Thursday, June 28, 2012


There is a guy in my law class who consistently drives me crazy. He's always making comments that are either extremely specific and related to a topic that does not pertain to anything we are talking about or are so loaded with opinion that it is uncomfortable.

Naturally, at the beginning of class today, my teacher was chatting about the Supreme Court ruling on Obamacare. He was merely talking to us about what grounds the Supreme Court upheld it on. In the constitution, Congress is given specific powers, and they aren't supposed to do things outside of those realms. Since this is a law class and we have been learning about these concepts, my teacher was explaining that the Supreme Court's rationale in saying that Obamacare is OK was based on the fact that the US Constitution gives Congress the power to tax.

Out of nowhere, this annoying kid spouts off his opinion. "I just don't know what to say to people who like Obama. They actually like Obamacare! I mean, are you retarded???? It's so dumb. OK, they can say people can't afford health care, but really yes you can if you just get a job. Then they say some people can't get a job, and that's just ridiculous. I know that's not true because I know tons of people who are too lazy to get jobs or aren't willing to take a job that is beneath them to provide for their family. They'd rather be on welfare. I mean, come on, get off your butts!!"

In a room full of people who probably feel the same way as him, I didn't have the guts (or the time, in my defense) to put this guy in his place. He made me so mad though. I notice this all the time at BYU. I think it's because the vast majority of students are conservative, so they feel comfortable stating their opinions as fact. Anyways, in response to Mister Obnoxious:

First of all, using the term "retarded" to describe something that you think is stupid is NOT OK.

Second of all, who are you to think you have everything figured out? Oh, clearly if you disagree with something you must be right - everyone who thinks differently from you must be intellectually inferior! Gee, why don't we just entrust the future of our nation to you, since you so clearly know all the sides of the situation and can prescribe the proper treatment. Apparently the general population and the leaders of our country don't know you exist, or else they would definitely reform the government and have you make all the decisions.

Finally, the national unemployment rate is currently 8.1% and has been as high as 10% within the past few years. This is a lot higher than anyone would like to see it (although, might I add, is nowhere near Spain's rate of 24.3% - yikes!) This statistic is computed including only people who are unemployed and have been seeking employment. I'm sure there are people who are lazy and don't get jobs. But how dare you group every unemployed and underemployed person in that category.

Basically, I don't care if you are conservative or liberal or somewhere in between. Have the decency to realize that there is a rationale behind both sides of the spectrum. Don't assume that just because something seems right to you means that you are right or that the other side doesn't have a good point. Of course you won't agree with everyone on everything, but don't act like you are the supreme authority on what is correct.


Friday, June 22, 2012


I honestly really struggle with the concept of budgeting, mostly because it consists of so much prediction. I never know what expenses are going to come up - sure there are the regular things like gas, groceries, rent, tuition. But how do I estimate when I'm going to run out of shampoo/need new underwear? I used to not think budgeting was necessary, but if you are serious about saving money, you really need a budget!

I think the most important part of budgeting is just tracking your expenses - what are you buying? How do you know what you can afford when you don't even know what's going on with your money? You can do this manually on a piece of paper or use an electronic service that tracks your expenses automatically. is an example of a free website that links to your debit/credit cards to help you analyze your spending. Quicken is a (not free) software that also links to your accounts. You might even be able to use your bank website. Sometimes we don't realize how much money we're spending on things like restaurants, new clothes, vending machines, etc. When you start tracking your expenses, you get a better idea of where your money is going and where you can cut back. Are you spending so much money that you don't have anything left to put into savings? Tracking your expenses also helps you estimate future expenses.

The old way of budgeting was to save whatever portion of your income wasn't spent. My personal finance professor taught us what he called "the better way to budget." In this method, you pay the Lord first (tithing) and pay yourself second by setting aside a set amount of your income for savings. Then you allocate the remaining income to your expenses. Everyone has to start somewhere. If you're living paycheck to paycheck, find a way you can cut back on even $5-10 per paycheck. Saving to buy the things you actually want is more fulfilling that wasting your money on things you don't really care about. Getting in the habit of saving money now will help you start saving for retirement and other goals as well. Start saving now, no matter how little it is! Don't think that it's not worth it to only save a little bit. Financial freedom is more the result of decreased spending, not increased income. Make saving money a conscious effort.

