The Problems with Investing for Others
You may think that investing for someone else is just a way of helping out a friend, but the thing is, when you start investing for other people, particularly your friends, you enter a world of complications that you might not have foreseen when you started out.

Legal Matters
Managing a friend’s money is a sticky business and if you go through with it you may be breaking the law. Investment professionals must be registered with the Securities and Exchange Commission or have a federal license. They are heavily regulated by the government and by trade organizations like the National Association of Securities Dealers, for the protection of consumers. If you invest for a friend for compensation, you could be breaking laws that are in place to protect investors from people who aren’t qualified to have discretionary control over others’ accounts.

Short End of the Stick
Despite the drawbacks, investing for friends isn’t always doomed to failure. With skill, smarts and a whole lot of luck, you might rake in the cash. If that’s the case, you still have to consider whether or not your friend is taking advantage of you. Helping out a friend is nice, but when that help consists of making significant amounts of money for that person and getting little or nothing in return, you might be suffering from an off-balance relationship.

Unrealistic Expectations
That friend of yours, the one who thinks that your 35% returns this year are going to happen next year as well, might be in for a nasty surprise when your picks make next to nothing. When you invest for friends, you have to deal with unrealistic expectations that can really put a damper on a relationship. If your friends wants you to invest for them, they likely don’t understand all of the risks involved with investing, including not quite meeting the investment goals that they may have been projecting.

Losing a Friend’s Money
Not meeting a friend’s investing expectations could jeopardize your friendship, but falling short of your friend’s projected returns could be a best-case scenario. When things go wrong, making some money is a lot better than losing money, which isn’t an abstract concept for anyone who invests actively. When you bring money into a relationship, things can get uncomfortable pretty fast, especially when that money is hemorrhaging out of an investment account. Do you tell the friend to suck it up? Do you repay the person out of your pocket? Do you try to make up the difference with new picks? Really, there probably isn’t a good way to deal with losing a friend’s money and you should consider this risk before you agree to invest for anyone.

When we shopped for two dozen smart phones we recommended at 12 retailers in the San Francisco Bay area last October, the carrier stores for AT&T, Sprint, T-Mobile, and Verizon had the highest prices for more than three-quarters of the phones. We’ve found phones to be especially inexpensive at Costco. But you may not find the exact model you want there—or at any retailer for that matter. All retailers don’t sell phones for all carriers, and all models might not be available everywhere.

2. Consider a low-priced carrier. It’s not easy to compare carriers’ plans across or even within carriers, because their buckets of minutes, messages, and megabytes differ. But you can find competing plans that are similar enough to give you an idea of their relative value.

When we compared 100 plans to similar alternatives in 21 matchups covering the full spectrum of plans, both prepaid and standard, Consumer Cellular came out on top. It had the best deal most often—in more than one out of three cases. The next-best deals, in order, were from T-Mobile, Sprint, Metro PCS, Net10, Straight Talk, T-Mobile prepaid, and U.S. Cellular.

With savings that usually ranged from $10 to $40 a month over pricier rivals such as Verizon and AT&T, some of those carriers not surprisingly received higher reader marks for value in our service Ratings. But not every high-scoring carrier had the best prices, and you may not find many, if any, of the hottest smart phones in the model lineup of smaller and prepaid carriers.

3. Use alternative services. Bypassing the carrier and using third-party services for texting and voice calls can be a money-saver. But there are trade-offs. Text messages, including a maximum 160 bytes of data, are outrageously priced à la carte by the carrier at 10 cents each. (Translated into data terms, that’s about $625,000 per gigabyte vs. the going rate of $8 to $40 per GB for wireless data plans.) International texts and texting while abroad can cost more—about 20 to 50 cents per message.

New apps such as Heywire and TigerText let you send text messages free over your data connection. Typically you use a special receiving phone number assigned to you by the service to avoid charges on your cell number. With most carriers, that means you won’t have to pay your carrier 10 cents a pop or $5 to $30 a month for limited-to-unlimited messaging plans. (Data charges do apply if you text using the cellular data network rather than Wi-Fi, but that should have little impact on your bill because texts contain so little data.)

