Stacking Benjamins

The May 6th Stacking Benjamins podcast is all about investing. They talk about what people do wrong with investing including using two acronyms: FOMO and TINA which mean "fear of missing out" and "there is no alternative" respectively. They say that the best thing when investing in stocks and bonds is not to even worry about the market and just keep investing a set amount and not trying to time it. People are adamant about jumping in and jumping out at the right time but guessing isn't really a solid investment strategy. Even though I participated in the stock market challenge and I was rewarded for jumping in and out of the market very quickly, this podcast persuaded me that that isn't the right way to invest in real life. This conversation is not something that I wouldn't understand before taking this class but now I understand it way faster. Not having to think about some of the words or systems that they refer to helps me understand faster and therefore probably allow me to think deeper about what they are talking about. Knowing the basics of finance is something really beneficial because from there you can really learn anything, even from a small podcast, like this one, playing in the background.

Saving Stuff

Bank of America

https://www.bankofamerica.com/deposits/savings/savings-accounts.go
Pros: 

1. Government insures money up to $500k
2. Interest on your money
3. Low monthly fee of 5$

Cons:

1. Only 0.01% APY
2. Not many cons

Telco Community Credit Union

https://www.telcoccu.org/preferred-money-market

Pros:

1. 0.40% APR

Cons:

1. Restriction: 6 waithdrawlas per month

Ally bank

https://www.ally.com/bank/online-savings-account/
Pros:

1. 1% APY
2. No monthly fees
3. Remote deposit of checks
4. Money is insured
5. Daily compounded interest

Cons:

1. Limit of 6 transactions per cycle
2. Account can be overdrafted

U.S. Treasury

https://www.treasurydirect.gov/

Pros:

1. 1.64% APR

Cons:

1. Penalty if you cash in in the first 5 year

My Goal:

All three of the goals on my card were trips to different location in the world. Wherever you go you are probably not going to spend more than $15,000. If I had $1,000 to save today I would use Ally bank. Their bank has the highest interest rate and there isn't any monthly fees so I think I would be making the most from using Ally bank.

Podcast Experience

This week we created a podcast. I liked the experience, it was very fun however my mic was broken at first so that was probably the biggest challenge. It was easy to just record a flowing conversation with my group member Forrest and get lots of good opinions and advice into the podcast. I thought that the creative flow that we had would actually help somebody who was wondering if they should get their teenager a credit card so I would say that that is a win. I also thought that the production of our podcast was a good experience. We had to find good royalty free music and put it in so that it actually sounded like a professional podcast. I thought that was fun and the production experience will help me in the future. If I created a second podcast I would probably do it the same way because I thought our first one was pretty good.

The Credit Score Story

My characters name is Angie and she is a very financially consistent, white, 44 years old woman making $32,000 per year. She is a mother and has 2 kids, one in high school one in elementary school. She works as a dentist's assistant and has been working as one for 7 years. She pays off all of her debts without late payments and very responsibly. She wants to buy a house and also trade out her car for a bigger car.

1. Helps FICO score
1. Angie is 32 years old and has had a little bit of time to establish a credit history and make good decisions.
2. Angie has 2 credit cards with no balance. We don't know how long she has had them or how far apart she got both of them so we can only assume they are good for her score.
3. She has payed off more than 75% of her auto loan that she got from the bank.
4. She payed off $15,000 in student loans in only 10 years.
2. No effect on FICO score
1. Angie is married with 2 children, this does not get added to her credit report but her lender might look at that.
2. Angie works as a dentist's assistant which doesn't matter to her FICO score because it doesn't take her employment into account.
3. Hurts FICO score
1. She is $2,500 in debt on a store loyalty card that she is paying off.

I would say that Angie's FICO score is around 750. She is a very great spender and she has shown that she can pay off and loans that are lent to her but she doesn't make an extremely large amount of money.

With this FICO score Angie has a lot of doors that she can choose. I think that she would be able to buy a $250,000 house considering how much she has saved up for the downpayment. For a car I think that Angie would be able to buy a $25,000 car considering how much she makes per year.

