Buying a Used Car: Why Older is Better

This past week, I announced that I got a new job. The job comes with a lot of potential advancement in addition to it being a direct application of my unique skill set. This is not to mention the slight pay increase as well. In many ways, it was a 'no-brainer' for me to accept the new job. One of the few downsides to accepting this position is that it meant that I could no longer take the train to work. Taking the train to my old job was in no way enjoyable. The walk through the snow, rain, and cold during the winters challenged my resolve to be a one-car-family almost every day. But, as I have come to find out, it was much more affordable to take the train than to own a second car.

I definitely didn't want a car THIS old'

Cars are expensive. New cars and old cars alike. While many people will argue that you should buy a certain car over others (as I will do later in this post), the important thing to first realize when looking to buy a new car (whether it's used or new) is that it is EXPENSIVE! Since I am unable to take the train to my new office, the search began. I knew of this likely expense ahead of time, but I had to wait until I was offered that job before I purchased a car. This mean that I missed a couple great deals. But, the important thing to remember is that there are always more deals to be found. You just have to wait for them.

New vs. Used ' Which is Better?

When I was starting to narrow my search, I came to learn that there were very few cars that are being sold in the in-between stage. There are a few that are 4-5 years old, but most of the cars being sold are either almost-new (1-2 years old) or well used (8-15 years old). I had a choice to make: should I buy a car that is practically new OR should I buy a car that is old (approx. 10 years old)? Despite what people may tell you, this isn't an easy choice. Yet, there are distinct advantages to each one.

Pros of Buying Almost New Car

• New Car Feel - That means no mystery smells or excessive dirt anywhere.
• Significantly Lower Chances of Necessary Repairs - Newer cars are unlikely to need large repairs. This also means a higher sense of trust that you wont break down on the side of the road.

Pros of Buying a Well-Used Car

• Less Expensive - One of the huge perks with buying a well used car is that it isn't as expensive. This is true not only for the sticker price (or how much you pay for it), but also the depreciation value. Older cars decrease in value significantly less than newer cars as long as they continue to run.
• Track Record - While it's highly unlikely that you will buy a lemon, with an older car, there is an even lower chance of this happening. The older the car is, the larger track record you have and a better understanding of what type of repairs to expect.

In addition to the obvious perks to each option, I wanted to make sure that I was buying the best option. One of the deciding factors for my decision was the fact that I only need the car for a little over a year. In a year's time, my wife and I are planning to move to the new location and return to being a 1 car family. This made the choice even more distinct. Either buy a cheap car now and sell it in a year, OR buy a pretty nice car that will be the family car that we keep even when we move (and sell our other car).

Why I Chose to Buy an Older Car

While I don't have a lot of money sitting around, I did have a large enough emergency fund to buy either option. There was a huge part of me that wanted to splurge for the comfort of having a reliable, new car. I hated the idea of playing the odds, crossing my fingers, and hoping that the well-used car that I would purchase would not break down on me. But, that is what I ended up doing. I ended up buying a 10 year old Jetta with just under 100,000 miles on it because I was able to get it for cheap. When I say cheap, I mean $1,000 under blue book value on it. Part of that is because there is some pretty large preventative maintenance that I will have to do on it in the next 6 months (i.e. timing belt, water pump, etc.) This won't be cheap, so I was able to negotiate down for those two expenses.

While I desperately wanted the security of a newer car, I knew that buying an older car was a better decision because of one reason. Opportunity Cost. In other words, the money that I could save by buying an older car could be invested and earn more money. So, not only would I have less money invested in an asset that appreciates, but I would also have more money invested, earning a positive return. Let me show you how this works. Assuming a standard 15% depreciation, here is how much money I can save by buying an older car.

Newer Car:

Purchase Price: $12,000

Depreciation: $1800 (12,000 x 0.15)

Older Car:

Purchase Price: $4500 (including expected maintenance)

Depreciation: $675 (4,500 x 0.15)

Return on Savings: $750 (12,000-4,500 = 7,500 x .10)

As you can tell, not only am I paying less money upfront even with the expected/necessary maintenance, but I am also earning money (in addition to losing less money in depreciation). In this example I am estimating a 10% return on my investment because I have several investments that are earning a larger return than 10%. In fact, the money earned is larger than the estimated loss from depreciation. Again, this is just an estimation, but regardless of the fact of whether my estimates are inflated, it still highlights how buying a used car (within reason of course) is the better decision for me since I only need the car for 1 year. Again, while my comparison between the two cars is limited and this general rule of thumb that older cars are the better decision, there is always an exception to this rule. It should also not be confused to say that older is always better. I think a car that is 15-20 years old is not the best investment unless it is in immaculate condition. But, this shouldn't take away from the value in the generalization that older is better.

Best Jobs 2012

According to US News and World Report, the best jobs for 2012 are listed as follows with their salary range in parenthesis:

Occupational Therapist ($49,000 ' $103,000)
Computer Programmer ($41,000 ' $118,000)
Physical Therapist ($53,000 ' $108,000)
Computer Systems Analyst ($48,000 ' $119,000)
Web Developer ($43,000 ' $120,000)
Database Administrator (41,000 ' $116,000)
Medical Assistant ($21,000 ' $40,000)
Pharmacist ($82,000 ' $138,000)
Software Developer ($54,000 ' $88,000)
Registered Nurse ($44,000 ' $95,000)

US News came up with the list based on the Labor Department's employment projections and then applied their own formula that weighted this along with their analysis for projected growth of future employment in the industry, salary growth and job satisfaction.

I think that anyone looking to go to college or even back to college should give this list some attention, but do not rely on it solely. The reason for utilizing the list is to understand where jobs are most likely going to be in the future. As you can see, a good number of the jobs are related to the medical profession. This should not come as a surprise since the Baby Boomers are nearing retirement and this is a large segment of out population.

You will also see on this list a handful of jobs related to computers. Again, as we move more towards tablets and smartphones, websites and technology will be changing. With all of this change comes the need for jobs.

The reason why I suggest to not rely solely on this list is because in my eyes, it is incomplete. Not because US News did anything malicious with the findings, but because it only lists the top 10. I would guess that financial planners would rank relatively high on the list, again given the fact that the Baby Boomers are nearing retirement and will need help living through their golden years on the nest egg that they have accumulated.

It does not surprise me that teachers do not show up on this list. My guess they do not is because of a lower salary than the other professions listed. While I think that teaching is a solid career choice, I think we are on the edge of changing our school systems. I think that teachers in private and charter schools will be more in demand in the years to come.

I think that researching possible careers before you decide on your major is a great first step for college students. While I think everyone has the right to do whatever you want to in life, you have to be realistic about your chosen professions job prospects and salary. There is no point in going to a great private college where you rack up $80,000 in student debt to pursue a career in a field that has limited job opportunities and a small salary. That doesn't mean you cannot pursue it, but maybe it can be a hobby as opposed to a full time job.

One last point about the list above, don't pick a career based on the salary alone or think that you will be making close to six figures the day after you graduate. Earning a high salary is going to take time and picking a career based only on salary will most likely leave you miserable. Find a happy medium between a career you will enjoy and that has good future prospects. That is the win-win situation you are looking for.

Different Types of Stocks

It's easy to think of the stock market as a place to buy and sell a single type of stock, but there are many different types of stocks to buy, sell, and invest in. Let's look at a few of the kinds of stock on the stock market as well as their unique advantages or disadvantages.

The 3 Major Types of Stocks

Three major divisions divvy up the stock market into smaller pieces. Here are the three main types of stocks:

1. Common stock ' Common stocks make up the majority of the buzz on Wall Street. A common stock is a simple piece of ownership in a company. Common stock holders have a right to a company's profits and value, as well as a vote in major decisions and board elections. These are the shares that you see quoted prices for online, in newspapers, or financial publications. Common stocks may or may not pay a dividend, and are considered riskier than preferred stock.
2. Preferred stock ' Preferred stock is more like a bond than common stock. Preferred shares give investors some level of ownership in a company, but preferred shareholders do not have voting rights. Preferred stocks are issued with known dividends much higher than the common stock. Preferred shareholders are subordinate to debt investors and senior to common stockholders in the event of a liquidation or bankruptcy, making them generally safer than common stocks. Preferred stocks can be callable, meaning that the issuing company can buy back issued preferred stocks at a premium on its own accord. Shares can also be convertible, allowing a preferred stockholder to convert their preferred shares into common stock at some point in the future.
3. Share classes ' Within the boundaries of common or preferred shares there are different share classes. For example, Facebook has a dual-class system that allows Mark Zuckerburg to own 28% of Facebook's stock but control more than 50% of all voting power. A dual-class structure is nothing new; Ford Motors has two classes that allow the Ford family to elect 40% of the board of directors, while Berkshire Hathaway has two share classes that give class A shareholders more than six times more voting power than class B shareholders.

