1. Create a new budget. A new year calls for a new budget. Rolling over an existing budget might be easy, but making changes now is easier than dealing with debt in the future. Have you moved, switched insurance, or added a new family member (child or pet) in the last year? Take into account what changed in 2011 and what you’d like to change in 2012. A pay increase or bonus might leave you feeling carefree, but using that as an excuse to splurge can quickly destroy your old budget. Update your budget (or if you don’t have one, start one) with help from these top five budget sites.

2. Ditch credit card dependency. If you’ve already got your budget under control, then putting the credit cards away shouldn’t be too hard. We don’t usually budget cash for impulse buys, so without cash in hand we often turn to the credit card quick fix for items we want but don’t need or can’t currently afford. The easiest way to eliminate this debt inviting thinking is by leaving your credit card at home. Removing the temptation is one way to break free from credit card dependency.

3. Improve your credit score. Don’t let your credit score surprise you. A bad score can keep you from getting the best interest rates, force you to pay deposits for utilities, or even cost you a job. Check your score, and if it’s below 750 make a commitment to improve your score in the New Year. Check out these tips for how to beef up your credit score.

4. Cut spending on [insert budget category here]. This year make a vow to lower your grocery bill, entertainment bill, or clothing bill. Using coupons (not just cutting them out) and comparison shopping can save a lot more money than you’d think. Search a number of different websites or newspapers for the best deals available instead of buying something the first time you see it. Pricegrabber.com even does the comparison shopping for you. Even small changes like attending the cheaper daytime matinee instead of the pricey Friday night movie can add up to big savings.

5. Grow your savings. Cutting spending is a good goal, but a better goal is to grow the money you’ve saved. For example, that $3.50 you saved saying no to the office Starbucks run once a week is good start, but why not take that $3.50 and turn it into nearly $1,000 after just five years. By investing those saved costs in a savings account you can actually profit from your good behavior. Check out how to build long term wealth with more easy tips.

The so-called “flash sale” discount sites are particularly enticing. A designer bag or new tech tablet is offered in limited quantities, and a timer runs nearby telling you how much time is left. Thinking to yourself, “I’ll never get a better deal,” you quickly make the purchase.

Sounds great, right? Not so fast: Spending more than you normally would, or spending on an item you don’t need (even if it’s on sale) is NOT saving—it’s overspending.

Here are a few tips about how to avoid the temptation to spend on the latest, greatest “flash” sale:

1. How Good is That Deal?

With a limited number of items and a limited time to buy, retailers are capitalizing on our impulse to buy now rather than later. But the deal you’re getting might not even be that great. As the New York Times reports, don’t be surprised if you find those same “exclusive” items on a different site, for less money and without the pressure.

2. Money For Nothing…

In an age of credit card information that’s automatically on file and “one-click” online purchases, sometimes it seems like you aren’t even spending real money. Reality check! The credit card bill is going to come every month, and it’s up to you to keep track of each purchase so you don’t blow your budget. Un-checking that “save my information” box at your favorite online retailer might be just the thing you need for a more frugal New Year.

3. Keeping up with the Joneses

Retailers on these “exclusive” discount sites have taken “Keeping up with the Joneses” to another level—not only can you purchase the new bag that your favorite celebrity is sporting, but you can also use social media to let your friends know about it. The best way to avoid going into debt is to stop keeping up with the Joneses – especially considering that the rich and famous don’t have much of financial track record to speak of.

5MinutesForMom.com

Spinning off Tuesday’s post, the question remains: If you do manage to cut your spending on discretionary purchases, how much money does that help you save every year?

Bills.com has a nifty Ways to Save Money feature that shows you how much your savings can add up if you sock away the money in an interest-bearing account. For example, cutting $5 per week from your grocery bill every week adds up to a savings of $1,300 over five years, assuming a 1 percent rate of return. That’s a fairly simple change that you can make with dramatic long-term results.

One drawback: At the moment, low-risk savings vehicles (like savings accounts and certificates of deposit) are paying peanuts — a fraction of a penny on the dollar in most instances. And Bills.com’s calculator does not allow users to select anything under a 1 percent return, so it may be overestimating how much your savings will compound over time.

But we offer a solution. Punch your estimated savings and the actual rate of return you’re getting in your savings account into our Compound Interest Calculator to play around with more realistic outcomes.

USMint.gov

You’ve seen those commercials on TV that proclaim, “For just 50 cents per day, you can change someone’s life.” And while some of those charities are no doubt worthy, what if the life you could change were your own?

