November 19th, 2008 — Investing, Long Term, Money, Personal Finance, Real Estate
Right now, if there was a market that had bad news written all over it, it would be real estate. The housing crisis has made investors jumpy, the economy appears to be tanking and home values are plummeting across the country. Would you believe that this is actually a good time to get into real estate? With the proper choices and management, this is absolutely true.
Down markets are a speculator’s dream come true and they can easily change your entire fortune. While we certainly don’t recommend sinking your life’s savings into a bunch of dead end properties this instant, this is a good time to think about investing in real estate the smart way. Never overextend yourself and always take the time to make smart investments that will pay off in the long term.
Let’s look at that statement a little more closely, especially the last two words – long term. Yes, right now, an investment in real estate is not going to do very well. In fact, it may even lose some value over the next few months. But, what goes down will go back up. Property values cannot stay low forever, and although they may not reach the insane heights they recently attained, it’s easy to make a good chunk of money with the right house.
Instead of looking at an investment in real estate in the tangible form, let’s compare it to an investment in a stock. You purchase a stock at $4 today and while it’s been steadily going up over the past few years, it’s still a pretty cheap buy. However, in eight months, the company takes off and the value of your stock increases exponentially. This would be considered a good investment. How is investing in real estate right now any different?
In fact, in some ways, you can do quite well with an investment in real estate right now. Consider the fact that foreclosures are at an all time high. What does this mean? Thousands of families need a place to live and they’re not going to be able to get a new home loan right away. This means that thousands of new renters have flooded the market and they have to find a house to rent.
Investing in real estate is always risky, but sometimes, the best returns come from taking a chance in a down market. You can easily pick up a property for pennies on the dollar, earn money from renting it out right now until the market changes and then sell it for a profit in a few years.
Remember – if you are going to jump into the real estate market, never purchase a property without first getting an inspection. Some homes that have been foreclosed on will be wrecked by the old owner or may have fallen into disrepair. Never accept anything on face value and insist on seeing the property in person. Pick properties that are solid, located in good neighborhoods and likely to go up back in value once this crisis passes.
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November 18th, 2008 — Banking, Financial Security, Income Streams, Long Term, Money, Personal Finance, Real Estate
While many are reacting to the news of bank failures and bailouts badly, there are a few people that are taking the time to assess the situation and figure out what they can do to stay on top, and keep their money safe. Panic is an ugly thing, especially when it involves money. Britain has already seen a run on their banks once this year, and many other countries are finding that their banks are on tenuous footing at best.
This creates an environment that is very unstable and as a result, the very real prospect of earning everything you worked so hard is now possible. The biggest mistake that people make when the economy goes through corrections is overreacting. Granted, no one wants to lose all their money in the stock market, and you would find few people indeed that aren’t at least somewhat concerned over the direction the economy is going.
While some are bleating “Great Depression” and others are scoffing, this is a good time to start developing some strategies that will keep your money safe. While there are no guarantees that you can protect every dime, there are ways that you can keep your money safe, and even increasing, in times of economic hardship.
One of the best ways to secure more income in these times is to find ways to make the situation work for you. As an example, the car market is struggling right now, people can’t pay their interest payments and housing is in the tank. However, a smart investor will look at this issue and see ways that they can profit from it.
Thanks to the falling value of homes, there is a rush to pick them up cheaply to flip at a later date. Whether you decide to use the property as a rental to keep regular income coming in, or you want to flip it quickly, real estate has a lot to offer at this time, even though everything seems gloomy. All hope is not lost, and while outright speculation is not a good thing, taking stock of the market and seeing how you can turn your finances around is a good thing.
While you should not invest if you have no experience, at least not without the help of a broker, it helps to broaden your view of the situation and see where you can profit. Reading the financial news on a daily basis is something proactive you can do and it can help you spot trends right as they are occurring. By becoming an informed consumer and taking the time to learn the ropes, you’ll be in a much better position than those who have not paid attention and frittered away their money.
If you are truly worried about your money, consider speaking with a financial analyst, or an investment broker that can help you develop long term strategies that will keep your money safe, and increase your income, no matter what happens in the world.
