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With the cost of college growing ever more expensive, more and more people are choosing to forego a degree and all of the debt that comes with it. I’ll explain why I didn’t go to college and if I have any regrets over my decision. For a lot of people, college is the natural next step after high school.  Our parents tell us to go; our teachers encourage us to go, all of our friends are going.  Once upon a time, there was no question that college was the path to riches.  But things have changed so does college still make sense? From an economic standpoint, the numbers are still in favor of obtaining a college degree.  People with a bachelor’s degree will earn 84% more over a lifetime than a high school graduate.  A degree will also open more doors.  Some companies will not even look at the resume of someone without a degree, no matter how much experience they may have.  It’s not fair, but it’s what a lot of companies use to screen the huge volume of resumes they receive.  Which college and the grades you got are less important. There are questions to be asked before making the decision though: * What kind of job do you want? * If you want to be a doctor, then the decision is already made. * Do you need to go to the most expensive, prestigious school that accepted you? Maybe you don’t.  The first few semesters will be pre-requisites, so maybe the best choice is to go to a local college part-time, work part-time, and live at home.  If more people took this route, there would be a lot less crushing student debt. College is not for everyone.  For some people, the past thirteen years of school are enough for a while.  There is no rule that you must start college at eighteen.  Maybe work for a bit, save some money and do some traveling.  Just living life can teach you not only what kind of job you want, but perhaps more importantly, what type of job you don’t want. There is plenty of time to decide on college so don’t let anyone rush you.  It’s you who will be on the hook for those loans so make sure the decision is your own. Show Notes iTunes U:  Complete courses from leading universities available for free download. Khan Academy:  A free online educational resource. Learn more about your ad choices. Visit megaphone.fm/adchoices

What is inflation, what is deflation and what benefits to knowing? We’ll explain the basics and what you need to know to make sure your money keeps pace. Inflation and deflation are terms you hear thrown around a lot but what do they mean and what impact do they have on us? What is Inflation? The value of a dollar is determined by its purchasing power, the number of things or services which that money can buy. When inflation increases, the purchasing power or our dollar decreases. In the US, our rate of inflation is 3% a year on average. That means the newspaper that costs $1 now will cost $1.03 the following year. Inflation means your dollar doesn’t go as far as it once did. Types of Inflation Demand-Pull Inflation: This is caused when there is an increased demand for something which drives up the price. When demand grows faster than supply, the price goes up. Cost-Push Inflation:If the cost to produce a good increase, a company increases the price to maintain their profit margin. Monetary Inflation: This happens when there is too much money in an economy. Too much of anything makes the value or price go down. The Impact of Inflation Inflation is not always a bad thing across the board. There are winners and losers when inflation happens. If you owe money to a creditor, you win! The cost of your debt is reduced. You really make out if the rate of inflation is higher than the interest rate on your debt. Inflation hurts your savings. A dollar saved now is worth less in the future when you need to spend it. If your raise at work is not more than 3%, it’s not really a raise because it doesn’t preserve the buying power of your dollars. If you are someone who lives on a fixed income that is not adjusted for inflation, your dollar is worth less too. If inflation in one country is higher than that of trading partner countries, the goods of that country are more expensive than imported goods. That can impact domestic producers and in turn, their employees How Inflation is Measured Inflation is measured by a market basket. It’s an imaginary basket of goods whose prices are totaled up. The number is called a price index and the cost of the basket is compared over time. This number is the price index, the cost of the basket today as a percentage of the cost of the same basket in the starting year. There are two price indexes used to measure inflation, consumer price index and producer price index. Consumer price index measures the change in price for consumer goods and services from the consumer’s perspective. Producer price index measures the average change of selling prices over time for companies that make goods and services, so changes in price from the seller’s perspective. The Federal Reserve is tasked with controlling inflation. Uncontrolled inflation can cause a recession. If the growth rate of the GDP exceeds 2-3%, demand can drive up prices leading to demand-pull inflation. The Fed slows growth by tightening the money supply, they allow less credit into the market. This makes it more expensive to borrow money which slows growth and demand and brings prices back down. What You Need to Know Year after year, inflation eats into the power of your dollar. You can buy less with that dollar. You have to protect your dollars by investing your money where it earns more than the average rate of inflation, 3%. The average return of the stock market over time is 7% so you’re beating inflation. The average interest rate on a savings or checking account is less than 1%, less than inflation so you are losing money when you have it parked in one of those low yield accounts. When inflation is high, interest rates go up so if you want to buy a house or a car or borrow money to start a business, Learn more about your ad choices. Visit megaphone.fm/adchoices

