Are the Low Costs of Oil Good or Bad for the United States?

The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog,  LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.

The price of oil has made a recent comeback from its historic lows, but oil is still far cheaper than what it used to be just a year ago. The stock analysts certainly think it’s a big deal, as we hear about the rise and fall of oil on a daily basis, but what is the true effect on the price of oil? Should we be rooting for a continued low price or a high one? Which one is best for our long-term success?

Cost of brent crude oil

Source: Nasdaq.com

 

The Low Cost of Oil For the Consumer

To be completely honest, I have been loving the money savings at the pump each time I roll up. Gas was not really that big of an issue for me before, since I drive a gas-sipping Honda Civic and my drive to work is only about 8 miles, but filling my tank for less than $20 has made me exceptionally happy during these fall and winter months of 2014.

I dare say that you have had the same experience as well. According to the experts, the average American citizen has saved over $1,800 at the pump last year, which is like putting that cash money directly into your pocket. Now THAT’s a nice chunk of change! It is pretty safe to say that this decrease in the price of oil has been an excellent benefit for the consumers.

 

The Low Cost of Oil for the United States

What is good for the consumer is not necessarily good for the United States as a whole. First of all, the United States is the largest producer of oil in the world (seems strange right? But totally true!), so the decrease in oil prices are hindering the domestic oil production companies. Beyond this though, stems an even larger problem for the United States that many are not yet seeing.

While I don’t want to get too technical in this post, I want to help you understand the long-term impacts of this extreme drop in oil prices. We have already established that the falling oil prices has negatively impacted the United States’ oil companies, and it has definitely hurt some, but this one shift is not really harming the overall Gross Domestic Product of the United States. However, it is impacting many other countries that depend heavily on the production of oil. This includes the mid-eastern countries and also our friendly neighbor, Canada.

So what does this have to do with the U.S.? Foreign exchange rates. Yeah, I know, nobody wants to talk about FX rates, so I’ll make it quick. Because so many countries have depended on the price of oil to carry their economies, their currencies has fallen with the reducing oil prices, but the U.S. currency has not, making our dollar much stronger than almost every other country out there. This stronger dollar is great if you want to take a vacation to a foreign country because you can buy more stuff, but what will this do to our nation’s exports? It’s going to halt them completely, because who wants to buy expensive American goods? Nobody.

The future U.S. economy is going to be a struggle with a reduced demand for our exports. From this, many foreign companies selling into the U.S. will likely thrive, but sales from the U.S. to outer countries are likely to suffer.

How about you all? What are your investment plans in 2015 and 2016? Does this analysis impact your thoughts?

Share your experiences by commenting below! 

Who Can Invest in Hedge Funds and Hedge Fund-Like Alternatives?

For the beginner investor, hedge funds can be very intimidating.  Hedge funds are basically a lump sum of money from many investors that gets invested into securities or other investments in hopes of getting positive returns.  The hedge fund can also be described as a “private partnership” between different individual investors that is managed by an individual person (i.e. a money manager).  Hedge funds are set up this way so that in the event the company in which the investments lie goes bankrupt, collectors can’t go after the individual investors for money.

Who can invest in hedge funds?

Investing in hedge funds is no simple task.  It is certainly something that requires a lot of prior research before jumping in head first.

In general, there are a few different ways you can invest in hedge funds, many of which are going to require that you have a lot of assets or a large income in order to invest.

The Accredited Investor

First, most of the time, if you want to invest in hedge funds you need to become an accredited investor.  According to the U.S. Securities and Exchange Commission, an accredited investor is one who:

  • …“earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the two prior years, and reasonably expects the same for the current year” …OR…
  • …”has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence)”.

In addition to individuals that met these criteria, other entities that can become accredited investors are banks, partnerships, corporations, nonprofits, and trusts. In order for any of these entities to be considered accredited investors, they must fulfill these criteria:

  • …”any trust, with total assets in excess of $5 million, not formed to specifically purchase the subject securities, whose purchase is directed by a sophisticated person”….OR…
  • …”any entity in which all the equity owners are accredited investors”.

