Archive for February, 2011

Credit Card Management: Are Credit Cards Good or Bad?

By: Kristina | Date posted: February 28, 2011 (3:12 am)

Good Monday Morning Green Panda Friends.  It’s time for a new series on Green Panda.  Our new Credit Card Management series will be featured every Monday and Tuesday over the next several weeks.  We will discuss the pros and cons of paying with credit cards, paying off our credit card debt, and the cost of carrying a balance on our credit cards.  We will also review several different credit cards to help you find the best credit card to fit your needs.

There are several Pros and Cons for using credit cards as a form of payment.  Paying with a credit card is a convenient form of payment since we may not always have cash in our pockets to pay for our purchases.

The con to swiping our credit card everywhere and using it as a common form of payment is the security risk of fraud.  The more places that we swipe our card, the higher risk there is of our credit card being cloned and used for fraudulent purposes.

The delayed payment and interest free period are other pros of using our credit card as a form of payment.  All credit cards offer an interest free period which usually ranges from 17 to 25 days. This means that we can make a purchase and have 0% interest on our credit card as long as the balance is paid off in full before the end of the interest free period.  We should always take advantage of the delayed payment via the interest free period as often as possible.

However, the con to the interest free period on our credit cards is that we may not be able to pay off the balance in full by the end of the interest free period; therefore the 0% interest free period will start to cost us.  Contrary to popular belief, we do not start earning interest on our purchases as of the first day. We start earning interest on our credit card balance after the interest free period is over.  Cash advances and balance transfers do not usually offer an interest free period. Therefore we start accumulating interest as of the first day.

Using a credit card as a form of payment and making our monthly payments on time helps us build a good credit history.  Our credit card doesn’t have to be paid off in full each month in order to build a good credit history.  As long as (at least) our minimum payment is made each month our credit card will be in good standing, and we will continue to build a good credit history.

The con to using our credit card as a form of payment is that if we are unable to make our monthly payments on time it can create a negative credit history.  Most credit card companies report our payment history to the credit bureau once a month.  Our payment history starts to become negative after we are 30 days late on our monthly payment.  Therefore, if our payment is due on the 5th of the month, we will start being 30 days late on the 5th of the next month. The credit card company may call us to collect the money after the payment due date, but it doesn’t affect our credit bureau for at least 30 days.

Another pro of using our credit cards as a form of payment is that we can earn Rewards Points to redeem towards cash back, travel, and/or merchandise.  You can accumulate a lots of point and travel with a airmiles credit card for example. However, the con to this benefit of a credit card is that hoping to earn rewards points may cause unnecessary spending.

As long as we do not carry a balance and do not accumulate interest on our credit cards I personally believe that the pros of using our credit card as a form of payment outweigh the cons.

Photo by Robert Scoble

Yakezie Time

By: MD | Date posted: February 25, 2011 (6:00 am)

This past week here on GPT we went over 5 ways to get rid of your student loans. This is an effective post for college graduates that are scratching their heads and wondering about what to do with those student loans. Hopefully the post will help you out.

Now it’s time for the Yakezie links:

1. What Keeps You On Track Financially? @ Watson Inc.

2. Inside a Millionaire’s Mind @ Krant Cents.

3. High Cost of Being a Moron: Round 2 @ Sustainable Life Blog.

4. I Grew Up Poor And Survived @ Yes, I Am Cheap.

5. Do we have a retirement crisis on our hands? @ Canadian Finance Blog.

6. Change and Perspective @ Everyday Tips and Thoughts.

7. Is Your Emergency Fund in Good Shape? @ Not Made of Money.

8. When Computing Housing Costs You Have to Remember… @ MJTM.

9. Understanding Financial Terms @ Saving Money Today.

10. Department Store Shopping Strategies @ Bucksome Boomer.

11. Road Rage, Realize The Enemy Could Be You! @ Money Reasons.

12. Why Bottle Redemption Fees Belong In Your Local Landfill @ Len Penzo.

13. Canadian Discount Brokers @ Money Smarts Blog.

14. Alberta Bakken Players in Southern Alberta @ Beating The Index.

15. Certified Financial Planner, Los Angeles @ Wealth Pilgrim.

»crosslinked«

5 Steps to Get Rid of Student Loans

By: MD | Date posted: February 24, 2011 (6:00 am)

Pay Student Loans OffAnyone with student loans understands the importance of paying them off. Student loans will linger on your financial mind as you try to save up for a mortgage, plan a trip, or try to start a family. This is why it’s important that you try to pay your student loans off as soon as possible.