We all fail and we’re all afraid to fail.  Today we’ll discuss why failure is not always the end of the road and may even be the beginning of a new path. No one likes to fail but if that fear is stopping you from trying, it can hold you back in every walk-off life from investing to dating.  Every failure should be mined for lessons.  What could you do differently the next time you try?  Maybe the endeavor you failed it should be scrapped entirely.  There is a difference between quitting and failing. If you start a babysitting business and your town is mostly comprised of retired people, quitting as soon as you realize that is not so much a failure but a reassessment of your situation.  Maybe you decide to start an in-home companion business and now you’re making money. When it comes to investing a lot of people are fearful and not well informed.  Because of this you listen to an “expert” when deciding what to buy without doing any research yourself.  Well, experts get it wrong too and if you lose money, you’ll blame them and decide the stock market is stupid and you’ll just keep your money under the mattress. You can learn from this.  Doing your own research will always be more tailored because you have your own specific circumstances an expert doesn’t have knowledge of. There is more than one way to do nearly anything.  If you need to budget you can use Mint, you can use a spreadsheet, you can use the envelope method.  Just because you failed at one option doesn’t mean nothing will work.  If you burned dinner would you never make dinner again?  No, you would learn that you should not put dinner in the oven and then take a nap. Once you succeed, no one will remember your failures.  Every time you fail, learn a lesson and try again. If it makes you fell any better Einstein probably failed more times then you ever will. Show Notes Betterment:  No hassle investing site. Think Like a Freak:  The new book from the authors of Freakonomics Learn more about your ad choices. Visit megaphone.fm/adchoices

How do you stop yourself from burning through all your hard earned money like a drunken sailor on shore leave?  Today we discuss a few mind hacks that can help curb your baser monetary urges. The easiest way to not spend money is to stay home.  No siren song of the bar, no annoying co-workers forcing Girl Scout cookies on you against your will or asking you to sponsor their self-congratulatory charity walk.  Staying inside like Howard Hughes is not really an option for most of us but you probably encounter at least one invitation a week you could say no to. You spend forty hours a week or more with co-workers.  Do you really want to spend more time and your money with them at happy hour?  Turn down those invites that you really aren’t that interested in. It’s hard to say no to spending money unless you have a reason.  Maybe it’s “eff you”  money.  The money that allows you to tell your idiot boss to go to hell when he or she asks you to work the weekend one too many times. Maybe it’s a vacation or the ability to send your kid to college unburdened by student loans.  Put a picture of your goal in your wallet so you are confronted by it before you pull out that credit card. Maybe you discover a new hobby and go nuts buying every accessory for it under the sun.  You don’t need enough gear to outfit a pack of Sherpas because you’ve suddenly discovered camping.  Borrow or even rent the gear to test out the new hobby.  Hundreds of dollars of camping equipment stuffed in the back of the closet with your home brewing accessories and do it yourself taxidermy kit is not a good investment. Our favorite tip is the “Thirty Day List.”  Every time you see something you think you can’t live without, it goes on the list.  If at the end of thirty days, you still want it, then maybe you can honestly justify the expense.  This is even easier if you’re an online shopper.  Put the items in your virtual basket and leave them there for thirty days.  Some online retailers will even send you promo codes for discounts if you don’t check out right away. Taking away decisions will also decrease your spending.  Not spending takes willpower and willpower is finite.  If you are something of a creature of habit, take away some decisions.  Eat the same breakfast every day, develop a “uniform” that takes the decision-making process out of what to wear. When you have to replenish those things, food or clothes, etc, you can find what you need and get in and get out.  This cuts down on temptation. The longer you spend in Whole Foods, the more your will power will be sapped. The final tip is to budget.  If you have $100 to spend on lunches for the month and you reach the limit, you’ll be brown bagging it until the budget re-sets. Show Notes Mint:  LMM’s budgeting for dummies. Magic Hat Elder Betty: A great summer beer. Learn more about your ad choices. Visit megaphone.fm/adchoices

