Boomerang Kids

According to a Kiplinger article, more than half of all college seniors make at least a pit stop back in the nest before starting their adult lives. To be honest, I think this has been true for almost every person I know.

My own stop was probably shorter than most, one month, but I know several friends and family members that have been back with the parental units for a year or more. While I think it's a pretty savvy move financially, there are many landmines to avoid, such as: not taking advantage of your parent's generosity, not becoming a burden, and not acting like you are 13.

I would love to hear some people's experiences from going home after college. Was it a good experience for you? How long did you stay? Are you glad you did it?

It's All About the Fundamentals

Morningstar has a nice basic article for younger folks about some fundamentals of what to do with your money. Their advice is to budget, save, and plan. The advice about setting a financial timeline is especially worth considering.

America Saves Week: 20 Savings Tips

This week has been deemed America Saves Week. Holler right at that. Every statistic notes that Americans' savings rates are abismal. If you fall into this category, or if you would just like to know how to save more, here are a 20 tips from Kiplinger [with a The F's comments intersperced in brackets and italics] to help you save more:

1. Give yourself a raise and bank it. Boost your take-home pay by adjusting your tax-withholding and have the difference in pay automatically transferred to an online savings account [The Financista can personally vouch for E-Loan and Emigrant Direct]. Kiplinger's tax-withholding calculator can help you revise your W-4.

2. Open a 401(k). If your employee offers a 50-cent match for every dollar you contribute, even adding $60 a month will net you over a grand a year. Plus, you defer paying taxes on your contributions, giving you a bigger paycheck now. [Not contributing to an employer matched 401k plan is inexcusable. There is no justifiable reason for passing up free money!] See how even small amounts can add up.

3. Raise your car insurance deductible. Upping your out-of-pocket outlay from $250 to $1,000 can save you 15% or more off your premium. [Better yet, if you live in a big city with a workable public transportation system, see if you can't get by without a car. It might be slightly more of a hassle, but the savings to you each year could make it worth it]. Learn more about how to save money on your car insurance.

4. Pay off your credit card. Carrying a $1,000 balance at 18% blows $180 every year on interest that you could put to better use elsewhere. [I think this should be a tip top priority -- credit card debt is incidious -- was that new pair of $80 shoes really worth the 21.75% additional tax you placed on yourself by not paying off your credit card last month? It's always helpful to truthfully identify what a "want" is versus what a veritable "need" is]. See Climb Out of Debt Faster for help.

5. Go green. Control energy costs with a programmable thermostat. Prices start around $50, but you'll cut your heating-and-cooling bill by 10-20%. For more energy-saving tips, see Your Energy Crisis Solved. [Consider turning down the thermostat during the day, before you leave for work. Those 8-10 hours and 4-5 degrees a day add up fast. Since we are past the wood stove days, it doesn't take modern homes or apartments all that long to heat back up].

6. Bundle up. Getting a package of phone, Internet and cable from one provider can save you about $50 a month. Learn more about bundling deals. [See if you can't downgrade from your package -- we recently saved $13 a month by getting rid of call waiting and caller ID -- mostly useless features when your primary phone is a cell phone, not a landline].

7. Use your employer's FSA. Flexible spending accounts let you pay healthcare costs with pre-tax dollars. If your company offers them, take advantage and save 33% or more. [Be careful here -- many FSAs require that you put in a minimum of $250 a year to participate. That's a large chunk of change for a younger person in good health. Since the money does not rollover usually, you are at risk of losing some of it. You can only buy so much Tylenol PM]. See Take Advantage of Tax-Deferred Accounts for help.

8. Get a credit card with rewards. Spending $80 a week on gas and groceries? Putting it on a card with 5% cash rebates will earn you nearly $200 a year. [My choice is Chase Platinum Rewards]. You can read my post about it here].

9. Kick the habit. Smoking is hard on your health and the wallet. Three packs a week averages $50 a month. [Besides being disgusting, it's a financial disaster -- quit! You can do it and sock that money away for a mountainside vacation with your renewed lungs]. Learn more about how getting in shape can fatten your wallet.

10. Brown bag it. Instead of spending $8 on takeout every day at work, bring a bagged lunch for $5. You'll save $60 a month and $720 a year. [This is a key point to My Fundamental #2 about prioritizing how you spend your money]. Do your own calculation at FeedThePig.com.

11. Negotiate your rate. Instead of paying an APR of 18% on your credit card, call your issuer and ask for a lower rate. If you have good credit, your lender might consider it and if you can provide examples of offers you've gotten from other companies, it'll strengthen your case. [Supply and demand is certainly on your side in the credit card market. The deals are almost endless -- don't settle for an astronomical interest rate when a 0% APR is just a junk mail envelope away]. For more help, see Tame Your Credit Card Debt.