New Ways to Divide the Market

You really can slice and dice the market as much as you want. Some would say there are other ways to divide the market by looking at a stock's style:

1. Value stocks ' Value stocks tend to be companies in slow-growing industries that trade for lower multiples of their earnings power. Examples of value stocks might include railroads, utilities, consumer staple producers (Coke or Clorox), and other industries that are simply'well, boring and unexciting.
2. Growth stocks ' Growth stocks are companies that are expected to grow significantly in the future and therefore trade for higher earnings multiples. Growth companies can be found in any industry, but they are most synonymous with the ecommerce, consumer technology, services, as well as restaurant brands and franchises.

Divisions by style are much more subjective than divisions by legal type of stock. Common stocks are obviously different than preferred stock. The lines between growth and value stocks, for instance, aren't always so clear.

Having some kind of knowledge about the different types of stocks should lead to deeper thinking about diversification. A really truly 100% diversified portfolio would include all different kinds of stocks ' class A or class B common stocks, preferred stocks, or convertible preferred stocks.

Emergency Fund: Everything You Need to Know About It

As I shared with you on Friday, I recently got a new job. While it is definitely a good thing that I accepted this new position, it did come with its own challenges. Getting a new job is usually a sign of financial relief, but my situation was quite different. As many of you know, I currently commute to work via train (even through the coldest of weather). Since this new position is not on the train line, I was forced to buy a new car. Well, used car, but new to us.

While this new job came with a slight increase in pay, in no way did it come with a signing bonus. This meant a several-thousand-dollar purchase on top of my regular expenses. I don't know about you, but my wife and I don't make this much more than our regular expenses. This meant I had to turn to our decently-sized emergency fund.

Emergency funds exist for a reason and this is it. Coming up with cash in a short period of time to cover unexpected costs. Granted, I knew this expense MIGHT come when I applied for the position. I knew weeks in advance that if I got the job, I would have to buy a used car. While I knew in advance, weeks ahead of time would not have been enough to cover even the cheapest of reliable cars. In other words, my emergency fund was necessary. (Childhood translation: Emergency Fund to the Rescue!)

You never know when emergencies might surprise you

How to Much to Save for an Emergency Fund

Many people do not have an emergency fund, and I'm not surprised. As I mentioned, many families do not make much more than their monthly expenses. On top of that, it's hard to motivate oneself to use what little you have left over to create an emergency fund. In other words, storing money away for a rainy day is not a top priority. Life gets in the way.

Despite how hard it may be to motivate yourself, you should make an effort to create one. You don't have to start out with a lot, but you should put something that will help you through a difficult time. Some people say to start with $1,000, but I am the type who wants something more substantial. I would prefer to have 6 months of expenses. This is often the rule of thumb. Some say 3 months, some say 12. While I may side with 6 months, ultimately it's about having enough to make you feel comfortable.

Where to Keep Your Emergency Fund

Perhaps the topic that is even more debated when it comes to emergency funds is where to keep it. Many people place their emergency fund in a savings account for the sake of liquidity, or easy access to it. Others put their money at higher risk by investing it. I, on the other hand, prefer to get a higher interest than a standard savings account without putting my money at risk. It's intended to let me sleep easily at night. I don't need the highest interest on this small part of my net worth.

A great alternative is high interest CD's. While it's possible to find any random CD without even looking for the highest CD rates, you will lose out on some money. As it turns out, Discover publishes a great resource of the highest CD rates that is worth looking at if you are thinking about a CD to keep your emergency fund.

If you do decide to put your money in a CD instead of a high interest savings account, it's important to consider staggering your money. In other words, it may be worth your time to put your 1/2 of your money in one CD and the other half in another one six months later. This lowers the probability of having to pay a penalty for withdrawing your money early. It is unlikely that you will need most of your emergency fund, so this may be a great alternative.

When to Use Your Emergency Fund

Last, but certainly not least, is the aspect of what qualifies for an emergency. Many people use 'emergency' very loosely and will spend their emergency fund on wants or desires instead of actual emergencies. While many would argue that my car purchase is not necessarily an emergency (we have one car that works and we COULD get by with the one). This would, however, mean that we'd drive a lot more miles on our current car and spend an extra hour each day in the car. When you combine this reason with the fact that we have a large enough emergency fund to still cover 5-6 months of expenses, I feel like it's okay to use it.

If you are at a point where you are considering using your emergency fund, ask yourself if you have exhausted all other efforts. Have you tried to minimize your other expenses for recent/upcoming months? Have you thought about finding extra income for this month? If you have tried everything else and you still need some cash, it's probably an appropriate time to use it.

While emergency funds may be difficult to build up while you are facing many of life's expenses, they can do wonders to take away the stress of personal finances. The unexpected bills are best conquered when you prepare for them ahead of time. The best part that I have learned recently is that when you do commit yourself to save up money for a rainy day, you are less likely to spend that money because you know in the back of your mind that you worked hard to build it up. It therefore not only provides a financial cushion, but teaches you to spend less in the process of creating it.

Readers, have you created an emergency fund? Where do you keep it and have you ever had to use it?

Financial Carnival for Young Adults ' 39th Edition

Welcome to the thirty ninth edition of the Financial Carnival for Young Adults. My purpose with this carnival is to create an easy-to-find place for information about finances for young adults. The carnival is hosted here at 20's Finances almost every week and features the most recent articles from around the web. I hope you enjoy this edition of the carnival.

Lance @ Money Life and More writes Be Prepared for Paycheck Shrinkage on January 1, 2013 ' Sorry to break the news to all of my American friends but starting January 1, 2013 your paycheck will likely be 2% smaller and that is on the conservative side. It could be even smaller than that! So what am I talking about and why should you care?

Ted Jenkin @ Your Smart Money Moves writes How To Rollover An Old 401(k) Plan ' Why do you need to know the details on how to rollover an old 401(k) plan? The average person holds 11 jobs from the age of 18 to 44, according to the Bureau

Darwin @ Darwin's Money writes The #1 Thing You Need to Be Successful in Life (That Nobody Talks About) ' Success at anything ' life, career, finances, you name it ' depends on this one single thing. And it is rarely talked about.

PITR @ Passive Income To Retire writes Passive Income Challenge Update 1 ' Learn more about my multiple streams of passive income and which source of income is the best.

BARBARA FRIEDBERG @ Barbara Friedberg Personal Finance writes WHAT IS THE FISCAL CLIFF? ' How the Fiscal Cliff will raise taxes. Financial wealth building strategies to cut your tax bill.

IMB @ Investing Money writes Diversification: Everything you Need to Know ' Find out everything you need to know about investing diversification for your portfolio.

Hank @ Money Q&A writes Buying A Purebred Dog Is Like Buying A New Car ' There are a lot of things that you must consider before buying a purebred dog. It is a lot like buying a new car with all the considerations that you must take into account. Here are some tips.

David Carlson @ Young Adult Money writes Why You Need Health Insurance ' A surgery or overnight stay at a hospital can run in the tens of thousands of dollars. If you don't currently have health insurance, consider getting it to take away the risk of unexpected medical bills.

Teacher Man @ My University Money writes What if Your Degree Doesn't Match What You Really Want to Do? ' Do you abandon your education in favor of what it is your really want to do, and waste thousands of hours of study and tens of thousands of dollars? Or do you just ignore what it is you really want to do? It's a tough choice no matter which way you go.

Jason @ Work Save Live writes Understanding the Basics of Deferred Annuities ' What is an Annuity? By definition, an annuity is: A fixed sum of money paid to someone each year, typically for the rest of their life A form of insurance or investment entitling the investor to a series of annual sums.

Jason @ Live Real Now writes Giving It All Away ' Monday, I start a new job, but I wasn't actively looking for a new job. In fact, over the last month, while I wasn't actively looking for a new job, I've had 5 job offers. Solid job offers. Some of them came after I announced I was leaving. How does that happen?

Miss T. @ Prairie Eco Thrifter writes Road Tripping Alone: How to Do It Well ' Here are my proposed tips on how to make driving alone a lot less lonely and boring.

The Potential of Green Technology

It was just a few weeks ago that Hurricane Sandy hit the the tri-state area. It left millions without power for days, and decent percentage of those families were without power for up to 2 weeks. While it is becoming more of a common occurrence, the NYC area is not adequately prepared for these large of storms. With antiquated power lines and less than reliable utility companies, it has left me wondering whether I want to be part of the electrical system. In other words, why be dependent on a system that is unreliable if you do not have to be.

On a small scale, I began to explore emergency systems that could better prepare me for the worst of conditions. It started with ordering a solar powered battery that could charge my small electronics. Having no power is bad enough. The last thing you want is to have no power and have to worry about your cell phone dying. Luckily, we made it through, but I can rest easier knowing that I have more gadgets to get me through major power outages. While this was a small purchase (and device), it got me thinking about ways that green technology could be utilized to offer more reliable systems.

