tag:blogger.com,1999:blog-7918604828807956732024-03-20T03:18:51.318-07:00Money $ense for the 18 to 30 CrowdEMPOWER YOURSELF -- BE SMART ABOUT MONEY MATTERS!!Unknownnoreply@blogger.comBlogger31125tag:blogger.com,1999:blog-791860482880795673.post-31778128792311980372007-01-10T12:12:00.000-08:002007-01-10T12:16:42.708-08:00Get in Line – getting rich as a life goal<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMVNjHq5LRVyMeVU7oacdQq8q8NyZ3rlApnHVSFrSsysiUDKcK3J7HjumjWzd8sx9vQAF71y4hoA2ojUMB9JwFhBy2Vnm7zfMNkAE-l8YV9UjtwBu4grlOMtBeYI17K9NOOF1weUqmL8U/s1600-h/waiting+line.jpg"><img id="BLOGGER_PHOTO_ID_5018497985987855090" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMVNjHq5LRVyMeVU7oacdQq8q8NyZ3rlApnHVSFrSsysiUDKcK3J7HjumjWzd8sx9vQAF71y4hoA2ojUMB9JwFhBy2Vnm7zfMNkAE-l8YV9UjtwBu4grlOMtBeYI17K9NOOF1weUqmL8U/s320/waiting+line.jpg" border="0" /></a><br /><div>I am not in the habit of reading USA Today but today’s cover story about GenNext caught my eye. The article reports that “eighty-one percent of 18- to 25-year olds surveyed in a Pew Research Center poll said getting rich is their generation’s most important or second-most-important life goal.” Any wonder why there are so many personal finance blogs??<br /><br />We all know that it is statistically impossible for more than half of any population to be better than average. Don’t let this distract you from your goal. In my opinion, it just makes the game more interesting. Just like the challenge of getting into a top school, achieving this goal will require you to be at the top of your game. Recognize that you don’t have an original thought and make sure you have a plan to succeed.<br /><br />One plan that I think works is to follow the “Lessons to Live By” (shown in the sidebar). Let me go out on a limb – embrace these seven lessons and it will be impossible not to achieve your financial goals. But, you do need to work each of these lessons – a focus on one or two is unlikely to do the trick. All you need to do is:</div><br /><ol><br /><li>Find good teachers and mentors</li><br /><li>Become financially literate</li><br /><li>Budget & understand your income and expenses</li><br /><li>Pay yourself – save 10% of your earnings.</li><br /><li>Borrow cautiously.</li><br /><li>Invest prudently</li><br /><li>Be charitable to the less fortunate.</li></ol><br /><p>Still not clear? Well stay tuned. My next posts will address each of these seven topics one by one.<br /><br />And don’t worry about that average thing. As President John F. Kennedy said, “a rising tide lifts all boats.” This focus of GenNext could have good implications for the broader society if properly channeled. You may be average but if we raise the average, both in America and worldwide, we will all be better off!</p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-80449995080630815732007-01-09T08:31:00.000-08:002007-01-09T10:03:01.952-08:00If You Don’t Know Where You Are Going, Any Road Will Take You There – the importance of setting goals<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiBego9gQWlPv0OD_LpF1OKfsjAMIl6k0N-xW6599vpp8v6CG7FiNiENmRTt3TXMs4P7DqqHM1QtmLCdpPhPNIMxL5ngQCNKT8yz7NQb8SIPlo83LsrgsttpV-BCno4fJWQ82cPY46YKq0/s1600-h/goal.jpg"><img id="BLOGGER_PHOTO_ID_5018070570190823842" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; CURSOR: hand" height="132" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiBego9gQWlPv0OD_LpF1OKfsjAMIl6k0N-xW6599vpp8v6CG7FiNiENmRTt3TXMs4P7DqqHM1QtmLCdpPhPNIMxL5ngQCNKT8yz7NQb8SIPlo83LsrgsttpV-BCno4fJWQ82cPY46YKq0/s320/goal.jpg" width="95" border="0" /></a> Did you have some thoughts about setting goals for the New Year but let them pass? My experience is that having these goals are one of the most important steps in achieving financial independence. This is a good time to focus on your main goal for this year and your long-term goal.<br /><br />I spent the first 10 years or so of my business career focused on doing what it took to deliver excellent service to my clients. Then I had a wake up call (a denied promotion) that got me to focus on dedicating my effects more to my financial situation than my clients'. I call it my Johnny Paycheck moment. If you don’t know what I am talking about, you are missing a great song. Have a little listen to <a href="http://www.artistdirect.com/nad/window/media/player/0,,144571-461478-WMLO,00.html">Take This Job And Shove It</a><br /><br />With that as my theme song, I became determined that I would put myself into a position where I would never have to work again. I figured out the “number” I needed to make me my own boss. My husband was not as sold on this goal but agreed to go along for the ride. Up until this time, we did the bare minimum in taking care of our financials, we had no debt to speak of and had some retirement savings. In order to achieve my goal, however, I knew that I would need to do better than that. We needed to start saving/investing on a after-tax (non-retirement) basis.<br /><br />We reached our goal within 10 years. Yes, once he saw it was achievable, my husband started to become a believer. Sure we had some lucky breaks along the way such as promotions and good returns on our investments. My view, however, was that “the harder I worked, the luckier I got.” I achieved this goal because it was a primary focus in my life. For those of you familiar with <a href="http://www.amazon.com/gp/product/1582701709?ie=UTF8&tag=monensforthe1-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=1582701709">The Secret</a><img style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; MARGIN: 0px; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" height="1" alt="" src="http://www.assoc-amazon.com/e/ir?t=monensforthe1-20&l=as2&amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;o=1&a=1582701709" width="1" border="0" />, you could even say I attracted it.<br /><br /><div><div></div><div>It is easy to say you have a goal. What you really need to do is to make sure that you have the proper tools to make that goal achievable. I found an article by Bruce Wares, entitled, <a href="http://www.bluinc.com/news/theimportance.html">The Importance of Setting Goals</a>, that says it better than I can. Have a read.<br /><br />Mr. Ware’s article should help you in your goal setting. Remember, effective goals are conceivable, believable, achievable, measurable, controllable and have a singleness of purpose. Ensure your success by writing down your goals. Keep reminding yourself of the goal. Whenever, I started to go off course, the lyrics “take this job and shove it, I ain’t working here no more” came into my head!! Find a similar way to motivate yourself to success.<br /></div><br /><br /><div></div></div>Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-791860482880795673.post-70749091325001784162007-01-09T06:26:00.001-08:002007-01-09T06:39:19.139-08:00Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-91739294199330060352007-01-08T17:51:00.000-08:002007-01-08T17:58:09.459-08:00Book Review - Altas Shrugged by Ayn Rand<iframe style="WIDTH: 120px; HEIGHT: 240px" marginwidth="0" marginheight="0" src="http://rcm.amazon.com/e/cm?t=monensforthe1-20&o=1&p=8&l=as1&asins=0452011876&fc1=000000&IS2=1<1=_blank&amp;amp;amp;amp;lc1=0000FF&bc1=000000&bg1=FFFFFF&f=ifr" frameborder="0" scrolling="no"></iframe><br /><br /><span style="font-family:verdana;">I first read Atlas Shrugged when I was about 17 years old. It was recommended to me by the manager of a Denny’s Restaurant during a job interview. I still find a certain amount of irony in that but I am forever grateful for his recommendation (even through I can’t remember his name).<br /><br />Atlas Shrugged and Ayn Rand’s other book, The Fountain Head, really shaped my thinking about my purpose in life and capitalism. You might also be interested in knowing that </span><a href="http://www.noblesoul.com/orc/bio/greenspan-time.html"><span style="font-family:verdana;">Alan Greenspan</span></a><span style="font-family:verdana;">, the former fed chairman, was a close friend of Ayn Rand and author of articles published in her books and magazines. My own personal view is that this should be required reading before anyone could register to vote. Fat chance but I can dream can’t I?<br /><br /></span><a href="http://www.aynrand.org/site/PageServer?pagename=about_ayn_rand_aynrand_biography"><span style="font-family:verdana;">Ayn Rand</span></a><span style="font-family:verdana;"> had a unique place in history that, in my opinion, provided her with some interesting insight into political and economic systems. She was born in czarist Russia. As a teenager she was an eyewitness to the Kerensky and Bolshevik Revolutions. In her early twenties, she lived under communism in Crimea. After that, she moved to America.<br /><br />The </span><a href="http://www.noblesoul.com/orc/books/rand/atlas/"><span style="font-family:verdana;">Objectivism Reference Center</span></a><span style="font-family:verdana;"> provides a good summary of the book. Rather than create my own, I have noted their summary:<br /><br /></span><span style="font-family:verdana;"></span><blockquote></blockquote><span style="font-family:verdana;"><span style="color:#666666;">“The plot is framed as a mystery story, but with strong elements of romance and science fiction, as well as Rand's trademark philosophical ideas. There are actually two mysteries: one about why so many of the world's most productive minds are disappearing, the other about who invented a revolutionary new kind of motor. As you might guess, the solutions to the two mysteries are closely related. Readers follow the struggles of Dagny Taggart, a railroad executive, and Hank Rearden, a steel magnate, as they attempt to answer both of these questions and stave off the collapse of an increasingly irrational and collectivist society.”<br /></span><br />The book really does have an interesting story line but it can be a bit heavy with Ms. Rand’s discourses on her philosophy. I’ll confess that I skimmed over these parts. Just understanding the plot, enables you to understand this philosophy, Objectivism, well enough. For a first read, I wouldn’t focus too much on trying to fully understand Objectivism. If you are looking to understand this better, I suggest you go to </span><a href="http://www.noblesoul.com/orc/books/rand/atlas/"><span style="font-family:verdana;">The Ayn Rand Institute</span></a><span style="font-family:verdana;"> web page which includes Ayn Rand’s discussion on Objectivism in her own words. She said that Objectivism, holds that:<br /><br /></span><span style="font-family:verdana;"></span><ol><li><span style="font-family:verdana;"><strong>Reality exists as an objective absolute</strong>—facts are facts, independent of man's feelings, wishes, hopes or fears. </span></li><li><span style="font-family:verdana;"><strong>Reason (the faculty which identifies and integrates the material provided by man's senses) is man's only means of perceiving reality</strong>, his only source of knowledge, his only guide to action, and his basic means of survival.</span></li><li><span style="font-family:verdana;"><strong>Man—every man—is an end in himself</strong>, not the means to the ends of others. He must exist for his own sake, neither sacrificing himself to others nor sacrificing others to himself. The pursuit of his own rational self-interest and of his own happiness is the highest moral purpose of his life. </span></li><li><span style="font-family:verdana;"><strong>The ideal political-economic system is laissez-faire capitalism.</strong> It is a system where men deal with one another, not as victims and executioners, nor as masters and slaves, but as traders, by free, voluntary exchange to mutual benefit. It is a system where no man may obtain any values from others by resorting to physical force, and no man may initiate the use of physical force against others. The government acts only as a policeman that protects man's rights; it uses physical force only in retaliation and only against those who initiate its use, such as criminals or foreign invaders. In a system of full capitalism, there should be (but, historically, has not yet been) a complete separation of state and economics, in the same way and for the same reasons as the separation of state and church.</span></li></ol><p><span style="font-family:verdana;">While I don’t subscribe fully to Objectivism, the points about every man being an end in himself and capitalism as the ideal political-economic system made so much sense to me as I absorbed the story of Atlas Shrugged. The book discusses many headlines of the day. As you read the headlines in the book you might be amazed at how they mirror the headlines of today. In my opinion, Atlas Shrugged also makes it easy to see how government interference can result in negative consequences.<br /><br />I recently reread this book as I was concerned that it’s “me” focus was inconsistent with my faith. I found that it really wasn’t. I think that as you focus on doing what is right for yourself, you also end up doing right by others. Take my life as an example. I came out of college hell-bent on making money. And, to be honest, it was my singular focus for many years. During this time, I never lost sight of my personal values and once I achieved my goals, I started to focus on how I could give back to society. I think I have contributed more to society by focusing on my own goals first.<br /><br /></span></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-14615044203912461642007-01-08T08:36:00.000-08:002007-01-08T09:29:25.109-08:00Looking for Some Quality Time? -- Speaking Engagements<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEierHfUvLDpwiN3Dzmx33iZmmICqRkuqIKTId58ZAcMCQGTkjuBDqtCNh2lLh8PKKqeuWQsDwqBGdIjcCfov3inZIJ4O7ZMOGO1fOv6DT9e-d8wVMWMrCSGvakA6GA_vyl3ABkuenT5Pxo/s1600-h/public+speaking.jpg"><img id="BLOGGER_PHOTO_ID_5017705755668701570" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEierHfUvLDpwiN3Dzmx33iZmmICqRkuqIKTId58ZAcMCQGTkjuBDqtCNh2lLh8PKKqeuWQsDwqBGdIjcCfov3inZIJ4O7ZMOGO1fOv6DT9e-d8wVMWMrCSGvakA6GA_vyl3ABkuenT5Pxo/s200/public+speaking.jpg" border="0" /></a><br /><div>As you read my blog, I hope you can see that I am passionate about these subjects. I have an important message to deliver and want to reach people while they are young. The earlier you start thinking about these topics, the easier it will be to become financially independent.