In 2006, Emily Johnsen, a college student in New York, was hospitalized for stress just a few months shy of graduation. “It was the stress of putting together my master’s thesis, and my financial situation — knowing I was entering repayment for my loans,” she says.
High Anxiety

Over six years of undergraduate and graduate education, Johnsen had taken out $140,000 in student loans, which her grandmother co-signed against her mother’s wishes. After Johnsen earned her master’s degree from a prestigious arts program at New York University, she assumed she’d make the median salary cited by the school’s financial aid counselor — $65,000. Instead, she couldn’t find a position in her field paying more than $30,000.

Johnsen, 26, has both federal and private loans. She put them on forbearance twice, and has now exhausted all the forbearance offered during the life of the obligation. “The interest is capitalized at the end of each forbearance period, so at the end of two years there was an additional $20,000 to $30,000 on top of the loans I took out,” she says.

Johnsen recently started a new job as a media assistant at a New York art gallery that pays $35,000 — or just over $1,800 a month after taxes. On Sept. 1, she begins a 15- to 20-year repayment plan. For the first two years, her payment is $527 a month. “Then it increases to 900-something,” she says. “By that time I’m hoping to be able to further myself with the company.” She still takes medication for anxiety and depression.

A Subprime Education

It’s time to banish the notion that all student loans are “good” debt. These products unquestionably offer the opportunity to boost one’s career — college grads make 60 percent more than those with only a high school diploma. But the changing nature of the private student loan industry — which in recent years doled out dollars with the enthusiasm of subprime mortgage lenders — makes it critical for students to assess the risk, and borrow with a realistic idea of future earnings potential. In fact, these loans are worse than subprime mortgages, because they can haunt the borrower for life.

During the 1990s, average student loan debt doubled. Two-thirds of graduates now leave school in the red, with average borrowing of $21,000, according to the Project on Student Debt. Ten percent of graduates from four-year, private, nonprofit institutions had debt of $40,000 or more.

Private loans, which typically carry higher interest rates than federal loans, have grown at an average annual rate of 27 percent in inflation-adjusted dollars since 2000-2001, according to the College Board. Private loans comprised about one-quarter of the student loans made in 2006-2007 — up from 6 percent a decade earlier.

Risky Business

“Federal loans offer fixed, low-interest rates and a lot of borrower protections in repayment,” says Lauren Asher, associate director of the Project on Student Debt. “Private loans have limited consumer protections and variable interest rates that can go very high. It’s a little like going to a payday lender — you’re paying a huge amount to get cash, and that can follow you through your whole life. They can be even more risky than credit cards, because private student loans can’t be discharged in bankruptcy.”

Some 54 percent of students polled in 2004 said they would have borrowed less if they had to do it again — up from 31 percent in 1991, according to the Project on Student Debt.

While Johnsen is an extreme example, consider what happens to the 10 percent of students who leave four-year private institutions with $40,000 in loans. Let’s say the graduate earns the 2006 median income of $46,435 a year — or $3,382 per month after taxes. I asked Mark Kantrowitz, founder of FinAid, a college information website, to create a few scenarios contrasting public and private loans, paid back over different periods of time.

By the Numbers

The borrower who repays his loans over 10 years will face a monthly bill of $460 to $551, or 13.6 to 16.3 percent of his income. (See the tables below.) The borrower who repays over 25 years will pay $278 to $392 a month, or 8.2 to 11.6 percent of his income. The private-loan borrower who pays back his debt over 25 years will pay nearly twice the amount of the loan in interest.

All Public Loans,
6.8% Interest Rate Monthly Payment % of Take-Home Pay Total Interest Paid
10-year Repayment $460 13.6 $15,239
25-year Repayment $278 8.2 $43,288
All Private Loans,
11% Interest Rate Monthly Payment % of Take-Home Pay Total Interest Paid
10-year Repayment $551 16.3 $26,120
25-year Repayment $392 11.6 $77,608
Note: The federal Stafford loan has a 10-year repayment, but the term can increase to 12 to 30 years if the borrower consolidates and chooses extended repayment. Private student loans tend to have 20- to 25-year terms.

“Ten to 15 percent of income is typically considered affordable,” Kantrowitz wrote me in an email. “So $40,000 in debt is within the range of affordability, although one would probably need a 20-year term on a private loan to make it affordable. But do you really want to still be repaying your own education debt when your children are about to enroll in college?”

read more: laura rowley

If you had a growing concern over out-sourcing and almost every single product you buy being made in China, the trend is only getting hotter. The newest phase will include cars made in China. At least eight cars made by Chinese companies, so far unfamiliar to the American market will soon make their way to the US. Will they compete with standards of US, Japanes, and European cars? Probably not, but they will be more financially attractive. Good news is that in order to be part of the US market, they will have to stick to safety regulations.

