Time for those New Year Resolutions! Take time to resolve to manage your personal finances better in 2008.
So I mentioned earlier that the first step for most people is to save money - most planners recommend anywhere from 2 to 6 months of your salary stashed away in a liquid savings account. This would be for emergencies (like losing a job or medical) or for your savings goals (like a new car or vacation).
Now most people don't have 6 months of salary sitting in their checking account, especially those starting off right from college so here's the easiest way to go about saving money:
Open a savings account with an online bank (I use ING Direct) with as little as $100. Online banks pay much higher rates than normal banks because of their lower overhead. This also allows you to "link" your checking account to your online savings account and establish an automatic transfer. ING lets you do any amount daily, weekly, monthly, or quarterly. You can also do 1-time transfers.
If your goal is to have 6 months of salary saved up by the end of 1 year, then set your automatic transfer to be 1/24th of your salary every month (when you get paid).
I recommend setting up the transfer on whatever day you get paid - so if you're paid weekly, you would have weekly transfers; monthly - monthly, etc. This way you're PAYING YOURSELF FIRST before you spend it!
Of course, if your budget doesn't allow this, then you should take a good look at your spending habits, your earning potential, and then transfer whatever you can with a goal to increase it. The point is to START!
Monday, December 31, 2007
Friday, December 21, 2007
Economic Outlook 2008
Nationally, interest rates were up, now down; stocks are flat, real estate values dropped on a year-over-year basis for the first time since the Great Depression! If you’re like me, your crystal ball is awfully cloudy when trying to discern the financial future right now. Let's take a look at some of the things we do know:
- The sub-prime mortgage mess has wrecked the financial services industry, and it probably won't recover for a couple years. Bright side: increased transparency and controls going forward (at least until enough time passes that no one remembers this), and nice bargains in stocks from large, solid companies that pay dividends. I won't make any specific recommendations here, but begin your search for blue chip stocks that are paying > 4% dividends and you'll find some bargains. Also try funds or ETFs that focus on this.
- The areas that are getting hit the worst in declining values are the same ones that had the most ridiculous run-ups over the last 2 decades (Florida, California, etc). Nationwide, there are still markets that have increasing value, even as new construction levels off. Here in Greene County, MO, average home prices continue to increase despite the high inventory. New construction has leveled off dramatically and the average day-on-market for all homes is 56 days. In the surrounding rural counties, listing times are a lot higher and it is a buyers' market. The biggest thing that sellers need to know is that buyers are having a harder time obtaining credit, therefore, your house may either need a price reduction or concession for a quick sale, otherwise it may sit a while. Thinking about "add-ons" or remodeling to increase your price? It may not be a good idea as buyers are able to afford less.
- Real Estate Investing still makes sense: a recent report by the NAR shows that investors nationwide are up $54,000 over the last 5 years (taking into account the recent pull back). Only investors who bought very recent would be facing a crunch - and again it's probably more so in those markets that have felt the biggest crunch. Here in Springfield, as I suspect there are in many other places, there are major bargains to be had for the serious buy-and-hold investor. Flipping properties like on TV may net the most gains in a positive market, but it comes with the most risk. In a flat or declining market, you have a very small margin of error to make money flipping houses. Alternatively, an investor who can afford to put some money in a rental that produces nice cash flow will ride out the downturn and see a nice appreciation (to go along with his cash flow) in the future.
- Something that really annoys me is how little the media actually understand investing - unless they're just really good at hiding it - they usually always overlook the fact that real estate investors are leveraged when they compare returns to the stock market. Remember to compare Cash-on-Cash return when investing.
With interest rates back under control and most industries still humming along, things are actually pretty positive. Employment is good, as is job creation. The subprime mess will mean that low to average income earners will go back to FHA loans rather than the adjustable rate loans - which is a good thing. With the elevated levels of inventory, it may take a while for the market to soar again (if at all). The economy as a whole is said to be on pace for modest increases in 2008. With the election coming up, there will be a lot of jitters in the market as many wait to see who will be elected and what new policies they will bring. The NAR forecasts that the housing market overall will continue to decline between .5 and 2% per quarter until around Q2 or Q3 of 2008 at which time the trend will begin to reverse and the nation will see modest gains.
