THE Y&FB BLOG

College Daze

I walk out in front of a room of future MBAs, accountants and business types the other day and ask them if they know what a FICO score is, what THEIR FICO score and where the hell to get it.

I get a room of blank stares. Oh sure, they know all about GDP, the Fed Funds rate and the U.S. trade deficit, but they don't know a damn thing about their personal financial life.

If you ask me, every college and university that is not teaching basic personal finance -and making it a requirement for graduation-is doing a crappy job of preparing its students for the real world. And isn't that a big part of what college is all about?

I have news for you, an intimate understand of GDP is not going to help you out in life one iota. Trust me. Same with most all economic terms, trends and data points. Nice info if you want to bore everyone at a cocktail party, but absolutely useless when it comes to living your life.

I would love to know if any of you had any course, or seminar, in college that taught you anything about financial info that has a huge impact on your future. Did anyone teach you about your FICO score, how to deal with credit cards, and god forbid, how to handle your student loans once you are out of school? (Did anyone tell you that consolidation is damn smart, especially the past few years when interest rates have been so low?)

And while you're at it, let me know the three financial lessons you wish someone at school had taken the time to teach you. Something that you had to figure out on your own much later, or something you are still clueless about. I want to know exactly what you think you could have learned in college that would have made your YF&B years easier. I promise that I will make sure your questions get adressed here, or at my website .

You Can't Afford to Not Have Health Insurance

I know it's tempting when you are YF&B to not pay for health insurance if you aren't covered by your boss, or are currently looking for work. You figure you're young and fabulous so you'll take your chances on staying healthy.

Come on, that's way too dangerous a game to play, and with the insane cost of medical care, if you even come down with the most basic malady you could be up a financial creek. So please make sure you have health insurance. If you are still in school and on a school plan, check to see what sort of coverage is available after you graduate. Or if you are covered by Mom & Dad see how long you're eligible to stay on that policy. And then head on over to ehealthinsurance.com and do some easy shopping on your own. If you anticipate you will get coverage through a job within the next 6 months to a year, check out the short-term plans that are available.

I think you'll be surprised to see that for just $50 or so a month you can get a solid health insurance plan to cover you in the event of some serious medical bills. One important tip: always ask what the "financial strength rating" is for an insurer. You want to do business with a company that is rated at least A, AA or even best: AAA. That means the company is on solid financial ground and will be in good shape to handle the claims of those it insures.

Career Networking on the Net

Look, if you are thinking about making a career move, or are about to graduate and are looking for that first foot in the door, you need to do some serious networking to find the most information on what jobs are out there for you, and who might be able to help with an intro or informational interview. So don't be shy about asking friends and family, and friends of family and people you barely even know for tips/insight/guidance. You can't afford to be shy in this tough job market. And you should also check out linkedin.com; I think it's a neat way to network.

Don't Miss out on the Student Loan Tax Break

With less than a month to go until the April 15 tax filing deadline I want to make sure all YF&Bers with student loans know about a great tax break: If you are single and your income is below $50,000 you can deduct up to  $2,500 in interest payments you made on your student loans. If your income is between $50,000 and $65,000 you're eligible for a partial deduction. Married couples filing a joint return with income below $100,000 are also eligible for the full deduction; from $100K-$130 you can claim a partial deduction. For more details, check out the IRS riff. It's super easy to get this break; you don't even need to itemize your deductions. All you need to do is file form 1040 or 1040A, rather than Form 1040EZ.

This is Your Blog YF&Bers...

I am absolutely loving my first few weeks of blogging; it's no secret I've always got plenty on my mind that I want to share!

But what would be absolutely great is if you would tell me more about what would make this blog work for you. Feel free to be blunt. I want to know exactly what you are interested in-and what you could care less about-so I can make this blog fun, interesting, and useful for everyone who is Young, Fabulous and wants to get past Broke ASAP.

So come on, click on the comments link below, and let 'er rip. Tell me what you want to see in this blog.

Betting on the House

Caught the news the other day that 23 percent of homes bought last year were for investment, not to live in. Oh my...here we go. After a few years of incredibly strong appreciation rates, everyone figures that buying a home as an investment is a great move.

Not so fast.

Look, real estate is indeed a terrific investment, but only over the long-term and only if you really know what you are doing and can weather any temporary soft spots. But I know that a lot of people jumping into real estate as an investment are an accident waiting to happen. They are using interest-only loans and adjustables to get the mortgage cost down, on the theory they will flip the home in a few years at a fat profit. Well, there are plenty of smart housing experts warning that the next few years are going to be a "cool down" period for home prices in a lot of regions. That means anyone banking on 20 percent or 30 percent appreciation over the next few years  could be rudely surprised, and in a financial bind.

I am also already hearing from folks who bought property they intended to rent, but are now having trouble getting tenants, or tenants willing to pay enough to cover the mortgage. And they don't have the savings to cover their costs. People, if you ever intend to own real estate as an investment, my eight-month emergency fund rule is non-negotiable. You MUST have substantial savings in place so you can handle any short-term cash flow problems.

