Yesterday I got up at 6AM. On my summer break. In my book that’s a crime, but the Italian Consulate is 3 hours away in Detroit and my visa application isn’t going to turn itself in. I made the trip – with nervous parents waiting back at home – and it actually went better than I thought. I was expecting the consulate people to fine some microscopic problem with my paperwork which would force me to drive back home to correct it. I guess my OCD helped me out here – I checked that thing at least 10 times for mistakes!

My trip got me thinking about where I want to live after school. I like where I live now, but I don’t think the location has anything to do with it. I like where I live because my friends and family are here. The people I went to school with for 12 years are close by. My best friend since preschool lives 2 roads and 7 minutes away from me.

But would I move away from all of that? I’m not sure. Sometimes I think how awesome it’d be to work in a foreign country or even a far away state. Other times I can’t imagine moving more than half an hour from where I live now. Money wise, where I live is awesome. Just about everything is cheaper in the Midwest than it is anywhere else in the country.

I’m still up in the air over whether I’d ever move, but I want to hear your thoughts. Would/Did you move far from where you grew up? What would it take (or what did it) for you to move? New job? Just wanted to live someplace else?

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The 313rd Carnival of Personal Finance is up! A Gai Shan Life hosts, check it out.

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Those poor banks. They work so hard storing your money and processing your transactions. They’re also starting to play hardball. Earlier, Bank of America started charging annual fees on previously fee free credit cards. Now, Chase is considering capping debit card transactions at either $50 or $100, according to a “source familiar with the matter”. Why? Because they can.

Just kidding. The real reason, they claim, is due to new financial regulations that limit how much they can charge retailers when you swipe your card. Retailers “pay an average of 44 cents” to process your payment when you pay by debit card right now. Those fees add up to hundreds of millions every single year for Chase. Under new regulations, they would be limited to charging just 12 cents.

The banks claim that this amount doesn’t fairly compensate them for the risk they take in transaction processing. Expensive purchases carry more risk, so eliminating those transactions is necessary if they can’t charge more.

I’m not convinced. I don’t have any proof (a.k.a. making this up on the spot), but I doubt that debit card fraud is a huge problem. A decent amount of those transactions would have been made with a PIN, making it an extremely safe payment method. If banks are so concerned with fraud, why don’t they add PINs to credit cards…like all of Europe has done? Their argument proves that they don’t really want to eliminate fraud – they just want to make so much profit that they can afford to take losses.

Limiting transaction amounts also doesn’t stop the obvious workaround: splitting the purchase into 2 or more swipes. I do this all the time at work when a customer asks for whatever reason. As far as Chase is concerned, each transaction is under the limit and will be approved.

Honestly though, I doubt Chase actually does this. Consumer fallout would be sky high and consumers to flock to other banks. If other banks hopped on board though…who knows!

What do you think of the (proposed) caps? Would you switch banks? Payment methods?

Source: CNN MONEY

Gasoline is the single most expensive thing I buy every month. From the start of the school year until fall quarter finals, I spent something like $500.

Ridiculous. That’s equivalent to me working 69 (“do not make a joke!”) hours…before taxes. With that said, you’d think I’d be a master at combining trips and driving as little as possible. You’d also be wrong.

I’m constantly making special trips for whatever reason. About 2 or 3 times a month, I’ll drive 10 miles to my local Chipotle for a burrito…because I really want a burrito and the food in my house just isn’t the same. Just like that, I’ve spent a gallon of gas just to feed my burrito addiction. Actually, it’s probably more than a gallon because I drive an SUV that is intent on raping the planet along with my wallet.

Yesterday, I was planning to go to the mall and a few other places to finish up my Christmas shopping. Which by itself isn’t a big deal. Yet, I’m scheduled to work today. I work at the mall. It’d probably make more sense to just delay shopping one day wouldn’t it?

Damn right it would! Just like that, I’ve saved probably $5.00, maybe a little more by tweaking my schedule. In fact, while I’m on winter break, (For a whole 6 weeks! Sorry to those of you on semesters.) I really shouldn’t need to drive into town any day I’m not working.

So unless you enjoy spending money you don’t have to, COMBINE YOUR TRIPS!

Over Thanksgiving dinner, my family asked what I wanted for Christmas. I didn’t really have a definite answer because there are two main things I’ve been eyeing. One is a digital camera (so I’ll have it when I study abroad next year) and the other is the Amazon Kindle:

If you’re not aware, the Kindle is an e-book reader. The main benefit is that you can carry around thousands of books with you, read them on a screen that looks almost exactly like paper (thanks to “e-ink”) but never have to deal with the weight and bulk of a book made from dead trees.

One of the problems with the Kindle though is that you have to buy the books you want to read. I know, who do those authors think they are, wanting to be paid for their work? I rarely buy books, instead I head to the library. It’s hard to beat free. So if I received a Kindle, I’d basically be forced to start buying books or I’d never get any use out of the thing. The other problem is that I don’t actually read nearly as much I’d like to. I used to all the time in elementary and middle school. But I just sort of stopped once I reached high school. Part of me is hoping that the convenience of a Kindle would jumpstart my reading habit.

