Monthly Mashup: March Edition

Spring has finally sprung.  Well, almost.  And to kick it off, we’ve once again picked out our favorite and most popular posts from LifeStyler and some other intriguing blogs and websites  ’round the web for our March Monthly Mashup.  Keep reading for a compilation of interesting shiz from the past month.

Also worth noting, we’ll be having a contest on the website soon.  So keep coming back for a chance to win a pretty freakin’ awesome prize.  We’ll be revealing it soon.

Are Young People Afraid to Invest? – Young people in recent history have shown a disproportionate lack of ability in managing their money.  We took a look into the issue to see if attitudes towards saving for retirement and frugality have changed due to the current economic climate.

Paparazzi iPhone App Turns You Into Julia Allison – Looking for that big break?  Want internet fame and fortune — or at least Facebook fame?  Check out the Paparazzi iPhone app game.  It brings a whole new meaning to the concept of popularity.

Think Networking Gets You Ahead? Not How You’re Doing It – Our friends over at Money Under 30 got it right.  Lots of young adults miss many of the crucial aspects of networking.  David explains what the Do’s and Dont’s of effective networking are and how to make sure you’re doing it right.

Cold Cash in the Name of Science? – Part-time jobs are ok, but quite a few people are looking into more unconventional ways to earn a buck or two.  One of those ways is by volunteering for medical research.  We spoke to a former medical research assistant to find out what’s involved with one of these studies, how much you can expect to make, and what to be prepared for.

The 5 Best Free iPhone and iPod Touch Apps: Part Deux – Our obsession with all things iPhone related continues with our second edition of the five best free iPhone apps.  We take a look at our second round of favorite applications that do everything from watching your stocks to browsing locales and planning your next vacation.

Wise Buys: Experts Share Tips for Saving on Clothes, Gadgets, and Groceries – The NY Daily News talks to NYC residents about how they save some green on everything from clothing, gadgets and groceries.  Because, really, who has the ins on ways to save in this great city of ours better than the villagers themselves?

Acer Aspire One: A Wallet-Friendly Netbook for the Budget Conscious – Thinking of downgrading that thousand dollar computer for a cheaper model?  We took a hard look at Acer’s new $350 netbook to find out if it’s worth ditching the full-size versions and taking advantage of the huge cost difference.  Read on for our thoughts on the tiny machine.

Neighborhood Watch: Astoria – The LifeStyler crew took to the streets of Astoria and spoke to long-time resident, Brian Heater to find out the inside scoop on his Queens hood.

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Photo credit: katmere

Are Young People Afraid to Invest?

Investing can be an overwhelming and daunting task when you’re young and first starting out with your investments.  But are young people today turned off by investing after seeing our parent’s nest eggs deteriorate in front of our eyes?  Or do we live in a world so focused on the here and now, that planning for the distant future seems like a nonessential task.

These questions popped into my head after having dinner with an old friend that I used to work with.  Having both worked within the financial industry, we were discussing common acquaintances and severe layoffs at all the big financial firms.  As we discussed the financial woes of the industry, I casually asked her how her stocks were doing, to which she replied that her 401(k) was down.

Assuming that she had other funds invested outside her company’s 401(k), I asked her which funds she thought were doing well during the recession, and which she personally invests in, to which she responded  “none”.  Puzzled by her answer, I further inquired as to why a financial professional would have opted to keep her money out of market circulation — I figured certainly a financial professional would have a good reason for not practicing the same values that she pitched to others on a daily basis.  But her reply was surprisingly simple:  she said that she just didn’t have the time to figure out where to put her own money and had never made it a priority to find a well performing fund that she liked or to deal with researching and buying her own stock.

Here was a woman who had spent 11 years working in the financial industry (specifically, a hedge fund), and the only money that she had personally invested in the stock market was her company’s 401(k).  So why would someone under the age of 35 not invest their money when they have plenty of time to catch a market upswing?  The sheer amount of opportunities to invest means that there are options for every type of investor — from the aggressive stock picker to the passive individual who prefers to put their money in tried and true funds and let the market run its course.

The market is not something to be afraid of.  It’s a tool that, when used correctly and responsibly, can exponentially increase your wealth (as opposed to just letting your cash sit in a savings account for 30 years).

As for my friend’s case, I chalked it up to sheer negligence.  Planning for retirement is not something you opt out of for a lack of time, it’s something you take care of regardless of if you want to or not.  The only person that you can depend on to carry you through your golden years is yourself, and if you’re not responsible enough to plan now, the future will certainly bring with it a harsh reality.  Think Wal-Mart greeter after a forty year career.