This is not a gimmick. To see how spare change can add up, I was just playing around with Econ4U’s Compound Interest Calculator to see what saving two quarters a day could earn you in the long run. If you sock away 50 cents every day, you’ll have $182.50 at the end of one year. Not bad in itself.

But what if you put that in a basic savings account paying 1 percent in interest?

Well, after five years of continuous saving, you’d have $930. And after a decade? You’re up to a whopping $1,908 — all for saving just 50 cents per day.

No matter how close to the brink you are, just about anyone can scrounge up two quarters by emptying your pockets, keeping an eye on the sidewalk, and checking change-return wells in vending machines. Hey, even the office couch may yield a return.

As they say, a penny saved is a penny earned — and with compound interest working for you, that makes nothing but sense.

SciencePhoto.com

Labor Day marks the unofficial end of summer, and for many teens and young adults, it also means the conclusion of the worst summer for finding seasonal employment in decades.

Our affiliate, the Employment Policies Institute (EPI), has released an analysis of new Census Bureau data showing unemployment among people ages 16 to 19 at or above 20 percent in 35 states through July 2011. Seven states and the District of Columbia were even worse, averaging more than 30 percent. (That should come as no surprise for anyone who spent the summer fruitlessly job seeking.)

In a press release, we delivered the grim news:

“The nation’s teens have just experienced their third summer in a row with an unemployment rate above 20 percent,” said Michael Saltsman, research fellow at the Employment Policies Institute. “As a result, thousands have missed out on the valuable career experience that comes from an entry-level job.”

Unfortunately, just because the school year is starting doesn’t mean that the job outlook is improving for students looking for after-school work. Wage mandates that were theoretically designed to help less-experienced workers earn more money have backfired, locking teenagers out from jobs and making the employment-seeking environment even more hostile to unskilled workers. Lawmakers need to reconsider the broad effects of minimum-wage laws and evaluate how they have affected the very constituents that needed the most help.

MSNBC.com

Last weekend, D.C. Mayor Vincent Gray granted an audience to high-school and college students in the Nation’s Capital to discuss the high teen-unemployment rate. At the beginning of the summer, the Bureau of Labor Statistics reported that teen unemployment had skyrocketed, with half the states showing unemployment rates above 25 percent. Even more depressing, the jobless rate for minority teenagers is 42.1 percent nationwide.

The D.C. government attempted to pre-empt this trend by spending more than $20 million to place 14,000 District youths in jobs at government agencies and local businesses. Still, many young people were left disgruntled at the reality of being unemployed for the summer, leading one 17-year-old to tell The Washington Post: “I think it’s not anyone’s fault. We need to go out there and get jobs, but at the same time, they could come to our schools and make it easier for us to sign up.”

However, we feel that sentiment misses a key economic point. With such a high teen-unemployment rate, the demand for summer jobs has clearly outstripped the supply. Teens who wish to work must show some initiative in pursuing the jobs that do exist, and lawmakers could rethink minimum-wage policies that tie employers’ hands in hiring less-experienced workers such as the young people who attended this town-hall meeting.

Beyond that, there are plenty of ways that teens can stay busy and earn money outside of traditional employment. If you’re looking to drum up a little extra cash before school is back in session, check out our tips post here.

Today’s expert is Mark Perry, a professor at the University of Michigan-Flint, a visiting scholar at the American Enterprise Institute, and blogger at the website Carpe Diem. At Econ4U, we talk a lot about how you spend your money. But where is that money being sent? And is it a bad thing if we’re buying things made in other countries? We asked Perry for three things you should know about the “trade deficit.”

1.     Trade deficits are a positive consequence of cost-conscious American consumers and businesses shopping globally for the best value, quality, and price.

It’s frequently lamented that the United States has a trade deficit with China, Japan, and the rest of the world, meaning we buy more goods and merchandise from those countries than they buy from us. But it’s important to understand that it’s not countries that engage in international trade—it’s American businesses and consumers who actually do the buying and selling.  International trade reflects the voluntary behavior of millions of Americans who have collectively found great value by purchasing products—like iPods, trucks, computers, clothing, and so forth—produced overseas.

2.     The trade deficit as most people understand it doesn’t exist.

It was recently reported the U.S. had a $141 billion trade deficit with the rest of the world during the first quarter of this year (This means we imported $141 billion more in goods and services into the country than we sent abroad). But what doesn’t get reported is that the trade deficit was exactly offset by a $141 billion foreign investment surplus during the first quarter (This means that foreigners purchased more financial assets like U.S. stocks and bonds than Americans invested overseas).  The net result is that America’s total trade with the rest of the world was perfectly balanced in the first quarter of 2011, just like it is in every quarter and every year.

