Four Amazing and Money Saving iPhone Apps!

Here’s Help with that Debt Reduction Resolution

Every New Year’s Eve we toast to a surviving another year and promise to make the next one even better. We sing away old acquaintances and drink to our health and happiness. But on the first day of the New Year the only thing we commit to is nursing away a very strong hangover. Read more

The Rules of Budgeting — Tailored to a New York LifeStyler

We’ve all heard the typical budget allocations for the rest of the country — 30% to rent, 20% to transportation, 15% for food.   But how does this tie in with New Yorkers who tend to average about 50% of their salary or more on rent?  Late last year, CNN posted a budget pie chart to show Americans where they should be allocating their monthly income. But we’re going to take a closer look at how New Yorkers are — or should be — budgeting their money. Read more

Review Corner: I Will Teach You to be Rich by Ramit Sethi

A few weeks back, I was able to get my hands on a copy of  Ramit Sethi’s (a personal finance blogger gone best selling author) new read.  Sethi’s book, “I will Teach You to be Rich” is a six-step program offering financial advice for people just starting out managing their money.  Like most financial know-hows, IWTYTBR doesn’t break any new barriers when it comes to basic financial principals.  But let’s face it:  personal finance isn’t nuclear science.  A successful PF book teaches people how to implement those basic ideas into their daily routine and make them stick.

I’ve read a decent amount of personal finance and investment books, and the ones that I find particularly effective and worthwhile are always the ones that break down the financial jargon into simple to understand terms.  No investopedia needed.

Luckily, Ramit’s book fits the bill with its easy-to-understand concepts and injected case studies that further explain financial concepts with realistic scenarios from friends and blog readers.

The starkly different concept of Sethi’s book, however, are his ideas on spending.  While hoards of other financial writers and bloggers will praise frugality and lecture you on the merits of reusing ziploc baggies and making your own laundry detergent to save $6 a month, Ramit does quite the opposite promoting an alternative to traditional budgeting called a “Conscience Spending Plan”.  And in doing so, he succeeds at bringing a sense of reality to money management.

As an example, in his chapter on controlling expenses he discusses his friend “Lisa’s” shoe spending — dropping a whopping five grand a year on footwear.  However, he further describes, that along with a healthy salary, she also still lives with a roommate, nixes expensive electronics and keeps eating out at a minimum.  While her priorities may seem out of whack to the rest of us, she’s spending money on the things that are important to her, while conserving funds in other areas of her life that she deems less important.

IWTYTBR revolves around a six-week program promoting a different financial concept each week that includes:

• Setting up credit cards and improving credit history
• Setting up the right bank accounts by negotiating no-fee, high interest accounts
• Opening and managing your 401(k) or Roth IRA Investment account
• Analyzing your spending and conceptualizing a budget that fits your spending
• Automating your banking infrastructure to make things run as smoothly and flawlessly as possible
• Learning how to get the most out of your investment accounts with very little work

At around 250 pages, it’s a quick read — and definitely worth your time if you’re like most people and trying (or perhaps forced?) to restructure your finances during the down economy.  And with the majority of young adults exiting college with an average of $12,000 in student loan debt and 66% having at least one credit card, it really couldn’t come at a more opportune time.

You can pick up a copy of Ramit’s book here , take a test run of a few chapters here, or you can play our little game in the Comments section for a chance to win a FREE copy!  Keeping on the topic of personal finance, we’re asking you guys to chime in with your own tips for saving money and managing your finances.  Our favorite tip wins a brand spankin’ new copy of I Will Teach You To Be Rich.  Contest officially closes on May 1st at 5pm, and the winner will be announced on May 4th.

ING Bank Just Got a Little Cooler

Unbeknownst to me, ING (the online based bank with the consistently good APY’s) has opened cafes in a bunch of major U.S. cities — complete with free wifi and free personal finance seminars and webinars.  Who knew!? Read more

Monthly Mashup: February Edition

It’s been seven months since we gave birth to the shiny new creation that is LifeStyler.  As we trek further down the road looking back on the happenings of the past month — whether it was delving into Obama’s new stimulus plan, tips on surviving in NYC’s harsh employment landscape, or fun, free weekend ideas — our mission stays the same:  to keep bringing smart, pertinent and helpful information about lifestyle and personal finance to the young and ambitious in NY.  And in true LifeStyler tradition, here are some of our Editor’s story picks from February’s harvest.