Note: A “sophisticated person” is basically someone that is highly knowledgeable about investing and about the company in which the investors are putting their hedge funds.

Aside from becoming an accredited investor, you still might not be able to get your hands dirty with hedge fund investing.  For example, hedge fund partners can allow whoever they want into their “circle”, so even if you’re an accredited investor, they can easily say “no”.

Also, even if you meet the requirements to become an accredited investor, you still might not meet the minimum requirements for specific hedge funds themselves.  Some require a $100,000 minimum, which if you become an accredited investor you obviously fulfill, but some hedge funds require upwards of a $25 million minimum investment, so if that’s the hedge fund you want, you won’t be able to invest if you don’t have those kinds of funds.

That’s where Sliced Investing comes in – they are looking to bring lower minimums to hedge funds and alternative investments.

Hedge Funds For The Not-So-Super-Rich

For the longest time, hedge funds were only available to those with significant funds or assets as described above.  However, in the more recent past, other opportunities to invest in hedge fund-like programs have become available for people who may not have the significant cash flow as tradition requires.

Now, these opportunities are not true hedge funds by SEC definition, however, for those people wishing to invest in hedge funds but simply can’t since they don’t qualify to become accredited investors, these similar programs may be a good way to increase their net worth so that one day they may qualify.

Alternative Mutual Funds

Dubbed “Hedge Fund Lite” by the Wall Street Journal and many others, these alternative mutual funds are probably as good as it gets for those people wanting to invest in hedge funds but can’t due to lack of funds.  Similar to hedge fund strategies, these alternative mutual funds use long/short investing strategies.  They allow you to invest in individual stocks that are “going up” and profit from individual stocks that are “going down”.

While these “hedge fund lite” programs don’t require the high performance fees that hedge funds do, they do require annual management fees that can reach upwards of 4% of your assets.

Replicating Returns

Sometimes called “liquid beta” or “replication funds”, replicating returns programs are another way for individuals to invest in a similar manner as hedge funds without requiring the massive income as assets as required for accredited investors.

These “liquid beta” fund programs try to follow a similar path as hedge fund benchmarks by “’backtest[ing]’ their portfolios of stocks, bonds, currencies, and other assets…until they approximately copy the trailing returns of the average hedge fund as tracked by research firms” (Source: WSJ).

Copycat Investing

Copycat investing is basically a way for non-hedge fund investors to act like hedge fund investors.  With copycat investing, you in essence are shadowing the investing behavior of real hedge fund investors and trying to move investments the way you see them moving their investments.  One issue here becomes is that once you get the information regarding what the real hedge fund investors did, it may be too late for you to perform the same action, thus potentially putting your assets in jeopardy of going bye-bye.

Conclusions

Unless you meet the requirement of becoming an accredited investor, which means you have to have a very large income and assets, you can’t truly invest in hedge funds.  However, there are some similar types of investment strategies like the ones briefly described above, that can allow people without significant sums of money to invest in similar hedge fund-like manners.

Disclosure: This blog post was written for Sliced Investing pursuant to a paid content arrangement I have with the company’s representatives as part of an effort to raise awareness about alternative investment options.

Control Your Food Spending with These Tips

money-down-drainThis following is a post by MPFJ staff writer, Jeff. Jeff writes about sustainable living and finances at his website, Sustainable Life Blog. Jeff really enjoys traveling with his wife as much as he can, to wherever he can.

For the longest time, my wife and I couldn’t get our food spending under control. While our food spending seemed to go up and down at times, it was always higher than we’d like. We were never as bad as one blogger who used to spend $600 per month on fast food but we still seemed to spend quite a bit.