Travis Pizel from Enemy of Debt tells us how he and his wife accumulated $109,000 of credit card debt through lack of communication and how they paid off the debt and strengthened their relationship in the process. HOW does a couple accumulate that much debt?  Buying Faberge Eggs, eating panda steaks marinated in unicorn tears?  The answer is pretty mundane.  Never budgeting, never tracking spending, vacations, dinners out, and perhaps the biggest problem, never discussing money. Travis and his wife both had good jobs and always figured the next pay raise would put them in a position of eventually having enough money that they couldn’t possibly spend it all.  But that never happened and eventually Travis began to insulate his wife from how bad it had become.  Opening the bills after everyone had gone to bed, shifting balances to newly opened cards, asking for limit increases on existing cards. The watershed moment came when Travis got five identical letters from a company that he had five different cards with.  The minimum payment amount was going to be raised from 1% to 2.5% and there was no way he could meet that.  Together Travis and his wife contacted this debt management company and were put on a plan. The couple sent a monthly payment to the management company who had negotiated lower interest rates with each credit card company.  The monthly payment, including the company’s fee was $2489.  As part of the agreement the family had to close each credit card account and not open any more.  Over 55 months, the entire debt was completely paid off.  The total fee paid to the company was about $2700 but it saved Travis $50,000 in interest.   The debt was being paid but Travis and his wife had to fix the underlying problem that caused the situation.  They now meet twice a week to discuss what needs to be done that week and how they did.  It also required a lot of sacrifice.  No more fancy dinners out, no more vacations, a meal plan so they weren’t just throwing things into the grocery buggy. Now that the debt has been paid and the family is communicating openly, they have never been happier.  Travis and his family realize that if they could make it through this, they can make it through anything. And Travis found a great source of side income.  He is now a freelance writer in addition to his regular job as a software engineer. UPDATE: This is Matt! I mentioned on the show that my brother used a debt consolidation company — that is not true. He corrected me and instead he used a credit score fixing company to improve his credit score. Here’s the link if you’re interested. Show Notes My Personal Finance Journey: One of the blogs Travis writes for. Learn more about your ad choices. Visit megaphone.fm/adchoices

We’re doing personal finance potpourri today, answering listener’s questions about investing with Betterment, unpaid internships, 401K’s, passive income, and credit scores. 1.  What is Betterment and what’s so great about it?  Betterment is an investment tool that charges a low fee, no transaction charges, and abstracts investing.  LMM’s loves Betterment because it is a great first step to investing.  It’s easy to use and allows you to choose your level of risk with a simple sliding scale. 2.  Are unpaid internships worth it?  Jackie from Personal Finance with Jackie Walters sent this one in.  An internship is valuable even when unpaid.  You gain experience, have something to add to your resume, can cultivate good contacts for the future and sometimes an internship turns into a full time job. 3.  If an employer does not offer matching 401K funds, should you contribute the minimum to participate and the rest into a Roth IRA?  We’ve done a few Roth 401K episodes and Matt paid attention!  Unless you are getting matching, the only reason to invest in a 401K is if it would drop you down a tax bracket.  This will show you the federal brackets for 2014. 4.  Is passive income possible?  Absolutely!  There are lots of ways to earn passive income.  Being a landlord, website affiliates, investing. 5.  If you want to buy a house, should you close credit cards that you don’t use?  There is almost never a circumstance where it’s a good idea to close a credit card.  Part of your credit score is made up of the average age of accounts. The longer the age, the higher the score.  Closing an account will lower the average age.  If you have a card you don’t use often, put a small recurring automatic charge on it like a Netflix or gym membership.  This will keep your account active as some companies will close an account that has been dormant. Keep the questions coming guys! Show Notes Betterment:  Use our affiliate link to help support the site and get a few free months of fee-less investing! Mint:  LMM’s chosen budgeting tool. Learn more about your ad choices. Visit megaphone.fm/adchoices

