Showing posts with label money. Show all posts
Showing posts with label money. Show all posts

Friday, May 14, 2010

Mutual Funds

Establish the right mix of mutual funds for you Low-risk stuff pays nothing nowadays, so you need to invest in stocks and bonds to earn a decent return.
Ingredients:
• Internet access.
• The result of your risk-tolerance test.
Instructions:
• See the model portfolios assembled using Kiplinger 25 funds.
• Choose the portfolio that most closely matches your recommended allocation. Tweak the allocations if your target for stocks doesn't align closely with one of the model portfolios.
If you're investing in a taxable account, consider using the Fidelity Intermediate Municipal Income (FLTMX) fund for some or all of your bond allocation.
Total time: five minutes.

Buy mutual funds
Ingredients:
• Internet access.
• A brokerage account.
• Your perfect portfolio.
• A calculator.
Instructions:
• Translate your portfolio's allocations from percentages to the actual dollar amounts you plan to invest.
• Next, log in to your brokerage account, and go to "trade."
• Place your orders.
Total time: up to 15 minutes.

See whether your fund managers have skin in the game
If the fund manager has money alongside yours, your interests are aligned.
Ingredients:
• Telephone or Internet access.
• Money in a mutual fund.
Instructions:
• Read a fund's "statement of additional information" to find out whether your manager has money in the fund. The statement will describe a manager's investment in broad dollar ranges, from zero to more than $1 million.
The statement is usually available on the fund's website. If not, call the sponsor and ask for the document to be mailed to you.
Total time: five minutes online or about 10 minutes for a phone call.
Source

Thursday, October 1, 2009

2008-2009 Recession Being Good for You!

Yup, your heard me right, the 2008-2009 recession is actually pretty good for all of us! Instead of looking at the recession as a walk in the desert, I prefer to see it as a cold winter of great warnings and doors of opportunities. It is true that recession hit very hard as a cold winter on those who didn’t protect themselves enough. When I talk about cold winter, I am talking about minus 40 degrees with 10 feet of snow… Many people have suffered from it but there is still a lot to learn from the current recession:

Investment opportunities
“Buy when there is blood on the street”. This is probably my favourite quote from Wall Street. It is a bit violent, but it clearly determines the only moment where you should use market timing: when everybody else is avoiding it! Investing during a recession will make your investment portfolio jump like you could not have imagined. It’s a classic but nobody’s doing it L. As the cold winter strikes and everybody goes inside at the first sigi of snowflakes, you can be brave enough to stay outside. You will get your stuff ready for next spring while everybody is looking at you through the window with their hot chocolate thinking “what a crazy, poor man, he has to work all winter…”. Who’s going to be the crazy, poor man after the recession? Huh?

Frugal spending
Badass winters used to strike our country while our parents (or grandparents) didn’t have much to eat, talk about genuinely rough times. As is the case during a recession, it drives to you think about managing your resources and spending more responsibly. This is when you develop frugal habits (that you will soon forget once summer is back…). The 2009 recession will definitely encourage people to save money (Canadian and US savings rates are ridiculous… as close as a 1 year CD actually… near nothing!). Spend less and save more, you will be able to eat throughout winter!

Recession improves ecologic habits
During winter, we all try to use everything on hand instead of wasting it. It is exactly the same thing with a recession. The best example would be the famous Cash for Clunkers. Governments try to stimulate the economy while appearing green (it gets good press even though not the primary goal!). While you have less money in your pocket, recuperating your old stuff becomes the best idea you can have.

Appreciate things we have
I always laugh when I hear people talking about the weather in Quebec. They spend their whole summer complaining it is too hot and once winter arrives, they whine about the cold weather (want some cheese with that) … This is what happens during a recession, we miss the good old days where we had to work 60 hours a week. The human being is a weird beast; it has to lose something before appreciating it. So, if you are lucky enough to not be struck by the 2009 recession, please appreciate what you have and take care of it!

Improves creativity
As companies cut out the fat, the remaining employees have to do more with fewer resources. This is when creativity rises to its best: when there are no other solutions than finding a better way of doing things! This is how most companies will show increases in productivity and the profit margin as well in 2010 ;-0.

Good position for a promotion
As it is the case with creativity, if you stay with your company and you are not part of the “fat”, you have a pretty good opportunity to work hard and show you can manage the stress and pressure. There is a better than average chance you will be in the running for a promotion when things go better as most people around will react poorly during a recession. They will whine about people being laid off while they still have a job. They will complain that they have to work more or do things that was not in their “job description” (don’t you hate hearing that?!?). By being responsible and showing a positive attitude, you will surely make your way through the top despite the recession.


When you think about it, a recession is really like a badass winter. If you work hard and are patient enough, you will get great rewards once springtime arrives! Now, go get your coat on, it’s freezing this morning!