Credit Karma’s Ken Lin on FICO’s New Scoring Model – In an attempt to find out more about FICO’s new scoring model, we called up Ken Lin — CEO of Credit Karma — to find out what changes to expect in the upcoming months.

Recession-Proof Activities:  Bigger, Badder, Harder – You asked for more, and we brought it.  Check out LifeStyler’s third edition of Recession-Proof Activities for fun, free weekend activities in the NYC area.

2009 Economic Stimulus:  What it Means for you - David at Money Under 30 delves into Obama’s 2009 stimulus plan, and breaks it down into layman’s terms.  Find out how the Stimulus bill will affect you.

The Dream Delayed:  Recent Grads and the Struggle for Employment – Our newest contributor, Christine Rochelle, jumps into the trenches to get the down and dirty on the current unemployment crisis.  Check out Lauren and David’s stories of how they’re keeping positive in a dismal job market.

The Banking Crisis Hasn’t Deterred Condescending Attitudes -With many banks on a slippery slope, you’d think customer service would be a high priority for their business.  As I witnessed a few weeks back, that may not be the case — condescending banker attitudes are still alive and well.

How to Deal with a Job Loss – Pinyo at Moolanomy gives nine tips on how to deal with the loss of a job as someone who is on the brink of losing his.  He details how to not burn bridges with your current employer, and how to beef up your skills and polish up your interviewing skills for the job hunt ahead.

5 Tips for Surviving on Peanuts – With economic conditions still in a deteriorating state, it’s more important than ever to save every penny in case of a job loss or unexpected emergency.  We give you five tips on how to cut your expenses and live on less.

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.

Credit Karma’s Ken Lin on FICO’s New Scoring Model

In the age of the credit crunch, credit scores are the passport to your financial future.  The new year has brought many things, and with it, a new scoring model.  We spoke to Ken Lin, CEO of Credit Karma (a website that lets you check your credit score for free — anytime, anywhere) about the change in the FICO credit scoring model to get a better idea of what the changes are and how they will affect you.

Can you give us an overview of the new scoring formula?
It hasn’t been fully disclosed or anything.  They’ve selectively agreed to point out certain things.  But the way it looks like things are going to work, it’s going to be a more holistic view on a person’s credit.  So what that means, is that it takes fewer of the micro late payments and looks at your credit on a more holistic level –  late payments or single late payments don’t matter as much on your credit score, but long term late payments will have a bigger impact.  I think that’s one of the first changes.

I think a secondary change is really around the authorized users and the notion of piggybacking your credit.  I think that’s been one of those things where people have gamed the system — where if you add an authorized user in your credit report, you are in fact transferring some of your good credit over to that person — and basically stop that process or that loophole, if you will.  And really the third component or maybe the global picture, they’re really trying to help lenders better determine who are lower risk people.  I think that’s the ultimate objective.  But at the high level, it’s all about making more of a holistic view on the credit score, rather than the minutia, as well as fixing a few of the loopholes in the hopes of getting a better [read] for lenders.

So, when does this new scoring method go into effect?
Well, it’s interesting.  So what happens most of the times with these scores, lenders will actually test it.  So it launched I think actually today or yesterday, with TransUnion.  I think Equifax is coming down the road, and Experian hasn’t actually released the date.  But normally  what happens with new credit scores is that financial institutions have billions of dollars in their portfolio based on existing credit scores, so they’re generally hesitant to switch over completely or unilaterally to new credit scoring systems without testing it.  What I suspect, is that banks will slowly migrate as they test it.  And what they’ll ultimately do is test this score against the old score and see if there are actually pickups in the performance of being able to detect chargeoffs or risk.  I think once those numbers come in, they’ll be more likely to make a final switch.

