Wednesday, December 12, 2012

Umemployment

Unemployment is a big issue in the United States right now. However, the official unemployment rate has been steadily declining since reaching almost 10% last year. But many people don't even know how the unemployment rate is calculated or what a true definition of unemployed is. You're considered unemployed if you're in the labor force and are out of work and looking. But for starters, you're considered employed if: you work for pay or profit one or more hours, work w/o pay for family 15 or more hours, or if you have a job but didn't work due to other factors. All this information is recorded via survey during a monthly survey. However, to find your labor force, you need to take the total U.S. population and subtract certain types of people such as: people under 16, people in jail, people in school, people in the military, and people not looking for work. Everyone left is either unemployed or not apart of the labor force. But there are different classifications for those that are unemployed such as frictional, structural, seasonal, and cyclical. Frictional is when you simply decide to leave a job to look for something else. Structural is when there is a change in consumer demand and you are not needed. Seasonal is when there is a change in seasons that cause job loss and finally, cyclical is the type of unemployment caused by the recession and the economy slowing down. Right now our unemployment rate is 7.7% but a 2%-5% is okay. The reason we believe this is the most important topic we've learned all year is because everywhere you look, the unemployment rate gets brought up on a daily basis but until now, we, as students, had no idea how unemployment was calculated and with percentages being thrown around everywhere, it's important for us to know how this number was found.

Resources: http://www.tradingeconomics.com/united-states/unemployment-rate
                 Portfolios
News Story:http://www.gastongazette.com/news/local/severe-cuts-to-unemployment-benefits-could-be-coming-1.65758
Video: http://www.youtube.com/watch?v=3VdL8wf9LM0



Investments

When the term investments gets brought up, there can be some confusion . A stock is a share of ownership of a company. As a stockholder, you have a claim of the company's assets and earnings. Stocks are bought and sold daily on the major exchanges. A share is the amount of ownership in a company. A mutual fund is an investment program funded by shareholders that trades in diversified holdings and is professionally managed. Finally a mutual fund is an investment that is made up of a pool of funds collected from many investors for the purpose of investing in stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. When you invest in a company, it spreads the risk of ownership and timing has everything to do with investing. You want to buy stocks at the right time and sell at the right time to make a good profit. Before you go investing, there are 3 tips you should follow: 
  1. Have a diverse portfolio to lower your risk of possibly losing all your money. In other words, don't put all your eggs into one basket.
  2. Be aware of the risks of investing. While stocks can be risky, CD's, bonds and mutual funds all have relatively low risks.
  3. Do some research on the companies you invest in first. It basically comes down to whether or not the company is good or bad. 


Resources: http://www.usa.gov/topics/money/investing/tips.shtml
                  http://en.wikipedia.org/wiki/Diversification_(finance)
                  http://www.investopedia.com/video/play/introduction-mutual-funds/#axzz2FBNFleaO
                  Portfolios
News Story: http://www.fosters.com/apps/pbcs.dll/article?AID=/20121216/GJBUSINESS_01/121219431/-1/FOSBUSINESS
Video: http://www.youtube.com/watch?v=GrbhGVcbCrQ



Buying a Car

You're looking at getting a new car but you don't have the money so you want to obtain a loan. Thing is, it's easier said then done. To obtain a car loan, you need to first shop around and do your research. Crunch the numbers and find out who has the best overall loan available. You need to also make sure you have a good credit score. The higher your credit score, the higher chance you have of getting that loan. Once you've done all this, you can go apply for the loan and hopefully get approved! However, you want to make a large down payment and for good reason. The larger down payment you put down, the better the loan terms are going to be. It's that simple. So if that means pooling all possible income resources together to making a large down payment, then so be it. Also, if you take out a loan that takes years and years to pay off, it may be a pain but if you make your payments on time, it's a great way to boost your credit score. But people need to realize that once you buy that car and drive it off the lot, it loses a significant amount of value. In fact, the moment you drive it off the lot, your car loses 11% of its value. After five years the car is worth 37% of what you paid for it at the dealership. Three tips we would strongly recommend when buying a new a car would be: 

  1. Make a sizable down payment
  2. Setup your loan in advance
  3. Look at the total cost of owning a new car



Resources: http://banking.about.com/od/loans/a/How-To-Get-A-Loan.htm
                 http://www.chattelmortgage.net/Mortgage_Terms.html
                 http://outofyourrut.com/have-your-down-payment-ready-before-you-buy-a-new-car/
                 http://www.edmunds.com/car-buying/how-fast-does-my-new-car-lose-value-infographic.html
                 http://www.consumerreports.org/cro/cars/buying-advice/index.htm
News Story: http://www.chicagotribune.com/classified/automotive/used/chi-getting-a-car-loan-20121211,0,4878368.story
Video: http://www.youtube.com/watch?v=z39XhGpdvsk



