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7/30/2019 YM Fall09Issue
1/21
fall 2009youngmoney.com
Earn It. Invest It. Spend It. Cdt Caand Std
Loa
digginout o
deb
Th Ky to
Comfotabl Ft
start savin
do ityourselfLvng th Flanc Lf
Making it andkeeping itHp-Hop Fnancal Ltacy
PotYos
geinsure
Make your Moneywork for you
Bdgts and Banks
y l, y M pbs Donald Faison, Host
Special Edition Guide:
7/30/2019 YM Fall09Issue
2/21
4
200olume
ssue
contents
fall
PuBLiSHer
Benjmin P. levy
eDiTOr
Cr Newmn
BuSiNeSS DeVeLOPMeNT
Todd Romer
CTO OF D S GN
Medi Grphics Inc.
ebec fernndez
Published by
Young Money, llC
Ofc (888) 788-4335
Fax (443) 264-0277
advertising Inquiriesyongmony.com/mdakt
ea quartere n unt a ey, ary an , oungoney, was create to c ange t e way
oung a u ts earn, manage, nvest an spen
money. e oung oney e a group ncu es
magazne, .
n ve campus events.
SubscriptionsYOuNG MONeY Magazn
10950 Gloy rd. St D
nt Vally, MD 21031
888-788-4335, xt. 7
agaz ne
(iSSN-1098-8300)
YOUNG MONEY is designed to provide
accurate an aut ortat ve n ormat on reg
t e su ect matter covere . t s presente
un erstan ng t at t e pu s ers, aut or
or a vertsers are not engage n ren ern
nvestment, accountng or ot er professio
servces. ega a v ce or expert ssstan
requ re , t e serv ces o a ompetent pro
s ou e soug t. e pu s er an pu
agents ma e no warranty regar ng t e c
of the publication, and will not be liable for
oss, amage or n ury n any matter ar s n
nc ent to t e use o t e pu caton., nc
consequent a amages.
3 LetterfromtheEditor
4 ItsYourLifeandYourMoney Learn how to manage both
6 MakingitandKeepingIt Hip-hop nancial literacy
8 MakeYourMoneyWorkforY Budgets & banks
11 DiggingOutofDebt Credit cards & student loans
14 StartSavingThe key to a comfortable futu
16 GetInsuredProtect yourself
18 DoItYourselfLiving the freelance life
6 11 14
Coege Journists
Want to wt fo
Yong Mony? Contact:
DonaldFaison,Host
7/30/2019 YM Fall09Issue
3/21
your life, your money on pbs
September 2009
ear Young MoneyReaders,
Financial education for young adults has never been more important. If the current
ecession has shown us anything, its that the lack of nancial literacy has devastating
implications. It is vital that we make a change, and that we make it now. This is why the
Your Life, Your Money and Young Money teams have collaborated to produce this very
special edition ofYoung Moneymagazine. We hope that you nd it valuable and that, at
he very least, it sparks dialogue about the basics of nancial education.
Your Life, Your Money is a PBS television outreach venture aimed at young adults.
ctor Donald Faison hosts the program which features a dynamic group of young adults
rom all over the country. These young adults allowed us a look into their lives so that we
ay learn from their real life personal nance stories.
e invite you to watch the PBS special, Your Life, Your Money, airing on your local
ublic TV station this fall*. We hope that you read this specia edition ofYoung Money
agazine and save it as a helpful planning tool as you confront different nancial topics
and issues throughout your life. In addition, we encourage you to visit the Your Life,
our Money website at www.pbs.org/yourlifeyourmoney for great media clips, tools
and games. We also ask that you help spread the word: tell your friends and family about
hese entertaining and timely resources.
hank you for your interest and most importantly, thank you for taking an important
step toward empowering yourself.
Sincerely,
our Friends at Your Life, Your Money & Young Moneymagazine
*Check your local listings for air times.
Your Life,
Your MoneY
outreach and
ProMotion teaM
National Outreach & Web:
Pml J, P.d.
National Promotion:
Gw Myk
Director of
Communications:
dw MP
teLevision
Production teaM
Producer / Director:
tm sm
Writers:
Jm Bk
tm sm
Editor:
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Segment Producers:
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Production Executive:
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Executive Producer:
J G
7/30/2019 YM Fall09Issue
4/21
Learn how to manage both
every day the news covers stories about the recessiondefaulted mortgages, rising unemploymen
failing bankswe are constantly bombarded with information about the current economic problem
Because of this, the timing of Your Life, Your Money, an informative and entertaining approach
nancial literacy produced by public TV station WNED in Buffalo, NY and Working Dog Productions, could
be better. A broad range of fundamental nancial information is shared through the telling of real-l
storiesreal people with real issues. Financial experts, celebrities, and everyday people contribute th
personal experiences and expertise. From topics such as basic banking, savings, and money manageme
to credit, debt, loans, and insurance, Your Life, Your Money encourages young people to be smart an
proactive when it comes to managing their money.
ItsYourLie
andYourMoney DonaldFais
ByCaraNewman
7/30/2019 YM Fall09Issue
5/21
DonaldFaison
onald Faison, the host of Yourife, Your Money, is known for hisoles in Clueless, Waiting to Exhale
and Remember the Titans but he iserhaps best known for playing theeloved character Dr. Chris Turk on
the popular television series crubs.
ven though he is doing well now, heasnt always famous and he didntalways have money. In the beginningof Your Life, Your Money Faisonsays, When I got my rst big movieole I took that paycheck and boughtyself a shinyew jeep. Man,loved that
car, but by thetime the third
ayment camedue I was outof money and
ad to hustleand try to holdon to it.
o matterho you are,
or where youcome from,you needto learn the
asics. Ifyoure like me,dealing with
oney wasot something
you learned inschool. I pickedit up by trialand error, andm still learning, says Faison.
