Loras College Launch Into Life

A guide to personal fi nance

LETTER TO THE READER….…………………………………………………………….4

ACKNOWLEDGEMENTS.………………………………………...……………….……...5

MEET THE AUTHORS……………………………………………………………………..6

THE JOB SEARCH MADE EASY.…..……………………………………………………..8How to Make a Great First Impression: Developing a Standout Resume and Cover LetterNailing Your InterviewCan’t Get That Dream Job Without Knowing What Happens In An InterviewDress For SuccessWhat Are You Really Worth?Don’t Rent & Rave, Buy & Save: Deciding whether renting or buying is right for youWhere Are You Going?Effective Communication Skills in the Workplace

TABLE OF CONTENTS

Launch Into Life:A Guide to Personal Finance

Written by the Finance Majors of the 2009 Loras College Graduating Class Publication—May 2009

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MONEY MANAGEMENT: The First Step in Achieving Financial Goals...………………18 Ready, Set, Budget 20 Ways to Save Wedding Vows and Wedding Costs Balancing Finances as a Couple Investing in your Children’s Future

USING CREDIT WISELY…………………………………………………………………25 What is a Credit Score Credit Card Essentials Student Loans Car Loans

TAXES: Affecting Everyone, Every Year….………………………………………………31 What’s so Important About April 15? Want to Reduce Your Taxes… Legally? What You Need to Know About Taxes In 2009

RISK MANAGEMENT……………………………………………………………………35 Identity Theft DWI: Driving With Insurance Your Health is Uninsured? Unacceptable Covering Your Assets: Life Insurance If There is a Will, There is a Way

INVESTMENTS………………………………………………………………………...…41 Investment Basics Investment Vehicles Keep It Diverse Investment Resources

RETIREMENT PLANNING: Preparing for the End as You Begin………………………..47 Start Early: Planning Your Income at Retirement Employer-Sponsored Retirement Plans: It Is All About Your Choices IRAs: Another Retirement Alternative Distributing Your Nest Egg: How To Allocate Your Retirement Savings

FINAL THOUGHTS……………………………………………………………………….51

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Disclaimer: The use of this guidebook is at the sole risk of the user. The publishers along with all contributors shall not be held li-able for any losses claimed to have arisen as a result of the information contained in this guidebook. This guidebook is not intended to be an offer, solicitation or inducement to engage in any particular investment activity or financial arrangement. Please consult your professional advisors before making any decisions.

T.S. Eliot once wrote, “The end is where we start from.” As we prepare for life after college, we begin to realize how easy we have had it. All-night study sessions, laid-back campus jobs, and the big rivalry game against Uni-versity of Dubuque all seemed stressful at the time but they pale in compari-son to planning one’s financial future. As you end this chapter in your life, how will you begin the next? We are entering an entirely new stage in our lives and everyone feels the stress of the major decisions we now face. It seemed like yesterday we were deciding between Dominos and Pizza Hut and today we’re deciding between graduate school and beginning a career. As senior finance majors at Loras College we have been feeling the pressure of having to make these tough decisions over the last year. We looked for a single helpful resource that could assist us in making informed decisions that graduating college seniors and new alumni must make. Young profession-als should have a guide to the decisions they will be facing and how those decisions will affect their life for years to come. We took it upon ourselves to write the very thing we unsuccessfully sought. This guide is our attempt at answering our own questions. How will I find a job? How do I balance a budget? What’s a credit score? How can I lower my taxes? How can I pro-tect my assets? When and how should I start planning for retirement? These are the questions we were asking ourselves over the past year. We chose to take the initiative to seek out the answers of these questions and compile them into a single, easy-to-read guide that could be understood by any young professional. So sit back, relax, and delve into the answers that we found. Begin the next stage of your life on the right foot by helping to secure your financial future with the information we provide in this guidebook.

LETTER TO THE READER

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This project was funded in part by the sale of advertisements. We would like to thank the following peo-ple and businesses for their contributions:

This project would not have been possible without the contributions and coordination of many individuals outside the class. We would like to thank the following people for their assistance with this project:

Robert Adams Loras College

Mark Cueno Woodward Printing Services

Susan Czeshinski (‘87) Loras College

Nancy Dunkel (‘00) Fidelity Bank & Trust

Julie Dunn (‘79) Loras College

Bobbi Earls (‘88) Loras College

Angela FitzPatrick Loras College

Helena Hall Loras College

Brittany Martinez Loras College

Patrick Marzofka Loras College

Ann Mauss (‘88) Loras College

Alejandra Monroy (‘09) Loras College

Thomas O’Shea Univeristy of Northern Iowa

Natalie Roling (‘10) Loras College

Debra Schleicher (‘84) Loras College

Gene Steidinger Loras College

John Upstrom Loras College

Anne Vaassen Loras College

Robb Belstar Belstar Financial Group

Joe and Suzanne Bernardi Bernardi Investments

Cheryl Biermann Edward Jones

James Billmyer (‘72) Raymond Jaymes

Jill Busch American Trust

Sue Czeshinski (‘87) Loras College

Nancy Dunkel (‘00) Fidelity Bank & Trust

Amy Francois Honkamp Krueger

Scott and JD Goins State Farm

Ben Graham Grahams Style Store for Men

Michelle Kennicott CCCS

David Klavitter Dupaco

Kevin Lynch Anderson Weber

Thomas Stecher (‘71) Liberty Bank

Judy Timmerman Eide Bailly

ACKNOWLEDGEMENTS

**A date following a name indicates a Loras graduate and year.

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Sara Cueno Accounting/Finance

East Dubuque, IL

Jarid Brockman Finance/Marketing

Roscoe, IL

Nick Teson Finance/

Sport Management Algonquin, IL

Michael Beck Finance/Accounting

Elkader, IA

Abishek Rayamajhi Finance

Kathmandu, Nepal

Joseph Hetland Finance

Chicago, IL

Santosh Khanal Finance/Accounting Kathmandu, Nepal

Ben Thompson Finance

Oak Park, IL

Roseann Sabers Finance

Sherrill, IA

Christine Ruggeberg Finance/Accounting

Bellevue, IA

Matthew Maloney Finance

Cedar Rapids, IA

Jaymes Billmyer Finance/Economics

Dubuque, IA

Corey Becker Finance/Applied

Mathematics Waterford, WI

Rijendra Maskey Finance/Accounting Kathmandu, Nepal

Luke Strub Finance

Dubuque, IA

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The Loras College Finance seniors have been working to organize, create, publish, and distribute this magazine. We are students with all different backgrounds

working together as a team to make this project a success. Thank you for your support.

Peter Kloberdanz Finance

Charles City, IA

Digger Kurt Finance/MIS Dubuque, IA

Kevin Geary Finance/

Mathematics Palos Heights, IL

Amanda Davidshofer Accounting/Finance

Bankston, IA

Jacob Bahl Finance/

Management Dubuque, IA

Briget Putz Finance

Dyersville, IA

Chelsea Kuenster Finance/Accounting

Farmersburg, IA

Amberina Uhlik Finance/MIS Dubuque, IA

Diana Catalina Pena C. Finance/International

Studies Bogota, Colombia

Jenna Muller Finance/Marketing

LaCrosse, WI

Biplaw Sijapati Finance

Kathmandu, Nepal

Jenny Dziubla Finance

Bartlett, IL

Edward Glynn Finance/Marketing

Des Moines, IA

Michael Hachey Finance

Cedar Rapids, IA

Professor John Upstrom Magazine Founder East Dubuque, IL

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The job search process can be a long and difficult journey, yet the benefits of its end are

very rewarding. Many different variables go into the process of finding a job that is ideal, and the skills needed to earn that job are

many. Finding a job begins with a great resume. Resumes act as an attention getter and should be

given a lot of time and effort. A good cover letter should accompany your resume. Once those are taken care of solid group interviewing skills are something all graduates should possess. With many types of interview styles, there are numerous pitfalls interviewees can avoid by simply reading an inter-view guide. There are many areas the recent gradu-ate needs to consider during the transition from col-lege to career. These include but are not limited to job salary, effective communication in the work-place, and the pros of cons of renting or buying a home.

Introduction

How to Make a Great First Impression: Developing a Standout Resume and Cover Letter Cover Letters

Would you ever start talking to a stranger without intro-ducing yourself? This is the same as sending your resume to a company without a cover letter. Cover letters are your way to introduce yourself to prospective employers, and let them know who you are. Cover letters also allow you to tell the audience what type of work you are looking for, and allows you to highlight your work experience and achieve-ments.

The cover letter usually consists of four paragraphs. The first paragraph needs to start with an attention grabber to get the company interested in you. It also explains why you are writing to the company and the things you know about them. The second paragraph should briefly describe professional and academic qualifications; this is where you can expand upon your resume. The third is where you should provide details on why you would be a great candi-date for the job. Finally, the fourth paragraph is where you request and interview and let them know you will follow your application with a phone call. Resumes

Your resume, along with cover letter, are the first things a company you are applying to will see. That resume will contribute to your all important first impression. It is im-portant your resume is free from grammatical or format errors as this will put your resume on the fast track to the trash. Your resume needs to stand out and be flawless to score the job that you want.

The set up of a resume can be done in three different styles chronological, functional, or hybrid. Deciding on a style of resume may be difficult, but when writing it, always be original and unique. Chronologic is the most commonly used format and is generally the best route for recent col-lege graduates looking to start their career. A chronological resume is used to list all relevant experiences and accom-

plishments that might apply to many positions. The functional format conveys your desire for a specific position or career area and highlights relevant milestones and accomplishments that prepare you for that position. The hybrid format combines the chronological and functional styles. It emphasizes your work history, but focuses on the skills from these past jobs. When using this style it should be to find a similar career to the one you currently hold.

When writing your resume, you want to make sure that the final product shows that it has a specific purpose, clearly con-veys a particular and consistent message, and must appropriately communicate the message to the specific audience. The first part of the resume, is the contact information including your name at the top, mailing address, phone number, and e-mail address. Some people include an objective next, this is a one to two sentence summary telling the employer what type of job you are seeking, and your experience. This summary should be brief, direct, and specific. Next, is the education or training that you have; it includes major, expected graduation date, and school name and location.

The work experience section shows what skills you have obtained from past work accomplishments. Even if your past jobs have nothing to do with your future goals, you should still highlight accomplishments and skills you learned. When writ-ing the experience section, start off with the job title you held, dates of employment, and the company name and location. When you are describing your skills learned from the job it is best to list achievements and the importance of your position. If possible add specific numbers or results. It is best to use bullet points in this section to make it more organized and clear to read. The next part of the resume is what is referred to as the “extras”. This is where you can show off your accomplishments and what makes you unique. This section should include clubs you joined in college, volunteer experience, study abroad ex-perience, different languages you can speak, military service, and any other relevant accomplishments you have.

HOW TO MAKE A GREAT FIRST IMPRESION

NAILING YOUR INTERVIEW

INTERVIEW FORMATS AND PREPARATION

DRESS FOR SUCCESS

WHAT ARE YOU REALLY WORTH?

RENTING VS. BUYING

WHERE ARE YOU GOING? COMMUNICATION IN THE

WORKPLACE

THE JOB SEARCH MADE EASY

Michael Beck, Jaymes Billmyer, Kevin Geary, Joseph Hetland, Jenna Muller, Brigit Putz, Abishek Rayamajhi

“Find a job you love and you will never

have to work a day in your life.” ~ Confucius

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Make sure to proofread carefully, one misplaced comma can cost you your dream job. This can be prevented by having your resume critiqued by many different people, such as friends, parents, and professors. The organization should be very clear and neat. Your resume is critical in getting that first interview, make sure you are prepared with an outstanding resume and

cover letter to set you apart from the rest. See resume and cover letter samples at http://www.loras.edu/launchintolife/.

Sweaty palms, butterflies, dry mouth, these are pre-interview symptoms that most of us have probably experienced. Though these conditions are natural, the interview process does not need to feel like an intimidating trip to the dentist office. Instead the interview is a great opportunity for you as a job seeker to express your talents and skills, and also learn more about the companies that you are interested in. There are five tips which will help you become a more successful and market-able interviewee.

Though these tips do not guarantee you a job, they will surely help you take a step in the right direction in earning the job that you desire.

1) Conduct Research. Researching will allow you to an-swer questions based on your knowledge of the company and what qualities and skills they seek from employees. Doing re-search also allows you as the interviewee the chance to see if the company is a good fit for you. If you don’t feel comfortable with the company and their goals, you may decide it isn’t the kind of place you want to work.

The main question is how do you study and research the company for which you are interviewing? Usually the best way to study a company is to research their online site. Company web sites provide a vast amount of information such as company goals, products, services, history, financial information, loca-tions and annual reports. Annual reports not only provide the financial stance of the company, but they also cover goals that were accomplished during the recent year. Other research mate-

The Job Search Made Easy

rials can be requested from the company or can be taken from the job description that you have been given. Having informa-tion before the interview is crucial because most of the ques-tions will likely be centered on the company and how your goals and skills fit.

2) Practice your answers. This can be done on your

own, or you can have a friend conduct an interview. When practicing for the interview it is good to work on things such as your formal introduction, posture, eye contact, answers, and questions you have prepared for the interviewer. Practic-ing not only prepares you for having a successful interview, but it also minimizes your pre-interview anxiety. Just like anything else, practicing for an interview gives you confi-dence and a determination that you can actually earn the job you are seeking.

3) Nonverbal communication. Nonverbal communica-

tion during an interview is very important because research shows that 65-70% of hiring decisions are made on the basis of nonverbal cues. It has also been proven that 65% of com-munication takes place through nonverbal channels. One might ask, “What is meant by the term nonverbal communica-tion?” Nonverbal communication involves things such as eye contact, posture, hand shake, listening skills, facial expres-sions, and vocal tones. In an interview it is very important to make a good first impression, and this first impression usually takes place through non-verbal channels.

First impressions are crucial because research has shown that 75% of hiring decisions are made in the first few minutes of an interview. When first introducing yourself to your inter-viewer, be sure to have a firm handshake, positive facial ex-pressions, and direct eye contact. Make sure that your hand shake is not wet and sweaty, and one trick to avoid this is to wipe your hand on the inside of your pants pocket before shaking hands.

There are a four other nonverbal keys to keep in mind during an interview and they are: good posture, frequent eye contact, smiling, and vocal inflections. Good posture conveys you are interested, eye contact conveys trustworthiness, smil-ing conveys a positive attitude, and vocal inflections convey enthusiasm.

4) Verbal communication. Your verbal interchange

should be something that reinforces the positive image that you have formed through your nonverbal communication. One of the most important parts of communicating verbally and answering questions is that you connect your skills with the employers needs. Employers don’t just want to hear about your great attributes, they want to know how those attributes fit within their needs. Another thing to keep in mind during verbal communication is to use positive language and form. This can first be achieved by using good grammar and diction. Use of proper grammar provides a sense of professionalism when you speak. Using good diction also helps you to avoid using sloppy and unprofessional speech. Avoid using slang

Nailing Your Interview

Launch Into Life

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speech and be sure to communicate using words in their en-tirety. Using shortened words like “yep,” instead of “yes,” or “shoulda,” instead of “should have,” can make you sound un-professional. It is also important to show the interviewer the respect he or she deserves. Never address the interviewer by their first name. Instead, be sure to use the interviewer’s appro-priate title such as Miss, Mrs., Mr., and their last name.

5) Ask questions of the interviewer. When interviewing

for a job it is crucial to remember that you must also be sold on the company. The interview process is just as much of a learn-ing process for you as it is for the company. Opportunities for asking the interviewer questions usually come near the conclu-sion of the interview. Don’t shy away from this opportunity! Ask important questions such as, “Besides the duties that were named in the job description, what other duties will I be per-forming in my position?” Or “What is the culture like in the department that I will be working in?” Asking questions gives the interviewer the impression that you have a deep interest in the position and the role that you will be fulfilling. By denying your opportunity to ask the interviewer questions, you are sending a signal that you don’t care about the specifics of the position or the company.

So there you have it, five tips that will help lead you to a more successful interview. By actively preparing for these five different areas, you will feel more comfortable as you walk into the interview room. Just like in anything else, the more you practice and prepare the more comfortable and stress free you will be when the real situation hits. So just remember the five skills: conducting research, practicing your answers, nonverbal communication, verbal communication, and asking questions. Make your next interview a positive and successful experience!

An interview can be a scary thing when you don’t know what to expect. Interviews today can take many forms and there are numerous types of questions a person can ask. If you want to be confident entering an interview you need to be very familiar with the interview process.

Interview Formats

Interviews can be conducted in different formats includ-ing; a one-on-one interview, a panel interview, a phone inter-view, and a group interview. The most common type of inter-view is the one-on-one interview, which is usually conducted by the human resource department or some sort of interview manager. Another interview format that is similar to this one is the phone interview, which is basically a one-on-one interview but is conducted over a phone rather than in person.

Although our last two types of interview formats, panel and group, aren’t as common, it is still important to be prepared for any type of interview. These two interview types are con-

ducted in a more casual but still formal atmosphere with differ-ent people participating in the interview and asking you ques-tions.

Interview Questions

Since you have a better understanding of the different for-mats an interview might take, we need to learn about the differ-ent types of questions that can be asked in an interview. There are three common types of questions that an interviewer can ask they are open-end questions, closed-end questions, and hypothetical questions. An open-end question is one where you have to elaborate on an answer such as, “tell me about your-self.” A closed-end question can generally be answered with a brief statement or simple yes or no. Lastly, hypothetical ques-tions are the “what would you do if” kind of question that show the interviewer how you would handle a certain situation

Of course there can be numerous other types of questions that an interviewer can ask you, but it is hard to be prepared for all of them. The best thing to do to is stay calm when asked a question and try to have some type of approach ready to answer a question. One such approach is called the ‘STAR’ approach. ‘STAR’ stands for situation, task or problem, action, and result. This is an easy way to divide up the answer to almost any ques-tion. First, describe a situation that relates to the question as well as the dilemma or problem that you faced. Then talk about what action you took and what the results were. This strategy may not help you answer every question in an interview, but it will help you get through a majority of an interviewer’s ques-tions.

