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Savers, Have You Considered Junior College?
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In the process of saving for college, families sometimes forget saving on college. There are few bargains left, but allow me to suggest the junior college. It could be the last of America's educational bargains.
In the year ending June 2006, there were 713,000 associates degrees granted in the United States. There were less than 500,000 a year until after 1990, when growth in the AA degree began to pick up. Associates degrees are now growing faster than Baccalaureate degrees, although the BA degree has almost 1.5 million degrees.
Less known are the many certificate programs at Junior colleges that run one year or less. There were 229,000 certificates awarded for the year ending June 2006. There another 183,600 awards granted in specialty programs that run between 1 up to 4 years.
Combined, there are well over a million people leaving junior colleges with degrees and certificates.
In addition to the many technical and allied health programs, junior colleges have a whole slate of English, math and social science courses that fulfill two full years of requirements at four-year colleges. A state's four-year college accepts their state's junior college credits.
Another advantage comes because junior colleges are usually sprinkled around a state at many locations and so they are convenient to attend without changes in address or work schedules.
There is also reason to believe the quality of instruction continues to rise because there is a growing surplus of qualified faculty with masters and doctorate degrees. Many of these people have work experience and want to get into teaching.
More and more junior colleges are hiring from the same pool of faculty as the four year colleges, and this is especially true in large metropolitan areas where the surplus is likely to be even bigger.
In Virginia in 2007, the average tuition and required fees for a full time student at the 4 year colleges was $7,083. At the many junior colleges, it was $2,524 — a savings of $4,559 a year with a full time course load.
Most states have similar or bigger disparities. If we figure a savings of $4,559 from the beginning of the first two years at 4 percent interest until the end of a four year degree, the savings is $10,853.36. Even at two percent interest is the savings is $9,771.91.
For savers who want a four year degree, think junior college.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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Milton Friedman vs. Your Wife: Who Gives Better Financial Advice?
Freakonomics author Steven Levitt posts today about the best personal finance advice he ever received:
When I was a first-year assistant professor at the University of Chicago, my friend and department chair, Jose Scheinkman, relayed the advice Milton Friedman had given him 20 years earlier, “Don’t save too much.”
The logic was simple: An academic’s salary rises steadily over time, as do outside opportunities — like writing popular economics books! The right reason to save is so you can even out your consumption. When times are good, you should save, and when times are bad, borrow.
Most likely, I would never be as poor again as I was starting out. That meant I should have been borrowing, not saving. I didn’t follow the advice as fully as I should have, partly because my wife insisted we save — she is not quite as good an economist as Milton Friedman.
Of course, most of us would agree that saving is important all of the time, but especially when you are starting out.
The best comment to support that, posted by donw, channels another pretty smart guy:
Your wife (and Albert Einstein) - COMPOUND INTEREST!
The earlier you start, the more you'll have.
Plus, your wife always wins every argument anyway.
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Savers Beware: What Are Your Underlying Assets?
There was a time when it was common for corporations to create long lived assets with borrowing. It may take several years to build a steel mill or a power plant before there is something to sell, but loan or bond payments will come from revenues and the economy will have more steel, more electricity and more assets.
Banks, or financial intermediaries as they are called now, are still happy to make loans for plant and equipment. Trouble is there are more loanable funds to loan than borrowers willing and able to borrow for long lived assets.
As a result, banks make more consumer loans that support consumption spending like credit card debt. Loans that support consumption helps support jobs and the economy and provide an outlet for savers looking to earn interest income. However, credit card purchases like vacations, housewares and clothing have little value as security for credit card balances.
The home mortgage should be a secure loan because a home is a long lived asset. It used to be that Savings and Loans would make mortgage loans at 6 or 7 or 8 percent interest and the home would be the asset in case of default.
Lenders with home mortgages on their books could sell their mortgages if they needed to raise cash but they would tend to hold them to maturity, earning a steady income. In case of selling a mortgage it would usually be sold to another financial institution such as the Federal National Mortgage Association.
That changed when adventurous money managers started to buy thousands of mortgages and bundle them for resale into something like to a bond that pays interest on invested principal. They call them collateralized mortgage obligations (CMO) or collateralized debt obligations (CDO). In that way, mortgages could be resold to smaller investors who would not normally be willing or able to buy individual mortgages.
What is important to notice though is that repackaging and reselling mortgages does not create new assets. Reselling mortgage credit means more transactions that allow money managers to charge management fees and potentially make money with price fluctuations in CDO prices.
Bear Stearns held collateralized debt obligations in their hedge fund, but apparently so many of the underlying mortgages were to people who were sub prime borrowers that defaults set off a chain reaction. Since Bear Stearns borrowed money to buy collateralized debt obligations for their investors, they defaulted on their loans and threatened the solvency of major banks.
With so many new ways for money managers to attract savers, it is more important than ever to notice the underlying assets and ability to pay.
Did Bear Stearns investors know so many of the underlying assets were sub prime loans? Savers beware!
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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U.S. Households See Net Worth Drop $1.7 Trillion
Americans $1.7 trillion poorer — CNNMoney.com
Americans saw their net worth decline by $1.7 trillion in the first quarter - the biggest drop since 2002 - as declines in home values and the stock market ravaged their holdings.
Meanwhile, the amount of equity people have in their homes fell to 46.2%, the lowest level ever.
The net worth of U.S. households fell 3% to $56 trillion at the end of March, according to the Federal Reserve's flow of funds report, which was released Thursday.