</div><p></p>My goal is to empower as many people as possible. I intend on using a number of tools including this blog, public speaking and perhaps books or recorded presentatons down the road. I believe that my own story is a powerful testament. With the proper education, motiviation and discipline people can become financially independent. There is no need for get rich quick schemes! <p></p>I am available to speak at your events -- small or large -- on any of these topics. I can deliver one of my standard presentations or tailor the presentation to your specific group. If you would like further infomation please contact me at <a href="mailto:moneyempowerment@yahoo.com">moneyempowerment@yahoo.com</a>. <p></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-503545306976934572007-01-07T10:45:00.000-08:002007-01-08T08:35:34.840-08:00A Word on Book Reviews<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi4QDop64mi0NyC0sQRfT8kwgsFu2x7HtF01QV1kdWQ6Ndi8c59kH5R7GhC5gEME0tURLq_gKx9CnyFkjOZONN_8s6H_sQG8X8j7azLGAB1HZGwcQ_m-nlpM9ZOA-KKD83JAWpRHKKJk3k/s1600-h/book+reviews.jpg"><img id="BLOGGER_PHOTO_ID_5017370851298828658" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi4QDop64mi0NyC0sQRfT8kwgsFu2x7HtF01QV1kdWQ6Ndi8c59kH5R7GhC5gEME0tURLq_gKx9CnyFkjOZONN_8s6H_sQG8X8j7azLGAB1HZGwcQ_m-nlpM9ZOA-KKD83JAWpRHKKJk3k/s200/book+reviews.jpg" border="0" /></a><br />In her book,<a href="http://www.amazon.com/gp/product/0131439685?ie=UTF8&tag=monensforthe1-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0131439685">Management Skills for Everyday Life: The Practical Coach (2nd Edition)</a><img style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; MARGIN: 0px; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" height="1" alt="" src="http://www.assoc-amazon.com/e/ir?t=monensforthe1-20&l=as2&o=1&a=0131439685" width="1" border="0" />Paula Caproni identifies five skills that are hallmarks of effective managers today:<br /><br /><ul><li>invest in lifelong learning and critical thinking</li><li>Develop self-awareness</li><li>Create a broad and diverse network of high-quality relationships</li><li>Design a workplace that brings out the best in individuals and teams</li><li>Craft a meaningful personal and professional life</li></ul><p>I couldn't agree more with Ms. Caproni's assessment that these are critical skills for success. She talks about them in terms of effective managers but I think it can be expanded to a life lesson for everyone. I like the list because it is short and sweet and something that you are likely to remember. </p><p>Reading books is all about developing that first skill of lifelong learning. Ms. Caproni was not the first (or last) to recognize this as an important skill. Anyone into investing knows that this is a point frequently made by Warren Buffett and his long term partner Charles Munger. If you don't know about Mr. Munger, you are missing out of big part of understanding Mr. Buffett's success. Charlie Munger has a lot to say on a lot of things and usually a very good way of saying it. He agrees with Ms. Caproni about lifelong learning but says it like this:</p><p align="center"><em>“Acquire worldly wisdom and adjust your behavior accordingly. If your new behavior gives you a temporary unpopularity with your peer group . . . then to hell with them.”</em></p><p align="left">If you keep reading my blog you are likely to read more about Buffett and Munger. They have had a strong influence on my life. In fact, you may have noticed that Mr. Munger's book <a href="http://www.amazon.com/gp/product/157864366X?ie=UTF8&tag=monensforthe1-20&linkCode=as2&amp;amp;amp;amp;camp=1789&creative=9325&creativeASIN=157864366X">Poor Charlie's Almanack Expanded Second Edition. The Wit and Wisdom of Charles T. Munger</a><img style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; MARGIN: 0px; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" height="1" alt="" src="http://www.assoc-amazon.com/e/ir?t=monensforthe1-20&l=as2&amp;amp;amp;amp;amp;amp;o=1&a=157864366X" width="1" border="0" />is on my recommended reading list. I will be writing a book review for this book as well as each one that is one my list. I will also be adding more books. I have kept the list to a few that have had the strongest influence on my life for now in the hopes that one of the titles might peak your interest . My reviews will explain what I learned from these books.</p><p align="left">I held off writing book reviews because I wanted to figure out a way to link the book to a place where you could purchase it. I finally figured out that I could do this with the Amazon affiliate program. Call me slow, but what do you expect from someone that was a little early for the "internet generation." Anyway, I now have these links in place. In the interest of full disclosure, I feel compelled to tell you that I <em>might</em> make <em>some</em> money if you use these links to buy a book. I say <em>might</em> because I haven't made any yet so I don't really know how it works. I say <em>some</em> because, at a 4% commission rate, I am unlikely to quit my day job due to the income from these links. Ok, so I don't really have a day job but you get my point! I tell you this because if you want to support me that is great. If you have issues with the link then just don't click it. Go directly to Amazon or favorite bookstore to buy it. Or, if you really are looking to save money, check out the book at your local library. This is the sensible thing to do, but I must confess that spending money on books is one of my splurges. I don't buy Starbucks, but I do buy books! Books are one of the joys of my life and I hope I can turn you on to some good ones. Stay tuned!</p><p align="left"><br />P.S. I am available to review books. If you are a publisher or author and want me to review your book please contact me at <a href="mailto:moneyempowerment@yahoo.com">moneyempowerment@yahoo.com</a> </p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-11361972582763383602007-01-06T06:59:00.000-08:002007-01-06T07:22:21.202-08:00Now Would Be a Good Time to Start Paying Yourself – what to do with that recent raise or bonus<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhg-UXM9JqVGBnsWnpDmxauDfMlE6iJSHN6ZP3Vc_GJKnbfkS_duf6JJI05YWJZLj6oawJdz6NQhqX15HxbI52xF_SPxacJPYYiytVo5XoCorSlYxaxSPkRJCU_udctNxwlrtBLiH9zMS4/s1600-h/payday.jpg"><img id="BLOGGER_PHOTO_ID_5016932751749734754" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhg-UXM9JqVGBnsWnpDmxauDfMlE6iJSHN6ZP3Vc_GJKnbfkS_duf6JJI05YWJZLj6oawJdz6NQhqX15HxbI52xF_SPxacJPYYiytVo5XoCorSlYxaxSPkRJCU_udctNxwlrtBLiH9zMS4/s200/payday.jpg" border="0" /></a> This is the time of year where you may have a debt hangover from spending too much during the holidays (you just didn’t want to listen to my advice in <a href="http://moneyempowerment.blogspot.com/2006/11/in-celebration-of-busiest-shopping-day.html">Just Don’t Do It!!</a> did you?). Anyway, you live and learn – it is only a mistake if you fail to learn from it. It is never too late to regain the focus.<br /><br />This might be a good time to rethink your saving/investment plan since you may have recently received a raise or bonus or expect to in the coming months. This is the easiest time to start or increase your allocation. You are (or should be used to) living within your means at your current pay level. You can allocate all, or a large portion, of your raise/bonus to saving/investing.<br /><br />Remember, as shown in the sidebar, my fourth lesson to live by is to “Pay yourself -- save 10% of what you make”. In my opinion, this is the bare minimum to be financially prudent. If you have lofty goals such as retiring early you will need to do a whole lot better than that. How do I know? Because my husband and I had such goals and we achieved them! From our mid-30s on we directed probably close to 80% of our raises and bonuses into our investment portfolio. Sounds draconian but it did enable us to retire before we were 40. Saving this much had two important outcomes. First, it has put us into a position of being able to afford anything we want. Second, since we got used to being cautious consumers, we became less materialistic and decided that we really don’t need to have the hottest new car or biggest house – thus making the first goal much easier to achieve!<br /><br />Life is all about making choices. If you recently received a raise or bonus you have a choice of what to do with it. Reward yourself by keeping it. Your plan might be different depending on your financial position.<br /><ol><li>If you have credit card debt or <a href="http://moneyempowerment.blogspot.com/2007/01/view-is-lousy-from-here.html">upside-down loans</a>, use this found money to pay it off. </li><li>If you haven’t started a saving/investment account start it. You may want to read (or reread) my post <a href="http://moneyempowerment.blogspot.com/2006/11/just-do-it.html">Just Do It</a> on how to start saving. </li><li>If you already are saving a percentage of your income, increase the allocation. My post <a href="http://moneyempowerment.blogspot.com/2006/11/chomping-at-bit.html">Chomping at the bit?</a> – how to start an investment portfolio might help you with this. </li></ol><p>The best way to make sure you follow through on your intent to save this raise/bonus is to set up an automatic electronic transfer from your checking account for the same day (ok, maybe the next day) that the funds will be coming in. That way you can make sure that the money doesn’t tempt you to do something foolish. If you are not convinced, think about how the government gets its taxes. They don’t give us the “choice” to pay these taxes – the money is taken right out of our paycheck. Most of us soon learn not to even count this as our money (a topic for a whole separate conversation!). If it works for the government, why not let it work for you.<br /><br />Sure you might want to take some portion of the funds and blow it on a cool new toy or entertainment. Just make sure that you don’t overdo it. My experience is that the “high” I got from watching my savings grow was much better then the temporary buzz I got from spending it on something that I didn’t need and didn’t last. When you think this way, you are well on your way to achieving financial independence.</p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-90944932778268961822007-01-05T13:28:00.000-08:002007-01-06T05:07:23.219-08:00The View is Lousy from Here -- fixing upside-down car loans<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgj8tYFZfv7viF6uhP12NL8ZVPRZV49-tp4eIyeuIrZKXnk9DWSj97g9W0cja4WsA6soK3AXLUvtJker_9bZcYlm38Vmt4oRrmsQCTkGR29njTyt288v2P1CdkF9tNx7KS3edbgVrgOzG8/s1600-h/upside+down+car.jpg"><img id="BLOGGER_PHOTO_ID_5016661640529109298" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgj8tYFZfv7viF6uhP12NL8ZVPRZV49-tp4eIyeuIrZKXnk9DWSj97g9W0cja4WsA6soK3AXLUvtJker_9bZcYlm38Vmt4oRrmsQCTkGR29njTyt288v2P1CdkF9tNx7KS3edbgVrgOzG8/s200/upside+down+car.jpg" border="0" /></a> Many of you may have read my November 19, 2006 post, <a href="http://moneyempowerment.blogspot.com/2006/11/paying-cash-for-your-car.html">Paying Cash for Your Car</a> and said, “yea right, but what if you already have a vehicle and are upside-down with the loan?”<br /><br />For those of you lucky enough to have never heard that term, “upside-down loan” is the politically correct term for owing more than what the vehicle is worth. You may not have heard it because you are not in that situation. Congratulations, you can stop reading here. If you are not sure whether you have an upside-down loan, then your first course of action should be to check it out. Compare the balance you owe to the current <a href="http://www.kbb.com/kbb/default.aspx?trid=3&gclid=CKK15ciPyokCFQSfYAodzkNywg">Kelly Blue Book</a> balance. While you are at it, you might want to take note of the interest rate on the loan because that will be the topic of a later post.<br /><br />If you are upside-down, you should take no comfort in the fact that you are not alone. The <a href="http://www.autoindustryforum.com/forum/showthread.php?t=33">Auto Industry Forum</a> quotes research that indicates that anywhere from 26% to 40% of consumers are upside-down on these loans. You are looking for financial independence and need to do better than the crowd. You should use it as an early warning sign that you need to shore up your finances.<br /><br />So an upside-down value does make life more difficult – but not impossible. You just need to remember one of the cardinal rules – <a href="http://moneyempowerment.blogspot.com/2006/11/in-celebration-of-busiest-shopping-day.html">stopping digging</a>!! The last thing you should do is trade the car/truck in and roll the shortfall into a new loan. There really is no easy way out of this but you can take some comfort in learning an important financial lesson on a relatively inexpensive purchase (read this to mean you can AVOID having the same thing happen to you on your home mortgage).<br /><br />We are looking to fix the problem here so I won’t talk too much about how to prevent this situation. The easy rules are 1) don’t finance more than 90% of the value and 2) keep the loan shorter than your intended holding period. If you want to read more, I suggest you read the Bankrate article, <a href="http://www.bankrate.com/msn/news/auto/20060821a1.asp">9 ways to avoid, correct upside down car loans.</a> One final word. Some might advise you to buy <a href="http://www.gapinsurancequotes.com/faq.html">gap insurance</a> to protect you from an upside down situation. As a former insurance executive I will tell you that, in my opinion, this is just a gimmick to raise your payments and take advantage of your need to trade in cars quickly. Holding the car longer than your loan is all you need to do. If this is an issue, then you are not learning what it takes to become financially independent. I would avoid leases for the same reason.<br /><br />If you are upside-down there are three things you can do to fix it.<br /><ol><li><strong>Keep and maintain the car/truck</strong> – The piper must be paid. If you are unhappy with this option, do it anyway. Just funnel your anger positively by reminding yourself that you won’t let it happen again. If you are still mad, look at item three below. </li><li><strong>Try to refinance </strong>– This option, it difficult but worth trying especially if you have a very high interest rate and a relatively new or expensive car. When shopping around for a better deal you need to be careful and avoid too many credit inquires (as it will go against your credit score). You also need to make sure that you understand the terms of the existing loan and the new loan to make sure that you are not making the situation worse. You especially want to make sure that you are not extending the length of the loan.</li><li><strong>Make extra payments </strong>– Use the monthly payment to remind yourself that you are digging out of a hole. Make extra payments whenever you can as these will reduce the outstanding principal and lower the amount going toward interest (more on that later) </li></ol><p>Take heart and understand that the problem will be fixed in a relatively short period of time <em>if</em> you stop digging. Whatever you do, <em>DON'T</em> trade it in as you will be compounding the problem. And learn your lesson for your next vehicle purchase. Always plan on a loan that is shorter than the expected holding time of the vehicle!</p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-83560636710229885292007-01-04T10:50:00.000-08:002007-01-06T05:08:52.005-08:00Free Money!!!! -- finding scholarships<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMZMpBKtokYPGXqh7XYVhMvblmMYZUNsPRHA7suhb-x7No0xbNJVmxTHHInx3p_AXHhO6Ck-z0fWzkwChOeQ8P1Tve2KPbgeA2zwlJjz9e_JvX5rnZqzwSFn2WdQKChb1vTEPDOLDUyik/s1600-h/student+money.jpg"><img id="BLOGGER_PHOTO_ID_5016249865202336674" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMZMpBKtokYPGXqh7XYVhMvblmMYZUNsPRHA7suhb-x7No0xbNJVmxTHHInx3p_AXHhO6Ck-z0fWzkwChOeQ8P1Tve2KPbgeA2zwlJjz9e_JvX5rnZqzwSFn2WdQKChb1vTEPDOLDUyik/s200/student+money.jpg" border="0" /></a> The other day as I was checking news on my stocks I saw an interesting headline for Walmart. “Need Money For College? Wal-Mart and Sam's Club Foundation to Reward Up to $7 Million in Community Scholarships.” The article noted that the deadline for applying for these scholarships is January 12, 2007. More information can be found at <a href="http://www.walmartfoundation.org"><span style="font-size:78%;">http://www.walmartfoundation.org</span></a> (click on the Education tab at the top) <p>Besides being proud that Walmart is doing this (Walmart gets far too much negative press in my opinion), the article got me thinking about scholarships in general. If you are in school you are probably on your winter break right now – a good time to find all that free money out there! The CollegeBoard notes that over $134 billion in financial aid is available. There are very few times in life where people give you money – especially for something you were going to do anyway. If you are looking to become financial independent, it is worth the effort to seek out these opportunities. The internet eases the effort. The CollegeBoard has a great article to get you started.