To help you get ready for that all important interview here is a short list of question that you can use for practice:

How would your friends describe you? What type of work environment do you prefer? Tell me about a personal accomplishment for which you

feel a tremendous sense of pride. Why should we hire you for this position? Name a particularly demanding goal that you have

achieved. What is your greatest weakness/strength? Where do you see yourself in five years? What attracted you to this position? How have you handled a difficult working relationship in

the past? Provide an example of a time when you offered a solution

to a difficult problem. Describe a time when you went above and beyond the call

of duty. Now that you feel a little more comfortable about what an

interview is going to be like and the type of questions you are going to be asked, there is no reason to be nervous anymore, so go out there and get that job you always wanted!

You Can’t Get That Dream Job Without Knowing What Happens in an Interview

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Jeans, a T-shirt, and athletic shoes, the perfect combination for a job interview, right? Wrong! As young people enter the job search world and seek a position in their ideal profession, they must be aware of impressions they make on employers. The kinds of impressions are those involved in an interview, and more specifically visual impressions. These visual impressions are a substantial part of an interviewee’s non-verbal communi-cation within the interview context. Failing to impress with dress could lead to you waving your dream job goodbye.

Overriding Rule: When in doubt of what to wear to your interview, always overdress.

By overdressing there is no way to give off a wrong impres-sion in terms of your appearance. Overdressing, or dressing for the part will give off the impression that you take the position seriously and you take the company seriously. Just remember, no one is going to fault you for dressing too well for the inter-view.

Appropriate Male Dress

The basic attire for men interviewing for a professional po-sition is a suit. Of course, you want to make sure that your suit looks professional and appropriate. It’s best not to look trendy, so it is important to pick out the appropriate color and style of suit. The suit color can make a big impact on creating an image


of authority and competence. Appropriate color for men’s suits usually fall under a mid to dark color such as blue or black. Once you have chosen the color for your suit make sure that the style is also appropriate. The style of your suit should be “classic” and also well-tailored and well-styled. The classic suit is the safest because it is very conservative and timeless in its appeal.

After you choose the suit that best fits your needs be sure to pick out a shirt that goes well with the color of your suit. Generally you should select a color that is lighter than the color of your suit. Shades of light blue are usually safe, and white is usually considered the most formal. It is also impor-tant to wear pants that match the color of your suit and are well pressed. Your pants should be well tailored from fabric identical to your suit coat and should also be pleated in order to have a classical look.

Dress For Success

Launch Into Life

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Other important factors to keep in mind for a formal interview are to wear an appropriate tie, belt and shoes. The tie should be silk, subtle and should coordinate well with your suit. Your belt should match the color of your shoes and should not be overly large or flashy. When choosing your shoes be sure that they are clean, polished and black. Black is generally the safest color.

Appropriate Female Dress

In general, the rules that apply to men for interview dress apply to women as well. Depending on the type of position you are applying for, women must decide if it is more appropriate to dress formally or casually. When choosing to dress formally, it is most appropriate for women to wear a suit, blouse, and shoes in a color and style that is conservative. The suit should be in neutral colors because it gives off a more conservative and professional appearance.

Whereas historically a skirt might have been the choice for women in the work place, modern times indicate that skirts or pants are equally acceptable. They are acceptable as long as they are an appropriate style and fabric. For in-stance, while it’s acceptable to wear a skirt you want to avoid fabrics like denim, which would be seen as more cas-ual. When choosing shoes to wear be sure that you also stay on the more conservative side. Wear low heels that don’t go over two and half inches, and be sure that the heel and toe is closed. Also keep in mind that your shoes should match the tone of your suit.

Though these are not the only guidelines to follow

when preparing for interview dress, they will give you a good start on gathering ideas. Be sure to be careful with your dress decisions, but also remember it isn’t all about how you dress, it is about who you are. The interview is for the employer to find out what kind of person you are. The point here is to make sure that you don’t make the mistake of ruining a good image with poor dress choices. So go ahead and get the needed apparel, but then go showcase yourself and not your clothes!

To the right are three additional clothing tips from styling professional Ben Graham of Gra-ham’s Style Store for Men in Dubuque, Iowa.

What can your degree do for you in terms of a starting salary? When entering into the workforce there are many things that must be taken into ac-

count before deciding on the right job. An important considera-tion one must take into account is what to expect for a beginning salary. The starting salaries one should expect in Computer Sci-ence, Finance, Accounting, Marketing, Education and Social Work are reviewed. According to the National Association of Colleges and Employers (NACE) the adjacent are national aver-ages that can be expected for graduates in 2009:

The NACE found the average salaries offered to graduates in English, Psychology and Political Science/Government remains relatively unchanged. The overall average starting salary offered to a Class of 2008 liberal arts graduate was $36,715 and the cur-rent average of $36,445 shows a decrease of approximately one percent.

Salary Benefits of an MBA

What is an MBA? The MBA stands for Master of Business Administration degree, which may be obtained after one to two years of graduate-level study, that provides training in the theory and practice of business management. An MBA is considered a career accelerator in a number of different industries which al-lows MBA graduates the ability to demand higher salaries.

According to one salary guide, an MBA is worth about $10-$30,000 a year over a bachelor's degree, but the salary increase you realize may be much less. An MBA gives the indi-vidual the tools and knowledge to make their mark in the busi-ness sector. Most MBA programs require the candidate to have work related experience and this requirement varies between in-stitutions. The majority of schools suggest at least two years of related experience; this helps you gain real world knowledge of the industry. It’s also important to have experience within the field to help aid in deciding whether or not an MBA degree would be beneficial. An MBA is still a general business degree, however those who are more interested in learning a specific sub-ject material should seek out a specialized graduate degree pro-gram. 6 Tips for A Higher Salary

1) Research. Know what you are worth in terms of educa-tion, experience and work potential. Review what others are re-ceiving for a salary for a similar job. Be sure to look at the com-pany’s pay scale because they vary from company to company.

2) Wait on a detailed salary discussion. It is important to

let your employer know more about you, before discussing salary figures. First, focus on getting hired and then discuss the starting sal-ary. If asked about how much you would like early on in the process respond “according to the salary scale”, ”according to the indus-try rate” or “as much as

What Are You Really Worth?

Page 13


you decide I am worth”. Remember starting salary is not the only issue; find out how quickly you will be able to rise within the corporate ladder.

3) Don’t rush into accepting a salary offer. When of-

fered a salary no matter how tempting it is to say “yes”, always thank the representative and ask for time to consider the offer. When you have time to review the offer rationally consider other offers and how quickly you can be promoted within each.

4) Don’t be afraid to ask for more. In many instances,

employers have the ability to offer up to 20% more than ini-tially offered to get the right person for the job. The initial sal-ary offerings are low intentionally, to keep the flexibility of possible pay increases in the future.

5) Be aggressive. When wanting more out of the offer,

the first thing to ask for is a higher base pay. Other forms of payment are usually linked to the base salary, thus the impor-tance of analyzing the base pay becomes evident. If the com-pany is not willing to go any higher on the salary, ask for other benefits such as tuition reimbursement, more holidays, sick leave, stock options or signing bonuses.

6) Know when to stop. Most offers are flexible to some

degree, but in some cases the company’s first offer maybe the only one that they are allowed to make. When you see that ad-ditional benefits are coming to an end it is important to know when to stop.

A graduate’s personal income experience may vary from

industry to industry and pay scale in different regions. Other variable factors include specific skill sets such as internship experience and knowledge of software applications. These can play a part in determining the net value of a graduate to the company. Looking at all aspects of the job offer is very impor-tant because over the course of your working life you may re-ceive only a few raises. The raises may, in some cases, only offset the inflation rate, thus the initial salary offer is important because it sets up your future earning potential. Few individu-als ask for a higher salary, primarily due to shyness and the fear of appearing greedy. However, job seekers should try to negoti-ate the highest possible salary, when first joining the business. This, in many cases, is the most significant chance one has to earn more in the long run. Determine what you are worth and can expect and don’t settle for anything less.

Does living with your parents for the rest of your life

sound like a good idea to you? If it doesn’t, you need to think

about where you will live for the rest of your life, especially now that you have graduated from college. Renting and buying both have their advantages and it is up to your personal prefer-ences and life situations that will decide whether you should consider renting or buying your own house.

Owning your own house is the “American Dream,” but there are up-front expenses that most recent graduates cannot afford, so renting is an excellent option. Renting an apartment or a house can be a financially sound decision for those that require mobility, don’t have money for a down payment, and don’t want the hassle of maintaining a property. Some people may look at renting as “throwing your money away,” but rent-ing can sometimes save money when compared to buying be-cause of added expenses of owning a home. Insurance, prop-erty taxes, and maintenance all have an increased cost, com-pared to the cost of insurance and taxes of renting, and most people overlook what must be spent on these items within a year’s time.

Even though renting can be cheaper per month, you aren’t building equity in an asset. You make a payment each month, but when its time to move, you will have nothing to show for that money you spent. If you had equity in a house you could use that for a down payment on your next home. Renting also limits how much you can personalize the building you are liv-ing in. Some landlords will allow you to paint and even update the actual building, and other landlords won’t let you change anything. If you enjoy personalizing your living space, you either need to buy your own house or find a landlord that will allow it. Another problem some people have with renting is that some landlords won’t allow pets. Some people have turned to owning a house simply so that they can have as many pets as they like, no matter the size. If you decide to rent, make sure you can deal with the conditions the landlord requires.

Buying a house can be one of the most rewarding assets a person or family will ever obtain. A house is usually the big-gest investment most people will make in their lifetime, and it helps to build wealth and net worth. The equity that you obtain from investing in real estate can be used as a home equity loan or to increase your net worth. The interest that is paid on your mortgage loan provides tax advantages.

However, interest can be very expensive throughout the life of the loan. If you were to buy a house with a 30 year mortgage and pay it off for 30 years you could end up paying more in interest than in principal on the house, depending on the amount of the loan. Property taxes and insurance must be

Don’t Rent & Rave, Buy & Save: Deciding Whether Renting or Buying is Right for You

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paid yearly and they have the possibility of increas-ing each year. There is also a large upfront cost to buying a house, and some banks won’t lend you money unless you have 15-20% for a down payment. On a $100,000 house you would need $20,000 upfront to even establish the loan. Most college graduates don’t have that kind of money right away, so renting for 2-5 years becomes a fi-nancial necessity.

When it comes time to move out of your par-ent’s house, you need to figure out if renting or buying is the right choice for you. Not everyone can afford to buy a house, and others cannot deal with the stipulations of renting an apartment, so do what is right for you and your personal and financial situation. If you plan ahead and do what you can afford and need, instead of want, you will be happy in the long run.

Now, that’s a good question. This is a question you will undoubtedly be asked many times by family, friends, and may

even ask yourself. A majority of graduates from the Illinois/Iowa area generally end up in one of four locations: Dubuque, Chicago, Des Moines or Cedar Rapids. All of these locations have a great deal to offer the recent college graduate. Whether you call one of these places home or are looking to relocate after graduation there are some crucial aspects to consider in choosing where you will live after graduation. In the recent economic turmoil, recent graduates should definitely consider the job market, affordability, and the ability to network. Of course graduates should also consider entertainment, conven-ience, and whether the place is a good fit or not. These consid-erations of course do not only apply to Loras grads, but to any-one looking to relocate from where they currently reside.

A simple transition to make from full-time student to join-ing the workforce would be to settle in Dubuque, the four year home to Loras graduates. For those who have enjoyed their stay in Dubuque, “the biggest small town in America” has plenty to offer recent graduates. Dubuque features steady job growth, inexpensive living conditions, and numerous national

recognitions including being named as one of the “100 Best Communities for Young People” by America’s Promise Youth Foundation. Although there is an evident manufacturing pres-ence in Dubuque, the growing technology, healthcare, and fi-nancial services sectors are helping to diversify Dubuque’s job market. John Deere, McGraw Hill, and Quebecor have a large presence in Dubuque. Prudential, Cottingham and Butler, and many local banks round out Dubuque’s financial services sec-tor. A recent article in the Telegraph Herald announced that IBM will be developing a service delivery center in Dubuque, and will bring 1,300 jobs. This is very promising news for recent graduates as we see America’s unemployment rate grow. Dubuque offers a great network for recent Loras grads and multiple tools for job-seeking as well. Both Loras College and the Dubuque Chamber of Commerce are excellent resources

for networking and job-seekers who wish to remain in Dubuque. With a cost of living 19 percent below the national average, affordability is an-other reason to re-main in Dubuque post-graduat ion. (bes tp l aces .ne t )

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Where Are You Going?

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For more information about jobs in Dubuque be sure to check out dubuquechamber.com and greaterdubuque.com

Those who are looking for a faster paced life-style can always travel three hours east to America’s third largest city. Although Chicago boasts the largest job market in the Mid-west, plenty of attractions and events, and having one of the largest park systems in the world, there are a few caveats to living in the Windy City. Living in the city is not cheap, espe-cially if you plan on living alone. The cost of living in Chicago is 26 percent higher than the national average. Cook County, the county where Chicago lies also has the nation’s highest sales tax at 10.25 percent making purchases and that after work social stop cost a little more. In fact, Forbes magazine rated Chicago as the No. 3 among America’s Most Miserable Cities. “Lousy weather, long commutes, rising unemployment, and the highest sales tax rate in the country are to blame for the Windy City being near the top of our list. High rates of corruption by public officials didn't help either.” (Forbes Magazine)

Not all is gloom and doom for recent grads in Chicago, however. If you are having trouble finding a full-time position there are numerous job placement firms in Chicago which offer temporary employment based on your skill set which may lead to permanent employment. Some of these include Kforce, Ga-relli Wong, and the Salem Group. Those operating on a tight budget can use many of the city’s free attractions and events to unwind from the stresses of living in a big city. The Chicago Park District has a lot to offer the frugal city dweller such as low cost fitness facilities, many free events such as outdoor dance lessons, and a very devel-oped lakefront including beaches every couple miles or so. The transit system makes downtown and sports venues very accessible without having to find and pay hefty costs for parking. The CTA and Metra also make it so you wouldn’t have to own a car at all. As a matter of fact many new alumni don’t even own cars when living in the city. Overall, Chicago makes for an exciting place to live for the recent college gradu-ate.

If neither Dubuque nor Chicago fit your needs, Des Moines is a balanced alternative as a place to go after gradua-tion. Des Moines prides itself on its schools, friendly commu-nities, short commutes, affordable living, and world-class amenities. Des Moines is not only for families, but the below average cost of living and being No. 4 among “The Best Places for Business and Careers” makes it an appealing place to live and work after graduation. As the third largest insurance center in the world, Des Moines has a lot to offer in terms of profes-sional jobs. It’s hard to go wrong living in this city with Kiplinger magazine rating it as the No. 9 among the “Best Places to Live, Work, and Play.” (Kiplinger ) Major corpora-

tions headquartered in Des Moines include Wells Fargo, The Principal Financial Group, and Blue Cross Blue Shield.

Des Moines’ top entertainment venues include the Iowa Cubs and other minor league teams, Drake relays, and the Iowa State fair which has been featured as one of the “30 top things every Midwesterner should experience.” (Midwest Living) The Jordan Creek Town Center offers visitors a shopping and dining experience unique to Central Iowa.

The Cedar Rapids/Iowa City area offers a diverse experi-ence for those looking to remain a little closer to Dubuque, but still enjoy some of the perks of a bigger town and the benefits of a lower cost of living. The Cedar Rapids/Iowa City job mar-ket consists largely of manufacturing, and Iowa City is espe-cially known for its hospitals and being a college town, which shares some similarities to Dubuque. Many companies have joined together in the two locations to form what is known as the “Technology Corridor,” making it one of the leading cen-ters in the country for the defense electronics industry. The fastest-growing segment of the metropolitan area economy is telecommunications and telemarketing. General Mills, Alliant Energy, and Ruffalo CODY, are companies located in Cedar Rapids.

Much of the Cedar Rapids/Iowa City entertainment is based on the University of Iowa athletics teams, namely Iowa Hawkeye football. Many enjoy the living situation in Cedar Rapids and commuting to Iowa City on the weekends for foot-ball games. Iowa City’s night life may appeal to recent grads seeking a similar night life to Dubuque.

Navigating today’s job and housing market can seem like a daunting task, but there are tools which recent graduates can use to make the transition a little more manageable. A major key to landing a job or finding your social outlet is to network. Finding other Loras grads can help make for smoother transi-tion. One way to do this is to stay in touch with the alumni office at Loras College. They will be able to help by referring you to the various Loras Clubs located in Dubuque, Chicago, Des Moines, and Cedar Rapids/Iowa City. The Loras Clubs provide a social network of Loras alumni and often set up events from financial planning and economic forecasts to golf outings. Each location also has numerous websites where you can learn of current job openings and craigslist.com can help you find housing and just about anything else at any location.

Remember, the main things to consider while choosing a place to relocate in this type of market are cost, job security, and making sure it’s the right fit for you.

Why is it so important to have effective communication in a professional workplace? Around 70% of our time at work is

spent in some communication task. Much of our success or failure in our professional lives is a result of communication. Studies show that career advancement is correlated with our ability to communicate well. Communication is more impor-

Effective Communication Skills in the Workplace

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tant than ever as globalization, technology, and specialization make speech and communication very crucial. The best way to improve our performances and boost our creativity and credi-bility is to utilize effective communication with our peers or coworkers. The following are several key tips for good com-munication in the professional workplace for graduates to con-sider.

Observe boundaries. It is best to know your peers and

their habits. Always respect a persons privacy, space, and com-fort zone. Sometimes, knowingly or unknowingly we can step into a person’s comfort zone and that can lead to a very uncom-fortable situation. Thus, it is vital we know about our cowork-ers and what they like and dislike.

Fulfill commitments. This can be very healthy in the

long term as we build a solid reputation and platform for our-selves. The key attributes for fulfilling obligations are being trustworthy, sincere, hardworking, and following through on our personal and professional commitments.

Respect time. When communicating with your peers al-

ways be conscious of time and know whether they are busy or doing something important. Only engage in communication if they are comfortable and are not particularly occupied with other tasks. If you sense they are busy, then move on as you can always talk later.

