“Pump and Dump” is Back – and on Social Media

One of the classic investment scams is the “pump and dump.”

While this scam has declined somewhat in recent years, it’s starting to make a comeback, at least according to FINRA.

FINRA warns that pump and dump is on the rise in emails. On top of that, it appears that other social media outlets offer the chance for pump and dump to really take hold. What’s old is new again, and you need to be on your guard.

What is Pump and Dump?

Pump and dump is a classic investment scam in which paid promoters try to get people to buy large amounts of stock. This technique used to be carried out through phones. Promoters in “boiler rooms” would call prospects and offer “inside” access to the “next big stock.”

With the pump and dump, investors are told they can get in on the ground floor with a small investment. Indeed, the investment is reasonably small. Many of these scammers push penny stocks that aren’t well known. The investor buys hundreds, or even thousands, of shares, sure that they have the inside track.

As the promoters sell shares of the stock, the price goes higher. For the investors watching the price, it seems like they have made a great move. The price is rising, and fast – and as an investor you’ve got in on the ground floor. You’ve made a great deal! Right? Perhaps not . . . .

The problem is that once the price is inflated to a certain point, the brokers and original shareholders and others who perpetrated the scheme, all sell their own shares. They sell while the price is nice and high, inflated by sudden interest in the shares.

Once all of those shares are sold and the scammers have their profits, there is no longer a push to promote the stock. The price plummets as the stock is unloaded, and the unwitting investors find themselves with shares of a practically worthless stock, or even losses.

Pump and Dump Moves to Social Media

The use of the telephone to perpetuate these scams is no longer as viable an option. With people screening their calls and asking to be removed from marketing lists, it’s difficult to reach people via phone.

But now it’s all about social media. FINRA’s alert says that there has been a huge increase in emails associated with pump and dump schemes. These emails come with subject lines like “Investment Alert” or “Buying Opportunity” or some other phrase that makes it sound like you are getting a good deal. You click over, make a purchase, and then watch the roller coaster ride as it goes to highs – and then comes crashing down.

One of the things about these email pump and dump schemes is that it is easier in some ways for scammers to get you to listen to the pitch. Instead of trying to get you to stay on the phone, everything is right there: company information, bogus performance projections, and other information. These emails are crafted with marketing principles in mind, and designed to entice you to action.

But it’s not just email. Pump and dump has the potential to show up in other media as well. I received a “stock tip” via Twitter a few weeks ago. Someone sent me a message claiming to have information that I, as a financial writer, might be interested in. It’s also becoming increasingly common to see these types of communications on Facebook. What’s to stop a boiler room style promoter from making a post on Facebook and then paying $15 to promote it? If enough people take the bait, that $15 can turn into hundreds of dollars for the scammer.

Protect Yourself from Pump and Dump Investment Scams

As always, you need to be on the lookout for investment scams. Pump and dump scams are increasingly common, and the fraudsters are looking for new ways to reach an ever-wider audience. Social media and email provide a way for scammers to reach people on an unprecedented scale.

If you want to protect yourself, you need to be on guard. Don’t act on “hot tips” offered to you via email or other social media channels, especially if they come from strangers. Even recommendations made by friends have to be vetted, since they might be inadvertently spreading the scam. Stick with the more boring investments that you are familiar with through your more traditional online broker.

What are some other scams people should be aware of? Have you almost fallen victim to a scam? Leave a comment!

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5 Smart, Inexpensive Summer Vacations

Schools have emptied and the hot weather is here. This time of year is very popular for vacations. With the way of the current economy however, not every person has the financial resources to take the trip away that they need. Everybody deserves a break in order to re-charge from daily life. Perhaps some of these ideas will strike a chord and give people an idea for their time off that will allow them to save some money.