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November 11th, 2008 — Personal Finance
Getting married is stressful and emotional, but when it comes to handling finances, things can get really scary. You’ll be combining two incomes in most cases and many people get the impression that they can start spending twice as much. This usually leads to double the expenses and a lot of heartache. If you’re just starting out on your path of wedded bliss, there are a few tips that will help you use these first few years to create a solid income for your future.
1. Business is business.
Too many relationships end up spoiled due to money problems. The best way to approach this is to understand that business is business. Your money should never be handled emotionally. Think of it this way – you are dealing with two banks. The manager at the first bank is sobbing and pulling out his hair. The manager at the second bank is calm and collected. Who are you going to trust more? Find a way to separate your finances and financial discussions from the rest of your life and create a zone where no emotion can enter. They’re cold hard numbers and they won’t appreciate your outpouring of emotion anyway.
2. Start thinking about your future right now.
You may be lost in the throes of wedded bliss, but now is the time to start planning for the rest of your lives. You need to develop multiple streams of income that will make it easier to save for your retirement and achieve your financial goals. Set up a path on paper of where you want your finances to be in 5, 10, 15 and 20 years. Set up definitive goals and then take the steps to make those goals happen. Chances are, neither one of your jobs are going to cut it.
In today’s economy, multiple streams of income are vital if you want to get ahead. This usually means making smart investments, purchasing property that will bring in returns and finding new ways of making your money work for you. If you don’t have the money to invest now, consider taking out a small loan to get started. This is a powerful method known as debt leveraging and it is used by millionaires throughout the world.
3. Avoid the Bad Debt Trap.
Leveraged debt is good debt. Overspending on things you don’t need is bad debt. Learn to separate the two and train yourself to stop before purchasing something you don’t need. Ask yourself – should I spend $5k on a new television or $5k on some stock that is going to pay be back four times over? This makes it a lot easier to get your priorities on the right path.
Too many couples end up trapped in the endless cycle of bad debt. Consider taking a course together that discusses debt leverage and learn more about it as a married couple. You’ll have more time to bond and you’ll be learning techniques that will carry you through the rest of your lives together.
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November 7th, 2008 — Book Review, Personal Finance, Wealth
Can a book about lowering your financial expectations be any good? We were intrigued by the premise of this book and decided to give it a try. It was a bit surprising in some places, and a little disappointing in others, but overall it was a very interesting read that we found to be thought provoking. While it is certainly not for everyone, if you’re struggling to make ends meet, some of the advice contained herein may be very useful to you.
Chatzky’s main premise is that seeking to be rich may be counterproductive, when you could instead be seeking to be “comfortable.” For most of us, that would be more than sufficient, especially if you don’t have any particular wealth building ambitions. However, given the state of the economy and worldwide uncertainty, we weren’t really convinced that this approach is the best one to take.
You can be comfortable right now and build up just enough income to get by, but what happens when the dollar falls further or gas prices rise? We’ve seen the cost of living skyrocket in the past year alone, thanks in a large part to the housing crisis and the cost of oil. What may have been “comfortable” last year, may be scraping by this year. Since 80% of Americans currently live from paycheck to paycheck, comfortable really doesn’t cut it in today’s society.
That’s not to say that the book has no value, it does, but much of it should be taken with a grain of salt. The book was obviously written before the current economic trouble and like so many that came out in this time period, it almost feels like the authors felt that the “good times” were going to last forever. That’s rarely the case when it comes to economics, and there will always be downturns.
Our main issue is that while not everyone can be a millionaire, is it productive to encourage people to settle for less. If you remove that drive for personal betterment, what is left over? It’s just human nature to want more, to achieve more and to get better things. While being comfortable may be fine for a little while, our natural inclinations may reduce that to rubble in a very short time. In a society where over spending is common, we worry that this book could actually prove to be disastrous for those that have little concept about good money management.
We did however appreciate Chapter Four, which discusses how to set financial goals that are meaningful to your life. This chapter alone makes the book worth reading, even if we didn’t agree with a lot of the author’s ideas. Overall, it was a good read and one that may challenge the way you think about money. We don’t really recommend it for those just getting into managing their finances, but for those that have experience in this area, it is certainly a good book to add to your reading list.