Saturday, November 3, 2007
Start saving your money NOW!
Guess what?
Most people have it within their power to increase their savings by 30 - 50% INSTANTLY!
Sound good to be true? Try this:
Let's say that in the average month you save $100.00. You probably don't even move that money to a savings account - if you do, you're smarter than most people. The average Joe will just spend what he wants and what's left at the end of the month is "saved." So let's say Joe transfers $150.00 to savings the same day he deposits his paycheck and now only spends what he has left for that month. Get the picture? You've just increased your savings by 50%!!
You may have heard the phrase "Pay yourself first" tossed around by self-help financial gurus...well, this is what they mean. Before you spend money, put some away for yourself. Don't even think about it, do it automatically!
If you want to increase the amount of money that you're able to "keep" for your future, then LISTEN UP: It is easier to NOT spend money than to earn more! Think about it. Let's say that you want an extra $100 a month to begin saving/investing. Think about how to earn extra money - work more hours, work harder, work smarter, get another job...etc. Those are all good things...and you should do them if you want to increase your earning power. But now think for a second about how easy it could be to simply NOT spend all your money.
Now a word here on spending: if you have a problem NOT spending money and like 80% of Americans, you are living paycheck to paycheck - you may want to start taking your finances seriously. Do you have a spending plan (a trendier, cooler word for "Budget")? Do you track it? Computer software makes it easier to do this than ever before. Invest a few dollars in Money, Quicken, or some other financial software and track everything!
Next, figure out how much money you want to save and start an automatic savings plan. Many banks offer online banking with automatic transfer options. If you're not getting a good savings rate, check out what banks are giving good rates at Bankrate.com. I use ING Direct, which gives a very good rate and is easy to use. Set up an automatic transfer into your savings account every month.
How much to save?? That's up to your, your budget, and your goals. Try to save at least 10% of your income with a goal of getting 1 month of your income saved within 1 year (you should get there at 10 months if you're saving 10% a month!!). Ideally, you want to get up to 3-6 months of your salary in savings. That way if you can't work, or need to make a large purchase - you'll have some cash.
Questions/Comments:
Do you have a separate savings account and use automatic transfer?
Is it hard to start a savings plan? What are some changes you've made to adjust?
Is tracking your spending "fun" or "work"? Ideas to make it more interesting?
Try to set tangible savings goals. This helps you strive for something. What are some of your savings goals?
Most people have it within their power to increase their savings by 30 - 50% INSTANTLY!
Sound good to be true? Try this:
Let's say that in the average month you save $100.00. You probably don't even move that money to a savings account - if you do, you're smarter than most people. The average Joe will just spend what he wants and what's left at the end of the month is "saved." So let's say Joe transfers $150.00 to savings the same day he deposits his paycheck and now only spends what he has left for that month. Get the picture? You've just increased your savings by 50%!!
You may have heard the phrase "Pay yourself first" tossed around by self-help financial gurus...well, this is what they mean. Before you spend money, put some away for yourself. Don't even think about it, do it automatically!
If you want to increase the amount of money that you're able to "keep" for your future, then LISTEN UP: It is easier to NOT spend money than to earn more! Think about it. Let's say that you want an extra $100 a month to begin saving/investing. Think about how to earn extra money - work more hours, work harder, work smarter, get another job...etc. Those are all good things...and you should do them if you want to increase your earning power. But now think for a second about how easy it could be to simply NOT spend all your money.
Now a word here on spending: if you have a problem NOT spending money and like 80% of Americans, you are living paycheck to paycheck - you may want to start taking your finances seriously. Do you have a spending plan (a trendier, cooler word for "Budget")? Do you track it? Computer software makes it easier to do this than ever before. Invest a few dollars in Money, Quicken, or some other financial software and track everything!
