Farnoosh Torabi's Blog, page 65

“Being So Money” In Your 20′s

I recently chatted with Business Insider’s Jill Krasny to share some of my best tips for young adults. There’s a snippet below. Check out the full article here.

Since publishing You’re So Money in 2008, I’ve had so many opportunities to engage with college students and young professionals and to share my perspectives on how to save and spend smart in your 20′s. Today, in fact, I’m at Penn State University visiting students at the Smeal College of Business for the Powerful Women Paving the Way conference.  Thanks to everyone for inviting me and for the warm reception. Looking forward to coming back soon.

Excerpt…

1. Start saving now. ”One of the things I’ve often heard from people in their 40s and 50s is that they regret not saving money,” Torabi says. “Of course, it’s a groaner to say, ‘save in your 20s,’ but it’s even harder to save in your 30s, 40s and 50s because your responsibilities grow even more. You get stretched in even more directions, whether it’s because you have dependents or bought a house. It’s not going to get any easier.”

2. Invest in yourself. ”Whether that means getting additional education—not grad school, exactly—growing your skillset, earning more accredidations, or enhancing your knowledge of a subject and exploring new things, now is the time to be selfish,” says Torabi. “You have no one else to invest that money in—you’re not saving for your kids’ education or paying for a wedding.”

3. Find another revenue stream. ”The cost of living is rising faster than wages, and if you’re in your 20s, then chances are your wages are lousy. Even if you have a job and benefits, it’s not enough. You’ve got to think outside the box to monetize your skills oustide of work,” Torabi says.

Some examples include becoming an errand guy (or gal) on sites like TaskRabbit.com or Fiverr.com; virtual tutoring via Tutor.com, pet-sitting, baby-sitting and freelance writing. “You still have your natural, youthful energy so capitalize on that,” adds Torabi. “Now’s the time to be self-absorbed, in a positive way.”

Today Show: Help for Underwater Mortgage Borrowers

[image error]This morning on Today’s #Money911 segment, we tried to help viewers with upside down mortgages, as well as give folks some alternative saving strategies. Check it out, in case you missed it! Also – see my Q&A on the new AG Refi Settlement written out below:

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Carolyn from Florida writes in:

My mortgage is up side down wtih a 6.75% rate, I have an A credit rating and never missed mortgage payment. Wells Fargo stating that I am not eligible for AG Settlement Refi due to the original investor WFALT 2007_PA2. What does this mean and what are my options?

My response:

I did manage to connect with the public relations team at Wells Fargo and what your letter says is that your mortgage does not qualify for refinancing under this new AG Refi program – which is a new, roughly $25 billion agreement between state Attorneys General and five of the country’s largest banks, including Wells Fargo to help underwater borrowers refinance or modify their loans. The reason is – your loan has to be owned and serviced by one of these banks. In your case, your loan IS serviced by Wells Fargo but it is actually still OWNED by Universal American, so you don’t qualify for this particular refi program.

That said, I would call back Wells Fargo and continue this dialogue with them to see what else you may be able to do. They tell me that these rules could change. The other option – harder option – is to pay down your mortgage more aggressively so that you build equity. I’m not sure HOW underwater you are, but in order to qualify for a traditional refi, you must have about 20% equity in your home. Whatever you do, don’t lose contact with your bank and understand that bank reps are still learning the ins and outs of all these alternative refinancing programs, so it may take speaking with a few people before getting a straight answer. Be persistent.

Reducing College Sticker Shock

It’s high season for prospective college students, as they and their families compare colleges and decide how to finance what is often one of life’s biggest expenses. After tapping savings and 529 plans (assuming you’ve been contributing over the years) there’s almost always a shortage. And while some parents feel obliged to do all the financial heavy-lifting (with some foolishly tapping into their 401ks), let’s remember that there are many more safe and affordable ways to fill the gap. Here are 6 ways for parents and college students to make paying for college easier.

Free Money

Millions of dollars worth of scholarships and grants are available each year to college-bound students. The key to winning them – aside from meeting the qualifications – is applying early and often. As Mark Kantrowitz, financial aid expert and author of Secrets to Winning a Scholarship, writes, winning a scholarship is kind of a game of numbers. “It’s based on both skill and luck,” he writes in his book.  “Applying to more scholarship programs gives you more opportunities to win a scholarship.” Databases at Fastweb.com, Scholarships.com and SallieMae.com are great places to begin your search for applications.

