It's tough to figure out what the best price is in the car market. Unlike certain retail products where you can easily comparison shop, cars are not all the same. Even cars that are the same model and year are not the same. But once you've found the car you like, here's how to negotiate the best price:
First: know the Kelly Blue Book price. Search online and have the exact price to commited to memory.
- Never be the first to "set an anchor". Always say "can you do any better?" rather than ask for a specific discount. If you are first meeting the dealer and have a certain budget, don't tell him!! Say what features you want - otherwise, no matter what car he gives you he'll try to charge you your maximum budget cap.
- Tell the dealer what Kelly blue book says its worth if he's trying to sell it to you for significantly more.
- Get up like you are going to walk out if they aren't budging. Start to walk out. Most times, a salesman will give you what you want rather than see a sale walk out the door.
Negotiating for your first car- how to get the best price
Broker Comparison
Student Loans: Weeding through the mail
If you have a student loan, you probably get about 5 offers a day offering to consolidate your loan and lower your montly payments. But it is nowhere near as confusing as they make it out to be, and to be honest, one company over another will not save you any money.
Here is what happens: when you consolidate your loans, they calculate a weighted average of your interest rates from all your loans, and apply this rate to the new consolidated loan. This rate will be the same no matter where you go. Some companies offer you a .25% or 1% reduction in that rate if you do electronic, automated payments and/or if you pay on time for a consecutive number of periods. These offers you do want to take advantage of, so do choose a company that offers it.
The sneaky part is this: by consolidating, they can extend the time you have to pay the loan back, which lowers the monthly payments...however they will be making more money on you!!
The longer it takes for you to pay the loans back, the more money you will pay in interest.
Let's say your interest comes out to 6%, and you have a $10,000 loan, spread over 10 years. If you pay the minimum payment, $111.02 per month for ten years, the lender makes approximately $8,000 from you. $8,000!! To me, that's way more than I'd like to give someone for not doing too much. But it gets worse. Let's say they spread you consolidate the loan and spread it over 15 years instead. Sure, your payment goes down to $94.92, but.... the lender makes $11,130.09 on you!! That's $3,130 more than if you paid it over ten years!
I know it's hard to juggle rent, school loans, and car payments. But don't just pick the easiest option for "right now" because you'll end up paying for it later. Whenever you can, pay extra money towards your loans - it'll save you money in interest expense in the long run. If you do decide to consolidate your loans so you don't have to pay three or four different companies a month(which is fine!), make sure you don't accept their offers to lower your monthly payment by extending the repayment period.
Those last few weeks....
As of today, I have exactly two weeks and 4 days until my college career is officially over. No more sleeping in until 11, no more all-hours of the night partying, and certainly (thank goodness!) no more horrible, food-release dining hall food. But venturing out into the real world is a scary thing, and I am a little apprehensive about paying all these bills, taxes, and boring expenses (why, WHY does my gas bill have to be $200?? I'd rather go a Red Sox game!).
Yet these are all a fact of life, and it is important you don't just ignore them.
Many college students graduate with students loans, credit card debt, and no clue how to manage their own money. Mom and Dad have paid for the neccesseties for so long, you forget that heating, and water, and television costs money. And you've gotten accustomed to your weekend job paying for your weekly manicures, your frequent bar trips, and new clothes.
But if there is one thing that I'm very appreciative toward my father for, it is his discipline. My father is a banker, and throughout my life he's had me make my own budgets, do my own taxes, and generally he's taught me how to manage my financial future. One of the most important things to do before you graduate is put together a budget. Here is how you might do that:
1. Take your annual salary, and divide it by 52. So that's how much you make in a week- GROSS
2. Figure out how much your company will withhold from your check, depending upon your tax bracket and your state taxes. It is important they take out enough, but be sure they don't take out too much. Sure, you'll get a nice fat check in April, but there is no sense in letting the government earn interest on YOUR money...when you could be earning interest on it.
3. Determine all your neccesary expenses, such as: rent/mortgage payments, gas bill, water bill, car insurance, car payments, medical & dental insurance payments (usually deducted from your check), and groceries.
4. If you are like most recent grads, you probably don't have too much left over after all the necessities. But if you do- save it!!! I can't stress how important it is to- as I've said about a billion times in these blogs- start early!! Even investing only $25 a month in your 401k makes a difference!
5. You should also put some cash in a rainy-day money market fund or savings account- you never know when your car will need repair, your stove breaks down...etc.
Are your financial software skills in check?
Finance isn’t just about economic theory, financial analysis, or number crunching- it’s also about data collection. Collecting relevant and accurate data is an integral part of any type of financial analysis to form an opinion. Being able to manipulate that data to display and highlight your ideas and opinions is integral to success in your job. Thus, knowing the right computer applications that allow you to do this is very important and can give you an edge up on the competition.