Whynancialliteracyisimportant
inancial literacy is the understandingof basic money management. It is
important to know where your moneyis going, how to make a spendinglan, and how to manage your debt.
ts also vital that you recognize thateverything in our current economicsystem is intertwined; therefore, some
orld events are likely to affect youersonally.
hen a recession hits, everyone isaffected. When the stock marketdropped, many people lost large
ortions of their retirement savings.his means less people will be able
to retire when they had previouslyexpected. Less people retiring, coupledwith companies cutting back and highunemployment rates, means it willbe harder for new graduates to nd ajob. As if this wasnt enough, incomefor 25 to 34 year olds has declinedfrom 2001-2007, and it doesnt looklike that downward trend is going tochange anytime soon. In fact, 48%of young adults are worried aboutmaking ends meet.
For too long our society has shiedaway from talking about money.Now, we are unfortunately seeing
the results ofour nancialignorance. Itsup to you totake care ofyour life andyour money.
Its also up toyou to learnhow to keepyour nancesin check.These lessonsarent difcult.Financialliteracy isnot rocketscience orbrain surgery,but it is just as
important, ifnot more. If youlearn how tomanage yourmoney nowyoull be better
equipped to deal with the things lifewill throw at you. The producers ofYour Life, Your Money and YoungMoney are here to help. In both the
program and this issue we cover thebasics; you will meet students in debt,young people learning how to save,
and even someone who started his
own business. In fact, this Your Life,Your Money Special Edition Guide isstructured to complement the show.
As Donald Faison tells us in Your Life,Your Money: Its a jungle out there;a nancial jungle. And its easy to getlost, unless you have the skills to ndyour way.
All statistics, young adult voices, andexpert quotes throughout this specialedition are courtesy of Your Life, YourMoney.
If youre like me,
dealing with
money was not
something you
learned in school.
I picked it up by
trial and error, and
Im still learning.
Cara Newman is the editor ofYoung Moneymagazine and YoungMoney.com.
what is the averagedebt of 22-29 year olds?
) $10,250
b) $16,120) $25,175
) $36,250
answer:b
7/30/2019 YM Fall09Issue
6/21
Theeconomytoday:Whatisarecession?
The National Bureau ofEconomic Research denes
economic recession as asignicant decline in the
economic activity spreadacross the economy, lastingmore than a few months.During a recession theGross Domestic Product
(GDP) growth slows,businesses stop expanding,
employment falls,nemployment rises, andousing prices decline.
ecessions have occurred
throughout the history ofthe world.
We are currently in arecession. This recessionstarted in December 2007,and as this is being writtenis ongoing. So, how did thisrecession begin? It startedwith the collapse of thehousing market. Next, bankbegan to tighten the amouof credit they were loaning
Without credit, consumercondence plummeted, anas people purchased fewerproducts, more jobs werelost; as the unemploymentrate climbed people hadless money to spend. As youcan see, a recession can be vicious circle.
Recessions are nowconsidered part of thenatural cycle of the moderneconomic system. Americaisnt the only country tobe plagued by recessions;Germany, the U.K., Chinaand Japan have all been hitby recessions. If one countris in a recession (especiallya key country, such asAmerica) it will affect therest of the world in one
way or another before therecession is over.
P 1907Cause: run on KnickerbockerTrust Company deposits
caused a monetarycontraction
P Wl W ir 1918-1921
ause: hyperinations inEurope, lost production
t end of WWI
t G dp1929-1938
ause: the 1929 Stock
arket Crash, bankingollapse, unemployment
r 1945Cause: demobilizationfrom WWII
r 1953ause: post Korean War,
change in Federal Reserve
policy
r 1960Cause: high unemploymehigh ination, low GNP
Making It
Keeping ItHip-hop fnancial literacy
and
ByCaraNewman
Timeline o 1900s recessions/depressions in history
A recession
is when yourneighbor
loses his job.
A depression
is when you
lose your job.
Anonymous
7/30/2019 YM Fall09Issue
7/21
Whatisnancialliteracy?
Financial literacy is theability to understandnance. It is anunderstanding of spendingplans, credit managementand savings.
In the past decade, nancial
literacy has become moreimportant. The U.S. Treasuryestablished its Ofce ofFinancial Education in
002; and the U.S. Congressestablished the FinancialLiteracy and EducationCommission in 2003. In
006, the Commissionpublished its NationalStrategy on FinancialLiteracy. And on January 22,
008, President George W.
Bush signed an executiveorder creating, for the rsttime, a Presidents Advisory
Council on Financial Literacyto improve nancial literacyamong all Americans.
However, most experts stillbelieve that Americans arenot nearly nancially literateenough. A 2008 survey bythe Jump$tart Coalition forPersonal Financial Literacyshowed that a majorityof high school seniors inAmerica failed a test onbasic personal nance. Theconsequences of this lackof nancial knowledgeare signicant. In fact, ourcurrent economic problemsmay be directly attributedto our lack of nancialknowledge. If people trulyunderstood mortgages,loans, interest and nancing,would they have bought
houses with mortgages theycouldnt possibly afford?