Imagine going on a wonderful vacation without dealing with packing, unpacking, being bodily searched, being squeezed into a sardine can for six hours with nothing but granola bar and a man next to you who is definitely not Sure, or eight-hour car rides and the effervescent smell of an exploded baby’s diaper in the back of the car. Most people don’t even realize they can relax and have all of the standard vacation/tourist experiences they need not far from their actual homes. Remember, you can also lower your vacation costs by planning ahead.

1. Please Don’t Feed the Bears . . .

No matter where you live, there are local, state and national parks somewhere in your area. For the lovers of outdoors, many of these parks offer camping accommodations. This is a very cost efficient way to get out of the house. (For first-time campers or those with children, you may want to try a night in your back yard first.) While there, you can enjoy the lake, beach, river etc. with a little fishing, boating or swimming. There is nothing better than the smell of breakfast cooking as you walk through a campground, or that first S’more of the evening.

2. Who Are the People in Your Neighborhood?

Why go sightsee some place you can’t even pronounce when there is so much right around your corner? From historic sites to theme parks, art galleries to random sites of curiosity, you can provide your family with a great time without having to take a second mortgage on the house.

3. Find the Local Watering Hole

If your vacation is family-oriented, one of the least expensive options is taking the family to the local public swimming pool. Many of these have become water parks with all sorts of activities for the kids. There’s fun to be had for the whole family at this inexpensive, safe family-oriented facility.

What if you don’t have kids? What if your way of kicking back is with a dirty martini and some charred meat? Do a search for local breweries, vineyards, wine bars and other great restaurants you have been thinking of trying.

4. The Circus Has Come to Town

Local carnivals and festivals are great ways to have fun, eat different foods and experience something out of the ordinary. Many are celebrated for a short period of time with special concerts or fireworks attached. It could be a balloon festival where you get to see the sky filled with color, or an oyster festival that features taste-testing contests. The kids will have a blast and you will find yourself smiling in no time.

5. Take Me Out to the Ballgame

With 30 professional baseball teams, not every corner of the country is able to take in a game. When you add the various “minor league” teams and facilities, it opens up a lot more options. Support your local teams and go see them play. You will experience the sights and sounds of America’s pastime and maybe even see a future star.

Hopefully at least one of these ideas will jump out at you. There are ways to show the entire family a good time and get out of the house without wiping out your bank account. Try these, you’ll like it. Be safe and have a great summer.

What are some other smart, inexpensive vacations you can take? Leave a comment!

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How to Sell Your Skills as an Older Worker

Every week it seems as if we are being treated to yet another story or report saying that Americans aren’t saving enough money for retirement. The statistics seem consistent with the claim, no matter what the source. But if people aren’t saving enough for retirement, what options will they have when the time comes?

For most, it will involve some form of work. Very few people will be able to live on Social Security alone, and if their retirement savings aren’t enough to cover the difference, then some form of earned income will have to do it.

But how do you sell your skills as an older worker?

You Have Plenty of Experience

If you are over 55 chances are that you have not years, but decades of work experience. Not only have you held several jobs, but you may have worked in two or more careers as well. That can give you an unusual combination of skills that should find a willing home in some business somewhere.

There is even scattered evidence that employers are showing a preference for older workers over very young ones. The reason cited is easy to see – older workers not only often have hands-on experience, but they understand what it takes to hold and to succeed on a job. “Little things,” such as punctuality, attention to detail, and customer service are major advantages in almost any type of business.

In any type of job that you would like to have, you should do what you can to redirect the employer’s attention away from your age and toward your many years of experience. Sell the employer on what it is you can bring to the table.

No Need for Benefits

Employee benefits are a major part of overall compensation packages in nearly every industry. This is a big reason why many employers are looking for ways to eliminate benefits. This is also where you may have a major competitive advantage.

If you already have health insurance, either through your spouse, a private plan, or Medicare, you will have no need of an employer-sponsored plan. Since this is a large and growing expense for employers, the fact that you don’t need a health plan will give you a huge advantage over younger workers who consider it to be a “must-have.”