Five Years After the Music Stopped...

Tomorrow marks the five-year anniversary of the peak of the Internet Bubble. And the hangover is far from done. From the NASDAQ peak on March 10, 2000 through its bottoming out in 2003 the index of growth stocks--with a heavy tech flavor-fell 78 percent. Even after a strong rebound since then, the index is still nearly 59 percent its 2000 high.

That means to merely make it back to the March 2000 level the index would need to post an average gain of 19.5 percent over the next five years. And that ain't gonna happen my friends. Even the most optimistic market watchers would tell you we would be lucky to get half that return on an annualized basis. At that pace the index breaks even in another 10 years.

I don't mean to depress you, but merely to impress a crucial point of successful investing: It may not be super sexy, but diversification is what works. If you had everything riding on the NASDAQ back in 2000, or a few of its highest-flying stocks-you got seriously slammed. But if you had spread your investments over a wide array of stocks you would be sitting a lot prettier right now. That's why I say a broad market index fund or ETF is the way to go.

Come tell me your "Broke Is" Story

Hey, I'm hitting the road to talk about the new book. Check out my travel sked; if I'm showing up in your neck of the woods I hope you'll come by to say hi.

And as I mentioned in the book (page 12) I bet you have a pretty good (or should I say bad?) "Broke Is" story. So come lay it on me. I want to hear what you're dealing with; and I promise to report back here on the best (actually worst is probably more to the point) stories. And you bet I'll also offer up my take on what you might do to help deal with your B-dom.

Be sure to check the travel sked for the appearances at Apple stores across the country. I'll be giving away a free iBook, Mac mini and iPod Shuffle at each Apple talk.

Index Fund Fee Wars Great for Investors

Okay, if you saw the riff on index funds in the Money Book for the Young, Fabulous & Broke (check out page 228 for a quick refresher) you know I am a big-time fan.

And the game just got even better.

There's a nice competitive war going on between Vanguard and Fidelity; the two big-boys of the no-load fund world. Vanguard used to have bragging rights to offering the lowest expense ratio (the annual fee that is skimmed off of a fund's performance to pay bills etc...) in the business. The 0.18 percent expense ratio on its Vanguard 500 Index fund is flat out cheap. But Fidelity stepped in and said it would offer its Spartan Index funds for just 0.10 percent, until further notice. Well, just today Fidelity said the 0.10 percent is permanent. The only catch with the Fidelity funds is that you typically need $10,000 to get started; but if you're self-employed and have a SEP-IRA the minimum gets down to $500. Over at Vanguard the minimum for any type of IRA is $1,000. If you can find the cash to invest in these super cheap index funds, just do it. Over time, those lower expenses (about one-10th or less what a typical stock fund charges) are going to make a huge huge difference in how big your account gets over the years.

Don't believe me? Check out this Fund Expense Calculator. (Some tips on using the calculator: on the first page plug in a hypothetical investment of any amount, and 8 percent for the annual rate of return. Pick a long Holding Period; since you're YF&B and investing for your retirement, I'd recommend plugging in 30 years. Everything else can stay set to "0" since you are only investing in a no-load fund. And just check "no" on the Convert question on the bottom. Then on the next page you'll be asked to plug in an annual expense ratio for each fund. Here's where it gets fun. Use 0.18 and 0.10 and then for the third fund choose a higher expense ratio. If you are currently invested in a fund, use its expense ratio. Or just go with 1.5 percent, which is the average ER for actively managed stock funds.) If you're on the index fund fence, I think I will knock you over to my side once you catch a glimpse of the "savings" you get with index funds.

Stolen Identity

Seems like we can't get through a week without news that there's been yet another breach of our financial and personal data resulting in yet more ID theft. The latest breakdown was the admission by ChoicePoint, a huge data compiler--and seller of that data-that it had forked over info to ID thieves.

Congress is acting absolutely shocked about all of this,which is laughable given what a huge problem this has been for a very long time. (ID Theft has been the #1 consumer complaint at the FTC for the past few years) Yet only now that it seems some members of Congress have discovered their own data has been breached, does it become the cause du jour in Washington.

Look, I hope Washington does take a serious look at this issue and comes up with ways for consumers--you and me-to gain protections against all this freewheeling sharing and selling of our personal financial data.

But I ain't holding my breath. In the meantime, the best way to deal with the ID theft epidemic is to constantly check your credit reports to make sure there's no sketchy data showing up; that's a tipoff someone may have stolen your financial identifying info and is masquerading as you. A new federal regulation is being phased in throughout 2005 that will allow all of us to get a free credit report from each of the three main credit bureaus, once a year. Don't get all three at once; its smarter to get one report every four months. That way you're consistently checking up on your record.  Check to see if free credit reports are currently available in your state.