Hip-HopSummitActionNetwork
ussell Simmonsas been calledhe Godfather
of hip-hop; he ishe co-founder of
ef Jam records,creator of theclothing line,
hat Farm, andounder of Rush
Communications,one of the mostsuccessful African
merican-ownededia business
in the country.e is the third
ichest hip-hop
entertainer, withan estimated net-worth of$325 million.
ut Russell Simmonsisnt your typical multi-
illionaire. He is determinedo give back to society. Likehe man who teaches aillage to sh, Simmonsght against poverty and
social injustice involvesroviding young peopleith the skills they need
o manage their ownoney and make their own
educated decisions.
n 2001, Russell Simmonsco-founded the Hip-HopSummit Action NetworkHSAN which puts on the
Get Your Money Rightseminars on personal
nance.
ccording to Simmons,
Financial literacy is notaught in schools, and its
not necessarily handeddown from generation togeneration.
With the backing of Visa,Simmons released theRushCard and BabyPhatRushCard; re-loadable Visadebit cards for people whohave problems getting acredit card account. Thesecards enable their users tobuild up their credit without
going into debt. Simmonssays, I made some badchoices early on, but, Iwas a little conservative, Iwas lucky enough that myparents taught me somethings. You learn aboutmanaging your life, youknow, kind of a trial anderror.
The HSAN brings togetherstars of the hip-hop world,music industry executives
and nancial experts to
1970 l Cause: oil crisis,stagation, Vietnam
980 rause: Iranian revolution,harp increase in oil prices,
high interest rates
1990 rCause: Long-term effects of BlackMonday (October 1987), savings &
loans crisis, beginning of Gulf War,spike in oil prices
ely 2000 rCause: dot com crash,September 11 attacks
rCause: collapse of housing market,tightened credit, banks & nancial
institutions collapse
activity: how much do you know about
Go through this listand make a check inthe appropriate box
g ll
b
g g
by
m l
g
setting a budget
choosing a bank
paying bills online
choosing a creditcard
how compoundinterest works
saving forretirement
health insurance
any other kind ofinsurance
different kinds ofexpenses
student loans
inancial literacy resources
continued on page 13
7/30/2019 YM Fall09Issue
8/21
make your
moneywork or you
Min
inLwinisanengineerlivinginChicago.Hesliving
onhisownforthersttimeandtryingtomanagehismoney.Minsays,TherstthingIdidwhenIgotmy
offerletterfromwork,ImadeanExcelspreadsheetandIsaid,
Okay,thisistheamountofmoneyImgetting.Andthesearethe
expensesthatImgoingtoanticipate.IdecidedIwantedtosave
liketenthousanddollars.Andtoreachthatgoal,thenIdhave
totrytokeepmyweeklyexpenditurestoacertainamount.But
theproblemis,itsreallyhardtoanticipateexpenses.Itsnotlike
yourespendingthesameamounteveryweek.
Budgets and banks
m
By Emily Torres
With any
nancial plan
the bottom
line is relatively
simple: dont
spend more
than what
you make.
7/30/2019 YM Fall09Issue
9/21
Whatisabudget?
A budget is an itemized inventory of income and expensesin a given period. A budget includes:
all sources of monthly income
all required, xed expenses (rent/mortgage, utilities,phone, etc.)
any other possible and/or variable expenses
You can prepare a budget using a spreadsheet, nancialsoftware, or with pencil and paper.
SettingaBudget
he rst step to creating a budget is listing your xedexpenses and your variable expenses. Fixed expenses areexpenses that dont change, such as rent, car payments,or insurance premiums. Variable expenses are expensesthat change according to how much you use them.
xamples of variable expenses are food, clothes, creditcard payments, and entertainment. It is also a good idea todivide your list into wants and needs. Wants could consistof entertainment, trendy clothing, and cable TV. Needs areent, food, gas, electricity and possibly your phone bill.
efore you make your budget, you need to know how muchyou are spending in each categoryyou should not guessor estimate your expenses. To get an accurate picture of
your spending you should keep a money diary. Write downevery thing you spend. You may be surprised to discover
ow much you are paying on little things like coffee andottled water. Once you know how much you are truly
spending, you can easily see where you can cut back, andfrom there you can go on to create an accurate spending
lan.
ts important to realize the difference between wantsand needs. Michelle Singletary, the author of he Power
to Prospersays, Anytime you go shopping you should askyourself, is this a need or a want?
A budget makes it easier to keep track of your bills and paythem on time. It will also help you to set nancial goals andactually reach them.
When you are rst starting out in life, its hard to always bepractical. It is way too easy to buy things on impulse. You
dont have to nickel and dime every part of your life, buttaking a minute to check yourself when buying anything isgood practice. Take the advice of Michelle Singletary, Everypenny ought to have a purpose.
It is important to build a contingency plan, or emergencyfund, into your budget. If you lose your job, youre going tohave a hard time making ends meet without a paycheck.A typical emergency fund should cover your expenses forthree months.
With any nancial plan the bottom line is relatively simple:dont spend more than you make. How can you be sure thatyoure not making this mistake if you dont keep track ofwhats coming in and whats going out?
It takes dedication and it does take time, but keeping trackof your money can bring you rewards that will last long into
your life.
Every penny ought to have
a purpose.
Michelle Singletary
n lw mmm bl
atM wk m
Py
cmp g
ol
what to look for in a bank
setting a budgetsp m w
c pg pl
7/30/2019 YM Fall09Issue
10/21
Choosingabank
ith your rst job comes your rstpaycheck. You will need a bankaccount to cash your check or depositit. When searching for a bank, thinkabout what you want and need froma bank. Are you going to bank online?Do you need a bank with ATMs and/ora main ofce close to your house? Doyou want free checking? Make a listof everything you want and need in a
bank. Next, add these items: no or lowminimum balance, interest rates, anda list of fees.