Acquiring an established brand might be the easiest way for Chinese companies to get a foothold with upscale U.S. car buyers, because in that segment perception trumps reality, experts say, and even five or 10 years down the road, the idea of a Chinese-branded luxury car made in China might be too tough of a sell with those shoppers.

“The public will buy most brands that are sold to and managed by other companies no matter where they’re located, so long as they maintain the same ’shape and feel’ to the product,” R.L. Polk’s Miller says. “The question here is whether the consumer will look under the hood and see a lot of Chinese script on the engine, or are they going to be able to tell that it’s still a Volvo?”Forbes

Rates for late-model crossovers are dropping fast. Kelley Blue Book helped us search out the biggest bargains.

2006 Mercedes-Benz R-class

Courtesy: Daimler AG
6-month value drop: $6,275

Est. private party value: $22,250

Mileage: 22 mpg Hwy, 16 mpg City

It’s no secret that used SUV prices have been collapsing as gas prices have shot up. But now prices are dropping for used crossover SUVs, which get better mileage, but are still thirstier than cars.

Some of these crossovers — SUV-like vehicles with smaller engines and car-like engineering — have been on the market long enough so that redesigned versions are out. That also means big discounts on the old versions.

We worked with analysts at Kelley Blue Book to find a few gems that this pricing drop has unearthed. If you’re in the market, this could be a great time to pick-up a relatively fuel-efficient used crossover.

Check out the Mercedes-Benz R-class. In just the past 6 months, values have dropped by $6,275. That reflects the trouble the R-class has had finding its niche in the American SUV market.

“There has been such a proliferation of vehicles in the Mercedes-Benz line-up that the R-class has taken a hit,” said Jack Nerad, managing editor of Kelley Blue Book’s KBB.com Web site.

Longer and lower than its close relative, the M-class SUV, the R-class looks a lot like a minivan with van-like spaciousness. But inside you’ll find the opulence you expect in a Mercedes-Benz SUV.

2006 BMW X5


6-month value drop: $7,162

Est. private party value: $36,960

Mileage: 21 mpg Hwy, 15 mpg City

When BMW engineered the X5, the automaker didn’t want to damage its legendary reputation for driving enjoyment. The X5 manages to keep BMW’s brand character unblemished with decent interior space and practicality to boot.

Besides the general decline in crossover values, the X5’s price plummet probably has something to do with the recent introduction of a newer, more powerful version.

The introduction of a redesigned vehicle almost always leads to a steep drop in the value of used versions of any given model, which has created a real buying opportunity here.

2006 Infiniti FX45

Courtesy: Nissan Motor Co.
6-month value drop: $6,162

Est. private party value: $27,734

Mileage: 18 mpg Hwy, 14 mpg City

Like the BMW X5, used FX45’s are getting hit by competition from Infiniti’s recently introduced FX50. With a different-looking new version out there, used FX45 buyers can no longer pretend they just bought a brand-new vehicle.

The FX45 may also suffer from its unimpressive fuel economy figures. There are larger, roomier SUVs out there that go farther on a gallon.

Nonetheless, FX45 buyers get sharp-looking design and an engaging driving experience.

2006 Acura MDX

Courtesy: Honda Motor Co.
6-month value drop: $6,036

Est. private party value: $22,177

Mileage: 23 mpg Hwy, 17 mpg City

The Acura MDX benefits from parent company Honda’s well-earned reputation for reliability.

But, again, a new, improved version is pushing down prices of the now old- seeming last-generation MDX.

That just means you’ll pay even less for a vehicle that gets very good fuel economy for a seven-seater, while earning top-notch crash-test ratings all the way around.

2007 Cadillac SRX

Courtesy: General Motors
6-month value drop: $4,493

Est. private party value: $22,641

Mileage: 24 mpg Hwy, 16 mpg City

Like the Mercedes-Benz R-class, the oddly shaped SRX has suffered from a lack of understanding.

“That’s a vehicle that, I always thought, looked a little awkward, but, man, I like the way it drives,” said Jack Nerad, managing director of Kelley Blue Book’s automotive data Web site KBB.com.