The worst part about our food spending is that when our fast food spending would go up, our grocery budget would stay the same – we expected it to go down as we were eating less at home, but it wouldn’t budge. We’d end up spending more money on fast food when we were over-scheduled or too busy, but that’s not a great excuse to spend $200-300 per month – I’d much rather have the money. We had to find a strategy to lower our spending and eventually settled in on a few good ideas that have helped us.

First, we figured out when we were hitting up the local fast food joints – it was mainly non-breakfast meals on the weekend (both days), and weeknights when we didn’t have a meal planned or some protein needed to be defrosted and was not or something like that. Once we identified when we were doing all this extra spending, we were working towards figuring out why were doing all that extra spending – it was simple. We didn’t plan and we didn’t make time to cook.

Get a Crock Pot

Our first step was to start taking the time to prep a few meals ahead. We noticed we were always busy (though self imposed, and we’ve been working on that too). We’ve gotten into a great routine on Sundays where we get both of our crock pots going. One crock pot has a meal for dinner that day (something like a soup) and let that cook all day. Usually if we get it in early enough we can eat it for lunch, but that doesn’t always happen. Since we have 2 crock pots, the other one gets filled with another recipe that I let cook all day and portion it out at the end of the night for lunches for the week.

Whatever is leftover from crock pot 1 also gets portioned out individually for lunches for the week. So with relatively little effort, We have 10+ servings of food for lunches for the week, as well as dinner (and sometimes lunch). This is a great and easy way to save some money and avoid eating out.

Here’s a few simple recipes for the crock pot – Barbacoa & Pulled Pork.

Set a Budget

The most important thing that we did to reduce our spending on fast food and dining out was to go all cash. My wife and I have been using credit cards for all spending (and paying them off every month, of course) but we switched to cash for this category. We set a monthly limit of $50, and at the beginning of the month I go to the ATM and get that amount of cash from our checking account and we set it on the counter. We both decide on when we will use it, and it has worked really well for us so far. We even seem to have more money left over at the end of the month from our $50! We were spending well over $150 before, and now we’ve got leftovers off of $50! So crazy!

If you aren’t sure what amount to budget, look at where you’ve been spending and set something lower than that. It needs to be low enough to make a difference and hurt a bit. Keep cash and stick to your budget and reap the savings.

Plan Your Meals

Our third breakdown was when we didn’t have a plan for what we were going to do for dinner, so we would just default to running out and picking something up quick. That’s not the cheapest option or the healthiest, so we were really working to cut that out. We’ve started planning our meals bi-weekly and have been going to the grocery store once per week to keep up on food. The planning really makes it easy as we go home and don’t have the “what’s for dinner” conversation.

How about you all? Do you plan your meals or budget your dining out expenses? Or what other tricks do you have to keep dining out spending low?

Share your experiences by commenting below!

***Photo courtesy: https://www.flickr.com/photos/59937401@N07/5930043516/

8 Ways to Get a Free College Education Even If Obama’s Free Community College Proposal Fails

The following post is by MPFJ staff writer, Melissa Batai.  Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food.  She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.

If you’ve been to college, you know how expensive it can be.  I graduated from college 20 years ago, and even with a scholarship that paid all of my tuition and fees at a community college for two years AND generous grants when I transferred to a four year institution, I still, after graduate school, left college with $20,000 in student loan debt.  It took me 13 years to pay off that debt.

Now, college is even more expensive, and, unfortunately, out of reach for many perspective college students.  In his recent State of the Union address, President Obama said that he wants every student to have access to a free, two year community college education providing that they maintain at least a 2.5 GPA and take at least a half-time load of classes.

Most experts don’t think this will happen.

Even if it doesn’t, there are still ways that you can get your education for free or at a greatly discounted price.  Keep in mind, not all of these tips are simple, but they all do help you reach the end goal of a low-cost education.