<span style="font-size:85%;"> </span><a href="http://www.collegeboard.com/student/pay/scholarships-and-aid/8936.html"><span style="font-size:85%;">http://www.collegeboard.com/student/pay/scholarships-and-aid/8936.html</span></a> The CollegeBoard identifies seven steps in this process. </p><ol><li><strong>Start With a Personal Inventory</strong> – taking time to identify all of your personal characteristics will expand the potential scholarship opportunities </li><li><strong>Research Local Scholarships First</strong> – your town, county, high school or college may offer scholarships. Chances for these scholarships should be better since there is less competition. </li><li><strong>Check Membership Organizations and Employers</strong> – the Walmart article demonstrates how organizations of all types and sizes sponsor scholarships. Look for opportunities in any organizations that you or your parents are affiliated with.</li><li><strong>Use a FREE Scholarship Search Service</strong> – The CollegeBoard identifies four FREE scholarship search services that can provide you with a list of possible scholarships. I am emphasizing the free aspect of this because you should NEVER pay for scholarship information (see discussion below).<br /><a href="http://apps.collegeboard.com/cbsearch_ss/welcome.jsp"><span style="font-size:85%;">Scholarship Search</span></a> <a href="http://www.fastweb.com/"><span style="font-size:85%;">Fastweb</span></a> <a href="http://www.srnexpress.com/index.cfm"><span style="font-size:85%;">Scholarship Research Network Express</span></a> <a href="http://www.collegeanswer.com/paying/scholarship_search/pay_scholarship_search.jsp"><span style="font-size:85%;">Wiredscholar</span></a> </li><li><strong>Contact Your State Department of Higher Education</strong> – Most states have scholarships for residents that attend college in-state. </li><li><strong>Research Institutional Scholarships </strong>– You college website and financial aid office should be able to provide information about scholarships that are offered for your school.</li><li><strong>Employ Scholarship Application Tips when Appling for Scholarships</strong> – remember presentation is at least half the battle. Make sure you read the How to Apply for a Scholarship article for advice on creating a winning application. <a href="http://www.collegeboard.com/student/pay/scholarships-and-aid/8937.html"><span style="font-size:85%;">http://www.collegeboard.com/student/pay/scholarships-and-aid/8937.html</span></a><span style="font-size:85%;"> </span></li></ol><span style="font-size:85%;"><p></span></p>So dig in and have fun! If this becomes "found" money make sure that you set some of it aside for your saving/investment portfolio. Also, make sure that you heed that advice of “if it sounds too good to be true it probably isn’t.” There are many scholarship scams out there that you need to avoid. Reading the CollegeBoard article “Can You Spot a College Scholarship Scam?” <a href="http://www.collegeboard.com/student/pay/scholarships-and-aid/408.html"><span style="font-size:85%;">http://www.collegeboard.com/student/pay/scholarships-and-aid/408.html</span></a> will help educate you on these scams. In general avoid any situations where they are charging fees or asking you for money. Don’t give out personal information unless you’ve initiated the contact and be wary of “financial aid consultants” as they can be shady and financial aid officers often resent their intervention.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-9894632064360167372007-01-03T17:37:00.000-08:002007-01-06T05:10:40.249-08:00The Tax Man Cometh -- income tax preparation<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHZow_fyhyphenhyphenEbpA7IE5rcV-k0_PlaZrvlbAFE7HJqMY4v-Ac6-sV44OuGfzRhmxp5cg8S0kX93eWdDLLoafurS-bV8GX9tVgqWDpR6CvtPVjuraiLhG0KP7CsUrwks121aSLgEK0ChoVHQ/s1600-h/taxes.jpg"><img id="BLOGGER_PHOTO_ID_5015983972366975890" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHZow_fyhyphenhyphenEbpA7IE5rcV-k0_PlaZrvlbAFE7HJqMY4v-Ac6-sV44OuGfzRhmxp5cg8S0kX93eWdDLLoafurS-bV8GX9tVgqWDpR6CvtPVjuraiLhG0KP7CsUrwks121aSLgEK0ChoVHQ/s200/taxes.jpg" border="0" /></a> As unpleasant as it might be, this is a good time to start thinking about your 2006 tax return. I suspect that many of you don’t give much thought to your return. You turn it over to someone else to prepare and are happy if they tell you that you are getting a refund. While you are not alone (more than half of the 130 million returns each year are done by paid preparers), you make two critical errors when taking this course of action. First, having a clear understanding of your tax situation helps move to the path of financial independence – if you are not involved in preparing your taxes you miss a great opportunity to focus your financial goals. Second, getting a refund means that you overpaid – a clear sign that you are not managing your money properly.<br /><br />So, that is the foundation for my unconventional recommendation that you prepare your own taxes this year. Yes you heard me correctly. I said you should complete your own tax return this year. The entire tax code is complicated but my guess is that your tax return is not. Also, there are several tax programs out there (TaxCut and TurboTax) that are inexpensive and do a great job at walking you through the process. Even if you have someone else prepare your return, I still suggest that you use one of these programs to prepare your return and then compare it with the “pro’s” version. There are great sales on these programs in January and you can usually find a copy for under $30. As an added bonus, you might find this software bundled with financial planning software (e.g., Quicken or Money) that you can use to start your budgeting.<br /><br />If you are still not yet convinced, I will give you more to think about. Just because you pay someone to prepare your return, doesn’t mean it is correct. Last April, The Washington Post ran an interesting article that reports the results of a GAO study that revealed errors in 19 out of 19 returns brought to them to test the accuracy of work done by large chain tax-preparation firms. I encourage you to read the article yourself. <a href="http://www.washingtonpost.com/wp-dyn/content/article/2006/04/04/AR2006040401863.html">http://www.washingtonpost.com/wp-dyn/content/article/2006/04/04/AR2006040401863.html</a><br /><br />Why are there so many mistakes? Have you ever heard the term GIGO – garbage in; garbage out?. No matter how qualified the tax preparer is, if they don’t know your individual tax situation they can’t prepare the return properly. This means you have to provide them with the right information or rely on them to ask the right questions. You owe it to yourself to make sure that you at least understand what information has tax consequences so that you can provide it to the preparer. This is where TaxCut or TurboTax comes in handy. These programs walk you through a questionnaire that asks all the right questions (at least for all but the most complicated tax situations). I will leave these programs (or your preparer) to ask all the questions but I will provide you will the general categories that should be addressed:<br /><ul><li><strong>Who needs to file?</strong> – Your requirement to file is based on your income level ($8,450 for single filers) but it is important to note that even if you are not required to file you might want to file to recover any tax withholdings you made or receive credits that you may be entitled to (see below).</li><li><strong>What is your filing status? </strong>– There are four different filing status (married filing jointly, married filing separately, single and head of household) each of which has a different tax rate. Determining your status may not always be as easy as it seems and mistakes are costly (e.g., filing single when you qualify as a head of household)</li><li><strong>What are your exemptions?</strong> – Exemptions reduce your taxable income and are based on your marital status and dependents that you have (or if you are a dependent)</li><li><strong>What is your income?</strong> – Determining your income is not always as easy as it seems. For instance did you know that gambling winnings are income but gifts are not? You essentially need to identify any cash that you received during the year and assess whether it is taxable income or not.</li><li><strong>What are your deductions?</strong> – Deductions are items that can reduce your taxable income. You can take a standard deduction (a preset amount) or itemized (if you have the proper documentation). Itemized deductions fall under the general categories of i) medical, ii) taxes, iii) interest, iv) charitable contributions and v) other miscellaneous deductions such as casualty and theft losses and some employee expenses. Not all expenditures in these categories qualify as deductions so it is important to maintain good records and assess each expenditure independently.</li><li><strong>Are you eligible for any credits?</strong> Credits are very good as they reduce you tax liability dollar for dollar and, for certain lower-income filers, could result in you getting a refund from the government even when you paid no taxes! There are some pretty significant credits related to child care, education and the working poor. This is an area that paid preparers are likely to miss if they don’t know you situation.</li></ul><p>There may also be an issue of the expertise of the preparer. The Washington Times article notes that these erroneous returns were prepared by individuals that are not “enrolled” agents. The GAO encourages you to seek out an enrolled agent (essentially a CPA or former IRS agent). While this might help some, it will be more expensive and still doesn’t solve the GIGO issue. You have to take charge by having enough of an understanding of taxes and your situation that you can assess the competency of the preparer. Let me challenge you by stating that if you can’t be bothered to do that, you are unlikely to ever be truly financially literate. It is a dirty deed that must be done!<br /><br />I hope that I have inspired you to at least attempt to prepare your tax return. Even if you get started and then turn it over to a paid preparer, you will have become more educated on the topic. Gathering the information for your tax return will help you organize your financial paperwork to start a budgeting process. You may identify areas that you did not document and thus have a better understanding of what you need to do for next year. As I said before, budgeting is an iterative process that will improve over time.<br /><br />As a final step I would ask you to determine what your effective tax rate was. This is determined by dividing your total tax liability (line 63 on Form 1040) by your total income (line 22 on Form 1040). This should be the basis for evaluating whether you think your tax burden is appropriate – NOT whether you get a refund or make a payment on April 15th. You should also use your tax return as a basis for adjusting your withholdings so that any refund or payment next year is as small as possible. Again, the software programs will help you with that.<br /><br />I will leave discussing a broader issue that is a personal pet peeve of mine. This is a little off track but let me get on my soapbox for a minute. Because so few people actually pay attention to the taxes they pay, we have an uneducated citizenry that allows elected officials far too much discretion in collecting and spending OUR money. The U.S. tax system really is a clever design that serves to minimize discontent. Think about it. First, you have no choice but to pay as your employer withholds it from your paycheck. Then the rules are so complicated that few feel comfortable calculating your tax liability yourself. This leads to the likelihood that you have too much taken out of each paycheck. But when you get your refund you feel good about it! Since you don’t really know how much taxes you are paying, you tune out any discussion of taxes, leaving politicians to freely spend your hard earned money. Clever but totally absurd if you ask me. And yes, I am mad as hell about it and I am going to do something about it. What you ask? Why, I am going to get as many people focused on their own taxes as I possibly can! So go to it and take charge of your life!!<br /></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-80049341193647498842007-01-03T06:28:00.000-08:002007-01-06T05:11:34.909-08:00Buy Low - Sell High -- textbook buying and selling<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiWerG9DXVRKCbDKVh9bx8ViLUcBswZ_NwY-XVaHioa5djd9pqSlxvze6P5iAVvd1F_g8_3dXjo-wpHLC85v8yMu1N0CnYI7WICo8B05He5rrVnyjBLBvxz0ew4WWsQIK8y0jw1vnFfvHE/s1600-h/open+stack.jpg"><img id="BLOGGER_PHOTO_ID_5015620313191056258" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiWerG9DXVRKCbDKVh9bx8ViLUcBswZ_NwY-XVaHioa5djd9pqSlxvze6P5iAVvd1F_g8_3dXjo-wpHLC85v8yMu1N0CnYI7WICo8B05He5rrVnyjBLBvxz0ew4WWsQIK8y0jw1vnFfvHE/s320/open+stack.jpg" border="0" /></a> Yes, this is a familiar phase in the investing world. Something easier said than done if you don’t have the proper knowledge and discipline. But today I want to talk about this phrase relative to something that really is a no-brainer – buying and selling textbooks!<br /><br />If you are in school, I would wager that textbooks are one of your largest expenditures. According to a July 2005 study by the U.S. GAO, “the average estimated cost of books and supplies per first-time, full-time student for academic year 2003-2004 was $898 at 4-year public institutions, or about 26 percent of the cost of tuition and fees. At 2-year public institutions, where low-income students are more likely to pursue a degree program and tuition and fees are lower, the average estimated cost of books and supplies per first-time, full-time student was $886 in academic year 2003-2004, representing almost three-quarters of the cost of tuition and fees.”<a title="" style="mso-footnote-id: ftn1" href="http://www2.blogger.com/post-create.g?blogID=791860482880795673#_ftn1" name="_ftnref1">[1]</a><br /><br />These costs are outrageous but you can do something about it. My first rule is – avoid the campus bookstore. Sure the bookstore is convenient but you will be paying out of the nose, even if you buy a used book. You may be able to find a student on campus selling the text book but my advice would be to go online. The explosion in web sites that buy and sell textbooks is a testament to how over priced these books have been at campus bookstores. I would be happy to see a little free market competition challenging this monopoly! Google “textbooks,” “buy” and “sell” and you will get close to 7 million hits! Some of the more well known sites include Amazon, Barnes and Noble, and Half.com.<br /><br />I just completed a Masters program and bought all of my books on Amazon. More importantly, I sold most of my books there as well. The net outlay for these books ended up being a couple of hundred of dollars – much less than the costs noted above. I am not necessarily endorsing Amazon over any of the other sites, I am just telling you what I used. I used Amazon because I was familiar with it and found it to work for me. You might find another site works better for you.<br /><br /><strong><u>Buy Low</u></strong><br />Buying textbooks online is so much cheaper and easy that I can’t understand why everyone doesn’t do it. I suppose the main drawback is the shipping time. If you wait until the first day of class to find out the required textbooks you may fall behind in the assignments. Please don’t let you grades suffer. The easiest fix to that is to get this information before class starts – either from the instructor or the bookstore website. You might also be able to share a book with a buddy or use the library’s copy while you are waiting for your book. Worse case, you can pay for express shipping – it will probably still be cheaper.