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Millennial Money with Cliff Mason

  Wednesday, 15 Oct 2008 | 3:13 PM ET

College BA: Worth The Price Of Admission?

Posted By: Cliff Mason

Great post from Megan McArdle yesterday on the uses and disadvantages of college for life: College Bound.

It's worth a read. The key part:

"But getting a BA has an opportunity cost. For one thing, it may use up funds that could have gone for useful vocational spending. For another, those who pursue college degrees they aren't really suited for give up several years of earnings, and more importantly, experience. Early experience seems to matter; the minimum wage literature indicates that failure to get a job as a teenager can have a permanent negative impact on later earnings.

The use of a BA as a signal is helpful to those who are below-average academically only if we presume that there is no other, useful training they could undertake, or that there is no more efficient means of sorting workers. If we instead imagine that three years of desultory course-flunking could instead be spent acquiring a marketable skill, or seeking out work that suits them, it seems more costly."

For my money, the big question is who's paying? If you've got parents or grandparents who are willing to cover the cost of college, or take on the debt to pay for it, they probably aren't willing to just give you that money in a block if you decide not to pursue a higher education. In that situation, where you're choosing between free college or zilch, you'd be nuts not to go to college even if you hate academics. And who says you have to attend class to graduate anyway? I skipped every class I could, which was most of them, my Junior and Senior years, and my GPA only dropped a tenth of a point. Then again, I went to a school that's the poster-child for grade inflation.

Now, if you have to pay, that's a real decision.

Megan also assumes that going to college and working a real job or getting vocational training to acquire "a marketable skill" are mutually exclusive. Not always true, but that course really isn't for the faint of heart.

Questions? Comments? Send them to millennialmoney@cnbc.com

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  Tuesday, 14 Oct 2008 | 1:48 PM ET

Crisis Fallout: Supporting the Parents?!

Posted By: Cliff Mason

In the old days, I’m talking pre-Industrial Revolution, children were an economic necessity for the vast majority of people. When your parents could no longer work, you and your many, many siblings were supposed to take of them in their old age.

Thanks to economic progress, pension plans and social security, that’s been less and less true for most people. The 401(k) revolution was making it easier and easier for our parents to take care of themselves when they hit their sixties and seventies. At least that’s how things were trending until last week, when the market probably took a big bite out of your parents’ retirement fund.

Now those of us in our twenties have a whole new set of problems to contend with. Forget worrying about your retirement, you’ve got to think about being able to send Mom and Dad off to Sunrise Senior Living or maybe an Assisted Living Concepts home in a few years. Instead of treating our parents like ATMs, we may have to support them in a few years time unless stocks recover pretty dramatically.

And unlike the status quo 200 years ago, the average American family has, what, 2.3 children? That means you and your 1.3 brothers and sisters could have an enormous burden to shoulder when your parents retire. Pray they do the parental thing and keep working so as not to inconvenience you, but it’s probably time to start thinking about what you won’t be able to have when you start supporting your parents.

More from the 20-Something angle ...

6-Tips for Living With Your Adult Child

Questions? Comments? Send them to millennialmoney@cnbc.com

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  Monday, 13 Oct 2008 | 10:40 AM ET

The Personal Finance Article Mill

Posted By: Cliff Mason

If you're writing about careers or personal finance there just aren't that many topics for you to cover. Mostly, you look around for old ideas to pack in new clothing. And when there is a new idea, you have to expect five or ten other people to pounce on it. Coincidence? I'm too paranoid to buy that.

I wrote a column, not very serious, about getting rich by marrying into money at thestreet.com. Within the week, someone had written an article with the exact same thesis and a few more interviews for Yahoo Finance. I didn't begrudge the person, but it really did make me feel like there was something impoverished, or even incestuous, about the state of personal finance writing.

I bring all this up because this blog launched on Thursday, and it included a post abouthow undergrads and business school types should be hiding at law schools right now. So imagine my surprise when an piece with a similar thesis, but a few more interviews turns up on the New York Times.

Given the situation we're in, I'm a lot more inclined to believe that this was coincidence, great minds think alike, etc.

But let me make you this promise, so this site doesn't turn into yet another sclerotic purveyor of boring, recycled ideas: if I see an idea I like somewhere else on the web, instead of pretending I came up with it myself, I'll link to it so you can read the original, and maybe throw in a couple comments of my own.

Questions? Comments? Send them to millennialmoney@cnbc.com

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  Friday, 10 Oct 2008 | 9:54 AM ET

Lost Your Job? Here's What To Do With 401(k)

Posted By: Cliff Mason

If you lose your job or you leave your job \(not something I'd recommend right now--this is a cling to your employer moment\) and you've got some money in a 401\(k\) plan, should you roll it over into an IRA? The conventional wisdom says yes.

