Entries from August 2008 ↓
August 31st, 2008 — Personal Finance, roundup
Sunday Money Madness is back again this week under the header of the Hurricane Gustav and Tropical Storm Hanna. Rainy and windy weather is about to bombard the southeast again and looks like Louisiana, and Texas are going to take the brunt of the category four hurricane. For those living in those states, stay safe and be careful.
Weekend reading material:
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August 29th, 2008 — Book Review
If you have ever wanted to get into investing, but you weren’t sure where to start, there are thousands of books out there that will get you started. But they are not all created equal. From sky high hope crushers to real world advice, you’ll have plenty of topics to go over. The Single Best Investment by Lowell Miller proclaims to help you decide which investment is the most important one, but can it live up to the title? Let’s find out!
While the book is very well written, we didn’t find that it covered anything really new. Which is not a problem in and of itself, unless you are expecting the book to contain earth shattering information that will make you a millionaire overnight. Basically, the premise is that your best investment is in stocks that are highly rated and have big payouts. You don’t really need to be an economics major to figure that one out, but there is a lot of merit to the actual discussion about these investments.
Dividends are a terrific means of creating multiple streams of income and who doesn’t like having extra money coming in? If you’ve got the money and the ability to find these stocks, then they are a solid way of making more money. There is still a good amount of risk involved, but by taking the time to research the stock carefully, you can limit this. No investment is fool-proof, but you can make a lot of money with these stocks.
He does provide some great advice on how to determine the overall quality of stock and what you need to look for if you are interested in this type of investment. Again, pretty basic stuff but useful to some. We did like the chapter on knowing when to sell and found that this was probably the best section in the book, especially for those new to investing.
Overall, we found that the book contained some pretty good advice. It is best suited towards those that are just getting started in the investment world, or for those that already have money and need to learn how to make more quickly. It won’t do much good for those that are still trying to save money, but in this case, leveraging may be the best answer.
We recommend this book to those that need to learn about how stocks work and the market in general. Pros won’t find much to learn here, since much of the information is basic and already well covered or known. That doesn’t make it a bad book, just one that needs a specific kind of reader. It’s not the worst book ever written on investments, but it’s not the best either. It holds that good middle ground where it’s just enough to make you want to read it and some readers will take away a good amount of information and advice they can put to use. For that, we give it a recommend.
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August 28th, 2008 — Banking, Income Streams, Money, Personal Finance
For many of us, saving is something that we always plan to do, but never quite get around to it. The bottom line is, if you don’t have a savings account and a regular plan for putting money aside, you may regret it in the future, especially as you get closer to retirement. A savings account can be incredibly useful in an emergency and it can also help increase your odds of getting a loan in the future when you may really need it. So, how can you start putting money aside right now, even if things are tight? Here are some tips to get you started.
First, it’s important to remember that saving money doesn’t necessarily mean putting thousands of dollars away every month. It’s ok to smart small, and in fact, this can help you build up some great saving habits. Even if it is only $5 a week, putting money aside is a great idea. It will add up, especially if you can find a savings account that has a great interest rate. Granted, you’re not going to get rich putting away $5 a week, but it is a start.
Next, you will need to open up a savings account. While it’s perfectly fine to put money in a drawer or just keep it in your checking account, it is simply too easy to access it. By putting that money into an actual account, you’ll be less tempted to pull from it, unless you absolutely need to. Shop around for a savings account before jumping in, since interest rates can vary greatly from bank to bank. If you have a habit of blowing through your money, you can put your savings account book away in a safe deposit box.
Once you’ve gotten into the habit of putting money aside, you can start looking at ways to make more money to add to that account. This can help increase your savings without scrimping. Unless you’ve already got a lot of disposable income, it can be tough to find enough money to save when you are buried in bills. This means that it may be necessary to investigate some money making options.
The most ideal option is to find a way to create another solid stream of income. Once again, you can start small with a little investment that will start returning money every month. Put that extra income directly into your savings account and watch it grow very quickly. The key is to keep making those investments and to keep moving forward. Never get stagnant or rely too heavily on just one income stream.
If you have a hard time finding any money to put aside each month, it may be time to revisit your finances. Whether you just overspend, or you are not making enough to support yourself at your current job, you’ll need to take a hard look at your finances and determine what can be changed to increase your ability to put money aside.