What spurred this change, or does FICO regularly and routinely change their methodology?
You know, credit scores haven’t stayed the same, really ever.  I think historically there have always been updates.  There have always been tweaks to get them to normalize for different years or economic conditions.  But even if you look at the current FICO score, its been updated five or six times since its original release in the late 90’s.  So this is a constant, but I think this one is a little bit more radical from the standpoint that they’re trying to address more of the macro level issues instead of the loopholes that we spoke about.  But you have to keep in mind that credit scores are constantly evolving, and its never the case where you have one consistent score from the beginning of time for you.

OK.  I was wondering if it had anything to do with banks lending money to unattractive borrowers and the whole sub prime debacle that we just went through?
You know, I think that probably is a little bit of the underlying effect.  I mean, credit scores, they’ve performed well.  I think the whole sub prime debacle is more of the factor that the banks got a little more greedy.  They were continually lowering their criteria or their threshold in the hopes of making more profits, and it just ultimately backfired.  I think part of this is grounded in the fact that you always want to be able to better mitigate your loss or predict losses based on your credit score.  I don’t think credit scores ultimately brought down the industry.  It was more of a case that the industry was a little too greedy and willing to lower their standards.

Do you think this new method will prove to be more beneficial to people, or do you think that a lot of people will see their scores being lowered?
Its too early to tell, but this score is meant to benefit banks and lenders — quite honestly, right?  Credit scores are always built for lenders.  Consumers are finally becoming aware of it because they know how much impact it has on their financial well being.  But historically these things are built for lenders.  And the ultimate gauge of whether this score is successful, is if it will be able to differentiate good borrowers from bad borrowers.  And that will be the decision.  So from a consumer’s standpoint, it’s important for them to always be aware of what their credit scores are, and making sure their credit reports are accurate.  But I think this particular change will have little impact on the consumer — more of the impact is really going to be focused on the lender and their profitability.

Like you said earlier, it’s going to be focused more on the minutia.  I heard that the smaller problems, like if you have a doctor’s bill for $100 that accidentally went into collections, it would mean less.  Is that true?
Correct.  Right.  It de-emphasizes the smaller aspects and looks more at the macro level trends.  So if you have a long history of always being late or being delinquent on your bills, that’s taken into more of significance, rather than if you have a small doctor’s bill, a collections notice, for a $100 or less — it has less of an impact.  And along the same lines, if you recently missed a payment, but you’ve always paid your bills on time, that will also have a much lower impact on your credit score.

I was also reading that they’re going to be focusing more on the credit to debt ratio.  Does it hurt your score to have a credit card open, but to never use it, if it’s paid off?
So, they’re starting to look a little bit more closely on inactive accounts.  I think the general rule of thumb is if you have a line of credit that’s available to you that you don’t use often, use it every couple of months to show that there is activity so that it continues to contribute to your active credit line.  I think the new model suggests that they are going to be de-emphasizing credit limits if you don’t use them.  So a simple way around that is to buy a tank of gas every other month with your card so that you continue to show usage.  That will kind of mitigate any of the negative impact of having credit lines that sit dormant.

Will the new scoring model change the way they differentiate between labeling scores good, fair, poor and excellent.
I don’t think so.  Historically, credit scores have been normalized.  Meaning that at any given year, they expect the same score to have the same amount of chargeoff.  So I think because everyone is so used to that standard, they’re not going to be changing the definition of good, bad, and poor.

What about precautions?  Are there any new ones that we should follow or should we stick with the same rules that we’ve been doing, like keeping a healthy credit to debt ratio and keeping accounts that are paid off open?
Yeah.  There are so many components that go into a credit score — I think at the last count it was over 200.  And for a consumer to actively monitor 200 or try to you know, eek that last 2 or 3 points of improvement really becomes difficult.  So following the general rule of thumb of not carrying too much debt, making sure your credit reports are accurate, not having too high of a utilization — those general types of tips will be always true.  I think consumers should be more worried about those macro trends, instead of doing X,Y, and Z to get the last three points of improvement.