For the house Angie would expect a 3.75% interest rate and for a car she would expect a rate of 4.25% because of her high credit score. Her final house cost with interest would be $383,443.23 including the downpayment of $50,000 and a monthly payment of $926.23. For her car Angie would expect to pay $27,229.32 with interest. Angie can expect to pay a much smaller final cost on items than other people because of the work that she has put into her credit score.

Teens and Credit Cards

     Should teens have credit cards? This is a question asked by many parents of teenagers. Credit cards are a step into the adult financial world and parents don't know if their child should take on the responsibility of a credit card when he/she is a teenager or when he/she becomes and adult. It is more traditional to have teenagers wait until they are out of their teen years to apply for a credit card, but does that mean they shouldn't? Linda Ray from the nest certainly thinks that that is true. In her blog she says that the differences between adults and teenagers is enough for adults to have credit cards and teenagers not to. She states that many things that a credit card brings are things that a teenager would not be able to handle until they were older. These things include the disappearance between need and want, procrastination supportance, and the devaluation of work. Linda says that teenagers do not have a goo feeling of what they need and what they want. This seems partly true as an adult understands what they need because they need to survive on there own money and also understand that they cannot afford some of their wants. She also says that credit cards promote procrastination because they offer to buy now and pay later. Teenagers are probably more susceptible to procrastination and by reinforcing procrastination in spending habits could screw up financial decisions later in a teens life. The last thing is the devaluation of work. Linda says that because credit cards seem to just give away money, it devalues work in the mind of a teen. Teens will think that money can just come out of nowhere and they will not understand that they actually have to pay those costs. Maybe this is true in .001% of teenagers but I really doubt that people think money comes out of thin air.

     However there are people who believe that teenager SHOULD have credit cards. Liz Schick believes that with the right technique, the benefits of teenagers having credit cards outweigh the downsides. She believes that spending habits will flourish and provide good practice for later down the line for teenagers. Liz says that because teenagers almost always have credit cards under their parents account that it is good for teenagers to make financial decisions with their cards because parents will see the bill and be able to give them feedback on what is good and what is bad. This real life experience is something that Liz believes provides good practice and promotes good spending habits for teenagers.

     I think that teenagers should have credit cards for the same reasons that Liz thinks. The supervision of parents would allow me to make decisions and be able to get real life advice that may not be available to me later in life. These are benefits that having a credit card as a teenager would give me, and would as easily be available to most all other teenagers.

Sources:

http://www.lifewithteensmag.com/why-your-teen-should-have-a-credit-card/

http://budgeting.thenest.com/disadvantages-teenagers-having-credit-cards-26918.html

Budgeting Process

     The budgeting process is something that made me feel like real life is harder than it seems. Many people say that once you become an adult you take on a lot of responsibility and have to make your own decisions, and the budgeting examples that we did in class helped me realize all of this firsthand(ish).
     We did a game in class where we had to act like we were adults who made 27,000$ a year and then we had to budget that money and basically try to survive how we normally would go about surviving with that much money. For me, this made me realize how hard it would be to live on that much money. When you are you and don't have a job 27,000 sounds like a ton of money that you could only dream of making. In reality it really isn't that much, money goes quick. This game also brought to life all the money that you make that doesn't go directly to you. Almost 1000$ every month were going to taxes. Even though technically that money is going to you by funding the country that you are a part of, it still doesn't feel good to see all that money out of your reach.
     I think that my budgeting choices in the game were fairly realistic. We had to factor out taxes first and then find a house and car to rent and buy. Then we added all other day to day expenses like groceries and gas. In the end I was left with about 20$ a month. I found a reasonable house that I would enjoy renting and also a car that was cheap but not exceedingly cheap. I also put 30% of my profit into savings, which some people would say is a lot however they would only say that because they are, in fact, correct, it is a lot. Other classmates made financial decisions that I couldn't see myself making realistically, like buying a 400$ car or living in a 600$ house with 3 other people. These nonrealistic decisions are things that I tried to avoid, however making a lifestyle out of 27000$ is harder than expected and I can see why people tried to do insane things to pull it off.
     This game has given me what I think to be a better view on the world as an adult. Making decisions is something I know will be crucial in later life but I feel after having practice with real life situations it might be easier now that I am the slightest bit more knowledgeable. The scary part is that almost everybody seems to go into adulthood unprepared and not expecting what is to come. Maybe everybody doesn't feel this way but I am sure that there are a fair amount of people who do and practice with finances could be the small amount of knowledge one needs to have confidence making their own decisions farther down the line.

