Debit versus Credit

Personal Finance Tips for Students

As a student the last thing on your mind is probably personal finance, and related personal finance tips & advice. Nonetheless while you are in your 20’s you are at a critical point in your life and following personal finance tips for students is something you’ll wish you’d done when you are older. I guarantee it. So if you are one of the more than 14 million students currently attending college in the United States (or a student attending college outside of the U.S.) then the following personal finance tips are for you. For those who’ve already graduated keep on reading as well, you might just find something that will benefit you as well!

Use the library

One amazing resource that you have at your full disposal as a student is your school’s library. If it’s like most college/university libraries out there then you’ll have a couple of neat things to take advantage of. The first, and possibly the biggest money saver, is free WiFi. Most schools will offer this, so if you live close enough or are able to spend enough time on campus you can take advantage of the schools internet and save yourself upwards of $30 a month. (more…)

August 24, 2011
Pay Yourself First Doesn’t Mean You Can Live Beyond Your Means

It’s your money and I don’t have any right to tell you what to do with it. On the other hand, you’re here because you’re looking for advice. So consider this advice: Don’t blow all of your savings on your lifestyle! If you’ve set up an automatic savings plan (about the only budget that most people can reasonably handle sticking with) already then consider this: It’s not pay yourself first unless you actually don’t spend the money you’ve payed into your savings plans on your lifestyle. You should have savings goals and retirement goals and the only way you’re likely to accomplish them is by following the principle of pay yourself first. (more…)

August 16, 2011
Emotions Have No Place With Investing

Investing and emotions don’t belong together. They never have and they never will. In fact if you want a sure fire way to lose money while investing then by all means let your emotions make your decisions. However if you are in it for the long haul and just want to grow your wealth by smart investing then hang on for just a second here and listen to me. If you’re more interested in freaking out over the 634 point drop in the Dow Jones Industrial Average (DJIA) yesterday (August 8, 2011) then please head back to the Debit versus Credit blog and find another post to read.

I tweeted this yesterday after the chaos had ended on the open markets:

Investing and emotions don’t belong together. Ever. If you’re letting your emotions get involved then trust me, you WILL lose money.

It’s as true now as it has ever been. Studies have repeatedly shown that if you let your emotions rule you will always lose money. By pulling out after a large loss you may indeed avoid losing even more, but don’t forget one thing here. If you have your money invested in stocks, mutual funds, etc. it’s all paper losses. You don’t actually lose anything until you cash out. So after the 634 point drop you initiated a sell order for your stock or a mutual fund. Before it wasn’t really a decrease in your cash holdings. Now that you’ve sold it is. Maybe you’ll get lucky — maybe the market will continue to drop another 10-15% before finally rebounding. Or more likely you’ll sell now and the market will rebound by the end of the week. Your paper losses would have disappeared, but you cashed out. So now you’ve really lost money, while those of us who stayed level-headed are back to where we were (much better than a loss isn’t it?).

Here’s the trick to avoid emotional investing

Don’t check your bloody portfolio every day.

Seriously. Especially if you hear about a down day on the market. Don’t check your stocks, don’t check your 401k. Don’t check any of your investments! If you don’t check them you can’t freak out about the “paper losses” and you won’t ever lose to your emotions and do something that will compromise your ability to build wealth.

Another thing. If you aren’t already taking advantage of dollar cost averaging through automatic investing you’re missing out on the ability to take advantage of great buying opportunities. Make sure you get that set up if you haven’t already. Now get out there and don’t let the market volatility freak you out. I’ll be watching.

picture courtesy of Icanhazcheezburger

August 9, 2011
I’ll Soon Be Making Less Money but Saving More With An Automatic Savings Plan

As I mentioned a few days ago I’ve accepted a new job where I’ll be taking a pay cut of approximately $10,000 a year when compared to my current salary. If you read that post then you would understand why I felt this would be a good idea, but suffice it to say that I’m lucky enough (thank you wifey!) to be in a position where the pay cut won’t be devastating to our budget and savings plan. Here’s the kicker: I’ve evaluated the budget and decided to make a few changes and further streamline my automatic savings plan. Said changes will allow me to almost double the amount of cash that I’m putting away into savings every month.

How did I do it?

They say it takes money to make money. For my situation I’d like to reword this phrase ever so slightly to “it takes money to save money.” My wife and I have been rigorously paying off our remaining debt over the past several years and we decided that it would be best to accelerate our payoff by several months in order to free up more available cash every month. So we took some money we had in our savings and used it to pay off a student loan and a revolving credit line that we took out a few years back. The savings from paying off these loans is almost enough to completely evaporate the income loss I’m taking with this new job.

I said I’d be saving more, not just breaking even…

I’ve known for a while now that our spending habits were getting a little out of hand. My wife and I both work, have no children and go out with friends several times a week. We’re classic DINK’s. So we’re using this pay decrease as an excuse to cancel a few of the frivolous monthly charges we’ve taken on over the years and make a slight modification to our lifestyle. A few tweaks here and there, a revamp of our automatic savings plan and, tada, we can live on her paycheck alone. As for mine? It will be going straight to a few IRAs, our savings account and an investment account. The amount that I will have going into our savings account soon will almost double the amount we’ve been contributing over the past few years.

Not bad for a pay cut eh?

August 4, 2011
Why I Accepted a Job Offer For $10k Dollars Less Than I Make Now

I’ve accepted a new job with a small tech/advertising company, which I’ll be starting in less than two weeks now. The catch? My salary will be decreasing by a little more than $10,000 a year with this new position when compared to my current job. I know what you’re probably thinking. It seems odd to take a job with less money, right? After all, generally when trying to build wealth your goal would be to increase your earnings over time. So why am I taking a step backwards here? (more…)

August 2, 2011
Must Read Posts That I Linked To on Twitter the Week of July 18th

I’m constantly scouring the internet for interesting articles and posts about personal finance, entrepreneurship, business trends and whatever else I happen to find interesting at the time. I then turn around and share the best material I can find with my followers on twitter. I wanted to share a few of my favorites from the week of July 18th with all of you today. The topics? Acquisitions, the US Tax Burden, Retirement accounts (specifically the 401k), DIY skills and an interesting approach to finding yourself a new job/career.

This 21-year-old just sold her startup for $100 million: http://bitly.com/noRVfL

The US Tax Burden Falls Disproportionately On Individuals and Small Business: http://bitly.com/rh4p2U

A Young Man’s Guide to Understanding Retirement Accounts: The 401(k): http://bitly.com/oTjZW4

How to Hone Your DIY Skills: http://bitly.com/pg9Mcv

Work For Free. It’ll Grow Your Brand.: http://bitly.com/pKM2RZ

That’s just a small taste of the quality content that I link to every single day on twitter. If you are not already following me, you should do so by clicking here.

July 27, 2011
Use an Automatic Savings Plan to Build Wealth

One of the most important lessons I learned in my quest for financial freedom is how important it is to use an automatic savings plan to build wealth. I was never truly successful at saving significant amounts of money when I was younger because I didn’t use an automatic savings plan. I learned that no matter how good my intentions, something always seemed to come up that prevented me from saving like I wanted to, and this happened almost every single month! (more…)

July 22, 2011