Dave Ramsey has a method for budgeting where he says "give every dollar a name." In other words, whenever you receive income, sit down and break that income up into what you're going to spend it on. For example, if your paycheck was for $700, you would say $550 is for rent this month's rent, $70 is for tithing,  $40 is for groceries, the rest is for savings. This method doesn't really work for me. Sometimes, our paycheck doesn't cover all the expenses we need for that two week period so we end up spending more than we made  for that paycheck, but our expenses will be lower for the next two week period so it all balances out over the month. I prefer to take a big picture view of budgeting and this way feels too stifling to me. But I know several people who budget this way and have great success. I think this way is great for spenders who really need to discipline themselves or people who have a lot of regular monthly payments (rent, car payment, phone bill utilities, etc). Dave Ramsey's website has some cool forms you can use to budget:

Another way to budget is to sit down in advance and estimate your upcoming income and expenses. You can do this weekly, every two weeks, monthly, every two months, etc. I like this way a lot better because I get to choose how often I want to make estimates. I can even estimate for the whole year to see if I will have enough many for big future expenses (such as tuition). This method still involves a lot of estimation, so it can still be tricky. I've gotten better about estimating our expenses but I'm still off by quite a bit each month. I used Quicken software for this, and I really enjoy it. If you're willing to shell out the money, Quicken runs from $50-100 based on the version you get.

This is what Quicken looks like:

Screenshot showing part of our future income and expense estimates:

Screenshot showing how we are doing this month

Next personal finance post: I've been saving money .... now what do I do with it?

Thursday, June 14, 2012

Plan for your financial future

"Plan for your financial future. As you move through life toward retirement and the decades which follow, we invite all . . . to plan frugally for the years following full-time employment. Be even more cautious . . . about “get-rich” schemes, mortgaging homes, or investing in uncertain ventures. Proceed cautiously so that the planning of a lifetime is not disrupted by one or a series of poor financial decisions. Plan your financial future early; then follow the plan" 
(“To the Elderly in the Church,” Ensign, Nov. 1989, 4).

Now is the time to plan your financial future. The best place to start is by deciding what you want out of life. How can you motivate yourself to save your money when you don't know what you're saying for? Why do you want to be financially self-reliant? Do you want to retire at 50? Do you want to pay off your house in 20 years rather than 30?

What are your goals? Most goals have a financial element tied up in them - it's important to know what you are working towards or you might miss the mark. I find that when I go through life without setting goals, I'm often disappointed when I look back. I wish I had accomplished more. By setting your goals now, you can avoid that. Write your goals down - a goal not written is only a wish.

For your reference, here are some of our goals:
-Graduate from school debt free
-Become CPA certified
-Plan on  Greg pursuing an MBA
-Stay up to date on personal finance topics (through magazine and WSJ subscriptions)
-Go on a date each week 
-Have money for our kids to participate in extra-curricular activities
-Take a trip to Alaska
-Go on a cruise, maybe to some of the islands in Greg's mission
-Take one family trip per year
-Take at least one trip on our own, just Greg and me
-Find a way to still participate in ballet
-Be spontaneous
-Save 20% of every dollar we make
-Save money for children's educations, missions, marriage
-Find a good deal on a second car
-Become better at couponing, finding deals, going to garage/yard sales

Monday, June 11, 2012

This semester I took an personal finance class for an elective for my major and I loved it. Well, I loved what I learned. We learned how to budget and how to analyze our spending. We learned about the appropriate amounts of health, car, and life insurance. We learned about the basics of investing and how to save for retirement.