Source: The Financial Blogger

Tuesday, September 15, 2009

How to Face a Family Financial Crisis

An anonymous GRS reader submitted a question last week that hits close to home:

I have a family member that this past year has been in serious financial trouble. He is one of the most ambitious and intelligent people I know and I would have never imagined him getting in this kind of trouble. His ambition may have been his downfall as he keeps shooting for the stars and has fallen short on some of his business ideas, which may have put him in a more vulnerable position when the economy turned south.

He is now living in debt and struggling to put food on the table for his wife and four young boys. He has had to live on credit cards for several months and they are all maxed out. I have never seen first-hand anyone in this much trouble.

My question to you is, When faced with job loss and depleted savings, how can you avoid going into credit red? At what lengths would you go to to avoid living on credit cards and missing payments on just about everything? In the situation, is credit rating even worth anything?
As I say, this situation hits close to home. Last year, I wrote about my little brother, Tony. (I say “little brother”, but he’s 36 now.) Tony’s family got caught up in the mortgage mess, buying a home in Bend, Oregon at the height of the bubble — and before their home in Portland had sold. Six months earlier and things would have been fine. But things weren’t fine. They couldn’t sell either house. The market went to hell and they lost both homes to foreclosure.

Tony now faces circumstances similar to those described in the question above. He’s learning that there’s no easy solution to a family financial crisis. His father-in-law recommends “earning your way out of the problem”. That’s a fine theory, but not always practical. Tony and his wife work hard, but they’re only able to earn so much. I think that he — and people in similar situations — should also:

Cut spending to the bare minimum. This can be difficult. It can be tough to shift from normal spending to frugality, especially if you’re accustomed to middle-class luxuries and a middle-class lifestyle. But when facing a financial crisis, it’s imperative to reduce spending as much as possible and as soon as possible. You must stop the bleeding before you can treat the wound, before it can heal.

Consider drastic measures. Sometimes it’s not enough to stop the bleeding. To stretch the metaphor, sometimes you need to amputate. If you’re in a financial crisis, you may have to take drastic action, maybe even selling a car — or your home. Most people are unwilling to consider steps like these, which only leads them further into debt. These folks need to…

Be brutally honest. It’s easy to say, “I’m in trouble now, but it’s only for a month or two. I’ll keep doing things as normal by using my credit cards.” If you find yourself in a financial crisis, try to take an objective look at your situation. Get outside advice from friends and family. Be willing to listen to what they tell you. Sometimes others are better able than we are to see the slack in our budgets.

Avoid touching retirement savings. When faced with financial peril, it’s easy to look at the large sums sitting in your retirement accounts and think they’ll provide the life preserver you need. In nearly every instance, though, you’re merely postponing the pain. Your retirement savings are there to provide for you when you’re no longer able to provide for yourself. They’re not an emergency fund.
I’m sure that other Get Rich Slowly readers have family members in similar situations. Perhaps you’re even struggling yourself (or have done so in the past). Based on your experience, what advice can you offer other folks who are struggling in this economy? What can be done to avoid sinking deeper and deeper into debt?

And as an ancillary question, what can we do to help family members in need? What should we do? I’ve told Kris that if Tony and his family find themselves in danger of living on the street, we’ll make room for them in our house. But what about before that? At what point do I loan him money? (Or gift him money?) Or should I just be here to offer advice when he needs it?

Source: Get Rich Slowly

Monday, September 14, 2009

If You're Thinking About Mixing Money And Family, Read This First

I've had both good and bad experiences loaning out money to family members, but renting from them and paying their mortgage is beyond my comfort level. In theory it should all work out fine (after all, you're blood right?) but in the real world people tend to get hurt or taken advantage of.

Unfortunately, an ol' college friend is experiencing just that - getting stepped on because he doesn't want to ruin his relationship with both his brother and his dad. My friend means well, but it's time he starts to consider his options before he loses even more of his sanity...and money! Here's a play by play of what's going on:

My friend Good Brother (as he shall be named from this point forward) decided to live with Bad Brother and pay him rent (aka part of Bad Brother's mortgage) as well as 50% of the utilities.
For 2 years Good and Bad Brothers were happy.
Then one day Bad Brother decided to go back to school and move half-way across the country.
Good Brother was sad to see him go, but happy Bad Brother was pursuing his dreams.
Bad Brother asked Good Brother to help him fill the occupancy while he'd be gone (2+ years), and since Good Brother is, by nature, Good, he had no problem helping him out.
Good Brother tried and he tried and he tried, but the recession had finally hit and he couldn't find a suitable renter. It had now been THREE months and it just wasn't working.
He explained to Bad Brother that his asking price was too high (all the while paying 100% of the utilities now), and that his brother needed to lower the price and the rental terms.
Bad Brother wasn't having it and decided to try himself - only Bad Brother was more talk than he was action (and Good Brother didn't realize he was being taken advantage of yet) so they let ANOTHER three months pass only to remain where they originally started- without a 2nd renter.
It turns out another culprit had come into play - lack of motivation. The reason? Crazy Dad.