In this special Father’s Day episode Matt and Andrew interview their dads to find out what mistakes and victories they had with money and what lessons they have for their sons and us listeners. The apples don’t fall far from the trees.  Andrew’s dad has been good with money for a long time.  Andrew’s father didn’t grow up with money and learned important lessons watching his own parent’s struggle.  He wanted to be a musician but soon realized that life was not a secure one.  He got a full time job and went to school at night and his job covered 80% of his tuition expenses.  He eventually received an MBA. When Andrew’s dad was coming up, it was unusual to job hop.  A lot of people of that age would work for the same company for thirty years and retire with a pension.  But his father was never afraid to chase more money and even when not actively seeking a new job, he would still go on interviews to see what might be out there.  He was able to increase his salary much quicker this way than by waiting for a small yearly raise. Andrew’s dad faced a few job losses in his career when the companies he worked for went under.  Faced with unemployment, he treated getting a job as a job, spending 8-10 hours a day on it.  He would contact a few recruiters, look at a few job boards and company websites and mine his contacts.  Even at the height of the crash, following these guidelines, he had a new job in less than four months while a lot of people around him went a year or more before finding employment. Dad’s parting advice is to never give up and live within your means while still enjoying a good quality of life. Continuing the theme of the apple and the tree, Matt’s dad is a musician as well.  And like Matt, he has only become educated about personal finance recently.  Also like Matt, Matt’s dad worked from a very young age.  He worked in a laundry for the same family from the age of ten through high school.  He did attend college and wisely decided to go locally and live at home to cut expenses.  He did graduate with student loans but paid them off within twelve years.  Sadly, twelve years sounds really quick to those graduating today. Matt’s father was a professional musician for six years.  As his family grew, he knew he needed to make more money and music became a hobby rather than a vocation.  Matt’s father lived paycheck to paycheck for many years, juggling payments for everything but the mortgage. Two things convinced Matt’s dad to take charge of his finances.  He saw Matt following the same paycheck to paycheck path and knew he had to lead by example.  And a friend recommended a book, The Richest Man in Babylon, which changed his views on money and finances.  The main lesson of the book being, “pay yourself first.” Today Matt and his dad are on the same path toward financial stability and teaching each other. Thanks to all the dads out there, whether you are good with money or not, you’ll always be our dads. Show Notes Ommegang Abbey Ale:  Andrew’s Father’s Day drink. Macallan 12-Year Single Malt Scotch: The drink Matt and dad shared. Career Alley:  Andrew’s dad’s blog.  This runs in the family too! The Richest Man in Babylon:  The book that helped Matt’s dad with his finances. Custom Rooms By Design: Even though Matt’s dad didn’t mention it, here is his website. Learn more about your ad choices. Visit megaphone.fm/adchoices

This financial life episodes give us a chance to delve into a listener’s personal finance life and to give them some advice to improve it. Today we have This Financial Life with Connor. Connor is 23, lives in Manhattan, has been working in finance as a commercial underwriter for about a year and is making $70,000 annually before bonus.  He has no debt,  credit card debt or student loan. Connor has some money invested in individual stocks.  He bought GM after the recall fiasco because the price was low.  A smart move as GM might have dipped, but it’s “too big to fail” so not going anywhere anytime soon.  At least until Elon Musk decides otherwise.  He also bought stock in an e-cigarette company because it’s a fast-growing trend.  And WWE (disclaimer:  Connor is not a pro-wrestling fan) after it dropped 43% on news that it did not get enough monthly subscribers to offset lost pay-per-view orders.  So Connor does his research and makes a move when other’s fear to tread.  A favorite LMM trait. Once again proving he is an attentive LMM’s fan, Connor has maxed out his 401K and Roth IRA accounts.  At present, Connor has about $54,000 invested, and the majority of that money is saved from part-time jobs he held while in high school and college.  If only us older folks had been as savvy as Connor. So what is there to improve upon?  Well, Connor might be living a little too baller.  Not because of his salary but because of where he lives.  Manhattan is expensive people.  Even though Connor has roommates, he’s spending 43% of his income on rent.  A good rule of thumb for rent expense is about 30%. Connor also makes the mistake that a lot of us make by keeping too much in a savings account.  That money is better utilized for something like Betterment.  A Betterment account can be liquidated in two days.  Unless you need bail money or something, there aren’t too many emergencies that will require faster access. We all wish we could be as smart as Connor was with his money so early on.  He has some room for improvement, but he is nearly a textbook case of smart money management.  As long as Connor continues to listen to our podcast, he’ll do well. Show Notes Mint: LMM’s budgeting weapon of choice. Betterment:  The source of your emergency fund for everything other than bail money. Learn more about your ad choices. Visit megaphone.fm/adchoices