Cluttered Life

After watching the "A Cluttered Life" video I was surprised by how many things that are displayed in the video represent thing sin my life that I never noticed before. Maybe these things were just so ordinary that I never minded thinking about or noticing them. One thing the video said was that the kitchen was the center, or the "base" of the house. They said that all operations ran from the kitchen and it was basically the control center for the household. I find this true in my house as everybody seems to be drawn to the kitchen when there is nothing to do or we are planning to go out. It seems to be the staging area for the family and the video definitely reflects what is going on in my household. The other thing that struck out to me was when, in the video, they said that Americans were good at adding things to their houses but bad at getting rid of them. I also feel like this is something that my family takes part in every day. My father, for example, can not throw away anything that he owns. This can be good if you are throwing away things that you need, however he will not throw away even the most useless pieces of trash that there are. I find myself doing this as well. There are tons of things in my room that I have accumulated in my room that I can't throw away for various reasons. I hardly use any of the things I own but I can't bring myself to throw them away because maybe one day they will serve a purpose. Overall I liked the video and it brought to my attention a lot of the things that are happening all around me that I never notice.

Parent Interview

I learned a lot by interviewing a parent about finance. I learned about how my parents use certain techniques like having a buffer amount of money and working hard to get what they want. It was an inspirational interview and I definitely learned something about finances in real life.

I was surprised when I asked my dad what decision a young person could make to secure a good job in the future and he said to look at supply and demand for jobs. I wasn't expecting this answer as I thought he would say something like work hard but instead he talked about how you had to look at where there was high demand for jobs but low supply of people to fill them. He said that these jobs generally pay the most and are the better jobs to have. However he did add that success did not necessarily come from how much money you made because you can still be happy making little money.

My father said that the most important thing to know about finances was that you do not have to make a lot of money to be happy. He said that the trick is to live your life on the budget you get and don't make life into a struggle for more money.

I asked my dad a bunch of questions but I think that the most important question was, "Do you have any good tips for teenagers looking to make early decisions in finance?" To which he replied, "Work hard and don't get too wrapped up in making a lot of money."

The experience gotten from asking an adult about finances is something that I found really valuable and that I think everyone should get outside of a classroom environment. You can be taught an infinite number of things in class but a real life experience is priceless.

Money Blogs

I read two blogs about money. One being "An Interview with Sydney of Horse Crazy Girls" and the other being "What are the Best Ways to Make Money if You want to make Life Changes". I found both of these blogs pretty interesting. Not necessarily because I will do what they advise but because the things they advised were interesting to read.

Sydney's interview with horse crazy girls was a blog about money that I would respect because Sydney has become successful with her horse website at a young age, however I do not think that I would ever go down the same path. The blog is about how a horse loving girls created a website called Horse Crazy Girls at the age of 15 that became very popular among girls who loved horse. This website gave Sydney revenue and she hoped that eventually she could make enough to finance her very expensive and stupid hobby, horses. I think that this story is interesting because of her success at a young age and she recommends that teens may have to sacrifice something for something else that they want more and they will just have to live with that. I respect this advice however horses aren't my thing and I would never make a website about horses following this tip.

The second blog that I read was about how to quit your job, do what you want, explore the world, and still have money to live. The author talked about how if you wanted to quit your job you either had to make a bunch of money before that or still have income after you had quit your job. This blog appealed to me a little bit more. It wasn't about one specific thing like horses but it still had all the helpful advice. The author went into detail about different ways to make money such as freelancing, starting a business, becoming a trainer, and other things as well. These tips were more in depth than Sydney's tips and were more open ended since the author wasn't talking about one thing like horses.

Both of these blogs had interesting viewpoints on economics and I thought that the differences between them were interesting as well as the things that they shared. Both gave pretty good tips about personal finance and both wanted the reader to be successful in their own journey.

Goals

The SMART technique is used to define what a goal is. There are 5 parts which are the 5 letters of the word smart. Specific, measurable, attainable, relevant, and time bound. These words are used to help define a goal. Below are three goals put into the smart format.


