What advice would I give to college graduates starting off
their careers with enormous student debt?
Perhaps the most important part of the repayment plan is to realize that
“debt” is a four letter word, which the recent grad is undoubtedly grasping
quickly. So it’s important to chip away
at the current debt without piling more on.
The most critical factor to achieving long-term financial
success is to never ever finance current consumption with debt. Never go to a restaurant or purchase a pair
of shoes and pay with a credit card for which you will roll the debt
forward. Note that it is fine to use a
credit card as a convenience, as long as you intend to pay it off at the end of
the month.
While the use of debt must be minimized, I believe there are
two significant purchases in addition to education that can appropriately be
financed by debt. The first is housing
and the second is transportation. Like
education, these are long-term investments, as opposed to short-term
consumption, such as a shopping spree.
The reality is that most people will have to manage a combination of
these three types of debt for the first 20-30 years of their working career.
At this point, you may be more depressed than before you
started reading this post, but a prudent, disciplined budget can create a
successful financial life. The first two
items in the budget are debt service and retirement savings. It’s easy to accept that the debt service
payment is non-negotiable, but I would argue that so is retirement
savings. If you don’t start saving from
day one, when will you? Unfortunately,
for most of us the day never comes when we can save for retirement without
making sacrifices.
Once you’ve committed to these two expenditures the rest of
the budget requires tradeoffs. Look for
ways to minimize or eliminate certain costs.
When you’re young, consider having roommates to defray the costs of
housing. Avoid buying things just
because you want them or because they’re on sale. Buy the things you need. Do you really need that expensive coffee
drink every day? Do you really need that
new car? I drive a 1997 Mercury Grand
Marquis (Big Red or aka Dragnet Car). I
will probably need a new car in 3 years.
Tradeoffs aren’t easy, but remember that when you make a
frivolous purchase today, you are trading your future. At the age of 59, I find that the future
comes sooner than you think.
I have a friend who never made more than $40,000 in any
year, and now, in his 80s, he is a multi-millionaire. He didn’t inherit the money. Like most people, he had a mortgage and a car
loan. But he accumulated his wealth
through a disciplined spending and investing approach.
I view Wall Street as a largely parasitic enterprise that
flourishes at the expense of ordinary investors. Every dollar is fees and
expenses you pay brokers comes directly out of your pocket. I recommend using
basic, low-cost index funds whenever possible.
My plan is simple but not easy; save at least 15% of income beginning no
later than the age of 25, and continuing every year until retirement. This does
not include rainy day funds, a home’s down payment, a car, college, vacation or
wedding. These funds you cannot touch. It is not easy but suck it up and you
will reap the rewards.
HOME IS
WHERE THE TAX ISN’T - Merger-and-acquisition activity continues
to intensify. Medtronic's agreement on last week to buy rival medical-device
maker Covidien for $42.9 billion is the latest in a wave of recent moves
designed, at least in part, to bypass U.S. corporate taxes. Covidien's U.S.
headquarters are in Mansfield, Mass., where many of its executives are based,
but its official home is in Ireland, which is known for having a relatively low
tax rate. Meanwhile, Germany's Siemens and Japan's Mitsubishi Heavy Industries
were close on Sunday to finalizing an offer for much of Alstom's energy
business, potentially entering a bidding war with General Electric for the
French industrial jewel. Google's $500 million acquisition of Skybox Imaging,
which puts satellites into orbit, could have a bigger impact on its bottom line
and on the world than any other recent acquisition by the search giant or its
rivals.
SCOTUS
MAKES IT MESSY FOR ARGENTINA : Argentina's elation after a
win in its opening World Cup match last week was short-lived as the U.S.
Supreme Court on Monday upheld a lower court ruling requiring the country to
pay holders of defaulted debt before the next scheduled payment on restructured
bonds that come due June 30. Officials say the country can't afford to pay both
sets of investors. Bloomberg has an in-depth look at the next steps:
"According to a memo leaked to an Argentine website last month, the
country's attorneys recommended a default and immediate restructuring in the
event the Supreme Court rejected the appeal. Argentina's economy minister last
week raised the prospect of negotiating with the holdouts, a step the country
has previously rejected.