The SRX offers the interior space of a mid-size SUV with the handling of a large luxury station wagon.

2006 Volvo XC90

6-month value drop: $4,332

Est. private party value: $28,958

Mileage: 23 mpg Hwy, 17 mpg City

The XC90 was redesigned for the 2007 model year and got a more powerful engine, but the old 2006 model got slightly better fuel economy.

As expected from Volvo, the XC90 also has outstanding crash-test ratings and electronic stability control is standard equipment.

2007 Kia Sportage

6-month value drop: $4,334

Est. private party value: $13,287

Mileage: 28 mpg Hwy, 23 mpg City

Kia and its Korean sister-brand Hyundai have long suffered from poor resale value. If you own a Hyundai or Kia, that’s bad. On the other hand, if you’re shopping for a used vehicle, it’s all the better.

Visit the Loans Center
Hyundai and Kia offer some outstanding, safe and fuel-efficient vehicles that you can buy cheap from the used vehicle lots at your local dealer.

The Sportage and the largely similar Hyundai Tucson are just two examples. Both are nice to drive while offering excellent fuel economy and crash safety.

2005 Toyota Highlander

6-month value drop: $3,457

Est. private party value: $15,928

Mileage: 27 mpg Hwy, 22 mpg City

Last year, Toyota rolled out the newer, bigger Highlander. That’s put additional pressure on the prices of used Highlanders, which don’t offer the comfortable third-row legroom of the new ones.

Toyota’s strong reputation for quality and fuel economy means that, even in this market, Highlander prices are holding up relatively well. But used models are still a real bargain.

You get a smooth, car-like ride and handling, excellent crash safety and outstanding fuel economy.

Ford Escape

6-month value drop: $3,185

Est. private party value: $15,770

Mileage: 29 mpg Hwy, 24 mpg City

The Ford Escape has always been a popular crossover SUV. For the 2008 model year, Ford introduced a “re-skinned” version. It then introduced more significant upgrades for the 2009 model, which is just now hitting showrooms.

That means prices are getting pushed even lower for the now ancient-seeming 2007 Escape. Even in the non-hybrid version, car-like fuel economy remains a high point.

2007 Suzuki Grand Vitara

6-month value drop: $2,726

Est. private party value: $12,573

Mileage: 23 mpg Hwy, 18 mpg City

When it comes to vehicles with four wheels and a roof, Suzuki suffers from an unfortunate lack of brand recognition. When you say “Suzuki,” what comes to mind for most consumers, is a motorcycle.

But for used car buyers, that means low prices for the company’s cars and SUVs, which have become quite competitive.

In this case, the handsome Grand Vitara, surprisingly rich in amenities and featuring a powerful V6 engine, looks like a steal at for something as new as a 2007 model.
CNN

What’s left after the smell of brand new leather is gone from your new car? The answer could be that the only thing missing is a nice couple of thousand dollars. Cars are the one product that unless you’re talking about a classic, older does not mean higher value and a higher networth on your assets sheet. Laura Rowley, a financial advisor gives us the facts:

If the idea of saving thousands of dollars is more thrilling to you than that new-car smell, you’ll find your heart’s desire in the used car market. A wider pool of quality used cars, and progress in Internet search functionality, have vastly changed the buying experience.

In 2007, roughly one in four buyers of late-model used vehicles relied on an Internet vehicle locator or online classified ad service to find the auto they purchased. That’s a 44 percent jump over the previous year, according to a study by J.D. Power and Associates.

And there’s no beating the price. “People don’t think of depreciation as an out-of-pocket cost, but it is,” says Philip Reed, senior consumer advice editor at Edmunds.com and author of “Strategies for Smart Car Buyers.” “There’s a steep drop off in [value] in the first year, and 30 percent depreciation by the end of the third year.”

For example, Edmunds looked at the Lexus GS 430 and GS 450. “The first-year depreciation on the new car is $14,000; if you bought a two-year-old model, the depreciation is $3,000 in the first year of ownership,” says Reed.

When you take the time and effort to do things yourself instead of being ripped off by a quasi-professional you accomplish three things: Save money, feel more confident and accomplished with yourself, and create another whole dynamic to yoursef. The truth is that anyone with the right tools and just a little bit of training can do anything. It all just depends on one thing: whether or not you believe in yourself.

Blow Dry Your Own Hair

This applies more to women- if you’re constantly paying over $30 just for a blowdry for every event that can add up to serious money over time. (especially if you’re in that friends’ weddings stage, or have many formal events to attend.) Buy a good blow dryer, a few clips to pin up your hair- and wallah- you’re set to go.