 

Take advantage of a “Promise” opportunity  

Many locations are now offering free college tuition.  For instance, the Kalamazoo Promise offers all Kalamazoo, Michigan school graduates who reside in the district of Kalamazoo County a free college education at a Michigan college or university.  The student must have graduated from a Kalamazoo district high school and must maintain at least a 2.0 GPA in college.  The amount of tuition received is prorated based on the number of years a student attended a Kalamazoo public school.  (If the student only attended a Kalamazoo high school, he’ll receive 65% of his tuition paid.  If he attended K-12, he’ll receive 100% free tuition.)

However, Kalamazoo isn’t the only place offering this type of promise.  All El Dorado High School students in Arkansas are offered tuition in a program very similar to Kalamazoo’s.  In addition, there is the Pittsburgh Promise.  (CollegeSavings.com).

Sometimes an entire state offers free tuition including West Virginia and Tennessee.  What’s interesting about Tennessee’s Promise is that homeschool students are also eligible.

 

Become a resident of the state first

If you have your heart set on attending an out-of-state college, there are ways to overcome the high cost of out-of-state tuition.  If you’re willing to delay starting college, you can move to the state after high school and get a job.  Most states require that you live and work in the state for a year before being considered a resident for college application purposes.  After you’ve met the year requirement, apply for college.  If you’re accepted, you will only pay in-state tuition.

 

Work at the college you want to attend first

Another option is to work at the school that you want to attend.  Many colleges offer tuition discounts to employees.  If you work full-time at the college or university, you may be able to get your tuition for free.

Of course, you’ll still be working full-time while getting your degree, so you likely won’t finish in four year.  You may take as many as eight years to complete your degree, yet when you have it, you will likely be debt free.

Another option is to have a parent work at the university or college so that she can get free tuition for her dependents.  My husband is currently employed at a university, and our plan is for our children to attend the university that he works at so they can get their tuition for free.  Of course, our kids can decide to attend a different university, but we won’t be able to help them much financially.

 

Take advantage of employer-based tuition programs

Another option is to work for an employer that will help pay for your college education.  For instance, if you’re an elementary school teacher with a bachelor’s degree, your employer likely will help you pay for a master’s degree.  There are also many employers who will help their employees pay for a bachelor’s degree.

 

Consider an honors scholarship to a community college

There are many, many community colleges that offer honors scholarships.  I, myself, received one when I attended a community college.  I had to have an interview, write an essay, complete an application, and submit my transcript and ACT/SAT scores.  I was awarded free tuition for two years, which helped me financially.  I hate to think how much more I would have had in student loans if I hadn’t been accepted to this program.

Being in the program gave me the opportunity to take smaller honors classes with a lower student-to-teacher ratio.  In addition, the program, along with my GPA at the community college, helped me transfer to a top university in my state.

 

Apply for scholarships

You may think it’s not worthwhile applying for scholarships because you don’t have a 4.0 or higher GPA.  However, there are many scholarships available, and not all of them are based on grades alone.

You may be surprised how quickly the scholarships can add up, even if they are only for small amounts.  “One mother forced her daughter to apply for two scholarships every day as if it were her job.  She didn’t have great grades, but kept sending applications in—winning enough to pay for the first three years of college alone” (America’s Money Smart Family).

 

Attend a free college

Yep, you read that right.  There are free colleges out there.  Some of them include:

  • College of the Ozarks,
  • Berea College,
  • Curtis Institute of Music,
  • Alice Lloyd College,
  • Webb Institute,
  • Deep Springs College,
  • United States Military Academy,
  • United States Coast Guard Academy,
  • United States Naval Academy,
  • United States Air Force Academy,
  • United States Merchant Marine Academy (US News).

As you may guess, admission to these colleges is highly competitive.

In addition, the old adage “Nothing in life is free” does apply to these schools.  For many of the colleges, students are required to work on campus 10 to 15 hours a week.  In addition, there are sometimes residency restrictions.  For instance, Alice Lloyd College only offers free tuition to students who live in the Central Appalachian service area.

Finally, those who get a free ride to the United States military academies must also serve in the military after graduation.

 

Join the military

If you are interested in the military but can’t get into one of the elite military academies, you can choose to join the military and, as a perk, benefit from tuition discounts or even free tuition.  How much you receive and when depends on many factors.