And is there any advice to someone who’s planning to purchase a house or car this spring, and will need to have a good score?
Yeah.  Well, I think credit scores are more important than they’ve ever been in the last ten years, if you will.  If you’re looking to make a major purchase, I think consumers need to start being aware of their credit scores today.  And anything lower than a 720 for example, on a mortgage is going to be really difficult to get good financing or at least financing at the best rate.  So consumers need to be diligent about monitoring their credit scores probably 6 months to a year ahead of that purchase.  Ideally they’re constantly monitoring their credit score.  They need to be very cognizant of cleaning up their [credit] lines, making sure they’re paying down their debt, and getting to the threshold of 720 plus, so they can get the best rates.

Will consumers be able to get a free copy of their credit score once the majority of the banks transition over to the new scoring model?
Well, this is a really interesting point.  I mean, historically you can only get your FICO score from myFICO.  Experian recently cut off their relationship with them.  So you can only get two of your FICO scores through myFICO.  But even FICO released the fact that they’re actually not planning to release this new FICO score to consumers for another two to three years, so these recent changes kind of, again, support the fact that from a consumer’s perspective, they can’t get too caught up in what they need because they still won’t technically have access to it for a few more years.

Is there anything else you’d like to throw out to our readers?
You know, I think the continuing message that we continue to support is that credit scores are very important for almost every aspect of financial health.  This is a minor change that consumers should be aware of, but they should definitely be aware of those macro level changes in terms of the economy and having good credit.  That’s just one thing that we continue to tell consumers — be diligent about knowing your credit score and really how they work.

Mixing Morals and Debt Management

Getting your debt under control isn’t something that comes easily or quickly.  It’s a long, arduous process, not unlike a diet, that requires constant attention and focus.  For many, it’s the same process that starts and stops each year, a declining goal once the initial excitement has worn off.  But if there’s ever been a year to shore up your finances, 2009 is it.  So to make sure there’s no backsliding, we’ve mixed some time honored morals into the process to help you stay abreast of your financial objectives this year.  Keep reading for four fundamental values and how they should tie directly into your debt management goals.

1.  Discipline

You must constantly keep yourself consistent on monthly payments.  Just like that one slice of pie can throw off your new year’s weight loss resolution, so can one missed student loan payment throw off your debt repay schedule — and mentality.  You’ll make it that much easier for yourself to miss a payment in the future.  The best way to curtail this is to sign up for automated payments.  Don’t give yourself the option of cheating.

2.  Honesty

Being honest with yourself is extremely important not only when paying off debt, but with your personal finances in general.  When I was throwing back payments on my credit card and student loans, I would get a little too optimistic about what I could really afford to chuck at my debt each month.  And in those cases, I would find myself almost penniless at the close of the next pay period because I wasn’t honest with myself about what I could realistically afford to put towards my debt.  It was all done with good intentions, but when those instances occurred, I found myself borrowing $20 or $30 from my savings or overdraft accounts to cover the days remaining til I got my paycheck.

3.  Moderation

You can’t have your cake and eat it too.  If you’re really serious about being in good financial health, you have to make sacrifices.  And with sacrifices comes moderation.  Growing up in a time when a good majority of us were given whatever we wanted, this can seem like a painful cutback.  But it’s worth it.  I cannot count how many times I’ve gone out to lunch and along with a salad or sandwich, have picked up something extra like a brownie or a candy bar — something that pulled an extra couple of dollars out of my wallet just because I thought I may want it later.  It’s not necessary, and those small daily expenses really add up over the long haul.

4.  Dignity

Being financially aware and responsible is something to be proud of.  Rather than hoard worthless material trinkets to feed your pride, focusing on productive and worthwhile goals will give you a higher sort of accomplishment and self worth.  Practicing the art of self-discipline and frugality is difficult enough, but strengthening personal growth endeavors will bring you an unobjectionable sense of pride and accomplishment when you succeed in paying off your debt and reaching your financial goals.

Vanguard on Investing Successfully in Today’s Market

Vanguard has a cool new video series up on their website right now which talks about how to make the most of your investing ventures. Their reassuring voice couldn’t come at a better time, considering many people’s hesitancy to trust the market right now. Read more

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