We tried both services on Android phones. Heywire worked fast and intuitively, and it’s free—provided you accept fairly unobtrusive ads along the bottom of the message-thread page. But TigerText, whose selling points include private messages that self-destruct after a certain time, didn’t work for us.

Skype Mobile lets you make free voice calls to other Skype subscribers in the U.S. and worldwide using your smart phone. That’s especially helpful for international calls, which tend to be even pricier on cell phones than on landlines. Skyping uses your carrier’s data service, so such calls don’t count against your cell plan voice minutes, but these VoIP calls eat data at the rate of about 3 megabytes per minute. If you use Skype over a Wi-Fi network rather than on the carrier’s network, you don’t cut into your monthly metered data allocations.

4. Max out on Wi-Fi. Avoid using your plan’s allotment of data by tapping into the rising number of Wi-Fi networks that are available. Your home and work networks are obvious choices. But your cable company or Internet service provider might offer access to its own free, local Wi-Fi hotspots with your subscription, as does Time Warner Cable around the New York/New Jersey metro area and Comcast in the Philadelphia/New Jersey area.

You’ll also find free public Wi-Fi hotspots at airports, libraries, universities, sports stadiums, and cafés. AT&T wireless customers can use 29,000 mostly free, unlimited Wi-Fi locations around the U.S., many of which are in more than 6,800 company-operated Starbucks and 11,500 McDonald’s locations, free for all customers.

There’s another way to limit data use on 4G phones, where faster network speeds can eat up your allotted monthly data more quickly. If you find that 3G speeds are just as good as 4G for activities such as texting or streaming music, set your 4G phone (via its Settings) to connect only to 3G.

5. Investigate employee discounts. AT&T, Sprint, T-Mobile, U.S. Cellular, and Verizon offer discounts to the employees of companies that use their service. To see whether you qualify, Google the carrier’s name and “employee discount,” and navigate to the Web page that asks for your work e-mail address. Discounts can be as high as 20 percent, though some deals exclude the iPhone or certain service plans.

Here are six credit slip-ups to avoid this holiday season, along with patch-up advice for the sadder and wiser shoppers among us.

Mistake No. 1: You now own a half-dozen retail credit cards.

Signing up for an in-store credit card to save 20 percent or even 30 percent on purchases that day is tempting. It’s also trouble, says David C. Jones, president of the Association of Independent Consumer Counseling Agencies, a nonprofit trade group based in Fairfax, Va. Sign up for a new card too many times in too short a period, and it can hurt your credit. “And in a lot of cases the interest rates are ridiculous,” Jones says.

Holiday help: Take a pass and make do with the credit you already have. Or if you absolutely must get a new retail card, get just one — instead of signing up for one in every store you visit.

Mistake No. 2: You’re tempted by delayed-interest offers.

A popular offer this time of year is “no interest until 2013,” especially on big-ticket items such as appliances and furniture. So even if you don’t need a new California king mattress and storage headboard to go with it, you buy.

Holiday help: Read the fine print before you sign. Retailers “aren’t in business to lose money,” Jones points out. “The truth of the matter is these offers are very carefully calculated.” Either the interest rate is built into the cost of the item, or interest accrues during the “free” period, and you pay it at the end of the free period. “It’s wonderful to use credit to get things you need right away,” Jones notes, “but it’s much better if you pay cash.”

Mistake No. 3: You’re spending more than you planned to.

So you walked out of the mall with twice as much stuff as you wanted or needed? No wonder: Retailers are geniuses at getting consumers to spend money. “Marketers know all about the psychology of spending ,” says Cicily Maton, founder of and financial planner at Aequus Wealth Management in Chicago.

Everything from artful displays to that pile of fetchingly priced stuff at the cash wrap “is geared toward making us spend more money,” she says. Her favorite crafty ploy: Buy-one-get-second-for-(however much)-off, which sends most consumers searching for a sweater or pair of socks they don’t need, just for the discount. “And you’re still spending half as much as you would anyway,” Maton points out.

Holiday help: Make a list for every single store you plan to visit, and stick to it, Maton advises. Stay out of stores you don’t need to shop at, she adds. Taking cash, not credit cards , also helps resist temptation, as does a snack before a shopping trip. “If you shop when you’re low on blood sugar, your judgment is impaired,” she says.