No Family in Tow

Young people often have heavy family- and social-commitments. But as a mature person who is past the child-rearing years, you’ll have more time, energy, and mental alertness to concentrate on a job. If you have children, or you have raised them in the past, then you know exactly what I’m referring to. Children are a blessing in life, but they can and often do compete with your efforts to earn a living. As an older worker with no family to support, your demands for both time and money can be less extreme than it will be for younger workers.

Contract, Part-time and Seasonal – No Problem!

Another very big advantage that you have as an older worker is flexibility. If you have Social Security, pension income, and/or a healthy retirement portfolio, you will be able to be more flexible in your work schedule.

Where a younger worker may absolutely need a full-time, permanent job, you can be available to work contract, part-time, and even on a seasonal basis. That flexibility can make you more desirable to employers than younger workers with greater needs.

In addition, employers are often looking for workers with very specific skills to handle a certain job within the organization. With your long career history, there’s a very good chance you may have such a skill. An employer may bring you in to handle that job, which may only be part-time or seasonal. In that way, you’ll have a significant advantage over younger workers.

As a first order of business in preparing for retirement, you should do all that you can to maximize the funding of your retirement plans. But if those plans – plus Social Security and any other income sources you have – won’t be enough to cover all of your living expenses, you may have to look to some form of employment to fill the gap. And if you do, you will have definite advantages.

Can you think of any other advantages that older workers can bring to an employer?

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Are You Sharing Too Much Information Online?

One of the great things about the Internet is that it’s possible to keep in touch with others. It’s easy to share what’s going on in your life, and to see what’s happening in the lives of those you care about.

However, there is a possibility that you’re sharing too much information online. If you aren’t careful, you could easily end up sharing enough information that fraudsters could use it to commit identity theft or hack your accounts.

Information Scammers Can Use

You might be surprised at the information that scammers can use to get information about you. Sharing high school information, such as when you graduated, can allow fraudsters to figure out what year you were born. Combine that with the fact that you share your birthday (even if you don’t share the year) publicly, and a scammer could guess your birthdate.

Common security questions for various accounts include questions about such items as:

• Pet names
• City of birth
• High school mascot
• Mother’s maiden name
• Best man at your wedding
• Best friend during high school

Now, think about how many of these items you have available online, via Facebook or some other social network, or whether you’ve mentioned some of them in tweets or even on blog posts that you’ve written about your life.

I make it a point not to share information about where I was born over the Internet. Yes, my hometown is listed. However, my “hometown” is merely where I went to high school, and not where I was actually born.

When you have the opportunity to make up your own security question, take it. Then, create a question that has an answer that you aren’t going to share anywhere online.

You might be amazed at where scammers can find information about you. And if you really think about what you’re sharing, you might be surprised. From friending your mom on Facebook to seeing where your friends have been vacationing, you can give something away that identity thieves and fraudsters can use against you.

How Scammers Use What they Find Online

In some cases, you might be coaxed into clicking on a particular link. If scammers can see what you’re interested in, they might send an email with a “special deal.” You click the link and are whisked away to a site that uploads malware to your computer. Information about where you shop online can be used to send phishing communications that encourage you to enter account information.

It’s also possible for scammers to use information found online to trick you into “helping” a distressed friend. A quick look at Facebook can let a scammer know where your friends might be traveling. Then, they can send you a message (or even call you, if your phone number is public) and tell you that they are in trouble and need your help. You are asked to wire money and – poof – it’s gone. And all the time your friend was safe and sound.

Many hackers use information in social media profiles and shared on blogs to guess passwords and login information. If a scammer has your email address, and a list of pet names, children’s birthdays, and other information, it’s possible to try different combinations until they hit on a combination that works. There are computer programs that do this automatically, so it doesn’t even have to be that hard for hackers to get into your account if you base your log in and password choices on things in your life.

Even worse: If you use the same login information for multiple sites, all a hacker has to do to wreak complete havoc with your life (and your finances) is to crack one account.