Additionally, parents should inquire about education awards at their respective companies. Some examples of corporate scholarships:

Wal-mart and Sam’s Club offer several scholarships each year worth $3,000 to $13,000 each. A student must be the child of Wal-Mart employee and prove financial need.
Alcoa’s Sons and Daughters Scholarship Program reserves free aid to graduating high school seniors who are children of Alcoa employees. The rewards are in the amount of $1,500 annually, renewable for up to three years.
The Verizon Foundation has scholarships reserved for children of employees, awards as high as $20,000.

AP Credits

Earn up to a year’s worth of college credits with Advanced Placement credits earned in high school. Many colleges and universities accept qualifying AP credits, which students can earn after taking an advance placement course and exam in grades 11 and 12. Each exam costs $87, but if you score high enough, you could be exempt from an entire class – a savings of hundreds or thousands of dollars, depending on the college.

Loans

Student loans – private and public – are the most significant type of financial aid for college students.  As universities increase tuition faster than the rate of inflation, few students and their families can actually afford to pay for education costs out of pocket or with scholarships and grants. In fact, the most recent data from the Institute for College Access Success shows that approximately two-thirds of graduates from four-year schools in 2008 owned an average $23,200. That’s close to double the debt of the class of 1996.

Apply for federal loans first. They offer low interest rates and flexible repayment terms. When scholarships, grants, federal loans and savings fail to cover the cost of education, some students and their families turn to private student loans to help cover the difference.

Unlike government loans, private student loans, which are offered through private lenders and financial institutions, are not subsidized and your eligibility and interest rate is often dependent on your credit rating. The interest rate is typically a variable rate, which resets quarterly, while federal student loan rates are fixed.

Campus Jobs

Working a part-time job while in school is one way students can continue to contribute to the cost of college, especially to pay for “extra-curricular” expenses. The key, of course, is to find a job that doesn’t compromise a student’s ability to graduate on time. Pick a job that’s on or near campus that works around your class schedule – as opposed to fitting classes around shifts. Some smart ways to earn money while in school include applying for federal work-study programs, selling class notes on sites like NoteHall, ShareNotes and DormRoomNotes.

Community College

Many students are choosing to attend a community college first to save money.  Why give a school $30,000 a year when you have no idea what you want to study? A community college gives students a chance to explore their academic interests cost-effectively.

Skip a Year

Ten or 15 years ago it may not have been as socially acceptable to take a year off between high school and college. Today, it can be a smart strategy, especially for students that need to shore up cash or take time to figure out their academic path. In the meantime, it’s important to maximize that year – to volunteer, travel, work and/or take some classes that can be counted towards your college graduation requirements.

Make 5 Dinners, 1 Bag of Groceries

[image error] Think you can make five whole meals from just one $50 bag of groceries?

I recently accepted Eating Well’s “5 Dinners, 1 Bag” challenge – and the answer is YES! Check out our clip below to learn more about the required ingredients and recipes! #finfit

Money 911: Taxes, Coin Collections & IRAs

On Today's Money 911, we answered viewers' questions ranging from how to use money made from selling your house and whether you should save your tax refund or use it to pay off credit card debt. Plus, what to do with an old coin collection?

Check out the clip below!

 

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FinFit: Can You Afford a Career Change?

[image error]Considering a career change? You're not alone. In my latest Financially Fit segment, we review some of the key considerations before making the big leap. Check out the video below and make sure to read the full article here.

Anderson: The Real Cost of Coupons

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How far is too far when it comes to couponing? That was one of the topics we discussed on Anderson this Monday.

My opinion? You have to ask yourself – how valuable is my time? Sometimes, in the pursuit of saving money we forget that our time is a very, valuable commodity. If you're spending 10 hours per week and only saving $50 or $60 on groceries with coupons, that means you're valuing your time – at best – at $6 an hour. Is that all you're worth? Can you find a more efficient way to save money…or make money? You also want to examine what you're actually buying with coupons. Some people let coupons dictate their shopping lists. That's dangerous, considering many coupons are for unhealthy foods and a large fraction of coupons distributed last year required shoppers to buy multiples of one thing in order to get a discount…buy 3 get one free deals, for example. So, are you really saving?

