ask.spoonah


on school vs. work
October 18, 2010, 9:16 am
Filed under: advice, career, education, financial, life | Tags: , , ,

Spoonah,
So I’m 24 and its about time I get my act together. I am little to no credits towards a degree because I have always been worried that If I don’t work full time I won’t be able to pay my bills. I’m really at a point in my life where I would love to work minimally and be able to dive into school full time. The problem at this point is that while I qualify for student loans, thats about all I qualify for. I know there are a ton of scholarship options I could look into but I don’t see anything being susbstantial enough to not have to take on full time work. I don’t qualify for private student loans on my own and don’t have a co signer and my federal loans are not enough.
Where should I go from here?

Thanks!
Wanna be educated

hey wanna be educated,

an age old question, one I have fielded many times. a tough one to be sure. the answer is not any gentler: you will probably have to keep working, or stop going to school.

if you do not have the ability to get private loans (which, by the way, I think are basically the devil incarnate and tell everyone not to get, even if it means it takes you 10 years to finish school), and no scholarships, your only option is to supplement federal loans with hard-earned cash. you can apply for grants or work study (typically you are entered for these when you fill out your FAFSA), but other than that, there isn’t much to be done. there is no real magic bullet, short of a sugar-daddy, that will pay your bills for you. if you want to go to school full time and not work, then you’ll have to find a school (and life) cheap enough that it can all be paid for with about $3500/year in stafford loans. if you find that, please let me know. I’ll be right there. otherwise, you’ll have to work.

every solution to this is a little different, depending on your situation. I’ll tell you a little about what I did to give you an idea. when I was an undergraduate, I went to school usually 3/4 time and worked part or full time. depending on when your classes are, you can sometimes find a job with flexible hours. I worked at AAA in the emergency roadside department, which is open 24/7, so I was able to work nights and weekends and save my days for classes. I have also found a surprising flexibility with employers in terms of hours (assuming it is the sort of things with shifts, such as retail or call centers) when you are going to school. now that I’m in graduate school, I supplement my loans and scholarship (which luckily, cover almost all my expenses) with petsitting and more petsitting. another nights & weekends gig, usually. check out care.com and sittercity.com to find dogjobs. they also have listings for child and elder care, housekeeping, stuff like that. if those sorts of things aren’t your deal, I recommend selling your body on the streets.

so all that said, I wish I had better news for you. now is a good time to think long and hard about your long-term goals. do you need to go to college to achieve them? could you do an apprenticeship instead? college is a very expensive way to figure out what you want to do in life (just ask my student loan companies). if you’re not sure you need it, put it off for the time being. if what you really want is to not have the job you have, or the life you have, college isn’t necessarily the answer. check out my previous post, on college, to see my views on this, as an overeducated and underemployed person. a word from the wise: I am just a few months away from my MBA, and I’m pretty sure I just want to move into the woods and make crafts and have some goats after I graduate. except I have $999999999999999999 in student loans, so now I can’t. let that be a lesson to you.

spoonah



on where to put your money
July 23, 2010, 7:20 pm
Filed under: advice, financial | Tags: , , , , , ,

Dear Ask Spoonah

I recently sold my car to cut back on expenses and am looking to put the money from the sale to work. I heard that online banks have higher interest rates for savings and money market accounts, but I wonder are they better than a brick and mortar bank in the long run? Also is there a big difference between a money market account, savings account, or certificate of deposit?

Cordially
~Savings Newbie

dear savings newbie,

first, congratulations on having the courage to make such a big move to support your financial goals! that’s a tough choice.

to answer your first question, there are a number of differences between traditional brick & mortar banks and online banks. obviously there is the issue of convenience and time, in that traditional banks allow easy access to our money just as soon as we can get there, where online banks are accessed online only and can often take up to several days to transfer funds to an account you can “get at”. this can be a good thing if you are trying to use the online account for savings (as it keeps you from making impulse withdrawals). the other main benefit, which you brought up, is online banking often offers higher rates on interest bearing accounts such as savings and money market accounts, and often offer interest on traditionally no-interest accounts (such as checking accounts). so to answer your question, the benefits to using an online bank for savings accounts are higher interest rates, so it can definitely be a good decision in the long run, especially if you plan to deposit large enough sums of money or for long enough periods of time that the difference in interest rates will make up for the lack of convenient access to the funds. I use online banking for my emergency savings accounts myself, as well as when I’m saving for other things and want to “hide” the money from myself so that I can’t take it out for impulses.

as for the differences between savings, money market accounts, and certificates of deposit (CDs), there are again a few benefits and drawbacks to each. the differences are primarily in terms of interest rates and liquidity (ease of access). savings accounts are the most liquid but generally offer the lowest interest rates. these are great for things such as short-term savings (of a year or less) or when you think you might need the funds within a few days (i.e. emergency savings). CDs are purchased for a set period of time before maturation, and the longer the time (from a few weeks to several years), the higher the interest you will gain. CDs promise a fixed interest rate determined at the time of purchase. they are a safe investment with a rate you can be sure of, but they lack access to the funds before the maturation date. money market accounts, on the other hand (not to be confused with money market funds, which are not FDIC insured and are riskier), are more liquid (like checking or savings accounts), and offer a competitive interest rate (which may vary). these often have a high minimum balance and limit the number of times in a month you may withdraw from them.