Retirement

Before even considering retirement, one needs to know the differences between 401(k) and IRA. A 401(k) is a free retirement account you can only get through an employer, and it holds money taken directly from your paycheck. Your employer also contributes money towards your retirement fund which is called “matching.” A IRA is set up so that your contribution each year is tax deductible and you aren't taxed on the income you make as it grows. You pay those taxes when you withdraw it for retirement, which you’re required to begin doing at age 70½. One must also know what social security is. Social security is a federal insurance program that provides benefits to retired people, the unemployed, and the disabled. In a way, retirement relates to personal savings in a way that, each month, you should set aside money for retirement. The smartest thing you can do about retirement however is to start early. Let’s say you decide to start saving for retirement at age 25 with a plan to retire at age 60. Let’s also say you decide to put away $100 a month into a 401(k). If you made no changes to the amount you saved, your account would hold nearly $380,000 when you wanted to retire. However, if you didn't decide to start saving for retirement until you were 35, you would only have a bit more than $130,000 by the time you were 60.  The earlier you start, the better. 

Resources: http://www.investopedia.com/categories/retirementplanning.asp#axzz2FBNFleaO
                     http://en.wikipedia.org/wiki/Retirement
                     http://www.nasi.org/learn/socialsecurity/overview

News Story: http://articles.marketwatch.com/2012-12-15/investing/35833570_1_fiscal-cliff-baby-boomers-x75
Video: http://www.youtube.com/watch?v=Yi_0gsW7BZI



Credit Cards

First off, one must have a rough definition of what a credit card is. A credit card is a card issued by a financial company (such as Visa or Master Card) giving the holder an option to borrow funds, usually at point of sale. You can apply for a credit card online, at your local grocery store, or even through the mail. Credit cards charge interest and are primarily used for short-term financing. Interest usually begins one month after a purchase is made and borrowing limits are pre-set according to the individual's credit rating. Unfortunately, there are tons of different charges that occur with a credit card that can seem a bit confusing. An annual fee is a yearly fees charged for the convenience of having the credit card that can range from $25 to $300 however some cards do not charge a annual fee. Interest rates, otherwise known as a finance charge, is a  monthly interest charge for the the convenience of carrying a credit card balance beyond the grace period. A typical interest rate is around 14%. A late fee is A charge for making less than the minimum payment or payment after the due date or both. Late fees range from $25-$35 but if you pay your bills on time, you don't have to worry about late fees. An over charge fee is when you have a balance above your credit limit. Having a credit card and making payments each month is an easy way to build up your credit history and have a good credit score along with the fact that you can buy something right away if you don't have the cash on you but it can lead to serious high interest and can lead to irresponsible spending. 3 tips every person should know about their credit cards would be to make your payments on time, understand the terms of your credit card, and be responsible by not buying anything you can't pay off. 

Resources: http://www.creditcards.com/credit-card-news/credit-card-glossary-terms-first-credit-card.php
                 http://www.fraud.org/telemarketing/teletips/cardtip.htm
                 portfolios
News Story: http://bucks.blogs.nytimes.com/2012/12/13/late-credit-card-payments-low-and-expected-to-stay-there/
Video: http://www.youtube.com/watch?v=gkg03eusG-A


Personal Budget

A personal budget consists of many different things like fixed and flexible expenses. Expenses that continue at relatively stable levels,month after month or year after year are referred to as fixed expenses. Typical household fixed expenses are mortgage or rent payments, car payments, real estate taxes and insurance premiumsFlexible expenses are costs that are easily changed, reduced or eliminated. Spending money on entertainment and clothing represent flexible expenses. Even expenses that must occur, such as a grocery bill, can be considered flexible because the amount spent can vary. Other terms associated with personal budgeting are compound and simple interest. Simple interest basically is the amount you borrowed times the interest rate. In other words, 5% interest on $1,000 is $50. Compounding interest is "interest on interest." It is a method of calculating interest where the interest is added to the original principle. Compounded interest is usually compounded monthly and sometimes yearly. However, budgeting your money and saving it comes down to simply being smart with your money. If you can, every day,  week, or month, set some money aside towards savings. It's ok to spend money now but stretch your dollar by all means necessary. You never know what emergency expenses can come up and setting aside money monthly can be used for things like replacing a flat tire or replacing a broken windshield. 

Resources: http://www.chattelmortgage.net/Mortgage_Terms.html
                  Portfolios
News Story: http://www.ft.com/cms/s/0/193b1952-408a-11e2-aafa-00144feabdc0.html#axzz2FE6ye6b1
Video: http://www.youtube.com/watch?v=FsS741Dow30