Friday, August 29, 2014

Ways To Make It Through College Without Debt

When you're going to school, it is easy to be drawn into both student and personal loans. While having the money right now is extremely helpful, in the long run it's a bad idea. Once you have to start paying back the loans, it can become detrimental to your budget and your overall lifestyle. The best thing to do is to work toward graduating as debt-free as possible. Here are a few great ways to keep your loan debts small, or even nonexistant.

Find Great Scholarships

Image via Flickr by Saad Faruque

One of the best ways to work your way through school without debt is to get as many great scholarships as possible. Schools such as Wake Forest University offer scholarships for students with financial need. However, there are other scholarships you can seek out. If you are good at an art or sport, try for scholarships based on these. There are also options for minority students. You can even find scholarships for attributes, such as those for left-handed students.

Invest Wisely

Another option is to make the money you have work for you. Look into investing your money, so that you are getting interest payments. In some cases, you may start getting a return long before your student loans come due. Watching the markets and investing wisely is a great way to make money while you're going to school. While this may not seem feasible to everyone, keep in mind that you can start investing with just a small amount of money. Then you can use the interest payments that you receive to add to your investment portfolio.

Get a Second Job

Paying for your own way through college is difficult. However, if you get a second job instead of taking out loans, you'll be happier in the long run. If you are able to pay for your schooling as you're going, you're going to be able to start your post-school life more quickly and easily. Working full-time, or even working two jobs while taking classes isn't easy. However, one option is to take your classes online, allowing you to study at your own hours. Another option is to take fewer classes. This extends how long you are in school, but allows you more freedom from debt.

Get Grants

There are many grants for students. Some are government grants, and others are private. Either way, this is money that you can use toward school that you don't have to pay back. If you are working or you have parents who are, look into whether the companies they work for offer education grants. Make sure to apply for government grants that are available to you. For example, the Pell grant is perfect for those who are going back to school later in life.
While it's tempting to get loans, there are better options to get yourself through school. When you graduate debt free, you can continue with your life without having the burden of payments hanging over your head. Consider the best ways you can get through your schooling and you'll finish without tens of thousands of dollars in loans.

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Monday, August 18, 2014

How to Measure Risk

Investing in stocks is a risky business. There are some risks you have some control over and other that you can only guard against. Thoughtful investment securities selections that meet your goals and risk profile keep individual stock and bond risks at an acceptable level.

However, other risks inherent to investing you have no control over. Most of these risks affect the market or the economy and require investors to adjust portfolios or ride out the storm.

There are two ways to measure risk. One is by using modern portfolio theory and the capital asset pricing model and the second is to look at the various risk factors which affect a business.

Capital Asset Pricing Model
We will not discuss in detail this theory of asset pricing as it requires you to have a working knowledge of first or second year university level statistics and finance. Since this is an introductory article, readers who are interested to learn more about the CAPM and Modern portfolio theory are encouraged to attend a course in finance or seek advice from a qualified advisor.

Basically, the CAPM makes some major assumptions about investors and their preferences. In order to use the CAPM to find the proper discount rate, one must know three things: a stock's beta, the nominal risk free rate, and the expected return on the market. Stock's with betas greater than one are more risky than the market and betas of less than one are less risky. For example, a stock with a beta of 1.5 is expected to gain 1.5% when the market rises 1%.

Modern portfolio theory is also where the main ideas about diversification come from. We will look at this concept in more detail later. For now, we can define a diversified portfolio as containing securities which have little or no correlation to other securities in a portfolio or the market. These securities are then placed in a portfolio in such a way as to minimize the volatility of the portfolio.

You may be scratching your head by now but this is essentially the basic concept of diversification and minimizing risk. There are a lot of disadvantages and advantages to using the CAPM and MPT. One assumption of the CAPM I will mention is that there are two types of risk. Market risk and firm specific risk. The CAPM assumes that investors only get a premium return for taking on market risk because the firm specific risk can be entirely eliminated through diversification. Thus, beta only measures market or nondiversifiable risk.

Second Way to Measure Risk
The second way to measure risk is to start by taking a nominal risk free rate. How do you do this? Well you take the yield that is currently offered on US Government bonds that match your investment horizon. For example, if you plan to invest for 5 years, you should use the yield on 5yr U.S. bonds. Now add to this the premium for risk and voila-you have your required return or discount rate. You may be asking, what makes up the risk premium? Well, remember from lesson one there are five things: financial, business, liquidity, foreign exchange, and political risk.