In order to protect yourself, it’s important that you be careful about what you share online. When choosing account login information and passwords, as well as security questions, choose items that are unrelated to your public life. Yes, it’s harder to remember (you can get a password manager, or encrypt a list) when you aren’t taking cues from your everyday life. However, your information will be safer.

And, finally, be wary of anyone who approaches you and asks for something. Don’t click on links in emails; instead, open a new window and go to the “official” home page. Be wary of what information you believe, since no matter how well someone seems to know you, they might have only pulled the information from the Internet.

Are you concerned that you’ve shared too much information online?

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Affordable Internet Access on Vacation

When I travel, I like to stay connected (unless I’m camping; then I want to be left alone). As a result, I make it a point to look for ways to access the Internet when I’m out of town. This is very important, since my entire livelihood depends on Internet access.

If you are traveling – even if you are traveling internationally – there are some ways to get affordable Internet access while you are on vacation:

Consider Where You Stay

I almost always stay somewhere with Internet access. Many hotels and hostels offer free Internet services to guests. Before you book a room, find out whether or not you will have Internet access. Even if you can’t get the access for free, it’s still possible to get affordable access in many cases. Some hotels charge a per-day fee for access, usually between $5 and $10. If you will be using the Internet a lot, it might be worth it to pay that fee. However, if you just need to check in every now and then, you can look for other ways to access the Internet, rather than paying the daily fee.

Internet Cafes and Public Hotspots

Many urban areas offer you access to Internet cafes and public hotspots. In many countries in Europe and in South America, you can pay an hourly fee to access the Internet. You either use computers provided, or you can get a wireless password and use your own laptop.

There are also public hotspots in many urban areas. Even my hometown has several coffee shops that offer free Wi-Fi access. Search ahead of time to find public hotspots that you can use to access the Internet for free (or for the cost of a cup of coffee).

Wi-Fi Services and USB Mobile Broadband

You can also take your Internet with you while you are on the go. Wi-Fi hotspot services like Boingo charge you a flat fee and you can connect anywhere there’s a hotspot. This can be more secure than using a public or free hotspot network. Costs start at about $9.95 per month, and can get higher if you are traveling internationally. Carefully consider this option before you sign up. If you travel frequently, or if you are going on a vacation that will last a week or more, it can be worth it to pay this monthly fee for access (cancel after your vacation). Just make sure there are adequate hotspots at your destination.

Another option is to get a mobile broadband plan. My grandfather uses this, since he travels all over during his retirement. You usually get a USB modem, and you can pay a monthly fee. However, you will see better results in urban areas. Find out about coverage and monthly costs before you agree. Sometimes it’s just easier to take the Internet with you.

Use Your Phone

If you have a phone with a data plan and Internet capabilities, that can be one way to access the Internet while you are on vacation. You can also purchase relatively inexpensive monthly data plans for tablet computers, if you want a bigger screen for typing/answering emails. If your phone has a browser, and you’re paying for data anyway, it can make sense to just use your phone. There are also apps that can turn your phone into a hotspot that allows you to access the Internet on other devices. Just make sure you understand any additional costs before you activate this option.

If you are traveling internationally, check with your provider to find out if there will be changes in your coverage, as well as any additional costs that come with international cell phone use.

Technology offers a lot of options for connectivity. In many cases, it’s possible to get inexpensive, or even free, Internet access when you travel. What’s your favorite way to get Internet when you travel?

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When Should You Ditch the Credit Cards?

Credit cards offer a lot of convenience. It’s possible to make purchases quickly and easily. And, when you make a large purchase that you don’t have the cash for, a credit card allows you to get the item immediately, and make small, manageable payments over time.

Unfortunately, it’s just this convenience that can cause problems for some consumers. The access to easy money can get out of hand, and pretty soon many consumers find themselves in debt, unable to cope with what they owe.

Savvy Credit Card Use

When used responsibly, a credit card can be a great financial tool. It’s possible to use credit cards to build up your credit history so that you can get better rates on your loans, saving you money over time.