 - By 50 year old be making over 200,000 dollars per year before taxes.

S: This goal is specific because it involves one number that must be a certain amount to complete the goal and there is a definite time limit. I need to, by the age of 50, acquire and get payed in a job where my yearly salary is greater than 200,000 dollars before taxes.
M: I will know when I have completed this goal when I get a yearly paycheck from my job that is greater than 200,000 dollars before taxes before I have turned the age of 50.
A: This goal is attainable because there have been many many people in the past who have accomplished this goal or the equivalent of this goal. Since there has been a path for other people to achieve this goal, I know that there must be a path for me.
R: This is a relevant goal because salary or income determines, for the most part, the wealth of an individual. If I am making over 200,000 dollars a year then I am a pretty wealthy individual.
T: This goal is time bound because it has a specific date where the goal will no longer be attainable.


 - By February 1st 2017 save up over 2000$ in a bank account.

S: This is a specific goal because it also has one number that must rise over a certain amount by a certain time. I will have to take around 175$ out of my pocket every month for 12 months to achieve this goal.
M: This is a measurable goal because if by Feb 1st 2017 I have over 2000 dollars in an account then I will know that I have achieved my goal.
A: This goal is very attainable because 2000 dollars a year is relatively pretty low for anybody to be making. The only problem with saving 2000 dollars is my ability to save and not spend that money.
R: This goal is relevant because by next year having 2000 dollars would be a helpful boost to buy something that I will need in a year like a new computer.
T: There is a very specific time restriction. If Feb 1st 2017 passes and I do not have more than 2000 dollars of my money in a bank account then I can no longer achieve my goal.


 - Spend absolutely 0$ of my own money in a week without going in debt to other people.

S: This is specific because there is one thing that can be completed
M: This is a measurable goal because you can measure the amount of money that I have spent in a week
A: This goal is attainable because I am not required to pay any expenses over the course of a week
R: This goal is meaningful because it can show me how little money I am able to spend
T: 1 week is a very specific timeline that can be followed

The Hoverboard Life

I listened to a podcast by planet money about the hoverboard that everybody seems to be obsessed with. This is the little two wheeled segway scooter thing that has recently hit the streets. The podcast was about how it was very hard to track down the inventor of the hoverboard because nobody could find a website or a company that made them. To buy a hoverboard in America you either have to go through an American company who act as the middle man between you and China. Or go deep into the internet and order (for a lot less) through a sketchy Chinese website. The podcast basically explained how the system in China is different from the system here. In China there are many factories that will tackle an idea and all start producing the same thing while sharing the design and blueprint of the products. In America an inventor will generally come up with an idea about a certain product and then patent that product and then sue anybody who manufacturers a copy of the idea that they came up with. I thought that it was very interesting how the podcast showed these differences and educated people about them through a popular product like a hoverboard.

Planet Money Podcast

I listened to a podcast created by NPR in a series focusing on money. This particular episode was about how gyms work on an economic level. Basically the podcast covered how gyms want lots of people to buy memberships to their gym but they don't want anybody to come and actually workout. They do this because people using the workout equipment cost the gym money whereas people who don't use any workout equipment but still pay their gym memberships essentially generate the gym free money. The podcast covered many techniques that gyms use in their advertising and design that create a situation where people would want to buy and renew their gym memberships every year without actually using any of the gym equipment.

This podcast was very interesting to me because even though I have heard a lot about "scams" or other tricks that companies can use to make you pay money without actually getting anything in return, I have never really seen a real life example of this happening. I'm sure that it is happening all around me all the time but I think that I've probably learned to tune it out. This podcast inspired me to really think about all the different things that companies will do just to make a tiny bit of money. They talked about how gyms will hide their equipment in the back or downstairs so that the experience of going to the gym isn't necessarily about working out and actually using the gym equipment. This seems crazy when you see it in plain sight, however when you are the unknowing gym-goer you think its normal for the gym experience to not be all about working out.

I thought that this podcast was a very good exposure of whats behind the curtain of a capitalist society. This podcast is something that I would recommend to anybody because it just makes you realize whats going on a little bit more than you did before.