The Future of Green Technology?

While i was busy imagining the future of green technology for this post, my wife reminded me that the future is already here. Not only in my portable solar powered battery, but also on a larger scale. My wife reminded me that friends of ours recently invested in numerous solar panels to power their house. They have a large enough backyard that they were able to generate more than enough electricity with their solar panels. In fact, they are generating more than enough electricity that they are selling power back to the power company. That's right ' they are selling electricity.

While I don't know the specifics of our friends situation (i.e. financial numbers), the reality of the situation is encouraging to me. Those of you who have followed me for a long time, know that I am semi-committed to making this world a cleaner place to live. This is part of the reason why I bike to work in the summer. I not only save money, but I stay healthy and contribute to a healthier environment. Now, before you think I am some sort of saint, I do have my limits. I refuse to bike in the winter (although I usually take the train). I try to use as little unnecessary plastic as posible, but I also recycle mostly when it's convenient. I definitely have areas to improve, but the commitment is still there.

Thus, when it comes to looking at ways to systematically improve the way in which we generate electricity, I can't help but be attractive to individual (or maybe smaller communities) sources of sustainable energy. Let's take a look at what it could look like'

What if every family invested in solar panels to power the needs of their own power. This would prevent a system-wide power outage in the event of a freak storm. One family's source of energy may be wiped out if a tree falls, but it would mean their neighbors are likely fully functional. Ultimately this means less dependence on a ancient system. Not only would this mean more reliable upkeep (since you are the person in charge), but it also means that families would take more responsibility for their energy usage. If a family's panels only produce a certain amount of energy in a given time, that means that they can't use any more than that. Whereas currently, families have an unlimited supply of energy. It's no wonder we have an energy crisis.

Before I hear some of the critiques against this approach (which, I'm open to, of course, especially since I am just speculating), there are many ways to make this work. People could either save up money to buy the panels themselves or they could look for financing options. I am sure there are many subsidies or plain green loans out there to help families afford such a large investment.

The beauty of this idea, as I see it, is the creation of a new line of work. It might put more electrical companies out of work, but they could transition to the field of renewable energy. The economy is a fluid thing. Where one door closes, another one opens up. We just have to be perceptive and move with the flow. It's those who don't transition who are stuck in a difficult situation.

While I am don't know enough of the technical aspects of solar or wind energy, I do know that I would prefer a system that relies on renewable energy and that is independently generated. It provides more security and continues to uphold a commitment to a green planet.

Readers, what do you think about this different energy system? Is it plausible?

I Got a New Job!

In an unexpected series of events, I have accepted a new job at a non-profit organization. I let a few of my closest blogging friends know and many of them wanted to learn the entire story, so I figured I would make the story into a post idea. This might be especially relevant for all you young adults out there who are thinking of moving on to something else, but have found yourselves comfortable.

When It's Time to Start Looking for a New Job

There are many reasons why people start looking for a job. Boredom. Unhappiness (with either the work or co-workers). Not being satisfied with current compensation. The list could go on and on if I allowed it. There were contributing factors to the reason that I started looking for a job, but the most important was my wife's recent job change. As I mentioned a little while ago, she recently got two job offers from her current employer. She ended up taking the lower paying job because the future potential for advancement as well as the goal of relocating. While my wife and I are happy were we are, we're not thrilled with the idea of living her long-term. Living on the outskirts or NYC has its advantages, but the disadvantages stick out in our mind. Not only is everything so crowded and fast-paced, but we find it difficult to relate to people (this is evidenced by the fact that 99% of our closest friends aren't from NJ). My wife likes to put it like this: 'In the greater NYC area, people wear business attire. In the place that we plan to move to, people wear fleeces. Those are our kind of people.' And she's right. We don't fit in with this work-as-hard-as-you-can-to-accomplish-your-dreams mentality. We believe there are more important things than career goals and making lots of money.

In case you haven't guessed it, this was the primary reason why I started looking. To be fair, I was only casually looking. For the most part, I didn't even expect to find anything, especially when I knew in the back of my mind that we would be moving in a little over a year (once my wife finishes her graduate school) I was even looking at what jobs were available in the 'destination city.' Little did I know, there would be a perfect job waiting for me. While I am glad that I started looking, a part of me still does not want to leave my current employer. I have a great boss who has been really flexible with me and I know how to do everything well. I am efficient and have some free time that I can come up with new projects. Even though it will be hard to leave the familiar, I knew that I needed to apply so that I can continue to develop professionally and start on my career path (instead of just working a job).

How to Get the Job of Your Dreams

It was just about a month ago that I found the job that matched perfectly with my skills and experience. When I first saw the job description, I felt like I was unqualified. They were asking for 5-10 years of experience, I had just under 5. I decided to apply anyway and see what would happen. To my surprise, I got the job ' but it wasn't by just pure luck. I have found that if you want to get a job that you really want, you have to go out and get it. You have to earn it. Here's how I did it:

Stand Out from the Crowd

One way to increase your odds of getting the job that you want is to make your name stand out. I made sure to go the extra mile. Since this job was in operations and would be working with the website (among many other things), I figured that I could help myself stand out by creating an online resume. I already had bought the domain for my full name, so I took a couple hours to create a very basic website with my resume information. I felt like this would show them that I am qualified to work on websites more than just a couple bullet points on a resume.

Emphasize the Positives

I was applying for a job even though I did not have the number of years of professional experience that was listed. Since I knew that these numbers are usually flexible if you have the skill set to perform that job, I ignored this and played to my strengths. If I had concerned myself with this small detail, I may have felt the need to explain this away in my cover letter. I know many people who do this. They write something like, 'I know I don't have the necessary experience, but'' Whatever you do, don't do this. If you were getting in a fight, would you tell your opponent your weakest part? Absolutely not, so why do that when applying for a job? I was glad that I didn't mention anything about my experience because I got a positive response from the beginning. Less than 12 hours after applying (on a Saturday night, mind you), I found an email that started with this: 'Your qualifications and work experience are impressive and I would be happy to talk to you about the position.' While I didn't know that I had the job, I did know that I was a person of interest going forward.

Get Help from Your Personal Network 

While many people are too proud to ask for help, one of the many advantages that you have is the people around you to support you. There are many cliche sayings that communicate the strength in numbers (yes, that may be one of them), but this really is true. I was fortunate to have a wife who had experience in the non-profit realm. Not only did she train me on an important donor database, but she gave me key phrases to use in order to illustrate my proficiency. I made sure that I was honest in all of my interviews, but these inside tips are the things that can help you highlight why you are the best candidate. At the very least, employers want someone who is resourceful.

As the interviews continued and I felt the chances of being offered the position increased, I reached out to some of my blogging friends for their assistance. I even got negotiation advice from someone who knows what they are talking about. It's nice to have powerful people in your network, but it won't do you any good unless you utilize them. I am glad that I asked for help from those around me and I hope you will do the same when the time comes.

How a Hobby Can Help You Get a Job

The last, but certainly not least, part of this story with me transitioning into a new position is that I wouldn't have even been considered for the job if it had not been for this (and many other) blog. Yes, you read that correctly ' blogging helped me get this job. It not only proved that I was capable of managing a website, but it gave me the supplemental skills that made me unique. Since the organization that I will be working for is a small non-profit, they were looking for someone who would be able to do multiple things. This means not only the technical skills, but familiarity with marketing strategies and such. As I was putting my resume and cover letter together, I realized that I do this on a regular basis with my blog. Marketing? Check! I interact with PR and Marketing departments of major organizations all the time to talk about sponsorship opportunities. Email marketing? Check! I recently started a newsletter for this blog, so I am familiar with email blasts and newsletters. Basic Graphic Design? Check! Not only do I design some basic logos, but I have also created some promotional material. Even though I hadn't set out to develop a lot of skills that would directly contribute to me getting this job, that is what happened as a result of starting this blog over a year ago. I'd say that is a huge success. I have proven that I not only have what it takes to create something successful, but I can learn new things and propel myself forward.

Going Forward

This job not only marks a significant success in being offered the job, but it also marks the beginning of a new realized career. There is a lot of potential for growth and I am sure there will be many new challenges. As I mentioned, I will be sad to leave many of my current colleagues, but I am excited about the new opportunity. It was too good of an opportunity to pass up on. Not only does it mean a change in job titles, but it also means a huge change in my finances. I will continue to unpack the implications of such in the coming weeks. Some of the biggest changes are to my health insurance, buying a second car since I can't commute by train anymore, and of course, a little bit of a pay raise. Stay tuned for more updates!

Buying Gifts for Co-Workers and Bosses. Yea or Nay?