And, of course, many consumers like credit cards because they offer rewards. It’s possible to get free travel, and even cash, when you use the right rewards credit cards.

However, if you find yourself unable to use cards responsibly (and responsible credit card use means that you need to pay off the balance each month), it might be time to ditch the credit cards.

3 Signs You Should Ditch Your Credit Cards

Take a look at your financial situation. Be completely honest with yourself. If you display any of the following behaviors, chances are that it’s time for you to get rid of your credit cards:

1. You carry a balance regularly: One of the worst things you can do financially is carry balances on your credit cards. When you carry a balance, the high interest rate associated with your card comes into play. Even if you have rewards, the interest you pay essentially wipes them out. If you never seem to pay off your cards, and if you are perpetually carrying a balance, it’s time to get rid of the plastic.
   
2. You spend just to get the rewards: Savvy credit card use requires that you use your rewards cards in conjunction with your regular, budgeted spending. If it’s not in the spending plan, you shouldn’t buy it. Unfortunately, many consumers buy things that they can’t actually afford “just to get the rewards.” If you realize that you are buying things that you don’t really need just so that you can rack up the rewards (and then you end up carrying a balance), it’s an indication that perhaps you need to ditch your cards.
3. You never seem to get ahead: Do you feel as though your balances are retreating too slowly? Can you never seem to get ahead? If this is the case, chances are that you need to get rid of your credit cards. Many people end up in a debt cycle where they keep spending on credit cards, vowing to pay off the balance this month, or next month. However, it never seems to work. If you are in this position, and you constantly end up back where you started, it might be time to get rid of credit cards.

Credit cards don’t fit everyone’s spending style. There are those who use credit cards to great effect, and are very successful. However, not everyone has the same measure of success. If you can’t seem to make them work, then get rid of them and use other ways to pay for what you need.

Are you thinking about ditching your credit cards? Leave a comment and tell us why!

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How to Wisely Invest Your Emergency Fund

Are you ready for a rainy day?

The day when the roof leaks, the air conditioner goes out, or the transmission in your car finally dies you will need a pile of cash sitting around to pay for that emergency.

Most financial pundits recommend 6 to 12 months of your expenses as an example of a fully-funded emergency fund. Of course getting to that amount might mean thousands of dollars and months of saving, but the benefit of having the money there when you need it is invaluable. Avoiding credit card debt during a tough financial season can mean a lot.

Investing Your Emergency Fund

Having that many months might mean you need $20,000 or $25,000 sitting somewhere and your instinct is to try and maximize the return on that money rather than just leaving it sitting there. Here are some tips on how to make wise choices as you look to invest your emergency fund.

Principal Protection Trumps Rate of Return

Maximizing the return on a big sum of cash is a fine idea, but be careful. The general rule of thumb with investing is the more reward you want the higher risk you need to take.

This is your emergency fund. Risk should not be part of the equation. The main benefit of having an emergency fund is . . . having an emergency fund. It isn’t the return that is generated off of investing your emergency fund. Simply having it and contributing enough each year to keep up with inflation is a win.

A majority of people live paycheck to paycheck, so by taking the time and effort needed to build up an emergency fund in the first place you are way ahead of the game. Don’t try to stretch a little bit further ahead by taking on risky investments. You could end up wiping out a big chunk of the fund and leave yourself in a financial bind.

Safe Investments for Emergency Fund

There are two primary safe investments you can use with your emergency fund without thinking twice. They won’t generate monster returns – they may not even keep pace with inflation – but the point is they will keep your fund safe.

Certificates of Deposit

A CD at a bank or credit union will earn a decent interest rate while keeping your funds safe. What is great about putting your emergency fund into a certificate of deposit is there is a penalty for withdrawing funds early. You would think you wouldn’t want to forfeit some interest to get your hands on your money in an emergency, but putting up a barrier makes it less likely you’ll raid the fund for non-emergency purposes.