Another option is to join the military after you complete college.  The Army, Navy, and Air Force all have plans to help you pay off your loans.  For instance, “in the full-time-duty Army, soldiers can qualify to have their loans repaid by the Military at the rate of one-third of the loan for each year of full-time duty served (maximum loan repayment is $65,000)” (Today’s Military).

Even though, in 2012, 7 out of 10 students graduated with loan debt averaging $29,400 (The Institute for College Access and Success), it doesn’t have to be this way.  If you’re willing to compromise on your college choice and take a non-traditional path to college, you CAN graduate without college debt, regardless of the passage of Obama’s free community college tuition.

How about you all? How do you plan to, or how did you, keep your own college costs low?

Share your experiences by commenting below! 

***Photo courtesy of http://pixabay.com/en/dartmouth-college-campus-school-292587/

What Cars Hold Up Best Against Depreciation?

Have you ever wondered why it is that a new car loses (depreciates) 30% of it’s resale value the minute that you drive it off of the new car lot? I mean, after all, the car still has that new car smell, right?! :)

Well, it all comes down to the idea that some people take better care of their car than others, and new car buyers are simply willing to pay much more for the assurance that the car is in “pristine” shape / has not been mis-represented by the previous owner.

Going along with this idea, it is also well established that some cars (typically ones that are more reliable) hold up their resale value much better than others.

Back in 2012, I sold my 2004 Honda Accord (which my family purchased for around $15k new) for $5k to CarMax. We didn’t think this was too shabby since the car was 8 years old!

For future car purchases, it’s good to know which cars hold up their resale value so you can maximize the amount you receive on the back-end of your car-buying purchase when you decide to sell.

A good resource for this researching is Kelley Blue Book’s Best Resale Value list. These selected vehicles are being recognized for their projected retained value through the initial five-year ownership period.

The 2015 model-year brand and category winners of the annual Best Resale Value Awards are shown below. You can hop on over to KBB.com to view the full list.

2015 BEST RESALE VALUE: BY VEHICLE CATEGORY

SUBCOMPACT CAR:  Honda Fit PLUG-IN VEHICLE: Porsche Cayenne S E-Hybrid
COMPACT CAR:  Subaru Impreza COMPACT SUV/CROSSOVER:  Jeep Wrangler
SPORTY COMPACT CAR: Subaru WRX MID-SIZE SUV/CROSSOVER:  Jeep Wrangler Unlimited
MID-SIZE CAR:  Subaru Legacy FULL-SIZE SUV/CROSSOVER: Chevrolet Suburban
FULL-SIZE CAR: Dodge Charger LUXURY COMPACT SUV/CROSSOVER:  Mercedes-Benz GLK-Class
ENTRY-LEVEL LUXURY CAR:  Lexus RC 350 LUXURY MID-SIZE SUV/CROSSOVER:  Lexus GX 460
LUXURY CAR: Lexus GS 350 LUXURY FULL-SIZE SUV/CROSSOVER:  Lexus LX 570
HIGH-END LUXURY CAR: Lexus LS 460 HYBRID SUV/CROSSOVER: Lexus RX 450h
SPORTS CAR:  Chevrolet Camaro V6 MID-SIZE PICKUP TRUCK:  Toyota Tacoma
HIGH PERFORMANCE CAR: Chevrolet Corvette FULL-SIZE PICKUP TRUCK:  Toyota Tundra
HYBRID/ALTERNATIVE ENERGY CAR: Toyota Camry Hybrid MINIVAN/VAN:  Toyota Sienna

 

For me, an intriguing finding of these results is how well Suburu did, earning the top resale value slot in most of the car categories, along with Lexus. Where I live in Colorado, Suburu is considered the “unofficial state car,” and my wife and I will likely purchase one when we go to purchase our next car. It’s good to know they are not only reliable, but also hold up their resale value after 5 years or so!