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November 4th, 2008 — Financial Security, Money, News, Personal Finance, credit
A few years ago if you referenced the term “credit crunch”, most people would be puzzled. Today barely a single day can pass without the phrase seeing consistent if not constant use in the newspapers and on television. The credit crunch is a crisis that is affecting numerous financial institutions and banks, and has been wrecking havoc on the economy since the summer of 2007. This is when it had officially become apparent that millions of mortgage borrowers in the United States were not going to be able to pay their loans back.
For a number of years banks were offering mortgages to people even when they did not have the credit to support them. These loans were offered at low rates, but only initially, and when the rates went up over time, borrowers were no longer able to pay the mortgages back, which meant that banks were becoming less willing to lend money, clamping down on the newer, fresher loans to other customers, only offering higher interest options to customer needing loans.
All of the world’s money markets have been affected by these financial issues, including markets in the United Kingdom and elsewhere. Regardless which bank or building society you turn to, credit is much harder now to attempt to obtain than ever before, and also much more expensive, and this goes for personal loans, mortgage loans, credit cards and even overdraft fees. Here is what you need to understand in order to stay calm and avoid becoming affected by the credit crunch. If you want to resist panic by surviving the credit crunch, consider these things:
- The credit crunch is absolutely not going to affect everyone equally.
If your credit is good or even just reasonable, then it should not be difficult for you to find a mortgage or another loan or line of credit that you need, even if you have to pay more now than if you had applied a year or two ago.
- Many banks are now cutting their base rates in half.
They are pumping money into other investment options to make it easier for responsible borrowers to get the money they need, which is going to bring down the cost of credit over the span of the next year or so.
- While some lending options are going to be a bit harder or more expensive to get, such as automobile loans and mortgage loans, you can get money when you absolutely need to.
So if you need a student loan, for example, rest assured that there are still options out there because the government is working to provide lending options that are most easily obtainable for those who are in need.
This will work wonders for keeping your lending options open when you need them, which is the best way to make sure that you can get a loan when you absolutely need to.
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October 27th, 2008 — Investing, Money, Personal Finance, Stocks, insurance
With so much uncertainty currently present in the marketplace, one of the most vital things that you can do to invest safely in a crisis market is simply to learn from mistakes in the past. Certain sectors of the market may seem incredibly attractive in times of a crisis, it is absolutely vital that you weigh all of your options before you make any important financial decisions relating to your investing.
With the stock market down, it may seem like a good idea to put some money into stocks which will surely rise again when the housing market rights itself. This may seem like sound financial advice, but how is it affecting other investors who made this decision ahead of you? Generally speaking, those who invested before you are learning the hard way about their investments. Don’t learn the hard way when you can learn from yours and others’ past mistakes.
Investing in a crisis market may very well appear to be a sound thing to do in some ways, because certain investment vehicles are suddenly looking very attractive. Just because the market has already made such a significant downturn, that does not mean that it is done sliding or that new investments won’t be negatively affected.
The best way to invest in a crisis market is not to invest at all, because there’s no telling what is going to happen next, or who is going to take the hardest hit. If you absolutely must make an investment, however, then there are investment options that you may want to consider, that can protect most if not all of your investment capital just in case the economy takes another dip and more financial institutions find themselves in trouble.
With so much uncertainty currently present in the marketplace, one of the most vital things that you can do to invest safely in a crisis market is simply to learn from mistakes in the past. Now that we are better aware of what investment vehicles did and did not survive all the recent market volatility, we have a better idea of which investment vehicles are worth putting money into and which should be avoided. Investments that are insured by the FDIC are a good choice, but only if you follow the necessary rules when investing in them. If you go over the limit that is insured by the FDIC, then you are throwing your money away because you will not see that money again if the market should happen to crash.
The important thing to do when investing in a crisis market is to really do your research, ask for recommendations, weigh options and work with experts to figure out what really is, and really is not going to work for you. There’s still really no telling whether or not a specific investment vehicle is going to be safe, but by learning from past mistakes, some are quite obviously safer than others and may do a better job of protecting your assets accordingly.