Let’s go through the 5 steps to get rid of student loans:

1. Defer your student loan payments if you have to.

Before you get hit with massive late fees or destroy your credit score, you might have to ask for an extension or deferral of your student loans. This is a critical step because it forces you to get a realistic grasp of your financial situation. If you’re making decent money then you can begin with your student loan payments. If you’re struggling to find a job or aren’t earning enough money then you’re going to have to defer your student loan payments.

It’s important that you contact the company that loaned you the money in advance to let them know of your situation. Most companies are willing to work with you as you try to figure out your financial situation. This is much more effective than just hating your student loans.

2. Find any source of income to pay student loans off.

If you can’t find your dream job right out of college you might have to suck it up and take any job. The longer you hold out for that dream job, the longer you go without making any money and the longer you go without paying off your student loans or saving money. This isn’t the greatest advice to read but the reality is that during a recession you might have to accept a job that you feel is beneath you.

Just remember to swallow your pride and to do your best to ensure that this doesn’t turn into a permanent gig. You can simply turn your mind off at work and save your mental energy for other projects that you want to work on. The important part is that you’ll now have a paycheck that you can use to make your student loan payments and save up to start your side business.

3. Decrease your spending aggressively.

If you do find a well-paid position and simply just want to speed up the payment of your student loans then this idea is for you. If you want to get serious about paying your student loans off, you must cut back your spending. This isn’t sexy advice by any means but it gets the job done. In case you’re stuck on how to save money, below are my favorite ways to decrease spending:

  • Prepare your own meals.
  • Find cheap ways to have fun.
  • Take public transportation.
  • Stay at home a bit longer.

Spending money can be fun, but paying off your student loans is amazing.

4. Grow your career.

The best way to pay student loan payments is to grow your career and have more money coming in. For those that are fortunate enough to have a job right out of college, you’re in a unique and enviable position. My only advice is to find ways to grow your career so that you will be able to earn more money and pay off student loans much quicker. How can you grow your career?

  • Ask for a raise.
  • Take evening courses.
  • Work harder than everyone else.
  • Switch companies.

As you grow your career over time you’ll be able to put more money towards student debt so that you can eventually enjoy your life more.

5. Stay out of trouble.

It’s really easy to get yourself into trouble out of college. This trouble can come in many forms: legal problems, going out too often, bad habits, and spending like crazy. You must be conscious and understand how toxic this behaviour is. Spending money to reward yourself is perfectly acceptable. The problem lies in racking up massive amounts of credit card debt because you want to have a new pair of shoes or go away on a monthly trip. Since I’m not your mommy and I’m not here to preach to you, I will just suggest that you do have lots of fun post-college, but do your best to stay out of trouble.

If you want pay student loans off then this was the 5 step guide for you. What step are you at right now in paying off your student debt?

(photo credit: usdagov)

Handling Your Finances – What is Being Frugal?

By: Green Panda | Date posted: February 23, 2011 (5:00 am)

Frugal vs Cheap – Is There a Difference?

When you mention to people that you’re trying to be frugal, a good portion of them will hear the word ‘cheap’.  Why? I noticed two big reasons for the majority of them. First, they may have had a bad experience with someone “frugal” where they had to foot the bill because they other person was too cheap to pay. An example I can think of is going out to dinner with friends and one person getting a ton of food and then everyone having to split that item. That’s not being frugal, that’s being cheap.

A second reason I’ve noticed people confuse the two terms is because their own financial habits are skewed. Some people don’t understand and/or care about their finances. I know some really sweet people that don’t get the concept of money and spending plans. They can’t tell you their net worth or bank account balance because they don’t pay attention to it. To them, being frugal is shameful. They think that they have to live on rice and beans and wear consignment store clothes. That’s not being frugal.

Using good old Wikipedia, I found a suitability definition of frugal -

Frugality is the practice of acquiring goods and services in a restrained manner, and resourcefully using already owned economic goods and services, to achieve a longer term goal.