When Min was looking for a bankhe was looking at interest ratesand maybe any kind of benets orbonuses.
Some online banks may have better
interest rates, but you wont be ableto go into an ofce. You need to
decide what matters to you. Mosttraditional banks also have onlinebanking. You can do most of yourbanking online: pay bills, transfermoney, and check your statements.No matter what type of bank youdecide to use, its a good idea to payyour bills online. Paper statementscan be easily stolen, and with themyour identity.
You may want a checking accountthat comes with a debit card. A debitcard is like a credit card, except thatthe money automatically comes outof your checking account. When facedwith the debit or credit question you
should answer credit. The moneycomes from the same place, but yourPIN number cannot be accessed byidentity thieves. Also, your friendlyshop clerk is charging you an extra 50cents each time you say debit. Thosesmall charges really add up.
When you are just starting out it isimportant that you choose a bank
account with no, or a low, minimumbalance. You dont want to get hit
with high fees if you go under theminimum.
You may also want to consider a crediunion. A credit union differs from abank because credit unions are ownedby the members who have accountswith the credit union. In other words,a credit union is owned by you.Credit unions may have lower feesand better loan rates. Many creditunions are smaller than banks, butthey often offer the same nancialservices; including savings accounts,checking accounts, credit cards, debitcards, online banking, and certicatesof deposit. Credit Unions are insuredby The National Credit UnionAdministration (NCUA), the federalagency that administers the NationalCredit Union Share Insurance Fund
(NCUSIF). The NCUSIF, like the FDICsDeposit Insurance Fund, is a federalinsurance fund backed by the U.S.government. As long as you choose abank or credit union that is either FDIor NCUSIF insured, your money shouldbe safe if anything happens.
Emily Torres is a San Francisco-based writeshe has written for Salon.com, YoungMoneycom and many other publications.
activity: make a budget
1.
3.
5.
7.
I decided I wanted to save like ten
thousand dollars. And to reach that goal,
then Id have to try to keep my weekly
expenditures to a certain amount. But the
problem is, its really hard to anticipate
expenses. Its not like youre spending thesame amount every week.
budgetguidelines
30%
g
20% y
mly
k-m
py b
pym
10% g
7/30/2019 YM Fall09Issue
11/21
Creditcards
Our rst experience withdebt is usually throughcredit cards. Theyre easy,convenient and spend justlike cash. But as FloridaState University studentAmanda McCormick foundout, credit cards can also
be dangerous. Amandaused her new credit card topay for college necessitieslike food and books, butshe quickly found herselfin serious debt. Sheremembers the day shereceived her card, Theysent it to me in the mail. I
activated it in 45-seconds,spent money on it twentyminutes later. Over thenext six months, betweenve cards, she spent lessthan $4,000, but aftercompiling interest, late fees
and penalties, she foundherself over $30,000 indebt. Amandas story is notuncommon. In fact, 66%of college students have acredit card and the averagegraduating student hascredit card debt of $2,623.
Amanda could have avoideda considerable amount ofdebt if she had selected acredit card that was a littlemore user friendly. As
DiggingOut O DebtCredit cards & student loans
Amanda McCormick
By Matthew Brandeburg
Deferment: time
period in whichpayments are notrequired
Forbearance:temporarily stopsloan paymentsbecause of nancialhardships
Debt is a four-letter word we all have to face. Any time we spend more
than we make, were probably making up the difference by gaining
some debt. Its a common problem, yet its something many of us
know very little about. For example, did you know that having some debt
can actually be a good thing? Did you know that the way you manage debt
affects your credit score? Do you know what your credit score is? These
are just a few of the questions you should know the answers to, but more
importantly, theyre questions you should be asking yourself.
7/30/2019 YM Fall09Issue
12/21
Beth Kobliner, authorofGet a Financial Life,points out, When yourecomparing credit cardoffers, you want to getthe lowest interest ratepossible, and you dont
ant to pay annualfees. Also, make sureyou read the ne print
to understand how yourinterest rate can changeand what your APR is.APR stands for annualpercentage rate, and itshows your monthly feesand rates in annual terms.Make sure when yourecomparing credit cardsyoure always comparingthe APRs.
he two most important
rules to using credit cardsresponsibly are to alwayspay your balance on timeand to watch how muchyou spend. These mayseem like easy concepts,but an MIT study showedthat when credit cardsare used, consumers tendto spend anywhere from30% to 100% more than ifthey used cash! The key tosmart spending is to resist temptation
and make sure you only buy what youhave enough cash to pay for whenyour bill comes.
If you nd yourself in credit carddebt, take a deep breath. Fortunately,theres plenty of help available.If youre in debt, try contacting aconsumer credit counselor who willhelp you explore your options andform a payment plan. Thats whatAmanda McCormick did when she
found herself $30,000 in debt andwithout any foreseeable way of
paying it off. She met with consumercredit counselor Duana Palmer whowas able to help Amanda work withher creditors to reduce her interestrates and consolidate her bills intoone monthly payment. By followingDuanas plan, Amanda was able tostart chipping away at her debt so itwont follow her through her life. Evenpaying as little as $10 more than theminimum monthly payment couldsignicantly reduce the length of time
it will take for someone tobecome debt free.