Mistake No. 4: You’re a big bargain shopper.

Newspaper ads and in-store signs tout half off — even 75 percent off — tempting gifts and goodies, and urge consumers to “buy now, while supplies last.” They’re bargains, right? And as a good shopper, how can you resist?

Holiday help: Unless the item is on your list, resist the urge to rush out and buy. “It’s not on sale,” points out Ed Landis, president of Landis Financial Services in Annapolis, Md. “Two weeks later, they’ll have another sale.” Landis also points out that a bit of Internet research often can reveal similar bargains (though be aware of shipping and handling costs).

Mistake No. 5: The bad guys got your credit card number.

The keep-it-close protectiveness you feel about your wallet or handbag can fade while shopping online. Yes, you’re safe at home, but talented hackers can breach even secure sites. Less-than-trustworthy e-retailers can neglect to fully secure their websites. Scam artists double down on spear fishing — sending innocent-looking links that, when clicked, download malware onto desktops. That malware records keystrokes and enables thieves to steal any and all data entered into that computer.

Holiday help: Make sure e-commerce sites are secure. Look for a small icon of a lock in a lower corner of the screen. The Web address prefix “https” denotes a secure site; the “s” stands for secure, explains Stan Stahl, president of Citadel Information Group, a Los Angeles-based cybersecurity firm. To protect your home computer, download software updates regularly.

To avoid malware downloads, don’t click on links in e-mail advertisements; cut and paste them into your browser, Stahl advises. Finally, buy only from e-retailers you recognize; thieves set up pop-up Internet shops this time of year and use savvy search-engine optimization tools and ridiculously low offers ($10 for an iPad, anyone?) as come-ons. Finally, review your credit card statements each month to make sure you, and not a thief, are responsible for the charges.

Mistake No. 6: You’re spending money you don’t have.

With mortgage and auto loan rates at record lows, credit card debt falling (it’s dropped by about $180 billion since August 2008) and a slight rebound in the job market, it may be tempting to feel flush, and spend accordingly. That might include tapping into the holiday bonus you know is coming this month or signing up for an extra credit card or two.

Holiday help: Don’t do either, advises Chris Karam, chief investment officer at Sheridan Road Financial, a financial-planning firm in Northbrook, Ill. “These are murky economic times,” Karam says, adding that credit-card companies are making offers again because of those low interest rates. “Liquidity has returned, but the ability to spend has not necessarily improved,” he says.

This million-dollar question is best answered by learning from the example of my mother.

For the longest time, we have only been renting. In fact, mom never experienced what it is like to own her home. Not for the lack of searching though. For the past 20 years, we have been scouting all potential and feasible properties but without success. I personally stopped counting after we hit 50 houses; and that was years ago. Several times we came close to buying one, but there was always a variable that won’t make the sale push through.

Proponents of homeownership would have argued that we are just throwing away good money month after month because of renting. We’re making others rich while we are not building any equity for ourselves.

Argument deemed valid and accepted. But there’s also a good side to renting that most people fail to see. Since Mom is not bound by any mortgage, all her excess funds go to her savings. As a result from decades of prodigious saving and investing, she has created a sizeable retirement nest egg. Best part of it: All of it is liquid.

When we were onsite for the tripping, the broker told us how one of his potential buyers was turned down by the bank because he couldn’t raise the required down payment. I thought the bank did him a favor. If the buyer couldn’t raise that amount, he would definitely be burdened by the monthly amortization. Since all of his funds are supposedly invested in the house, he now has zero liquidity. In financial planning, we have always emphasized the need to maintain three to six months of liquidity in case of an emergency. That home equity won’t bail him out in the event that happens.

Furthermore, there is the psychological pressure of needing to keep up with the monthly amortization and cost of maintaining the house. Long before Robert Kiyosaki came up with the term “rat race” and shocked the world when he declared that a house is not an asset but a liability, the Chinese already gave this precarious situation a name: wu lu which means “slave to the house.” You become too focused on making money to pay for your home that it saps you of the energy to enjoy living in your home. That is the real liability.