to summarize:

in order of liquidity, high to low—savings, money markets, CDs
in order of interest rates, high to low—CDs, money markets, savings

if you’re sure you won’t need the money for a specified amount of time (like a year or more), then I say put it in a CD. otherwise, shop around for the best going rates on a savings or money market account. all three of these options are FDIC insured.

happy saving!



on paying someone else to buy your groceries
March 27, 2010, 7:55 am
Filed under: advice, financial | Tags: , , , , ,

Hello Ask Spoonah,

My question has to do with personal grocery shopping services. Our local grocery store is now offering this service, for either a $5 fee or free if you spend a certain amount. With crazy schedules and what feels like no time, this seems like a great deal. If you don’t meet the minimum though is it really worth spending the $5 to save the time?

Thought this might be something you might have thoughts about.

-curious in western mass

dear curious,

I often think about things like this. generally my answer comes down to when I am about to do something I could pay someone else to do (i.e. grocery shopping, laundry, etc.), I ask myself, “would I pay $5 to not have to do this right now?” if the answer is yes, well then, there you go.

these services are helpful for two groups of people: the busy, and the lazy. I guess for a third as well: the lazy busy people. I usually fall somewhere between the busy and the lazy busy. I also am generally way busier than most people, and at other times in my life I would not use services like this (because doing so would be simply assuaging my lazy self and I actually have time to do it). currently, however, I use them whenever possible. I have a friend do my laundry for me (it’s cheaper than doing it myself and it takes no time) and I like to do online grocery shopping/delivery (if only whole foods did this, I’d really be in trouble).

if you’re still not sure, I’d ask yourself this. figure out the total of your order, and figure out what percent of it $5 is. then ask yourself if you’d be willing to pay that percentage more for the same products. another way to think of it is think about what else you could do with $5. if that is going to make a difference for you in another area, then don’t spend it here. personally I’m at a point in my life where $5 is generally worth the convenience and time savings (I’m much more strapped for time than money), but there was definitely a point in my not-too-distant-past where $5 was enough money that I wouldn’t dream of spending it on something so frivolous. but that’s a question only you can answer. think about how much money your time is worth. personally, mine is usually worth the fee.

happy shopping!



on what to do with your tax return
January 18, 2010, 4:22 pm
Filed under: advice, financial | Tags: , , , , , , ,

dear spoonah,

it’s tax season. i’m getting scores of w-2s and other letter/number combinations of forms that i don’t understand. it would normally be frustrating, but i manage to stay un-stressed based on the possibility of getting a large return. so let’s just theoretically say that happens, and i end up with a pretty reasonable check from the government. do i:

a) buy those boots i’ve been wanting for oh-so-long?
b) finally purchase that sex toy i’ve been eyeing since aught seven?
c) follow my thrifty instincts, put it all into savings, and try to forget about it until an emergency comes up?
d) spoonah’s choice

please guide me. i am lost, bewildered, and need to be spoon(ah)ed.

in christ,

broke but eager, in portland.

dear broke but eager,

the answer to this is going to vary based on a few factors. namely, how much you get back and how much these things cost. according to the IRS website, the average personal tax refund was $2,345. however, the average American filing tax returns is (and I am just guessing here) married, with children, and has a family income of $50,233.00 (in 2007, via wikipedia). since you have not indicated that you are either (and since I know for a fact that you are neither) your tax refund is probably going to be pretty different (read: lower). I couldn’t find a lot about average tax refunds for single people with lower incomes and no children, but an article from 2005 by Intuit states that the average refund for people between the ages of 18-24 is $900. so let’s assume we’re working with somewhere around $1000, shall we?

I would like to think (but do not know) that neither the boots you want or the sex toy you want cost anywhere near $1000. if that is true, and you’ve been pining after them for years, then by all means, go at it. another thing I know about you (not included in your letter) is that you are an exceptionally hard worker, so you should learn to treat yourself. let’s say that between the two of them you spend, say, $300. that leaves you with $700 left to put in savings, pay off debt, or shred and bathe in. up to you.

but spoonah, you say. how do I know whether to pay off debt or put it in savings?

a good rule of thumb is this. if you have no savings and some (or a lot) of debt: take the first $500 you have beyond daily expenses and put it into an emergency fund. use the rest on debt. $500 is the smallest emergency fund I am comfortable recommending, though I feel a lot better about $1000 or more. However, since interest rates are such shit right now for deposit accounts, you’re undoubtedly better off clearing out some debt that you’re paying more interest on. especially if they are credit cards that you can then have available in case of a serious emergency.

happy spending!

-spoonah