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Today: Work at Home Jobs

[image error]Branching out at TODAY show and doing a MOMs segment on easy and safe gigs for stay-at-home parents. We only had 3.5 minutes so I left out the last tip about turning your home office into a call center. You can watch the clip below and see all my tips in full detail after the video.

 

 

 

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In today's changing economy, self-employment is rapidly becoming the new employment.  In fact, 40% of the country's work force is expected to be self-employed by the end of the decade, according to the Bureau of Labor Statistics. And particularly for stay-at-home parents, self-employment can offer the best of both worlds: a chance to make money, possibly pursue a passion without really compromising the time and attention you give to your family. I interviewed dozens of stay-at-home moms, in particular, and some are making up to $1,000 or more a month through safe and easy side gigs – often from home – that's helping them save more, pay down debt or just spend with more freedom, which we could all get some help with in this economy.

Good at scheduling and organizing? Consider being an assistant. Earn $45 to $50 a day executing other people's random tasks either in your own town (such as getting groceries for another family while you're getting some for yours, picking up someone's dry cleaning while you pick up yours, etc.) or assist virtually. The site taskrabbit.com, for example, has a long list of "virtual assistance" gigs you can do via your laptop, ranging from data entry to online research. The best part: You can work from anywhere. The more technical your skills, the more you can charge.

To sign up with taskrabbit.com, go to the site to submit an online application and do a video interview. In return, the company will send you a copy of its guidelines and quiz you on it. The process usually takes about a week to get through, and 70 percent of applicants are accepted. Similar sites worth looking into are elance.com, odesk.com, and virtualassistants.com.  And by the way, online hiring grew 120% last year, so lots of demand in this sector.

Strong knowledge of a particular subject matter? Try online tutoring. At tutor.com qualified tutors work with students via video conferencing and online chats, earning an average $10 to $14 per hour. Math and science tutors earn the most.  You don't have to be a certified teacher to qualify, but you do need to have a college degree or be in the midst of earning one. The process isn't just sign-up-and-start, though–there's an online application, followed by an exam, a tryout session, a background check, and another exam. The good news: You only have to test in the area you'll be teaching, from math and science to writing and job-interview prep.

Love pets and have room in your house or backyard? Make money by pet sitting and pet boarding, that can bring in an average $20 per pet, per day. Parents can even involve their kids with this stay-at-home business. Do an online search for pet boarding sites that connect pet owners and pet sitters. For example, sleepoverrover.com, is a Phoenix-based site that handles all advertising, reservations, and payments between pet owners and boarders. (Another option: Partner with a local vet or pet store and ask them to refer people to you.)

Own an up-to-date computer and a landline phone? Turn your home into a call center for reservations or customer service.   Many companies hire at-home customer service reps, such as Hilton Hotels and 1-800-Flowers. Pay is usually $8-$10 an hour and you want to set aside at least 15 to 20 hours a week for this, but many times, call centers are 24 hours, so the hours can be flexible.

STAY SAFE: Just like employers will do a background check on you — do a background check on any company advertising work from home gigs or online jobs. At the very least, do a web search and see what's been written about the company. Sites like Glassdoor.com and Jobitorial.com have reviews from employees. Check your local Better Business Bureau  to see if they have a rating or any complaints. And don't ever pay any "fees" for securing or landing a job. If you're asked to give money or your credit card information that is more than likely a scam.

 

Freelancers: Secure Your Paycheck!

Freelancing, as opposed to working a traditional 9 to 5 job, can be a liberating way to manage your career, but it does carry some financial risks if you're not careful. For example, since you're not guaranteed a timely paycheck, there is the unfortunate chance of getting ripped off by a dishonest company. In fact, a recent Rutgers University economist found that freelancers in New York were unable to collect an average $4,600 last year.

For the self-employed, here's my advice on how to help ensure you never get stiffed:

Screen Clients

See what previous contractors are saying about a company before agreeing to any terms. Check out the freelancer forum at FreelanceSwitch.com and try a Google search for the company's name in the blogosphere at Google.com/blogs. The Freelancers Union also has a new "Client Scorecard," where freelancers leave reviews for companies.

Request a Down-Payment

For big projects, as part of your agreement with a client, request a reasonable down-payment – perhaps 15% or 20% of the project's total fee – that will be applied towards the final payment. This will, at least, offer some security, in case the client bails. It also incentivizes the client to pay you on time.

