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Revealed: Starbucks Surprise
Tweet Share on Facebook April 8, 2008 Comment (6)Update on the Starbucks surprise: The company has introduced a new kind of roast, which it calls its “smoothest coffee ever.” If you’ve sipped it, let us know what you think.
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Can a 401(k) Pay for Grad School?
Tweet Share on Facebook April 7, 2008 Comment (3)Dear Alpha Consumer,
I am currently working and plan to attend business school in fall 2009. I want to save as much as I can in advance and also avoid as much tax as possible. If I contribute toward my 401(k) plan, will it be possible to withdraw the money without any penalty and taxes?
The short answer is no. In general, workers with 401(k) accounts can't make early withdrawals without paying a 10 percent penalty. There are exceptions, including for "hardship" situations, but going to business school is not likely to qualify. And it is possible to take a loan out against a 401(k), but there are plenty of reasons to avoid that, including the fact that you'll miss out on years of compounding. However, if you are confident that you will repay it and catch up on retirement savings later, a loan is one option to consider. (Be sure to check that your company's plan allows taking out the loan even while you're not employed there; some plans don't.)
An even better option, suggests Perry Chlan of the Fidelity Research Institute, is to save up in a 529 plan, which is a tax-sheltered account designed for college savings. Such accounts generally can be used for graduate school, too. That way, you can avoid paying taxes and a withdrawal penalty.
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Starbucks: Unveiling the Venti Surprise
Tweet Share on Facebook April 7, 2008 Comment (1)Over the weekend, the blogosphere was buzzing about a surprise Starbucks was set to unveil at all of its stores on Tuesday, April 8, at noon EDT (9 a.m. PDT). Speculation ran wild: Was Starbucks returning to use of its old cup design? Perhaps the company was introducing a size even larger than venti? Was the surprise related to the recently introduced—and much maligned—skinny latte drinks?
Readers of Starbucks Gossip suggested ideas ranging from the mundane—free coffee samples—to the slightly more exciting—a new type of brewed coffee.
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Carnival: Money Tips on Spouses and Pets
Tweet Share on Facebook April 7, 2008 Comment (1)This week's Carnival of Personal Finance gives tips on two of my favorite topics—marriage and dogs. The Money Under 30 blog explains how much a pet can cost (it's a lot), and Free Money Finance explains what to discuss, financially speaking, before walking down the aisle (everything).
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CBS: Cheap Is the New Black
Tweet Share on Facebook April 4, 2008 Comment (2)As Katie Couric reported on the CBS Evening News last night, it's now trendier to save than to splurge. Shame has been replaced with pride when it comes to getting discounts, shopping at more affordable stores, and avoiding pricier items.
Thank goodness this shift has taken place. It's exhausting to pretend to afford things we can't. And the fact is, even someone with a decent salary can find it hard or impossible to live like people do on shows like Lipstick Jungle or Cashmere Mafia. As the Budgeting Babe blogger Nicole Mladic told the news program, "When I'm actually spending more than I'm making—on clothes, rent, furniture, and stuff for my apartment— that's not right."
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True or False: Married People Are Richer
Tweet Share on Facebook April 3, 2008 Comment (6)On my way home from work yesterday, I came across a poster from a pro-marriage campaign at a bus stop. "Married people earn more money," it said, over a photo of a happy, smiling couple. While I didn't doubt the truth of that statement, I did doubt what it is implying: that marriage is somehow responsible for increasing the wealth of those who are married. After all, people with higher education levels are more likely to get married, which means they were probably going to make more money anyway, whether or not they walked down the aisle.
It turns out I was only half right. Marriage itself does seem to help people save money, as Barbara Dafoe Whitehead, codirector of the National Marriage Project at Rutgers University, has pointed out. Married people gain from sharing costs such as housing and food and also save on joint health insurance. One study found that couples who are in long-lasting marriages build up significantly more wealth than those who are not.
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Study: Budget for the Year, Not the Month
Tweet Share on Facebook April 3, 2008 CommentNew research suggests that creating an annual budget instead of a monthly one might be the better way to go, because people tend to more accurately predict their yearly spending, while they underestimate their short-term expenditures. In the study, which involved college students, monthly estimates were off by 29 percent on average while yearly estimates were only 3 percent off their mark.
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Smart Splurges and Saves
Tweet Share on Facebook April 2, 2008 Comment (9)For research on a story on personal finance decisions for 20-somethings, I've been speaking with young professionals about how they manage to meet all their financial obligations—and desires—on relatively low salaries. One of them, Ben, 29, who earns $51,000 a year as a lawyer for a nonprofit in Washington, D.C., says his approach involves skipping big-ticket items but not giving up his adventurous travels. (He asked that I not use his last name since he is sharing so much personal financial information.) Here's what he does to save money without giving up what's important to him:
To save:
• He drives a '93 Honda Accord with 200,000 miles on it. He paid it off over nine years ago.
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I'm Not Smarter Than a 12th Grader
Tweet Share on Facebook April 2, 2008 Comment (25)I probably shouldn't admit this, but I did not earn a perfect score on the financial literacy quiz we recently posted online. The quiz, which is excerpted from a test given to 12th graders every two years by the Jump$tart Coalition for Personal Financial Literacy, asks practical money questions, just like the ones this blog addresses. The average score for seniors who take the entire exam is usually just over 50 percent, suggesting many students don't have a strong grasp of money management concepts.
But perhaps it's possible that answering the questions is harder (or easier) than making real-life decisions. Reasoning on paper that investing in stocks is a good long-term choice is not quite the same as actually purchasing stocks. I may be just trying to make an excuse for my own error, but it seems like a valid point.
Readers, if you took the quiz, what do you think? (For the record, the one that got me was question No. 5, on earning interest on savings accounts.)
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Think Twice About a Seven-Year Car Loan
Tweet Share on Facebook April 2, 2008 Comment (4)While auto dealers are often eager to finance customers—they want to sell cars, after all—the terms aren't always favorable to consumers. LeaseTrader.com, which matches up consumers looking to unload their leases with those who want them, sent out a reminder yesterday that seven-year financing terms can be quite expensive:
Similar to the problems plaguing the current housing situation, these loans could damage both consumers and banks that participate in the lending. At 84-month terms, a $20,000 car will cost an additional $5,335 in interest alone—roughly a quarter of the entire car's price.