Ever wondered what the truth behind American homeownership is and how it became a cult following? Corporations didn’t want their employees to have too many job options and so they encourage their people to go out and buy their own home. The government played its part in offering low interest rates and easy access to loans. Initially, there was the momentous feeling of accomplishing the “American dream,” but later on, a lot of homeowners realized that they were trapped in a seemingly never-ending cycle of slavery and could not take a lot of risks, like switching jobs, even if they wanted to. The subprime crisis that erupted five years ago only exacerbated the situation and compounded their fears.

A recurring theme in my favorite Japanese manga, Crayon Shin Chan, is that the father of the five-year-old protagonist often complains about their 35-year mortgage, and how he’s stuck in his work because he has to keep up with it. Our mortgages may not be as long as the Japanese’s but it’s not really a comforting thought of having to pay that in the next 15 or 20 years. As a rule of thumb, no more than 30 percent of your take-home income should be allotted for the amortization. Otherwise, it becomes too burdensome.

Mom made sure of that when she finally found her dream home and she opted for a term just long enough for her funds to generate interest until she pays the full mortgage off. She could have settled for a pricier and bigger home, but she realized, “It won’t make me any happier than I already am.” Best of all, she used only 30 percent of her resources for the property. She was wise enough to leave 70 percent to continue earning passive income for her.

A broker-friend once said, “If you’re looking to buy a home, see it as a place for you to live in and not as an investment because in case you ran out of cash, you might be forced to sell it at a loss.” Mom did not see it as an investment. She saw it as “the place she’ll retire and play with her grandchildren.” (Still working on it, Mom.)

I learned a lot of money management principles from my mother. I’m adding buying a home to that list.

The late Jim Rohn, one of my favorite business mentors whose rags-to-riches story inspired millions, once said that success is a “numbers game,” and nowhere is this more true than in generating a profit.

So whether you’re uncomfortable with the idea of profit or you accept it as your company’s objective, here are three simple guidelines to establish a profit orientation both in your mindset and your operations:

1. Adopt a “for profit” mindset and accept the fact you need profit to survive.
This is easier said than done, but it can be achieved if you’re open to examining your beliefs about money, wealth and profit and committed to changing your point of view.

Jim Rohn also pointed out that while some religious teachings may promote the idea that it’s hard for a rich person to get into heaven, they don’t say it’s impossible. That’s an important distinction that may help shift your own perspective on wealth.

Also, consider that business is among the few games around that let anyone play regardless of social status, education or age, and that can produce substantial personal wealth in 10 years or less. Not a bad return if you look at business ownership as one of the best long-term investments you can make in yourself.

2. Aim to buy ever lower and sell ever higher. Years ago, businesses could survive on lower profit margins, especially in retailing. But these days, increased overhead and competition, along with digital offerings that let customers easily compare prices and services, mean you need higher margins and repeat business to survive.

Fortunately, new technologies offer great opportunities to consistently buy or produce something for $1 or less, then turn around and sell it for $10 or more and deliver impeccable customer service.

To make your numbers work, you also will need to keep a keen eye on costs, including the growing number of hidden expenses such as credit card and other transactions fees, and to focus on maintaining consistently high margins and repeat sales.

3.Know your numbers, then work up the vital numbers.
“Knowing your numbers” means not only knowing your costs, but also which numbers will accelerate your bottom-line growth.

Here is a “Five Ways” formula which can work in any business. Very simply, if you focus on the following five things you can multiply your bottom-line results.

1. Leads
2. Sales conversion rate
3. Average dollar sale
4. Average number of transactions
5. Profit margins

Here’s how the “Five Ways” formula works:

Leads x Sales conversion rate = Customers

Customers x Average dollar sale x Average number of transactions = Revenue

Revenue x Profit Margins = Profit

To start getting the greatest benefit from the formula, try boosting your profit margins by at least 10%. Increasing profit margins is easiest and least expensive for most businesses, while generating more leads is generally hardest and most costly.

You can also boost profits by raising prices. Few people will notice a small increase in price, preferably on your best selling item, but you will immediately notice the difference in your profits.

Remember, all businesses need profit to survive, thrive and contribute to their owners, customers and community. The quicker you can generate higher and more consistent profits, the closer you’ll be to achieving your own vision of success.