Online “High Yield” Saving Accounts

Likewise you can enjoy a little bit more liquidity than a CD by using an online savings account. These used to be called high yield accounts because you could get 3% to 5% or more just for having a savings account. Those rates haven’t existed in a while thanks to the Federal Reserve.

Nevertheless, you can earn a decent return (albeit somewhat lower than a long-term CD) and have easier access to your funds if you need them. You just need to be careful not to constantly be pulling money out for small “emergencies.”

Do you plan on getting an emergency fund? Where will you invest it?

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The Bad News on Unpaid Internships

College students are often anxious to get internships, especially as graduation approaches. A short stint working for an employer in some capacity that is related to your major can be a be an advantage when it comes time to look for a permanent job after graduation. But there is bad news on unpaid internships. Many students – unable to land paid internships – settle instead for unpaid ones. What’s the difference, right?

Plenty.

A recent report indicates that college students with an unpaid internship are no more likely to land a job after graduation than students with no internships at all. Paid internships (one way to make some money in college), by contrast, substantially increase your chance of getting a job.

The major difference it seems, has everything to do with whether or not the assignment is paid. If so, should you even bother to take an unpaid internship?

1. Unpaid internships aren’t always what they seem on the surface.

The theory behind unpaid internships is that, at a minimum, they provide a relevant line item on your resume. This would seem to be especially important for a new graduate who is about to join the full-time, permanent workforce. But there are a couple of significant reasons why an unpaid internship won’t provide the benefits that you are hoping for.

The work may not be related to your career field. In many unpaid internship situations, the employer has you working in functions that are not directly related to your career major. For example, they may have you working on non-critical tasks, such as clerical functions, that provide no form of hands-on experience. The only benefit you may have in this type of arrangement is the fact that you will have a previous affiliation with an employer in your field. But an affiliation is not true hands-on experience, and potential employers know the difference.

In the business world there’s a big difference between paid and unpaid. Pay is a powerful form of validation in the business world – being in a paid internship means that a competing employer considered your services worth paying for. In the business world, that connection is more than casual. An unpaid internship can be too closely associated with a volunteer effort, in which the employer did not think enough of your work to compensate you for it.

Unpaid internships do not usually lead to employment offers. If an employer assigns you to relatively low-level work – and doesn’t pay you to do it – it’s a completely one-sided arrangement. That being the case, they usually don’t see fit to extend an offer of employment after graduation.

2. Unpaid internships may be going away anyhow.

Unpaid internships are in danger of disappearing completely. In June of this year, a federal court ruled that they may violate federal minimum wage laws. Employers are bringing interns in to work for them, and not even paying them minimum wage. This arrangement completely favors the employer, while promising the intern neither compensation nor a promise of employment.

Alternatives to Unpaid Internships

If it is impossible to land a paid internship, and unpaid internships offer no tangible benefit, what are the alternatives if you’re looking to gain experience that will help you to get a full-time, permanent job upon graduation?

Find paid work in a related field. If you can’t find a paid internship that is directly related to your major, then look for something in a related field. For example, if your major is accounting, consider taking a seasonal job as a paid income tax preparer or even as a bookkeeper in a small business. The job doesn’t have to be an internship either. It can also be a part-time job that you use to help pay your expenses while you’re in school.

Find paid work in an unrelated field. Graduating from college without any previous paid work history can be a negative in general. Employers want to know that you have experienced the responsibility that goes with holding a job, since this is a very different environment than the school environment you have been in for the past few years.

Holding a job – just about any paid job – is an indication that you understand what it’s like to have critical work functions and deal the public. A skill as seemingly small as being able to answer a telephone in a professional manner can be important to potential employer. And once again, it’s important that someone was willing to pay you for the job you’ve done.

Start out as a temp. If you are unable to find paid work that is related to your major area of study, the next best move may be to work as a temp right after graduation. You may start doing simple functions, but it will be paid work that will get you a foot in the door and a chance of permanent employment. And even if the organization you work with on a temporary basis doesn’t hire you, you’ll have relevant experience to bring to the next job application.