<br /><br />I sense that another reason students don’t comparison shop for books is because they are not paying for them. Your parents or employer might be paying these costs. I think it just makes good sense to spend others money just as prudently as you spend your own but I know that is not the easiest lesson to learn. But you might be able to make this a revenue generating activity. For instance, if you parents are buying the books, you might be able to work out a deal to get a percentage of the saving. This might even give you a jump start to saving (see the November 21, 2006 post “Just Do It!). It might be harder to work out the same kind of deal with your employer but I think they would be impressed knowing that you are spending their money wisely. It could be a career boosting move!<br /><br /><strong><u>Sell High</u></strong><br />Don’t forget the other side. As an undergraduate, I kept most of my textbooks, especially those for my major. I was a nerd – my guess is that most students don’t form such an attachment. For the others nerds out there, I would also tell you that there are probably very few textbooks that you should keep. Especially now as textbooks are changing so frequently, they become out-dated very quickly. Any reference material you need can be readily found on the internet or at local or company libraries. As with selling, avoid the bookstore. I am appalled by how little these bookstores offer While a little more effort is required to sell you books online, you will get far more money for them.<br /><br />So what effort is required? Not much really. Again, with Amazon, all I needed to do was set up an account and list my book for sale. Amazon only charges a commission if something is sold (usually about 20%). Every two weeks any money due you is credited to your bank account (even if it is a small amount). The shipping is a bit of a pain because it requires a trip to the post office. I usually save the package that the book was mailed in and reuse it when I ship it out. The standard shipping is media mail where the rates are quite low and you do get a shipping credit so I usually find that it doesn’t detract from the amount that I receive. You have two business days to ship but I advertise that I ship within 24 hours of the order (I find that this encourages students to select my book because time is usually a factor. I also frequently offer expedited and international shipping for the same reason.). I suspect that I could have made more by using other sites but I used Amazon because it was pretty painless.<br /><br />Just a few other points. I find that I need to highlight passages in my textbooks to fully absorb the information. Many students don’t do this because they plan on reselling it afterward. Don’t be penny wise and pound foolish. The emphasis should be on learning the material. If you need to highlight to learn, then that is what you should do. I find that it hasn’t hindered my ability to sell the books. I make sure that I accurately describe how much highlighting there is and price the book accordingly. There is a market for these books. Selling online also helps when you school updates to a new edition. Usually there is still a market for the older editions for a few more semesters for other schools that haven’t already switched to the new edition. Timing is also a factor, you want to make sure that you have your book listed a month or a few weeks before the semester. This will show you the current prices. If it doesn’t sell, try again for the next few semesters. I had a text that came out with a new edition and I thought I would never sell it. I checked a few semesters later and found that I actually got a better price by waiting!<br /><br />And don’t forget – proceeds from these sales should be found money. Don’t just blow it away. Use it to start that saving account!<br /><br /><a title="" style="mso-footnote-id: ftn1" href="http://www2.blogger.com/post-create.g?blogID=791860482880795673#_ftnref1" name="_ftn1">[1]</a> <a href="http://www.gao.gov/new.items/d05806.pdf">http://www.gao.gov/new.items/d05806.pdf</a>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-56742293916124924022007-01-02T15:28:00.000-08:002007-01-06T05:15:16.500-08:00Let's Get this Party Started! -- applying Covey's third habit of highly effective people<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJjzLZoxRjtptxGMzdu5JMZDujcQxqCK3vRhJpAiEx0Zxl7sWQmQ3Ntw3GXwcw0Lje3kqG4tGAxBOyV5ktyFLR_bzFhvPnpMwSYGPF2oqBI5NntBgdlPK8PuN35xa9NbKYdSuFm0Kw7q0/s1600-h/motion2.jpg"><img id="BLOGGER_PHOTO_ID_5015579364972856162" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 173px; CURSOR: hand; HEIGHT: 129px; TEXT-ALIGN: center" height="145" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJjzLZoxRjtptxGMzdu5JMZDujcQxqCK3vRhJpAiEx0Zxl7sWQmQ3Ntw3GXwcw0Lje3kqG4tGAxBOyV5ktyFLR_bzFhvPnpMwSYGPF2oqBI5NntBgdlPK8PuN35xa9NbKYdSuFm0Kw7q0/s320/motion2.jpg" width="286" border="0" /></a><br /><div align="center"><em><span style="color:#996633;"><strong>A body in rest tends to stay at rest,<br />and a body in motion tends to stay in motion,<br />unless the body is compelled to change its state.<br /></strong></span><br />Newton’s First Law of Motion </em></div><em><div align="left"><br /></em></div><br />So now you know that I have two speeds, on and off! I am sorry that I have been away so long. We can all learn a lesson from this. If we don’t stay focused on our goals, days turn into weeks, weeks turn into months and before we know it, we are doing what is urgent but not what is important. Stephen Covey cautions us about this in the third habit of highly effective people, put first things first. As he describes it, the four quadrants of activities are:<br /><br /><div align="left"><table><tbody><tr><td></td><td><p align="center"><strong><u><span style="font-size:85%;">Urgent</span></u></strong></p></td><td><p align="center"><strong><u><span style="font-size:85%;">Not Urgent</span></u></strong></p></td></tr><tr><td><strong><span style="font-size:85%;">Important</span></strong></td><td><span style="font-size:85%;">I – crises, pressing problems, deadline-driven projects</span></td><td><span style="font-size:85%;">II – prevention, production capability (PC)</span><a title="" style="mso-footnote-id: ftn1" href="http://www2.blogger.com/post-create.g?blogID=791860482880795673#_ftn1" name="_ftnref1"><span style="font-size:85%;">[1]</span></a><span style="font-size:85%;"> activities, relationship building, recognizing new opportunities, planning, recreation</span></td></tr><tr><td><strong><span style="font-size:85%;">Not Important</span></strong></td><td><span style="font-size:85%;">III – interruptions, some calls/mail/reports/meetings, proximate, pressing matters, popular activities</span></td><td><span style="font-size:85%;">IV—trivia, busy work, some mail/calls, time wasters pleasant activities</span></td></tr></tbody></table></div><div align="left"><br /><em>Source:The Seven Habits of Highly effective People (page 151)<br /></em><br />As Covey explains, “Effective people stay out of Quadrants III and IV because, urgent or not, they aren’t important. They also shrink Quadrant I down to size by spending more time in Quadrant II” (page 153). As we start the new year it is good to be reminded of this habit.<br /><br />I’ve had my wake up call. Why don’t you take a minute or two and estimate what percentage of your time last year was spent in each of these quadrants. Remember, this is for you alone, there is no need to share! I am not even going to tell you what quadrants I’ve been in these last few weeks!Make it a goal to shift your focus this year to more Quadrant II activities.<br /><br /><a title="" style="mso-footnote-id: ftn1" href="http://www2.blogger.com/post-create.g?blogID=791860482880795673#_ftnref1" name="_ftn1">[1]</a> Abilities or assets that produce the “golden eggs.” </div><div align="left"></div><div align="left"><br /></div><div align="left"></div></tbody><div align="left"></div><div align="left"></div><div align="left"></div><div align="left"></div><div align="left"></div><div align="left"></div><div align="left"></div><div align="left"></div><div align="left"></div><div align="left"></div><div align="left"></div><div align="left"></div><div align="left"></div><div align="left"></div><div align="left"></div>Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-791860482880795673.post-15805091393391960152006-12-04T10:34:00.000-08:002006-12-04T10:37:11.521-08:00Out to lunch<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidwcOVec2ZM9TiyHoxbGggUbd3U1uEuvF2D6Twb1GnzCzdoZoIMaU0gg7EI74f33cdreM_J5CCRRG83Q3cf6lcJDVK3Z-ogC5pI8McNuvuU7x_S1mPdgDhD5y1PbShhdodWocbmiPk1p0/s1600-h/out+to+lunch.jpg"><img id="BLOGGER_PHOTO_ID_5004742492308376978" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidwcOVec2ZM9TiyHoxbGggUbd3U1uEuvF2D6Twb1GnzCzdoZoIMaU0gg7EI74f33cdreM_J5CCRRG83Q3cf6lcJDVK3Z-ogC5pI8McNuvuU7x_S1mPdgDhD5y1PbShhdodWocbmiPk1p0/s400/out+to+lunch.jpg" border="0" /></a><br /><div><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjhjkD2YURwKzfr0xREN7Owg2uFjIS-FAQVE7XB26lVaFHhws_uqPk8J0QP_MEDP5BMdV_SeRRIBxXZ563C1TVNjH3PAyaL45D5s_Qvp3XXQBbxOHo6S51H8RxF86p70C_yPwc0-xbHKCY/s1600-h/out+to+lunch.jpg"></a><br /><br /><div></div></div>I haven't run out of ideas to discuss here. It is just that my "real" life is catching up to me and I will be swamped for the next couple of weeks. I will be posting again soon so please stay tuned!Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-21308980022160010022006-11-30T10:11:00.000-08:002007-01-06T05:16:17.765-08:00Budgeting is a State of Mind -- how to start a financial budget<a href="http://photos1.blogger.com/x/blogger2/5145/96662656601659/1600/341382/think%20kid.jpg"><img style="FLOAT: left; MARGIN: 0px 10px 10px 0px; CURSOR: hand" alt="" src="http://photos1.blogger.com/x/blogger2/5145/96662656601659/400/402078/think%20kid.jpg" border="0" /></a> When most people think about budgets, they think – accounting and BORING.— Sure, it makes sense to budget but I have more important things to do than play with a bunch of numbers!<br /><br />It is true that some budgets are quite complicated and boring. In my opinion, simple budgets are better. Complicated budgets are hard to comply with and frequently have adverse consequences. Want an example of budgeting gone wrong? Look no further than the Budget for the U.S. Government.<span style="font-size:85%;"> </span><a href="http://www.gpoaccess.gov/usbudget/"><span style="font-size:85%;">http://www.gpoaccess.gov/usbudget/</span></a><br /><div><p>The best budget is one the makes you aware of what you are earning and spending. The general goal is to earn more than we spend so that we are left with money to save and invest. You can start your budgeting process by following four simple steps.</p><ol><li><strong>Track</strong> – The first step in effective budgeting is keeping track of your earnings and expenditures on a monthly basis. There are a variety of ways to do this. You can set up a simple paper or computer spreadsheet register or use a software program like Quicken or Microsoft Money These two programs are very inexpensive and easy to use. They usually come preloaded on many personal computers so you may have a trial version available right now. Paying for most of your purchases on a debit card or credit card saves you the trouble of tracking those expenditures – just make sure you don’t charge more than you can pay off each month. Even if you are not ready to put pen to paper, I suggest you start to mentally track these items.</li><br /><li><strong>Evaluate</strong> – At the beginning of a month, compare your prior month actuals to what you estimated (of course you can’t do that in the first month). If there are differences think about why/how they arose? Was it a bad budget? Was there an unforeseen cost? Did you temporarily lose your mind? In the evaluation process you might also be surprised by the “unaccountable” funds. Was there a hole in your pocket? Probably not. What was more likely is that you got cash from an ATM and spent it like a drunken sailor. While comparing your actual to budgeted amounts may be a somewhat embarrassing process, remember, this can be done privately. This doesn’t need to be shared with others. The important thing is that you understand why the actuals were different than the budget.</li><br /><li><strong>Estimate</strong> – Use the information from the evaluation process to establish a budget for the next month. . It is important that the budgets reflect reality. Don’t budget only $25 for entertainment when you plan on going out every weekend. We only fool ourselves when we make up an unrealistic budget (why am I thinking about the Government again?)</li><br /><li><strong>Act</strong> – Use the estimate to focus your actions for the next month. Correct any behaviors that caused you to go off budget in previous months. For instance, if you found that any cash you had on hand just burned a whole in your pocket, try to avoid ATM withdrawals. Also, determine whether you want to make any modifications to your behavior (e.g., earn more or spend less). Some modifications (such as making more money) might require months, even years, to fully modify. Just make sure that you are taking the necessary first steps. Most importantly don’t continue bad behavior. If you are spending more that you earn, you need to fix that ASAP. </li></ol><p>Budgeting is a continual process. One where practice makes perfect. It is understandable that you will make mistakes at the beginning. Just think about taking small steps forward. When I started budgeting all I did was simply make sure that I never spent more in a month than I earned. If I overspent in any one month, I cut back in the next month until I was back in balance. I kept track mostly by monitoring my bank balance -- there were no fancy software programs at that time! </p><p>Your budget will become more sophisticated over time. And, once you see how budgeting can improve your financial position, you will become more motivated to give it more thought. For instance, in my twenties, I began automatic investing as part of my budget. Once I saw how the funds accumulated, I was motivated to save more and spend less </p><p>Trying to establish a budget that is too complicated or too severe at the beginning will just turn you off from the process. Nobody was going to tell me not to spend my hard-earned money when I first graduated from college! In later posts, I will get into more of the mechanical process for setting up a budget (you can also go to the GE money budgeting website shown as the budgeting link below). For now, I just want to leave your with the thought, “I think, therefore I budget.”</p></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-34812845876680482132006-11-29T11:57:00.000-08:002007-01-06T05:13:13.472-08:00A Hard Way to Make an Easy Living --making money playing poker<a href="http://photos1.blogger.com/x/blogger2/5145/96662656601659/1600/222660/poker%20skull2.jpg"><img style="FLOAT: right; MARGIN: 0px 0px 10px 10px; CURSOR: hand" alt="" src="http://photos1.blogger.com/x/blogger2/5145/96662656601659/400/983703/poker%20skull2.jpg" border="0" /></a> If you are reading this blog you are probably interested in getting rich. We all want to find the easiest and quickest way to get there. These days there is all this talk about how you can make a career out of playing poker. I googled “poker” and “career” and got 1,970,000 hits. Sounds an awful lot like the day-trading craze back in the dot-com era.<br /><br />Yes, some people do make money playing poker. Just like some guys make money playing football or basketball. Most of us realize that mastering some athletic skill takes hard work effort and a certain innate ability. We give up our dreams of going “pro” at a very young age. If you are thinking that you can make money playing poker you need to recognize that, like professional athletes, very few people have what it takes to consistently win at poker.