The digital camera will definitely get used during my time abroad, but I’m not sure how much I’ll use it until then. My iPhone camera is sufficient for most of the pictures I want to take and I always have it on me. I can also just ask for a camera for my birthday in a few months. Or just buy it before I leave on my trip. I know I won’t buy myself a Kindle anytime soon.

So…do I ask for a gift that will definitely require me to make periodic purchases or one that might not get used much at all for another 9 months?

I mentioned back in the early fall that I had made the split second decision to live at home instead of on campus. My main reason for the sudden change was financial – another $8,000 tacked onto my university bill was too much to stomach. Combine this with my desire to study abroad next year and I just didn’t think I could afford it.

Now that I’ve completed my 1st quarter, let’s look at how that decision worked out.

There are a few different areas to address. The main one is cost, obviously. Without a doubt, I saved money. From September 1st until now, I spent $500 on gas. This is the only real direct cost that commuting cost. If I had stayed on campus, I would have paid $1,666 just for the room. Plus, I would have still driven some amount. Let’s estimate low and say 20% – that’s $100 bucks. So living on campus would have cost me $1,766 for just one quarter. That’s $5,298 for the years versus $1,500.

Food costs I’m guessing would be roughly equal no matter what decision I made. I spent about $400 on food, usually lunch, in my 1st quarter. I’d like to be able to say that if I lived on campus, I would have spent less since I could have kept stuff like cereal or Easy Mac in my dorm. But I probably wouldn’t have done that. We have a Pizza Hut on campus. ‘Nuff said!

While driving everyday is significantly cheaper from a cash standpoint, there are a lot of other things to consider. The biggest one is that it was harder to get involved on campus. After being on campus from 10am-3pm, I just wanted to go home. Staying late for a group study session or attending an honor’s association meeting was not something I wanted to do Time is also a cost to commuting. I spent roughly an hour everyday just driving. That’s time I could have been sleeping, studying, or blogging. Finally, I wasn’t able to spend much time “partying”. This could be negative or positive depending on what you want out of your college experience.

The finance side of this decision is black and white. Living on campus is more expensive than commuting. That’s clear. But the other issues are practically impossible to assign a value to. How much is an hour of my time worth when I’m driving? Is that time I would have just spent lounging around in my dorm? Would making a few great friends be worth spending 5 grand?

I can’t honestly answer any of those questions. There are pluses and minuses to every decision like this. I’m planning to “make up” for these lost experiences by going abroad, but is it really possible to replace freshman year like that? Only time will tell! The best advice I could give would be to weigh your options carefully, then go with your gut. Only you know what you want and how much you’re willing to spend/borrow.

Everyone’s aware that credit card companies and issuers primarily make money by charging interest on the amount you borrow. The specific rate charged can range from an introductory (meaning it expires after set period of time – usually around 6 -12 months) 0% to a you’re-never-paying-off-that-balance 79.99%. But interest rates aren’t the only way the credit card industry makes a profit. Below are additional methods of getting you to part with your hard-earned cash:

1. Late payment fee

Forget to mail in your check? Internet outage and you can’t login to online banking? That’ll be $39 please. The new credit card laws have somewhat cracked down on bogus late fees – ones where your payment was considered late just because the processing center’s mail didn’t come until late afternoon.

2. Cash advance fee

Cash is king. Because of that (or maybe because of the potential profits), credit cards can usually be used at an ATM to make a withdrawal against your line of credit. This is where you get dinged twice. Once for the fee, usually around 5% of the amount you borrow. Plus the higher interest rate you pay on what you borrow.

3. Balance transfer fee

If you’re carrying a balance on a high interest rate card, you can transfer it to another card with a lower interest rate. But this isn’t a freebie. The new card issuer will often charge you 3% to 5% of the balance transfer as a fee. While this is an upfront cost, balance transfers can save you money by reducing the interest you pay. Just do the math beforehand to make sure it’s a good deal.

4. Exceed credit limit fee

Shop until you drop and you’ll likely go over your credit limit. That’ll be another $39. This can get expensive quickly because if you just make the minimum payment, your balance will only be slightly below your credit limit. That means it’ll be extremely easy to go over again

5. Annual fee

This fee is simple – you pay it in exchange for being given the privilege of using a particular card. Annual fees had all but disappeared in the past 10-20 years, but the recent credit crisis has seen them make a small comeback. Most average everyday student or rewards card are still annual fee free.

While these fees are ridiculously expensive, they’re all optional. Just as paying interest is. You can choose whether to carry a balance over many months and years. You can choose whether to go over your limit. You can choose to get a card without an annual fee. You don’t even have to have a credit card if you don’t want to. But, if you choose to have a credit card like most people do, it’s wise to know all of the fees that can wreck havoc on your finances if you aren’t careful.

Mutual funds can be another important part of your portfolio, but it helps to understand them first.

So What is a Mutual Fund?

