529 Plans: Another Way to Save

Recently I’ve been considering ways to save beyond my Roth IRA, workplace 401k, and stock brokerage account (which I don’t consider to be “savings”). In addition, I have a “high yield” savings account with Emigrant Direct, and a Prosper account too (which I’m currently pulling my funds out of). I also have adequate emergeny savings.

What other ways can I save? At the top of my list a 529 plan.

A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.

Now I’ve been to college; I even have my master’s degree. And I don’t plan on going back for my PhD. So why would I want to save for future college costs? You guessed it… those *gulp* offspring I’m not planning on having for at least 10 years. Given how fast college expenses are increasing, it’s safe to argue that now is as good a time as any to start saving for these future expenses. Being from Oregon, I’ve been looking at the Oregon College Savings Plan for all my specifics.

Opening a 529 plan will give me:

• A method of forced savings every month (the minimum contribution is $25/month). At the minimum, I will be contributing $300 a year.
• Oregon State income tax deduction.
• Federal & Oregon State tax-deferred growth.
• No Federal & Oregon State income tax on qualified college expenses.
• The time value of money working in my favor.

 In my opinion these are some pretty good benefits.

The Oregon College Savings Plan has about 15 funds from Oppenheimer and Vanguard to choose from. At the top of my list is the Vanguard Total Stock Market Index Portfolio. This fund has a 0.21% expense ratio and represents roughly 99.5% of the total stock market cap of US stocks.

I feel the long-term benefits of opening a 529 plan at my age will be amazing. There’s so much time between now and when these funds are needed that I can make the minimum investment every month and have significant funds in the account 30 years from now. Plus I’ll see some tax benefits in the near-term. Overall a win-win in my book, which is why I’ll be opening a 529 tomorrow.

New graduates, getting a job and network!

Up the Ladder is aimed at young professionals who are just about to graduate or have recently graduated. With that in mind, it is about that time to start finalizing those offer letters (or to start the process of job hunting if you haven’t!).

Recently I stumbled upon a couple interesting articles that I really think help lay some basic foundation.

Both articles focus on one common theme:

Network network network!

The first article really talks about MBA grads landing their first job in the current market (but in my mind really applies to all new graduates). LINK

For a new graduate networking may be the single most difficult challenge.

1. You do not have a lot of industry experience, yet.

2. You probably have not built a strong professional network because you have been in school studying to land that first job. At least that was true for me. I knew very few people in my current industry.

I think this article really helps talk about the void between your ’social’ college network and starting your first ‘professional’ network. Perhaps forgo the BIG name power company and look at smaller companies.

Another approach that helps land a position during a downturn is to go for a lesser-known company to acquire the desired skills. “Don’t be picky about the brand name,” says Ann Futch, a 2001 grad from Duke University’s Fuqua School of Business, who had a career in investment banking during a downturn. Recent grads will “get a free pass with the caveat that they need to be doing something to keep their skill set moving.”

This can be a very difficult concept especially to new graduates. I know that I ONLY applied to larger corporations in search of my ‘dream’ job. However, after working for a several smaller companies starting out, I was able to work hard and climb up through the ranks fairly quickly. Although the pay may not follow you up the ladder as quickly as your responsibilities, and work ethic, it will. Eventually the hard work does pay off, and if nothing else, you have your foot in the door and should be able to start building your ‘professional’ network.

The second article (LINK) I also like because I know when I was first looking for jobs, I spent countless hours on Monster and CareerBuilder. I have nothing against these websites, I think they are great tools, but they are just ‘tools’ and in my opinion should be used sparingly. Look for other opportunities, such as family, friends, and your university’s career resource center. Eventually head hunters will start coming to you. Keep your resume up to date and always be prepared for that unexpected phone call from a head hunter.

A lot of the points in the second article Christopher and I have both put into action for ourselves. Up the Ladder being a prime example of using our knowledge and passion for finance and our careers to give advice and at the same time promote our brands.

To all the new and upcoming graduates, I do wish you the best of luck! If you are reading this and have any questions or comments please feel free to contact myself or Christopher!

IKEA: Banning the Bag

The first time I shopped at an IKEA, I was surprised to find the bags cost a nickel each. Being the cheapskate I was at the time, I decided to go bagless and cart everything out to my car.