<br /><br />Trying to make money at poker sounds too much like work to me. If you don’t think I know what I am talking about how about taking the advice of a successful poker player, Barry Greenstein? Here are some of the comments found on his web page <a href="http://www.barrygreenstein.com/"><span style="font-size:85%;">http://www.barrygreenstein.com/</span></a><br /><blockquote><p><strong><span style="font-size:85%;color:#009900;">What advice do you normally give to someone starting on a poker career?</span></strong></p><p><span style="font-size:85%;color:#663300;">Normally, I advise people to put their energy into something more productive. I explain that I have played cards since I was a young child. I am a mathematician. I am well versed in psychology. I am very easy going, yet very competitive. In short, I believe I have the essential qualities to be a good poker player. But even with that, it has not always been easy. </span></p><p><strong><span style="font-size:85%;color:#009900;">Maybe it's the TV and participating stars, I don't know, but around here, poker seems to have captured a whole new generation in a big way. Junior high and high school kids are having big games routinely and it's far more widespread than I ever remember. Beyond TV, the popularity of the game has led to a lot of other forms of media attention, and now your book, which has all this potential for mass-market appeal that just wasn't there even five years ago. Any thoughts, any qualms, about how this came to be?</span></strong></p><p><span style="font-size:85%;color:#663300;">Televised poker is similar to reality TV, but poker players are really competing for a million dollars and are not acting. When people watch professional sports they may project themselves as being able to “play with the pros,” but they know it is a fantasy. Viewers of poker can think along with the players and really feel that if they had the opportunity, they might be one of the players at the final table. Many of the viewers actually play poker with family or friends at least a few times a year.<br /></span></p><p><span style="color:#663300;"><span style="font-size:85%;">I am uncomfortable when teenagers ask me for poker advice, even though I played a lot of poker when I was in my teens. I have told my teenage son Nathaniel and my teenage nephew Michael that I will not teach them to play poker until they have completed their educations and have accomplished something productive. </span></p></blockquote></span><p><span style="color:#000000;">Take it from one who has been there, a poker career is best considered after establishing yourself in some other profession. </span></p><p><span style="color:#000000;">What you are not going to find in all those articles about making a career out of poker is the dangerous downside. Google “poker” and “addiction”and you get 1,340,000 – almost as many as for poker careers. Very few people get addicted to playing football but the sad fact is that many get addicted to poker and other forms of gambling. There is a lot ofeducational materials out there about the dangers of drug, alcohol andtobacco. Gambling addictions are just as bad if not worse. My advice is to stay away from competitive poker to avoid any potential for addiction. Compulsive gambling is a sure way to ensure that you will NOT become financially independent! </span></p><p><span style="color:#000000;">LaunchPoker has a good article on poker addiction. If you are not yet convinced about the wisdom of my words, I suggest you read it.<span style="font-size:85%;"> </span></span><a href="http://www.launchpoker.com/psychology/-poker-addiction-/"><span style="font-size:85%;color:#000000;">http://www.launchpoker.com/psychology/-poker-addiction-/</span></a><span style="color:#000000;"><span style="font-size:85%;"> </span>The article has the 20 questions taken from the official site of Gamblers Anonymous that ANY poker player should ask themselves at least once a year. These questions are provided to help the individual decide if he or she is a compulsive gambler and wants to stop gambling. If you answer “yes” to more than 7 of them – you have serious problems. And remember – its not a joke!</span></p><ol><li><span style="font-size:85%;color:#000000;">Did you ever lose time from work or school due to gambling? </span></li><li><span style="font-size:85%;color:#000000;">Has gambling ever made your home life unhappy?</span></li><li><span style="font-size:85%;color:#000000;">Did gambling affect your reputation?</span></li><li><span style="font-size:85%;color:#000000;">Have you ever felt remorse after gambling?</span></li><li><span style="font-size:85%;color:#000000;">Did you ever gamble to get money with which to pay debts or otherwise solve<br />financial difficulties? </span></li><li><span style="font-size:85%;color:#000000;">Did gambling cause a decrease in your ambition or efficiency?</span></li><li><span style="font-size:85%;color:#000000;">After losing did you feel you must return as soon as possible and win back your<br />losses? </span></li><li><span style="font-size:85%;color:#000000;">After a win did you have a strong urge to return and win more?</span></li><li><span style="font-size:85%;color:#000000;">Did you often gamble until your last dollar was gone?</span></li><li><span style="font-size:85%;color:#000000;">Did you ever borrow to finance your gambling?</span></li><li><span style="font-size:85%;color:#000000;">Have you ever sold anything to finance gambling?</span></li><li><span style="font-size:85%;color:#000000;">Were you reluctant to use "gambling money" for normal expenditures?</span></li><li><span style="font-size:85%;color:#000000;">Did gambling make you careless of the welfare of yourself or your family? </span></li><li><span style="font-size:85%;color:#000000;">Did you ever gamble longer than you had planned? </span></li><li><span style="font-size:85%;color:#000000;">Have you ever gambled to escape worry or trouble? </span></li><li><span style="font-size:85%;color:#000000;">Have you ever committed, or considered committing, an illegal act to finance gambling? </span></li><li><span style="font-size:85%;color:#000000;">Did gambling cause you to have difficulty in sleeping?</span></li><li><span style="font-size:85%;color:#000000;">Do arguments, disappointments or frustrations create within you an urge to gamble? </span></li><li><span style="font-size:85%;color:#000000;">Did you ever have an urge to celebrate any good fortune by a few hours of gambling?</span></li><li><span style="font-size:85%;color:#000000;">Have you ever considered self destruction or suicide as a result of your gambling? </span></li></ol><span style="color:#663300;"><p><span style="color:#000000;">If you play poker please ask yourself these questions. If you answer yes on 7 or more please seek help by talking with someone you trust and/or contacting Gamblers Anonymous or some other gambling addiction treatment organization. Gambling is NOT the way to financial independence! </span></span></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-9537604417743617832006-11-28T11:13:00.000-08:002007-01-06T05:17:49.189-08:00Are You Holding Your Breath? -- how investing in real estate fits into a financial plan<a href="http://photos1.blogger.com/blogger2/5145/96662656601659/1600/hold%20your%20breath.3.jpg"><img style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 263px; CURSOR: hand; HEIGHT: 240px" height="283" alt="" src="http://photos1.blogger.com/blogger2/5145/96662656601659/400/hold%20your%20breath.1.jpg" width="304" border="0" /></a> You may have noticed that none of my posts discuss “investing” in real estate. If you are waiting for a post on this topic I will politely tell you not to hold your breath. Buying and selling individual real estate properties for rental or “flipping” purposes is one topic I won’t be talking about.<br /><br />Don’t get me wrong. As I will discuss in a later post, I strongly believe that everyone should own the real estate they live in – your house, condo, or trailer if that is what floats your boat. I also believe that a diversified real estate product such as Real Estate Investment Trusts (REITs), are an important part of any investment portfolio. Buying individual properties in an attempt to make money, however, is, in my opinion, an occupation not investing. A whole different animal that requires a whole different skill set. I am not knocking it (ok maybe just a little), it is just something I don’t do. If you are looking for “hot” real estate tips you have come to the wrong place. <div><div><div><div><div><br />I don’t invest in real estate because, frankly, I find it too much like work. Owning individual investment properties requires securing/retaining tenants (dealing with the inevitable vacancies and deadbeats) and maintaining/improving the property (I struggle enough with keeping my own house in order!). If you are going to “invest” in individual real estate properties you need to make sure that you are competent in these two areas – and that you enjoy that line of work.<br /></div><div>There are additional risks related to investing in individual real estate properties such as concentration risk (putting all you eggs in one basket) and illiquidity (can’t get the cash out quickly). Additionally, such investments almost always involve leverage (debt). While leverage can provide better returns when values are rising, it works against you when values fall. Most of you weren’t around to remember how real estate prices crashed in the 1980s. Not to worry, you are likely to see that soon. As the October 11, 2006 Forbes article, “Where to Worry About Real Estate” notes, “Everyone knows the housing market is slowing; the question is how fast and how painfully.”<a title="" style="mso-footnote-id: ftn1" href="http://beta.blogger.com/post-create.g?blogID=791860482880795673#_ftn1" name="_ftnref1">[1]</a> </div><div><br />For those of you that think there is free money to be had in real estate, I suggest you do your homework carefully. You will hear and read many stories about how someone made a fortune in real estate. You don’t hear, however, about the fortunes lost. The last real estate bust caused Donald Trump to declare bankruptcy in 1990. The Donald may have recovered personally but many of his creditors did not. To add further insult to injury, the Trump Hotels & Casino Resorts sought voluntary bankruptcy protection in 2005. Investing in real estate is not for amateurs. You might start doing your homework by reading The Key to Getting Stated in Real Estate Investing (Know Your Risks) by Dr. Steve Sjuggerud <a href="http://www.investmentu.com/realestateinvestmentadvice.html#key"><span style="font-size:85%;">http://www.investmentu.com/realestateinvestmentadvice.html#key</span></a> and “The real estate B.S. artist detection checklist” by John T. Reed. <a href="http://www.johntreed.com/BSchecklist.html"><span style="font-size:85%;">http://www.johntreed.com/BSchecklist.html</span></a><span style="font-size:85%;"><br /></span><br /><br /><a title="" style="mso-footnote-id: ftn1" href="http://beta.blogger.com/post-create.g?blogID=791860482880795673#_ftnref1" name="_ftn1"><span style="font-size:85%;">[1]</span></a><span style="font-size:85%;"> </span><a href="http://www.forbes.com/home/realestate/2006/10/10/housing-bubble-metros-life-re-cx_tvr_1011restate.html"><span style="font-size:85%;">http://www.forbes.com/home/realestate/2006/10/10/housing-bubble-metros-life-re-cx_tvr_1011restate.html</span></a><span style="font-size:85%;"> </span></div></div></div></div></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-62258008259727874932006-11-27T12:42:00.000-08:002007-01-06T05:19:38.291-08:00I Hire People to Do That! -- things you should know if you plan to use a financial advisor<a href="http://photos1.blogger.com/x/blogger2/5145/96662656601659/1600/837681/chauffeur.jpg"><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" height="190" alt="" src="http://photos1.blogger.com/x/blogger2/5145/96662656601659/400/832647/chauffeur.jpg" width="285" border="0" /></a><br /><div></div><div></div><p align="center"><span style="font-size:130%;color:#cc33cc;"><strong>Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy.<br />Groucho Marx (1890 - 1977)</strong></span></p><span style="font-size:130%;color:#cc33cc;"><strong><p align="left"></strong></span></p>As hard as it is to believe, I do understand that some people just don’t like to think about money. Sure they want it but they want someone else to manage it. Nothing wrong with that. My only advice is to be careful who you hire. Anyone can call themselves a financial advisor, consultant, planner or whatever. Remember the simple rule that "you get what you pay for."<br /><br />Perhaps the most direct question you should ask when engaging an advisor is “Why are they doing it? If they were really that good at managing money, wouldn’t they be too busy managing their own? I am always amused when I listen to analysts recommend stocks on CNBC and then proudly state that they don’t own any. Why would you want to take someone’s recommendation that has no financial interest in seeing how it turns out? Sure there are conflict of interest issues that need to be sorted out but I definitely subscribe to the “put your money where you mouth is” school of thought.<br /><br />So, once you get past that hurdle, there are other questions that you should ask. These questions fall into four general categories:<br /><ul><li><strong>Compensation</strong> – how much do they charge, what way do they charge (hourly, flat fee, commission or combination) and who else pays them (beware of advisors that collect commissions or product placement fees)</li><br /><li><strong>Qualifications</strong> – what makes them a good financial advisor? What licenses and professional designations do they have? What is their education and work history? Have they ever had complaints of disciplinary action taken against them?</li><br /><li><strong>Products and Services</strong> – What exactly are they going to do for you? What services do they offer? What information will you need to provide? Do they offer a full range of investment vehicles or only those from particular companies?</li><br /><li><strong>Performance</strong> – Many questionnaires leave this off but I think it is important. After all, that is the bottom line of why you are hiring them. I never bought into the logic that advisors could explain away bad results by bad markets. I want to see a proven history with accounts similar to mine. Further, the performance results should be in compliance with the CFA Institute’s Global Investment Performance Standards (GIPs). These standards are best practices for institutional investors. I see no reason why investment managers for the little guys can’t comply as well. The CFA Institute has a good 2 page article on evaluating investment portfolio performance that I would encourage you to read. <a href="http://www.cfainstitute.org/aboutus/investors/pdf/How_to_Evaluate.pdf"><span style="font-size:85%;">http://www.cfainstitute.org/aboutus/investors/pdf/How_to_Evaluate.pdf</span></a> </li></ul><p>There are several questionnaires on the internet but I am not including links to any because, frankly, I didn’t find them to be that good. Perhaps in my free time I will put one together ;-). In the meantime I would use the list above. In addition, I would also ask to see the advisor’s ADV Form (or the state securities agency equivalent). This is an annual filing that is required by every registered advisor and provides useful information regarding their operations. You can read more about this form at this link.<span style="font-size:85%;"> </span><a href="http://financial-dictionary.thefreedictionary.com/Form+ADV"><span style="font-size:85%;">http://financial-dictionary.thefreedictionary.com/Form+ADV</span></a><span style="font-size:85%;"><br /></span><br />Another simple rule to follow. Watch for hidden clues and body language. If the advisor is uncomfortable answering these questions or providing you with backup documentation, run don’t walk to the nearest exit!!!