In other words, being frugal means making the most of what you have for a specific goal you created. Do you want to own a house or a business? Do you want to travel more? Do you want to pay down your debt? Incorporating frugality into your lifestyle can be a wonderful way for you to save money for what really matters to you.

Finding Frugality Tips That Work

Curious to see if frugality is helpful for your situation? I compiled a list of frugal tips to help you get started.

  • Get a snapshot of your finances. It’s hard to know where to go if you don’t know where you’re starting. Mint is a great, free tool that you can use to see what you’re spending your money on.
  • Create goals and write them down. Write out what goals you’d like to achieve this year and longer. Then post it up on the fridge or bathroom, where you can see it everyday.
  • Compare your goals with your spending. If you want to buy a house in 3 years, do you notice how much is going to your savings right now? Decide on where you can cut back by looking at what’s NOT important to you. If you’re not too crazy about eating out, try to having your friends over more for potlucks.
  • Rent an affordable apartment. Don’t live beyond your means. Can you get a roommate to offset of your expenses? make sure that you don’t sacrifice safety to save $50-$100/month, be balanced on where your money is spent.
  • Let online bill pay be your friend. Take 30 minutes or so to set up your bank accounts to automatically pay your monthly bills. Also focus on starting an automatic transfer to savings every paycheck. Even if only $10/week, you can sock away over $500/year (plus you earn a little more with a high interest savings account). Once you start saving a bit, make your next goal to send extra payments to pay down any high interest debt you have.

I recommend that you try out 1 or 2 of the tips at a time and see if it works for you. As you develop the habit of being frugal, you’ll notice that it becomes easier to adopt.

Thoughts on Being Frugal

How about you? Do your friends and family see being frugal as a virtue or shameful? Would you describe yourself as frugal? Do you think you’re cheap sometimes? Do you have any stories to share on being frugal vs being cheap?

Retirement Planning 101

By: Kristina | Date posted: February 22, 2011 (3:18 am)

Happy Tuesday Morning Green Panda Friends.  I hope that Monday wasn’t too hard on everybody; I know it was a holiday for some!  I am personally not a big fan of Monday mornings. Almost every single Monday morning when my alarm goes off I think to myself… When can I retire?

Our Canada Pension Plan will be a major source of income when we are ready to retire.  If you regularly monitor your weekly, biweekly, or monthly paycheque you may notice an amount that is being withdrawn from your gross income for the Canada Pension Plan (CPP) or the Quebec Pension Plan (QPP).

According to Service Canada  the Canada Pension Plan will provide us “with a stable and dependable pension (we) can build on for retirement.  (Our) contributions also provide (us) and (our) dependents with basic financial protection if (we) become disabled or die.”

Who can receive Canada Pension Plan Benefits?

There are conditions and restrictions regarding who can benefit from the Canada Pension Plan. According to the Retirement Income Options resource center from TD Canada Trust, only people who have contributed into the CPP/QPP during their years of employment can benefit from the CPP/QPP during retirement.  The amount that we will receive depends on the number of years we worked, as well as the amount of money that we contributed into the CPP/QPP over those years. The current maximum CPP/QPP benefit is $863.75 per month.

When can I start receiving the Canada Pension Plan Benefits?

If we are eligible, we (or our parents) can start receiving full Canada Pension Plan Benefits at the age of 65. Alternatively we can start receiving Canada Pension Plan Benefits starting at the age of 60, although a penalty will apply.  If we decide to start receiving Canada Pension Plan Benefits early we will have a penalty of 6% annually, which equals a 0.5% reduction for every month that we choose to receive our benefits before the age of 65.  In a nutshell, we will lose 30% of our total Canada Pension Plan Benefit if we start to receive the money at age 60 instead of 65.

Will the Canada Pension Plan be available when I retire?

In recent years as the baby boomer generation retires and starts to collect their benefits there has been some controversy over the sustainability of the Canada Pension Plan.  People are questioning whether or not there will be any money left in the Canada Pension Plan for the younger generations to benefit from in our retirement.   Recent changes to the Canada Pension Plan “will ensure that the CPP remains fair and sustainable.”