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August 27th, 2008 — Long Term, Money, Personal Finance, insurance
Most of us look at insurance premiums as a big drain on our finances. Insurance policies do not come cheap, but they may be essential. In many ways, you can look at insurance as a way of avoiding financial failure in the years to come. While you can’t buy a policy to protect your checkbook, you can invest in insurance that will protect you and your money should an emergency occur. Let’s take a look at how various insurance policies can impact your financial future.
Health Insurance –
This is one of the most expensive forms of insurance, and if you’re generally pretty healthy, it can seem like a waste of money. But, look at it this way – let’s say that you are injured off of the job (where you would not be eligible for worker’s comp.) It is a serious injury and you’re unable to work for two months. In addition to missing that salary, you’ll also have to pay for all of your hospital bills. An unexpected illness or injury is one of the number one causes of bankruptcy. If you had an insurance policy, you would not have to worry as much about those bills and your financial burden would be smaller.
Business Insurance –
If you are running your own small business and you do not have business insurance, you are setting yourself up for failure. This is especially the case if you do business with the public or create products that are sold to the public. There is always a chance that someone will be injured and they may sue your company. It is entirely possible to lose everything you own very quickly in this situation.
Errors and Omission insurance is also vital, and often overlooked, for business owners. Anytime you are providing information to the public, you are at risk for giving advice that may not be used properly. In today’s litigious atmosphere, you really cannot have too much insurance if you have your own business.
Car Insurance –
This is usually required by states, but it can seem like a bit of overkill, especially if you’re paying a lot on your premiums. But, once again, if you imagine what could happen, it’s easy to see why this insurance is so important.
Let’s say that you only have a liability policy, which is generally accepted as the minimum requirement by most states. You’ve got one car, and it is not paid off. The car is wrecked, and although you were not at fault, the insurance will only pay for the damage you caused, and not the damage on your car. Suddenly, you’re stuck with still making car payments, even though the car has been totaled. Since it was your only car, you’ve got to go out and finance another. It’s easy to see how that could be disastrous for most people.
Insurance may be expensive, but only when you don’t have the right outlook. When you consider how much protection it provides to your financial interests, it is well worth the money.
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August 26th, 2008 — Bankruptcy, Debt, Money, Personal Finance
If you’re phone is ringing off the hook, or your debt collectors are literally breaking down your door, it’s time to learn your rights and how to handle them. No matter why you ended up delinquent on your accounts, dealing with debt collectors is humiliating and infuriating. However, there are a few steps that you can take to ensure that you will not be taken advantage of.
1. Find out if they are an actual collection agency.
If it is a collection agency, then there is a very good chance that they purchased your old debt for pennies on the dollar. This means that they will be very likely to settle for a lower amount, because they make money no matter what. For example, many companies will purchase a $2000 debt for a mere 87 cents. Anything they make over that is sheer profit. This gives you a chance to negotiate for a smaller overall payout.
2. Don’t hide.
Hiding from debt collectors is never a good idea, it will only make your situation worse and you may actually end up getting sued. It is best to face the problem head on. If you need to buy extra time, you can request that the debt collector provide you with proof that you actually do owe the debt. This gives you about thirty days to come up with the money to pay it, and during that period, they are not allowed to contact you.
3. Read the FDCPA act.
You have rights, but your debt collectors are putting money on the fact that you may not know them. The first step is to read through the Fair Debt Collections Practices Act. This outlines exactly what a collection agency or debt collector can and cannot do to collect on a debt. You can get some great tips on how to handle the situation from this act and your debt collector’s won’t be able to pull the wool over your eyes any more.
4. Don’t cave to threats.
Debt collectors can be very shady. They will threaten you with criminal arrest, they’ll threaten to ruin your reputation. Legally, they cannot do this. You cannot be arrested for a bad debt, unless there is a bad check involved. Once again, read the FDCPA act to get a clearer understanding of all of your rights.
5. Don’t be afraid to report them.
The FDCPA has a reporting system in place where you can get assistance if you are being harassed by a creditor or a collector. If you are getting calls in the middle of the night, being unduly harassed or actually threatened, you do have recourse.
Do not fall prey to these pressure tactics, and stand up for your rights. Chances are when you do, the collection agency will suddenly back off. They only like to deal with people they can intimidate and once you know your rights, you will have a lot more power that you can assert.