But these are unconventional times. With the market getting killed almost daily, you could probably wait for a better moment to invest in your retirement account. If we really are heading into a depression, remember that the market didn't bottom during the great crash of 1929, although there was an interim bottom with the Dow at 198.6 in November of 1929, it bottomed in 1932 with the Dow at 41.22.

I don't think things are that bad, but I do think there will be better opportunities for investors to buy stocks, especially young investors with a lot of time ahead of us, if we wait a few months, if not a few years. True, you could keep your money in cash inside an IRA or in bonds for that matter, but you won't get much appreciation from that, and when you're investing for retirement in your 20s, capital appreciation is the point.

On the other hand, the reason they tell you to roll that money over into a new 401(k) or an IRA is a pretty good one: if you don't you'll pay a 10% penalty in addition to paying income tax on all the cash in your 401(k) as it becomes cash in your wallet. That's a big hit, and if you don't need the money, then follow the conventional wisdom, roll it over.

But if you've just lost your job in this new world of rising unemployment I think you'd be better served with the money, even if the tax-man takes some of it away. Consider also the fact that it's going to be pretty hard to borrow money from anyone except family and friends unless you've got great credit or a decent net worth, in other words, unless you don't need it.

If you've gotten laid off, fired, axed or terminated (as in your employment), keep the cash and throw the conventional wisdom out the window. The fat years are over, I don't know if we're looking at seven lean ones, but I do know that saving for retirement, basically laying out money to pay for your expenses in the distant future, only makes sense when you've already taken care of your expenses in the present and the more immediate future.

It's time to stop worrying about tomorrow in a metaphorical sense, as in fifty years down the line, and start worrying about tomorrow literally, because no matter what, it's going to be rough.

So in the immortal words of the Steve Miller Band, take the money and run!

Questions? Comments? Send them to millennialmoney@cnbc.com

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  Thursday, 9 Oct 2008 | 10:45 AM ET

Take This Job And Shove It Money: Who Needs It? You!

Posted By: Cliff Mason

As some of you may be aware, I don’t have the highest opinion of the dogma that says it’s always right to save money, especially for retirement, especially when you’re in your 20s and not making much money.

But there is one very good reason for you to at least keep something stashed away, to put aside what I call “take this job and shove it money,” mostly because it would be inappropriate to use profanity on this site.

On Wall Street they talk about F*#@ You money, meaning the amount of money you need before you can tell you boss, well, you can guess, and quit your job for good. I don’t know if that kind of money is still obtainable on the street, given how bonuses are being slashed, layoffs are abundant, and the masters of the universe are struggling mightily to keep their jobs, but “take this job and shove it money” is a similar, if less ambitious concept.

At any given moment, you should have enough money in your bank account to be able to quit your job and survive—meaning pay all your bills, feed yourself, buy toothpaste—to live your life normally for two months without having to put anything on your credit card. I’m not a big believer in long term thinking, but I do think it’s important to be empowered. And having just that much money socked away gives you the power to quit a job you hate and spend some time rigorously looking for a new one.

The problem with living hand to mouth, paycheck to paycheck, as many of my friends do, and I’m sure many, many more people our age go, is not that you’re being irresponsible. It’s that you’re shackled to your source of income, your job. If you don’t have “take this job and shove it money,” you have no choice but to keep working somewhere you hate.

Now, what if you love your job? Doesn’t matter. If you don’t have “take this job and shove it money” you’re giving up an essential freedom. Having that money, just enough to get you through two months, should change your whole outlook. Don’t you think you’d be willing to put up with a lot less, let’s say guff from your superiors if you knew you could just walk out any minute you chose?

    • Jobless Claims Fall 20,000 as Storm Impact Fades

The point isn’t to escape a bad employment situation, it’s to set yourself up so you don’t feel chained to any particular situation. Money is freedom (OK, it’s a store of value, same difference), that’s one of the main reasons I don’t believe in hoarding it while you don’t have much of a salary—money stuck in a retirement account won’t do you much good if you need it tomorrow, but it’s also why you should try to have some put aside, so you can move from job to job without living in fear of poverty, or worse, moving back in with your parents.

Questions? Comments? Write to millennialmoney@cnbc.com

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  Monday, 22 Sep 2008 | 4:13 PM ET

Undergrads: Listen Up--Time To Think About Law School!

Posted By: Cliff Mason

Undergraduates, listen up, it's time to stop job hunting and start taking an interest in a graduate school education! I know it's still the beginning of the year, but for those of you who are seniors, this is the time to start thinking about your future in the "real world."

The last thing I'd want to do if I was in your shoes is try to find decent work in this lousy job market. Instead, take a deep breath and get ready to do what millions before you who couldn't decide what to do with their futures have done: go to law school.