Listen carefully and pay attention. Most people when

they think they are listening are really thinking about what they’re going to say next when the other person stops talking. Truly effective communication goes both ways. While it might be difficult, you should truly try listening to what your co-worker is saying. Never try to interrupt and don’t get defensive. Just hear them and reflect back on what they’re saying so they know you’ve heard. Then, you’ll understand them better and they’ll be more willing to listen to you. Practice active listen-ing and learn to process what is said and unsaid in order to im-prove the quality of your communication in the work place.

Stay focused. Sometimes it’s tempting to bring up past

seemingly related conflicts when dealing with current ones. Unfortunately, this often worsens the situation and issue and makes finding mutual understanding and a solution to the cur-rent issue less likely. It also makes the whole discussion more taxing and even confusing. Try not to bring up past incidents or other topics, stay on task.

Avoid unnecessary gossip. The best way to deal with this

is to avoid gossip and walk away from gossip when you en-counter it, in spite of how appealing and spicy it may be.

There are various skills and tips which will help you better

understand how to effectively communicate with coworkers. Remember that the goal of effective communication should be mutual understanding and finding a solution that pleases both

parties, not ‘winning’ the argument or ‘being right.’ Also, keep in mind that it is important to remain respectful of the other person, even if you dislike their actions. There are numerous sources of distraction or interference that can enter into the communication process. In a work setting, it is even more common since interactions involve people who not only lack years of experience with each other, but communication is complicated by the complex and often conflicting relationships that exist at work.

Last but not least, effective communication is a very essen-tial skill required in a successful workplace. We might be tal-ented, smart, hardworking, and reliable, but we also need to be competent communicators. The above mentioned tips are help-ful for graduates expecting to work in the professional work-place. In addition, it is vital to know and understand the barri-ers for good communication. In this competitive world, effec-tive communication becomes crucial as it leads us to the path of success in the professional workplace.

During the job search it is important to remember that you get out of it what you put into it. The easiest way to secure that

job you want is to go through these steps carefully. The proc-ess begins with a great resume and well written cover let-ter. These must stand out in order for an employer to recognize the qualities of the applicant and set up an interview. It is im-portant to remember that for a successful interview you need to not only understand the various interview formats but also pre-pare for questions and make sure you are appropriately dressed. This can be the most significant chance a graduate has at earn-ing more in the long run. In addition, it is important to know and understand the barriers for good communication. In this competitive world, effective communication becomes crucial as it leads us to the path of success in the professional work-place. Follow the advice in this chapter and you will have a great start to your professional career.

Conclusion

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Finance 101: The Job Search Made Easy

Annual Report – An annual report is a comprehensive report on a company’s activities throughout the preceding year.

Human resources – A term with which some organizations describe the combination of traditionally administrative personnel func-tions with performance, employee relations and resource planning.

Mortgage – A loan to finance the purchase of real estate, usually with specified payment periods and interest rates.

Principal – The amount borrowed, or the part of the amount borrowed which remains unpaid on a mortgage.

Works Cited “Acing the Behavioral Interview.” California State University, Chico – Chico State. Ed. Kathleen Bristow. 30 Oct. 2007. California State University. 03 Apr. 2009 http://www.csuchico.edu/plc/behavinterview html America’s Promise. http://www.americaspromise.org/MediaPlay.aspx?id=9822. 09 February, 2009. Badenhausen, Kurt. “America's Most Miserable Cities.” Forbes Magazine 06 February 2009. Dictionary.com. 2009. Web.20 Mar 2009. <http://dictionary reference.com/>. Graham, Ben. Personal interview. 12 March 2009. Koncz, Andrea. National Association of Colleges and Employers. 10 February 2009. 18 February 2009

<http://www.naceweb.org/press/display.asp?year=&prid=296>. Krannich, Caryl. Interview For Success. Manassas, VA: Impact Publications, 1988.

Medley, Anthony. Sweaty Palms: The Neglected Art of Being Interviewed. Berkeley, CA: Ten Speed Press, 1992. Mozinskith, Eilees. “1,300 Jobs”. Telegraph Herald 15 January, 2009. Munter, Mary. (2006). Guide to Managerial Communication: Effective Business Writing and Speaking. (7th ed.) Upper Saddle River,

NJ: Prentice Hall. "Reference Guide For Interview Dress Etiquette." ExecStyle. Nov. 2005. Feb 2009 <http://www.execstyle.com/eBook/

Interview_Dress_Etiquette.pdf>. "Reference Guide to Women's Interview Dress Etiquette." ExecStyle. Nov. 2005. Feb 2009 <http://www.execstyle.com/eBook/

Womens_Interview_Dress_Etiquette.pdf>. Salary Survey Report for Degree: Master of Business Administration (MBA), Finance. 2002-2009. 16 February 2009

<http://www.payscale.com/research/US/Degree=Master of Business Administration (MBA), Finance/Salary>. Starting Salaries in Business: How Much Can you Make? 2009. 16 February 2009

<http://www.businesschooledge.com/starting-salaries-for -business-school-graduates>. Thorkelson, Berit. “30 Things Every Midwesterner Should Experience.” Midwest Living. Wojino, Marc A. “No. 9: Des Moines, Iowa.” Kiplinger's Personal Finance. July 2008. Zupek, Rachel. Best entry-level salaries for new grads. 28 April 2008. 18 February 2009

<http://www.cnn.com/2008/LIVING/worklife/04/28/cb.salaries.grads/index html>.

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“For years, co-workers were amused by a woman who carried a brown bag lunch to her job each

day. That woman later retired in finan-cial comfort and lived her later years in beachfront prop-erty. A daily coffee and muffin can add up to over $1300 a

year.” (Personal Finance, 97) As stated above the woman found a way to budget for a desired future goal. The main idea when it comes to

money management is the setting of priorities or goals and planning your finances accordingly. Proper money management has three steps:

1) Set your priorities and goals 2) Plan your finances accordingly 3) Meticulously stick to your plan

This chapter will show you basic money manage-ment principles such as how to build a realistic budget, control your spending and manage your debt. It will also cover specific topics such as fi-nancing wedding costs, budgeting for married cou-ples, and financing a child’s education expense.

Introduction

Ready, Set, Budget

Have you ever mistakenly spent too much money on unnecessary items and later ran into trouble? If you have you probably weren’t budgeting. Budgeting is a forward thinking spending plan. The steps associated with a suc-cessful budget are: evaluate your current situation, plan your financial future, implement, and evaluate how your budget was implemented. Evaluation of Current Financial Status Evaluating your current financial status is a crucial step in a budget. In order to figure out where to go, you need to figure out where you are now. To do this, you’ll be forming your very own personal financial statements. These per-sonal financial statements are basic forms called a balance sheet and a cash flow statement. Your current situation doesn’t just include your financial position, but also your needs, values, and life situation. You definitely should real-ize that your wants aren’t necessarily your needs, and should be separated. Balance Sheet A balance sheet is a way of categorizing not only what you own (assets which are identified in the four sections table below), but also what you owe. The balance sheet portrays your net worth (Assets – Liabilities = Net Worth). Cash Flow Statement A cash flow statement shows cash coming in and going out during a given period of time. The first step in creating a cash flow statement is to figure out your income. Your income is the cash that is coming into an individual or household (see chart on next page for income categories).

The next step is to figure out the cash outflow or your expenses. These can either be fixed or variable. The fixed

expenses are the expenses that don’t vary from month to month while variable expenses are those that do change from month to month (see chart on next page for examples).

Income – Expenses = Cash Surplus or Deficit To see templates for Balance Sheets and Cash Flow Statements go to http://www.loras.edu/launchintolife/ Plan Your Financial Future Now that you know your current financial position, it’s time to put on your thinking caps and use your imagination… It’s goal setting time. A successful goal should be a realistic, obtainable, and have a measurable outcome that accounts for your current life situation. Your goals should be stated with specific terms, so you know exactly what your objective is, the time frame, and the action(s) needed. One common goal might be to get out of

READY, SET, BUDGET

20 WAYS TO SAVE

WEDIING VOWS AND WEDDING COSTS

BALANCING FINANCES AS A COUPLE

INVESTING IN YOUR CHIL-

DREN’S FUTURE

MONEY MANAGEMENT The First Step in Achieving Financial Goals

Sara Cueno, Christine Ruggeberg, Roseann Sabers, Amberina Uhlik

“...A daily coffee and muffin can add up to over $1300 a year.”

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consumer debt in as short of time as possible. So how might you go about achieving that goal? Got Debt? The first step is to find out the interest rates (APR) and minimum payments for all of your consumer loans. This can be found on your Loan Verification Letter and bills. Now sort them in descending order as shown in the chart below. Remember to always make at least, and preferably more than, the minimum payment on all loans, because late fees and the effects on your credit scores will only hurt you in the long run. Suze Orman, television financial advisor, recommends looking at the credit card with the highest APR and paying the minimum payment + 20% (“Oprah's Best Life Week- Day Four: MONEY”). So if your highest APR is the Mastercard, such as in the example below, you would be paying $72. The calcula-tion for this amount is found by taking 20% of $60 and adding that to the minimum payment ($60). Do this until the card is fully paid off. Shred it and apply what you were paying to the next card. In this example you would be paying $102 ($72+$30) to the Dick’s Sport’s Scorecard. Repeat this until all

Money Management

of your cards are paid off. Your expenses for your debt pay-ments won’t go up, and your debt will be manageable. When you get to paying more off on your student loans, it’s recom-mended that you apply the extra payment directly to the prin-ciple, instead of simply increasing the next month’s payment. This will get you into the routine of always paying each month for each debt. Remember to add these amounts to your budget, which will be explained in the next section.

Setup Budget After your goals are set, it’s time to create your budget.

The Vertical Chevron List illustrates the steps in creating your own budget sheet. To see a sample Budget go to http://www.loras.edu/launchintolife/.

Implement and Review: The final two steps to the budget cycle are extremely im-portant. Implementing the budget involves monitoring your spending, saving, and investing throughout the budgeted time frame and trying to stay within your budget parameters. Evaluating your budget is the final step. This is when you compare budgeted amounts with actual numbers from your cash flow statement. This comparison will show the vari-ance or the difference between what was budgeted and im-plemented. The end result will determine whether or not you need to revise your spending and savings plan. Remember, that this is a continuous cycle so your variance will assist you with the next budget cycle. The keys to a successful budget are that it is well planned and takes time and effort to prepare. It should also be realistic, flexible, easily revised, and clearly communicated.

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The idea behind building wealth is to save more money than you spend. Easier said than done, right? Each of the following tactics are easy methods to save a few extra dollars each month.

1. Avoid shopping on payday- When you receive your

paycheck it is easy to forget about regular monthly ex-penses. Be sure to allow for those including savings contributions. Use payroll deduction, that will help you see how much is available for your budget.

2. Take advantage of coupons- Coupons are worth the time and effort only if you are already planning to pur-chase the item. Don’t buy items just because you have a coupon. Check out newspaper circulars or websites such as www.coupons.com for useful savings.

3. Use a cool down period- Whenever you are about to make an unnecessary purchase, take a few days to think about it. This can be a shorter time frame for smaller items and longer for larger ticket items. This may help reduce the urge to compulsive shop.

4. Cut expensive spending habits- Cutting back on un-necessary expenses such as smoking, entertainment and snacking could save you a bundle. Remember, you can budget and still have fun too.

5. Invite friend’s over- Instead of going out; invite friends over for a movie or a game night. Having a small get together will help cut down on entertainment costs and still have the potential to create a fun-filled evening.

6. Check out the Library- The next time you think about buying a book or a movie, go to your local library. The library carries a collection of books, music and movies and the best part, it’s all FREE.

7. Eliminate unused cable channels- If you don’t watch the channel, get rid of it. You may even consider switching to free HDTV, a high definition broadcasting system.

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8. Don’t pay interest on credit cards- As soon as you are unable to fully payoff your credit card bill each month, the interest starts racking up. There is always a huge temptation to spend more money with credit cards. If this is the case, consider eliminating the card.

9. Pack a lunch- Try to cut back on eating out. Con-sider bringing a sack lunch or reducing the number of days you go out to eat each week. Encourage pot-lucks at work so you are less tempted to go out.

10. Don’t shop on an empty stomach or without a list- Everyone has heard of this rule, and it is true. People, who shop when hungry, venture off their list and spend more money. Stick to the list!

11. Compare prices- To do this, simply calculate the price per unit to aid in deciding what product and size is the best value for your money. Some stores provide the per unit price on the shelf tag by the product. The Sunday ads in your local paper are also a great way to compare prices at different stores.

12. Drink water- When you go to a restaurant, order water. Many restaurants charge you per glass of pop and alcoholic beverages are always expensive. Per-haps add a lemon for a splash of flavor.

13. Consider carpooling- Find a friend or coworker that is heading the same direction and take turns driving. Not only is this environmentally friendly, it will also reduce your gas consumption.

14. Clean your air filter- By cleaning or replacing your car’s air filter more frequently; it could save you as much as 7% on your gas mileage. This is a simple task that can often be done yourself or by a mechanic if you don’t feel comfortable doing it.

20 Ways to Save

Pa

15. Don’t speed- We’re sure you have heard this before. However, gas mileage usually decreases quickly after hitting 60 mph, so to save money, drive the speed limit.

16. Bring your own coffee- Instead of stopping on the way to work to grab a cup of coffee, make it at home and take it with you. It may be less convenient to prepare coffee at home, but it costs only pennies per cup.

17. Exercise at home- Not only is exercising at home a benefit to help avoid medical bills, it could also help eliminate those costly gym memberships.

18. Collect your change- Save all your change in a jar, and when it gets full take it to the bank and cash it in. Change adds up quickly and you will have more money than you realize.

19. Avoid ATM fees- Some machines can charge as high as $3.00 per transaction. These surcharges can really add up; try to only take money out of ATM’s that are approved by your bank.

20. Organize your receipts- Gather your monthly bank statements, bills and receipts together in one place. By staying organized and up to date on your personal fi-nances, you will be able to live within your means.

Money Management

Imagine this scenario, your significant other just asked you to marry him and with a huge smile on your face, you excitedly answer “yes!” After you have overcome the initial excitement and have called everyone you know, many reali-ties of your special day will begin to surface in your mind. Once all the questions arise about what needs to be done, the question of “Who pays for what” will need to be addressed. There is no right or wrong answers to this question.

First, it is essential to map out who is going to pay for what before you begin planning a wedding. The separation of these expenses could change from family to family, wedding to wedding depending on the individuals getting married and each of their families.

A wedding can become quite expensive unless you create a realistic budget that works for you. Some of the smaller miscellaneous items such as stamps for the invitations, RSVP’s, thank you notes as well as gifts for the wedding party can become pretty costly depending on the size of the wedding. The marriage license and the officiator fee may not be due till a later date but need to be considered with initial expenses. Also keep in mind the deposits that will need to be paid in advance.

The chart on the next page illustrates a breakdown of approximately how much of your budget should be allocated to each wedding expense. According to costofwedding.com

Wedding Vows and Wedding Costs

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US couples on average spend approximately $20,398 on their wedding. However, this number varies greatly depending on the location. Most couples spend between $15,299 and $25,498 which is generally twice their wedding budget. The amounts above do not include cost for a honeymoon or engagement ring. Understanding average wedding costs now can help you with preparing a realistic wedding budget later.

Some couples have found it beneficial to start a bank ac-count specifically for last minute items as well as one credit card for the wedding expenses in order to keep track of their spend-ing. This account could be used for other costs as well. It may be a good idea to set up a spreadsheet to include the following information with dates and dollar amounts:

What items need to be paid? Who paid for what? Who still needs to pay for items? Who prepaid deposits? Whether a purchase was paid with credit card, cash, or

check, mark that information down on the spreadsheet. Re-cording this information, as well as saving the receipts is an or-ganized way of keeping a detailed record of the finances and costs incurred, as well as staying within your wedding budget.

Your wedding will be a once in a lifetime event that should be budgeted and planned for accordingly. Just keep in mind that it can seem like an overwhelming, costly event, but be sure to take the time to enjoy the exhilarating process.

The idea of combining financing as a couple can be a sig-nificant hurdle for two people in a serious relationship, whether it’s marriage, engagement, or simply living together. The ques-tions of ”do we join our accounts, or keep separate accounts” – “you pay for this and I’ll pay for that”, or a combination of both will need to be answered.

Communication between you and your spouse or significant other will impact your financial situation considerably. Having a joint account may be a wise choice to pay combined regular bills such as your house or apartment payments and utilities like gas, electric, water and refuse. You may also have other com-bined expenses such as cable, satellite, internet and other addi-

Launch Into Life

tional amenities. More than one joint account could be used to pay for different types of expenses. A joint account for utilities and mortgages could be a main joint account to pay for the costly regular and fixed expenses. Another account could then be used by taking a portion of each individuals check and putting it into that account to use for paying grocer-ies, prescriptions, household supplies and other variable ex-penses.

Another joint account could be opened and 5% of each paycheck should be put into this account for any emergencies such as a car breaking down, someone being laid off, etc. These expenses could easily arise and without this account, bills might not be paid on time and your credit rating will start to diminish. Although these are suggestions, these joint ac-counts are highly recommended to help with finances. One of the biggest mistakes couples make in setting up financing is keeping separate accounts and saying “this finan-cial situation is yours, this one is mine, and that one is ours.” According to SmartMoney magazine, financial arguments are one of the leading causes of the separation of couples. Some newlyweds begin their lives by opening a joint account while still keeping their separate accounts. SmartMoney magazine took a poll that showed 64% of couples have everything in joint accounts. Going from sepa-rate accounts to a joint account is something that needs to be discussed between couples. There needs to be open commu-nication and agreement between partners about the accounts. Again, communication is vital, including about finances, when beginning a new life together. Don’t assume that your significant other feels the same as you about financial respon-sibility. Many couples tend to fight about money causing a lot of stress in the relationship. Considering the debt of a spouse or significant other as his or her sole responsibility to pay off also causes problems. When choosing to become a couple and possibly choosing to marry, the debt becomes the respon-sibility of both to pay off, together.