What other ways can you think of – or have you used – to gain relevant experience during or after you finished college?

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How to Move Out of Your Parents’ Home for the First Time

One of the scariest times of young person’s life is when moving out of their parents’ home for the first time. It can be even more intimidating than going off to live at college, if only because at that time you’re still under your parents’ wing . . . financially speaking.

When you move out of your parents’ home for the first time, it has an air of permanence about it. And not only that, it’s sink or swim time – either you will be able to make it on your own, or risk moving back home with your tail between your legs.

But it doesn’t have to be that way. Some advance preparation can not only make the transition from your parents’ home to your own home easier, but can also give you a better life as time goes on.

1. Keep your debt to a minimum.

This can be problematic if you are a recent college graduate and already have a substantial amount of student loan debt. If you do, it might be worth spending a couple of years remaining at home while throwing all of your financial resources at paying off, or at least paying down the debt.

Generally speaking, your chances of making it on your own will also be better if you don’t have a car loan. But if you already have one, it might be best delaying your departure to pay it off. Otherwise consider buying a used car that you can afford by paying cash.

It should also go without saying that any credit cards you have should have zero balances before you leave. If you can’t make that happen while you’re still living home, your balances will probably only get bigger when you’re out on your own.

There’s one more point about debt and now is the perfect time to bring it up: Debt tends to be a bad habit. If you don’t lick the problem early on, it could very well haunt you all of your life. If you are still living home, then now is the best time to get that under control once and for all.

2. Make sure you have some savings.

It will be far easier to avoid going into debt when living on your own if you start out with a decent amount of savings. The word “cushion” is often associated with savings, as in a savings cushion, and there’s good reason for this connection. A cushion is something that’s soft and comfortable – which is exactly what savings are when financial difficulties hit.

And just like debt, savings are also a habit. Have you ever noticed that some people seem to be natural savers, while others never seem to get the hang of it? Chances are, the reason for both situations developed early in life. Those who were savers at the beginning, continued to be as they got older and even amassed more savings. And the non-savers? They were usually stuck running in place where finances are concerned.

This is an important time in your life to choose which side of that line you want to be on. Once again, it is much easier to save money while you are living home than it will be once you’re out on your own. Seize the day, right?

3. Rent a room or share a rental.

If you really want to increase your chances of succeeding at your first try in living on your own, you should try doing it on the cheap – at least at the very beginning. By renting a room or sharing a rental apartment, you’ll cut the cost of living on your own substantially and improve your chances of making it the first time out.

It is also a fact that the first place that you move into will be full of extra expenses. For example, some of the costs that are normally associated with taking an apartment include:

• A rent deposit
• Utility deposits
• Renters insurance (many landlords require you to keep this)
• Furniture
• Stocking of food and household supplies

If you share an apartment with at least one other person, you can cut these upfront expenses in half, freeing up more money to pay off debt or to keep in savings. If you rent a room, you won’t even have some of these expenses. It’s just a way to get started until you’re on a firm financial footing.

As a general rule, you should keep your monthly rent to no more than 25% of your gross income (or better yet, 25% of your net income). That will ensure that you do not risk being “house poor” – that unfortunate state of affairs in which a disproportionate amount of your income is dedicated to housing. This will leave you very little for extras like having fun, paying off debt, or saving money. The time to avoid this trap is when you’re first starting out.

4. Buy what you need second hand.

We already discussed how buying a secondhand car can free you from having a loan attached to it. But you can follow the same pattern with everything that you buy. You can usually buy furniture and entertainment equipment at a fraction of retail cost by buying them at thrift stores, secondhand stores, garage sales, and estate sales.

Yes, it will take some time to accumulate the things that you need, but you can save 70%, 80%, or even 90% of what it will cost to buy the same items in retail stores brand-new. That will be money that you can use for better purposes. As the years go by, you can gradually replace what was bought secondhand with newer items. That will make it a lot easier for you to budget, and to avoid credit crunches and draining your savings.