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October 10th, 2008 — Book Review
If nothing else, the state of the economy has shown that millions of people don’t have a good grasp of how to manage their personal finances. There are hundreds of books written every year on the subject and yet, this concept still seems to elude many. Some books are either too technical for some readers, while others fail to get to the right points. We were wary about this book for many reasons, but it actually managed to surprise us. If you are looking for an in-depth, no nonsense guide to personal finance that is still fun to read, this is the perfect title.
The book is short, coming in at just over 155 pages, which in this case, is probably in its favor. Those looking to avoid a heavy, scholarly tome will undoubtedly be drawn in by the lively cover and the fact that you won’t strain a muscle just by picking it up. It’s divided into three main sections, Capture the Numbers, Corral the Paper and Advanced Projects. Each one goes in-depth without being boring on all of the fundamentals needed for personal finance management.
The first section, Capture the Numbers, covers how to start tracking the money you make and the money you spend. There is some great advice here on keeping everything in order and this is a section that should probably be re-read by most until it’s second nature. The next chapter goes into the concept of balancing everything and getting all of your figures to match. Last by not least, this section ends with a discussion on avoiding late fees and other miscellaneous bank fees that arise from mismanagement of your funds.
The next section covers how to stay organized in the midst of a swirl of papers, budgets and balance sheets. Some great tips are provided on how to develop a filing system that is not difficult to maintain as well as how to easily find documents when you need them. The section on proving whether or not a debt is yours is also vital reading.
The advanced section covers more complex subjects, like what you can learn from your spending habits and how to become more informed as a consumer. Yes, the information is very basic, but it does a great job of making personal finance concepts accessible to all, regardless of education, experience or the simple desire to keep everything in order.
We highly recommend this book to all that need to learn how to get a grip on their personal finances. While the experts may not have much use for it, the everyday person and family has a lot to gain by cracking this book open. With the way the information is presented, managing finances no longer seems to be a mystical experience that should be feared. This is one of the best everyday guides we have found on the subject and we hope that more people will read it and put its advice to good use.
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August 4th, 2008 — Budget, Cash Flow, Goal, Money, Personal Finance
As the housing crisis worsens and the economy looks increasingly weak, most Americans are facing the reality that their finances are in a bit of a wreck. Chronic overspending, a lack of savings and too much bad debt has left many in a financial condition that they would prefer not to be in. Here are some top warning signs that your finances are in a wreck, and how to get out of the problem.
It sounds overly simple, but many of us do not realize how much we spend in a month. Take the time to keep a log of how much you spend in one month and compare it to your salary. If the numbers are dangerously close, you’ve got a problem. Don’t forget to include your credit card purchases on there as well, since you will be paying for them.
Solution: Set a monthly budget that you can stick to. Add up the expenses that you can’t help, such as rent or utilities and then build from there. Try to free up as much money as you can. As we mentioned above, credit card spending should be included in this budget, even if you don’t have to pay for those items right away. By limiting how much you spend on your credit cards in this manner, you can start carving away at your debt. It is important to set a budget that is not too difficult to stick to. Allow yourself a little wiggle room, but make sure that you do come in well under what you make each month.
2. You are falling behind in your bills.
A couple days late here, a week there – after all, the phone company doesn’t really mind do they? If you are finding that you are trying to space out your bills to the point where you are chronically late on all of them, this is a sign that you have a major problem. Late payments really do matter, whether you realize it or not. Even phone companies report to the credit bureaus and you will not be doing your credit rating any favors.
Solution: Budgeting can help with this, but if you are finding that your paychecks are not syncing up with due date, it is important to do something about it. Most companies will allow you to change your due date to something that is more suitable for your paycheck schedule, but you will have to ask. This is a great solution if you have the money to pay the bill, but you just don’t have it on time.
These are two simple solutions that can bring a wrecked financial plan into better territory. However, it is vital to break that cycle of relying on your paycheck to meet all of your financial needs. Consider debt leverage to create more than one stream of income. This will free up your finances and chances are, you’ll sleep a lot better at night.