Choosing to be in a serious relationship, whether married, engaged, means that most things will be combined. When couples start to fight over money, it can take the form of blaming one or the other for spending too much, arguing over who’s debt is who’s or who’s money is who’s. These sorts of arguments will only lead to more and bigger problems. If you choose to be part of a couple you need to finance as a couple, and that includes communication about money without argu-ment. This is a stressful but exciting time because it’s another step forward in life. Remember communication about fi-nances is very important. Don’t just assume that your signifi-cant other feels the same as you do about financial responsi-bility.

These are only suggestions that a few experts have rec-ommended, but couples will need to face their financial en-deavors according to their needs.

Balancing Finances as a Couple

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Now that you are through your glory days of college you are probably either looking for a good job to pay off your col-lege loans, or you are really thankful that your parents helped you out. Wouldn’t you like your child to be one of the thankful ones? It is never too early to start saving for your child’s future. As soon as your child is issued a social security number you can begin an account to save for an important part of your child’s future, their education. There are a couple of different options when it comes to opening an education savings account. These are the Coverdell Education Savings Account and the 529 Plan. Coverdell ESA A Coverdell Education Savings Account (ESA) is a savings account for a beneficiary under the age of 18. The account pro-ceeds are used to pay for qualified education expenses of the beneficiary at an eligible school including elementary, secon-dary, and postsecondary institutions. Qualified education ex-penses include tuition, fees, required books, supplies, and room and board. There are yearly contribution limits for the Cover-dell ESA. In 2008 the contribution limit was $2,000 per benefi-ciary no matter how many different individuals contribute to the account. Contributions may be made by any individual who has a modified adjusted gross income (MAGI) of less than $110,000. If a joint return is filed the MAGI must be less than $220,000 for any contributor. If the MAGI of the contributor is in excess of the limit then the maximum contribution is lowered. Coverdell ESA distributions can be rolled over tax free to a member of the beneficiary’s family as long as that family mem-

Money Management

ber is under the age of 30 or is a special needs beneficiary. The main benefits of this type of college savings account is that the money can be used for education expenses ranging from kindergarten through college and that the account is more flexible when it comes to investment options when com-pared to 529 plans. 529 Plans

A 529 Plan is commonly known as a Qualified Tuition Plan. States, state agencies, or educational institutions spon-sor these tuition plans. There are two different types of 529 Plans and each of the fifty states, as well as the District of Columbia, offers at least one of these. The two types are pre-paid tuition plans and college savings plans. Pre-paid tuition plans lock in tuition prices at eligible public and private universities. Most pre-paid tuition plans set lump sum payments or installment payments based on how old the beneficiary is and also the number of years of college tuition that is purchased. Pre-paid tuition plans usually cover tuition and mandatory fees. However, some plans allow you to purchase a room and board option. Most pre-paid tuition plans have a limited enrollment period as well as an age or grade limit for the beneficiary. This type of plan is usually guaranteed or backed by the state in which the plan was is-sued. A 529 college savings plan does not lock tuition at an educational institution it builds a savings account. Contribu-tions can be made to the account at any time and most ac-

Investing in your Children’s Future

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Finance 101: Money Management APR (Annual Percentage Rate) – total interest rate per year Balance Sheet – tabular statement of both sides of a set of accounts in which the debit and credit balances add up as equal. Budget – a planned itemized allocation of income and expense for a given period in the future Evaluate – assessing, judging, or determining progress in significance, worth, or quality

Works Cited Kapoor, Jack R., Les R. Dlabay, and Robert J. Hughes. Personal Finance. 8th ed. New York: McGraw-Hill/Irwin, 2007. The Knot.

16 Feb. 2009. Orman, Suze, and Oprah Winfrey. "Oprah's Best Life Week- Day Four: MONEY." Oprah. NBC. KWQC. 15 Dec. 2008. Orman, Suze. 2009 Action Plan. New York: Spiegel & Grau, 2008. “Little Steps: 100 Great Tips For Saving Money For Those Just Getting Started." The Simple Dollar. 09 Mar. 2009 <http:// www.thesimpledollar.com/2008/ 02/06/little-steps-100-great-tips-for-saving-money-for-those-just-getting-started/>. Todorova, Aleksandra. "The Six Financial Mistakes Couples Make." SmartMoney. 11 June 2008. 16 Feb. 2009. "Wedding budget: breakdown of wedding costs." Love and relationship advice : romantic ideas. 01 Apr. 2009 <http:// www kissmegoodnight.com/wedding-costs/wedding_budget_breakdown_of_costs.shtml>. <http://www.irs.gov>.17 Feb. 2009.

counts have contribution limits in excess of $200,000. The ac-count is not guaranteed and returns usually depend on the mar-ket. The account may invest in a variety of securities. The 529 Plan does not have any age limits for the beneficiary and the proceeds from the account can be used to cover all qualified higher education expenses. Such expenses include tuition, room and board, mandatory fees, and books. Taxes and Penalties Savings in both Coverdell ESAs and 529 Plans grow tax free. The distributions are also exempt from federal tax and in most instances state taxes, as long as they are used for qualified tuition expenses. If the distributions are not used for qualified tuition expenses they will be taxed and a penalty will be as-sessed. Qualified rollovers are also tax-free. Example The following example demonstrates the difference in the ending account value if the account was started when the child was born versus if the account was started when the child was 10. The model assumes a modest 3.5% account return.

Opening an Account The account opening process for a 529 Plan varies by state. Some states have direct-sold plans as well as advisor-sold plans. If there is the option in your state, the direct-sold plans usually have lower fees. The details for 529 Plans for all fifty states are available at www.collegesavings.org. A Coverdell ESA can be opened through most banks and mutual fund companies. Fees for investing and for account mainte-nance will vary by company.

The next time you are trying to find the perfect gift for your child, or even a niece or nephew, look to a gift that will last a lifetime. Nothing lasts longer or is more valuable than a college education. Money management is allocating your funds according to your priorities and goals:

Evaluate Current Financial Status Budget Finances Find ways to Save Plan and Finance for a Wedding Balance Finances as a Couple Invest in the Future

With diligent planning, accurate implementation, and disciplined savings, your goals are possible. Just as were the goals of the woman mentioned in the beginning of the chapter who is now living on beachfront property.

Conclusion

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“Sorry to inform you, your loan application has been denied due to bad credit.” This is a situation that no one wants to go through, and keeping your credit score and current loans intact can make obtaining loans less stressful. Credit can be very instrumental in our financial lives as it can have a significant impact in various deci-sions related to achieving financial goals. Credit is an agreement to obtain goods or services now and pay for them later. Credit can be very benefi-cial because most individuals do not have the money available to pay for larger purchases such as a house, car, or college tuition. Loans allow us

to have high-priced items before we have the money to purchase them. However, we must pay back with interest to whomever we borrowed the money from. Credit cards are very helpful for smaller purchases and everyday use and only require the payment of interest if you carry a balance from month to month. Closed end loans are used for more expensive items and require the borrower to pay interest whether you payment is made on time or not. Borrowing money is not an easy task, so every borrower needs to know what they can do to make the process as easy and stress-free as possible.

Introduction

What is a Credit Score

Credit score is a numerical evaluation that helps deter-mine the creditworthiness of a person. A credit score simply helps lenders evaluate your credit risk based on a report of your financial history including past loans and payments. The higher the credit score, the lower the credit riskiness of that person. Hence, lenders are more willing to lend money to consumers who are more credit worthy and typically at a lower interest rate. Credit scores are based on credit reports that are issued by three national consumer credit bureaus: Experian, Equifax and Transunion.

FICO® is the most widely used credit score and it is created by Fair Issac Corporation. FICO® is calculated using five important categories: total indebtedness, length

of credit history, credit mix, new credit accounts and payment history. Credit scores range from 300 to 850®. Typically, a credit score from 720-850 is recognized as an excellent score. Credit scores ranging from 680-720 is considered to be good and scores below 650 represent the riskiest consumers who in general will have difficulty getting loans. The Importance of your Credit Score

Your credit score is important for many reasons. First, the better your credit score the easier it will be to get a loan as lend-ers will only grant loans when they are confident they will see their money returned. Second, you will be able to borrow money more cheaply when lenders see you as a lower credit risk. And finally, prospective employers can check your credit

CREDIT SCORE

CREDIT CARD ESSEN-

TIALS

CAN I LOAN YOU SOME ADVICE

STUDENT LOANS

CAR LOANS

USING CREDIT WISELY

Mike Hachey, Briget Putz, Biplaw Sijapati, Nick Teson

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score as a means to investigate your back-ground and responsibility. As a result you need to do everything you can to get your credit score as high as possible. Improving your Credit score

Almost everyone can do something to become more creditworthy. College students in particular have room for improvement in their credit score. Few students pay attention to their credit scores, and if you start your career and set your personal finance goals without this knowledge you will be missing an important part of your financial landscape. How to get your credit report

The Fair Credit Report Act (FCRA) re-quires all three credit bureaus to provide each consumer a free copy of their credit report once every 12 months. To order a copy of your credit report, you can either visit annualcreditreport.com or call 1-877-322-8228. If you don’t like either of these options, you can always complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

Many young college students are unaware of the importance of their credit score in their lives. Those who possess a working knowledge of credit scores are more likely to be successful in their financial lives.

Credit cards can be both a friend and enemy to consumers. Credit cards often get a bad reputation, but the truth is they can be very beneficial tools in your financial life if you use them

Launch Into Life

correctly. Whether it is your first time searching for a credit card or you already have one in your wallet, there is important information you should know. Things to know about credit cards include the different types of credit cards, how to avoid making common mistakes, and how to benefit from using a credit card wisely.

Everyone’s financial needs are different and it is impor-tant to choose the right credit card(s) for your situation. The three main types of credit cards you will encounter are: Se-cured, Regular, and Premium credit cards. Creditcards.com is a great website to learn more about credit cards.

The key is to know when it is the right time to buy on credit and when it is not. Only use your credit card when you are absolutely certain you will have the money to pay off the balance when it comes due. Intelligent use of a credit card can be an easy way for young people to build a credit history

which helps in securing future credit. Using your credit card wisely and paying bills on time is an easy way to start on the right foot toward building great credit. When you receive your credit card bill, it is important that you never pay only the minimum pay-ment. If you fall into the minimum payment trap, your balance will re-peatedly rollover and gain interest along the way. Avoid the minimum payment trap by paying your bill in full and on time, before any interest is accrued on your account. While not the deciding factor when choosing a credit card, rewards programs and cash back features should be considered as well. A few popular incentives and services

Credit Card Essentials

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offered are frequent flier miles, cell phone minutes, other travel related discounts, and credit card registration. This registration is convenient in case you need to report your credit cards lost or stolen. It is important to know your liability in the event your credit cards were lost or stolen as well. First and foremost, if that were to happen you need to report to your credit card com-pany as soon as possible. A phone number you can call should be on your monthly statement or you can search the company’s website. As far as your liability is concerned, you do not need to purchase credit card insurance because of the federal Truth in Lending Act. This act protects you from not paying more than $50 of charges if your credit card is lost or stolen and used by someone else.

Credit cards will often provide that temptation to go ahead and spend. Fight that temptation and use your credit wisely! The average college graduate leaves school with $3,000 of credit card debt. Knowing the basic information about your credit cards and using them sensibly will enable you to reap the many benefits credit card ownership has to offer.

According to the U.S. Department of Education, the aver-age American college student graduates with $17,500 of student loan debt (www.ed.gov). Generally speaking there is nothing inherently wrong with going into debt as a means to finance

Using Credit Wisely

your education, but it is important to understand how to get the most out of your student loans.

That average of $17,500 of student loan debt is a large amount of money and many students are borrowing even much more than that. But college is an important investment and without those loans, for many, college would be impossi-ble. People trade debt for an education, which in the long run is well worth the money borrowed. When students borrow money to pay for their education they do it with student loans. A loan is a term everyone is familiar with, but very few peo-ple know much about them or how they actually work. Inter-est rates, accrued interest, time period, grace period, princi-ple, delinquency, deferment, consolidation; these are all dif-ferent terms used in loan programs that can be confusing and sometimes overwhelming. Understanding your individual student loan situation is the key to being able to successfully pay back student loans and stay out of debt.

Student Loans

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Providing Loans Most college students have to take out student loan to help

finance their college expenses. Colleges and universities pro-vide federal student loans through either the Direct or FFELP loan program. The main difference is where the money comes from. Loras College uses the FFELP loan program for its stu-dents. Federal Family Education Loan Program (FFELP)

Lending institutions like banks, savings and loans, and credit unions make these loans on behalf of the federal government.

If your college uses FFELP, you choose the lender like Iowa Student Loan, Wells Fargo, CitiBank, US Bank, Bank of America, etc.

There is a 10 year repayment schedule on federal student loans After graduation, students are expected to begin paying

back their student loans. Students are given a six to nine month grace period after graduation to get settled before they are ex-pected to begin making payments on their loans. All federal student loans have a grace period. The grace period for Stafford loans is six months and for Perkins loans it’s nine months (www.iowacollegeaid.gov). Most grace periods are around the six month range but it does vary, especially from state to state. It is important to find out what your specific grace period is on your student loans, so you can get prepared for the payments. Loan Consolidation

An important strategy to take advantage of when looking at your student loans is consolidation; because most students use multiple loans to finance their education, consolidating can help to keep organized. Consolidating your student loans is the proc-ess of combining your different loans into one loan from a single lender. Consolidating your loans allows you to personalize your payment structure to fit your personal needs and makes refinanc-ing easier if interest rates fall. Because interest rates do vary from time to time, it may be possible to consolidate or refinance the terms of your loan into a lower interest rate. This can save you some extra cash. The consolidation process can however be quite extensive according to U.S. Department of Education’s website, and the following questions should be considered be-fore students consolidate their loans:

While consolidating is a good option for most people, Julie Dunn, Director of Financial Planning at Loras College warns of one specific risk. If you’re entering a job that offers loan for-giveness on some loans, you may lose that benefit if you con-solidate. Be aware of potential benefits that may be provided by a prospective employer before taking this step.

Launch Into Life

Tips to Avoid Trouble with Repayments Communication. This is the most important tool when

paying back loans. Communication with the lender can help avoid loan default and credit trouble. Manage your loans. Make sure to manage your loans and

make payments on time. Budget your money. Be responsible and organized with

your money. Have a personal budget and follow it. Deferment before Default- It is always better to defer

loan payments if you can’t afford them. Avoiding the lender if times get tough and going into default is a bad idea.

Understanding the loan terminology. According to Tho-mas M. O’Shea, MAE, Assistant Director of Communica-tions for the University of Northern Iowa’s Office of Ad-missions, “The understanding of loan terminology is es-sential for students to know what to do when paying back their student loans”. (There is a list of useful loan defini-tions in the Personal Finance 101 section located at the end of this section).

Exit Counseling Every student when graduating is given exit counseling

information about their student loans. Students will either receive a packet filled with the information needed or they can attend an exit counseling session. These exit sessions include letting students know the total amount they have borrowed, which lender is going to be their provider (this is who the stu-dent will be responsible in paying back when making pay-ments on their loans), and their repayment packets that help explain how to handle repayments and who to contact if prob-lems arise.

When paying back student loans understanding the terms of the loan and communication with the lender are the keys to staying out of credit trouble. In some cases, it is good to pay off your student loans slowly as your interest payments are typically low and you can get a better return on your money elsewhere. Be sure to contact a personal finance professional who can analyze your specific situation when making this decision. College is a costly investment that is usually worth the cost. Follow the steps outlined in this article and you will be successful in managing your education expenses. (www.Iowacollegeaid.gov is a website with numerous tools that can help if questions or trouble arises)

After graduating from college, what is the first major purchase you plan on making? Most graduate’s first attempt at acquiring a consumer loan is buying a vehicle. Unlike fed-eral students loans, auto loans can vary significantly from institution to institution and your loan terms greatly depend on your credit score.

One key strategy when attempting to buy an automobile is shopping. By shopping for both the financing and the price of the automobile, a consumer can save thousands of dollars. It is vital to pay close attention to the details of the loan pro-

Car Loans

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gram to make sure you’re getting the best deal possible. A helpful website to research fi-nancing is www.bankrate.com . Make sure you contact multiple lending institutions and compare loan prices, rates, and time periods before making a final decision. The length of the loan and the interest rate will help deter-mine the amount of your payments and how long the payments will last. Each individual should pick the loan program that suites them best and is the most affordable for their par-ticular situation. There are many important factors when getting an auto loan that you must consider. Lending institutions have levels concerning credit scores that determine who gets the best interest rate, and the higher your score they better rate you will get. Having a down payment will increase the chances of quali-fying for a loan, and you will want at least 20% of the purchase price of the vehicle to put down. Lastly, make sure you pay an appropriate amount for the vehicle you are purchasing, because the lending institution will only loan you the amount the car is actually worth. To find the price of a car go to www kbb.com (Kelley Blue book) or www.edmunds.com. Know your figures before going to meet with a loan officer and you will come out feeling confident you made a good deal.

Another important strategy when buying an automobile is figuring out affordability. Each individual needs to make a list of their finances and figure out how much they can comfortably afford to pay for a car payment per month. Make sure to factor in costs for insurance, gas, and other variable expenses when considering affordability, because these items can greatly in-crease your cost per month. Most people forget to consider these expenses and often find they cannot afford a certain vehicle be-cause of these items. Making sure to include all possible costs can make for a more comfortable situation financially.

Using Credit Wisely

Leasing vs. Buying Most graduates do not understand the difference between

leasing and buying because leasing is a term you don’t often hear in conversation. Leasing can be compared to a long-term rental. You make monthly payments for using the car, and then turn it back in after your allotted time. It is advantageous for those who want a new vehicle every couple of years, while keeping their payment low. When you buy a vehicle, the ownership of the vehicle is in your name and you build equity in the vehicle. It is common for businesses to lease and con-sumers to buy.

Buying a car should be a fun and exciting experience. Being prepared and doing a little research beforehand can save you money, as long as you remember to stay within your budget. Always weigh in different options, such as rates, term, and down payment to make sure you get a program that suites your lifestyle. Consider both buying and leasing before you make a final decision and never impulse buy. As long as you stick to your guns and get what you want, you should be happy with your vehicle and your loan.