Apparently, the vast majority of IKEA shoppers are in the same boat as yours truly. Since initiating the 5 cent disposable bag surcharge in March 2007, disposable bag use at IKEA has dropped 92%. IKEA will now charge 59 cents for reusable bags, or give you no bag at all. Is this good for business? In my opinion, definitely. IKEA will (1) cut their costs on bags and (2) make their customers feel like they’re doing something for the environment. And since green is in for business, little things like this will help give IKEA the edge.

Forbes on the Most/Least Profitable Businesses to Start

I ran across this interesting article today on Forbes.com. Forbes took a look at 100,000 small companies (revenues < $10M) and examined their pre-tax profits.

Good news for me – accounting services ranked #1 as the most profitable business to start, with an average pre-tax margin of 25%! The theme I got from the top 10 and bottom 10 businesses is to:

1. Keep your fixed and variable costs LOW, and
2. Provide a service that requires some kind of specialized knowledge.

And as always, developing and maintaining relationships is of utmost importance.

VISA is finally here!

Congrats to all of those who were able to nab a few shares as it hit $55 today. As of this post it is trading around $60/share.  Originally priced @ $40/share price was upped last night/late this morning to $60/share. Continue to watch and see how this stock performs. Things should be interesting.

Google Finance for VISA

Bearish VISA article

Bullish VISA article

What are your thoughts?  I am still Bullish on VISA, however, I am not too thrilled on the $60/share price. If VISA comes down around the $50/share price I think then it is a great value.  ~Ian

Fed Cuts Rate by 3/4 point

The FOMC reduced the fed funds rate to 2.25%.  Yay cheap money, boo inflation!

Big Tuesday

Tomorrow promises to be eventful day after this weekend’s fiasco that is the JP Morgan purchase of Bear Stearns for $2 a share. The buyout, in combination with the Fed’s lending rate cut of 25 basis points on Sunday, had serious impact on markets around the globe. Japan ended lower by 3.7% and the rest of Asia is down as well.

Here’s the events that Big Tuesday has in store:

• FOMC meets to discuss interest rates
• Commerce Department reports on housing starts
• Labor Department reports on producer price index
• Adobe Systems (ADBE) releases Q1 results
• Goldman Sachs (GS) releases Q1 results
• Lehman Brothers (LEH) releases Q1 results

The Dow closed flat today, and it’s hard to tell what a mix of results from the above list will do to the markets. My prediction? A full percentage point cut by the Fed will be offset by poor results from the above companies will have the markets volatile but flat once again.

Here comes VISA!

As a follow up to my previous post. Here lies another informational post for Visa. Seekingalpha did a great job summarizing the Visa information here. Remember the company is going public sometime in the coming week 3/17.

Paulson Remarks on PWG Recommendations

Treasury Secretary Henry Paulson remarked today on the President’s Working Group on Financial Markets (PWG) recommendations regarding the recent market turmoil. The recommendations boiled down to more transparency, risk management and regulation. Paulson had the following remarks about the six key objectives:

• One, stronger transparency and disclosure. The challenges of complexity were exacerbated by opacity. The best antidote to opacity is transparency and disclosure.
• Two, stronger risk awareness. Regulators and all market participants must be more aware of and better able to respond to risks. Credit rating agency practices must improve, and the users of their services must rely less on, and appreciate more the limitations of, ratings products.
• Three, stronger risk management. We need improved risk management practices by investors, issuers, financial institutions, rating agencies, and regulators alike. Risk management is everyone’s business.
• Four, stronger capital management. Well-capitalized institutions are better prepared to deal with challenges, foster economic growth and enhance market confidence.
• Five, stronger regulatory policies. Regulatory policies, including capital requirements, must address risk management weaknesses and improve the safety and soundness of our institutions and financial system.
• Six, stronger market infrastructure. Perhaps the best example of innovation is the over-the-counter (OTC) derivatives markets. These markets have grown tremendously; but the infrastructure has not kept up – and it must.

You can read Paulson’s full remarks here and the PWG’s recommendations here. The recommendations are targeted at financial institutions, and I’d like to see consumer education added to the list. In my opinion, regulators take a reactionary approach to market situations like the subprime mess. I feel consumers should always make an effort to protect themselves, and they can do that through education.

Gold and Commodities are UP!

As I posted earlier this week, it looks like Wall Street finally caught up, and realized that the Fed’s proposal to purchase bank debts is not such a great idea. This in turn drove up prices in Oil and in gold. Seeking Alpha had a great visual representation of various commodities.