Microsoft Office- Excel, Access & Powerpoint – obvious, I know, but you wouldn’t believe the number of graduates from other colleges I’ve met who don’t know how to use Excel. Most finance employers expect you to know these applications cold.
Bloomberg Certification – Equities & Fixed Income
This platform integrates data, news, analytics, multimedia reports, e-mail and trading capabilities. For an individual not trained on its logic, it can be quite daunting to navigate.
Capital IQ- this research platform combines in-depth information on companies, markets, and people worldwide with robust tools for fundamental analysis, financial modeling, market analysis, screening, targeting, and relationship and workflow management.
Argus- this platform allows you to do real estate valuation, lease analysis, structure debt terms, conduct portfolio analysis, and do cash flow analysis for development and mixed use real estate.
Northfield Open Optimizer- enables you to input an investment portfolio, and based on the information provided, it will deliver a portfolio that has more return for each level of risk and reflects your preferences and beliefs.
Thompson One Banker- platform providing information on US and international company financials, earnings estimates, ownership, deals (M&A and new issues), annual reports, SEC filings, plus screening tools.
Baseline – this software delivers long histories of key fundamental statistics (15+ years), price action, ratios, First Call earnings, revenues and cash flow estimates, quarterly and annual income statements, balance sheets and cash flow statements for over 9,300 US and Canadian stocks. The information is updated nightly with the ability to also update intraday.
Factset- attribution analysis for investments.
I need your input! Do you have a topic you’d like covered next week in my blog? Email me at ejourdan1@babson.edu with what you want to learn more about!
The Series 7: Becoming an financial advisor or stock broker
Here are the basics:
When passed, the Series 7 licenses you to act as a Registered Representative. Individuals who receive this license are allowed to sell most securities including: Stock, Bonds, Options, Mutual Funds and Annuities. You must be sponsored by a company who is a member of the NASD (National Association of Securities Dealers) to take the exam. There are over 5,000 members.
The Series 7 exam itself is comprised of many topics although not equally divided. Approximately 50 questions will be on Municipal Bonds alone. Each question is worth .4 of a point. 175 questions correct will equal a passing grade. The score is not curved or rounded up- if you get 174 questions right, you will fail. Each part also includes 5 experimental questions, which do not count toward your final grade. You will not know which ones are the experimental questions. Each exam is different. This applies to all Licensing exams but the difference between tests is less with smaller content exams like the Series 63.
The license is active while you are a practicing representative. Practicing with a Series 7 means that you are either employed or affiliated with a member firm. If you leave the firm, your license will still remain active for 2 years after your last day with the firm. If you do not re-enter the business within 2 years, your license will expire. You would then have to pass the exam again.
You will be given a calculator and scrap paper to use at the center. Test-takers are not permitted to bring their own. You are tested using the Proctor computer system, which enables the computer to score your exam quickly- you get your score online within two business days. Once the test starts you can write down anything you want (formulas, etc). The computer also offers the student the ability to change their answers at the end of the first or second part of the test. If you desire to change an answer to a question in the first half that you have already answered, you must wait until the end of the first half to do it. Once the second half starts, you will be unable to view your first half. Basically, you are taking 2 different 125 question exams. Even if you are unsure what the correct answer to a question is, you must enter something before the next question is shown.
Below is a pie chart of what topics and skill sets the exam will test you on:
Source: Investopedia
Tip: want more information on your prospective broker and his past history? Call the NASD BrokerCheck at (800) 289-9999 for free historical records of individual representatives.
Your Credit Score- getting one and improving it
Auto insurance will soon be in your future, if you are not paying your insurance now.
New graduates need to establish their credit to obtain good interest rates on car financing, auto loans, and new home loans. If you do not have student debt, or haven’t used a credit card during your college career, it is important to start right away establishing credit. Apply for a card and buy some things- making sure you pay on time and don’t rack up a high purchase-to-limit ratio.
There are three companies that track your credit score: Transunion, Experian, and Equifax. Each company will usually have a different score for you, but they should generally be around the same. You are allowed one free credit report per year, and to obtain this report contact the Annual Report Requesting Service at:
P.O. Box 105281Atlanta, CA 30348-52811 877 FACT ACT (1 877 322 8228)
Or http://www.annualcreditreport.com/
Factors impacting your credit score:
Source: insurancescore.com
Payment History
Account payment information credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.
Presence of adverse public records (bankruptcies, judgements, suits, liens, wage attachments, etc.), collection items, and/or delinquencies.