</p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-2327927134519961232006-11-26T16:52:00.000-08:002007-01-06T05:22:06.166-08:00What's in a Name? -- distinguishing amongst professional financial designations<a href="http://photos1.blogger.com/x/blogger2/5145/96662656601659/1600/393173/financial%20guru.jpg"><img style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 235px; CURSOR: hand; HEIGHT: 163px" height="169" alt="" src="http://photos1.blogger.com/x/blogger2/5145/96662656601659/400/992634/financial%20guru.jpg" width="275" border="0" /></a> Since I have started this blog, I have been surfing the investment sites on the internet. It makes me wonder whether the world really needs another blogging investment expert. We will find out won’t we? If anyone out there in cyberspace is finding my comments useful, I would appreciate hearing from you. I won’t promise to stop if I don’t hear from you, it just would be nice to know someone is listening ;-).<br /><br />So who is worthy of your time? Call me biased but I do think that is important for financial writers/advisors to have some type of professional designation. Why else would I have worked so hard to get my CPA and CFA? I am sure that there are investment experts out there with no professional designations who are very good. The legendary investor, Warren Buffett comes to mind. Mr. Buffett has no letters after his name – just a whole lot of zeros! He does however have a Masters from Columbia University and was the protégé of the Benjamin Graham, the father of value investing. My point is that acquiring a professional investment designation shows a certain level of competency and dedication to the subject. If your advisor doesn’t have a designation, you need to do further research to make sure that he/she exhibits Buffett-like qualities.<br /><br />OK. We’ve established the importance of professional designations now comes the hard part. Which one? The International Association of Registered Financial Consultants (IARFC) reports that as of January 2005 there are 89 designations, certifications and degrees and 87 financial services associations and professional institutions. If you want to torture yourself, you can read a little of each on IARFC’s web site. <a href="http://www.iarfc.org/content_sub.asp?n=64">http://www.iarfc.org/content_sub.asp?n=64</a><br /><br />In my, albeit bias opinion, there are three that merit special attention – CFA, CFP and CPA for generalist investment knowledge. I have shown the description from the IARFC’s web site for these designations below.<br /><br /><div><ul><br /><li><strong>CFA Chartered Financial Analyst</strong>. Has completed three comprehensive exams on ethics and professional conduct, securities and portfolio management and investment valuation offered by the CFA Institute (formerly Association for Investment Management and Research - AIMR). Candidates must also meet reference, ethics and work experience requirements. There are over 30,000 CFA charter holders worldwide.</li><br /><li><strong>CFP Certified Financial Planner™.</strong> In the U.S. a Certified Financial Planner professional who successfully completes the CFP Board of Standards comprehensive examinations and meets ongoing certification requirements. CFP is an internationally recognized designation held by over 55,000 people in 13 countries, although there are some differences in the accreditation process outside of the U.S..</li><br /><li><strong>CPA Certified Public Accountant</strong>. Has met educational qualifications, such as a bachelors or masters degree in accounting, passed four state-certifying examinations and met experience qualifications in the area of public accounting. CPAs are licensed individually by state and can hold licenses for more than one state at a time. An approximate number of CPAs is 600,000 with 55% of them being AICPA members.</li><br /><li><strong>CPA/PFS Certified Public Accountant - Personal Financial Specialist</strong>. A designation awarded by the AICPA to accountants who have completed additional study and examination requirements in personal financial planning.</li></ul><br /><p>A financial advisor that possesses one of these designations should have some level of knowledge in financial matters -- but -- a designation (or two) is not a guarantee of expertise. Just as I shudder to think about some of my college classmates that are now surgeons, there are many CPA, CFAs and the like that are not worth a lick. You still need to determine each individual’s competency based on their character and performance. In my next post, I will discuss the types of questions that you should be asking your advisor to assess these traits.</p></div>Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-791860482880795673.post-79354870393438451972006-11-26T09:34:00.000-08:002007-01-06T05:24:23.543-08:00Investing Basics<a href="http://photos1.blogger.com/x/blogger2/5145/96662656601659/1600/366196/stock%20picks.jpg"><img style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 188px; CURSOR: hand; HEIGHT: 138px" height="122" alt="" src="http://photos1.blogger.com/x/blogger2/5145/96662656601659/400/909939/stock%20picks.jpg" width="199" border="0" /></a> I have been searching around the internet for some good articles on investment basics. Imagine my surprise when I came across an article from the SEC (yes, the government agency) that was pretty good. In fact, it covers all the key points in just a few pages in plain easy to read words. Today is a good day as I see that some of my tax dollars are going to good use!<br /><br />I would encourage anyone interested in investing to start with this article. <a href="http://www.sec.gov/investor/pubs/assetallocation.htm">http://www.sec.gov/investor/pubs/assetallocation.htm</a>. My cliff notes version and comments from the peanut gallery are below:<br /><br /><strong>Key Factors</strong> – the two key factors to consider when investing are what is referred to as the investment time horizon and the investors risk tolerance.<br /><br /><ul><li><strong>Time Horizon</strong> – how long you plan to invest. In general a longer time horizon means an investor can have a riskier more volatile investment portfolio. </li><br /><li><strong>Risk Tolerance</strong> –the investors ability and willingness to take losses on his portfolio is an important factor that should be identified prior to investing. Risk and reward are inextricably entwined. If you want higher returns, you need to recognize that you will need to accept higher risks (read losses) </li></ul><p><strong>Investment Choices</strong> – there are three broad classes of assets that are typically considered part of an investment portfolio – stocks, bonds, and cash. In addition there are other category specific investments (such as real estate) that might also be included in a portfolio. In my opinion these other categories should only be invested in after the investor has meaningful investments in the three major classes. I know many of you are wondering why I think this way because real estate is (or was) all the rage these last several years. I will write another post later on the appropriate place for real estate in your portfolio. </p><ul><li><strong>Stocks</strong> – highest returns and highest risk. There are subclasses within the stock category, with varying degrees of risk. The broadest of these subclasses are U.S. large cap, U.S. mid cap, U.S small cap and foreign stocks. </li><br /><li><strong>Bonds</strong> – bonds are generally less volatile than stocks and thus offer lower returns. Bonds are highly influenced by interest rates so their value will vary with movements in the rates (which is why bond traders pay close attention to the Fed). Subclasses of bonds include government bonds (lowest risk), corporate bonds (with risk related to the issuers credit rating) and foreign bonds (which have the added risk of foreign currency) </li><br /><li><strong>Cash</strong> – the safest of the asset class but also the lowest returns. Cash portfolios are not likely to outperform inflation over long periods of time. </li><br /><li><strong>Other</strong> – this class includes (real estate, precious metals and other commodities, and private equity. In my opinion, these asset classes should not represent a significant portion of a beginning investors portfolio (except of course the real estate that you plan to live in) </li></ul><p>The initial decision that an investor needs to make is determining which asset classes to invest in. This is called “Asset Allocation” and will be determined largely based on the investors time horizon and risk tolerance. The SEC sites has a link to an asset allocation calculator offered by the Iowa Public Employees Retirement System. <a href="http://www.ipers.org/sub/calcs/AssetAllocator.html">http://www.ipers.org/sub/calcs/AssetAllocator.html</a> Imagine that, another good product from a government institution. Try it. I think you will find it useful.<br /><br />The SEC article introduces two other important investment concepts – diversification (which I talked about in yesterday’s post) and rebalancing (maintaining the appropriate asset allocation).<br /></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-86206728973467499912006-11-25T18:17:00.000-08:002007-01-06T05:25:49.178-08:00Chomping at the bit? -- how to start an investment portfolio<a href="http://photos1.blogger.com/x/blogger2/5145/96662656601659/1600/714945/chomping%20at%20the%20bit.jpg"><img style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 164px; CURSOR: hand; HEIGHT: 206px" height="255" alt="" src="http://photos1.blogger.com/x/blogger2/5145/96662656601659/400/613883/chomping%20at%20the%20bit.jpg" width="216" border="0" /></a> <span style="font-family:times new roman;">Most of my posts so far have been about debt. This post is for those of you out there that are thinking “enough already, I want to get on to investing.” We will be talking a lot about investments in later posts. The main issue with starting with investments is that you need money to invest (at least $3,000 in most cases). It is also hard to start with investing because there is a lot to learn in order to invest successfully. For those of you chomping at the bit I want to show you how to get started. I want to provide you with a simple, low risk (note that this does not mean NO risk) method for investing small amounts. Putting myself in your shoes, I am seeing that this may sound easier than it is. I have just spent several hours researching this topic on the internet. There is a ton of information on investing for beginners but none of it is presented in a concise manner. So, here is my attempt. </span><br /><div><div><ol><li><span style="font-family:times new roman;"><strong>First, take advantage of any tax deferred plans offered by your employer</strong> – if your employer has any saving plan you should first invest in this. Not only are taxes deferred on many of these plans, but many employers match contributions. This match almost guarantees that you will earn more on these investments that you earn elsewhere. The issue is that there are restrictions as to when withdrawals can be taken from these plans so you need to know the rules. While I started investing in these plans, I quickly moved to other investments because I knew that I wanted more access to my funds. To get the best of both worlds, you will likely need to invest more – this requires strong discipline in delayed gratification which you may or may not aspire to. As a student, this may not be an issue for you so we can move on.</span></li><br /><li><span style="font-family:times new roman;"><strong>Invest in an index rather than individual stocks</strong> – study upon study shows how very few investors – professional or otherwise – are able to outperform the market. Standard & Poors reports that “actively managed mutual funds underperformed their relative S&P benchmark in 8 of 11 general domestic equity styles during the first half of 2006.”</span><a title="" style="mso-footnote-id: ftn1" href="http://beta.blogger.com/post-create.g?blogID=791860482880795673#_ftn1" name="_ftnref1"><span style="font-family:times new roman;">[1]</span></a><span style="font-family:times new roman;"> When you start out, you have the added disadvantage of having limited funds which would result in inappropriate concentration. While stock pros like Warren Buffett have the appropriate skills to make concentrated bets, diversification is an important tool for the beginning investor. Don’t worry. Once you have accumulated some knowledge and funds, we will move on to investing in individual stocks. To start, however, stick to the index funds.</span></li><br /><li><span style="font-family:times new roman;"><strong>Dollar cost average</strong> – don’t you hate it when you buy something and then find it on sale a week or two later? Dollar cost averaging means that you make systematic investments at over time rather than all at once. This reduces risk and helps to establish a good habit of saving. Just as the pinch of tax payments are lessened as they are taken from your check before you see it, making an automatic investment on pay day helps you to think of this money as unavailable.</span></li><br /><li><span style="font-family:times new roman;"><strong>Invest only those funds that intend to keep invested for at least five years</strong> – we are talking about investing not gambling (that will be a subject of another post). Investing in a diversified portfolio over an extended period of time should result in a fairly predictable return. Most studies will show you that you can expect to earn 8% to 12% on large cap U.S. stocks over a 5 to 10 year period. If you want more information on historical returns, I suggest that you read an interesting article from TAM Asset Management, Inc.</span><a title="" style="mso-footnote-id: ftn2" href="http://beta.blogger.com/post-create.g?blogID=791860482880795673#_ftn2" name="_ftnref2"><span style="font-family:times new roman;">[2]</span></a><span style="font-family:times new roman;"> This return is only expected over long periods of time. There are years that you could lose up to 20% of your investment. Since, no one can predict up and down years, it is important to keep this money invested for the long term. </span></li><br /><li><span style="font-family:times new roman;"><strong>Minimize expenses </strong>– the nasty hidden secret is that many investor returns are eaten up by expenses. Keeping expenses to a minimum helps avoid that. This is also a topic for another post. For now, I will just tell you that, in my opinion, you should never invest in a fund where expenses are greater than 1%.</span></li><br /><li><span style="font-family:times new roman;"><strong>Restrict initial investment to large cap U.S. securities that is a blend of the value and growth styles </strong>– Investing in large cap securities should result in performance that is consistent with the U.S. economy. While other asset classes are sexier and could result in higher returns, they also involve more risk. To start, it is better to investment in the broad market.</span></li><br /><li><span style="font-family:times new roman;"><strong>Make sure that you keep some funds in cash or other low risk investments</strong> – investing in stocks involve risk and it is important that you plan on keeping these investments for a long period of time. Accordingly, it is important that you only invest funds that you will not need for the short term. You need to think about you day-to-day expenses as well as maintaining a “rainy day” fund.