BLINDED
BY SCIENCE - New blood test could detect heart transplant rejection up
to five months earlier than heart biopsy: http://ow.ly/ybVFw
COLLEGE
CHRONICLES – For-profit colleges in the U.S., already
suffering sharp declines in student enrollment, now are facing mounting
pressure from Washington. Industry stocks tumbled at the end of the week after
the Obama administration on Thursday suspended access to federal funds for
Corinthian Colleges Inc., COCO +19.32%
one of the nation's largest operators of for-profit colleges. The move
was part of a federal probe into the Santa Ana, Calif.-based company's
marketing techniques, including questions over whether it lied about graduates'
job-placement success.
The cutoff immediately sparked a crisis for the company,
which warned it may have to close. It was also the latest signal that federal
regulators are getting tough with the industry amid growing concerns about
student debt and college dropout rates.
BIRTHDAYS
THIS WEEK – Birthday wishes and thoughts this week to: Dan Dierdorf (65), Beth Elmore …ULV you should of kept
her as Alumni Director, Juli Inkster (54), Derek Jeter (40), U.S. Senator, D-
Mich. Carl Levin (80), Ross Perot (84), Supreme Court Justice Sonia Sotomayor
(60), Vera Wang (65).
SUMMER BARBECUE – Rink Rats
Barbecued Ribs
Total Time: 2 hr 20 min
Prep: 10 min
Cook: 2 hr 10 min
Yield: 4 to 6 servings
Level: Easy
Ingredients
2 slabs baby back ribs (about 3 pounds)
Kosher salt and freshly ground black pepper
Extra-virgin olive oil
2 bacon slices
4 sprigs fresh thyme
1/2 onion
3 smashed garlic cloves
2 cups ketchup
1 cup peach preserves
2 tablespoons Dijon mustard or 1 tablespoon
dry mustard
2 tablespoons brown sugar
1/4 cup molasses
2 tablespoons red or white wine vinegar
1 teaspoon ground cumin
1 teaspoon ground paprika
Directions
Special equipment: Kitchen twine
Preheat the oven to 250 degrees F. Put the
ribs on a baking sheet, season with salt and pepper and drizzle with olive oil.
Stick them in the oven, and let the ribs bake, low and slow for 1 1/2 hours.
Meanwhile, make the sauce. Wrap the bacon
around the middle of the thyme sprigs and tie with kitchen twine so you have a
nice bundle. Heat a 2-count of oil in a large saucepan over medium heat. Add
the thyme bundle and cook slowly for 3 to 4 minutes to render the bacon fat and
give the sauce a nice smoky taste. Add the onion and garlic and cook slowly,
without coloring, for 5 minutes. Add all of the rest of the sauce ingredients,
give the sauce a stir, and turn the heat down to low. Cook slowly for 20
minutes to meld the flavors. Put some sauce in a separate bowl for basting,
reserving the remaining sauce for serving.
Baste the ribs with the sauce and let them
continue cooking, basting twice more, for 30 more minutes. When the ribs are
cooked, take them out of the oven. You can let them hang out like this until
you're ready to eat.
When ready to eat, preheat the broiler for 5
minutes and broil the ribs, basting with the sauce. They should become crisp
and charred, about 5 minutes on each side. Pick the onion and garlic out of the
sauce and serve with ribs.
SUMMER MOVIE STATS - The Las Vegas
ensemble comedy "Think Like a Man Too" topped a slow weekend at the
summer box office with $30 million, besting blockbuster holdovers from last
week and Clint Eastwood's new Four Seasons musical "Jersey Boys."
The Kevin Hart sequel "Think Like a Man
Too" narrowly edged out "22 Jump Street," which took in $29
million in its second week of release, according to studio estimates Sunday.