Launch Into Life

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Finance 101: Using Credit Wisely Grace Period - The amount of time the credit card company gives you to pay your balance before a charge is incurred. Minimum Payment - You credit card provider will generally state the minimum balance you have to pay each month. Any balance in excess of the amount will be carried over and the APR will be applied. Accrued interest - Interest that has accumulated on the loan. Repayment schedule - Shows the monthly payment, interest rate, total repayment obligation, payment due dates and the term of the loan. Delinquency - Failure to make loan payments on time. Late fees may be charged, and if they miss several payments, a person’s loan will go into default. Default - The state of a loan when people fail to make several regular payments on time or otherwise don’t meet the terms and con-ditions of the loan. If people default on a loan, the lender, the state and federal government, and the college can take legal action to recover the funds, which can include garnishing a person’s wages and withholding income tax refunds. Deferment - Postponement of loan payments. Most federal loans are deferred if a person is still in school at least part time. If they don't qualify for a deferment, they may be able to get a forbearance. However, they can't get a deferment if their loan is in default. Forbearance - A temporary postponement of payments to the principal allowed by the lender. (Interest charges continue to accrue, even on subsidized loans.) People still need to pay the interest charges during the forbearance period. Forbearances are granted at the lender's discretion, usually if a person has extreme financial hardship or other unusual circumstances and don’t qualify for a defer-ment. People can't receive forbearance if their loan is in default. Forgiveness or Discharge - The cancellation of all or part of an educational loan because a person meets certain criteria (for exam-ple, they perform military or volunteer service).

Works Cited Credit Cards - Compare Credit Card Offers at CreditCards.com. 18 Feb. 2009 <http://www.creditcards.com/>. "Credit Education: Credit Education - Help Topics." Credit cards | Compare credit card offers | Apply for credit card. 18 Feb. 2009 <http://www.creditcardflyers.com/credit-education/>. "Credit Card Dos and Donts" CreditShack.org. 20 Feb. 2009 <http://www.creditshack.org/2005/credit-card-dos-s/>. Iowa College Student Aid Commission. Exit Counseling. Brochure. Des Moines, IA Credit Card Applications - Apply Online for a Credit Card. 20 Feb. 2009 <http://www.creditcardclients.com/>. Julie Dunn, Director of Financial Planning at Loras College Thomas M. O’Shea, MAE, Assistant Director of Communications for the University of Northern Iowa’s Office of Admissions www.Iowacollegeaid.gov www.ed.gov

Credit is a vital aspect of your financial life that you need to keep tabs on. Knowing how to manage your finances to keep your credit score respectable will benefit you throughout your life. Credit should not be thought of as a bad thing or something to avoid, but rather as a tool in your financial toolbox. This credit section provides solid advice on where to start watching your credit and how to avoid getting into credit trouble. In re-

gards to loans, your credit score is a primary determinant in the interest rate you’ll receive; which can be the difference in saving hundreds or even thousands of dollars in pay-ments. Being educated helps lower your risk of making mis-takes. Lower risk in the financial world is a great thing be-cause it increases people’s chances of becoming successful.

Conclusion

Page 31

Most people cringe at the sound or sight of the word Tax, but you shouldn’t have to. Taxes have a huge influence on your life, so this infor-

mation is c r i t i c a l and useful to have. With some basic sug-g e s t i o n s

about tax preparation and common deductions, you will be on your way to planning your taxes. Even though you might have someone else do the

preparing, it is necessary that you understand what he or she is doing with your money.

Introduction

What’s so Important About April 15?

While attending college, most students are claimed as “dependent” on their parent’s taxes. The majority of you probably left your tax paperwork and tax season stress up to Ma and Pa. Because of this, many college graduates have no clue what to do with the “important tax documents” they receive during January of the next year. Now that you have graduated and entered what many call “the real world,” it is time to start thinking about your taxes as well. Understand-ing taxes is important to everyone because it affects the everyday financial decisions being made.

The rules and regulations which make up our current tax system can be found in what is referred to as the Tax Code. Reading the tax code can be extremely confusing; however, luckily we have professionals to decode what all of it means, and how it applies to each of us. When you start a job, your employer will have you fill out a form called a W4. This is a document used to tell the employer how much tax you want taken out of your check every pay period. Let’s face it: we all must pay taxes, and it is easier to have a little taken out each paycheck rather than getting a $15,000 bill on April 15th. The amount of money that comes out of your paycheck is simply an estimate. The period from January 1st to April 15th of the following year is used to file tax forms which figure out exactly how much each taxpayer owes, or how much should have been paid in for the entire previous year. If, in the end it is determined that the amount withheld from our pay was more than we owe the IRS, we get a tax refund. It can also be determined, however, that we did not pay the IRS enough through our W2s; resulting in an amount we must pay them by April 15th.

So what does all this mean to you? Anyone who earned money above a certain threshold or had any money withheld is required to file taxes, and most people use form

1040. On this form, you fill out your name, social security num-ber, other basic information, and how much money you made during the year (which you get from the W2’s that are mailed to you from your employer by January 31st). The first page lists certain qualifying situations in which you can adjust this amount of income to arrive at your AGI, or adjusted gross income. The second page of the 1040 is for subtracting any exemptions and deductions you are eligible t o receive, computing the tax you owe by using the tax tables, and then subtracting any tax credits you are eligible to take. Two de-ductions are offered: the standard deduction and the itemized deduction. Most recent college graduates will chose the standard deduction. These deductions are essential in preparing taxes because they will ultimately reduce the amount of tax you owe to the government.

While this tax form may look confusing at first glance, cop-ies of the form and detailed explanations of it can be readily obtained at www.irs.gov. If there is something on the form that you are questioning, the instructions explain each entry by line number.

WHAT’S SO IMPORTANT

ABOUT APRIL 15TH? WANT TO REDUCE YOUR

TAXES… LEGALLY? WHAT YOU NEED TO

KNOW ABOUT TAXES IN 2009

TAXES: AFFECTING EVERYONE, EVERY YEAR

Amanda Davidshofer, Chelsea Kuenster, Rijendra Maskey

“… you will be on your way to planning your

taxes.”

“Let’s face it: we all must pay taxes, and it is

easier to have a little taken out each pay-

check rather than get-ting a $15,000 bill on

April 15th.”

Page 32

Now what about actually filing? Anyone can prepare their own taxes; all that is needed is the important tax documents and some basic knowledge. You can also prepare them via tax soft-ware which can be purchased at most department stores and office stores nationwide. Another option is to take your docu-ments to a tax preparer, who for a fee will file them for you after you answer a series of questions. If you look at your tax form and your situation and feel confident about doing it you can pre-pare your own taxes. In addition, if you have income of less than

$56,000, you can file them electronically for free on the IRS website. By filing elec-tronically, you do not have to mail anything; you will get your return much faster, and can have it directly deposited into your bank account. The professional tax preparer

option is often used for people who have complex tax situations or do not understand how to prepare taxes in general. There are many small, medium and large tax preparation and accounting firms in most areas that for a fee will file them for you after you provide them the necessary information. These generally tend to be expensive, but they are professionals and they should be highly considered if you have a special or complicated tax situa-tion. Even though they are professionals you will want to know what is going on with your own tax situation, in case any mis-takes are made. If you take your taxes to a CPA firm and they make a mistake, you are still liable to the IRS, so make sure you look over your copies before signing it. You will also want to make sure that the preparers have included the deductions and tax credits that you will qualify for. While most tax preparation software automatically includes this, be sure to ask your tax preparer about any special situation you might have.

Do you want to maximize your tax return? This is a com-mon quote heard on many preparers’ commercials during tax season. There are two ways of maximizing your tax return. The first way is making sure that your tax preparer didn’t miss any

Launch Into Life

deductions or tax credits while preparing your tax return and the second way is properly planning expenditures and income allocations, so that the deductions can be maximized and taxes will be reduced. As in life, proper planning can lead to desir-able outcomes, and the same can be true for income taxes. Tax planning is not as difficult as many people think it is. There are a few main things taxpayers need to know in order to benefit from tax planning.

For AGI Deductions: There are two general types of

deductions For AGI Deductions, also called above-the-line, and From AGI Deductions, called below-the-line. Adjusted Gross Income (AGI) is assumed to be the line between the two types of tax deductions. For AGI deductions are directly subtracted from the taxpayer’s income to get to AGI. These deductions include, but are not limited to unreimbursed mov-ing expenses, contributions to traditional Individual Retire-ment Accounts (IRAs) and other retirement plans, fees for college tuition and related expenses, and interest on student loans. Let’s say Ryan is a resident of Dubuque, IA, but is hired by a company in New York, he can deduct his unreim-bursed moving expenses to New York as an above-the-line deduction. If a taxpayer’s job offers a retirement plan, the money put into that plan can be deducted as an above-the-line deduction.

Adjusted Gross Income (AGI): AGI is the amount after

deducting For AGI Deductions from the income. This is an important number as many other calculations are based on it. For example, medical expenses need to exceed 7.5% and job expenses and certain miscellaneous expenses need to exceed 2% of AGI to be eligible for deduction.

From AGI Deductions: From AGI Deductions are of

two types, standard or itemized deductions and personal ex-emptions. These are deducted from AGI to determine taxable income. The taxpayer’s filing status determines the amount of the standard deduction. The tax payer then has the choice of taking that amount or calculating or itemizing his or her de-ductions. The standard deduction amount assumes a typical tax situation whereas the itemized deductions require the tax-

Want to Reduce Your Taxes… Legally?

One of the most impor-tant aspects of tax plan-ning is proper documen-

tation to support ex-penses and deductions.

Page 33

payer to keep track of certain expenses. The taxpayer chooses, whichever is greater, the standard deduction or the itemized de-duction. The amount of the standard deduction and personal exemption is adjusted annually for inflation.

Itemized deductions are certain personal expenditures that the IRS allows taxpayers to deduct from their AGI. As men-tioned above, these are only taken when the amount is greater than the standard deduction amount. These expenditures are medical expenses, certain taxes and interest payments, charitable contributions, expenses related to production and collection of income and management of property held for production of in-come. The medical expenses include the expenses related to care of the taxpayer, spouse and dependents. The purchase of pre-scription drugs and insurance premiums paid by the taxpayer can be included in this category, but they must exceed 7.5% of AGI, as mentioned earlier. The taxes and interest payments include but are not limited to, income taxes paid to the state or sales taxes, whichever is greater, property taxes, real estate taxes, and home mortgage interest. Charitable contributions include any cash, check or non cash gifts given to a qualified organization. Charitable contributions can be carried over for five years. The expenses related to income production and collection, and management of property held for in-come production include, but are not limited to, fees paid for tax prepara-tion, investment expenses, union dues paid at work and job travel expenses.

Once the taxpayer has a basic idea about how these deductions work, he or she can do some planning to reduce their tax liability. Often college graduates delay contributing to their retirement plans because they need extra cash. This can be a costly mistake since these deduc-tions can lower your tax bill. Another deduction that you might be able to take is the moving expenses that your employer does-n’t reimburse you for when relocating for that first job. You are able to deduct these unreimbursed moving expenses which will help reduce your tax liability and therefore earn you some extra cash. Another option would be to invest in municipal bonds, which are bonds issued by state and local governments and the interest is tax free. Because of that feature you will not have to pay any tax on the money you earn in this investment. These are a few among many ways in which the college graduate can plan to minimize taxes.

Tax planning is not as time consuming as business planning or as extensive either. A little time and commitment can go a long way. One of the most important aspects of tax planning is proper documentation to support expenses and deductions. This will help the tax preparer as well as help the taxpayer if he or she ever gets audited by the IRS. Last, but not least, communi-

Taxes

cate properly with your tax preparer and make sure he or she has the necessary documents and knowledge about tax plan-ning and deductions. The preparer might not be aware of all the deductions you are eligible for and without the necessary documents he or she won’t be able to get you that maximum refund you are looking for.

With the changes in the economy and our daily lives, it is easy to forget about your taxes until the last possible minute. Although changes in taxes do not seem as relevant in your hectic life, they are important to know. From increases in de-

ductions to the new tax breaks and additions from the American Recovery and Rein-vestment Act of 2009, the changes in your taxes are important and necessary to know for tax planning in the upcoming year. Let’s start with the “simple” tax changes for 2009. As usual, the government increases certain items to try to stay current with infla-tion. The standard deduction is one of those items. In fact, for those filing as “single,” the standard deduction is going to $5,700 for 2009 from $5,450 in 2008, an increase of $250. Another basic tax issue comes with your personal exemption which will see an increase as well going from $3,500 to $3,650 for 2009. As for the American Recovery and Re-investment Act of 2009 that President Obama signed in February 2009, there are some important tax issues that you should be aware of. For starters, a new “Making Work Pay” credit was introduced that can be used to reduce the amount of taxes withheld from

your paychecks. The benefit of this tax would be the fact that you would see around thirteen extra dollars a week in your paycheck starting in June 2009. If you would rather keep your deductions the same, you have the option of taking this as a credit on your tax return. However, it cannot exceed $400 for single tax returns or $800 for joint returns.

What You Need to Know About Taxes In 2009

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Another significant change due to the Recovery Act is the expansion of the credit for first-time home buyers. For those of you who are looking to buy a home for the first time, the credit value was bumped up to $8,000 from $7,500. The total amount you receive is only 10% of your home’s cost though. This credit is a refundable credit which means that if the credit amount ex-ceeds your tax liability, the IRS will send you a check for the remaining amount of the credit. In addition, if you buy a home before December 1, 2009, the obligation to repay the credit is waived, whereas before you needed to pay back the amount through your next fifteen tax returns.

What if you are going to attend grad school? There are benefits coming your way too. Added into the law by the Re-covery Act are more expenses that you can claim as qualified educational expenses on your tax return. The Recovery Act states that “expenses paid in 2009 or 2010 for the purchase of a computer or equipment as well as Internet access that will be used by the taxpayer and the taxpayer’s family during any of the years that the taxpayer is enrolled in an eligible education insti-tution may be taken as an education expense.” However, this is not to include expenses for computer software that is designed for games or hobbies unless those software programs are pre-dominantly educational by nature. These expenses must have been paid or incurred after December 31, 2008.

Looking into buying a new vehicle in 2009? The Recovery Act includes a tax deduction when a taxpayer purchases a new car, light truck, motor home or motorcycle, which meets the

Launch Into Life

requirements of Title 2 of the Clean Air Act, between Febru-ary 17, 2009 and the end of the year. This deduction can be taken even if you don’t itemize your deductions. This deduc-tion cannot exceed the amount of tax paid on the first $49,500 of the vehicle’s purchase price. To find the exact require-ments that your new vehicle needs to meet in order to qualify for this deduction, visit http://www.epa.gov/air/caa/title2.html#iic.

Every year tax laws change and it is the taxpayer’s re-sponsibility to stay current on these changes. There are cred-its and breaks available to most taxpayers if they are willing to look for them. With the above mentioned basic changes, you can not only be prepared for how your purchases can affect your taxes but also know what to expect next tax season.

Nobody likes to pay taxes, but the laws require that we do. With understanding and proper tax planning, you can make sure that you are paying your fair share but no more than your fair share. Although it is impossible to master all of the minute details of tax preparation and planning, you can be more optimistic about the next tax season by understanding the basics of the tax forms and the changes that could affect you in 2009.

Conclusion

Finance 101: Taxes American Recovery and Reinvestment Act of 2009 - a bill that was passed in an effort to infuse money into the economy, create and save millions of jobs, and create change in the challenges that our country faces by allowing us, the taxpayers, to know where, how, and when our tax dollars are being spent Dependent - a person that relies on someone else for financial support Tax Deduction - an item that is taken out of gross income that reduces the amount of income that is subject to tax Tax Liability - the amount of tax that a person is obligated to pay the IRS Tax Credit - a direct reduction in tax liability Taxable Income - the amount of income subject to income tax

Works Cited Hoffman, William H., James E. Smith, and Eugene Willis. South-Western Federal Taxation Individual Income Taxes, Volume 1

(with TaxCutÂ® Tax Preparation Software CD-ROM). New York: South-Western College/West, 2008. "Income Tax Changes 2009." Careers, Finance and Investing : Money-zine.com. 13 Feb. 2009 <http://www.money-zine.com/

Financial-Planning/Tax-Shelter/Income-Tax-Changes-2009/>. "IRS Information Related to the American Recovery and Reinvestment Act of 2009." Internal Revenue Service. 14 Feb. 2009

<http://www.irs.gov>. Recovery.gov. 13 Feb. 2009 <http://www.recovery.gov/>.

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As we get older we face many new chal-lenges, responsibilities, and obligations that are very important in life. One of the most important

aspects of life is managing your risk. Managing your risk is protecting your-self, protecting oth-ers, and making sure that you have the financial stability to do the things that

you want to do in life, while reducing your expo-sure to outside threats.

This chapter on risk management is divided into five sections, each dealing with a specific subject that will help you reduce your risk. Discussions in these chapters include ways to ensure that your identity is not stolen, one of the major threats facing our gen-eration today. Also included is information about researching and purchasing the right type of insur-ance for you, a recent graduate, and how important it is to have. Lastly we focus on writing a will, and the five W’s surrounding the questions about wills: who, what, when, where and why. After reading this chapter you will have gained a much better under-standing of how to reduce your exposure to risk, and live with a much greater sense of security.

Introduction

Identity Theft

Identity Theft! Is This the End of the World? Every day when we turn on the news, we see plenty of

crime related activity and many times that crime is identity theft. Identity theft has become a prob-lem for people all around the world. Due to fast paced improved technologies, many people have various ways to steal your money or your identity for their personal benefit. A simple definition for identity theft and identity frauds is a criminal act where someone wrongfully obtains someone’s identity and uses it for their personal financial benefits. Personal data such as your Social Security Num-ber, your bank account, credit card number, your telephone number and other valuable identifying data can be used if they fall into the wrong hands.