</span></li><br /><li><span style="font-family:times new roman;"><strong>Know what you are investing in </strong>– It is important to know what you are investing in. While I am attempting to provide you some useful information, it will be important for you to do your own homework. </span></li></ol><p><span style="font-family:times new roman;">Based on these pointers, I found a few funds that you might want to look at. If you are interested in investing in one of these funds, I would suggest that you go to their web site for further information. </span><table><tbody><tr><td></td><td><strong><span style="font-size:78%;"></span></strong></td><td><strong><span style="font-size:78%;"></span></strong></td><td><span style="font-family:trebuchet ms;font-size:78%;"><strong># of</strong></span></td><td><span style="font-family:trebuchet ms;font-size:78%;"><strong>Price as of</strong></span></td><td><span style="font-family:trebuchet ms;font-size:78%;"><strong></strong></span></td><td><span style="font-family:trebuchet ms;font-size:78%;"><strong>Expense</strong></span></td><td><span style="font-family:trebuchet ms;font-size:78%;"><strong>5 Yr Total</strong></span></td><td><span style="font-ze: 78%;font-family:trebuchet ms;font-size:78%;" ><strong><u>Minimum</u></strong></span></td><td><span style="font-family:trebuchet ms;"><strong><span style="font-size:78%;"><u>Investment</strong><strong></span></u></span></strong></span></td><tr><td><span style="font-family:trebuchet ms;font-size:78%;"><strong>Mutal Fund Name</strong></span></td><td><span style="font-family:trebuchet ms;font-size:78%;"><strong>Ticker</strong></span></td><td><span style="font-family:trebuchet ms;font-size:78%;"><strong>Style</strong></span></td><td><span style="font-family:trebuchet ms;font-size:78%;"><strong>Stocks</strong></span></td><td><span style="font-ize: 78%;font-family:trebuchet ms;font-size:78%;" ><strong>11/24/06</strong></span></td><td><span style="font-family:trebuchet ms;font-size:78%;"><strong>Yield</strong></span></td><td><span style="font-family:trebuchet ms;font-size:78%;"><strong>Ratio1</strong></span></td><td><span style="font-family:trebuchet ms;font-size:78%;"><strong>Return</strong></span></td><td><span style="font-family:trebuchet ms;font-size:78%;"><strong>Initial</strong></span></td><td><span style="font-family:trebuchet ms;font-size:78%;"><strong>Subsequent</strong></span></td><tr><td><br /><span style="font-family:trebuchet ms;font-size:78%;">Vanguard 500 Index</span></td><br /><td><span style="font-family:trebuchet ms;font-size:78%;">VFINX</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">Large/Blend</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">513</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">$129.38</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">1.65%</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">0.34%</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">7.13%</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">$3,000</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">$100</span></td><tr><td><span style="font-family:trebuchet ms;font-size:78%;">T. Rowe Price Equity Market Index</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">POMIX</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">Large/Blend</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">1,849</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">$15.35</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">1.20%</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">0.80%</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">8.53%</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">$2,500</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">$100</span></td><tr><td><span style="font-family:trebuchet ms;font-size:78%;">Schwab Inv 1000 Index</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">SNXFX</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">Large/Blend</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">990</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">$41.25</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">1.13%</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">0.72%</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">7.70%</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">$2,500</span></td><td><span style="font-family:trebuchet ms;font-size:78%;">$500</span></td></tr></tbody></table></p><p><span style="font-size:78%;">1 Expense and Management Fee</span></p><p><span style="font-size:78%;"><strong>Source:</strong> Standard & Poors Mutual Fund Reports</span></p><p><span style="font-size:85%;"><em>Data quoted represents past performance. Past performance is not an indication of future results and investment returns and prices for exchange-traded funds will fluctuate. Your investment may be worth more or less than your original cost at redemption. Current performance may be lower or higher than the performance data quoted. Before investing you should consider the appropriateness of this investment based on your individual circumstances. You should also obtain updated information regarding this investment from sites such as http://finance.yahoo.com or https://us.etrade.com and obtain and read a copy of the investment's prospectus.</em></span><span style="font-family:times new roman;"></span></p><p><span style="font-family:times new roman;">There may be some of you out there that don’t want to wait until you have $2,500 to $3,000 to invest. While I think it is generally better to wait, I don’t want to discourage anyone. My opinion is that we learn the most when we have a vested interest. Another way to invest is to invest using ETFs or Exchange Traded Funds. These funds trade like stock and you can buy them through an online broker. Kiplinger Personal Finance’s latest ranking of online brokers</span><a title="" style="mso-footnote-id: ftn3" href="http://beta.blogger.com/post-create.g?blogID=791860482880795673#_ftn3" name="_ftnref3"><span style="font-family:times new roman;">[3]</span></a><span style="font-family:times new roman;"> named the following as the top brokers for accounts of $50,000 or less:</span></p><p><span style="font-family:times new roman;"><strong><u>Kiplinger Ranking of Best Brokers for $50,000 (and less) accounts</u></strong>1. OptionsXpress<br />2. Muriel Siebert<br />3. Wells Fargo<br />4. Firsttrade<br />5. Fidelity<br />6. Vanguard<br />7. TradeKing<br />8. Schwab<br />9. E*trade<br />10. Scottrade<br /><br />I have listed a few ETFs in the chart below that should be appropriate to start your investment portfolio. While these funds provide essentially the same performance as the index funds and expenses are typically lower, the issue is that you are charged a commission every time you buy an ETF. Even with low cost brokers, commissions are likely to be between $10 and $20 a trade. This adds considerably to your cost. The upside is that you can start you investment with much less than $2,500. You can buy at little of one share but you must remember the commission cost. </span></p><p><table><tbody><tr><td></td><td><strong><span style="font-family:trebuchet ms;font-size:85%;"></span></strong></td><td><strong><span style="font-family:trebuchet ms;font-size:85%;"></span></strong></td><td><strong><span style="font-family:trebuchet ms;font-size:85%;"># of</span></strong></td><td><strong><span style="font-family:trebuchet ms;font-size:85%;">Price as of</span></strong></td><td><strong><span style="font-family:trebuchet ms;font-size:85%;"></span></strong></td><td><strong><span style="font-family:trebuchet ms;font-size:85%;">Expense</span></strong></td><td><strong><span style="font-family:trebuchet ms;font-size:85%;">5 Yr Trailing</span></strong></td><tr><td><strong><span style="font-family:trebuchet ms;font-size:85%;">ETF Name</span></strong></td><td><strong><span style="font-family:trebuchet ms;font-size:85%;">Ticker</span></strong></td><td><strong><span style="font-family:trebuchet ms;font-size:85%;">Style</span></strong></td><td><strong><span style="font-family:trebuchet ms;font-size:85%;">Stocks</span></strong></td><td><strong><span style="font-family:trebuchet ms;font-size:85%;">11/24/2006</span></strong></td><td><strong><span style="font-family:trebuchet ms;font-size:85%;">Yield</span></strong></td><td><strong><span style="font-family:trebuchet ms;font-size:85%;">Ratio</span></strong></td><td><strong><span style="font-family:trebuchet ms;font-size:85%;">Returns</span></strong></td><tr><td><span style="font-family:trebuchet ms;font-size:85%;">iShares Dow Jones US Total Market Index</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">IYY</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">Large/Blend</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">1,629</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">$ 68.33</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">1.52%</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">0.20%</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">6.75%</span></td><tr><td><span style="font-family:trebuchet ms;font-size:85%;">iShares Russell 3000 Index</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">IWV </span><td><span style="font-family:trebuchet ms;font-size:85%;">Large/Blend</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">2,959</span></td></td><td><span style="font-family:trebuchet ms;font-size:85%;">$ 81.39</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">1.50%</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">0.20%</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">6.95%</span></td><tr><td><span style="font-family:trebuchet ms;font-size:85%;">iShares S&P 100 Index</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">OEF</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">Large/Blend</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">100</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">$ 65.38</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">1.55%</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">0.20%</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">3.69%</span></td><tr><td><span style="font-family:trebuchet ms;font-size:85%;">SPDRs</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">SPY</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">Large/Blend</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">500</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">$ 140.35</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">1.69%</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">0.10%</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">5.71%</span></td><tr><td><span style="font-family:trebuchet ms;font-size:85%;">Vanguard Total Stock Market</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">VTI</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">Large/Blend</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">3,764</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">$ 139.31</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">1.66%</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">0.07%</span></td><td><span style="font-family:trebuchet ms;font-size:85%;">7.53%</span></td><span style="font-size:85%;"><span style="font-family:arial;"></span></span></tr></tbody></table></p><p></p><p><a title="" style="mso-footnote-id: ftn1" href="http://beta.blogger.com/post-create.g?blogID=791860482880795673#_ftnref1" name="_ftn1"><span style="font-family:times new roman;font-size:85%;">[1]</span></a><span style="font-family:times new roman;font-size:85%;"> </span><a href="http://www2.standardandpoors.com/spf/pdf/index/071906_SPIVA_pr.pdf"><span style="font-family:times new roman;font-size:85%;">http://www2.standardandpoors.com/spf/pdf/index/071906_SPIVA_pr.pdf</span></a><span style="font-family:times new roman;font-size:85%;"><br /></span><a title="" style="mso-footnote-id: ftn2" href="http://beta.blogger.com/post-create.g?blogID=791860482880795673#_ftnref2" name="_ftn2"><span style="font-family:times new roman;font-size:85%;">[2]</span></a><span style="font-family:times new roman;font-size:85%;"> </span><a href="http://www.tamasset.com/pdf/assetclass/may06ac2.pdf"><span style="font-family:times new roman;font-size:85%;">http://www.tamasset.com/pdf/assetclass/may06ac2.pdf</span></a><span style="font-family:times new roman;font-size:85%;"><br /></span><a title="" style="mso-footnote-id: ftn3" href="http://beta.blogger.com/post-create.g?blogID=791860482880795673#_ftnref3" name="_ftn3"><span style="font-family:times new roman;font-size:85%;">[3]</span></a><span style="font-family:times new roman;font-size:85%;"> </span><a href="http://articles.moneycentral.msn.com/Investing/Extra/TheBestOnlineBrokers.aspx"><span style="font-family:times new roman;font-size:85%;">http://articles.moneycentral.msn.com/Investing/Extra/TheBestOnlineBrokers.aspx</span></a><span style="font-family:times new roman;font-size:85%;"> </span></p></div></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-20826367287737493202006-11-24T06:17:00.000-08:002007-01-06T05:27:05.115-08:00Just DON"T do it! -- how to use credit cards properly<div align="center"><a href="http://photos1.blogger.com/x/blogger2/5145/96662656601659/1600/629610/innocent.jpg"><img style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 289px; CURSOR: hand; HEIGHT: 199px; TEXT-ALIGN: center" height="185" alt="" src="http://photos1.blogger.com/x/blogger2/5145/96662656601659/320/975967/innocent.jpg" width="289" border="0" /></a> <a href="http://www.bichons.btinternet.co.uk/bichon.htm"><span style="font-size:78%;">http://www.bichons.btinternet.co.uk/bichon.htm</span></a><br /></div><div align="center"><a href="http://photos1.blogger.com/x/blogger2/5145/96662656601659/1600/225996/holes.jpg"></a><span style="font-size:180%;color:#006600;"><strong>If You Find Yourself in a Hole, </strong></span></div><div align="center"><span style="font-size:180%;color:#006600;"><strong>Stop Digging! </strong></span></div><div align="center"><span style="font-size:130%;color:#333399;"><strong><span style="font-size:100%;"><span style="font-size:85%;color:#006600;">(Will Rogers)<br /></span></div></span></strong></span><br /><p align="left">In celebration of the busiest shopping day of the year, I thought we might talk a bit about credit cards. I hope I am not the first to break it to you but credit cards are NOT free money! Here are some “fu<span class="blsp-spelling-error" id="SPELLING_ERROR_0" onclick="BLOG_clickHandler(this)">n” f</span>acts about college students and credit cards from a Nellie Mae report:</p><ul><li><div align="left">76% of undergraduates in 2004 began the school year with credit cards; 56% reported obtaining their first card at the age of 18.</div></li><li><div align="left">The average outstanding balance on undergraduate credit cards was $2,169. </div></li><li><div align="left">21% report paying off all cards each month; 44% say they make more than the minimum payment but generally carry forward a balance; 11% say they make less than the minimum required payment each month. <a title="" style="mso-footnote-id: ftn1" href="http://beta.blogger.com/post-create.g?blogID=791860482880795673#_ftn1" name="_ftnref1">[1]</a> </div></li></ul><p align="left">While I cringe at the average balance and the high percentage of students that don’<span class="blsp-spelling-error" id="SPELLING_ERROR_1" onclick="BLOG_clickHandler(this)">t pa</span>y off their card each month, I need to remind myself that reality is probably even worse than this. These statistics are just for students applying for student loans. The statistics on the general population would probably show higher balances and poorer repayment patterns.<br /><br />Carrying a balance on a credit card is one of the easiest ways to ensure that you never achieve financial independence. Paying only the minimum balance or less will mean that you will always be paying the highest rates. Funny how no one told you this as all those offers for credit cards were rolling in. While credit cards can be a wonderful thing, the sad fact is that too many young adults have to learn a painful lesson before they properly manage their credit cards. Take heart, however. By absorbing this lesson early in your credit life, you will be way ahead in the game. Many Americans never learn this lesson and that is why they continue to work for their money rather than have their money work for them.