financial_advice:finances

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=====Finances=====



====Savings====

Here's something everyone should do.  Internet savings and checking accounts can yield 3-4٪ on small holdings, which is much better than the <1٪ most brick-and-mortar banks give you, and offer other perks, too.  For instance, [[http://home.ingdirect.com|ING Direct]] and [[http://us.etrade.com/e/t/jumppage/viewjumppage?PageName=CSAlanding|E*Trade Financial]] offer > 3٪ on savings accounts, and the [[http://www.salemfivedirect.com/|Salem Five EOne account]] yields > 3٪ interest on small holdings, offers free bill pay, and refunds ATM fees ([[http://www.bankrate.com/brm/rate/mmmf_highratehome.asp?params=US,416&product=33&sort=2|Bankrate]] maintains an updated list of the highest-yielding savings and checking accounts.).  These accounts usually allow convenient electronic transfer to your local bank account and are FDIC insured.  There is no reason for money to sit in a low-yield account when it could be earning interest if you won't need it right away.  It's not much, but over your graduate career it can add up to a few rent payments.  Any time you have more than a couple hundred dollars just sitting around, waiting to go toward rent or something, toss it in the savings account.  

====Credit Cards====
Credit cards are great.  Some grad students use theirs all the time for any purchase they can, including all travels to telescopes, rental cars, and conference hotels.  Some credit cards have no annual fee, give you frequent flier miles for your purchases, and, if you always pay your balance in full, you'll never pay any interest.  You should set up an automatic payment plan for the minimum monthly payment in case you ever forget to pay your bill so you never pay late fees.

Of course, credit cards companies are evil, too.  They're predatory and their interest rates can be right up against legal usury limits.  If you ever find yourself with a balance make paying it off your number one financial priority.  No investment you can make will reliably pay as well as paying off credit card debt -- it's 10-20٪ annually, guaranteed.  

If you find that you have so much credit card debt that you're having a hard time paying it off, you might consider taking out a low-interest student loan and consolidating your debt (see below).  If you need more detailed advice along these lines, [[http://www.debtadvice.org/takethefirststep/compinfo.cfm?agency_id=10181|consider credit counseling]] from an accredited, non-profit credit counselor.


====Credit Report====
Know your credit score.  You have a legal right to a free credit report, and for a few dollars you can get your score, too.  Get your [[http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre34.shtm|free credit report]], and understand everything in it.  You'll feel more in control of your financial health and have a better grasp of what constitutes good credit.  Credit scores are important for determining things like the interest rate you'll get on a loan for a car or house, but their [[http://money.howstuffworks.com/credit-score.htm|calculation]] can be arcane.

The best and most obvious thing you can do to get keep a good credit score are to always pay all of your bills on time.  Less obviously, people with no credit history are considered bad credit risks, so one of the best ways to get improve a good credit score is to get a credit card.

If you don't have a credit card yet, get one and never carry a balance from one month to the next (but use it!).  If a department store offers you a store credit card at the register, go ahead and sign up (department cards are considered a different kind of credit, so they can help even more than a second bank card).  Don't get carried away, of course;  having 10 cards will probably hurt your score.  Some say that the sweet spot is 3-6 cards, but a lot of voodoo goes into credit score calculations, so take it with a grain of salt. 

In addition, the longer you (responsibly) hold a credit card, the better your credit score will get.  So don't close old credit card accounts!  Applying for new cards lowers your average credit card age, so getting a fourth credit card just to show you're a responsible user of credit might not help much.

====Student Loans====
{{financial_advice:cal.jpg}}Should you pay off your student loans?  It depends.  If your loans are all subsidized, you won't pay or accrue any interest until you're out of school for 6 months.  That means that if you have enough money to pay them off, you can instead put that money into a [[financial_advice:glossary#cd|CD]] and earn interest on it before you use it to pay back the bank.  There, it can constitute a "rainy day" fund: if you ever need money in an emergency, it's there, and in the meantime it still earns interest.  CDs are good for this purpose because they're hard to raid, so you're unlikely to be tempted to spend the cash for a non-emergency.

{{financial_advice:cal.jpg}}If the interest on your loans is due, though, you might want to pay them off.  You should weigh the cost of paying them off versus the good you can do with that money now.  Along these lines, Máté Ádámkovics [[financial_advice:mate|advises us to take out additional student loans]] (don't worry, [[http://www.nytimes.com/2007/11/18/magazine/18wwln-ethicist-t.html?ref=magazine|it's completely ethical]]).
Trace: • day8 • day5 • retirement
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