I previously talked about how to handle holiday office parties professionally. Now I want to discuss how to handle buying gifts for others at work. This can be trickier than one might think. I know when I first started off, I wasn't sure what was considered to be good etiquette or bad etiquette. Now that I have some years under my belt, surviving the holidays at work had become a breeze. Here are some guidelines.

Buying Gifts for Co-Workers

All in all, you are safe to buy gifts for co-workers. You don't have to buy a gift for everyone if you don't want to. You can simply buy gifts for the co-workers that you are closest with. If you feel uncomfortable giving one person a gift in front of someone else, then wait until they are not at their desk or when the two of you are heading out to your cars after work. Overall though, you shouldn't feel bad that you are buying one person a gift and not another. With all of the time we spend at work, it's a given that we will make friends.

Office Secret Santa

There are a few different ways companies handle Secret Santa. In some cases, you pick a name out of a hat and you have to buy a gift for that person. At my old employer, we picked a number. Whoever was 'number 1' picked first. All of the gifts we wrapped on a table and you could pick any one you wanted. The gift dollar limit was $20 and you were free to buy a 'gag' gift.

If your company follows a Secret Santa like my old company did, I would highly encourage you to participate. It is loads of fun and you can buy anything you want. The best gifts were the practical ones: $20 gift cards to Target or a local gas station. While it is OK to decide not to join in, I discourage it. There was one woman who didn't participate and while we were all laughing and having a good time, there she was over at her desk working away. We never were certain why she didn't join in (she did celebrate Christmas because she would talk about it all of the time), but it just seemed odd.

If your Secret Santa follows the more traditional route of picking a name, it will be harder to buy a gift for Mike in Accounts Payable with whom you've never really spoken too. In this case, play it safe. Go with a generic gift like a gift card to Target or Wal-Mart or from a gas station. Even better would be to seek out the assistance of one of his close co-workers that you do know to get some ideas. I would recommend against just buying him something, such as a bottle of wine because you don't know if he even drinks wine, if he is a recovering alcoholic, or loves it. Instead of taking that chance, play it safe.

Buying for the Boss

When it comes to buying a gift for your boss the answer is no. Regardless of the situation, it is still no. Trust me on this one. While buying a gift might appear to be a good idea in your mind, it really isn't  First off, co-workers will think you are simply 'sucking-up' to the boss. If you get a bigger raise or a promotion next year, it's not because you earned it, it's because you are a suck up. None of your co-workers will look at you in the same light.

Though doubtful, your boss might see it as 'sucking up' as well. It's best to avoid buying the boss a gift at all costs. If you still feel as though you should do something, give them a card. Simply say happy holidays and leave it at that.

Final Thoughts

Buying gift for bosses and co-workers can be filled with landmines. To navigate it best is to avoid standing out. Join in on the company Secret Santa and buys gifts for close friends. But steer clear of buying gifts for your boss or even subordinates. This can derail your career in more ways than you think.

Readers, how do you handle buying gifts at the work place for the holidays?

Should You Invest in Bonds?

Bonds are understood to be the middle ground between stocks and cash. Bonds are more volatile than cash, but offer higher returns. Bonds are less volatile than stocks, and provide for lower returns in the long-run than stocks.

What are Bonds?

When a business or government wants to raise money, it sells bonds to investors. The most common type of bond is a bullet bond.

Bullet bonds pay a specified annual or semi-annual interest amount known as a coupon. When the bond matures, the borrower pays off the bond with a large payment equal to the bond's face value. You can think of a bond as a way to be the banker of a large corporation, local or state government, or the federal government.

Advantages of Bonds

There are a few unique advantages of bonds:

1. You're paid first ' Bond interest has to be paid before profits can be paid to stockholders and before money is spent on operating expenses. Being the first priority gives you an extra layer of safety during recessions or in the event of a bankruptcy.
2. Less volatility ' Whereas stocks move up and down wildly from day to day, bonds are less volatile as they are perceived to be less risky than stocks. Bonds tend to zig when the market zags, performing best when stocks are weakest, and weakest when stocks perform the strongest.
3. Predictability ' It is much easier to find bonds that are likely to provide a positive return than stocks that are likely to provide positive returns. A business does not have to be a top performer or a record growth company for bond investors to make money; it simply needs to be able to make good on all interest payments as they come due.

Disadvantages of Bonds

No investment is without its disadvantages. Here are a few disadvantages of investing in bonds:

1. Low returns ' As bonds tend to be safer than stocks, bonds also tend to provide lower returns in the long-run.
2. Inflation risk ' Bondholders carry more inflation and interest rate risk than stock investors. Because the total return on bonds tends to be lower than stocks in the long run, inflation eats more from bond returns than it does stock returns.
3. Difficult diversification ' Individual bonds sell for $1,000 of face value, meaning that a well-diversified portfolio of 50 bonds would require an investment of $50,000. Few individual investors ever buy individual bonds, and instead they have to buy into bond mutual funds or exchange-traded funds.
4. Taxed as income ' With the exception of municipal bonds, bonds are subject to income taxes at your normal income tax rate. Avoid higher taxes by keeping your bond exposure in a tax-deferred retirement account like a 401k or IRA.

Should You Invest in Bonds?

Broadly speaking, there are only a few groups who do not benefit from at least some bond exposure. There is only one group of people who should absolutely not invest in bonds: people with substantial high-interest debt, or people with student loan debt.

When you buy bonds, you're lending money to someone else. If you have student loan debt at 6.2%, and you're buying bonds at today's low rates of 2-4% per year, you are borrowing at 6.2% and lending at 2-4% per year. Think about this as if you were a bank ' no bank would stay in business borrowing at 6.2% and lending at 2-4%. Additionally, student loans have to be paid back; there is no way around it. If you have student loans, you already have a way to invest in risk-free 'bonds' by repaying your student loan debt. Repaying student loan debt makes much more sense than investing in bonds for a lower return with greater risk.

Otherwise, some bond exposure helps balance out the volatility in a retirement plan. See this post on diversification, which details historical performance of different asset allocation levels to stocks and bonds. Consider targeting a return and then picking an allocation that has historically hit your hurdle rate ' the return you need to have the retirement savings you want.

Financial Carnival for Young Adults ' 38th Edition

Welcome to the thirty eight edition of the Financial Carnival for Young Adults. My purpose with this carnival is to create an easy-to-find place for information about finances for young adults. The carnival is hosted here at 20's Finances almost every week and features the most recent articles from around the web. I hope you enjoy this edition of the carnival.

I'm sorry to those who submitted to last week's carnival and were disappointed to see that there wasn't a published edition. There have been lots of changes for me in the past two weeks (about which I will share in the coming weeks) that kept me from publishing it. That and there were some technical difficulties with the submissions. I hope everyone enjoys the upcoming (US) Holiday.

Lance @ Money Life and More writes What Would You Do?: Should I Refinance My Mortgage? ' I reached out to a mortgage banker I have dealt with in the past and asked for a quote. Inside are the details of my mortgage situation along with the quotes I received. Do you think I should refinance my mortgage based on these circumstances?

Bryan @ The Insurance Expert writes How To Save With Cheap Car Insurance Quotes And Get The Best Policy Coverage ' Helps consumers save on car insurance by discussing the discounts to look for, the factors that affect insurance rates, as well as the average premiums per state and type of policy.

Suba @ Broke Professionals writes Kids and Money: What They Really Think ' What do kids really think about money? I asked my daughter ' and her friends ' what they'd do with a million bucks. Their answers are hilarious!

Ashley @ Money Talks Coaching writes It's not about what you earn' it's about what you keep! ' When I first heard the phrase (work smarter, not harder), I dismissed it as business jargon for (work harder for us with no extra pay).

Jester @ The Ultimate Juggle writes Fairness In Spending On Kids ' When I first heard the phrase (work smarter, not harder), I dismissed it as business jargon for (work harder for us with no extra pay).

krantcents @ KrantCents writes Moving When You Retire Is Dumb! ' Unless you are moving with friends and family, moving when you retire is dumb! You have roots in the neighborhood, family and community. Social connections are very important to living a long happy life.

Hank @ Money Q&A writes How To Stay Out Of Debt This Holiday Season ' Here are several ways that you can avoid adding to your debt this Christmas. There are ways that you can learn how to stay out of debt this Christmas and holiday season.

Kyle @ The Penny Hoarder writes The 5 Weirdest Things We've Sold for Cash ' Over the past few years my family has made close to $7000 by selling unwanted stuff from our closets. My husband is a musician, and musicians have a lot of crap'er, gear, so that helped with our earnings.

PITR @ Passive Income To Retire writes How Cash Flow Investments Change Your Life ' Find out how dividend investing or cash flow investments can change your life in more ways than the income itself.