You see, trying to make things better and "help out," Crazy Dad had decided to subsidize the amount of the 2nd half's rent so that his son (Bad Brother) would have enough to pay the mortgage each month. While nice in theory, this has only caused more delays in finding a roommate as the sense of urgency has quickly disappeared.
On top of it all, Crazy Dad and Bad Brother believe Good Brother needs to be held responsible for filling the vacancy - family duties and all.

Good Brother is now pissed.

As it stands - now SIX MONTHS later - Good Brother is still paying 100% of the utilities & the vacancy has yet to be filled. Only now, Good Brother is starting to realize that it's not his responsibility to find this elusive roommate, and he's thinking of moving out. Why should he continue paying an extra $150 every month or continue getting bashed for not finding a roommate? Is this really HIS responsibility? Personally, I think not. The one who owns the house should be the one maintaining and paying for it - no one else. Ask his father or brother, and they'll tell you differently though.

Now, there's probably more to it than what Good Brother tells me, but the reason I post all this is to illustrate the importance of being careful. Mainly, being careful when it comes to mixing money with family members. Some of the times things work out great! But it's those other times that really put a strain on your relationships, and the times I hope you're able to avoid.

So please please PLEASE think it through when considering money arrangements with your loved ones. If you decide to go for it, write down in complete detail the arrangements you'll be making so everyone's on the exact same page. We all think it could never happen to us, but money has a strange way of breaking families apart. So please, be careful out there :)

Source: Budget Are Sexy

Friday, September 11, 2009

12 Clever Substitutions That Save Money (Nearly) Effortlessly

One of my favorite ways to trim money from my spending is to find simple little substitutes for my regular expenses. If I can trim a few bucks from the cost of household supplies, routine purchases, and other things like that, over the long run, that can add up to a lot of money with virtually no change in my life. Here are twelve of my favorites (not including my “infamous” homemade laundry detergent).

Laundry Softener -> Vinegar
Instead of buying expensive laundry detergent, just use half a cup of white vinegar to the “softener” cup in your washing machine. It accomplishes the same effect as softener – it makes your clothes really soft – plus it breaks down the laundry detergent, making the clothes much better for people with sensitive skin or allergies. What about the smell? Once the clothes are dried, you smell nothing at all. You can buy four gallons of vinegar for $6, meaning the cost per load is about $0.05, while a load’s worth of Downy costs about $0.15. You save a dime per load and your clothes are less chemical laden.

Ziplocs -> Reusable Containers
Ziplocs – especially the small ones – usually wind up in the trash after one use. On the other hand, a reusable container can last for years. Since a typical Ziploc costs about $0.10 and you can get a reusable Rubbermaid container for about $1.00, you break even on the container after about twelve uses or so (the cost of washing the container in the dishwasher is estimated there) and everything thereafter is pure savings.

Dishwashing Detergent -> Simple Homebrew
Instead of using liquid or powder dishwashing detergent (and paying a stiff premium for it), just take an old milk jug, put two teaspoons of liquid dish detergent and four teaspoons of baking powder in it, then slowly fill the jug with warm water, sloshing it while you do it (even better, just slowly add the soap as you’re adding the water). Then put that jug under the sink. Each time you do a load, fill up the cup with the homebrew. It works like a charm. The jug will provide enough for eight to ten loads of dishes for about a penny each, compared to about thirteen cents per load for ordinary detergent.

Knife Set -> Chef’s Knife
You’re just getting started in the kitchen and you think it’s time to get yourself a big ol’ knife set. Don’t. Unless you’re doing crazy things in the kitchen, all day every day, you really only need one knife – a chef’s knife. Head down to your local retailer and check them out. One good chef’s knife will make kitchen work easier than an entire block’s worth of other knives. It’s really all you need – I can’t even remember the last time I used a knife besides that one. Just learn how to properly hone it and sharpen it (both are easy – check out this YouTube video).

Windex -> Vinegar
Seriously. Just use vinegar instead of Windex when you clean your windows. It cleans off almost anything on a window and doesn’t streak and, more importantly, doesn’t leave a film behind as Windex often does. Just put some vinegar in a spray bottle – maybe that Windex one that you didn’t buy a replacement for – and just wash windows as normal. You’ll be quite happy with the results – and you’ll save about a penny per squirt.

Paper Towels -> Reusable Cotton Cloths
Cotton cloths work better, absorb more, and you can get a five pound (!) box for about the same price as a jumbo pack of paper towels. But what about the WASHING? It’s easy – just keep a ton of them in a drawer in the kitchen and use them for spills and filtering and other purposes until they’re dirty, then just toss them into any load of socks or underwear or towels. Even a big handful take up barely any room at all and before you know it, you’ve refilled your supply. Better yet, you’re not buying any more paper towels and you’re reducing your garbage.