DreamWorks Animation DWA -1.88% SKG's
"How to Train Your Dragon 2" slipped to third, with $25.3 million.
The top three films are sequels that moved into
the big box-office summer season following originals that were surprise hits as
springtime releases.
WORDS OF THE MONTH –
crapulous \ KRAP-yuh-luhs \ , adjective;
1. given to or characterized by gross excess
in drinking or eating.
2. suffering from or due to such excess.
“Hastily running across the court to his own rooms, he groped
his way—giddy and crapulous —up the dark and narrow staircase, and, after some
fumbling with his key, opened the door.”
-- Frederic W. Farrar, Julian Home: A Tale of
College Life , 1866
cóctel, noun
1.
Cocktail
2.
Spanish often respells words it’s
borrowed from English to represent how Spanish-speakers say them, and el cóctel
is an example.
“Es mi cóctel preferido.”
- It’s my favorite cocktail.
WORLD CUP WATCH - After a
brutally disappointing tie Sunday night, the United States faces a dizzying
array of possibilities heading into its final match in the World Cup's group
stage. ... The United States advances so long as one of three things happen: 1)
It beats Germany; 2) It ties Germany; 3) Ghana and Portugal tie in their match.
No, avoiding a loss to Germany will not be easy. But the United States has
shown it belongs in this tough World Cup group, and Germany looked mortal in
its 2-2 tie against Ghana (which the United States beat, 2-1).
THE
SWAMI’S WEEK TOP PICKS –
WORLD
CUP – Brazil to beat Spain in the World Cup Final.
Gold
Cup Stakes – Saturday, June 28, Santa Anita Park - $500,000
Grade 1, 3 Year Olds and up.
We like Bob Baffert’s Game on Dude to win.
2014
WIMBLEDON – Serena Williams to win the Women’s Title, Rafael
Nadal to win the Men’s (going out on that limb
J )
2014
Season to date (38-31)
MARKET
WEEK
- The Dow is just 53 points away from 17,000 after another record close. The
S&P 500 is coming off an all-time high. And the Nasdaq is now at its
highest level in more than 14 years. Investors will get a fresh update of the
housing market’s health, with the National Association of Realtors issuing its
existing home sales report for May at 10 a.m. ET. Economists are expecting an
annual sales rate of 4.75 million units, up slightly from April’s 4.65 million
unit rate.
DRIVING THE WEEK - President
Obama today hosts a summit on working families ... Secretary of State John
Kerry arrives in the Middle East to try and build support to block the Sunni
uprising in Iraq ... House OGR has hearings on the IRS and the missing Lois
Lerner emails scheduled for tonight at 7:00 p.m. and Tuesday at 9:30 a.m. ...
President Obama meets with Israeli President Shimon Peres for lunch at the
White House on Wednesday ... Obama goes to Minneapolis on Thursday ... Treasury
Secretary Jack Lew testifies Tuesday morning at 10:00 a.m. before House
Financial Services on the Annual Report of the Financial Stability Oversight
Council. Lew testifies on the report on Wednesday at 10:00 a.m. before Senate
Banking ... House Financial Services has an Ex-Im reauthorization hearing on
Wednesday at 10:00 a.m. ... Existing home sales today at 10:00 a.m. expected to
rise to 4.74M from 4.65M ...
Case-Shiller home prices at 9:00 a.m. Tuesday
expected to rise 0.8 percent ... Consumer confidence at 10:00 a.m. Tuesday
expected to rise to 83.5 from 83.0 ... Third estimate of Q1 GDP at 8:30 a.m.
Wednesday expected to be revised down to -1.8 percent from -1.0 percent on
lower health care spending. The number could even go below -2.0 percent which
would probably create some significant headlines ... Personal income and
spending at 8:30 a.m. Thursday both expected to rise 0.4 percent with the core
deflator at 0.2 percent.
Next
week: Summer concerts, Jack Ass of the Month and Oh Canada.
Until Next Monday, Adios.
Claremont, CA
June 23, 2014
#V-10, 219
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