3.     Trade deficits are most often associated with periods of strong US economic growth—not decline.

Researchers at the Cato Institute found that, over the last thirty years, the U.S. economy grew at a healthy annual 3.6% pace in those periods when our trade deficit was growing larger—and an annual rate of only 1.0% when the trade deficit was shrinking. A recent example illustrates the relationship: even though it was reported that the trade deficit was “improving” (decreasing) in 2008 and 2009, America at that time was suffering from one of the worst economic downturns and financial crises since the Great Depression.

Today’s expert is Antony Davies, a professor at Duquesne University and a Mercatus-affiliated Senior Scholar at George Mason University. At Econ4U, we talk a lot about managing your own money—but what about the federal government’s money management skills? We asked Davies for three things you should know about the national debt.

1. The debt is yours. It is tempting to think of the government’s debt as the government’s problem. But remember that every dollar the government receives comes from taxpayers or is borrowed and must be paid back by taxpayers. That means that children today will be paying for today’s debt in the form of future higher tax rates. It’s the same as if your parents took out a credit card in your name and went on a spending spree. It doesn’t matter that your parents are doing the buying — you’re the one on the hook for the bill.

2. Don’t expect the rich to pay the debt. Even if the government taxed earnings over $250,000 at one-hundred percent, it wouldn’t raise enough money to fund its operations — let alone pay down the debt. The debt is so large that the only way to pay it down without cutting spending is to raise taxes at all income levels.

3. It isn’t going to get better. Even if the government pursued the politically unpopular course of raising taxes on the middle class, it wouldn’t raise enough money to pay down the debt and continue operating at its current level. If the government were a household earning $50,000 a year, it would be spending $85,000 a year and (so far) have racked up $320,000 on its credit card. The only way the government can hope to tackle its debt is to dramatically reduce spending –by dramatic, I mean cuts close to one-trillion dollars per year.

Note to Readers: Curious about just how big a trillion is? Click here to find out more.

Today’s expert is Mark C. Schug, a professor emeritus at the University of Wisconsin-Milwaukee and a national consultant on economic and financial education. The high price of a gas is a common complaint, but who’s responsible for those prices? And is that gas station boycott you heard about in a forwarded email really going to help matters?

1. Your local gas station isn’t responsible for rising gas prices. Most economists agree that gas prices are set by the laws of demand and supply.  Local gas stations are “price takers” and not ”price makers”—which means they’re paying the same high price you are. In fact, most retailers are only earning 1 to 3 cents in profit for each gallon sold.
2. High gas prices are painful for your wallet, but they do serve an important purpose. High gas prices are signals to oil producers that demand exceeds supply—which means they need to find more oil and come up new technologies.  Some oil companies are using new technologies in the old oil fields of the Texas Permian Basin; North Dakotans are aggressively developing oil deposits in the Bakken formation. Such new oil supplies may eventually bring oil prices back down.
3. Boycotting gas stations will not reduce the price of gas. Local gas stations are merely reflecting changes in the market—they have no more say over the price of gas that your local grocer or family doctor. What will reduce the price of gas is an increase in supply, which is why some elected representatives have discussed expanding supply by obtaining oil off the coast of Alaska, California, and Florida.

MIT.edu

Should colleges disclose to undergraduates the expected future salaries for people with degrees in their field of study? That’s the major question (no pun intended) posed by Georgetown University’s Center on Education and the Workforce, which compared the median lifetime earnings for bachelor’s degrees in a range of disciplines, from engineering and computer science to English and psychology.

The Washington Post reports:

According to the study, the median annual earnings for someone with a bachelor’s degree in engineering was $75,000. The median wage was $47,000 in the humanities, $44,000 in the arts and $42,000 in education or in psychology.

The individual major with the highest median earnings was petroleum engineering, at $120,000, followed by pharmaceutical sciences at $105,000, and math and computer sciences at $98,000.

The lowest earnings median was for those majoring in counseling or psychology, at $29,000, and early childhood education, at $36,000. Workers with a bachelor’s degree in English language and literature, the most popular major within the humanities, have median earnings of $48,000.

That means that an average B.A. in engineering is worth, salary-wise, up to two or three times what a degree in the humanities is. Not only that, but a recent study by the National Association of Colleges and Employers found that 56.2 percent of graduates with a computer science degree were considering at least one job offer, compared with just 19.5 percent of those with a bachelor’s degree in education.

Without question, the world still needs teachers and scholars in addition to scientists and engineers. But in an era when the average graduate walks away with $24,000 in student-loan debt, making an informed decision about what subjects to pursue should be part of the curriculum for every student choosing to invest big bucks in academic enrichment.