Next, figure out how much money you want to save and start an automatic savings plan. Many banks offer online banking with automatic transfer options. If you're not getting a good savings rate, check out what banks are giving good rates at Bankrate.com. I use ING Direct, which gives a very good rate and is easy to use. Set up an automatic transfer into your savings account every month.
How much to save?? That's up to your, your budget, and your goals. Try to save at least 10% of your income with a goal of getting 1 month of your income saved within 1 year (you should get there at 10 months if you're saving 10% a month!!). Ideally, you want to get up to 3-6 months of your salary in savings. That way if you can't work, or need to make a large purchase - you'll have some cash.
Questions/Comments:
Do you have a separate savings account and use automatic transfer?
Is it hard to start a savings plan? What are some changes you've made to adjust?
Is tracking your spending "fun" or "work"? Ideas to make it more interesting?
Try to set tangible savings goals. This helps you strive for something. What are some of your savings goals?
Wednesday, July 18, 2007
How do I start?
The question I get most is "I want to start investing...how do I start?"
I think that most people are clever enough to figure this out on their own, but they simply lack the passion to make smart investing a priority in their life. Notice I did NOT say they lack "time." I firmly believe that we have enough "time" to do ANYTHING. We just don't have enough "time" to do EVERYTHING. So we prioritize our time according to what we MUST do (work, responsibilities, etc) and what we WANT to do (our passions).
Therefore, my first piece of advice for those who want to "start investing" is that you MUST make it a priority in your life to be a smart investor. This doesn't mean that you have to spend 20 hours or even 2 hours a week on analyzing stocks. It simply means that you must put in the time necessary to make educated decisions. Heck - if you're not gonna make educated decisions then you may as well gamble your money away rather than invest it!
Once you've made up your mind to be a smart investor, we can get serious about what you can actually DO. While everyone's situation is unique, I would recommend the following step-by-step plan to get started:
Questions/Comments:
Does anyone have a story about when they "made it a priority to be a smart investor?"
What do you think about my step by step list? Why is it in that particular order?
What step are you on? What step would you like to be on next year? In 5 years?
I think that most people are clever enough to figure this out on their own, but they simply lack the passion to make smart investing a priority in their life. Notice I did NOT say they lack "time." I firmly believe that we have enough "time" to do ANYTHING. We just don't have enough "time" to do EVERYTHING. So we prioritize our time according to what we MUST do (work, responsibilities, etc) and what we WANT to do (our passions).
Therefore, my first piece of advice for those who want to "start investing" is that you MUST make it a priority in your life to be a smart investor. This doesn't mean that you have to spend 20 hours or even 2 hours a week on analyzing stocks. It simply means that you must put in the time necessary to make educated decisions. Heck - if you're not gonna make educated decisions then you may as well gamble your money away rather than invest it!
Once you've made up your mind to be a smart investor, we can get serious about what you can actually DO. While everyone's situation is unique, I would recommend the following step-by-step plan to get started:
- Have a savings account for short term needs
- Fund your retirement account
- If married and your spouse doesn't have a retirement account, fund an IRA for them
- Fund a ROTH IRA for yourself and your spouse
- Buy a house
- Invest extra savings in mutual funds/brokerage accounts/real estate
Questions/Comments:
Does anyone have a story about when they "made it a priority to be a smart investor?"
What do you think about my step by step list? Why is it in that particular order?
What step are you on? What step would you like to be on next year? In 5 years?
Why MoneyWiseGuy?
Money
Is there a more controversial topic than money? Perhaps religion and politics are the two no-no's of dinner conversation, but think for a second about the taboo topic of money:
What's the #1 cause of problems in marriages?
What's the #1 cause of disagreements among heirs of an estate?
What topic is so "personal" that some families don't discuss it at all?
Companies have unwritten rules about their employees talking about their salaries.
Siblings start to resent the others because of differences in wealth.
There's even the often quoted (and misquoted) Bible verse that says that "...money is the root of all evil."
For better or worse, money has permeated most of our society. We can choose to either ignore the topic as a lot of people do, or tackle the tough questions head on.