The benefits of the Canada Pension Plan are usually not a sufficient source of income during retirement.  As young investors we should also save for retirement through our personal Retirement Savings Plan (RRSP,) as well as in a private pension plan with our employer.  These savings combined with the benefits of the Canada Pension Plan will create a stable income for investors during retirement.

This is the 6th and last post in our My First Portfolio series, I hope you enjoyed it.  Other topics that we have discussed during this series are Stocks, Dividends, Exchange Traded Funds, It’s Time To Start Investing, and 5 Steps To Create Your Investment Portfolio .  Please contact Green Panda anytime with questions about your retirement and/or investments.

5 Steps To Create Your Investment Portfolio

By: Kristina | Date posted: February 21, 2011 (2:59 am)

A part of saving is having a savings strategy, this means that we need to create an investment portfolio.  As young adults we need to start saving for our future goals such as buying a home and saving for retirement; and we need to create an investment portfolio that is designed for each individual goal.  The investment portfolio for a long term goal such as our retirement in 35 years will be a lot different than the investment portfolio for a short term goal such as buying a house in 5 years.

Here are the 5 Steps to help create your first investment portfolio:

Set Your Goal.  Having a defined goal will help determine what types of investments you need to create your investment portfolio.  Short term investment portfolios will have lower risk investments such as fixed income mutual funds, bonds, and GICs.  Long term investment portfolios will have higher risk investments such as Stocks and Exchange Traded Funds.

Determine Your Level of Risk.  When you create your investment portfolio you will need to know how comfortable you are with fluctuations in the value of your portfolio.  High risk investments could bring large profits over the long term; however they could also bring losses to your investment portfolio in the short term.  You must ask yourself…am I willing to lose some of my money in the short term to potentially gain profits in the long term?

Find Out What Type of Investor You Are.  Before you buy investments to create your investment portfolio you will need to determine your investment priority.  This can be done by answering a few simple questions commonly known as your Investor Profile or the Know Your Client (KYC) questionnaire. If your investment priority is capital security and not capital growth then you may be a conservative investor.  However, if your investment priority is capital growth over the long term then you may be an aggressive growth investor.  Keep in mind that you can’t have a lot of potential growth with capital security; you can only pick one as your investment priority.

Diversify Your Investment Portfolio.  We should never put all of our eggs into one basket.  Therefore, it is a good investment strategy to have a variety of investment options when we create our investment portfolio.  Diversifying your investment portfolio means investing in different asset classes such as cash investments, fixed income, foreign income, local equity, foreign equity, as well as different sectors investments.  In general an investment portfolio of under $10,000 should have 3 different investment options (such as Mutual Funds), and an investment portfolio of $25,000 should have 4-5 different investment options. If you’re a Canadian resident, you’re going to want to look into Canadian dividend stocks.

Do Your Research.  Before you buy investments and create your investment portfolio please research the investments that you want to buy.  When you are looking at information on investments please remember that past performance is not an indication of the future.

Best Student Jobs to Avoid Student Loans

By: MD | Date posted: February 17, 2011 (6:00 am)

Best Student Jobs to Avoid Student LoansSummer jobs for students is a hot topic around this time of the year because it’s when employers start looking to hire employees for the summer season. It’s also the time of the year where college students start getting excited for the end of semester life. This is why I wanted to take a moment to congratulate you. By reading this article you’ll be ahead of the game and be looking for the best student jobs to avoid student loans.

If the title of this post caught your attention, let’s look at the best student jobs to avoid student loans:

On-campus jobs to avoid student loans:

Administrative position.

Most colleges will often hire current students to work in administrative positions that require little responsibility. Anything from watching the accounts receivable at the gym to helping a professor balance their books can be used as a decent source of on-campus income.

Tutoring position.

There are many ways you can make money on-campus and avoid student loans by tutoring your peers. You can find work as a Teaching Assistant and work closely with the professor throughout the duration of the whole course. You can offer private tutoring sessions around campus to students that are interested in help. You can also do what my buddy did. He met students in class and offered them tutoring sessions at discounted rates. Just remember that we are all good at something that someone else out there struggles with.

Tour guide.

Working as a tour guide on your college campus will allow you to meet new people and learn more about your college than you could imagine. A good source of income that will provide you with plenty of exercise and networking.

General Assistant.