Severity of delinquency
Amount past due on delinquent accounts or collection items
Time since past due items, adverse public records or collection items
Number of past due items on file
Amounts Owed
Total amount owed on all accounts
Amount owed on different kinds of accounts (for example, amount owed on credit card accounts versus mortgages)
Number of accounts with balances
Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts- purchase to limit ratio)
Proportion of installment loan amounts still owing
Length of Credit History
Age of oldest accounts and the average age of accounts
Length of credit history
Time since accounts opened
New Credit
Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account
Number of recent “voluntary” credit inquiries
Time since any “voluntary” credit inquiries- credit cards, etc
Types of Credit Used
Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)
Improving your score:
- Pay your bills on time, every time
- If you have a short credit history, don’t open a ton of new accounts too quickly. This will lower your average account age.
- Do rate shopping over a short period of time- the credit reporting agencies will view that as rate shopping, rather than looking for lots of avenues for new credit.
- Keep a low balance on credit cards
- Have credit cards but manage them responsibly
- Apply for new credit only as you need them
- Don’t closed a large number of unused cards as a way to raise your score- a lower overall credit limit can make your purchase to limit ratio lower and adversely affect your score.
Recent Graduates Salary Expectations
Wondering how much money to expect from your first job? It’s an important topic to think about when applying to different positions and figuring out your budget for your first year out of college. What you can expect depends upon your major- some pay well at first, and top out at a certain level unless you open your own firm (like accounting), and others start out low but have higher long-term income potential (like marketing or finance). The National Association of Colleges and Employers recently released data on the salaries of recent graduates, shown below.
Your prospects look good- employers have increased the hiring of new graduates by 17.4% since last year. And good news for finance majors: according to Salary.com, investment specialists and financial planners are both in the top 20 jobs in America. On the happiness scale, they receive a B+ and an A- respectively, and the top ten percent make over $130k. Job growth in the next ten years is over 20%.
So what should weigh into your decision other than the salary? Make sure you consider the benefits package (medical, eye, dental, and life), the work-life balance, and other unusual perks. Even though you should be happy and grateful for a job, don’t be scared to ask if they can “do any better”. Just don’t be rude, demanding, or pretend you have another offer in the works if you don’t to start a “bidding war.”
Here are some of the best companies in America, thanks to research by Fortune magazine:
- Genentech
- Wegmans Food Markets
- Container Store
- Whole Foods Market
- Network Appliance
- S.C. Johnson & Son
- Boston Consulting Grp.
- Methodist Hospital Sys.
- W.L. Gore & Associates
- Cisco Systems
- David Weekley Homes
- Nugget Market
- Qualcomm
- American Century Invest.
- Starbucks Coffee
- Quicken Loans
- Station Casinos
- Alston & Bird
Working for Quicken Loans? A great perk is the company-sponsored bus trips to see the Cavaliers play. Goldmans Sachs employees who get married get an extra week of vacation (investment bankers aren’t all work and no play!).
The most important thing is to examine what is most important to you- money, personal time, security, etc…and then make your decision based upon what will make you happy, taking all benefits and perks into account.
All about REITs
REITs (Real Estate Investment Trusts) are companies that own and actively manage income-producing commercial properties. These include apartment buildings, warehouses, office properties, shopping malls, hotels, storage centers, and health care facilities. Some REITs invest in loans that are secured by real estate. Shares of REITs are publicly available on the stock exchange. The purpose of REITs is to allow investors to invest in large-scale real estate ventures and a collection of diversified properties that they could not normally do. REITs are useful in a diversified portfolio for dividend income, tax benefits, and risk allocation. It is also a liquid investment- unlike trying to sell a warehouse or industrial building, unloading shares of REITs is easy and timely. A REIT is known as a “pass through” investment, because the company does not have to pay corporate taxes- instead, the income is passed to shareholders and they are personally taxed, thus avoiding double taxation.
REITs have high dividend yields- they are required by law to distribute 90% of their yearly taxable income to shareholders. Between 1995 and 2000, the average REIT yield was 7.3% - six times the average yield of the Russell 2000.
The combination of high dividend yields and the capital appreciation of the real estate properties results in total returns on average higher than the S&P 500. (See below)
So how do you compare REITs? The industry standard metric for REIT performance is FFO (Funds from Operation). This measures the performance of the REIT excluding historical depreciation. When looking to buy a REIT, you should compare REITs using this metric. You should also analyze the managers- look for a quality manager that has survived or performed well relative to the REIT market in down cycles. Look for REITs where more than 10% of the ownership is from insiders- if they’re selling, they know something you don’t and you don’t want to buy. Also look for REITs that invest in a large geographic area- it is important for a high-return REIT to be diversified in geographic area and in property type so a long downturn in a specific region won’t devastate your total return.