<br /><br />In a later post, I will discuss how you can work yourself out of high credit card debt. The lesson for today is just “stop digging the hole any deeper.” If you can’t pay <span class="blsp-spelling-error" id="SPELLING_ERROR_2" onclick="BLOG_clickHandler(this)">off </span>the balance on your card, don’t use it<span class="blsp-spelling-error" id="SPELLING_ERROR_3" onclick="BLOG_clickHandler(this)"> aga</span>in until the balance is paid in full. You really don’t have to <span class="blsp-spelling-error" id="SPELLING_ERROR_4" onclick="BLOG_clickHandler(this)">do a</span>ny fancy budgeting. Sure this may mean that you have to wait to buy stuff but delayed gratification isn’t all bad. A<span class="blsp-spelling-error" id="SPELLING_ERROR_5" onclick="BLOG_clickHandler(this)">s sh</span>own in the famous marshmallow test, the ability to wait has a positive impact on where you end up in life. <a href="http://ezinearticles.com/?Delayed-Gratification-and-Money-(or,-Marshmallows-and-Your-Financial-Health)&id=237818">http://ezinearticles.com/?Delayed-Gratification-and-Money-(or,-Marshmallows-and-Your-Financial-Health)&id=237818</a> As Morgan James notes “When you go to spend your money, think about the Stanford Marshmallow Test. Then think about how many marshmallows you could buy if you delayed your gratification.”<br /><br />In my opinion credit cards are not about buying things before their time. Card credits should be paid off in full each month. So why use them you ask? The primary benefits of credit cards are that they:</p><ol><li>Help you establish credit.</li><li>Allow you to take advantage of specials (e.g., airline miles, cash-back).</li><li>May provide insurance/protection for your purchases.</li><li>Provide a tracking of your purchases.<br /><br /><br /><a title="" style="mso-footnote-id: ftn1" href="http://beta.blogger.com/post-create.g?blogID=791860482880795673#_ftnref1" name="_ftn1">[1]</a> <a href="http://www.nelliemae.org/library/research_12.html">http://www.nelliemae.org/library/research_12.html</a> </li></ol>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-16778242592776997572006-11-23T08:26:00.000-08:002007-01-06T05:28:48.825-08:00Got Credit? -- tips for establishing good credit<a href="http://photos1.blogger.com/x/blogger2/5145/96662656601659/1600/555814/bank.jpg"><img style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 274px; CURSOR: hand; HEIGHT: 181px; TEXT-ALIGN: center" height="212" alt="" src="http://photos1.blogger.com/x/blogger2/5145/96662656601659/400/233811/bank.jpg" width="282" border="0" /></a><br /><div align="center"><strong><span style="font-size:130%;color:#6633ff;"></span></strong></div><br /><div align="center"><strong><span style="font-size:130%;color:#663300;">A bank is a place that will lend you money, </span></strong><br /></div><div align="center"><strong><span style="font-size:130%;color:#663300;">if you can prove that you don't need it.</span></strong><br /></div><div align="center"><strong><span style="color:#663300;">Bob Hope</span></strong></div><br /><div></div><br /><div>Good credit is one of those funny things in life. The better your credit is, the less likely you are to need or use it. One of my “lessons in life” is to borrow cautiously. Knowing when and how to borrow is an important skill that you will need to become financially independent. While I don’t encourage you to have a lot of debt, I do encourage you to establish a good credit record early in your life. There are three key reasons for this. Establishing good credit:<br /><br /></div><ul><br /><li>Helps you to get the best possible terms when you do borrow. </li><br /><li>Teaches you important money management skills.</li><br /><li>Is an important character reference. Rightly or wrongly, employers, landlords and others will look at your credit as a measure of how responsible you are. </li></ul><p>Liz Pulliam Weston has a good article on MSN Money that list 9 ways to build a killer credit score<a title="" style="mso-footnote-id: ftn1" href="http://beta.blogger.com/post-create.g?blogID=791860482880795673#_ftn1" name="_ftnref1">[1]</a>. She notes that “if you’re just starting out, you have an once-in-a-lifetime opportunity to build a credit history the right way.” While I encourage you to read the entire article, I will summarize the 9 points below: </p><ol><li><strong>Check your credit report</strong> – while you may not think you have a credit report, it is possible that your information has been confused with someone else or that you have been the victim of identity theft. It also serves as a reference point and helps you understand the rules of the game. </li><br /><li><strong>Establish checking and savings accounts</strong> – these should be established as early as possible as lenders see them as signs of stability.</li><br /><li><strong>Understand the basics of credit scoring</strong> – the two most important factors used in credit scoring are on-time bill payment and keeping well within your available credit limits (use only 30% of your available credit). Also, pay off the entire balance. Carrying a balance IS NOT a key factor in building your credit score.</li><br /><li><strong>Piggyback on someone else’s good credit</strong> – this is a good strategy in certain circumstances especially when you are finding it hard to get credit yourself. Personally, I would only use this on a limited basis, if at all. You need to make sure that whoever you are piggybacking really does have good credit and that the issuer reports the history on authorized users to the credit agencies. </li><br /><li><strong>Apply for credit while you’re a college student –</strong> I probably don’t need to tell you how anxious lenders are to give you a credit card while you are still in school. Take advantage of this but remember to pay off the balance each month. When you don’t carry a balance, it really doesn’t matter what interest rate applies to the card. </li><br /><li><strong>Apply for a secured credit card </strong>– this is another last resort method to build credit when you can’t get credit any other way. Secured credit cards is basically using your own money as you are required to deposit money with the lender and your limit is usually this deposit. If you take this method, you need to make sure that the fees are low and that your credit history will be reported to the credit bureaus. </li><br /><li><strong>Get a finance company card </strong>– gas companies and department stores are usually easy to qualify for. You should apply for more than a few of these and again you need to make sure that you pay off the balance each month. </li><br /><li><strong>Get an installment loan</strong> – once you have a few years of credit card management under your belt, you should obtain auto loans, personal loans and mortgages. Credit scores are based on a mix of credit so it is important to develop a history on these credit types along with credit cards. </li><br /><li><strong>Use revolving accounts lightly but regularly</strong> – to maintain your credit score, you should have some activity in your account at least every six months.<br /><br /><a title="" style="mso-footnote-id: ftn1" href="http://beta.blogger.com/post-create.g?blogID=791860482880795673#_ftnref1" name="_ftn1"><span style="font-size:85%;">[1]</span></a><span style="font-size:85%;"> </span><a href="http://articles.moneycentral.msn.com/CollegeAndFamily/MoneyInYour20s/9waysToBuildAKillerCreditScore.aspx?page=1"><span style="font-size:85%;">http://articles.moneycentral.msn.com/CollegeAndFamily/MoneyInYour20s/9waysToBuildAKillerCreditScore.aspx?page=1</span></a></li></ol>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-36474730805802315822006-11-23T06:45:00.000-08:002006-11-28T07:29:14.643-08:00Giving Thanks<a href="http://photos1.blogger.com/blogger2/5145/96662656601659/1600/give%20thanks.jpg"><img style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" height="258" alt="" src="http://photos1.blogger.com/blogger2/5145/96662656601659/400/give%20thanks.jpg" width="339" border="0" /></a> I was a little too busy cooking to post this message on Thanksgiving but I didn't want to let the opportunity pass without my giving thanks. I recognize that I was one of the winners in "The Ovarian Lottery," a term coined by Warren Buffett. I am truly grateful for being born at a time and in a country where I have the opportunities and freedom to pursue my dreams. <div></div><div>Warren Buffett frequently talks about the Orarian Lottery. I have heard him speak about it at the Bershire Hathaway Annual Meetings. Blogger Darren D. Johnson provides a nice summary of Mr. Buffett's comments on this subject. I am reproducing Darren's post below:</div><div></div><div></div><div><span style="color:#3333ff;"><strong><blockquote><p><span style="color:#003333;"><strong>Be Grateful</strong> -</span></p><p><span style="color:#003333;">There are roughly 6 Billion people in the world. Imagine the worlds biggest lottery where every one of those 6 Billion people was required to draw a ticket. Printed on each ticket were the circumstances in which they would be required to live for the rest of their lives.<br /><br />Printed on each ticket were the following items:- Sex-Race- Place of Birth (Country, State, City, etc.)- Type of Government- Parents names, income levels & occupations- IQ (a normal distribution, with a 66% chance of your IQ being 100 & a standard deviation of 20)- Weight, height, eye color, hair color, etc.- Personality traits, temperment, wit, sense of humor- Health risks<br /><br />If you are reading this blog right now, I'm guessing the ticket you drew when you were born wasn't too bad. The probability of you drawing a ticket that has the favorable circumstances you are in right now is incredibly small (say, 1 in 6 billion). The probability of you being born as your prefereable sex, in the United States, with an average IQ, good health and supportive parents is miniscule.<br /><br />Warren spent about an hour talking about how grateful we should all be for the circumstances we were born into and for the generous ticket we've been offered in life. He said that we should not take it for granted or think that it is the product of something we did - we just drew a lucky ticket. (He also pointed out that his skill of "allocating capital" would be useless if he would have been born in poverty in Bangladesh.) </span><a href="http://darrenjohnson.blogspot.com/2005/04/wisdom-of-warren-buffett.html"><span style="font-size:85%;color:#003333;">http://darrenjohnson.blogspot.com/2005/04/wisdom-of-warren-buffett.html</span></a><span style="color:#003333;"><span style="font-size:85%;"><br /></span></p></span></blockquote></strong></span></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-16474046287718635102006-11-21T08:20:00.000-08:002007-01-06T05:32:34.355-08:00Just Do It! -- how to start saving<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgoXQ5fLJODDYbfky5lmSv-0auiHp0oDbsoes59hyphenhyphenEUGVZcL3waO6zx4fFE0NJNR3k1gPIIxNS_ZeP5jl-MIlwhhs6rObApiyPs1XbfUwp-mH7YEp8wozSFhXM_stZOxGJMifvhZCp4AWk/s1600-h/do+it.gif"><img id="BLOGGER_PHOTO_ID_5016909670595486018" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgoXQ5fLJODDYbfky5lmSv-0auiHp0oDbsoes59hyphenhyphenEUGVZcL3waO6zx4fFE0NJNR3k1gPIIxNS_ZeP5jl-MIlwhhs6rObApiyPs1XbfUwp-mH7YEp8wozSFhXM_stZOxGJMifvhZCp4AWk/s200/do+it.gif" border="0" /></a> Sometimes it is hard listening to "older folk." I know many of the things told to me in college went in one ear and out the other. So, I won't be surprised if you just skip over this. Try, however, to give it a few minutes thought.<br /><br />Many of you in college are thinking that money is tight. It is hard to get enough cash together to pay for the happy hours, Starbucks and -- horrors -- cigarettes! There will come a time when you are likely to look back at your college days and see how much you could have saved if you had focused on it. This is especially true if you are one of those "failure to launch" types that is still living at home.<br /><br />The hardest part is just getting started. I would challenge you to set a goal today of trying to save just $50 to $100 a month. How hard would that be? It might be as simple as giving up your daily Starbucks fix ($5 day x 20 days a month). The 50 bucks is for those of you that can't give it up completely and need to do every other day. Give up cigarettes and you free up a lot of loose change! Happy hours are a very personal thing so I will leave it up to you to decide whether you can free up any funds there.<br /><br />The next step would be to open up an account to accumulate these funds. A saving account at your local bank might do (make sure you understand any fees). While I am not recommending any particular firm (and am taking no money from them), I might suggest you look at E*trade bank or any other bank that has a similar deal. E*trade allows you to open up a saving account that is currently earning about 5% with $1. That is right -- one dollar! You can also set up an automatic monthly transfer from your main bank account. That automatic thing is quite important because it keeps you focused once the initial willpower wears off and you are hankering for that Starbucks. Here is a link to the description of the E*trade account. <a href="https://us.etrade.com/e/t/home/completesavings?_skinnertab=bank">https://us.etrade.com/e/t/home/completesavings?_skinnertab=bank</a> I like E*trade because it sets you up for the next step -- investing. Please remember that this is only a suggestion. Do some more research about other brokers and banks and pick the one that is right for you. The important thing is to get started.<br /><br />I want to keep this brief (so that you will read this!). Motley Fool has a FREE online seminar that shows you how to get started in greater (and better) detail. I suggest you take a look at it.<br /><br /><a href="http://www.fool.com/seminars/sharebuilder/index.htm?sid=0008&lid=000&pid=0000">http://www.fool.com/seminars/sharebuilder/index.htm?sid=0008&lid=000&<span class="blsp-spelling-error" id="SPELLING_ERROR_0" onclick="BLOG_clickHandler(this)">pid</span>=0000</a>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-791860482880795673.post-22141722414685026252006-11-20T11:31:00.000-08:002006-11-26T09:59:12.339-08:00Balancing a Budget -- There are only two moving partsIf you want to be financially independent the math is simple -- you need to make more than you spend.<br /><br />In a later post we will discuss how you can make your money work for you but that is hard to start with when you have no money. So first things first, you need to think about your intended lifestyle. It is easier to focus on how much you plan to spend (we have been doing that our whole life!). Once we know that, we can target how much we need to earn in a salary to support this life style. Knowing what we need to earn should help us decide on a career.<br /><br />Our chosen career should help us select a major. Of course, you want to do something that you enjoy, but you need to understand the financial implications of your choice. For example, I always wanted to be a teacher. My mother (who was a teacher) recognized that this was a low paying job and encouraged me to consider other careers. I choose accounting since I enjoyed math and knew I could get a good job when I graduated. I didn't give up on the teaching though. Throughout my career I have used my teaching skills -- presenting a seminars, training staff even this blog!<br /><br />So many students pick majors without really knowing what the payoff will be. To empower yourself you need to educate yourself. Here is a good web site that discusses careers, salaries and majors. <a href="http://www.studentsreview.com/choosing_career.php3">http://www.studentsreview.com/choosing_career.php3</a>Unknownnoreply@blogger.com0