12. Travel on the cheap. Bypass the old trifecta of travel search engines (Travelocity, Expedia and Orbitz) and head straight for Sidestep.com, which will search them all -- saving you money and time. [I actually prefer Kayak for doing my comparison shopping -- I think the interface is cleaner and easier to use]. For last minute deals, try Site59.com. And see our list of the 25 Best Travel Sites for more cost-cutting resources.

13. Insure yourself. Even if your company has a health plan, you may be able to do better for yourself. Pairing a high-deductible medical policy with a health savings account -- which lets you put away pre-tax dollars for out-of-pocket medical expenses -- can save money on premiums. Shop around at www.ehealthinsurance.com.

14. Make media free. Dust off your library card and enjoy DVDs and books for free. If you'd normally rent a movie a week and buy a book a month, you can cut costs by $30. [Another Financista-approved idea is Blockbuster online. Read about my love for BBO here].

15. Change your calling plan. The average wireless-phone user spends about $60 a month, including taxes and fees. If you talk for 200 or fewer minutes per month, switching to a prepaid plan where minutes cost 25 cents a minute could save you $10 a month. [If possible, get on a family plan -- you don't necessarily have to be related to be on the same plan with someone else. This can provide large savings each month. Furthermore, if you are a teacher or a government employee or have a AAA card, flashing your creds can save you up to 10% a month. There's no harm in asking]. Compare plans at www.myrateplan.com.

16. Park your car. Why pay $25 a week in gas when you could pay half that to use public transit? [Many employers, like mine, will even pick up the bill! See if yours will do the same, or at least allow you to use pre-tax money to purchase public transport fares] Or check out carpooling at www.erideshare.com and www.carpoolconnect.com.

17. Ditch your gym. Forget the $40/month gym membership that'll cost you almost $500 a year and check out community centers in your area. Some may be free or charge a minimal fee such as $100 a year. Or buy a good pair of running shoes and work out the old-fashioned way. [Also, many employers will offer perks like a gym in the building at a reduced rate. A lot of apartment buildings will have smaller facilities in their basements as well that are included in the price of rent -- however in the long run, this feature may end up costing you more than a gym membership if you don't actually use it because there's no way to cancel that built-in fee from your rent!]

18. Reshop your auto insurance. Using a comparison site like InsWeb can help you determine if you've got the best deal.

19. Learn to cook. Cooking at home saves on your food budget and it could even improve your dating prospects -- who isn't impressed by someone who can prepare a great meal? [Plus, it's a great, fun way to create relationships with people -- romantic or platonic]. Check out Nine Ways to Get Ahead for more practical financial advice.

20. Keep track of your money. The best way to save is to know what you spend. It might not be pretty, but detail every expense for a month to get an idea of where you can cut back. Nearly everyone has some fat they can trim from their spending to put toward a savings goal. [Check out my post about Free Budgeting Tools to see if you can't find a system that works for you].

A Financial Fable

Bankrate, one of my favorites, posted a great allegorical tale about Early Shirley and Late Nate to illustrate the power of compound interest. Please read the story, learn the lesson, and act on it!

Consider the tale of Shirley and Nate.

Shirley's not particularly organized or ambitious, but she had the advantage of attending a seminar while still at college where she learned about the magic of compound interest.

So at age 25, after graduating from college and landing a job, she opened a Roth IRA and began contributing $4,000 a year to it. She chose a moderately aggressive balanced fund within her IRA that invested mostly in stocks, with limited exposure to bonds. It produced annual returns of 9 percent on average.

Shirley did this even though she owed money on college loans. She continued to invest until she turned 35, at which time the account was valued at $60,772. Then she stopped and invested nothing more, but continued to earn 9 percent annually in the account. At age 35, her life intersected with Nate's.

Nate was quite ambitious and owned all the latest technological gadgets. But he had put off investing because, well, he was about driving cool cars and impressing women and he just didn't want to think about retirement. Retirement was for old people. He finally started investing $4,000 annually at age 35 because Shirley put him up to it. In fact, that marked their first fight, among many.

Nate invested this amount for 20 straight years in a mix of funds that also returned 9 percent annually on average. When he turned 55, his account was worth $204,640 -- less than Shirley's account value, which by then had grown to $340,591. Nate's total outlay of $80,000 was twice that of Shirley's. And oh, by the way, the two had split up eons ago, after only investing six months in the relationship.

You can read the rest of the worthwhile article here.