That is what this blog is all about!
WiseGuy
I like this moniker a lot because it can have a double meaning. Obviously "wise" + "guy" could mean having knowledge or wisdom and being a dude. Both of which I qualify somewhat.
But also the fact that "wiseguy" could mean poking fun at some of the preconceptions and misconceptions about money. You know those people who are either embarrassed, shy, or think it's wrong to talk about money? Well, that's not me.
At this point in my life, I've learned that I have a deep passion for all things business: business planning, budgets, strategy, investing, and yes, even tax work. I've immersed my personal life in business. I still have my CPA license (now inactive) and my Accounting & Business education from Drury University. I still prepare tax returns annually for myself, my businesses, and a handful of clients. Now, I've received my Realtor designation and started a real-estate investing company with a friend of mine. And I've made it a point to run my personal finances like a business: keeping monthly financial statements and actively looking for investment opportunities.
Since money is the common language of all things business, a lot of my discussions will revolve around business topics. However, I would also like to touch on many other related topics such as:
A lot of people are scared talk about money, especially their personal situation. I encourage those people to stretch their comfort zones! Open and honest discussion is the best way to LEARN! I think most people who struggle with finances are the ones who either do not or are afraid to talk about their money.
And if you ARE comfortable! AWESOME!! It is said that "iron sharpens iron" so please join this important dialog and we'll learn together.
Questions/Comments:
Why is it "TABOO" to talk about personal financial issues?
Do you share my opinion that we SHOULD talk about these issues?
What do we need to be careful of when discussing financial topics?
Do you share a passion for business/money/finance? What excites you about it?
What topics would you like to see in the future?
Is there a more controversial topic than money? Perhaps religion and politics are the two no-no's of dinner conversation, but think for a second about the taboo topic of money:
What's the #1 cause of problems in marriages?
What's the #1 cause of disagreements among heirs of an estate?
What topic is so "personal" that some families don't discuss it at all?
Companies have unwritten rules about their employees talking about their salaries.
Siblings start to resent the others because of differences in wealth.
There's even the often quoted (and misquoted) Bible verse that says that "...money is the root of all evil."
For better or worse, money has permeated most of our society. We can choose to either ignore the topic as a lot of people do, or tackle the tough questions head on.
That is what this blog is all about!
WiseGuy
I like this moniker a lot because it can have a double meaning. Obviously "wise" + "guy" could mean having knowledge or wisdom and being a dude. Both of which I qualify somewhat.
But also the fact that "wiseguy" could mean poking fun at some of the preconceptions and misconceptions about money. You know those people who are either embarrassed, shy, or think it's wrong to talk about money? Well, that's not me.
At this point in my life, I've learned that I have a deep passion for all things business: business planning, budgets, strategy, investing, and yes, even tax work. I've immersed my personal life in business. I still have my CPA license (now inactive) and my Accounting & Business education from Drury University. I still prepare tax returns annually for myself, my businesses, and a handful of clients. Now, I've received my Realtor designation and started a real-estate investing company with a friend of mine. And I've made it a point to run my personal finances like a business: keeping monthly financial statements and actively looking for investment opportunities.
Since money is the common language of all things business, a lot of my discussions will revolve around business topics. However, I would also like to touch on many other related topics such as:
- personal finance
- money in marriage
- money and the Bible
- Investing strategy
- Real Estate
- Tax planning and strategy
A lot of people are scared talk about money, especially their personal situation. I encourage those people to stretch their comfort zones! Open and honest discussion is the best way to LEARN! I think most people who struggle with finances are the ones who either do not or are afraid to talk about their money.
And if you ARE comfortable! AWESOME!! It is said that "iron sharpens iron" so please join this important dialog and we'll learn together.
Questions/Comments:
Why is it "TABOO" to talk about personal financial issues?
Do you share my opinion that we SHOULD talk about these issues?
What do we need to be careful of when discussing financial topics?
Do you share a passion for business/money/finance? What excites you about it?
What topics would you like to see in the future?
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