It was great. I want to share everything I've learned with everyone. Before I took this class, I was so intimidated by investing money. But really, the principles are quite simple. There are so many basic principles that, if people knew, could empower them to make great decisions and save so much money. I considered pursuing financial planning as a career, but the set-up of most firms doesn't really appeal to me. Plus, I don't really want to be managing people's money - I'm more interested in coaching people on the basics so that they are empowered to manage their own money. I'm more interested in helping regular, every day people rather than rich people.

I guess personal finance will become a hobby for me. I hope that friends, family, people at church, etc. will approach me with their questions. I've thought about doing a blog series to share some of the more interesting/pertinent things we learned in class. I want to help other people feel empowered to save money and invest to meet their goals. Would that be interesting at all?

Thursday, June 7, 2012

Rising Tuition Rates?

[I love hearing from Greg about how economics explains things that are happening in everyday life, so I asked him to guest post! Greg has a knack for explaining things in a simple way that make sense. This is his first blog post and I think it is very interesting - enjoy!]

You have probably heard that college tuition rates have risen dramatically over the past 10-15 years. This is correct. In fact from 2001 to 2011 rates have risen by over 60%. The problem though is that these facts don't tell the whole story - there is a very interesting story behind these raising rates. A closer look proves that, while tuition rates are rising, the amount that students actually pay is increasing at the same rate as inflation. So, how is this all possible?

The first reason is something called price discrimination. You may have heard this term from Econ 110. This is when businesses charge different rates to different people for the same product. Some examples are student or senior rates at the movies. Another example is airline tickets. Depending on how busy a flight is, or how desperate a flyer is (determined by how recently they bought a ticket) the price of a ticket fluctuates a lot. Most colleges do this too. Take the case of Harvard. Harvard's tuition for one year of school is about $40,000. The great thing about Harvard is they offer a very "generous" financial aid program for their students. They request the information regarding the incomes of each of the student's parents, and offer scholarships depending on the income level. The richest of students pay the full $40,000, less wealthy get perhaps a $10,000 scholarship, even less wealthy get a $20,000 scholarship and so on until the actual price of the tuition equals what it costs Harvard to provide it to that student. I have no idea what that would be. But basically what they have pulled off is some of the best price discrimination out there. They charge people very close to what they are able to afford, and make a killing.

Harvard has been doing this for a very long time, and other schools are starting to catch on. More and more school are shifting to this type of system of having very high tuition rates, which only a small portion of students pay, and offering a very "generous" financial aid program. What does this translate into? A 60% growth in tuition rates (the sticker price that few actually pay) but the growth of actual payments made by students growing at about the rate of inflation (2 percent a year).

I could end here, but there are two other reasons why universities love posting high tuition rates that get marked down with financial aid scholarships. Reason number two follows a similar strategy used by clothing stores. You are looking for a pair of pants, you find a pair that is $30, and another pair that was originally listed at $50, but is on sale for $30. From what you can tell, they look about the same (and the stores little secret is that they are), but hey, how could you pass up the $50 pair that's on sale?! This is the same marketing strategy that colleges are favoring. A high tuition seems to announce, "We're a good school." If you were accepted to a school that is $10,000 a year, and to a school that is $30,000 a year but you get a $20,000 scholarship, I would predict you would choose that latter.

The last reason (that I can think of) is the proud mom effect. Moms love to brag about their children, and does it get any better than her child getting a scholarship at Harvard? Probably not. People feel proud about getting scholarships, so even though everyone else might be getting one too, opening that letter and seeing how much they are going to take off your tuition is a great feeling, and certainly brag-worthy for moms.

To sum it all up, the sticker prices of colleges and universities are rising at a very rapid rate, but this should not be alarming unless you are very rich and can afford the high rates. Everyone else's tuition is staying right where it should, and if you're poor it's actually decreasing. Schools are just using price discrimination to suck the profits out of the rich kids (which I am fine with by the way), and offering discounts to make their school seem more appealing. Receiving that scholarship also makes us feel good.

Now you know the truth when you hear politicians make claims about how students are in dire need of help to stave off evil schools that are charging way too much .

What do you think is going on with these rates?