So far in 2012 nearly a third of dividend announcements have raised payments to investors. That’s the highest rate since 2006, according to a CIBC World Markets Inc. report by economist Peter Buchanan. The trend has been up since the second quarter of 2009, when only 5% of dividend announcements specified higher payments.

The capacity to raise dividends keeps on expanding. Cash balances on corporate balance sheets recently surpassed $500 million in Canada, an amount equal to about 30% of Gross Domestic Product (GDP). Normally, corporate cash balances are about 10% of GDP.

The pressure to share the wealth is mounting. Not only are shareholders pushing for greater distributions but so are groups seeking economic growth, jobs, and reductions in government deficits. Even business-friendly Prime Minister Harper may be getting into the act: the federal budget due in late March mayimpose penalties on CEOs who hoard cash.

As executives and Boards of Directors feel the heat, it wouldn’t be surprising to see them dipping more into their cash coffers to raise dividends. They could also allocate more to share buybacks, additionally boosting shareholder value. Capital expenditures will also likely be ramped up, generating cost savings and revenue growth that contribute to shareholder value over the longer term.

According to CIBC World Markets, the dividend-payout ratio for companies in the S&P/TSX Composite Index stands at 41% (based on average earnings over the last four quarters). Considering the historical median is 45%, there would seem to be room for this ratio to grow.

In fact, there is some possibility the payout ratio could rise substantially above the historical norm, if comparable (commodity-based) stock markets are any guide. Notably, the companies in Australia’s main stock market index, the S&P/ASX 200, pay out 65% of their earnings in dividends.

In Canada, the utilities, industrials, and materials sectors have the most room for dividend increases. Their payout ratios are the lowest relative to their respective historical averages. Energy, consumer-discretionary and telecom sectors have the least room.

From 2010 to 2011, corporate profits in Canada rose 15% to $208 billion, further augmenting cash reserves. As a percentage of corporate assets, cash currently stands at 7%, up substantially from 4% a decade ago (financial companies excluded).

The materials and energy sectors have been mainly responsible for the growing cash piles. CIBC World Markets says an in-house study found that companies with twice normal cash balances had a 7% chance of raising their dividend in a quarter, compared to 4% for companies with payout ratios 25% or more below their norm.

Some landlords include the water bill in the rent. Others charge it directly to their tenants to provide an incentive to use water economically. Whenever a delinquency in payments arises, many landlords in Ontario are finding that their municipality has recently transferred responsibility for collection from the water utility to them. They have to retrieve the money themselves or have it added to their tax bill.

Kayla Andrade of Cambridge, Ont. knows the aggravation only too well. She is a young mother of two children, and a landlord with tenants whose delinquent accounts have driven up her taxes.  “Just because I am called a landlord does not mean I am rich—I am just getting by,” she says.

Numerous other landlords in Ontario are finding themselves in similar straits, and a groundswell of protest seems to be building. Andrade, in fact, is circulating a petition that calls on the Ontario Government to end the transfer of water bills to landlords.

Compared to water utilities, small-scale landlords like Andrade have less recourse for collecting unpaid water services, says Rachelle Berube, owner of a property management firm and blogger at Landlord Rescue. A utility can ask for deposits in advance, engage collection agencies, cut off service and sue the tenant.  “The landlord has to wait until the tenant moves out and then take them to small claims court at their own expense,” adds Berube. “And small claims can take a year to get your money back.”

“You’re at risk from the tenants, and the laws are heavily pro-tenant,” she continues. “This is why there is little decent affordable rental housing—it’s just too damn risky.”

It might be supposed that landlords can recoup their losses by raising rents on tenants in other units, or on future occupants of the unit in arrears. But this makes their accommodations less competitive on the market, which can result in longer vacancies and a failure to break even.

Many local taxpayers may prefer that landlords be held responsible in order to avoid having the water bills put on their tax rolls. However, by making the ownership of rental properties even more uneconomical, the stock of affordable rental housing will be at risk of shrinking further. And this could lead to greater spending by local governments in the areas of social housing and related services.