Financial Risk:
Financial risk involves a company's capital structure. What is their debt/equity? What is their current ratio? etc. We will look into how to assess financial risk in greater detail later in lessons on accounting and financial statements analysis.

Business Risk:
This involves the economics of the firm you are looking at. Ask yourself, how will this company look ten years from now? Do they have barriers to entry? (ie patents, economies of scale etc. more on this in the economics lessons).

Liquidity Risk:
It has been shown through various studies that firms which are private or thinly traded are sold at a significant discount to their value compared with similar firms with active markets. Firm's which can be easily bought or sold with little transaction costs are called liquid or marketable. The lack of liquidity can occur if the stock you are researching is not widely followed. It can also happen if you plan to liquidate a large block of stock. Your transaction could bring down the price significantly.

Foreign Exchange/Political Risk:
This involves firms which derive significant portions of their sales overseas. For example, many exporters to Asia have been affected by weaker demand for their goods. Foreign Exchange/Political risk can also happen because the company you are looking into is heavily restricted by the government. Finally, different countries have different accounting rules so you should be aware of this when investing in foreign stocks.
When investing in foreign stocks, you also run the risk of the U.S. appreciating. To adjust for this, you should restate your foreign returns to U.S. returns.
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Tuesday, August 12, 2014

5 Apps That Help You Manage Your Money

Let’s be honest. Most people are not accountants, financial advisers or qualified money managers. The normal person is not always equipped with the knowledge needed to maintain their personal finances. And with the economy in flux, responsible money management has never been more important. Luckily, there are several financial apps available to help you manage your money.

Mint app Image Via Flikr by Linsey Knerl
Price: FREE
Are you the kind of person who has no idea how much money you have in your bank account at a given moment? If so, the Mint application is the perfect way for you to start organizing your finances. It allows you to see all your account balances and transactions in an easy to read list. You are able to connect it to a variety of different accounts including credit cards, checking accounts, investments, and even loans. Not only are they listed for you to see the balances, but Mint breaks down your spending into categories. This can include Entertainment, Food, School, and Rent just to name a few. You can even set it up to send weekly breakdowns. Mint is an excellent app to get you on the right track to managing your money.


Price: $1.99
Remembering to pay bills is one of the reasons people are having such a hard time managing their money. When thinking about your personal funds, it is important to realize future payables. This can include loan payments, rent, utilities, and a variety of other bills. BillTracker is a great app for displaying all your monthly bills in an organized and easy to follow manner. It allows you to input all your bills, set payment reminders, and even can be linked to provide payment confirmations. It is an excellent app to help anyone keep track of their bills and is a must have for managing your money.

Adaptu Wallet

Adaptu Image Via PCmag
Price: Free
Adaptu Wallet is a hybrid app combining both of the aforementioned apps. It allows you to display your latest account balances and also set up bill reminders. The idea behind the app is to act as a virtual wallet that allows you to carry all your information in the palm of your hand. It even allows you to store images of your insurance, social security, and business cards. Not to mention, the added benefit of spending forecasts so you can evaluate your finances. The best part of all is that everything is stored under bank-level security, so you will never have to worry about losing your information.


PayPal Image Via Itunes
Price: Free
The PayPal application can be used on all cell phone plans. If you have ever purchased something online you have probably come across PayPal before. This app makes it extremely easy to transfer money at the push of the button. You can shop around for the best deals on your smartphone and then quickly purchase the item through this safe and easy app. Another great feature is that it allows you to deposit a check immediately to your account by simply snapping a photo. Having an accessible and secure way to transfer money over a variety of different accounts makes PayPal an excellent app for people looking to manage their money.


Image Via Itunes
Price: Free
If you are someone who is relatively responsible with their personal finances, but looking to become more connected with investments and stocks then StockTwits is for you. This is a financial communications platform for anyone looking to gain insight into the stock market and investing. It connects you to traders and investors, financial news, charts, and all kinds of investment information. It pulls up real time stocks and connects it with all of your investment portfolios. This app is an excellent way to monitor the money you have invested and makes it very easy to see trends and gain professional insight. Monitoring your personal finances is no easy task. From bill paying and account management all the way to investment portfolios it is tough to keep track of where and what your money is up to. There are hundreds of useful financial apps on the market and many of them are free to download. If you are looking to take control of your money take the opportunity to look at some of the apps mentioned above.  
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