Millions fall victim to identity fraud each year around the world. Even though identity theft has decreased in re-cent years, identity theft is still a significant danger for indi-viduals in communities all around the world. People who suffer from identity theft have reported that unauthorized persons have taken funds out of their bank or in the worst case scenario; they have taken identities altogether, running up vast debt and committing crimes using innocent people’s identity. In many cases, a victim’s losses may include not only out of pocket financial losses, but also the fact that they have to spend a substantial amount of money and time restoring their reputation in the community. They also spend time correcting erroneous information for which the criminal party is responsible. To prevent the possible emo-tional and financial stress of having your identity stolen you need to take certain precautions to prevent such a disaster. Some precautions that can be used follow:

What should I do to protect my sensitive information? Do not carry your Social Security card with you unless

needed. If you have to give your social security number to any

party, make sure it is a legitimate party. Shred all documents that you no longer need to keep. Protect PIN numbers - Cover the number pad when you

are entering the PIN and don’t write your PIN on the card.

Do not do anything with your personal information when you are in a rush as that can lead to errors and possible loss of secure information.

How can I secure my mail? If possible put a lock system in your mail box and have it

attached next to your door. Sign up for electronic delivery of bills and bank state-

ments. Make sure you are getting all your mails that you nor-

mally get, if you don’t receive a bill by its usual date con-tact the bill sender immediately.

How can I keep an eye on credit activity? Sign up with a credit monitoring company to identify

unusual behavior on your credit report. If you have a low credit score or your credit score is de-

creasing, make sure to check if there is fraudulent activity going on by other people who may have stolen your iden-tity. Call 1-877-ID THEFT or contact the Federal Trade Commission to report the situation.

You can freeze your credit by calling credit agencies if you suspect unusual activity.

IDENTITY THEFT: IS THIS THE END OF THE WORLD?

DWI: DRIVING WITH INSURANCE

YOUR HEALTH IS UNIN-

SURED? UNACCEPTABLE!

COVERING YOUR AS-

SETS: LIFE INSURANCE

IF THERE IS A WILL THERE IS A WAY

RISK MANAGEMENT

Jennifer Dziubla, Santosh Khanal, Peter Kloberdanz, Daniel Kurt

Risk Management: Protecting yourself, protecting others,

and creating financial stability

for yourself

Awareness is an ef-fective weapon

against many forms of identity theft.

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Launch Into Life

Take advantage of a free credit report that is offered by the three credit reporting agencies. Get one statement at a time from each agency every four months. The three credit reporting agencies are: Equifax, Trans Union and Experian.

Securing credit cards and other bank information is also very im-

portant in order to protect identity. Some banks will give you two cards at the same time. If that is the case always keep the second card in a safe place or cut/shred the credit card. Never leave your credit card receipts behind even if it doesn’t have the full credit card number. Try to see if you can add your picture to your credit card so that even if someone wants to use your credit card they cannot use it. While mak-ing a purchase, only make a purchase through trusted websites where you have knowledge of and can trace the purchase history. Further-more, if someone you don't know calls you on the telephone and offers you the chance to receive a "major" credit card, a prize, or other valu-able item, but asks you for personal data such as your Social Security number, credit card number or expiration date, or mother's maiden name, ask them to send you a written application form.

These are some guidelines people can follow when handling im-portant personal identity information. But these are not only the ways to protect your identity there are other steps one can take to protect it. Probably the single most important thing a person can do in protecting their identity is to be aware. Awareness is an effective weapon against many forms of identity theft. We should always be aware of how iden-tity is stolen and what you can do to protect and monitor your personal information. Armed with knowledge of how to protect and take actions to be safe against identity theft, people can make the identity thief’s job more difficult. It is hard to keep track of everything and to be con-stantly thinking about securing your identity but spending some time in taking precautions can save you from the trouble and anxiety that re-sults from identity theft.

The purpose of auto insurance is to protect the insured against fi-nancial loss due to property damage, injury or liability. In the United States, all drivers are required to have the minimum limit in liability insurance to be able to drive. This protection comes in an auto insur-ance plan, known as a policy. The policy will specify the various cov-erage options and the limits or amounts of each type of coverage. So what type of policy will give adequate coverage at a reasonable price?

To answer this question, you must first find a policy that meets the minimum requirement for your state of residence. From this point, ad-ditional coverage options can be added at an additional premium. De-pending on what type of car you own, what other assets you own, and how much you are able to pay for an insurance policy, additional cov-erage may be necessary.

Before you begin shopping for your perfect policy, it is also rec-ommended that you check the status of your driving record. This back-ground check is important because a bad driving record will increase auto insurance rates. Depending on the state you live in, make sure to

DWI: Driving With Insurance

State Farm Professional Quote: Price should not be the only factor in deciding your auto insurance. A person should evaluate the financial stability, customer satisfaction, and claims reputation of the company and agent they are considering. A licensed agent can help you decide on the correct coverage to best protect you and stay within your budget.

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research the laws regarding traffic tickets and at what point they will be expunged from your record. If your current driving re-cord will soon improve, you should wait to price auto insurance policies.

Now that you are prepared, you can begin shopping! This process may be tedious, but will guarantee finding the best pos-sible price. A great place to start is the Internet. Shopping online is a good starting point because you can price several insurance companies at one time. With the help of insurance quote sites such as (Progressive.com, Geico.com, etc.), quotes from many insurance companies will be pulled into a comparison spread-sheet. These comparisons will be helpful and should be saved for future reference and to avoid duplication. Edmunds.com provides a list of things to make note of while comparing differ-ent policies: (Edmunds.com http://www.edmunds.com/advice/insurance/articles/89618/article.html)

After you have accomplished online comparisons, it is time to pick up the phone. Pricing insurance over the phone is proba-bly not at the top of your list, but just remind yourself that you may still find a better deal and save a lot of money! Make sure after each phone call to have the quote sent to you by fax or mail. This paper copy will be important to keep on file.

Risk Management

Now that a list is in place, it is time to weed out the ex-pensive and unnecessary policies. Some policies may be obvi-ous discard choices, but others will need more detailed com-parison. This second level of comparison may include deter-mining discounts. Several insurance companies offer dis-counts for good driving records, a quality credit score, car safety features, and other things. These discounts should not be overlooked because they will save you even more money.

By now, you should have a list of your best possible choices. So where do you go from here? Make a decision! Edmunds.com provides a list of steps to guide your decision:

Congratulations! You have decided on an insurance pol-icy. There is one last step; sign the paperwork. However, be-fore you give your autograph make sure to read through the policy and have a clear understanding of your rights and

terms. If you currently hold another policy, make sure the new policy is in force before cancelling the old policy.

For the greater portion of our lives we have been under the guardianship and care of our parents. Whether we catch the flu, break a bone, or have strep throat, it seems that our parents have always been able to take us to see a qualified physician to give us the care we need to recover from whatever our ailment may be. But what do we do once we are on our own? Are we still on our parent’s health-care plan? Do we have to pay more? Who do we see about health insurance? These will be the ques-

tions that we will all face at some point in our lives, and for the graduating seniors these will be questions that need to be answered now.

We all wish buying insurance would be a simple process, but it is not a very easy question when people inquire about it. Asking to purchase health insurance is like going to a car dealership and saying “Hey, I want to buy a car.” There are many available options, features, and companies that you can choose from, just like you would be able to choose with a car. However for those who are about to acquire their own health-care plan there are some simple options. With those simple options come some simple answers.

Here is what to plan for upon graduation: you need your own health insurance. Right now most of us are on our par-ents plan, and have been for the past 22 years, but it is time for us to become independent from our parents. Conse-quently, most plans will state that upon completion of school or upon relief of guardianship that a particular individual will be taken off of their current plan – that is, there parents plan. Every graduate needs to find when their current coverage ends, and when their new coverage begins. Depending on if there are any gaps between coverage periods, you may want to consider a temporary plan.

Your Health is Uninsured? Unacceptable

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This is something that we must all plan for, because we will be on our own as far as healthcare is concerned. However this doesn’t mean you can’t receive treatment. For instance say you are in a car accident and are taken to the emergency room, you cannot be denied treatment. There will be costs involved, but you will never be denied treatment when in these types of situa-tions. What graduating students can plan on is either getting coverage through their first job, or by purchasing a policy them-selves. An important consideration for employer sponsored health care is who bears the cost, you or your employer. Many employers offer healthcare through their business, and this would be a very easy way of acquiring coverage.

So what if I don’t have a job that offers health insurance? How can I get covered? Again, like our car shopping problem, there are many options available to you. One of those options for graduating college students is a short term plan, great for students between school and getting their group health benefit from their first job, or as a good option for anyone between jobs. With the current economic condition many jobs are being cut, which means healthcare coverage for those individuals is also being cut. In this instance a short term plan may be the right option. A short term plan can include coverage for major hospi-tal, medical, and surgical services, and has many options such as the length of coverage and deductible level. These may be sin-gle, two-person, or family coverage. Depending on your current financial situation, it is advisable to speak with a qualified insur-ance agent on which option is best for you, but you can typically expect a monthly premium anywhere from $35 to $70 according to Blue Cross Blue Shield for a short term single plan.

So what should you have as a deductible? At a young age it doesn’t make much sense having a low deductible simply due to the fact that the monthly payments are much higher with a lower deductable. For instance, a deductible of $1,500 for a 21 year old male, non-smoker is around $113 per month. But a deducti-ble of just $500 for the same person is about $137 per month; all according to Blue Cross Blue Shield. More options such as ma-ternity coverage will cost more per month, and are available to choose from upon purchase of your policy.

Still not sure about getting coverage? There are still options available to graduating seniors, and for anyone else that needs it. HIPIOWA, otherwise known as the Health Insurance Plan of Iowa, was created by the Iowa State Legislature to provide ac-cess to health insurance coverage to all residents of the state who are denied individual health insurance. Let me repeat my-

Launch Into Life

self: they provide coverage to all residents of Iowa who are denied individual health insurance. What HIPIOWA has done is eliminate the excuse for not having insurance because of being denied coverage. A requirement to apply for health insurance through HIPIOWA is that you have had a rejection of health insurance coverage within the last nine months from a major healthcare provider. This Iowa-made plan not only provides a means to purchase health insurance they also do it at an affordable rate. Want more information? Visit www.hipiowa.com for more information on this almost guar-anteed coverage.

Again, buying coverage is like buying a car, if you want everything you have to pay for it. If you don’t need a specific coverage, such as maternity, then you don’t have to pay for it. It is nice being able to choose your own healthcare options and save money at the same time, isn’t it?

The best thing to do upon graduation is find a job that includes health coverage in their benefits package. The next best thing? See your insurance agent for availability and op-tions on personal plans. Still can’t get coverage but a resident of Iowa? Well the leaders of the great state of Iowa have set up a plan with HIPIOWA that can help you out. Healthcare is available to you, to your friends, to everybody. With the amazing healthcare that we have available in America it is almost unbelievable to think that a person would not have coverage, and hopefully you now know that you can have it to.

There are many questions raised when it comes to a life insurance policy: How much do I need? How much can I afford? When do I need it? What type of policy should I pur-chase? Although each of these questions have their own ex-planation and answers, the first thing a person must do when considering a life insurance policy is look at what type of situation they are in at that point in their life.

Some of the factors one must take into consideration when asking themselves “Do I need Life Insurance?” is at what point in their life are they in? If you are married, have dependants, or if are there others that would be adversely af-fected if you died are good signs that you may need life insur-ance. Another important factor in choosing a policy is look-ing at your current debt. Typically the reasoning behind pur-chasing a life policy is because the policy holder wants to protect family, or perhaps his or her estate. When the policy holder dies there must be money to pay for all the bills and debts created in that person’s lifetime, which is where life insurance takes over. Death itself is an expensive event and some families may not have the financial means to pay for it. The value in holding a life insurance policy is not what is gained from a claim or event, but rather from the peace of mind that in the event of death that there will be no adverse financial consequences due to the loss.

When does a person get life insurance? Typically this is a harder question to answer because of the factors that should

Covering Your Assets: Life Insurance

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be taken into consideration. Specifically, are you married? Do you have kids? Do you have debt that will need to be taken care of in the event of your death? If you answered yes to any or all of these questions, then you should probably think about pur-chasing a plan. The time to purchase a plan and the plan that you should purchase are both questions that should be answered by a licensed insurance agent or financial planner, and all factors

should be weighed accordingly. So how much life insurance should you get? A person needs to determine the overall financial consequences of them dying in order to purchase adequate cover-age. You must have enough to pay for your debts so that those costs are not passed on to other family members. Or perhaps a policy holder wants to create a

trust, or even set up a scholarship in their name; these can all be paid for through a life insurance policy. The amount of life in-surance one must purchase also depends on what point in life they are in, and who this policy would affect. Marriage, chil-dren, purchasing a home, sending kids to school; these are all important life events, and each of these can have an impact on the amount of insurance to purchase, and the type of policy that suits you best.

The type of policy you choose should be what fits your cur-rent financial and life situation best. Insurance companies will use a “mortality table” to decide how much a particular policy will cost for an individual. A mortality table is a statistically-based table that will show expected mortality rates. The three biggest factors in that table that affect a policy is the age of the policy holder, their gender, and if they use tobacco. The younger you are, the less likely you will die in the near future, which means the policy will be cheaper. The reason for gender is due to the fact that on average women live longer than men. Insurance companies take all of these factors into consideration when creating a policy, and calculate a policy price based upon these factors. A good idea is to buy when you’re healthy. The older you are or worse your health is the higher your premium. In short, buy early and buy healthy.

At this point we still have an unanswered question: What type of policy is for me? This question ultimately should be left up to a licensed professional who has the best interest of the party purchasing the plan in mind. Term life insurance, also known as temporary, is a very common form of life insurance. Typically cheaper, this type of policy is common for younger adults, and provides coverage for a particular number of years for a specified premium. Permanent life insurance is another common form of life insurance; this policy is effective for a stated amount of time, typically until the policy matures, or if the owner fails to pay the premium when due. Different from term, permanent will build cash value over time, which essen-tially reduces the amount of risk the insurance company is ex-posed to in the event that a policy holder makes a claim.

A whole life police is one form of permanent insurance that

Risk Management

combines life coverage with an investment fund. With this policy a person is buying a policy that will have a stated, fixed amount on your death. As stated before, part of your premium goes towards building cash value derived from investments made by the insurance company. This cash will continue to build and is tax-deferred for every year that you keep the pol-icy. And if the policy holder wishes they can surrender the policy and receive the amount of the cash value. There are many options to choose for when you are deciding when and what type of life insurance to purchase. Things to always keep in mind are your age, your dependents, current debts, and costs associated with death. A person wants to be able to guarantee their insurability, and protect themselves and loved ones from any unfortunate event.

Whether drafting a will is in your distant future or on your agenda for next week, there are many questions you may be asking yourself. Most of these questions can be answered using the 5 W’s: Who, What, When, Where, and Why? Using these questions will guide you through this what for many seems undesirable, yet crucial process. Who Needs a Will?

Everyone who has guardianship issues or assets to worry about needs a will. Once you are out of college, building your career, and potentially starting a family, it is important to put ‘Drafting a will’ at the top of your to-do list. Every adult needs a will that states their wishes. It is best to do this before an uncontrollable and unfortunate event occurs. It doesn’t matter your age, marital status, or assets to your name. At this point in your life, it is very important to take the time to write a will. A will should not only be for people who have reached an age where death is not far away. People die at all ages and a will is needed to sort out that unfortunate situation.

What is a Will?

A will is a legal document that sets forth your wishes re-garding the distribution of your property and the care of any minor children. The most important and crucial part of the will is who has guardianship rights of minors. A will is a writ-ten statement, signed in compliance with the various laws within the state it is written. It is a legal document containing the names of the people you want to benefit, as well as details of your possessions at the date of your death. Your property and possessions will include everything you own, such as your home, land, investments, personal jewelry, bank ac-counts, etc.

When should a Will be drafted?

A will should be drafted now, especially if you have size-able assets or children whose guardianship needs to be speci-fied. There is no time like the present. It is far better to have a will created early than late . Even if you plan to live a long, long time, there's always a chance that you won't, and it is

If There is a Will, There is a Way

The amount of life insurance one must purchase also de-

pends on what point in life they are in,

and who this policy would affect.

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Page 40

Finance 101: Risk Management Identity Theft – Identity theft is a crime in which an imposter obtains key pieces of personal information, such as Social Security or driver’s license number, in order to impersonate someone else. The information can be used to obtain credit card, merchandise, and services in the name of the victim, or to provide the thief with false credentials. Liability Insurance – Any type of insurance policy that protects an individual or business from the risk that they may be sued and held legally liable for something such as malpractice, injury or negligence. Liability insurance policies cover both legal costs and any legal payouts for which the insured would be responsible if found legally liable. Intentional damage and contractual liabilities are typically not covered in these types of policies. Policy – The document describing the coverage provided by an insurer.

Works Cited

Bosworth, Martin. "Study Claims Identity Theft to decline." Telephone calls new medium for fraud and phishing. 12 Feb 2008. Con-sumer Affairs. 8 Mar 2009 <http://www.consumeraffairs.com/news04/2008/02/id_theft_declines.html>.

"Insurance Tips: Steps to Buying Auto Insurance Edmunds.com." New Cars, Used Cars, Car Reviews and Pricing - Edmunds.com. 05 Mar. 2009 <http://www.edmunds.com/advice/insurance/articles/89618/article.html>.

"Reinsurance Jargon: Policy." ARIG :: a reputation for dependability, professionalism and the highest standards of customer service.

05 Mar. 2009 <http://www.arig.com.bh/mc_re_jargon.asp#P> United State Department of Justice, "Identity Theft and Identity Fraud." Department of Justice. 06 March 2009. 8 Mar 2009

<http://www.usdoj.gov/criminal/fraud/websites/idtheft.html>. “Liability Insurance.” Welcome to Investopedia.com—Your Source for Investing Education. 06 Apr. 2009 <http://www.investopedia.com/terms/l/liability_insurance.asp>. “Reinsurance Jargon: Policy.” ARIG : : a reputation for dependability, professionalism and the highest standards of customer ser-

vice. 05 Mar. 2009 <http://www.arig.com.bh/mc_re_jargon.asp#P>

better to be safe than sorry. Nobody knows when their time will come so it is important to get it taken care of while you still have a chance.