Just another tip which can also save you tons of money- Go to a beauty school to get your hair done. If you periodically dye your hair, relax it, or Japanese straighten it, this is probably the best idea. A Japanese straightening can come up to $800, and in a school it can be free. If you’re nervous about people messing up your hair, don’t worry, the schools won’t let that happen. The teacher will always redo the student’s job.

Fix Your Own Car

Learn more about the vehicle you own. Learn about all the oils and know which oil goes where and where your coolant goes. This way if you feel you need brake fuel, or whatever the case may be, you can walk into any hardware store, buy it and fill up the car yourself instead of paying someone else to do it.

Even if your car needs a repair that isn’t so minor, know about your car, so that when you do take it into the shop you can tell whether you’re being ripped off. Many times pipes and radiators can be welded instead of being replaced. Knowledge is power. Being a little knowledgable about your car can go a long way.

Dry Clean Your Own Clothing

How do I do this is probably the question you’re asking about this. Many times the solutions sold to put onto clothing stains actually do work. Use your judgement in deciding which clothes are worth taking to the cleaners- e.g. your tuxedo- and which ones are O.K. to do yourself.

Another tip- most dry clean clothes can be put into a washer with cold water and then hung to dry. If your washing machine does not have a setting which doesn’t wring out the clothing then take out the clothes a little bit early and hang them so they won’t be wrinkled.

Make Your Own Food

Even the fanciest foods always have simple recipes that can be made in your own kitchen. Grocery shopping is basically the key here. The difference in cost of buying your own raw ingredients instead of eating out is enormous. Just throw some rice or noodles into a pot, add some spices, serve it with vegetables, and you have a gourmet meal. It’s really not a big deal.

Drive Less

Don’t drive a car when you don’t have to. Walk, take the bike, or take a bus. This also will help our environment and may be better for your health. Is it really necessary to drive to the store that is only a few blocks down the street?

Get a credit card

Some credit cards offer gas savings when you use the card for purchases. But watch for interest rate charges. Also check whether the station charges a higher rate for using a credit card to see if it’s worth it.

Get a new air filter

More efficient brands of air filters will pay for themselves in most vehicles in fuel savings.

Get Low Resistance Tires

There are tires, such as Michelin Energy MX 4 Plus, which are supposed to increase gas mileage.

Get a membership card

Some gas stations offer membership benefits. Make sure you understand the benefits; getting a 10-cent discount on gas that consistently costs 20 cents more than the next guy doens’t save much money.

Give your car a tune up

Properly maintaining your car won’t save you money at the pump, it will save you gas. Using less gas saves you money. Have the oil changed, and have a certified mechanic give your car a check-up. Better maintained cars are more fuel efficient.

It is commonly said that housing needs shouldn’t take up more than one third of a person’s income. While this in principle should be true, many people with hindsight are paying even more than the recommended percentage. 33% may be the average recommended percentage, but ideally, for someone who really wants to enjoy life the above advice is way too old fashioned. Who wants to spend their life in debt to the bank- which is essentiall what most home ownership is about- for a longer time than necessary?

The trick to getting out of a life-time of mortgage payments and to really enjoy your life without the number one
most annoying bill of the month is to pay off your mortgage early. Paying off your mortgage earlier can mean a saving of tens of thousands of dollars in the long run. Remember, the longer you pay, the more interest you will pay.

ThisIsMoney explains why you should overpay.

Say you have a £100,000 mortgage taken out over a 25-year period, with an interest rate of 6%. Overpaying by £100 a month could save you a healthy £27,039.37 and knock more than six years off the life of your mortgage. (Use This is Money’s calculators)

However, with some lenders there is a minimum amount you are allowed to overpay. If you pay in less than this, your money sits in the lender’s coffers until the end of its financial year, which means you are giving it an interest-free loan.

If you pay more than the minimum, your interest bills will be recalculated from the following month.

Some firms offer flexible or ‘offset’ mortgages that recalculate your balance daily. The effect is to help you get rid of your loan even faster and people can take advantage of this by paying extra every month.

Many High Street lenders have given normal loans flexible features, although some set minimum or maximum amounts you can overpay.

The 2000 study by Ventis and Wises title, “Choice, Chance, and Wealth Dispersion at Retirement,” revealed a wide range in how much people at the same income level were able to save for retirement. The study proved that how much people saved had nothing to do with the amount they earned. In fact, some people in the lowest income groups were able to save $100,000 more than people in higher income level groups.