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August 25th, 2008 — Banking, Debt, Financial Security, Leverage, Money, Personal Finance, credit cards, credit score, retirement
Whether you are pushing thirty and trying to get your first home or your retirement is staring you in the face, there are times when you may feel as though you’ve run out of time financially. We don’t always make the best decisions when it comes to saving money and before long, we end up wondering where it all went wrong. If you’re trying to figure out how to catch up financially here are a few tips to get you started on the right track.
1. Fixing your credit.
First and foremost, your credit should be your main focus. This will make a big difference in whether or not you are able to get any kind of loan and it is always good to have as high of a score as possible. If you are below 600, there are plenty of things that you can do to improve that score. You’ll need to start by paying off any delinquent accounts. Then, open up a secured credit card or get a small loan and make regular payments. In six months, your score can jump as much as 80 points or more.
2. Putting money aside.
If you’re already in a financial bind, putting money away can seem impossible, but it’s not. There are a few ways that you can start saving money right now, even if it is only a little bit. Place it in a high interest bearing savings account to get the most out of your money and add to it as much as possible. Some nest egg is better than no egg at all, and every little bit does help.
3. Consider debt leverage.
In this situation, when you need to start getting more money in to secure your future, debt leverage may be the best choice. If you are not familiar with how this process works, you basically take out a loan and invest that money. Whether it is into stocks or even real estate property, the idea is to have it start earning money for you. This is a good kind of debt and one that can mean a big difference when it comes to retirement. If you don’t have a savings account, you’ll need to have an alternative source of income coming in that will last through your older years.
4. Realize that it is never too late.
Many people make the mistake of thinking that there isn’t any point in turning things around. It doesn’t matter how old you are, or how bad your situation may be. There is a way out and you can turn your financial life around. Never give up, find new ways to make more money and hang in there. By sticking it out, you will be able to start securing your financial future, one dollar at a time. It’s not the quickest way, but it will work, provided that you dedicate yourself to wise spending and investing.
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August 24th, 2008 — Money, Personal Finance, carnivals, roundup
Hello and good morning, welcome to another edition of Sunday Money Madness. Our prayers are with those in Florida who have been flooded by Tropical Storm Fay. My parents were unfortunate to have sustained some damage from the winds if not the rains. Best wishes for your future - please stay safe!
Thank you to the carnivals that had us this past week! Here they are:
Carnival of Debt Reduction @ Carnival of Debt Reduction
73rd Carnival of Money Stories @ Living Almost Large
39th Edition of the Festival of Frugality @ Our Fourpence Worth
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August 22nd, 2008 — Book Review, Debt, Income Streams, Leverage, Money, Personal Finance
On the surface, this book seemed like the ideal read. It has a strong premise of how to create multiple streams of income using debt leverage. That is a great premise and one that we follow and put into practice every day. It was such a disappointment that this book failed to deliver on such promise. We really wanted to like this one, but at the end of the day, we simply cannot recommend it.
Let’s go into the good things first. Those who are new to real estate investment will get a lot of information from just the few chapters. The book covers 1031 transfers in a way that makes them so easy to understand. So many books try this and can’t even do that in 200 pages, let alone in a few chapters, so this is a definite plus for this book. They also cover some really great advice on how to actually make money with your mortgage.
The basic premise is that you take out a Smart Loan, using ARM payments. Make only the minimum amount and use the money that would have gone into higher payments into a high interest account. Sounds great on the surface, but it is obvious that the authors thought that the age of low interest rates on ARM loans was going to last forever. That’s simply not an intelligent way to think – the markets have already proved this many times over.
We fear for those that took this advice to heart and are now trying to figure out how to keep their homes. While debt leveraging is a terrific way to make money, and create more than one stream of income, it should never be done in a risky manner. It’s one thing to take out a loan, it’s another to think that interest rates are never going to skyrocket. By far, the best idea is a fixed rate loan, even if it means you’ll be making a little less money. You’ll more than make it up compared with what would happen when your ARM rate explodes.
We would have liked to have seen more than one option mentioned in the book, and it would have made it easier to offer at least faint praise. However, by only providing readers with one option, the authors failed to provide smart advice on smart loans. They always fall back on relying on that ARM to stay low, and this is a mistake that only amateurs make.
While this book is definitely not advice anyone should follow, debt leverage is still one of the best ways to make extra money. However, the key is finding the SMART way to do it an minimizing your risks. There’s no point in going to all of that trouble if one change in the market could drastically affect your fortunes. The book had a lot of promise, but at the end of the day, it simply failed.