Where can I get a Will?

If your situation and wishes are simple, you can draft a quick and inexpensive will using a Web-based legal document service. Otherwise, you'll probably want to hire a lawyer to draw up a will for you. It is a good idea to have an attorney draft your will because they can foresee any problems that may arise with its content. Lawyers will ask questions to make sure that their clients know who their beneficiaries are. They will also investigate to make sure their client can de-scribe their family and their finances; then the lawyer knows that the client is competent to give instructions. Having a law-yer help with the process is a great safety net, but you will definitely pay for it. Prices will vary based on the complexity of the will, expect to pay $200-$750 for a basic will. It is best to inquire with a lawyer and see what is best for your situa-tion.

Why do I need a Will?

If you die without a will the state decides who gets what. They do not make the distribution based on your wishes or

your heirs' needs. If you die and leave a spouse and kids, your assets will be split between your surviving mate and children. If you're single with no children, then the state is likely to decide who among your blood relatives will inherit your es-tate. Making a will is especially important for people with young children, because wills are the best way to specify guardianship of minors. Overall you may not plan to die in the near future, but if you die suddenly without a will, you'll be subjecting your family and loved ones to confusion and anxiety during what is already a difficult time.

We will be exposed to many different threats in our life-time, and the best way to reduce this is by placing preventa-tive measures between you and the troubles that may come. Following simple steps such as signing up with a credit moni-toring site, tracking the amount of your current debt, writing up a will, or even just becoming more informed of your states current insurance laws will help you secure yourself and oth-ers around you. Stay informed, stay safe.

Conclusion

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The transition from college to the real world brings new financial opportunities and challenges,

many of which may seem foreign to you. Although this transition may seem overwhelming at times, you must keep the big picture in mind by preparing for

your future. Money spent today is money that can’t be used in the future. On the other hand money saved or invested for the future is money

that can’t be used for consumption today. An op-portunity cost is the cost of making this sort of deci-sion. You have to be prepared to make good deci-sions that balance the need for consumption today and desire to meet your long term financial goals. Money mistakes can elicit many problems down the road so it is in your best interest to learn the basics of investing before you make the impor-tant decisions that will affect the rest of your life. Developing an understanding of the basics of in-vesting, the different investment vehicles and ser-vices, and the benefits of diversification will lead to a more fulfilling life for you and your loved ones.

Introduction

Investment Basics

One way to think of investing is saving your money with the expectation of some benefit for doing so. When you forgo spending your money on consumer goods or ser-vices and choose to save it, it would be nice if you could be rewarded for it. Banks have a long history of success coor-dinating this practice. For example Billy has a surplus so he puts his paycheck in the bank and the bank turns around and loans that money out to Samantha who needs help buy-ing a house. Samantha then pays interest on her loan which translates to Billy’s “reward” for saving (and of course the bank takes their cut). However, this is a basic investment that most people already understand. There are many other investments and investment strategies to consider when leaving college and they will each offer different risks and rewards.

There are some basic principles that every graduate

should understand before deciding how they should allocate their money. Most college graduates understand how to earn interest through their checking account and maybe even a sav-

ings account at a local bank. Unfortunately, most stu-dents haven’t been exposed to the benefits of compound interest because they have-n’t had these accounts for more than a few years. Compound interest is the concept of reinvesting your interest earned into the same investment vehicle so the interest begins to earn its own interest income. As your total investment

amount increases, the interest earned will increase and grow very large if given the time. There are many surprising com-parisons between students who are able to start putting money away immediately after graduation and those that wait a few years. Through the power of compound interest, investors can gain a major head start by investing early. Because of this, the first rule of investing is to invest early. Even if the investment is a very small amount it will grow over time and by the time you decide to retire, that small amount will have grown exponen-tially. For the 30-40+ years that you are working full-time, this small investment will be working hard full-time for you. The Power of Compound Interest insert above shows the benefit of starting early. Suzie who starts funding her investment right after college at $4000 per year for ten years and then stops would accumulate roughly 3.3 million dollars by the end of 44 years. Paul who decided to wait and not start investing for 10 years but then invested $4000 per year for the remaining 34

INVESTMENT BASICS

INVESTMENT VEHICLES

KEEP IT DIVERSE

INVESTMENT RESOURCES

INVESTMENTS

Jacob Bahl, Corey Becker, Jarid Brockman, Luke Strub, Ben Thompson

You must keep the big picture in mind

by preparing for your future.

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years would accumulate roughly 1.6 million dollars. So for a total investment of $40,000 Suzie more than doubled the accu-mulation that Paul achieved investing a total of $136,000 simply because she started early. These returns are based on an as-sumed long run average stock market return of 11.69%.

Here you can see the obvious benefits of starting your re-tirement planning early. The primary goal of this guidebook is to provide recent or future college graduates a resource to help them ensure financial success for the future. Keeping this in mind, the following investment factors will primarily relate to long term investments. Every investment has a different level of risk associated with it with the total risk determined by nu-merous factors. The first risk to consider is liquidity risk . This is the risk that you won’t be able to convert your investment into cash quickly and easily (without giving up large amounts of value). You will be rewarded more if you give up the ability to quickly withdraw your investment. The second risk is default risk. This is the risk that the firm will not make all of their pay-ments promised to you. You could end up losing a lot of money if a company defaults. The more stable and established a com-pany is, the less likely a company will default. If you choose to invest in a riskier company, you will be rewarded with a higher rate of return but will have to consider the risk that this company may fail. Another risk to consider before investing is market risk. Market risk is the expected behavior of an investment de-pending on market fluctuations. If the stock market on average plummets, what will happen to your investment? If there is a direct relationship between the market and your investment, then it will perform well in a booming market. The inflation rate risk can affect an investment’s return but it is included in nearly all investments and is difficult to exploit. Finally, the last risk factor is interest rate risk. This is primarily associated with in-

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vestments such as bonds that can lose or gain value based on the market average for interest rates. If you invested in a bond that pays you 10% every year for 10 years but after a few years the average interest rate in the market increases to 15%, your investment will have lost value. If you want to sell that bond then you would have to sell it at a discount because buy-ers can receive 15% from other bonds. However, if you’re receiving 10% and everyone else is receiving 5% then the value of your investment is much higher. Locking in an inter-est rate for a period of time can sometimes be risky for that reason.

Because every investment incorporates financial risks that are out of your control, how do you select one that is right for you? This is often a personal question based on your goals, age, income, etc. As a young person, you can invest in riskier growth stocks or mutual funds because your money will have time to weather market fluctuations. However, when you’ve grown older you will want a more uniform payment structure with much less risk and variability. In most cases, young in-vestors are hoping for large profits so that they can retire early. On the other hand, older investors are looking for a stable form of income so they can simply live on the wealth they have accumulated over their lifetime. They are ready to sit back and watch their money work for them.

Once you have decided that you want to invest, you must come to the decision of which investment vehicles will work best for you. There are many different investment vehicles, so it is important to pick the one which is most suited to your needs. The following are some of the most common types of investments: common stocks, preferred stocks, bonds, and

mutual funds. The following information can serve as a quick guide for anyone look-ing at available investment options. Common Stock When a public company wants to raise money, it may issue shares of common stock that can be purchased by anyone. Common stock represents partial owner-ship of a company, no matter the quantity of shares purchased. Money can be made through the ownership of stock when the stock price appreciates or through the re-ceipt of stock dividends. Stock dividends are payments made periodically from the company to the owners of each share of stock. Not every company may choose to pay out dividends, in which case the money is kept as retained earnings to be reinvested back into the company. When a company wants to enhance the trading appeal of its stock, it may perform a stock split. A stock split occurs when a

Investment Vehicles

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company exchanges the shares outstanding for a larger number of shares. The market value of a company will remain the same however the price per share will decrease, making it much more attractive to investors. When a stock is split, stockholders who had already owned the stock will increase their shares by the same multiple of the split as shown in the chart below. The top line represents the value to an investor who owns 100 shares prior to the split. The bottom line shows post split that the over-all value hasn’t changed but the number of shares has doubled and the price has cut in half. The hope here is of course that the stock will go back up eventually to its pre split price and the investors value will double. The company and the shareholders usually benefit from responsible stock splits.

Preferred Stock

Preferred stock is much like common stock in that preferred stockholders own part of the company, however it differs in that preferred stock will have a stated fixed dividend rate. This divi-dend rate is guaranteed to be paid to the owner before all com-mon stockholders receive their dividend. It is also important to mention that preferred dividends are always a fixed amount, where common dividends can fluctuate by going up or down and can even be eliminated entirely. A preferred stock owner will not have voting privileges or the ability for rapid apprecia-tion in price like other stocks, but a preferred stock owner will have a number of options that a common stock holder doesn’t.

Many preferred stocks are convertible, which means that at either a specified time or at the owners request they are able to exchange their preferred stock for a set number of shares of common stock, giving them more flexibility. Some preferred stock may be non-cumulative, meaning if the company cannot pay the dividend for the year the owner will simply miss out, which is why cumulative preferred stock is usually more desir-able. Some preferred stock may be callable or retired early by the company, in this case the stockholder gets their investment back and returns the stock to the company. There are many op-tions pertaining to preferred stock, so it is recommended to re-search what type you may buy and what features they have. Bonds

Bonds, to put it simply, are the I.O.U.’s of the financial marketplace. There are a variety of bond types with varying returns, tax rates, and maturities. Various bond types come with special features. Bonds come from various sources, includ-ing corporations, the Treasury, and even municipal governments that need money. Historically over the past 10 years, AAA rated bonds (top quality corporate bonds) have earned a return of roughly 6%, however bond returns can vary widely over time and by type.

Investments

Important aspects of bonds include their market prices, par value (the price you will get at the maturity date), and the coupon rate. The price can vary over time, and is affected by several factors, most notably interest rates. The coupon rate determines how much the investor earns on the money they invest. This is accomplished through coupon or interest pay-ments being sent out to the bondholder at set intervals.

There is an inverse relationship between bond prices and interest rates. As interest rates increase, the value of a bond that is being sold will decrease. This is because investors want to commit their money to bonds with a higher interest rate (and increased profit). As a result, owners of bonds with lower rates have to offer a lower price for their bonds if they want to sell them to make up for lost profit from the lower interest rate. This lower price means the return percentage is increased because the par value (the value paid when the bond expires) stays the same.

The par value of a bond comes into play at the maturity date. This date is the specific day on which the corporation, (or whichever entity issued the bond), must pay back their debt in full to the current bond owner.

Many different entities issue bonds. Treasury bonds, which are bonds issued by the federal government, can have maturities anywhere from three months to ten years. These bonds also pay interest every six months, and are exempt from both state and local taxes, which is beneficial to the investor. These bonds are considered a fairly safe long term investment because the only way to not get your investment back would be for the U.S. government to go bankrupt.

Municipal bonds (or a muni) are another form of govern-mental bond, issued by anything from a town government up to a state government. They issue these when they need capi-tal to pay for projects such as improved water treatment in the municipality. The main benefit you gain from these types of bonds is that the interest you earn is exempt from federal taxes.

In addition, if you live in the state it was issued you gain exemption from the state tax, and the same goes for the local tax if it is issued by a local or town government. Generally a muni will have a lower yield than a bond issued by a corpora-tion or the Treasury because of the fact that you are not pay-ing taxes on the interest you receive. These bonds, even though issued by governments, are riskier than treasury bonds.

Mutual funds

A mutual fund is “an investment company that invests its shareholders’ money in a diversified portfolio of securi-ties” (Fundamentals of Investing) and is a way to invest in all of the above investment types. The company pools money of many investors and takes that money and invests it into a number of different stocks, thus giving the investors a little piece of many different companies. A mutual fund can in-clude hundreds of different stocks which all react to the mar-ket differently. By having a piece of many different stocks, the risk of any one stock decreasing the value of the fund is greatly diminished.

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Mutual funds have different organizational structures known as either open-ended or closed-ended investment compa-nies. An open-ended investment company creates their own shares to sell to investors, and buys them back when sharehold-ers no longer want them. There is no limit to how many shares the open-ended investment companies can release as the shares are created based upon demand. A closed-ended fund on the other hand has a fixed number of shares outstanding and trades in the market like any stock. The Net Asset Value (NAV) of either structure is calculated once a day to determine its true value. Another type of investment similar to a closed end fund are Exchange-Traded funds (ETF’s). ETF’s give investors the ability to earn returns based upon the value of broad indexes such as the Dow Jones Industrial Average, specific sectors within indexes, and commodities such as oil and gold. These funds are bought and sold like normal stocks and offer some professional management to steer them.

Mutual funds have full-time portfolio managers who make decisions about which securities are to be invested in and have other managers to take care of the daily record keeping. These portfolio managers may offer investment options ranging from risk averse low yield funds to aggressive high yield funds and invest your money accordingly. Load funds are sold by brokers and investors must pay commissions when purchasing them. No load funds on the other hand are sold directly by the mutual fund company and do not charge commissions. Many mutual funds also charge a management fee for services provided and a 12(b)-1 fee to cover distribution costs. These fees are charged annu-ally regardless of how well the fund actually performs. These fees are usually small, usually ranging from .5 to 2.5%, but do take away from the funds’ overall profitability. Certain mutual funds may also have redemption penalties that are levied if the investor withdraws before a specified date or above a specified amount. Mutual funds are a common way to invest as they are widely quoted and offer convenient options like automatic in-vestment plans. It is a good idea to research the particular struc-tures and fees associated before choosing which fund to invest in. Mutual funds are a good place to begin to invest as opposed to buying individual securities.

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The benefits of mutual funds over individual securities for early investors are that they offer diversification which lowers risk and professional money management. Mutual funds also require much smaller initial investments, as well as smaller additional investments than individual securities, and offer the ability to add an automatic investment plan for in-vesting over time. There are many different types of mutual funds to meet almost any investor’s objective.

After exploring some of the different kinds of investment vehicles it is important to go over how to keep your invest-ment portfolio diversified. It is never a good idea to be over exposed to any one investment because if that investment were to decline then you could potentially experience a loss that could devastate your financial situation. Instead of in-vesting too much in one position, it is best to spread out your assets (money) across different investments. What this does is significantly reduce your risk and allow you to sleep at night knowing that your life savings is not dependent on the out-come of one or two investments. Generally, people invest in three main areas in a portfolio: equity (stocks), fixed income (bonds) and cash. Equity positions are positions that provide exposure directly to the stock market and fixed-income posi-tions are positions that have a set revenue stream through in-terest rates or fixed dividends. Fixed-income securities are usually bonds and preferred stock positions which were ex-plained above and the cash equivalent positions are mostly accomplished through holding CD’s, or other near cash in-vestments. Through these three areas people are able to diver-sify their entire portfolios by gaining exposure to investments that do not move together.

Equity investments that are in the average person’s port-folio consist mainly of mutual funds rather than individual stock positions. This in itself helps to keep a portfolio diversi-fied because, as discussed earlier, when you buy a share of a mutual fund you are buying a piece of many different invest-ments. To further increase your level of diversification, your

portfolio should be invested in numerous mutual funds that are invested with spe-cific investment goals. It is important to be sure that there is little overlap in the expo-sure between the funds. The “goals” of any one mutual fund usu-ally fall within one of four different asset classes, with some exceptions, but they are Large Cap Growth, Large Cap Value, Small Cap Growth and Small Cap Value. What these are referring to are both the market capitalization levels of the compa-nies as well as the general characteristics of the particular stocks in which the funds are focusing their investment efforts. The “Large Cap” and “Small Cap” simply refer to the market capitalization of the com-

Keep It Diverse

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pany; basically how big or small the company is. “Large Cap” stocks usually have a capitalization value of $10 billion dollars or more which means that the stock price times the number of shares issued is above that number while “Small Cap” stocks’ capitalization values range around $300 million to around $2 billion. The main point is Large Cap stocks are older and more stable hence may provide slightly lower risk. Small Cap stocks on the other hand are newer and often in technology areas pro-viding higher potential returns but at increased risk levels.

The “growth” and “value” terms are also relatively simple to understand. “Growth” refers to companies whose earnings and/or revenues are growing faster than other companies in its industry or the general market. “Growth” companies tend to not pay dividends (earnings distributions) but instead reinvest their earnings into the company to enable further growth. “Value” on the other hand refers to bargain stocks that are believed to be trading below the stock’s actual value. These positions usually pay dividends, unlike their growth counterparts, and their divi-dend yields are usually much higher than their competitors. In addition to the diversification within the equity section of a port-folio, the other half of the equation for a well diversified portfo-lio lies in the fixed-income allocation. Like the equity alloca-tion, the fixed-income exposure offered to the average investor is done through investing in funds termed “bond-funds,” which is really just a mutual fund that focuses solely on fixed-income investments (as explained in the previous article). These funds invest in bonds, preferred stocks and treasury bills and then dis-tribute the interest and dividends that they receive to their inves-tors.

Another approach that mutual funds take is what is referred to as a balanced approach. These funds are appropriately called balanced funds and are invested like traditional portfolios would be, with exposure to both equity and fixed income; unlike previ-ously mentioned funds which have investment goals within a single asset class. Generally, balanced funds are used for smaller accounts that simply do not have enough money to be allocated in the traditional manner. Balanced funds are meant to be low risk investments and are usually used by people that are just starting investing so they are perfect for those getting out of school with a relatively small amount of money to invest. It would be advisable for an investor to put his or her money in two or three balanced funds so that all of their money is not at risk in one mutual fund investment.

You have now gained a general knowledge of investments but how do you put it to work? For those new to investing, it is generally recommended to consult a professional to devise a financial plan. There are many appropriate investment services that can be put to use including personal financial advisors and online brokers depending on your investment needs.

Everyone will need to make knowledgeable decisions re-garding their future investments. Luckily for us, there is help in the form of personal financial advisors. Personal investment firms such as Bernardi Investment Services, Edward Jones and

Investments

Raymond James work one on one with their clients to develop a plan consistent with your investing goals. Personal invest-ment firms offer the advantage of developing long-lasting relationships with their clients as well as being accessible and quick to react to changes in your investment plan. Personal investment firms generally offer a wide range of investment services including retirement planning, estate planning and trusts, college savings plans, insurance, and saving, spending, and borrowing solutions. Some firms are locally based while others will have advisors in nearly every moderately-sized city including Dubuque.