If you’ve been living on your own, what advice would you give to someone who is about to make the jump?

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How to Prepare Your Finances for a Career Change

When it comes to making a career change, we usually get caught up in the mechanics of the change itself. Do I have the necessary skills? Can I learn those skills if I don’t? How quickly will I be re-employed? How secure will the new career be? Will I have to make a geographic move?

Those are all important to considerations, but if you have time to prepare for the career change in advance, you might want to take a close look at your finances. The state of your finances can determine your success or failure in a career change as much as any other factor.

1. Cut your living expenses.

One of the more unfortunate aspects of making a career change is that it so often involves a reduction in income. If this will be the case with your career change, it is important that you cut your living expenses to a level that you’ll be able to comfortably afford with your new, reduced income level.

Depending upon how significant the decrease in income will be, you may be able to accomplish this by trimming around the edges of your budget. For example, it may be possible to make enough room in your budget simply by eliminating cable TV, eliminating your landline telephones, and cutting back on groceries and entertainment.

If you expect the reduction in income will be more significant, then you may need to consider making more fundamental changes. This may get into reducing what we might refer to as “macro expenses” – the bigger expenses in life, such as housing and cars.

You may determine for example, that you cannot afford to make a career change with your current $1,500 per-month house payment and two $400 per-month car payments. If so, you may need to consider moving to a less expensive home and eliminating at least one of the car payments. These are major moves to make, but they may be entirely necessary to pave your way into the new career.

2. Get out of debt.

One of the very best ways to lower your living expenses is by reducing or eliminating debt. For example, the elimination of the $400 per month car payment opens up an extra $400 per month in your budget. That will enable you to live more easily on a smaller income.

If your shift into a new career is voluntary, you can take advantage of any time that you have in advance to begin reducing your overall debt level. Of course, credit cards should be the first to go since they have variable rates of interest that could spike at the worst possible time. Right behind those are car loans. They tend to be large payments on relatively small balances, so the sooner they are eliminated the more budget flexibility you will have.

Any debts that you’re able to reduce or eliminate will make your career transition that much easier by easing the financial pressure.

3. Fatten your savings.

Changing careers brings about a certain amount of uncertainty – you are going from a career or job that you know well, to one where you will have to “learn the ropes.” It will be very much like starting all over, and that brings a host of variables.

One of the best ways to prepare for uncertainty is by building a healthy savings account. That will give you money to fall back on for emergencies, or even unexpected disruptions in income. The path into a new career is not always a straight line, so you’ll have to be prepared for whatever circumstances you will face. Think of your savings as a form of insurance just for that purpose.

There is an intangible factor with savings as well. Having a few thousand dollars saved in a safe place can give you the extra confidence that you need to face the challenges ahead. Even apart from the obvious financial benefits, that confidence is always well worth having when you’re facing new circumstances.

4. Plan to continue funding your retirement.

One of the biggest problems with changing careers is that it often causes a disruption in long-term savings, particularly retirement savings. This is especially true if the career transition is accompanied by a drop in income. However, it is important that you have a plan in place to continue funding your retirement through and after the transition.

If you are leaving a company that has an employer-sponsored retirement plan, you may have to consider starting an individual retirement arrangement (IRA) until you are in a secure position to have a more generous plan. You may also need the IRA as a place to park your 401(k) money upon leaving your previous employer.

If continuing to save money for retirement is important while you are transitioning into a new career, it’s probably even more important that you resist the temptation to liquidate any retirement savings that you have accumulated so far. Not only will you face an additional income tax burden and early withdrawal penalties as a result of taking money, but if you drain your plans too low, you can find yourself starting over with your retirement plans, but at a much later point in your life.

The benefits you will receive as a result of withdrawing money from your retirement plans early will not be made up by contributions you’ll be making later. If you cannot save for retirement during the transition to the new career, at least avoid the temptation to withdraw what you already have.

What other financial factors can impact a career change? Leave a comment!

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