When did tipping become such a minefield? Who do you tip, how much, how often? We are going to sort it all out for you. We are giving you just the tips and will tell you how much to tip pizza delivery and everyone else. It seems that everywhere you go, no matter what you do, there is someone you need to tip. And tip well. A decade ago for instance, 10 percent was an acceptable tip — 15 percent if the service was impeccable. Now, anything less than 15 percent is considered inappropriate. For good service, 20 percent is the norm. In more expensive restaurants, patrons are sometimes expected to tip up to 25 percent on the total amount of their bill (taxes included). Sometimes you expect it. If you are out to dinner, you know you are expected to tip the server. But there are a lot of other situations where you might not be so sure. We will explain what you should tip in both kinds of situations. Food Tipping around food probably causes the most consternation for people simply because there are so many scenarios. Unless you shop for your own groceries and cook all of your meals at home, these are some of the situations you will run into that require a tip. Restaurants Standard practice is to tip 15-20% on your restaurant check, and yes, that includes drinks. Sometimes there is a workaround for this. If the restaurant allows BYOB, do that. Sometimes BYOB places require a corking fee, a charge incurred for the server opening and pouring the wine. See if the corking fee is less than it would cost to buy wine in the restaurant. If you have a wait for a table, grab a drink at the bar and drink it slooooow then cash out before moving to your table. It’s customary to tip the bartender a dollar or two for drinks purchased at the bar so doing this may save you some money on the tip. Even if you do order more drinks with dinner, at least you won’t have to factor that first one into the tip when you get the bill. If you want to earn a little money when you go out to eat, book your reservation through Seated. You’ll get a $10-50 credit for Lyft, Starbucks, or Amazon. It will basically cover your tip! What if you had poor service? Unless the service was really egregious, it’s not cool to leave no tip at all. Servers generally tip out support members of staff so when you stiff a server, you stiff people like runners and bussers too who did nothing to deserve it. If you had poor service, consider who exactly is at fault. Was the food cold? That’s likely the server’s fault. They didn’t get the meal out to you in a timely way, so it sat in the window getting cold. Was the food of poor quality? That’s the restaurant’s fault, not the server’s. Tip them the standard 15-20% and just don’t return. Pizza and Food Delivery Well, you could have taken your lazy ass to the restaurant and eat in or brought the food home, but you couldn’t be bothered for whatever reason. So the person carrying food right to your door deserves something for doing so. But they aren’t refilling your drinks or checking to make sure everything was to your liking once you began eating. A fair tip for delivery is 10%. However, if the weather is terrible, tip at least 20% and preferably in cash. Delivery workers have a hard, dangerous job on a nice day; it’s ten times worse in searing heat, pouring rain, or driving snow. Pickup Orders You were too lazy to cook but not too lazy to go out and pick up your food. Do you have to tip on a pickup order? If it’s a small, simple order and there is a tip jar on the counter, throw a dollar or two in there. You don’t have to, but it’s a nice gesture. Learn more about your ad choices. Visit megaphone.fm/adchoices

We’re talking Roth and traditional IRA’s today with Darin Hayes, author of Beer Money: A Beer Drinker’s Guide to Personal Finance and Investing. Let’s put this in drinking terms.  Taxes are a hangover.  A Roth IRA gets the hangover out of the way before the drinking even commences because the money contributed is taxed before the contribution.  A Traditional IRA let’s you drink first and the hangover comes later because the money is taxed once it’s withdrawn. How should you decide when you want to suffer your hangover?  A very simple way to determine is whether or not you receive a tax refund.  If you get money back, do a Roth.  You likely are in a lower income bracket and don’t need the tax deduction.  A lot of young people with years ahead to work and invest will fall into this category.  If you’re older, making more and in a higher tax bracket, a Traditional IRA will give you that deduction that may drop you into a lower bracket. A Roth IRA also has the advantage of having no penalties for early withdraw on the principal.  This makes a Roth a good place to invest your emergency fund.  If you pull out any gains, there will be penalties but not on the initial investment. What is the difference between an IRA and a 401K?  A 401K is an employer sponsored program.  For those whose employer does not offer a 401K or are self-employed, an IRA can be set up by an individual and serve as your retirement account. A SEP-IRA is something for self-employed individuals to consider as well.  You can contribute up to $52,000 a year depending on income.  A SEP-IRA can be opened with a brokerage firm or an on-line investment account. How’s that for a simple break down?  Putting things in drinking terms makes everything easier to understand! Show Notes Beer Money: A Beer Drinker’s Guide to Personal Finance and Investing:  Darin’s easy to understand book on managing your money. Get Beer Money:  Darin’s website. Ommegang Hennepin: A rustic golden ale. Blindfold Black IPA: A light bodied IPA with a bold, hoppy character. Learn more about your ad choices. Visit megaphone.fm/adchoices