Although the majority of recent college graduates are recommended to consult a professional to manage their in-vestments, some may have the desire and expertise to manage their own accounts. There are many different online broker options which offer unique tools and independent research to help guide your investment decisions. The online broker mar-ket is made up of many firms including E*Trade, Fidelity, Charles Schwab, ScottTrade, Vanguard, and TDAmeritrade among others. Other online brokers such as Lowtrades, Trad-ing Direct, and Interactive Brokers are geared towards fre-quent trading and offer discounted commission rates per trans-action. When determining which online broker is right for you, you must consider the tools they offer as well as their fees and commission schedule. Brokerages such as Fidelity and TDAmeritrade offer excellent third-party and free inde-pendent research reports, however, you pay for these services with higher commission costs. Other brokerages such as ScottTrade and the before mentioned discount brokers offer significantly reduced commissions and fees but less research hence are designed for the most independent of investors. Many brokerages offer free trial periods to determine whether their services are right for you.

Online trading offers great versatility and convenience for those looking to actively manage their own investment ac-counts in the future. Many online brokers offer unique tools and market research, however before choosing an online trad-ing account be sure to make sure their commissions, fee struc-ture, and balance requirements are consistent with your invest-ment needs.

Investment Resources

Launch Into Life

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Finance 101: Investments

Bond - A debt investment in which an investor loans money to an entity that borrows the funds for a defined period of time at a fixed interest rate Common Stock - A security that represents fractional ownership in a corporation Compound Interest - Interest paid not only on the initial deposit but also on any interest accumulated from one period to the next Diversification - The inclusion of a number of different investment vehicles in a portfolio to increase returns and reduce risk Mutual Fund - A company that raises money from sale of its shares and invests in and professionally manages a diversified portfo-lio of securities Preferred Stock - A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock Stock Split - The amount of money you take out of a retirement fund in a given year

Works Cited Gitman, Lawrence, and Michael Joehnk. Fundamentals of investing. Boston: Pearson Addison Wesley, 2008.

Guenthner, Greg. "The Best Online Brokers." The Daily Reckoning. Agora Financial. 28 Apr. 2009 <http://dailyreckoning.com/the-best-online-brokers/>.

http://finance.yahoo.com/

http://investopedia.com

Now that you have read the basics regarding investing it is time to get started. Contact a professional and set up a meeting to go over your financial situation. Being a recent graduate comes with a huge opportunity to start investing early. A life free of finance related stress is an attainable goal for anyone and by developing good investment habits for your future now, you will be on your way to a richer life; pun intended. All you need is a little bit of guidance, knowledge and discipline. With that said, good luck and enjoy the process of building your financial nest egg.

Conclusion

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For most if not all of us, retirement planning is a concern for the future and not part of this

stage of your life. Plan-ning for retirement might seem like a daunt-ing task, especially for recent college gradu-ates. Your life and fi-nancial situation will likely change between

now and retirement, so it may seem futile to think about retirement at this point; but as you begin your career you should start planning for the end

of it as well. To secure a financially successful and comfort-

able retirement, several planning steps need to take place. Learning how to estimate the amount of money you need to save, how to get the most out of your employer’s retirement benefits, how to open and fund a retirement account that works for you as an individual, and some strategies for allocating your retirement dollars are all crucial for a happy retirement. The information in this chapter will help you develop a knowledge-base on how to get started on your retirement plan.

Introduction

Start Early: Planning Your Income at Retirement

How much money do I need to be able to retire? The first step in planning for retirement is determining how much income you will need when you are no longer in the workforce. Think realistically about the standard of living you intend to have at your peak. If you are going to be a teacher, it may be $40k, if you are going to medical school, it might be well into six figures. Most people will want to maintain the lifestyle they have grown accustomed to after they stop working, so it is important to rationally estimate your desired income.

When you are retired, your income will likely come from multiple sources. For most people, retirement income comes from a combination of social security, pensions and deductions from retirement savings. Savings deductions will likely supply a large portion of your retirement income. When determining how much money you need to save for retirement, you will need to estimate how much you plan on deducting from your savings each year once you retire. To do this, take the amount of income you want to have each year and subtract the amount of cash you anticipate from other sources, such as social security and any pension pay-ments for which you may be entitled. This is the yearly income your savings will be responsible for providing.

The next step in this process is to take this required income from savings and multiply it by 20. This is an esti-mate of the amount of money you will need to have saved by the time you reach retirement. Why is saving 20 times your required income recommended? When you save this amount, you can make safe and predictable investments at retirement. By having 20 times your required income, you can invest in CD’s, tax-free municipal bonds, government bonds, and annuities earning a historical average of around 5%. You will be able to maintain your standard of living while stripping off the interest payments and never touching

the principal. The power of compound interest works strongly in favor of

the young investor. Compound interest is the result of reinvest-ing interest payments or capital gains. It is the benefit an inves-tor receives from allowing additional growth on in-vestment gains. For peo-ple who let compound in-terest work for them, a vast majority of their net worth will come from money they never saw in a pay-check. For a more detailed analysis of your retirement savings needs and the power of com-pounding interest, please review the Investments section of this guidebook, or visit our webpage at http://www.loras.edu/launchintolife/, and see the retirement savings calculator.

Twenty times your income might seem like an intimidating amount of money to save, but by starting early and staying disci-plined you can definitely get there. If for example, you want to have $100,000 of income per year in retirement, you will need

PLANNING YOUR INCOME AT RETIREMENT

EMPLOYER-SPONSORED RETIREMENT PLANS

INDIVIDUAL RETIREMENT ACCOUNTS

ASSET ALLOCATION FOR RETIREMENT SAVIINGS

RETIREMENT PLANNING Preparing for the End as You Begin

Edward Glynn, Matthew Maloney, Diana Pena

“As you begin your career you should begin to plan for the end of it as well.”

"With this method you can live off your earned interest payments and leave your principal intact."

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to save at least $2 million ($100k x 20). A 22 year old can get there by age 57 if they save $7,000 each year at 10% interest.

Generally speaking the most difficult issue about saving is staying disciplined. Once you develop your plan, you should stick with it. Keep in mind the benefits of starting young so you can prepare for a prosperous retirement for you and your family.

If you are like many people who think about retirement, you may be asking yourself: How do I go about choosing my retire-ment plan? When it comes to retirement planning, it should be all about your choices and creating retirement income that meets your needs. When you contribute to a retirement plan at the early stages of your life, you will be able to have enough savings at retirement, receive tax deductions, and earn extra money if you decide to invest your contributions. Not all retirement plans are the same, therefore it is important for you to research about the types of plans, identify the benefits each of them of-fers, and select one that is available and most suited to your needs.

Employer-sponsored plans are a possible source of retire-ment income. The employee benefits from this plan through contributions that are tax-deductible. Additionally, a retirement plan is a tax-deferred mechanism (you do not pay taxes until the funds are withdrawn). Lastly, your savings can increase if your employer decides to match your contributions to the plan.

Employer-sponsored plans are divided into two types; de-fined-benefit and defined-contribution plans. A defined-benefit plan is a pension plan in which the benefits promised to the em-ployee are specified before the plan starts. Your employer’s con-tributions can be irregular during the plan as long as it accom-plishes the total dollar amount promised at retirement. Defined-benefit plans are losing popularity where most companies today that provide retirement plans are now offering defined-contribution plans. With defined-contribution plans, the amount of contributions made by the employer and employee are established. If an employer decides to contribute to the plan,

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they can commit to make a defined contribution as a percent-age of their employee’s income, or to match their employee’s contribution to the plan. Some defined-contribution plans al-low the employee to make decisions on how the savings in the account will be invested, so the employee assumes the risk of return on these investments, and is directly responsible for the result at retirement.

Defined-Contribution plans include 401(k)s, profit shar-ing, stock bonus, money-purchase pension, and simplified pension plans (follow the retirement flowchart to see how these plans are divided).

401(k)s have gained popularity due to the advantages they provide to employees and employers. These plans receive their name from the section of the Internal Revenue Code which pro-vides its regulations. Ac-cording to the IRS, “In a 401(k), employees can make contributions from their salaries up to $16,500 for 2009” (www.IRS.gov). This limit increases by $500 every year; however, employees that reach age 50 or older are allowed to make additional ‘catch up’ contributions up to $5,500 for 2009. In some cases, employers might contribute a certain amount of their em-ployee’s pay; or match their employee’s contribution to the plan. Nonetheless, their contributions add up to the total limit contributions specified ($49,000 for 2009).

Contributions are sent to a third party that distributes your money in mutual funds, stocks, and bonds. Although the third party distributes your money, you are in charge of determin-ing the mix of investments (if you want to know about invest-ments’ selection, please turn to the Allocation for Your Retire-ment Savings article below).

A drawback of the 401(k) is that if funds are withdrawn before you reach age 59 ½, you will have to pay taxes on pre-tax contributions and earnings, plus a 10% penalty to the gov-ernment. However, in some cases you might be able to with-draw funds early without the penalty if your plan has a provi-sion that allows for loans from your plan.

An important feature to remember about 401(k) plans is that they are offered by for-profit corporations. Employees

Employer-Sponsored Retirement Plans: It Is All About Your Choices

“Investing in a retire-ment account offers tax-deferred benefits, tax deductions, and some extra money that might be contributed by your employer.”

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working at nonprofit organizations have a special 403(b) plan. This plan is similar but is established for employees of school systems, hospitals, and religious organizations. Furthermore, employees of state and governmental organizations also have a special retirement plan titled 457.

After reviewing employer-sponsored retirement plans as a possible source of income for retirement, you should be able to determine your needs and make a decision based on your long-term goals. Regardless of the plan you choose, remember that investing in a retirement account offers tax-deferred benefits, tax deductions, and some extra money that might be contributed by your employer.

Personal retirement plans are becoming commonplace for those that do not necessarily have access to a company retire-ment plan or who are looking to set up retirement accounts apart from those plans offered by their employers. The most popular is the individual retirement account or IRA.

There are two major types of individual retirement accounts (IRA), Traditional and Roth. An IRA is an account set up by an individual for retirement savings. These accounts are different from a regular savings account as there are several provisions designed to benefit the individual in his or her savings for retire-ment. The savings or “contributions” to an IRA may be tax de-ductible. These contributions, as well as the earnings or interest you gain on the money in an IRA, are tax-deferred meaning you don’t pay taxes on the money until it is withdrawn. The benefit

is that you can make more money from your IRA because you have non-taxed money gaining inter-est throughout the savings period. The most common plan is

known as the Traditional IRA. This plan lets you contribute up to $5000 a year under the age of 50 and $6000 if you are over 50. The amount of money you put in an IRA may be deducted from your income tax filings depending on your filings status, income and other factors.

Unfortunately, there are some penalties you will incur if you have to take money out of the IRA too early or even too late. If you need to withdraw money from your IRA (a distribu-tion) before the age of 59 ½, you are charged a tax penalty of 10% in addition to the ordinary income tax. Likewise, there is a penalty for not withdrawing soon enough. If you wait until you turn 70½ to start withdrawing your money, you can be penal-ized. There are required minimum distributions that you must take in order to freely withdraw your retirement savings without penalties. These minimum distributions are based on your life expectancy at the time of the distribution as calculated by the Internal Revenue Service’s life expectancy tables.

The Roth IRA is slightly different from the Traditional IRA.

Retirement Planning

An important difference is that contributions to a Roth IRA are not tax-deductible. There are also fewer withdrawal re-strictions and requirements. Earnings you make on a Roth IRA are tax-free and you are not required to take mandatory distributions, meaning that you do not have to start taking money out after turning 70½ and you can even add more to your IRA after that age. After you have been contributing to a Roth IRA for 5 years, you can take tax-free, penalty-free dis-tributions, if you are over 59 ½ or are using the money for first time home-buying expense. To be eligible for a Roth IRA, your Adjusted Gross Income, or the amount of money you make minus deductions, has to be under $105,000 a year for a single filer.

If you have a nonworking spouse, a Spousal IRA might be a good alternative. A Spousal IRA is much like a Tradi-tional IRA but both you and your nonworking spouse can con-tribute up to the annual limit of $5000. This money and the interest you earn are also tax-deferred.

For self-employed and small business owners there is an option called Simplified Employee Pension (SEP). A SEP IRA is one that can be set up by an employer or self-employed individuals. This lets you set up a retirement fund for you and your employees that is tax deductible and gives the employer the option of contributing up to $40,000 annually with tax-deferred earnings. In a Simple IRA, an employer establishes a retirement plan for him/herself and the employees. It allows the employees to contribute any amount up to $6,500 per year with certain required employer contributions and penalties for premature distributions.

IRA’s are a good tool to help you save for retirement. There are many different types and it is important to under-stand all of your options before you begin to put money away for retirement. With a well-developed financial plan, IRAs are a practical way to manage your retirement funds. Well-managed funds will allow you to live a long, comfortable life after the end of your career.

There is no need to be scared when investing your retire-ment money. How to best allocate your funds across a wide array of sponsored mutual funds or how to allocate your IRA savings might seem intimidating. However, you should not let these situations concern you as there are some general guide-

IRAs: Another Retirement Alternative

“Well-managed funds will allow you to live a long, comfortable life after the end of your career.”

Distributing Your Nest Egg: How To Allocate Your Retirement Savings

Page 50

lines you can follow when allocating your retirement funds. For starters, think about your risk tolerance. Are you able

to accept risk in ex-change for higher returns? Or do you want stable and slower growth for your savings? Gener-ally speaking, you are able to bear a higher risk in your portfolio

when you are young and retirement is years away, because you have the time whether up and down market cycles. Once you get closer to retirement, you should re-distribute more money into stable investments, specifically fixed income. Know that there are many investment professionals who can help with this proc-ess. Be sure to ask about the fees charged for receiving advice as well as performance of fund managers and financial advisors. Also, make sure you ask about how you can diversify your port-folio (create an appropriate mix depending on your risk toler-ance and goals) and make sure you are not putting your retire-ment nest egg into only a few baskets.

For more information about how to distribute your savings across different investment opportunities, please refer to the Investments chapter of this guide book.

It is time to get started on your retirement planning! Let’s review the steps needed to plan for a successful and comfortable retirement:

Review your plans every year so that you are still on track in relation to the income expected at retirement. Make sure that your savings are distributed across a wide range of investments that suit your risk tolerance and growth preferences.

Launch Into Life

Since there are different saving mechanisms for retire-ment, you might wonder about the right ‘mix’ of plans. In this sense, it is generally recommended that you contribute to your 401(k) to the extent that you can take full advantage of your employer’s match. If you have additional dollars to invest, then it is recommended to contribute to a Roth IRA until the maximum allowed. Lastly, if there is still additional money available to invest, you can make additional contributions to your 401(k) as these savings will grow tax-deferred. You can use the Retirement Planning Resources section at the end of this chapter to obtain more information about retirement planning online.

What happens to your savings and benefits in the case you change jobs? Some plans allow you to carry your retire-ment plan from one employer to another. If this option is not available, you might be able to transfer (roll over) your 401(k) money into an IRA.

The steps and facts mentioned should serve as tools for you to get started on your retirement planning. Preparing for retirement does not have to be difficult; it only requires a well thought out plan and discipline to follow it. Planning for the end as you begin is the best way to secure a happy and com-fortable living at retirement.

Conclusion

Finance 101: Retirement Planning Tax Deferred Savings - Earnings and money in your retirement account for which no taxes are paid until withdrawn. Defined-Benefit Plan - Retirement plan in which the ending benefit is established before the plan starts.

Defined-Contribution Plan - Retirement plan in which the contributions are established before the plan starts.

IRA - A personal savings plan that provides income tax advantages to individuals saving money for retirement purposes.

Contributions - The amount of money you add to a retirement fund in a given year.

Distributions - The amount of money you take out of a retirement fund in a given year.

Works Cited

"IRS 401(k) Plans." Internal Revenue Service. 8 Apr. 2008. US Department of Treasury. 07 Mar. 2009 <http://www.irs.gov/

retirement/article/0,,id=120298,00.html>.

" Once you get closer to retire-ment, you should re-distribute your assets into stable invest-ments, specifically high quality fixed income."

Preparing for our future can be a daunting task. We face many importantand often life changing decisions. In order to make good decisions we need three things: well planned goals, relevant information, and theconfi dence to follow through on making those decisions. This guidebook was created to help with all three. Goals need to be set based upon the many areas covered in this guidebook. The information provided should assist you in charting a path to achieve those goals. With this guidebook and recommended links as a resource we hope to give you the confi dence to move forward with making these important decisions.With every decision there is risk, and information is the key to moderating that risk. As James Bryant Conant, American diplomat said, “Behold the turtle. He makes progress only when he sticks his neck out.” We are all about to “stick our necks out” as we begin the next stage of our lives. Do it with confi dence, persistence, and thehope of creating a better world than the one given to you. We hope youfound this guidebook an interesting and useful resource as you makethat important step.

FINAL THOUGHTS

LETTER TO THE READER….…………………………………………………………….4

ACKNOWLEDGEMENTS.………………………………………...……………….……...5

MEET THE AUTHORS……………………………………………………………………..6

THE JOB SEARCH MADE EASY.…..……………………………………………………..8How to Make a Great First Impression: Developing a Standout Resume and Cover LetterNailing Your InterviewCan’t Get That Dream Job Without Knowing What Happens In An InterviewDress For SuccessWhat Are You Really Worth?Don’t Rent & Rave, Buy & Save: Deciding whether renting or buying is right for youWhere Are You Going?Effective Communication Skills in the Workplace

TABLE OF CONTENTS

Launch Into Life:A Guide to Personal Finance

Written by the Finance Majors of the 2009 Loras College Graduating Class Publication—May 2009

Finance cover spread final.indd 2 4/30/09 8:54:41 AM

Stay connected at http://alumni.loras.edu Contact the Alumni Offi ce at [email protected] to fi nd out how to stay connected to the Duhawk community and get your Loras Email for Life.

A guide to personal fi nance

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