Conservation issues may come into play, as well. Passing the tab to someone less able to collect on overdue payments could mean that the problem of unpaid water usage and over-consumption will grow steadily larger over the years to come—not a socially desirable outcome, it would seem.

Considering this is an election year, however, expect politicians to harp on facts, figures and terms that most Americans weren’t taught in high school. To help out, it’s time to dredge up lots of scary facts to make you pay attention.

Before we get going, a quick primer on the number TRILLION:

• $1 trillion = $1,000 billion or $1,000,000,000,000 (that’s 12 zeros)

• How hard is it to spend a trillion dollars? If you spent one dollar every second, you would have spent a million dollars in 12 days. At that same rate, it would take you 32 years to spend a billion dollars. But it would take you more than 31,000 years to spend a trillion dollars.

• And now, some scary facts about the debt and the deficit — some basics:

• Deficit = money government takes in — money government spends

• 2012 US deficit = $1.33 trillion

• 2013 Proposed budget deficit = $901 billion

• National debt = Total amount borrowed over time to fund the annual deficit

• Current national debt = $15.3 trillion (or $49,030 per every man, woman and child in the US or $135,773 per taxpayer)

OK, let’s get started!

1. The U.S. national debt on Jan. 1, 1791, was just $75 million dollars. Today, the U.S. national debtrises by that amount about once an hour.

2. Our nation began its existence in debt after borrowing money to finance the Revolutionary War. President Andrew Jackson nearly eliminated the debt, calling it a “national curse.” Jackson railed against borrowing, spending and even banks, for that matter, and he tried to eliminate all federal debt. By Jan. 1, 1835, under Jackson, the debt was just $33,733.

3. When World War II ended, the debt equaled 122 percent of GDP (GDP is a measure of the entire economy). In the 1950s and 1960s, the economy grew at an average rate of 4.3 percent a year and the debt gradually declined to 38 percent of GDP in 1970. This year, the Office of Budget and Management expects that the debt will equal nearly 100 percent of GDP.

4. Since 1938, the national debt has increased at an average annual rate of 8.5 percent. The only exceptions to the constant annual increase over the last 62 years were during the administrations of Clinton and Johnson. (Note that this is the rate of growth; the national debt still existed under both presidents.) During the Clinton presidency, debt growth was almost zero. Johnson averaged 3 percent growth of debt for the six years he served (1963-69).

5. When Ronald Reagan took office, the U.S. national debt was just under $1 trillion. When he left office, it was $2.6 trillion. During the eight Regan years, the US moved from being the world’s largest international creditor to the largest debtor nation.

6. The U.S. national debt has more than doubled since the year 2000.

• Under President Bush: At the end of calendar year 2000, the debt stood at $5.629 trillion. Eight years later, the federal debt stood at $9.986 trillion.

• Under President Obama: The debt started at $9.986 trillion and escalated to $15.3 trillion, a 53 percent increase over three years.

7. FY 2013 budget projects a deficit of $901 billion in 2013, representing 5.5 percent of GDP, down from a deficit of $1.33 trillion in FY 2012, which was the fourth consecutive year of more than $1 trillion dollar deficits.

8. The U.S. national debt rises at an average of approximately $3.8 billion per day.

9. The US government now borrows approximately $5 billion every business day.

10. A trillion $10 bills, if they were taped end to end, would wrap around the globe more than 380 times. That amount of money would still not be enough to pay off the U.S. national debt.

11. The debt ceiling is the maximum amount of debt that Congress allows for the government. The current debt ceiling is $16.394 trillion effective Jan. 30, 2012.

12. The U.S. government has to borrow 43 cents of every dollar that it currently spends, four times the rate in 1980.

Real estate in most areas today is not a top investment compared with investment securities. “You’re not going to get a 30 percent return on your house,” said Steve O’Connor, senior director of residential finance at the Mortgage Bankers Association of America. In the past decade, people have been advised to think of a home “as shelter not investment” O’Connor said. “Wealth accumulation is secondary.”

Still, as shelter, most experts say if you can afford the down payment, it makes sense to buy your home rather than rent it. That’s because you can deduct mortgage interest on income tax and build equity in your property. This is especially true when mortgage interest rates are low. Mortgage interest rates are deductible up to a $100,000 annual limit.