A Handshake's No Good

"Deadbeat companies are pros at offering verbal contracts with no paper trail," says Sara Horowitz, Founder and Executive Director the Freelancers Union. "So many freelancers kick themselves for doing business on just a handshake." Another free tool from the Freelancers Union is the "Contract Creator," which helps you create and customize your own contract to ensure a client pays on time.

Invoice Promptly

Invoice your client right away via e-mail and/or traditional mail.  If it's a short project of just a few weeks in length, invoice promptly at the end of the term. If it's a lengthier project, invoice twice a week in smaller amounts. All invoices should include both parties' names, project date title, date of invoice, your social security or business ID number and a description of the completed work.

 

Credit Score Myths

With interest rates still very attractive, you may find yourself shopping for a new loan or applying for a new credit card. The process will likely include coming face-to-face with your FICO credit score – a number between 300 and 850 that determines how good of a borrower you really are. We know that, in general, the higher your score, the lower your interest rate may be on a loan product. But the world of credit scoring can be quite confusing and there are a number of popular misconceptions about what actually impacts your score.

If you plan to boost your score this year with the hopes of taking advantage of super low rates, take into account these popular credit score myths.

Myth #1: Closing a card – after paying off a massive debt load – is a fine idea.

While it may feel good to kiss that card goodbye, it's not necessarily a smart move.  Closing a credit card account may actually increase what's known as your debt-to-credit utilization ratio, which is the sum of all your outstanding credit card debt divided by the sum of all your credit card limits. A higher utilization is considered risky by credit score calculators and can potentially ding your score – in the wrong direction. To earn the highest score, try to use no more than 10% of all your available credit.

Myth #2: Your employment history impacts your score.

This isn't true, yet more than half of consumers surveyed believe having a steady job track record improves a credit score. Of course, having a job helps you to qualify for a loan, but it's not factored into your credit score.

Myth #3: Financing a big purchase – like a new home or car – will lower your score.

False. Your score won't be affected for simply taking on a new loan like a mortgage or car loan. Actually, having a variety of credit cards and loans — and managing them responsibly – can help boost your score. In fact, about 10% of your FICO credit score is dependent on the "types of credit used."

Myth #4: The older you are, the higher your score.

While it's true that the length of your credit history factors into your credit score, it doesn't take into account your age. The important thing to note is that the earlier in life you establish credit and, again, manage it responsibly by paying your bills on time and having low balances, the better for your score in the long run.

Myth #5: Checking my score will lower my score.

This is a huge misconception. But the truth is, looking up your own score yourself is totally harmless. In fact, it's recommended that you check your scores yearly from each of the three major credit reporting agencies: Experian, Equifax and TransUnion. On the other hand, if a lender or credit card company checks your credit score, it's likely recorded as a "hard" inquiry and may work against you if you have multiple financial institutions checking your credit. One exception is if you're shopping around for a mortgage or car loan and receive multiple credit inquiries from lenders within a short time frame. All the inquiries in this case will typically count as just one inquiry and should do little to no harm on your credit score.

Some additional advice to help you increase your score:

Check your credit report.

According to the Public Interest Research Group, 25% of credit reports surveyed contained serious errors that could result in the denial of credit, such as false delinquencies or accounts that did not belong to the consumer. IF you want to repair your credit, begin by checking to make sure your credit report is accurate and is free from erroneous information, since your score is based on information on your credit report. If you find errors on any of your reports, you'll want to dispute them with BOTH the credit reporting agency and the lender or bank involved. Your credit report is FREE to check.

Focus on NEW debt first, OLD debt last.

If you missed a credit card payment last month, it's really important to get back on track as soon as possible with the account and start making on-time payments for a while. That will help your score A LOT. Meantime, if you have an old bill from a couple years ago that's gone into collections, addressing that old bill won't do as much to help your score. The damage has already been done. According to FICO, the impact of past credit problems on your FICO score fades as time passes and as recent good payment patterns show up on your credit report.

Raise Your Limit

If you've been paying down a credit card responsibly for several months or longer, call the card company and ask if they'll increase the limit on the card by a few thousand dollars or more…not so you can go and rack up more debt, but so that you can reduce your overall debt to credit utilization, which we mentioned earlier can help boost your score.