The conclusion of the study was that people who chose to save more money and spend less throughout their lifetime, regardless of their income level, had more money for retirement. Tahira Hira, a professor of personal finance at Iowa State University who has spent more than 25 years studying people’s spending habits, agrees with this conclusion and offers her own tips.

Hold the mother of all garage sales.

Cast a critical eye on the stuff at the way back of your closets. If you haven’t used it in six months, chances are you can do without. Same goes for all that junk in storage. (See “The hidden costs of too much stuff.” ) Annual savings? Depends on how much junk you have, of course, but one coworker guessed he had at least $5,000 worth of stuff he could get rid of. I’d put my own garage sale potential down at around $1,000. Thats a good number.

Quit smoking

Pack-a-day habit? In Washington state, that’s easily $5 a day — or about $1,800 a year — that can go right into your savings, not to mention what it saves you on insurance and health care.

Tame your driving addiction

In other words, carpool or use public transportation. This saves on gas, insurance and maintenance costs — not to mention any money spent on aspirin. Using the IRS’s 2002 mileage reimbursement rate of 36.5 cents per mile as a proxy for the cost of commuting, you could save $1,141 a year by driving half the time for 50 weeks a year (based on a 25-mile roundtrip commute). For an even more drastic approach, consider getting rid of your car if you live in the city. Some cities are now implementing progressive programs that allow you to have access to a car without the ownership hassles (e.g. “Flexcar” in Seattle, Portland and Washington, D.C. For more on Flexcar, see link at left.)

Buy used.

The average consumer spends about $1,750 a year on clothing and its upkeep, according to the U.S. Bureau of Labor Statistics’ most recent Consumer Expenditure Survey. You can potentially cut that in half by shopping at consignment shops and auctions, though the life of the goods may be less than buying new. To account for that, the annual savings may only amount to 25%, or $437.

Become a homebody.

At just over $1,800 a year on average, entertainment spending has a way of quickly eating through the best-planned budgets. Consider the library for books, music and movies. Eat out less often. The average person spent $2,276 a year on eating out in 2002. Try cutting your spending in half on both areas for annual savings more than $1,900.

Cut your housing expenses.

While a move across the tracks may save some money, moves are expensive in themselves. Consider renting out a room. The average housing costs per person in 2000 were just over $13,200. In metropolitan areas such as Seattle, rooms easily go for $400 a month. Figure about $20 of that goes to increases in utility costs, and you’ve still got an annual savings of more than $4,000 before any income taxes.

Cut up your credit cards.

Build an emergency fund first to handle most unexpected expenses. This allows you to become your own lending agency. (OK, if you’re chicken, try cutting up all but one.) Credit cards can be a cash-flow management tool, but paying only the minimum will keep you in debt for years. If you’re the average American with at least one credit card, you probably have close to $8,523 in credit card debt, according to industry research group CardWeb.com. At an average APR of 14.4%, it could cost you as much as $1,100 a year in interest alone. By simply waiting until you’ve saved enough money to make purchases, you could eliminate those interest payments entirely.

If you’re really are committed and follow all the above tips, you could be saving nearly $12,000 a year. Sounds pretty cool, huh?

This can be greatly helpful in avoiding the impulsive and silly purchases of things you hardly ever use. Before you buy something, especially with expensive items, rent one, borrow one, or try one out before you purchase. This way you will kow if you are not satisfied with it, or determine that it really is not something you needed before you buy it.

Example: You feel that you absolutely must have a new motor scooter, at a cost of $4500 (and that is before financing and taxes). You go to the bike path, rent one, and 45 minutes into a one hour rental you are saying, “gee, this is a long hour.” Saved: More than $4500.

Have you ever heard yourself say, “I have no idea where all that money went?” Chances are, if you’re like most people, you’ve made this statement plenty of times.

One way to avoid going broke before you can even recall where the money went is to carefully read through your credit-card statements, staying on the lookout for ongoing monthly fees that you may have forgotten about and get a general feel for what you’re over spending on and what you can cut back on. In addition, cancel any club memberships you don’t use and magazine subscriptions you don’t read.

The next step is to pay yourself first. If it seems like all the money you make falls straight through your fingers and gets gobbled up by bills and other expenses, think hard about a reasonable amount you could start to view as another monthly bill. Start putting that money away for yourself, pronto. This way you won’t feel deprived when you start cutting back.