So why does investing seem to rank lower on the list of importance to younger generations?  Is it the confusing, convoluted air of the industry, the intimidation that it begets or the innumerable choices between buying individual stocks and the myriad of different funds?  Is this a case of market fear or does the future seem so distant that we’re neglecting our financial plans in lieu of living for today?

Photo credit:  Mateusz Stachowski

Know Your Stuff: Breakin’ Down the Roth IRA

Investing in your retirement has never been more important than it is now. With the current state of the economy, there’s not much of a reason to have faith that you’re social security payments will provide much stability to you in your golden years. With the rising costs of living and pretty much everything else, social security contributions can’t and won’t keep up with inflation, and what may barely pay your bills now certainly won’t pay them when you’re 65.

This leads us to the following, inevitable fallback plan:  start piling up your own source of future income.  Since retirement planning is such a vitally important part of everyone’s long term plan, the government has blessed us with the Roth IRA. Keep on reading for a few basics that you need to know to get started with one:

• A Roth IRA is an Independant Retirement Account which allows you to save money for retirement by contributing a set amount of money per year and letting you earn interest through investments.
• Roth IRA’s currently have a contribution limit of $5,000 a year, considering that your earned income falls below $101,000.
• The major difference between a Roth IRA and a Traditional IRA is that you are not penalized and charged a fee if you take out your contributions (not your earnings) before you retire.
• The Roth IRA is 100% completely tax-free when you make your withdrawals after your retirement age. Kiplinger gives this startling (and inspiring) example: If a 25-year-old contributes $5,000 each year until she retires and makes an average annual return of 8% on her investment, she’ll have $1.4 million saved by the time she retires at age 65. If that same 25-year-old invested that same $5,000 a year in a regular taxable account earning the same 8% return, she’d only have about $1 million after 40 years if her earnings were taxed at 15% federal. That’s more than one-fourth less money than if she’d gone with the Roth.
  

There is really no excuse against opening a Roth IRA account. It will only benefit you and it also offers this additional bonus:

• You are allowed to take out up to $10,000 tax and penalty free to purchase your first home. This is per person, so if you and your significant other both have a Roth IRA, this would give you a $20,000 limit.

To open a Roth IRA Account, you need to first decide what you feel most comfortable investing in. A lot of people choose to go the mutual fund route because it offers a more diverse portfolio (investing in many different industries as opposed to just focusing in on say, real estate). There are a few places where you can open a Roth IRA:

• A bank – this is a good choice if you want to invest in COD’s (Certificates of Deposit) and Money Market Accounts, which are less risky investments.
• A Fund Company like T. Rowe Price or Vanguard is a good choice for mutual funds because you will have a professional choosing your stocks. For these funds, you normally need around $2,500 to start, and they will usually waive the minimum if you sign up for monthly automatic deposits into your account.
• A Brokerage Firm – this is a good choice for a more seasoned investor to purchase individual stocks and bonds. Usually the same $2,500 minimum applies, but these companies tend to charge hefty fees when it comes to each trade and maintaining the account. You should always double check to make sure your fees won’t hurt you.

If you’re young, going the Vanguard route may be the way to go – you have plenty of time to increase your earnings with a much higher return compared to a traditional COD.  It’s also the best way to get a well-rounded and diversified portfolio for your money without paying huge management fees.

But if the idea of calling up an investment company is still a little daunting, set up a meeting with a financial advisor at your current banking institution.  It’s free, and they’ll be able to set you up quickly with an IRA account or at the least, give you a sampling of helpful information to get you started on the right path.

A Surefire Way to Spend your Retirement in the Poor House

After speaking to various older coworkers and family members, I’ve come to the realization that it’s not only the younger generations that need a crash course in personal finance — many of the ones closing in on retirement need a refresher course too.

The red flag that signifies this need for a major overhaul of financial planning and education is the fact that people seem genuinely surprised when they’re five years away from retirement and lose 50% of their 401(k)’s because they kept all their holdings in stocks.    I think most people would roll their eyes if someone took $100,000 of their savings and gambled it away in a casino, yet we’re shocked and appalled when a 60-year old loses half of their retirement savings because of having a majority of  stock holdings.  This isn’t bad luck — this is bad planning.

Take for instance my father.  At 62 years old, he’s getting close to the day when he’ll be able to kick back, relax, and maybe play a little golf.  Or will he?  In October, he lost a good chunk of his 401(k) after the stock market plummeted.  Although he had amassed a nice pile of retirement cash and had a strong company match, he neglected to check on where his holdings laid — which turned out to be completely in stocks — and lost half of his savings.  I love my father dearly — he’s an intelligent man, but that clearly wasn’t the smartest of moves.