Studentloans
Remember, not all debt isbad. Take student loansfor example, they allowyou to get an educationand increase your earningspotential. With so manydifferent types of studentloans available, this typeof debt can be confusing.To simplify student loansyou should rst learnthe two basic types ofloans: subsidized andunsubsidized. As FinancialAdvisor Peter Bielagusexplains, Subsidizedstudent loans arethose loans where thegovernment is paying the
interest while you are inschool. These types ofloans are more attractivethan unsubsidized loans,where the interestcontinues to accrue evenwhile youre still in school.Peter explains that havingan unsubsidized loancould mean that a $10,000loan taken out during your
freshman year could grow to $14,000by graduation day. Because so much
money is at stake, its important toknow what your monthly paymentwill be on your student loans whenyou graduate. According to Peter,this is crucial because when youreapplying for your rst job, you need toknow if the salary youre being offeredis enough to cover the loans youvetaken out.
Creditscore
Between student loans and creditcards, many young people ndthemselves in signicant debt as theyenter the real world. This debt willimpact the rest of their lives becauseits reected on something veryimportantyour credit score. Yourcredit score contains the history ofevery credit relationship you have,including credit cards, student loans,car loans, home loans, etc. The goalis for your credit score to be as highas possible, and as you pay your billson time, your score improves. If youmiss a payment or max out your credit
activity: manage your debt (example)
name of debt unpaidbalance
interestrate
order topay off
visa $18,000 11.99% 2
american express $8,000 14.99% 1
best buy $3,000 1.99% 5
car loan $6,000 .99% 3
student loan $25,000 6.80% 4
total $60,000
In order to manage your debt effectively, you rst need to getorganized. Try this activity, which will help you calculate your totaldebt and form a plan to pay it off efciently. Fill out the table aboveand rank your interest rates from highest to lowest. This becomesthe order that you should pay off your debt.
activity: manage your debt
name of debt unpaidbalance
interestrate
order topay off
what tolook for ina credit card
Lw
n l
n pl
g
7/30/2019 YM Fall09Issue
13/21
cards, your score suffers. Banks and lenders use yourscore to determine your level of credit risk. A high creditscore means you are a low risk and you will subsequentlybe charged lower interest rates on your loans. As PeterBielagus explains, Maybe tomorrow, you and I bothgo to buy the exact same car on the exact same day.Because of my terrible credit score, I will pay $7,000 moredollars in interest to buy that car than you will, simply
because of this one number. Because your credit scoreis so important, you need to check it regularly. In fact,youre entitled to receive a free copy of your credit reporteach year; you can get this at www.annualcreditreport.com. You can also visit the three reporting bureaus:TransUnion, Equifax and Experian.
Remember, you want a high credit score and low to nodebt. The next time you think about using your creditcard, think about Amanda McCormick. She is still tryingto dig herself out of debt. However, her experience hastaught her a lot. According to Amanda, The simpleststructure is always the best; spending money you donthave just complicates things.
Matthew Brandeburg, CFP has six years of fee-only nancial planningexperience and runs his own nancial advisory practice based inColumbus, OH.
help young people learn that managing their money isan essential life skill. According to the HSAN website,The HSAN uses the cultural relevance of hip-hop musicto serve as a catalyst for education advocacy and othersocietal concerns fundamental to the empowerment ofyouth. In addition, they foster the belief that hip-hop is
an enormously inuential agent for social change, whichmust be responsibly and proactively utilized to ght thewar on poverty and injustice.
Dr. Benjamin Chavis, the President and CEO of the Hip-Hop Summit Action Network, and a 40-year veteranof the Civil Rights Movement, says, When we rststarted the Hip-Hop Summit, we found out we hadunderestimated the readiness, the thirst and hunger of
young people for this material.
You know, no matter how rich you are, you need to beable to afford your lifestyle, says Simmons. The summithas given many people their rst steps. They come outempowered, connected, feeling like they can get theirnancial situation in order, get their house right, or theirmoney right.
Cara Newman is the editor ofYoung Moneymagazine andYoungMoney.com.
Statistics and quotes courtesy of Your Life, Your Money.
Making it and Keeping ItContinued
Maybe tomorrow, you
and I both go to buy the
exact same car on theexact same day. Because
of my terrible credit
score, I will pay $7,000
more dollars in interest
to buy that car than you
will, simply because of
this one number.
Peter Bielagus
When we rst started
the Hip-Hop Summit,
we found out we had
underestimated the
readiness, the thirst andhunger of young people
for this material.
Dr. Benjamin Chavis
7/30/2019 YM Fall09Issue
14/21
Balancing school,busy social livesand budding
careers may makesaving money thelast thing on theto-do list of most20-somethings, butaccording to experts,young adulthood is theprimetime for planninga secure nancialfuture.
D. Woods, a memberof the platinum-sellingpop group Danity Kane,moved back home tolive with her mother soshe could start savingmoney. Even thoughthe success of DanityKane brought Woods
some fame, she wasstill working on makingher fortune. Mymother denitely satme down when I gotmy rst big check, andshe said, Take this andput it over here, forgetthat you even haveit. And it denitelycame in handy becausethere was a big dryspell, and it was scary,
says Woods. To makesaving easier, sheorganized her moneyinto three differentbank accountsachecking account, asavings account, andan account at a creditunion. She also putsome money into CDswhich she cant touch,but earn her moreinterest.
Any nancial plannerwill tell you that thosewho start saving earlybenet the most; theyare putting time ontheir side. Just ask yourparents if they aresaving for retirement
The key to a comortable uture
Maria Cortez
By Shawna Kenney
$tartaving
7/30/2019 YM Fall09Issue
15/21
and when they beganthen ask themif they wish they had started savingearlier. Many of us can learn from our
arents choices, both good and bad.Maria Cortez, for example, is partowner of her familys restaurant in
ew York City, which has caused herto think about her own future.