BARBARA FRIEDBERG @ Barbara Friedberg Personal Finance writes SHOULD I INVEST IN COMMODITIES? ' Learn commodities investing. Commodity and investment returns are volatile. Commodities are risky investments.

Daniel @ Sweating the Big Stuff writes Think Hurricane Sandy Doesn't Affect You? Think Again ' While most of America lives in states not affected by Hurricane Sandy, the entire country will feel its effects, especially the bad and ugly ones.

A Blinkin @ Funancials writes The Fiscal Cliff is a Solution, Not a Problem ' Once the media gets a hold of an idea and it enters it's way into everyday conversation, it's either over-hyped or (not as bad as they say.) In my opinion, the Fiscal Cliff falls into the (not as bad as they say) category.

Steve @ Ready To Quit My Job! writes Quitting Without Retiring: Keep Your Name Prominent ' Quitting doesn't have to mean retirement. Keep in touch and don't fade into obscurity.

Jon the Saver @ Free Money Wisdom writes Three Financial Decisions Newlyweds Need to Make ' These three financial decisions are things you really need to take into consideration if you're ever to ensure that your future is financially stable.

IMB @ Investing Money writes What is a Mutual Fund? ' Find out what a mutual fund is and how to use it to your advantage in your portfolio.

Marie at Family Money Values @ Family Money Values writes Why Not Use that Halloween Pumpkin? ' Pumpkins raised for carving, I just learned, are not the best ones to use for cooking. Who knew! I've been peeling and cooking my Jack O'Lantern pumpkins for years and making delicious pumpkin bread and pie from them since the kids were small. It has grown to kind of a (time consuming) tradition.

J.P. @ Novel Investor writes What Is A Trailing Stop Order? ' The type of orders you use is just as important as what you buy and sell. A trailing stop order allows you to limit your losses without sacrificing gains.

Robert @ My Multiple Income writes How To Go To College For Cheap ' Have you thought about going back to school? Going to college and getting your undergraduate degrees, MBA, etc. might be a good idea. After you have decided whether or not going back to school is a good choice for you, it is time to get a reality check and think about all of the major costs that are included.

Average Tuition Increase Rates: Why High Projections are WRONG

If you being responsible and saving for your child's education years before he/she attends college, I bet you have taken a look at the average tuition increase in order to try and estimate the amount you need to save so that your child doesn't have sell a body part in order to pay for school. As a person who has paid 3 different schools for tuition (and recently), I know how difficult it can be to pay for the high tuition costs.

While tuition costs are certainly high, it doesn't mean that the estimates of high annual tuition increase predictions are accurate. For those trying to estimate how much college will cost in the future, you need to read this!

It's going to be more expensive to stand in this line next year, but how much more?

What People Claim About Average Tuition Increase

Recently, I've seen a number of other personal finance blogs highlight the recent high increases in tuition. While I support their efforts to educate the public on the need to save, many are taking one statistic published by various agencies like the College Board, and exaggerating the future costs of tuition.

I noticed a recent article on US News about the increasing cost of education, and how to predict future costs of tuition. Here's what he says:

According to the US Department of Education, the average annual cost of public school increased 6.5 percent each year over the last decade. That means that by 2030, annual public tuition will be $44,047. The total cost for a four-year degree will be more than $205,000. 

Again, why the statistic seems to be reputable, as he is quoting US Dept. of Education, it fails to take into consideration why schools increased 6.5% as well as the private institution. Assuming that tuition rates will continue to increase at 6.5% each and every year is about as naive as assuming you can get a 10% return on your investments each and every year for the next 30 years.

This article is just the tip of the iceberg. There have been several other writers who have taken a simple average over the past 10 years and inserted it into a compound interest calculator to figure out the future costs of tuition. While I like using compound interest calculators as much as the next personal finance author (especially to retirement or other savings goals), it is inappropriate to apply this approach to future tuition costs.

Why the Average Tuition Increase Numbers are WRONG

What the people who take one statistic and run with it to scare others fail to consider is the real life happenings. I have worked at two private universities within the past 4 years. I probably have more experience working at a higher education institution than 90 percent of the population. Most people don't know what it is like behind the scenes of a university.

After working at a university, and being part of the conversations where tuition increases are discussed, I can tell you that many of these high annual increases do not represent the whole. While there may be a small percentage of schools that are increasing tuition drastically to skew these averages, my experience has been tuition increases between 2-4%.

To be more specific, I currently work at a University in one of the most expensive areas of the country, which has one of the highest tuition rates. Our administration knows we are one of the most expensive. In a conversation with the CFO of the University, he told me that universities cannot continue to increase tuition to meet the increasing costs. In fact, he said that even a 4% tuition increase isn't reasonable anymore.

When asked more about the subject by a colleague of mine, he clarified. There was a period where institutions would simply increase tuition rates high enough to cover the increasing costs of running a tuition. For those who don't know, college universities suffered as much as any other investor during the economic downturn. Institutions rely on endowments to pay for a portion of their operating costs. When returns on investments decrease (or are negative), that affects the university's budget. When revenue is low, one of the easiest ways to compensate was to increase tuition. I imagine that this is one of the reasons for the recent high rates of tuition increases. But, my university acknowledges that high increases in tuition is going to have negative consequences for them financially.

More Reasons why Tuition Rates/Projections are Exaggerated

You may be thinking that my experience is not a very wide reach. My experience could be that of a couple institutions that is ignoring the rest of the trends. In some sense that may be true, but I doubt it. In fact, there are several other reasons why you can expect lower tuition increases in the future, that are not dependent on my personal experience working in higher education:

• Most universities are not out to make a profit - What tends to happen when people hear these tuition increase figures is that universities are these evil institutions that are trying to take advantage of families and college students. This simply isn't the case. Very few institutions are for-profit, meaning that most are classified as non-profits. This means they aren't out there trying to takes as many dollars as they can in order to pad the wallets of a select few. Universities are simply trying to cover costs.
• As economy improves and endowments stabilize, universities will rely less on tuition increases to cover expenses - As I mentioned before, many universities have endowments to pay for part of their operating costs. We all know that the market took a huge hit the last few years. This isn't going to always happen. It was a rare occurrence. This means that universities won't require large increases in tuition to cover costs.
• The highest tuition schools know they are the most expensive and want to remain competitive - No university wants to be the most expensive in the country or region. It's an accolade that only fools would try to obtain. When you have the highest tuition in the country, that decreases your pool of applicants. No matter how good your education and employment rates are, if a comparable school is $5,000 less than you, you are going to lose potential students. Universities will want to remain competitive so they will do everything they can to keep tuition increases low.
• Higher education is struggling financially as much as anyone else, but it doesn't mean they ignore supply/demand principles - It's economics 101. Supply and demand. When supply increases, price drops. When demand decreases, prices drop. If you continue to increase tuition as a university, this affects the number of high school graduates who see value in attending your university. In other words, the demand for your 'product' will decrease. If universities continue to raise prices that are out of reach of the majority of the population, I also think more institutions will be created. As the motto goes, with more supply (of higher education institution), the prices will drop.

Tuition increase rates have been extraordinarily high recently. But, it doesn't and most likely won't continue this way. While these high projections may be intended to scare you into saving more for your child's education (which is a good result, if it doesn't convince you that saving money is hopeless), these are inaccurate predictions. Tuition will undoubtedly increase, but not at the rates that have been projected in popular media and other financial blogs.

Readers, what's your take on the projections of tuition increases?

How To Handle Holiday Parties Professionally

Company holiday parties are right around the corner. For those new to the work force, this may be your first time attending an office party. For those that are veterans of the company holiday party scene, this post will serve as great reminders for things you should and should not do at the holiday party.

Does Your Boss Go Overboard with Holiday Parties?

Holiday Party 'Do's'

The first thing to do is to talk to your boss. You don't need to talk about an account or what happened that day at work, but work on getting to know them better, on a personal level. This connection helps you to better understand their needs and concerns, which helps you at work to help them out.

The next thing to do is to network with those in other departments. These interactions can lead to opportunities that you may not have thought of. Even if it doesn't lead to opportunities, you get to learn more about your company, which can help you in your current role and it will allow you to build and strengthen relationships.

Holiday Party 'Don't's'

The biggest and most obvious don't is to not get drunk. Every holiday party I've been to, someone ends up getting drunk. The sad thing is the aftermath of the drunken night. Some people I've known were fired within a few days of the party. Others, while not fired, were never promoted and most eventually left the company. Feel free to have a good time, just make sure you know when to stop so that you aren't that person.

Another don't is not going. Unless you have something else planned that cannot be changed, it's important to go to the party. You don't have to stay all night, but show up, work the room, and feel free to leave.