Example
A homeowner has a gross annual income of $40,000. The monthly mortgage payment is $1,000 on a 30-year mortgage. In the first few years, 80 percent of that payment goes to interest and is therefore tax deductible. In the 15 percent tax bracket, the homeowner saved about $375 more in taxes with the home provision versus with only a standard deduction.

Lease-Purchase Agreements
Some people take a middle road. They ease into homeownership by renting a house or condominium with an option to buy.

• Lease-purchase gives a buyer time to save for a down payment or to clean up a credit history.
• It can work in a buyer’s favor in areas where real estate values are rising quickly at a rate of 10 percent a year. A buyer benefits from this appreciation because the purchase price of the home is locked in on the day the buyer signed the rent-to-own contract with the seller.
• In most agreements, the seller allows a portion of the rent to be applied towards the purchase price, which some lenders consider to be part of the down payment. The amount of rent credited could be 10 percent to 100 percent, based on your contract.
• Most rent-to-own options require some down payment to secure the agreement, which is not refundable in case the renter decides not to buy.

Homeowners who would agree to a lease-purchase option include people who have had property on the market longer than they wish or owners who had to move and want the house to be lived in. The owner benefits with rental income to help pay the carrying costs of the home, and the strong possibility of selling the house when the contract expires.

The burden is big: U.S. college students borrowed $117 billion in federal student loans last year, and the Consumer Financial Protection Bureau reported earlier this year that debt from student loans exceeds $1 trillion, surpassing credit card debt for the first time.

Tuition and fees at both public and private universities have been steadily increasing and some higher education institutions are cutting financial aid, reducing class offerings or even freezing enrollment at campuses because of state and federal funding shortfalls. California State University, for example, announced in March that it was not accepting new students at 15 of its 23 campuses for the spring 2013 semester and will wait-list all applicants the following Fall after a $750 million funding cut.

President Obama wants to overhaul the college education system and proposed a new financial aid program during his State of the Union address in January, saying higher education isn’t a luxury. Rather, Obama says “It’s an economic imperative that every family in America should be able to afford.” In a recent speech at the University of Michigan, he told students that colleges were being put on notice. At the heart of the problem: “If you can’t stop tuition from going up, then the funding you get from taxpayers each year will go down,” he says.

According to an analysis by Moody’s Analytics, student loans have grown “persistently at double digit-rates throughout the last decade” and “college costs have outpaced overall inflation by a significant margin.” A new report by PNC Bank finds that students hold an average of $45,000 in student loan debt.

Robert Reich, a public policy professor at University of California Berkeley and the labor secretary in the Clinton administration, says a four-degree would mean a 70 percent to 100 percent increase in salary compared to someone with just a high school diploma. Students would leave college with thousands of dollars in student loans, but the higher salary would make up for the monthly payments. However, now college students are “facing very dim employment prospects” and “people will be struggling with college costs” for a long time, Reich says in an interview with The Daily Ticker.

The plight of college grads has been well documented in the media. There are the Harvard-educated 22-year-olds who are working as Starbucks baristas. Or the liberal-arts grad taking a second unpaid internship. The Phi Beta Kappa member working in retail sales. There are similar stories like these around the country. Even for students lucky enough to find a full-time job after graduating, many are low paying and more often than not exclude previous guaranteed perks like health insurance or a 401k plan. The cost of student education has shifted to the federal government as students and families seek out additional scholarship aid to help pay more soaring college costs. Some families would take out second mortgages on their homes to pay for college tuition, but many families can no longer do that in the face of high unemployment, a weak housing market, tighter credit and an overall uncertain economic climate.

Pell Grants and Stafford loans, scholarship money awarded by the federal government to lower-income students, have not kept pace with the cost of tuition despite the Obama administration advocating for increases in the maximum Pell Grant award. Republicans, who have made unprecedented cuts to education in their budget proposals, have targeted federal education assistance for years. Federal education aid has “become a kind of political football,” Reich says.

Online education, a growing trend that an increasing number of private and public institutions have embraced, could be one way to lower the burden of college costs for students. Technical schools are another point of interest: in Germany, students with a technical degree are making as much as students who have completed four years of higher education, Reich says.