My mom just showed me what shesgoing to be getting for Social Security,and honestly, its very little, she says.I want to be in a better situation.Cortez sought the help of a nancialadvisor to help plan for her parentsetirement as well as her own.
According to Greg Plechner, aetirement Advisor and Director ofinancial Planning for Greenbaum
and Orecchio, Inc., there are two
approaches to saving for retirement:One approach is to open up aetirement plan through yourusiness. Alternatively, you can
establish an IRA account.
Stuart Ritter, who works as a Certiedinancial Planner at T. Rowe Price and
as an Instructor of Personal Financeat Johns Hopkins University, tells hiscollege students, Its easier to save
now, as a youngperson, because theamount you have toput away if you startearly is smaller. Asyou get older, youllhave actual nancialresponsibilities, whencurrently they mayonly be pizza andbeer. He suggestssaving 10-15% ofyour income forretirement using anIndividual RetirementAccount (IRA) or Roth
IRA (which are not tax-deductible,but usually have fewer withdrawalrestrictions). IRAs allow you to setaside money each year that will
accumulate interest tax-free or tax-deferred.
Another option is to participate inyour companys 401(k) plan, if oneis offered. A 401(k) is an employer-sponsored retirement plan. Theseoften offer a company match, whichmeans the company matches part,or all, of what you put in. This is free
money, so if your company offersa match you should denitely takeadvantage of it.
In addition to saving for retirement,most experts suggest that everyoneshould have an emergency fundconsisting of at least three monthsworth of living expenses. You shouldbe able to get your money if you
Y p ira w ll $100.
starting early can make a big difference
Comprinci dinter esan a sayat ag n.By th 0inves
COMPOUND INTEREST CHART
c g Y l
g 65
Bl
g 65
c
wg ll
c
wg %*
20 5 $159,602
30 35 $73,927 $85,676 54%
$34,242 $125,360 9%
50 15 $15,861 $143,741 90%
Rate of return: 8%*How much less money you have than if youd started at age 20
c g Y lg 65
Bl g 65
c wg
ll
c wg
%*
20 5 $1,932,528
$861,584 $1,070,944 55%
40 25 $365,530 $1,566,998 81%
50 15 $135,761 $1,796,768 93%
Rate of return: 8%* How much less money you have than if youd started at age 20
singlecontributiono
f$5,0
0
0
annualcontributionsof$5,0
00
D. Woods
s gly
c mgy
i m
g
7/30/2019 YM Fall09Issue
16/21
I
f you live in the U.S. and want to protect your nancial future, get good health
insurance. Barely anyone in this country (besides the extremely wealthy, likeBill Gates) can afford a major medical crisis without health coverage. The
biggest reason people go bankrupt, says nancial counselor Ann Diamond, is
because they had a health emergency and the bills were so overwhelming that
theres no way they could possibly pay them. A Harvard study published in
2005 found that medical expenses contributed to 50 percent of all bankruptcy
lings. Every 30 seconds someone in the U.S. les for bankruptcy following a
costly health crisis.
Rochelle James is now an electrician with a union job, but things werent always so good for her.
I didnt come from a poor background, she says. But because of unfortunate circumstance, Idid end up at the very bottom.
Every 30
seconds
someone
in the U.S.
les for
bankruptcy
following a
costly healt
crisis.
GetInsured
ProtectyourselBy Lisa Montanar
Rochelle Ja
7/30/2019 YM Fall09Issue
17/21
Insurance
Its amazing to me, says Beth Kobliner, author ofGet aFinancial Life, that with all the talk in our country abouthealth insurance, 20 million people age 18 to 34 still donthave it. Its a huge problem. You may think you dontneed health insurance because youre young, but youprobably know or have heard of someone who received anunexpected diagnosis or had an accident that led to massivemedical expenditures. Its unsafe to assume this can never
happen to you. Were all at risk, and insurance allows us tomanage our risk: we agree to a small guaranteed loss (themonthly premium we pay the insurance company) and inreturn, that company protects us against a huge unforeseenloss that might ruin us nancially.
Then why stop at health insurance? Why not auto insurance,life insurance, pet insurance, kidnap and ransom insurance,and any number of other bulwarks to save us from thepoorhouse?
You dont need insurance for things you dont have or near-impossible disasters. Volcano insurance probably doesntmake much sense, unless you live in Hawaii, and you dontneed crop insurance if youre not a farmer.
But what cant you afford to lose? Here are some kinds ofinsurance you may need as a young adult living in the U.S.
Healthinsurance
As we said, youneed it. If you workfull-time, youremployer mayprovide healthinsurance through a group plan. The way this works isthat every member pays a premium, and the premiums of
those who dont have high medical expenses help cover thecost of those who do. If youre self-employed, youll needto nd and purchase your own health insurance throughan individual or group plan. Many individual plans dontcover pre-existing conditions, which can include anyhealth issue that requires medical treatment before thedate your new coverage starts. If youve had no recent orchronic health problems requiring medical attention, youmay be ne with individual insurance. But most individual
plans exclude people with certain pre-existing conditionsthat may cost the companies millions of dollars. Read thene print carefully. If you have one of these conditions,your best bet may be to join an organization or union(such as the Freelancers Union) that offers a group plan.Health insurance policies vary widely, so be sure to read thebenets carefully. Dont just get the plan with the cheapestpremium. A policy with a $10,000 deductible wont help ifyou cant come up with $10,000 out of pocket.
Dont forget about dental insurance. Many employersno longer offer dental in their suite of benets. Do some
research on how much a cleaning, check-up and lling willcost without it, and then decide if you need it. Even if younever have a major mouth problem, everyone needs theirteeth cleaned at least once a year.