I feel sorry for all of my compatriots in the class of 2007 who are off getting their MBAs right now. Even if they can get jobs on Wall Street, the days of big bonuses are over. Now, you could study something esoteric, I know of plenty of schools that will pay grad-students a big stipend--as much as $18,000 a year--just to study something like political economy or history. If that's the kind of thing you're interested in, I suggest you spend the next couple of years hiding inside of a university before wading into the private sector.

But for those of you who are money hungry, go to law school. Is it boring? I've heard nothing to suggest otherwise. But if you get into a decent place and get good grades, then you're pretty much in the promised land of $200,000 a year salaries as soon as you graduate.

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  Wednesday, 10 Sep 2008 | 2:47 PM ET

Credit Scores? We Don’t Need No Stinking Credit Scores!

Posted By: Cliff Mason

My roommate has been bugging me about his credit score and credit scores in general for the past few days because he’s trying to get a new credit card and has been denied by both Bank of America and American Express in turn.

Now that helping people juice their FICO scores has become a cottage industry of its own, with commentators aplenty analogizing your credit report to the report card you’d get in High School and those stupid FreeCreditReport.com advertisements, I feel like I have to put my foot down. Your credit score isn’t that important. It’s not the holy grail of personal finance. A bad score isn’t even really much of an albatross around your neck unless you’re trying to borrow money.

Most of the things it measures are important, like how much outstanding debt you’re carrying, but there’s nothing magical about the actual number.

As it turned out, my roommate’s credit report still reflected $700 of debt on two cancelled credit cards that he’d paid off just the day before. He had no other credit cards, and it looked like he had $700 of debt, of course his credit score was bad. As soon as that debt comes off his credit report, which shouldn’t take very long, he’ll be fine and perfectly able to get a credit card. If he’d waited a couple days before applying for the card, his darned FICO score never would’ve come up, and I would’ve been saved many a trying conversation with him on my balcony, where we go to smoke and complain bitterly (and impotently) about the general unfairness of the universe.

    • Got a Handle on Your Budget? Try Out This Tool

All of which is to say, it’s not your stupid credit score that matters, it’s the stuff it mainly measures, like outstanding, unpaid debts. Worry about those things instead of trying to use gimmicks to boost your FICO score. Your credit score is just a measurement of your creditworthiness—if you can’t figure that out on your own and need to contact one of the three credit rating agencies so it can give you a number that encapsulates your situation, I’d say that’s your real problem.

But if my roommate still can’t get a credit card after his credit report shows he’s paid off that $700 debt, I will of course eat my hat, retract all previous statements, and apologize to anyone whose feelings may have been hurt by this post…and someday I’ll win the lottery too.

Questions? Comments? Write to millennialmoney@cnbc.com

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  Wednesday, 10 Sep 2008 | 12:06 PM ET

The Big Lie

Posted By: Cliff Mason

There’s a big lie at the heart of pretty much every book, article, blog post, and probably pamphlet offering personal finance advice for people my age, members of Generation Y or Millenials (does anyone remember when we got rebranded? I feel like it happened sometime in 2007, when all of a sudden dozens of articles were telling me I belonged to the Millenial generation, or writing things like, “or as they prefer to be called, millenials.”

Was there some plebiscite I slept through while I was sleeping through class in college? For my money, millenial sounds way too much like millenarian and reminds me way too much of the embarrassing Y2K party I went to when I was 15), and frankly for everyone else too, but the big lie hits people our age (my age?) worse.

It’s this: no matter your level of income, as long as you responsibly manage the money you have—never purchasing expensive electronics, saving responsibly, living the most ascetic lifestyle possible, and of course, cutting up all of your credit cards and maybe turning them into a nice mosaic to put on your wall—you can attain finance security, or financial freedom, or whatever the buzzword happens to be this week.

Come on. Do you really believe that? I’m pretty sure that earning more money is a swifter and more credible path to living comfortably. But it’s the big lie that lets people write columns about how you should always use the ATM at your bank, and never pay $2.00 to take money out of another bank’s machine because “it adds up.”

The big lie is nice because it gets people to focus on the boring minutia involved with being financially responsible, but if you’re in your 20s, buying into the big lie also does a lot of harm.

Why? Because the big lie says if you take care of the little things, if you pay your bills on time and don’t borrow money from those vicious, evil, credit card companies, you’ll be just fine. That gets less and less true as you make less and less money, and those of us in our 20s are at the bottom of the income totem pole.

If you’re concerned about money, making lots of it or just having enough of it, and you’re living on a just-out-of-college income, your focus should be on earning more. Good for you if you make what you have last longer and put some savings away, but at this age it’s your paycheck that matters, and getting a bigger one should be your top priority. You can go through all the conventional personal finance checklists and tell yourself you’re doing just fine, but if you don’t have a plan to get paid more in the future, you’re really just treading water.

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