Posts Tagged ‘debt’

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In need of a hero?

Monday, July 25th, 2011

Holy blazes, Batman, the budget’s gonna bust! We’re zooming toward the debt ceiling, but nobody seems to know what to do..

We need a hero. A Budget Hero!

Luckily, American Public Media put together this awesome widget that you can use to play around with the U.S. government budget, a little bit like our elected officials in Congress do. Cut spending, increase taxes, watch your deficit move around, and learn about what all these cuts and increases mean.

Think you can do better than Congress is now? You just might be… a BUDGET HERO!

Apparently Debt is the New Cigarettes

Thursday, June 23rd, 2011


(photo credit: paalia)

Now, debt isn’t necessarily a bad thing, okay? But this is a little crazy. For the past 25 years, people in their early and mid-twenties have reported feeling a thrill of maturity and self-confidence when they first started to dig themselves into the debt hole.

Whether the money was going toward education or just going into the “I’ll pay for this pizza later” pile, young adults – especially those in the lowest 25% of income earners – said they experienced greater “self-esteem and perceived mastery” when they began to run up a tab.

Some kinds of debt are better than others. In general, debt that can be considered an investment in something – like a home, or an education that can get you a better job – is a good thing. But debt that gets you nothing but fees, interest rates, and a pizza that has long since been digested and forgotten – i.e., credit card debt – is not good.

The most important factor in determining whether your debt is good or bad is whether you’re able to make payments in full and on time. If you don’t, your credit score will suffer and you’ll find yourself on the road to Massive Debt.

Which, by the time you reach 28 (according to the study), will start to make you feel kind of bad about yourself.

One More Thing, Before You Go…

Wednesday, May 25th, 2011


(photo credit: bredgur)

It’s not often that the Wall Street Journal writes for readers under 40, but they just published a really good article with financial advice for the pre-college population. Now, we’re not trying to get all parenty on you, but as pseudo-grownups we can assure you that a little planning goes a long way.* (And it really doesn’t take that much time out of your schedule.) Here are some of the points writer Zac Bissonnette makes:

  • > Debt becomes part of your life once you take it on. If you’re planning to use student loans to pay for school, remember that paying back those loans after graduation means part of every paycheck will belong to the bank.
  • > Speaking of paying for college, do you really need to pay for an ivy league degree? Success doesn’t depend on which school you go to – it depends on the effort you put in.
  • > Don’t get sucked in by materialism. The vast majority of people are not rich but still perfectly happy. But there are a lot of forces around you conspiring to make you feel poor and deprived. Tell them to go away.

(TILE Fun Fact: A small amount of debt can actually help you, by rounding out your credit history and boosting your credit score. But ONLY if you use it responsibly – that means pay it off, and never miss a due date.)

The most important question you need to ask yourself is this: What is this college degree really going to cost me, in terms of my dreams? Maybe you’d like to travel the world after graduation, or take an entry-level job in the nonprofit sector, or buy your first house before you’re thirty. Massive debt can really screw up your plans, so plan accordingly.

* For example, if you chose to invest $1,000 at age 18 and earned a paltry 3% return, you could have $3,500 waiting for you when you’re 60. (And by the time you’re 60, 60 will be the new 30.) All that with absolutely no effort. Well, you do have to take an hour to invest that $1,000 when you’re 18. See what we mean about planning?

Play with your own numbers to see what a little investment today can earn you: Compound Interest Calculator

Accounts Receivable is…

Wednesday, May 18th, 2011

Accounts receivable (A/R) is an accounting term that refers to money someone owes to a store or business. If you buy something from a store, but don’t pay them right away – the amount that you owe goes into the store’s accounts receivable record.

Most large companies have an entire accounts receivable department that is solely focused on keeping track of money owed to the company.

Accounts Payable is…

Wednesday, May 18th, 2011

Accounts payable (A/Ps) is an accounting term that refers to money owed by a person or business to another person or business.

For example, if an office has bottled water delivered each week but doesn’t pay for it until the end of the month, the charge goes into accounts payable until the check is written. Employee paychecks also fall into the category of accounts payable until they are actually given out to employees.

Student Loan Debt Exceeds Credit Card Debt for the First Time in History

Friday, April 29th, 2011


(credit: scui3asteveo)

Q. What’s the difference between defaulting on your student loans and defaulting on your credit card debt?

A. If you fall into a hopeless debt spiral because you can’t pay back your credit card company or your mortgage, you can declare bankruptcy and get a clean credit slate after a few years. If you default on your student loans, you can never escape. Ever.

