The Trouble with Public Colleges and State Universities

At the 50,000-student University of Florida, only 50 or so undergrads major in geology.

Pretty key things in this era of climate change, especially in a coastal wetlands state like Florida. But Perfit's department may soon be unable to offer so many courses to non-majors. UF fears severe state budget cuts in May and has warned that it may have to lay off half the geology faculty.

Record applications. Soaring tuition. Tighter budgets. State U. may no longer be as great a deal or as easy a backup as it once was. Parents and kids, time to rethink your strategy.

Peter Laumann, a UF senior active in a student group protesting the cuts, says some of his instructors have asked students to stop submitting papers by e-mail.

But now, just when families most need low-cost, high-quality schools, State U. is under intense financial pressure. Arizona State University will be charging a temporary $510 annual surcharge over tuition to get it through the recession (see editor's note).The University of Washington is bracing for a 26% cut in state money, bringing funding back to where it was a decade ago. Meanwhile, families searching for a bargain have deluged some of the better public schools with applications, making them even more selective.

Their average resident tuition of $6,600, or even the $17,500 charged to nonresidents, still pales in comparison to the average $25,000 at the privates.

If you want to make sure your child gets into a great school, and that you can afford to pay the bill when she does, you're going to have to rethink your game plan.

 

Sources:

By Pat Regnier, Money Magazine assistant managing editor
CNNMoney

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Money Management - Personal Finance Tips For All Ages

Young people get a bad reputation in society these days. Actually, the concept of blaming ills on younger adults is nothing new. Certainly the non-conformist generation of the 1960’s got their fair share of bashing in their day. Nowadays, young adults contend with many stereotypes, some imagined, others that are real and are completely unique to their generation. One of the preconceptions is that they are not responsible with money. In a lot of cases, that notion is true.

Most college graduates leave school with an average of $20,000 worth of school loans saddled to them. Couple that figure with several more thousand from the numerous credit cards they’ve accepted and possibly even a car loan, and some college graduates can feel as though they’ve lost before they’ve even begun. Irresponsibility and indebtedness is common within younger generations, yet that fact doesn’t make the challenges that debt presents easier to deal with. There are, however, some very real ways to manage debt and to prevent falling back into it.

If young adults are already in debt, then the ship has already sailed on preventing themselves from getting into that trap. It is never too late, however to right the ship. Even though a person may be starting in a harder position, they can always learn from their experiences and add those experiences to their money management-personal finance knowledge.

It’s important to note that debt is necessary for most people and that not all debt is bad. For instance, lenders look upon student loans and mortgages favorably as positive debt if the account is in good standing. Credit cards, though useful at times, are the things that get most young people into trouble. Many credit card companies approach people as young as eighteen with credit card offers, often times on college campuses. If a parent or another guardian hasn’t properly taught a young person of the pitfalls of credit card debt, ignorance and irresponsibility could very well be causes that makes a young person indebted. There is no such thing as a free anything!

To prevent young adults from falling into poor money management habits, it’s important to give them money management-personal finance responsibilities early. In addition, an overall financial education is vital to a responsible view of how money flows through our global economy and how it affects their bank account. For instance, opening a low balance checking account, requiring them to get a job and budget and save income can be key learning tools and a good foundation for young people. Fiscal responsibility is essential to understand how money functions as a tool in our society.

Once they’ve reached adulthood, encouraging young adults to continue to educate themselves about money management - personal finance becomes even more important. The doors that open to further indebtedness are just as vast as the doors that open to financial freedom. An understanding of money as a tool and a respect for it will help to make smarter, more financially savvy adults. It's also important to review that how you see money and wealth is a choice. What will happen is that financially savvy adults teach their children to be financially savvy, and it becomes a domino effect. Think of the doors that would open to so many more people if they chose financial freedom versus indebtedness.

Young adults can learn proper money management-personal finance techniques if they are taught early on in life and stay committed to those principles. Once a young person becomes independent, it’s easy for that newfound freedom to turn into irresponsible spending habits. Young people, with help and the proper money management strategies, can become responsible adult consumers and investors.

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Is it time to buy American Express?

American Express is feeling the consumer's pain. In the fourth quarter of 2008 the credit card giant's earnings fell 79% from the year before as consumers spent less, more customers failed to make payments, and charge-offs for unrecoverable debt increased.

Of its four main businesses - including international and corporate credit cards, and expense management - the U.S. credit card business has been hit hardest.

The credit card giant has been hit hard by consumer woes, driving the stock down to 1997 levels.

To adjust, the company has slashed expenses and reduced credit limits for some cardholders. But still, its stock, down 52% over the past year, now trades at 1997 levels.

Is AXP (AXP, Fortune 500) a value at this price? We asked two analysts for the answer.

Bear: Don Fandetti, Citigroup

The first words out of any investor's mouth about American Express are, "They grew too fast from 2005-07." We rate it a hold.

They have more exposure than other credit card companies in hard hit regions like California and Florida. And they tend to service the higher-end consumer. That's where this downturn is different than others. Spending, in particular discretionary spending, is slowing on the high end.

One key is that AmEx did not take a big write-down last quarter. It needs to do that at some point in 2009 to account for higher charge-offs. Charge-offs are going to go up to around 12% in mid-2010, from 8.6% in February.

The other problem is the consumer. AmEx's billings will fall by a high single-digit number this year. In the last quarter it was down 10%. There's going to be an extended period of less spending. And AmEx is very leveraged to spending trends - half of its revenues come from its billed business and the fees charged to merchants when members make purchases. The savings rate already moved up to the 5% range from being negative. The consumer is deleveraging, just like a hedge fund.