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August 21st, 2008 — Budget, Financial Security, Inflation, Investing, Money, Personal Finance, Standard of Living
Turn on the television, read a paper or go online and chances are you’ll be bombarded with bad news about the state of the economy. Inflation is being whispered about, and in some cases, shouted about from the rooftops. Are we really facing inflation and how bad will it get? How can you find ways to save money when everything seems like it costs more?
First and foremost, inflation rates are up, but they are not as bad as they have been. For example, inflation in the 1980’s was actually much worse and we were in lousy economic shape back then. Now, due to the higher cost of living, it may seem as though we are in the throes of a world ending inflation, but it’s not quite that bad, at least not yet.
The main economic issue right now is how our daily necessities are quickly rising in cost. For example, flour now costs 37% more, and milk prices have jumped 23%. You don’t need to be told that gas prices are killing a lot of drivers, it’s already pretty obvious. Add in rising energy costs, crop failures and the housing crash and you have a recipe for disaster.
However, you don’t have to fall prey to inflation, if you take the right steps to avoid here. Here are some great ideas that will help you survive inflation, no matter how bad it gets.
First, if you don’t have a savings account, now is the time to start putting money aside. It may be a little tough, but you need to have some security and a cushion to fall back on. Even a small savings account can be useful. Inflation effects everything, but with the right budgeting, you can find at least some money to put aside each month.
Next, you can consider your employment options. If your company will allow you to telecommute, you can make that switch. You’ll save a lot of money on gas, particularly if you have a long commute. You may also want to consider either getting a second job that is close by, or working an online second job that you can handle from home. Getting more income coming in will definitely make inflation easier to ride out.
If you are investing, it may be time to retool your portfolio a little bit. Historically, bonds perform worse than regular stocks during inflationary periods. However, before jumping into the markets, make sure that you know what you are doing and that you have the help of a broker or financial planner to help you manage your portfolio.
Lastly, when it comes to beating high food prices, the old standards still apply. Clip coupons and find cheaper stores. Consider switching to a less expensive brand. No one likes having to scrimp, but if your budget is already tight, this can make a big difference. Stop eating out for one extra night a week or find ways to save money elsewhere to give you a little more freedom with your budget.
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August 20th, 2008 — Debt, Income Streams, Money, Personal Finance, bad debt, credit cards, credit score
No matter how wealthy or poor you are, there are financial traps that are waiting to disrupt your lives. Many people end up finding out too late that they are in the depths of one and it is nearly impossible to get out. However, there are specific steps that you can take to ensure that you don’t fall into one of these financial traps. We’ll cover the three most common traps and the steps you can take to avoid them.
1. Maxing out far too many credit cards.
When you’re first starting out, you get one card and soon the offers come in for more. Before you know it, you’ve got five credit cards and you’re dealing with a lot of temptation. One of the worst financial traps that you can fall into is accepting all of these cards and then maxing every single one out. This can have a terrible effect on your credit rating.
How to Avoid This: You really only need one or two credit cards at most, perhaps one department store card and one gas card. Anything over that is superfluous. When you open these cards, the key is not to look at the available balance on the card, but the available balance in your checkbook. Control your spending and pay them off each month.
2. Spending more than you earn.
Many of us don’t actually realize that we’re doing this, but it is one of the number one problems facing Americans today. Through credit card purchases, homes, cars and other material goods, we end up far into debt before we even realize that anything went wrong.
How to Avoid This: Use the old rule of thumb when calculating what you need to buy. For example, for a house, you should multiply your current monthly salary by three. That will be your price range. For everything else, set a budget and stick to it. It’s not always easy, but you’ll feel a lot better when you have money to spare at the end of every month.
3. Relying on one source of income.
Too many Americans are living paycheck to paycheck and this spells big economic trouble. Whether it’s due to overspending or just a salary that is too low, this is a bad situation for anyone to be in. If you lose your job, everything else goes down hill very quickly.
How to Avoid This: Find ways to either increase your monthly income, by getting a raise or a better paying job, or start creating more than one stream of income. This is ideal and will provide you with the most financial freedom. Whether it is through a side business, your own company or investment returns, a secondary or tertiary stream of income will ensure that you are free from the shackles of your regular paycheck.
All three of these financial traps have a lot in common. They are all related to the amount of money you have coming in, versus the amount going out. Remember, the key to financial freedom is more than one form of income and never spending more than you make.
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