Unfortunately, it looks like a lot of college grads are about to find themselves with a black mark on their permanent records. Your credit history, unlike that mythical permanent record your teachers threatened you with in 4th grade, can really affect your opportunities in life. It can determine whether or not you get a credit card, a school or car loan, or a mortgage on a new home. Some employers even check credit reports to get the dirt on potential new hires.

Check out this article on good.is for more fun details and a glance at the ever-increasing Student Loan Debt Clock!

See also: this depressing article on “mal-employed” college grads.

Also see also: this list of the “20 most useless college majors,” which shows the limited mid-career earning potential for chemistry majors, among other obvious low-paying career tracks (hello, art history scholars!) Of course, being “useless” financially doesn’t mean your degree of choice won’t make your heart soar like an eagle. We recommend you use your own criteria for success when making major career choices. And don’t default on your student loans.

Rut-Roh: Credit Rating Agency Just Not That Into U.S. Debt Right Now

Wednesday, April 20th, 2011

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(photo credit: striatic)

Well, that pesky federal deficit has finally caught up with us. Standard & Poor’s, a credit rating agency that basically judges how risky (or safe) it is to invest in a country, has officially said that the United States’s economic shenanigans may end up costing it its pristine AAA credit rating. (That’s three A’s, so you know it’s extra awesome.) The main reason? Washington’s seeming inability to agree on a plan to reduce the deficit.

S&P didn’t actually downgrade America’s credit rating, but it did change its “outlook” from “stable” to “negative.” This is basically a shot across the bow, or a warning from your mother that if you keep hanging out with those corner boys all you’ll get is a reputation.

This is kind of a big deal. If the U.S. is downgraded (and according to S&P is could be within three years), we’ll be out-credited by France. And foreign investors might be less interested in buying Treasury bonds, which would cut off an important source of income for the government. Which might result in more cuts to services like health care, education, and, you know, repairing roads.

Let’s see where we are in two years. In the meantime, how do you think you would do in S&P’s eyes?

Can you weather the credit storm?

Family Investors? More Like Donors.

Wednesday, March 2nd, 2011

“Experts generally advise entrepreneurs to ask for an amount that their loved ones can afford to never get back, and say the recent recession is in some cases proving this point.

‘The reality is most companies do not succeed,’ says William D. Bygrave, a professor of entrepreneurship at Babson College who co-wrote a 2010 study on the expectations and motivations of informal start-up investors, including family, friends and strangers.

Dr. Bygrave’s findings show that about half of such investors anticipate a positive return on their investment, while the other half expect to lose part or all it. ‘The closer the relationship between an entrepreneur and an investor, the lower the expected return,’ his research concludes.”

What do you think?

If you borrowed money from a family member for a business venture, how likely would you be to pay it back? Would you sign a formal agreement or try to keep the loan “casual?”

Americans Suddenly Remember They Have Savings Accounts

Thursday, February 24th, 2011

“The recession that just rocked the U.S. economy happened in part because Americans were borrowing and spending more than they could afford. Now, three years after the downturn began, families are moving faster than many analysts had expected to put their finances in order by paying down debt and boosting their savings.”

What do you think?

Are you saving more? Spending less? Do you think saving is good for the economy?

Even if Mom is still doing your laundry, you can always make graphs

Tuesday, February 22nd, 2011

Even if the graphs are, oh, maybe just a little misleading. Take this one, for example. It appears to say that the reason certain European countries are in worse financial shape than others is because more of their men want to stay at home playing videogames.

See? Italy, Greece, Spain, and Portugal are over there on the right, with more of their menfolk living with the parents. And, conveniently, those same countries rank high on the riskiness (a.k.a. sovereign risk) of their government bonds (a.k.a. sovereign debt).

If he lives with his parents, you might want to think twice. About buying his government’s debt. (via The Economist)

But in case your statistics teacher hasn’t drilled this into your heads yet, correlation is not causation. This is a real-world example of that. Just because you can make a chart with a nice line on it doesn’t necessarily mean that one factor causes the other. Think about this:

  • The % of men living with their parents may be another way of describing the % of men who are unemployed (or underemployed). That would certainly be a factor in a country’s financial health.
  • Adult kids living with their folks might be due to a really expensive housing market, which is another factor in a country’s financial situation.
  • The countries with the highest % of men living with their parents all have cultural traditions that encourage kids to stay with their parents until they marry, or sometimes even after.
  • Ireland doesn’t have this culture of stay-at-home-til-you’re-40, but their bonds are still considered risky investments. If you just focus on the red line, you might miss this important point.

In conclusion:

  1. Correlation is not causation
  2. Think before you reblog
  3. If you can’t do either of those things, at least read the comments
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