Disabilityinsurance
If youre like most of us, your most valuable asset is notyour home or your car, but your capacity to work and earna living. The U.S. government provides Social SecurityDisability Insurance (SSDI) and Supplemental SecurityIncome (SSI). These two programs would ideally provide asafety net for every citizen who is disabled, blind, or over 65
renters insurance
Average annual cost: $150-$300
Average coverage: $35,000
continued on page 21
Its amazing to me, that withall the talk in our country
about health insurance,
20 million people age 18 to
34 still dont have it. Its a
huge problem.
Beth Kobliner
1 3 yg l lkl
$3,300: g pl
7/30/2019 YM Fall09Issue
18/21
n todays bleak job marketany people who never
considered self-employmenefore are venturing out
on their own. These newlyinted entrepreneurs haveuch to learn about the
freelance life, including howto nd their market, attractegular stream of clients, do
their taxes, and ensure thatthey have the best possibleealth insurance.
Self-employment can beanything from working as afreelancer (or a contractor)to starting your own
usiness. While there areany differences between
eing a freelancer andowning a business, bothof them involve makingopportunities for yourself
and being smart enough toandle your nances.
im Bouchard, a Webdesigner in Buffalo,
ew York, started hisown business before theecession, but hes still
discovering the ins and outof self-employment. WheTim rst graduated fromcollege, he got a job wita Web design rm. But
after learning the tricksof the trade, he explainI decided to break offinto my own businessbecause I personally lovehaving creative controland a close relationshipwith the clients fromstart to nish.
Tim is in the process ofbuilding his clientele.One disadvantage of
self-employment is thatyou dont always know
Remember the old, pre-recession days when the career gurus asked, Are
you living for your passion or your paycheck? Rocketing layoffs havechanged the nancial landscape and posed new questions: Are you
living from unemployment check to unemployment check, or are you using
your new free time to turn a hobby you love into the career of your dreams?
diy
op Wyedia
B & JyIce Cream
Pbl PPainter
My Ky a osmetics
(Mary Kay)
P.t. BmEntertainment
(Barnum &Bailey Circus)
Blonstruction
J BzInternet (Amazon)
amous reelancers
Living thereelance lie
: , :
al alyDance
:
7/30/2019 YM Fall09Issue
19/21
where your next paycheck iscoming from. The workowisnt always consistent. Ispend about 20 percent ofmy week searching out newjobs.
Entrepreneurs also haveto manage their ownbusiness nances. Thismeans knowing your dailyoperating costs. For instance,Tim has to make sure hisWeb design company, SharpCut Media, has the mostup-to-date technology andsoftware. He also pays forcopy paper, gas mileage,Web hosting, and manyother necessities that hisemployer would cover if hestill worked for a Web designrm.
Since self-employed peoplehave to spend moneyto make money, the IRSallows them to deduct theirbusiness expenses fromtheir gross income, butthey also have to put asidepart of their gross incomefor taxes. When you workfor an employer, you paysome taxes automaticallyas you earn money: partof your income is withheld
from each paycheck to coveryour taxes, social security,
Medicare,and possiblyyour healthinsurance.
hen youwork foryourself,nothing iswithheld.You haveto keepmeticulousrecords ofyour income and businessexpenses. If the IRS thinksyou owe them more thanyouve paid, they may audityou. Its a pay-as-you-gotax system, explainsWashington Postpersonalnance columnist MichelleSingletary. The governmentwants their money as you
earn your money. If you havenot paid enough into thetax system based on yourincome, you are penalizedfor that. The IRS does notplay. They will come afteryou, and the penalties fornot paying are stiff.
Freelancers are generallyadvised to save a thirdof their gross income fortaxes. Tim puts aside 30 to
35 percent for taxes and 15to 20 percent for business
expensesand healthinsurance.His father,a certiednancialplanner,advises himto save 10percent for
retirementas well. Ifyoure self-
employed,you also have to provideyour own pension. You donthave an employer who offersyou a pension and 401(k)plan and directly depositspart of your wages into yourretirement account.
Freelancers have to keeptrack of their own money,or hire someone to do itfor them. Some freelancersare great at saving andinvesting, but many hireaccountants and certiednancial planners to helpwith ling taxes, investing,and saving for retirement.
Health insurance is amongthe thorniest challengesfreelancers face. When youwork for yourself, there are
no pre-selected employerhealth plans you can signup for, you have to scoutout your own. You have theoption of applying for anindividual plan, or joining aunion or organization thatoffers a group plan like theFreelancers Union based inNew York City).
hether you are workingfor yourself or as part of
a company, what mattersmost is that you are happy.
Everything is an opportunityfor us to better ourselves.
he important thing ishat you do with the
opportunities you have; ifyou continually aspire upyou will prosper.
As Tim Bouchard says, I livea life of not knowing what I
ill make in two months orhat I will be working on.
You could say that it is theultimate motivational tool. I
ork more hours than I usedto, but I do get the exibilityto work those hours intomy day as I see t. Everyoneloves feeling accomplishedin one way or another, I amno different.
Visit Tims site atww.sharpcut.net
Melicia Trumball has been self-employed for more than 10 years.
l BlmbgFinancial Information
r BVirgin Group
aw gteel (US Steel)
d bb flookies
(Mrs. Fields)
Wl dyEntertainment
Bll Goftware
(Microsoft)
dl d fClothing (Gap Inc.)
activity: are you living for your passionor your paycheck?
set aside 30% for taxes
15% for businessexpenses andhealth insurance
10% for retirement
SampleExpenses
Ofce supplies:$150/year
Latest software:$200/year
Ofce equipment:$2,000
Mileage: $50/month
Web hosting:
$220/year
7/30/2019 YM Fall09Issue
20/21
need it, while it is also earning someinterest. If you hide your savingsunder your mattress you will actually
lose money in the long run due toconstant ination. Your best bet is toopen up a savings account or CD.