A third don't is to not show up wearing clothing that you wear out to the club or out on a Saturday night. Even though this is a party, it is still a business function. This isn't saying that you need to wear a coat and tie, but you should dress accordingly. All office parties are different, so if you are unsure as to how casual you can dress, you best bet is to ask your boss.

Final Thoughts

Overall, holiday office parties are intended to be a great time. After all, the idea behind them is to thank employees for all of their hard work throughout the year. Take advantage of this time by attending the party and networking not only with those in your department, but also with others that are in other departments that you don't interact with on a regular basis.

Be sure to thank your boss and other key management personnel for the event. If you are in a large company, don't think twice about sending a thank you note to top management thanking them for the party. It's seems insignificant, but you never know if it might lead to something in the future.

Free Trustworthy Resources for Investors

The internet completely changed the world for investors. There are now more free and accessible resources for investors than ever before. I've compiled a list of some of my favorite online resources for investors, and I hope you'll help by adding any more in the comments.

Best Investing Resources

Here are my favorite resources, broken down by category:

• Stock Screeners ' Stock screeners are a good way to select stocks based on identifiable quantitative information. My two favorites are Google's stock screener and the FinViz stock screener. I find Google's easier to use and more precise, but FinViz has a few additional options and variables that Google's does not have.
• News and Events ' General news sites are great for big picture views. I like BusinessWeek's website, which is free to everyone without a subscription. Also, sites like InsiderMonkey are great at tracking business and insider news, as well as publishing up-to-date information about how investors are moving their money. You can access any investing news publication ' even those with a paywall ' through Google News.
• Fund News & Information ' Those not interested in active-selection will like a site like IndexUniverse, which is a great read for information surrounding exchange-traded fund strategies and performance. ETF Database is great for researching exchange-traded funds. They also have a very good free ETF screening tool.
• Analysis ' There is no such thing as a free lunch when it comes to Wall Street analysis. Of the sites that are free, SeekingAlpha is a relatively good source for large cap analysis. Although contributing authors are generally amateur and nonprofessional investors, the comments section on each article holds most authors accountable. Another great site is the Value Investors Club. With a free membership, you can view analysis on a 45-day delay. Full membership requires getting into the club, and the commitment to post two new ideas each year. Run by Joel Greenblatt, the site hands out $120,000 in annual prizes to the best analysts which rewards members for insightful commentary on individual stocks.
• Modeling and Valuation ' I've really started to get into Trefis, which is a modeling site that allows you to push and pull different 'levers' in a business to get an idea of how each piece of a business affect a company's valuation. It encourages investors to really think about how companies rise and fall in value. Its models are not perfect ' it won't beat a custom-built Excel model ' but they're free and very easy to use for a quick and dirty valuation of a company.
• Financials ' Yahoo Finance, Google Finance, and countless websites have finacial data for any publicly-traded company, but no site matches Morningstar when it comes to great, free data. Their 5-year historical data is free to use, and they do a lot of the heavy lifting for you by breaking down financial reports into actionable ratio analysis.

Innovation in the financial world is absolutely incredible as few of these sites and resources existed 5 years ago. As more investors turn to the internet for financial advice and information, free resources should only become better and more plentiful.

What sites or tools do you find useful in making investing decisions?

Buying Your First Home: Is Hatred for Renting a Good Reason to Buy?

Anyone who knows me, or even stalks me on twitter, knows that I hate renting. It was just last month that I got a message from my landlord. She called one evening when I was watching a movie and I didn't bother to answer. I knew she would leave a message if it were important. As it turns out, 'important' is a relative term for her.

She was calling to let me know that one of the three tenants had been making a mess with our garbage cans. Not only was there loose trash in them that the garbage men (yes, they are men) would not take, but it became the new homes of hundreds of flies. While I wasn't a fan, I knew it wasn't my fault. Anyways, she called to tell us her new plan to change the cleanliness of the garbage cans. She decided that I was going to have to clean out a garbage can that would from there on out become 'my' garbage can.

To make a long story short, I called and let her know that I wouldn't be doing this and that she would have to clean them out first is she wanted us to be assigned to a garbage can. She agreed, but the annoyance of renting continues to nag at me through these renting moments.

As many of you know, my wife and I planning to buy our first home in about two years. We are already saving up a down payment and figuring out how much of a house we can afford. You know, all the things that young adults SHOULD do when buying their first home. Who wouldn't want to be prepared? Yet, as I make the preparations and plans, I can't help but wonder if my hatred for renting is causing me to jump into home ownership for all the wrong reasons. That led me to question what the good reasons are for buying a home and what the bad ones are. If you are looking to buy a home, or have just recently purchased your first home, you may want to think whether it is/was for the right reasons.

Bad Reasons to Buy a Home

Being the youngest of three boys, I have always wanted to grow up faster than anyone else my age. I am more responsible than anyone else I know and I plan like no one else. In many ways, it's a good thing. It has helped me be successful in all of my employment opportunities. While my peers were working as student works, I was a full-time staff member. I not only got benefits, including vacation and holidays, but also free tuition. Simple put, my motivation has been a good thing in so many ways.

Many people take the same drive to be a grown up and carry it over to buying a home. In other words, many people buy their first home because it seems like the 'grown-up thing to do.' While I am a fan of buying a home, I do not endorse buying a home for the wrong reason. This is one of those bad reasons. Buying a home to feel grown up will often mean that you are buying before you are ready (both financially and emotionally). You need to consider the financial and lifestyle changes of buying a home.

Here are some other bad reasons to buy your first home:

• To have more space or a certain feature of what is often associated with buying (i.e. a backyard, garage, etc.)
• You assume it's better financially
• You've been told the market is a buyer's market
• You don't want to miss out on low interest rates

There are many other reasons not to buy a home. The easiest indicator of whether you are making a mistake seems to be making too a decision without thinking it through. This should come to us as no surprise. The aspect of considering all of your options, which is great advice for your personal finances in general, is going to apply to buying your first home. In other words, the message here is this: don't jump into buying a home without knowing the reasons why you are buying.

Is Hatred for Renting a Bad Reason to Buy a Home?

The implications of thinking through why you are buying a house would suggest that buying a home for the sole purpose of not having to deal with a landlord is indeed a bad decision. You shouldn't run to buy a home because you can't stand dealing with a landlord. First, you need to consider renting somewhere else. There are lots of great landlords out there and if you are considering buying a home for the sole purpose of escaping that landlord, you're confused. There will be more issues that you, as a homeowner, will have to deal with.

Reasons We Will Buy a Home

While my wife and I hate renting, this isn't the only reason why we are buying a home. Here are some of the other reasons we want to buy a home, that I think make for good reasons to buy. You'll have the option in the comment section below to tell me whether we are buying for the right reason or not.

1. Building Up Equity - Equity in a home is a great way to build wealth. Instead of paying a monthly fee for renting, by buying a home we would be putting money into our own pocket. Equity isn't just about net worth either. By buying this asset, we are increasing our wealth AND lowering our future expenses (once the mortgage is paid off). Who wants to pay rent forever anyway? The financial benefits are certainly the biggest reason for us to buy a home.
2. Diversification - Buying a home allows us to invest in something different than our retirement accounts. When most people talk about diversification and how to do it, they don't talk about real estate or buying a home. Diversifying your investments/assets is a great way to hedge against downward spirals in the market. Granted, it will initially put a lot of our money in a home, but if the stock market crashes, at least we will have value in our home.
3. Responsibility - Like I already mentioned, I enjoy being responsible for things. I want to manage and take care of my own home. There's something about successfully managing an asset that just excites me. On top of that, I know that since I am the one responsible, I don't have to wait for my landlord to fix something or to go cheap on something because I will be the 'landlord.' I will be the one who makes all the decisions (or Mrs. 20's will be, at least).

Buying a home is something that needs to be done for the right reason. Jumping the gun, so to speak, is a great way to put yourself at increased risk of causing a financial disaster. If you are thinking about buying a home, make sure to take the time to think about why you want to buy. Ask yourselves whether you can afford it AND whether you are ready for that type of commitment.

Readers, what do you think are good reasons to buy a home? Am I buying a home for the right reasons?

How to Prepare for Final Exams in 3 Steps

I know, most of you reading this is are asking why am I writing about final exams in early November? Final exams are over a month away! While this is true I have found that I did best on the final exams that I started studying for early. In fact, here is the pan of attack that I used while in college to great success.

Step 1: Start Early and Small

I started to study for final exams about a month before the actual exam. That's not saying I was pulling all-nighters every night up until the final, quite the opposite. I started out small, studying maybe an hour a night. This allowed me to slowly soak up the information. As the exam date came closer, I would up my study time. By the time I was spending a few hours a night studying, the professor had our review for the exam so I could then focus specifically on what was going to be on the exam.