Wowzas, right?
Some of this is obviously inflated, since falling housing prices (which were off the scale during the bubble) made up $305 billion of the decline. But the news isn't that encouraging.
At the same time, there are now more than 1 million homes in foreclosure.
Are you a part of the net worth decline? Even if your home value has dropped, is your net worth (outside of real estate) doing the same?
Leave a comment and tell us.
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What Would You Do For $1 Million?
I'm starting a meme — and you're invited!
Now be honest here. The point is for your readers to learn more about you — so truthfulness is necessary.
Here's How It Works
Let's get started: here's how it works.
1. When you're tagged, answer the question on your blog, with a trackback to the original post.
2. Ask an additional million dollar question — and tag 3 bloggers with answering.
So, since I'm starting the meme, I'll ask the first question.
Would you spend 1 week in jail for $1 million?
Answering: Lee Distad, Dave Weinberg, and SingleGuyMoney.
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How Saving Fuel is Costing Jobs
According to the Washington Post's "A Switch on the Tracks: Railroads Roar Ahead," rising fuel costs for 18-wheeled trucks has generated a rapid turnaround in rail traffic with freight rail tonnage and rail ton-miles surging ahead.
The article cites a 3 to 1 fuel advantage for rail over trucks, but the fuel advantage also means less environmental pollution in an eco-conscious society.
Using less fuel to transport a ton-mile of freight represents a physical savings of resources that potentially benefits many because fuel costs are reflected in grocery store prices and for just about everything else we buy at stores.
Savings that lower costs should always be good, but because even though a higher share of freight traffic could go on the rails, changing modes of transportation will affect jobs.
Trucks have been dominating freight traffic measured by value and tons. The latest commodity flow survey data published by the Bureau of Transportation Statistics and Federal Highway Administration compiles domestic freight shipments.
It shows that trucks haul 70 percent of freight measured by value and 60 percent of freight measured by tons.
Rail, on the other hand, has only 3 percent of freight measured by value and a little over 10 percent measure by tons. Truck traffic measured in value of shipments is bigger than rail by a ratio more than 20 to one. In tons of freight, trucks are bigger than rail by a ratio of 6 to 1.
Freight measured by ton-miles, or tons multiplied by miles, shows the relative advantage of rail as a bulk carrier. Trucks haul 34 percent of freight measure by ton-miles compared to 31 percent by rail. In ton-miles, trucks are about even with rail by a ratio barely above 1 to 1.
However, the ratio of tractor trailer and heavy truck driving jobs to locomotive engineering jobs tells a different story. Heavy and tractor trailer drivers have 1,860,000 jobs compared to 46,600 jobs as locomotive engineers and operators.
Heavy truck driving jobs outnumber rail engineer jobs almost 40 to 1. Those totals count only heavy and tractor trailer jobs. There are a million additional light and delivery service trucking jobs.
Efficiency sounds so much like something we should like, but saving energy and reducing air pollution by shifting to rail and away from trucks will eliminate thousands more jobs than it will create.
If America wants efficiency, we may need to think of some new ways to share their work.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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Gas Rebate Credit Card: Which One Should I Get?
For our trip to California, we're going to be doing a lot of driving — which, thanks to high gas prices, is going to make it expensive.
So in order to cut down on our costs, we're looking to get a gas rebate credit card.
We're not big credit card mavens — in fact, we only have one that we pay off every month — but it seems like it could be to our advantage to get a new card for paying gas.
I've looked over the Gas Rebate Credit Cards at cardratings.com, but really am not sure which one to go with.
I need your help. Which gas rebate card should I get?
Let me know what you think in the comments.
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Do It Yourself and Save Big Bucks
In today's economy, we need to remind ourselves we can save without saving by using do-it-yourself production.
Suburban homeowners might employ a lawn service to take care of their yard or join a health club or gym with a personal trainer to take up a program of planned exercise. Do-it-yourselfers will get their exercise mowing the grass and avoid the lawn service and the health club altogether.
One of the often overlooked advantages of owning a home over renting an apartment is the opportunity to save with do-it-yourself production. Apartment renters lose the tax deductions for property taxes and home mortgage interest, but their rent has to cover all of the landlord's landscaping and maintenance costs.
Renters pay out of pocket each month while the homeowner can choose a few, or many, do-it-yourself savings from lawn care, painting the shutters, replacing faucet washers, or flashing the roof vents.
Condominium owners get property and home mortgage tax deductions, but lose some do-it-yourself opportunities since condominiums often provide landscaping and exterior maintenance in common as part of a monthly fee paid with after tax dollars.
Take just $60 a month out of a condo fee for landscaping and the savings are $8,835 for 10 years at just 4 percent interest.
Remember too that cost of living increases come as a percentage of gross income. If you have a $50,000 salary and a 3 percent cost of living increase, it will be $1,500 more in gross income. Before you get a dime, 7.65 percent goes to social security, at least 15 percent goes to the federal income tax and probably 5 to 8 percent goes to a state income tax. That's before you buy anything, which will also be taxed.
With heavy taxation and the loss of at least a third of gross income, do-it-yourself savings of only $800 or $900 will be equal to $1,500 of gross income. It is something to think about in a stagnant economy.
In the United States, nearly every transaction that can be recorded is recorded, then it's counted and taxed. In the mayor's office, or the county commissioner, or the state legislature, or the federal Congress, they want transactions. It is their bread and butter, so to speak.
Do-it-yourselfers have another idea.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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