One positive is that there is anywhere from $8-$15 of per-share value from the card network processing business. That will support the stock.

Once investors get comfortable with the economy, they're going to want to buy this stock - it's a great brand and company. But it's still too early.

Bull: Robert Napoli, Piper Jaffray

The key, and what people are missing, is that American Express can handle high charge-offs and still generate profits. Historically, it has traded at 20 times normalized earnings. If you believe earnings power is $3 a share when the economy stabilizes - in mid- to late-2010 American Express should be earning at historical levels as we get through this - we're now trading at five times earnings power.

American Express can remain profitable at a 12% U.S. unemployment rate for a full year. It's not easy. But because fee income from its credit card processing business is 80% of revenues, they're much less credit sensitive than other credit card companies like Capital One (COF, Fortune 500), for example. If unemployment goes up 1%, and spending goes down, that has three times the negative effect on Capital One's earnings than it does on American Express's because of all the fee income that American Express generates.

I admit American Express screwed up. It grew too fast from 2004 through 2007. Still, it did not loosen credit to a significant extent. Its customer base is a premium customer base, and its average FICO score has not changed much from prior to the cycle to today.

The economy is not free falling like it was three months ago. So as that $3 earnings power becomes clearer, the more dangerous being bearish on it is.

Also, the company is cutting out $1.8 billion of expenses this year and restructuring. These are permanent expense cuts. I'm not saying it all goes to the bottom line, though it could. Our target price is $36.

Source:
By Scott Cendrowski
Fortune Investor Daily

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Personal Finance Do's and Don'ts

Every single one of us, no matter our location, age, gender, hair color, family background or race has to manage our personal finances.
For some, it’s an exciting passion, a never-ending game of “how much can I accumulate in one lifetime”. For others, it’s just part of life, something that needs to be dealt with but doesn’t border on obsession. And finally, for many of us, personal finance is nothing but drudgery at best and an emotional trigger at worst.

Every single one of us has to manage our personal finances. Fortunately, there are a few simple rules that will help anyone stay on track, and reduce the amount of stress involved when it comes to making sure personal finances are well in order.

Fortunately, there are a few simple rules that will help anyone stay on track, and reduce the amount of stress involved when it comes to making sure personal finances are well in order.

Do get organized: Even if you’re a “messy”, this is crucial. You’ll miss important due dates, pay exorbitant late fees and possibly get into serious debt (or credit trouble) if you don’t have a handle on what you owe and when you owe it. A simple rule of thumb: the messier you are, the simpler your system.

Do draw up a spending plan: Every dollar that comes into your household goes out in one way, shape or form, even if it’s to a savings account. Know where your money’s coming in and where it’s going. Without this information, you can’t possibly make wise financial choices. Overwhelmed by the thought? Ask a financially responsible friend or relative (whom you trust) to do it for you. You can’t argue with success and they can help you make the hard decisions when it comes to having to “trim” spending in certain areas.

Don’t cut out all your fun: Decide, along with your family, what’s most important to you in terms of living a happy life. Then divide up your budget accordingly. If your family really enjoys eating out, plan for it. Just keep in mind you may have to spend a lot less on groceries or clothing. If none of us are the same then our spending plans shouldn’t be the same. If you love to read then cutting back on cable TV wouldn’t be a problem. If you love to watch sports, then cutting back on cable TV would be a serious problem.

Do allow impulse spending: You read it correctly. Unless you plan for a certain amount of miscellaneous, unexpected expenses in your spending plan, you’ll always feel as though you’re blowing your budget when you pick up items you weren’t planning to buy. Just like anything else, give yourself a “buffer”. A side benefit: you get to skip the guilt when you pick up that neat velour Elvis on the boardwalk.

Don’t use your local bank: Unless you absolutely have to. Check out all available credit unions first. In most cases, they’ll have better rates and more friendly policies on everything from fees to lending practices. Each dollar you deposit buys you a share, or membership, in the credit union. So instead of being a customer you’re actually a “member”. Like the ad says, membership has its privileges.

Do use a debit card with protection: Before you use a debit card, make sure your checking account is safe in case you lose your card or it’s somehow stolen. Also make sure you have the right to reverse charges in case merchants don’t provide the goods or services you purchased.

Don’t buy a new car: Considering the fact that new cars depreciate thousands of dollars as soon as you drive them off the lot, can anyone explain why buying a new car would be a good idea?

Do run numbers before every major financial decision: Conventional wisdom works most of the time. But there are always exceptions. For example, in most cases, it doesn’t make sense to borrow from a 401(k). But there are instances where it’s financially beneficial. You’ll hear it preached from the rooftops that you shouldn’t use a home equity loan to pay off credit cards, or that debt consolidation loans are nothing but trouble. But if you’re financially responsible and ran into some tough circumstances, a HELOC or debt consolidation could be a lifesaver. Search online for calculators that will help clarify the situation. Numbers don’t lie.
And finally, perhaps the most important “Do” of all…

Do remember that personal finance is just that personal: Everyone loves to give advice, and everyone loves to share their opinions. What worked for your mom and dad may not work for you. On the other hand, they probably have years of wisdom you can draw from.

Consider your personal finances an extension of who you are and where you’re going. Study the topic, and take the time to develop your own unique strategies when it comes to saving, spending and investing. During this information age there’s never been a better time to find the facts you need, in record time.

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