Over the past 25 years, companies have become varied and (somewhat) generous with their retirement plans, offering a myriad of pensions and 401(k)’s.  And for the most part, I think that’s great.  But someone has to be responsible for educating people in what these plans actually do and what risks are inherent in each of them.  As a country that emphasizes the importance of wealth building,  we are seriously falling short in our ability to educate our citizens on how to prepare themselves for the financial future.

This lack of personal financial knowledge when it comes to the risks and uncertainties of investing, is going to keep hurting uninformed individuals unless we start focusing on financial education.  I think we need to start with our high school and college students and not stop until work our way up to Gen Xers and Baby Boomers who haven’t yet clearly mapped out their future finances.

Stock markets do nose dive, like we recently witnessed, and until we start educating the masses about their investments, the people that lack a basic financial know-how will be the ones who come out of it marred and flat broke.

How To Spend That Holiday Bonus – Responsibly.

If you were lucky enough to have a job this holiday season, and even luckier to get a holiday bonus from the boss, then pat yourself on the back. Since funds are few and far between these days, that holiday bonus is even more precious. And precious things should be spent well — or shall we say invested well. We know it’s hard to not spend that cash, but hold out for another week or so when most of the shopping mania calms and the urge to spend dies down. And in the spirit of saving cash and building wealth, we’ve thrown together a few ideas on where to go and what to do to get the most out of your bonus this year.

1. Open or Fund a Roth IRA

If you haven’t opened one yet, this is your year! It’s never too early to start planning for your retirement. And if you think that your company pension is going to offer you a warm retirement, chew on this for a minute: a 25 year old currently making an annual salary of $40,000 a year would need to save approximately $600,000 by the age of 65 to effectively battle inflation and live on 75% of their ending salary (assuming they received living wage raises each year). Keep in mind that the majority of pension payment lump sums are in the $100,000 range, meaning that most people only save that much throughout their entire career, and social security payments are barely a drop in the bucket. Never underestimate the crippling power of inflation and economic instability. Supplement your future income by chucking away even a hundred dollars a month into a Roth IRA, and your future self will thank you.

2. Open a Vanguard Stock Account

I will be the first person to tell you that now is the time to Buy, Buy, Buy! Stocks are cheap, the market will rise again, and the people who take advantage of opportunities now will be in better financial shape ten years down the road because of it. Don’t believe me? Follow Warren Buffet’s lead. He’s been buying up stocks like they’re on the 50% off aisle at Wal-Mart. I’ve been putting more money into my stock account, and am planning to invest in another fund this year. And since I’m a big Vanguard fan, here are my three favorite funds managed by them: 500 Index Fund, Extended Market Index Fund, and the Total International Stock Index.

3. Debt Repay

Nothing says “Hello 2009″ like a clean financial slate. Throwing a lump sum at a mountain of student loan debt can be a big motivator to getting that balance paid off. Plus, knocking down a balance can drastically reduce your monthly payments, although I prefer the snowballing method rather than lowering your minimum payments to hasten the repayment process. There are few feelings that trump being free of debt, and the extra disposable income you’ll see each month after finishing off that last bill will feel like sweet victory.

4. Invest in Yourself with a Networking Vacation

I’ve decided to sock away some cash to go towards Networking Vacations. This is not your typical vacation, but attending industry conventions and networking events to further promote my freelance career. After a quick Google search for industry networking events across the country, I realized that there is a convention for absolutely everything. So far for 2009, I’ve planned three small trips and I’m treating them as personal investments in my budget. To save funds, I’ve set up a recurring savings transfer to a high yield checking account with a savings goal (this means once I reach my target amount, the money transfers will automatically stop). And since I’m planning pretty early (almost a year in advance for two of them), I’ll be able to get super cheap airline flights and good hotel rates.

The Hidden Costs of Investing

We hope you guys are taking full advantage of the bearish stock market right now and buying up bargain stocks for your portfolio. But since stock purchasing can be a confusing maze of percentages and fees, we’ve decided to throw together a list of typical investment fees to be aware of and — in some cases — to avoid. Read more

Thrasher Funds: A Cool Way to Invest?

Last Sunday, as I was dutifully surfing the internet for You Tube videos to entertain myself with, I stumbled across an interview with the founders of Thrasher Funds, an investment fund targeted towards the young, trendy MTV crowd. Read more