Beth Kobliner, author ofGet aFinancial Life, explains that, a CD, orcerticate of deposit, is like a savingsaccount, except that you promiseyoull keep your money in for a setlonger period of time. Because ofthis promise, the interest rate on a
CD is usually higher than that of a
bank savings account. Whether youare considering putting your moneyinto a savings account or a CD, make
sure the nancialinstitution is FDIC-insured. This meansthat the governmentis insuring yourmoney up to a setamount, and if yourbank goes out ofbusiness you wontlose your savings.Currently, the basicinsurance amountis $250,000 per
depositor, per insuredbank. Check FDIC.gov
for the most up-to-date information.
Putting money aside doesnt have tobe painful. Ritter suggests everyonetry saving 15% of their monthlyincome for at least three months, asa test. This isnt as hard as it sounds,think about it this way: if you putaside 5% of your paycheck each monthand your company matches you 5%,you are already saving 10%.
percentage youll need to save for retirement
____________
Amount you have
already saved for
retirement:
____________
Annual salary:
Round this number
to the nearest
multiple below____________=
Multiple:
Example: If you are 35 years old and have already saved half of your salary (multiple = .5), you
need to save at least 15% of your salary each year from now until your retirement date.
ve already saved, assuming you retire at age .
ax-deferred account before retirement. When you retire, it assumes your initial withdrawal amoun will be 4% ofyour alance a t a t me.
Curren
tage
MULTIPLE OF AMOUNT OF SALARY ALREADY SAVED
25
30
35
4045
50
55
10%
14%
18%
25%37%
56%
95%
8%
11%
15%
22%33%
51%
89%
5%
8%
12%
19%29%
47%
83%
3%
5%
9%
15%25%
42%
77%
-
2%
6%
12%21%
38%
71%
-
-
3%
9%18%
33%
65%
0x .5x 1x
-
-
-
5%14%
29%
59%
3x2.5x2x1.5x
If youre in thisrange, yoursavings strategyis on track.
its never too early to start saving for retirementJust remember, these days, there arefew sources of retirement incomeother than your own savings. StuartRitter reminds us that, there are noloans, scholarships or work-studies inretirement. You might be able to workbut thats about it.
Shawna Kenney is an author, freelance writerand writing instructor. She co-teaches onlinewriting workshops at www.lifesabitchbooks.com. Her works have appeared in Veg News uxtapoz, Transworld Skateboarding, and the L
eekly among others.
harts courtesy of T. Rowe Price.
inancial terms
activity: make a budget
1.
2.
D. Woods at the recording studio
start saving Continued
7/30/2019 YM Fall09Issue
21/21
and uninsured or underinsured. But the monthly stipends areso low that many people cant get by.
Many employers offer optional disability insurance for asmall fee. Its usually worth the cost. As a general rule, youshould keep enough money in savings to cover your livingexpenses if you cant work for three months. But what if you
eed more time to recover, or become permanently disabled?Sometimes even minor accidents cause debilitating painthat makes it hard to get to work or do your job, and itseassuring to know that if you cant work for a long time, you
ight still receive 60 percent of your income. If youre self-employed, some insurance companies offer individual plans
and some unions and organizations that offer group healthinsurance let you opt for disability insurance as well.
One major issue with disability insurance is that mostdisabled people want to continue working in some capacity,and most disability plans penalize you for working. Onlyown-occupation disability insurance allows you to claimdisability if you can no longer work at your regular job, butchoose to do something else.
Lifeinsurance
Life insurance is primarily for people who are nanciallysupporting children, spouses, domestic partners, disabledpeople, or older adults. If no one depends on you earningincome, you probably dont need life insurance.
AutoinsuranceAlmost all states in the U.S. require car owners to haveauto insurance, though states vary in the minimum levelof coverage set by law for liability insurance. Some statesrequire you to show proof of nancial responsibility if youchoose not to purchase insurance. If you drive, but dont owna vehicle, its still wise to have insurance in case you have anaccident when youre behind the wheel of someone elsescar.
Rentersinsurance
If you rent an apartment and dont own anything of value,
you may not need renters insurance. But if you have a brandnew LCD HDTV or other expensive property, you mightconsider this kind of coverage. Estimate how much your stuffwould cost to replace, because this will determine the cost ofyour premium. Some landlords require you to have it in caseof an accident, such as a re or overowing bathtub.
Lisa Montanarelli is co-author, most recently, ofThe First Year Hepatitis C:An Essential Guide for the Newly Diagnosed.
activity: research a type of insuranceyou dont have. i y l, .
Questionstoaskwhenshoppingforanindividualinsuranceplan:
e requ re o prov e
get insured protect yoursel Continued
Rochelle James at work
other types of insurance to consider:
homeowners insurance:Necessary if you own your own home.
laptop insurance:Your renters or homeowners insurancemight cover a stolen laptop but what if youdrop it, or it gets stolen outside your home?
identity theft insurance:
It might not be worth the cost, but if youare really worried ask your bank or nancialadviser.
pet insurance:If you have a dog or cat you should lookinto this. Pet insurance premiums areusually low. Hopefully your faithfulcompanion will never need hip surgery ordialysis, but even regular visits to the vetcan be expensive, and pet insurance canhelp you cover a large part of the cost.