Any general on-campus job from monitoring a computer lab to working as an Exam Invigilator will pay you a decent wage, while you sneak in some time to study for your next exam. Another benefit here is that you’ll be forced to stick around campus, and this way you can meet new people and stay focused on your studies.

Off-campus jobs:

If you have no luck with finding a job on your college campus or you simply don’t want to spend any more time on your college campus then you need to, you can try some of the following off-campus jobs to pay for your college tuition:

Local businesses.

Many local businesses around town hire college students to work for them. The opportunities are endless. You just need to focus on applying in advance and acing your job interview. You can make some money in town and get to know the trends in your area.

Serving drinks/food.

This is likely the best way to make money in college. Some of my friends have told me nothing but great stories from these jobs. You’ll usually end up working with lots of other college students. You can also make some decent money from tips if you work at the right location.

Now that we looked at on-campus and off-campus jobs to help you avoid student loans, let’s dive into summer work.

Summer work to pay off college loans:

Some college programs are so academically intense that you simply can’t hold down a job during the school year. This is why you should strive to take advantage of the summer by finding seasonal work to help you avoid student loans all together by earning enough money to cover your college tuition.

Some summer jobs for students that  can help you avoid student loans.

Yard maintenance.

This is where I made all of my money in high school. Cutting grass and taking care of some one’s yard can allow you to make some money while you enjoy the fresh air all summer. I personally worked with elderly people in my community. This also allowed me to hear some interesting stories from people that have been through a lot in life.

Work at a country club.

I had to throw this one in because I know a few people that did this. Working at a local country club can do wonders for your future. My friend met and created many connections in his field just be working as an assistant at a golf club.

Anything you want.

Most career advice states that you should try to enter the field as soon as possible. However, I feel that the summer months allow college students to work any job that they really want. You can simply turn off your brain and find something that you enjoy to do. Once you start your career you’ll be stressed out about moving up the ranks and trying to keep your job. For now you don’t have to stress as much.

There you have it, an extensive list of student jobs to help you avoid student loans in college. I’m curious to hear about what you did for work in college?

(photo credit: yanec)

Is it Time to Quit My First Job?

By: Green Panda | Date posted: February 16, 2011 (5:00 am)

Burned Out By Your Job? Test Yourself

You may have to do a burn out test to get to the root of your problem. There’s no need to jump ship if you can’t pinpoint what the problem. It’ll just happen again at your new job- figure out what’s wrong and you’ll be much happier with your next position.

  • Am I challenged by my work? If you find that work is mundane and uninspiring, it’ll be hard for you to stay passionate about your work. Ask your boss if you can take on some challenging projects. If they give you some, that may solve your problem. If they refuse, then you probably should prepare your finances to getting a new job.
  • Am I appreciated for the value I add to the company? No one wants to be ignored at work. Next time you speak with your manager point out how you’ve contributed to the company’s bottom line and she how he/she reacts. If your boss is belittling or dismissive of your hard work, then it’s time to move on.
  • Do I get excited to come up with new ideas for my department and company? Does your company encourage feedback from everyone or do they only want to hear from certain people? Work should inspire you, not drain you of your time. Have an honest discussion with your manager to see if the company is the right place for you.

Looking at Your Options

What can you do once you realize you need to move on? Quitting right away might not be viable, but you can find a new job that can help you professionally and fulfill your personal goals. It’ll take work to achieve, but it’s definitely worth it.

  • Stay in the industry, move to another company. Prepare and update your portfolio, resume, and get some cover letters ready.
  • Keep the same position, but switch industries. You may love what you do, but you may be able to expand your network by shifting industries. Ask around and see if you have anyone working in a different industry that know of an opening for your position.
  • Start a new career. If you have the talent and energy, you may want to change up your career and get out of your comfort zone. It’ll be hard work, but you may find it more fulfilling than just switching companies.
  • Start a small business. Entrepreneurship can be a bumpy and profitable road. Do it right by preparing your finances and honing your business skills.

Which move is right for you? Only you can decide for yourself.

Thoughts on Being Burnt Out From Your Job

How did you know it was time to quite from your job? How long did it take for you to realize you were suffering burn out? How did you fix your problem?

Check out the whole series to get an idea of how to navigate your career. Please leave your thoughts and feedback in the comments section.

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