Some reading may argue that I wasted my time studying things that weren't going to be on the exam. For me, I needed to study a little bit over time. Think of studying like driving a car. You can't get into a car an instantly be going 100 mph. That's the equivalent of waiting until a few days before the exam to start studying. By studying the way I did, it was like getting in the car, letting it reach its operating temperature and then heading out, slowly getting the car up to speed. It may sound boring, but that's how you keep a car running for 200,000+ miles and that's how you consistently score well on final exams.

Step 2: Stop Studying the Night Before

I know, this might sound crazy, but it works. I've found that if I try to cram the night before the exam, I retain almost nothing. In fact, I still vividly remember sitting during the exam with my eyes closed trying to picture my notes from the night before. Most times, the image never came.

This also goes for studying while waiting for the professor. I see so many others reviewing their notes right before the exam. I never retain that information so I don't bother reviewing them. I sit there and stay relaxed, knowing that I am prepared.

Taking the 'night off' from studying allows you to let your mind and body recharge before the exam. If you studied well up to this point, you should not fear losing any of the information you learned. You won't.

Step 3: Get a Good Night Sleep/Eat Breakfast

Getting to bed at a reasonable time (meaning you get at least 8 hours) is essential. Same goes for eating a good breakfast. Having your body and mind fully rested and running at peak performance will allow you to perform your best on your exam.
Staying up all night cramming might help you remember a few key facts, but there is a good chance you won't remember most of what you studied. This is because not only don't you learn your best cramming like that, but without a good night's rest, you won't be able to think as well as you otherwise could.

Final Thoughts

Final exams can be a stressful time for most college students. By preparing as I have laid out above will allow you to be in peak condition and ready as you can be for your exam. You can go into the final confident that you know the material and will be able to apply it as needed. Good luck!

Should You Use Target Retirement Funds? ' Pros and Cons

Target date funds are a new innovation on Wall Street, a product designed for convenience and easier retirement planning.

A target retirement fund is one which builds an asset allocation mix based on a retirees expected retirement date. Over time the fund makeup changes to moderate the portfolio's risk as the future retiree gets closer to their ideal retirement date. Let's look at target retirement funds and lay out the pros and cons.

Are Your Investments Linked to Your Age?

Pros of Target Retirement Funds

Here are the main advantages to target retirement funds:

1. Automation ' A target retirement fund automates asset allocation decisions. Each year, the portfolios are also rebalanced to return to their target allocation going forward.
2. Availability ' Target retirement funds are everywhere. Virtually every 401k sponsor and brokerage firm carries a target retirement fund for investors.
3. Tax efficiency ' When based on index funds, target retirement funds are very tax efficient as there are only a few transactions that would pass on taxes to fund investors. Keep in mind that taxes only matter when funds are held outside of a tax-sheltered retirement account.
4. Simplicity ' Never has investing been easier than simply picking a target retirement date and making automatic contributions. There is no need for analysis paralysis ' a simple list of choices encourages many more people to invest who might not otherwise if they had to make their own selections.

You probably notice a trend in the advantage above. A target retirement fund makes retirement planning easier, more convenient, and automated. The major advantage is the ease at which someone can start saving for retirement.

Cons of Target Retirement Funds

A full analysis requires consideration for the downsides of target funds. Here are some of the disadvantages:

1. Fees ' Some target date funds are packed with fees. As target funds are funds of funds (a mutual fund or ETF that holds other mutual funds and ETFs), investors are hit with double fees.
2. One size fits all planning ' We are all different. Our finances are very different. A target date fund does not take into consideration key retirement factors like home equity, existing debt, or other assets and liabilities that you have outside of the fund.
3. No side benefits ' You pay for financial advice in one way or another. When you hire a financial planner, you pay commissions or fees for advice on matters that extend beyond investments and into insurance, estate planning, and taxation. You don't get the same advice with a target date fund that you might get for a similar price from a financial planner.
4. Less useful for people closest to retirement ' A target retirement fund is a 'good enough' way to save, not 'the best' way to save. As your savings grow and you near retirement, it makes much more sense to seek professional advice for your individual situation than to accept the one size fits all approach to planning.

The primary disadvantage of a target retirement fund is that it makes decisions based solely on when you wish to retire. A proper financial plan is formulated from far many more variables than the date at which one wants to enjoy life without working.

Should You Use Target Retirement Funds?

I'm a big fan of low-cost target retirement funds for people who are just starting the process of saving for retirement. When you have a less than substantial amount of savings or net worth'say, less than $100,000, it would be difficult if not impossible to add to performance after costs by paying higher commissions or flat fees to a financial planner.

There is a point at which hiring a financial planner to independently assess your situation and your finances makes economic sense to the extent that you get more finely-tuned planning at a lower relative price. Seeing as fee-only financial advisers charge by the hour, or as a fixed percentage of assets based on how much you invest, it makes sense to hire a planner for 'hands-off' planning when you have accumulated a significant net worth. A net worth of $100,000-250,000 seems like a good ball park number for moving to individual advice.

Financial Carnival for Young Adults ' 37th Edition

Welcome to the thirty seventh edition of the Financial Carnival for Young Adults. My purpose with this carnival is to create an easy-to-find place for information about finances for young adults. The carnival is hosted here at 20's Finances almost every week and features the most recent articles from around the web. I hope you enjoy this edition of the carnival.

Green Panda @ Green Panda Treehouse writes Powerful Tips to Avoid Debt at an Early Age ' How you can avoid debt early on.

PPlan @ Provident Plan writes Finances and Going Back to School ' Going back to school isn't cheap. You need to find out how you can afford it before making the leap.

Jennifer Lynn @ Broke-Ass Mommy writes How Much Cash Do You Carry? ' Is there a right answer? Not exact, so let's discuss how much cash you carry. I'll reveal how much cash I carry around!

Corey @ Steadfast Finances writes What Happens When You Don't Pay Taxes ' Perhaps you haven't given it much thought, but there are very different implications and penalties for not paying your taxes.

Michelle @ Making Sense of Cents writes What They Don't Tell You When You Graduate ' In my post last week I talked about how I'm oh so happy that school is done forever. However, even though there are so many reasons for why I am happy and things I looked forward to when graduating, there are also many things that new graduates are not told about.

Suba @ Broke Professionals writes I'm A Bonafied Professional: Finding Financial Independence ' Financial independence snuck up on me ' after working freelance for two years, I finally managed to find a gig that makes me a professional writer!

Crystal @ Budgeting in the Fun Stuff writes Our House is a Money Thief ' Moving is expensive and new homes come with a lot of expenses. Here are the ones we expected and a few we didn't.

Joe @ Midlife Finance writes Saving For Retirement: More' or Less? ' There's a new trend out there, arguing against the long-held advice put out by practically every financial guru, from Money magazine to Suze Orman: You don't really need as much for retirement as they've said all these years.

IMB @ Investing Money writes How to Evaluate a Stock ' Find out how you can evaluate a stock and what you need to know to make a wise investment.

What Sandy & 60+ Hours of No Power Taught Me

As many of you know, Hurricane Sandy hit the North East pretty hard this past week. I am happy to report that while I was in the path of the hurricane, everyone that I knew personally did not have any significant damage or injuries. For those who weren't glued to their TV all week watching the updates by the various news programs, there were over 7.5 million people without power as a result of the hurricane, tens of people in the tri-state area lost their lives, and now hour long waits at the gas stations. While these effects of the hurricane are horrible, it started to affect us before even hitting us.

How to Prepare for a Hurricane or Long Power Outages

It was still a few days away (the storm hit Monday night), but my wife and I spent the weekend preparing for the storm. We didn't go out with friends or do of the any things that we normally do, but instead made the preparations for storm. We aren't in an area where there is risk of flooding and we were far enough inland that we knew the only things we had to prepare for were trees being down and long power outages. Last year, we also faced similar (but not as bad, destruction wise) storms with Irene and the early October snow storm that caused major power outages as well. In other words, this wasn't our first rodeo. We had done this before, so we knew what to do in order to prepare. If any of you are wondering what to do to prepare for a Hurricane, here's a step-by-step list of our actions that we took:

1. Clean the Apartment ' The first thing that we needed to do was to get our apartment clean. If the worst case does happen, it will be stressful enough. You don't need a cluttered home. This includes getting rid of clutter and washing clothes and dishes. We failed to wash our clothes, but I am planning on doing that sometime this week (once life gets back to normal).
2. Get 3-4 Days of Water/Food - The next thing we did was to prepare the essentials, in terms of food and water, for the days to come. Part of the stress involved in preparing for the hurricane is dealing with the unusual traffic of people wanting to do the same thing. Whenever there is a storm coming, you can bet on bread and bottled water selling out almost immediately. This didn't worry us because we just stored water prior to the storm in water bottles and other containers. We also planned meals that we could either eat cold or warm up on the stove. For us, this meant soup and pesto-paninis. There's no need to resort to PB&J sandwiches just for a storm.
3. Fill Up Gas - This is something that we did last minute and I am SO GLAD that we did. While it may not seem necessary to fill up all of your cars with gas, it is a MUST! I didn't fathom the worst case scenario with gas (which is happening now), but I got gas anyways just to be prepared. As it turns out, the state is now rationing gas for who knows how long. You can only get gas every other day (depending on your license plate) and the lines are hours/miles long. I dread having to get gas and hope that it is back to normal by the end of next week.
4. Extra Water - Another cool trick is to fill up your bathtub with water. This isn't necessarily for drinking water, but just water to use for flushing you toilet in case you don't water in your pipes for a few days.
5. Charge Electronics - Our lives are so tied to electricity and especially technology (think of the last time you didn't use your computer for a whole day), so it's important to charge your electronics ahead of time. They won't last forever, but it will get you through the first 24-48 hours depending on how old your batteries are. While I didn't have this ahead of time, I just purchased a solar power battery, that I can charge my electronics with. That means I can charge up the batter via sunlight and then use it to charge my cell phone or I Pad. While this may seem like a luxury item, it takes away the stress of having your cell phone die when you need it the most. It won't power your house, but it is enough for the essentials.
6. Lights/Candles - Another essential is having a few flashlights/Lanterns/Candles to help light up your house. It now gets dark around 6pm (or 5pm thanks to daylights savings), so you need a few hours of light each day. We have 2 main flashlights in addition to candles and a headlamp. I realized that it would be nice to have a lantern, so I will probably add that to my 'kit' for next time.

While there are many other minor steps (like prepping your freezer/fridge and getting a cooler ready), these are the essentials. I didn't intend this post to become a preparation post, so let me jump into my reflections on the storm.

Reflections from Hurricane Sandy

There is a lot that goes through one's head when something like this happens so close to home. Moments of stress and feeling overwhelmed are paired with moments of gratitude ' because it could have been worse. These are a given. I've been surprised to notice a few other things as well.

• Some People will Always Under-estimate the Storm - My wife and I were amazed at how many people were not taking the storm seriously enough. There were surfers in the water, people who were staying in their houses that had mandatory evacuation zones, and much more. Even myself, and I am normally a 'be ready for anything' type of person, I didn't imagine it would be this bad. Luckily it didn't stop me from preparing for the storm, but it still goes to show you that people assume they are untouchable.
• Some People are Selfish, but Most Care about Others ' Overall, my friends and I banded together to help each other out. When one person had power, everyone was invited to enjoy the heat and power of that person's apartment. When everyone lost power, there were texts the next day to check to see if everyone was okay. I even had grandparents calling me to make sure everything was okay. This type of stuff doesn't get conveyed as much as it should in the news. Instead, it is filled with stories that draw on people's emotions. Reporters interview people with a vary narrow focus, asking them about the homes they lost, what they are going to do, etc. I even saw stories about looters. While it is important for the public to know about this, these stories are emphasized while stories of camaraderie are swept under the rug.
• We DEPEND on Systems / Others - We like to think that we can take care of ourselves, but this simply isn't the case. My work closed for 5 days while everyone dealt with the impacts of the storm, but I am still getting ready to go to work tomorrow with no way to get to/from work. As many of you know, I take the train to work. As of this morning (Sunday), my train line is still suspended until further notice. When you combine this with the gas shortage, this is not going to be an enjoyable week. Between this and other experiences in this storm, I have learned that no matter how independent we are, we are almost always dependent on others.

Sandy, my uninvited guest, is now long gone, yet its impact on the North East continues. I am hoping that life gets back to normal sometime soon, but most importantly, I am thankful that my family and friends did not suffer any significant damage / injuries. I know that a lot of people cannot say the same thing and my thoughts are with them.

Did you live through Sandy? What did you learn from the time?

Buying Your First Home: How Much House Can You Afford

The other day my wife and I were dreaming about our future home. Since we are planning on buying our first home in a couple years, we are already making the plans. It's never too early to start saving the down payment. The conversation drifted towards what kind of house we will look to buy.

We talked about our current 1 bedroom apartment and all of the the feature that we like about it. We also expressed our dissatisfaction. All of the things that we want to be upgraded in our new home. Even though we are years away, our fun little conversation sprang into planning our future home. Two-three bedrooms. A modest back yard. The list goes on and on.

Unfortunately, this is how I imagine most first time home buyers start planning for their first home. They get caught up in the dream and fail to think about how much house they can afford. Or, the popular way of thinking about how much house you can 'afford' is instead a checklist of items that you 'need.' In all actuality, these things are simply wants. It has nothing to your budget nor your financial goals.

Popular Ways to Determine How Much House You Can Afford

As it turns out, after a little bit of research there are a lot of generalizations out there about how much house you can afford. Everyone has their own advice on what you should be able to afford, based on different figures. Here's some of their advice

• 28-40% of Monthly Income - One rule of thumb is that you can afford 28-40% of your monthly income for your housing costs. This means that if you are earning $10,000 you can afford to pay somewhere between $2,800 and $4,000 each month on your house.
• 1.5-3x Your Annual Salary - Another popular number that is thrown around is 1.5x-3x your annual salary. If you are earning $100,000 each year, that means you can afford $150,00-$350,000 in a house.

These are just some of generalizations that help you determine how much home you can afford and they should be treated as such. While they may be helpful, they fail to take into consideration the true costs of owning a home and your current budget. You cannot rely on these estimates if you are looking to buy a home. Doing so may lead you to foreclosure or something even worse.

Expenses with Buying a Home

In order to better assess whether you will be able to afford a house, or how much of a house you can afford, you first need to understand the number of expenses that buying a home entails. It's not the same as renting. You don't just have a monthly payment anymore like you would if you were renting.

• Down Payment - One of the first costs that you will incur when buying a home is the down payment. Usually lenders will require 20% of the home value as a down payment. While it is possible to buy a home with less down, usually this comes with additional costs.
• Closing Costs - These are often the fees that are overlooked when buying a home, so first time home buyer is usually forced to empty any and all emergency funds at the last minute. These fees will include (but are not limited to): escrow fees, legal fees, inspections, prepaid loan interest, and more.
• Homeowners Insurance - Homeowners insurance is usually an additional few hundred (or maybe thousand) dollars each year, depending on the value of the home and locaiton. Usually this is a requirement to get the final approval for the mortgage from the lender.
• Taxes - One of the additional costs that homeowners occur is property taxes. These will vary depending on the property value and the location of the property, you must account for these additional costs.
• Maintenance - Maintenance may be difficult to predict, but some say that you should budget for 1%-3% of the property value for maintenance. Some years will be less and some more. Regardless of the amount, you can bet on one thing: repairs are necessary.
• Monthly Mortgage Payment - Last but certainly not least, is your monthly mortgage payment. This will depend on the amount of the loan, the interest rate, and the duration. While you may initially aim to match the amount you are paying in rent, considering all of your other costs, you should probably look to have a lower mortgage payment than your rent.

Other Factors that Affect Your First Home Budget

Estimate how much house you can afford isn't simply adding up all the costs and seeing if you have that much in your monthly cash flow. There are many other important things to consider.

• Retirement Planning - Do you have big retirement goals? Are you trying to max out your Roth IRA each year or maximize your 403(b) contributions? Buying too big of a house may put these goals on hold for years, if not decades. Make sure to consider your retirement planning and don't assume that buying a home is ultimately the best thing for your retirement goals.
• Other Debts - People who have lots of consumer debt should not be thinking about buying a home. Before you even think about buying a home, figure out how much debt you have and what you can do to lower your debt. Not only will this lower the risk involved in buying a home, but this will increase your monthly cash flow thereby allowing you to pay for all of the expenses mentioned above.
• Children - I can't stress the importance of this enough! If you are thinking about having children soon, you need to take that into consideration. Will it prevent one of you from working? If so, make sure that either you save up enough money to afford it or buy a significantly smaller home.

Estimating How Much Home I Can Afford

Like I already mentioned, my wife and I are a couple years from being able to afford our very own home. We aren't planning on having kids anytime soon, but we do have aggressive retirement savings goals. Not only are we maxing out our Roth IRA's, but we are also contributing to our 403(b)'s in addition to some other investment opportunities. This is really important to us. As much as we want to buy a home, we don't want to dig into our retirement savings in order to buy our own home. That would delay our retirement several years.

When we buy our first home (or condo), we are going to make sure that we don't overspend. We are currently estimating somewhere between two and three times our household income. When we buy, we will put 20% down. This will put our monthly payment, including taxes just a little higher than what we are currently paying. We are fine with that since we are currently saving more than enough each month AND we would be building up equity in an asset.

Readers, how did you figure out how much house you can afford?