A mutual fund is actually a collection of different stocks, bonds, and other types of securities (investments). The point of this is to lessen risk, while still reaping a decent reward. A mutual fund also pools many different investors’ money together to purchase these investments, with each investor getting part of the profits (or losses…)

What’s So Great About Mutual Funds?

The best thing about mutual funds is that your risk is spread among many different types of investments. If one company has a bad year, your investment won’t crash and burn. The other benefit for “normal” people is that the fund is managed by a professional so you don’t need to know the nitty gritty details of investing to start.

Mutual funds can also be an affordable way to start investing. Quite a few funds don’t have high minimum balances, so you can get started without a lot of money.

How Do Mutual Funds Make Me Money?

Similar to single shares of stock, you own shares of a mutual fund. You can usually sell these shares anytime you wish. Assuming you sell them for more than you bought them for, you make money.

Also similar to stocks, you can earn be paid dividends when the mutual fund performs well.

What’s Not So Great About Mutual Funds

Because mutual funds are managed by a professional advisor, there are fees and costs associated with buying into one. These fees are charged even if the fund doesn’t do well, so you might have to deal with a negative return along with a sales fee or purchase fee.

You have less control. With individual stocks and bonds, you can pick exactly what you want to invest in. So you aren’t likely to find a mutual fund with only the investments you want.

Overall

Mutual funds can definitely reduce some of the risks associated with investing. But you also have to deal with fees and a lack of control. From my own research and reading, I’m not too impressed with them since the fees seem to eat up a large portion of any return.

In the financial world, a CD refers to a certificate of deposit. Some might say that a CD isn’t an investment because they are insured by the FDIC (a US owned corporation which protects certain banking products), but I’m counting them here because they do provide a higher return than savings, but at a significant cost: time.

So What is a CD?

A certificate of deposit functions in many ways like a savings account. You open the the account and deposit a certain amount of money. Interest is earned on this deposit. Pretty much every bank in existence issues CDs. However, you do not just withdraw money every time Nintendo releases a new Wii game.

What’s So Great About a CD?

Mainly, the benefit is a higher interest rate. A secondary benefit, if you want to call it that, is it forces some self control. You can’t just take the money out whenever you feel like it or you’ll lose money.

What’s Not So Great about a CD?

In exchange for a higher interest rate, the bank locks up your money for a set amount of time. If you withdraw your money before this time period is up, you will pay a penalty. Banks can also set up a “withdraw window” where if you don’t collect your money before this period is up, the money will be rolled over into a new CD. If this happens, your money is once again tied up for a certain period of time.

Overall

If you have a lot of cash and know you might only need a portion of it, putting the rest in a CD, or across multiple CDs, can be a good way to get a better return than what a regular savings account would provide. On the other hand, you need to choose the length of CD carefully. The shortest are typically 3 months. If you have good reason to believe you’ll need the money before that, then look elsewhere to keep your money.

Of all of the personal finance concepts that people should know, I think investments are one of most misunderstood concepts out there. This is backed up by the fact that “just 17 percent of students knew that investing in stocks are likely to produce higher returns over the next 18 years than savings bonds, savings accounts and checking accounts.” With that sad fact out of the way, I thought it would be a good idea to do a simple introduction to investing over the next week.

The definition of investment is something that grows in value over time. But there isn’t just one type of investment. There are stocks, bonds, mutual funds, index funds, exchange traded funds, and more. This can all get really confusing.

In this series at The Financial Student, we’ll look at the different types of investments. What they are, what’s unique about them, their risks and rewards, and everything else.

By learning what types of investments are out there, you’ll understand how you can earn money while managing risk and not lose sleep every night.

I know, it’s one of society’s most honored norms. You never, under any circumstances, ask someone how much money they make.

Screw it.

I’m serious. There are two people whose incomes you should know. They’re your parents. Knowing how much money your parents bring in and how they run the family budget is an important tool in understanding real world finances.

For one, it removes a mysterious aspect of money. Adults typically act like their income is some government secret worth more than all of the information inside Area 51. It’s not. It’s a number they assign a high importance to. These types of secrets don’t help you learn about money and it’s functions.

Furthermore, there’s a trust issue at play. Why don’t my parents trust me with this information? Why exactly can’t I know it? Answers like “it’s none of your business” and “just because” are pretty common, but they’re also bullshit. This just creates a situation where you’re kept in the dark and in not-an-adult-yet-zone forever.

You need to know what’s expected of you. Are you paying for your 1st car?  College tuition? Room and board? Prom? Just because your parents could pay for these expenses doesn’t mean they will. Knowing their income can be the 1st step in figuring out who’s responsible for what.

Lastly, it lets your parents be direct and honest. Instead of making up a reason why they can’t afford to buy something, they can explain financially that there just isn’t enough money in the budget. This is a great example of how the world isn’t all rainbows and butterflies. Knowing the truth is better. You can deal with bad news just fine.

Overall, I think there’s a lot to be gained from kids knowing how much money their parents make. I think the biggest benefit is how much secrecy is removed. Your parents no longer have to dance around money issues any longer if all the cards are laid out on the table.