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July 21st, 2008 — Budget, Money, Personal Finance, Standard of Living
Right now, it has never been more important to manage your bills and get your finances under control. The economy is going through a particularly rough patch, food and gas prices are going up and it can be pretty hard to make your paycheck stretch each month. If you’re finding it difficult to keep up, now is the time to start making some changes before you get in over your head.
Most people really don’t realize how much they spend every single month. The vast majority of Americans do spend more than they make, and many of these expenditures are for non-essentials. There is one very important thing that everyone should do to determine whether or not they over spending. For a period of one month, keep a log of absolutely everything you buy or pay, from that pack of gum to the bills you pay.
At the end of the month, add up everything to see just how much you spent. Chances are you may be pretty surprised at just how much is going out the door. If you are spending more than you are making, or if you are not putting anything in a savings account or investments, you need to figure out how to cut some of your costs.
Go through your month’s log and split everything up into two columns. The first column should be your essentials, such as rent, utilities, car payment, insurance, phone and groceries - but not eating out. Total all of this column to see how much you have to spend every month.
Now put everything else in the second column and total this one up as well. This will be the amount where you can start cutting some expenses. Go through the list one more time and check off the things you don’t think that you can do without. Put these in a third column. Everything else should be examined in that second column and reevaluated. For example, if you are spending $100 every month eating out, you can easily cut this in half and put $50 aside.
All of these little expenses add up quickly and before long, we’re overspending without even realizing it. Once you have everything divided up into three columns you can determine what kind of budget you want to work with. Your goal should be to put as much money aside as possible.
Once you free up some of that cash, you’ll need to work on creating more income so that you don’t have to live quite so frugally. Consider using this to create another stream of income through an investment or opportunity. This can help free up more money that can be spent on non essentials, or that income can go back into another income stream. If you don’t have any available cash to do this, consider leveraging a loan to create an income stream to take the pressure off of your paycheck. This can really make a difference in how much money you have coming in every month.
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May 20th, 2008 — Debt, Diversification, Income Streams, Leverage, Money, Personal Finance, Wealth
The economy is in a state of constant flux. If one industry is doing well, you can bet another is suffering. While it can be difficult to weather any cycle, there are techniques that you can use to ensure that you stay on top no matter what happens. Here are just a few of the most proven ways to keep making money, no matter what state the economy is in.
1. Leveraging Debt -
The proper use of debt is one of the best ways to increase your income and have the stability you need to weather any cycle. Whether it’s a personal cycle, or a global one, if you are making more money from several different avenues, you’ll be prepared for no matter what happens. If you’re relying on only one paycheck, you’re at a much greater risk of losing everything if something should go wrong.
2. Multiple Streams of Income -
Why have just one source of income when you could have several. Let’s look at this on a personal level first, and then a global level. Let’s say that you have one paycheck coming in from a job you’ve held for years. It’s been a secure job, but today you wake up to find out that you’ve been downsized without warning. Even if you have severance pay, it’s going to take time to find a new job. Since you were only relying on that one stream of income, you’re suddenly at risk for losing everything you own, or at the very least, drastically reducing your savings.
On a global level, let’s say that you’ve had one investment that has been returning nicely for the past few years. Today you wake up to find that the bottom dropped out, the company went bankrupt and all of that stock you were counting on has evaporated. This has spelled disaster for numerous investors all over the world.
Now, let’s say that in addition to that one job or that one stock, you had several streams of income coming in every month. Suddenly, it’s not so earth shattering if one of them fails. You’ve got the benefit of having numerous different forms of income that will keep you above water.
3. Diversity -
There is nothing worse than putting all of your eggs in one basket and hoping for the best. It may work for a little while, but no economy is stable enough to keep performing at the same level for a hundred years. Using the same examples as above, it just makes more sense to spread your risks around. You won’t be running the chance that you’re going to be ruined if one of them fails. Smart investors always diversify and smart business owners usually have more than one way of making money.
It’s the smart way to do business. If you’re not diversified, now is the time to take a hard look at your stocks or holdings and determine how best to start. You can always ask for the help of a financial planner if you’re short on diversification ideas.
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