YF&B sounds great but it's very U.S focused. Would you be able to suggest something with Canadians in mind?<BR/><BR/>Thanks!<BR/><BR/>Karen <BR/><BR/>PS: I floated over here from the NYT link - glad I did!!! Hello:

I’m a 26 year old law student - months away from graduating. I’d love to find a book that will help me get my finances in order and pay down my student loans stat!

YF&B sounds great but it’s very U.S focused. Would you be able to suggest something with Canadians in mind?

Thanks!

Karen

PS: I floated over here from the NYT link - glad I did!!!

]]> By: ispf http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-40 ispf Sat, 17 Feb 2007 17:46:00 +0000 http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-40 Great post! Linked. Great post! Linked.

]]> By: Stephanie http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-41 Stephanie Sat, 17 Feb 2007 07:54:00 +0000 http://poorerthanyou.com/2007/02/14/money-advice-for-the-college-student-part-iii/#comment-41 <B>Liara</B>: Thanks for coming by! I haven't read Kiyosaki yet, although I plan to simply because he's such a big name. I do recognize that there are good and bad debts: obviously, a mortgage would be a good debt - since it's likely to give returns, and since it puts a roof over your head. I also see a car loan that enables you to get to a job every day as a "good debt." Student loans are usually good debts too - although I encourage my peers to know exactly how deep they're getting into their loans!<BR/><BR/>However, I do not usually consider credit card debt to be a good debt. There are obviously individual cases in which it could be, but in general - especially for college students - it's a bad debt, and wracking up bad debt at a young age is establishing a bad habit right out the gate. Liara: Thanks for coming by! I haven’t read Kiyosaki yet, although I plan to simply because he’s such a big name. I do recognize that there are good and bad debts: obviously, a mortgage would be a good debt - since it’s likely to give returns, and since it puts a roof over your head. I also see a car loan that enables you to get to a job every day as a “good debt.” Student loans are usually good debts too - although I encourage my peers to know exactly how deep they’re getting into their loans!

However, I do not usually consider credit card debt to be a good debt. There are obviously individual cases in which it could be, but in general - especially for college students - it’s a bad debt, and wracking up bad debt at a young age is establishing a bad habit right out the gate.

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