Drain Cleaner -> Baking Soda and Vinegar
Remember those nifty volcanoes that kids tend to make for science fair projects in grade school? The basic mixture that made them bubble up was baking soda and vinegar – it expands nicely and pushes itself into everything. Perfect for clearing a clogged drain, no? Just put in a quarter cup of baking soda, chase it with half a cup of vinegar, then cover the drain and wait fifteen minutes. Once that’s done, chase it with a gallon or so of boiling water. This will clean almost any drain and save you from blowing unnecessary amounts of money on a big bottle of Drano. This also works as a toilet bowl cleaner – it’ll foam up like crazy at first, but after fifteen minutes, you’ll be able to scrub your toilet with a brush with ease.

Television -> Old Computer
If you need a new television somewhere, why not just use an old computer instead? A computer that’s five years old with a ‘net connection can easily be a substitute for a television. You can watch tons of programs full screen on Hulu and many channels offer a full screen stream, too, plus it’s simple to watch DVDs on a computer as well. Even better, you can stow the box somewhere out of the way (in a cabinet, perhaps) and just leave the monitor somewhere easy to access. This can be a great solution in a kitchen, where you can watch television on it or use it to call up YouTube videos to tutor you through a meal prep – plus you don’t have the cost of buying anything to get it working.

Oven Cleaner -> Ammonia
If you cook at home, you’ll eventually have to clean your oven – and it can be a nasty job. There are lots of products out there that claim to be able to make this process easy, but the easiest way I’ve found is far cheaper – and far easier. Just put a cup of ammonia in a glass bowl in the evening, put that bowl in your oven, and close the door. Let it sit overnight. The next morning, get rid of the ammonia and you’ll find scrubbing down the inside of your oven is suddenly quite easy. The burnt-on drippings from spilled dishes will come right up with no problems. Plus, a jug of ammonia is far cheaper than some spray-on solution.

Keep reading more tips here, on The Simple Dollar

Thursday, September 10, 2009

Spending Filters and Delaying Gratification

In a recent article Matt Jabs from Debt Free Adventure discussed an interesting concept, Spending Filters. A filter is a device that removes unwanted items as they pass through it; a spending filter is something similar. Before making a purchase you run it through some of these filters to ensure you are not making a purchase for the wrong reasons.

Matt lists 6 filters:

1. Do I need it?

2. Ask for a discount

3. Consider alternative products/services

4. Compare prices

5. Be productive instead of spending

6. Use spending ledgers

Some other filters mentioned by readers in the comments section are:

1. Control spending

2. Need vs. Want

3. Will I need it in the future?

Although I like Matt’s concept of spending filters, I think that most of us use spending filters knowingly or unknowingly. I believe Matt has left out one important factor: self-discipline. If you do not have self control and the ability to delay gratification then the above mentioned filters will not be of any use to you – because at the end of it if you want, you’ll buy it.

Spending filters will only work if you have a desire to save and the self discipline to delay immediate gratification. If someone really wants that brand new car then putting it through spending filters won’t stop them from getting it. I can come up with tones of reasons why I really need the new car:

1. Buying used car will cost more in long run due to repairs.

2. No warranty for used car.

3. No guarantee that the car is truly in the condition the seller claims it to be.

4. New car will last me longer.

The list can go on and on. Just recently I had a family member go through this exact scenario – tones of debt, just one income, recently had a child and he was able to convince himself to lease a brand new car, probably the worst financial decision he could make at this time. Not only did we (the wife and I) put the purchase through the spending filters for him, but we also did detailed math and showed him in numbers how bad of a deal he was getting. However, he was convinced that he needs the new car and that there are no alternatives.

If you do not have sufficient self control, this concept will not work very well. Spending filters are subjective; you see things as you WANT to see them even with the filters on. If you have spending problems than your focus should not be on applying these spending filters, but learning how to delay your gratification and practicing self control to avoid impulsive spending.

Consumers are not in debt up to their neck because they do not understand the spending filters and wants vs. needs, but because they do not have sufficient self control and are accustomed to having everything they want now. This need for immediate gratification leads them to impulse buying, which leads eventually leads to spiraling debt and the cycle goes on.

If you are reading personal finance blogs then you fall into two groups:

First group are those who are financially responsible and want to learn more about saving, investing and personal finance.

Second group are those who have made some financial mistakes and fallen in debt, but are now are trying to get things back to normal.

If you fall into the first group then I direct you to Matt’s article to learn more about the spending filters and how they can help you, if you are in the latter group than I direct you to our article on how to delay gratification.

Source: Financial Highway