By Molly Greaves

 

 

 

 

Volunteering By Reading Text Books For Blind, Dyslexic and Disabled Folks

I love volunteering. I just got back from 3 hours of reading at the RFB&D where I enjoy spending some of my energy reading textbooks for blind students (today I learned how to direct readers and ran the recording technology).  Disabled folks can use our service too, including folks that cant turn the pages because of arthritis for example. Some students have been recently blinded and some were born blind. Either way, it’s very rewarding because of the impact on others. I’m going to join the Ambassador committee soon, so I thought I’d start by sharing some interesting facts with you about the program.

Where I volunteer, we serve Texas, Arkansas and Oklahoma. Pretty fun territory for a gal from Vermont to think about. Wonder what listeners think of my accent?

* In Texas alone, we have over 16,000 borrowers that have benefit from our services.  Nationally, Recording For The Blind & Dyslexic provides over 185,000 people with print disabilities the books they need to learn and succeed. 

* Currently over 700 Texas schools and districts are members of our service.

* Borrowers range from kindergarten-graduate students and continuing education. We have even helped a blind woman graduate successfully from acupuncture school!

*  We have a studio that has 7 recording booths. Everyone gets to direct!

* Johns Hopkins University evaluated the effectiveness of RFB & D’s (reading for blind and dyslexic) recorded textbooks, and found a 38% increase in content acquisition reading scores.

* Their goal (and mine too, which is why I volunteer here) is for all people to have access to the printed world. 

www.rfbd.org

And if you’re in Texas, they’re just right up the street off of Lamar and 45th!

 

Vanguard’s Economic Week In Review—Week Ending Friday, June 27th

Economic Week in Review: Consumers grow gloomier
————————————————

This week’s economic reports showed little signs of relief as the
consumer confidence index fell even lower than expected. Consumers
continue to be concerned over rising unemployment rates, historically
high gas prices, and the housing slump. On a brighter note, sales of
existing homes were up for the month, albeit still far below
historical averages. In other news, the Federal Reserve Board’s Open
Market Committee met this week and kept the target funds rate at 2.0%,
putting an end to an eight-month-long string of rate changes. For the
week, the S&P 500 Index fell 3.0% to 1,279 (for a year-to-date total
return of –12%). The yield of the 10-year U.S. Treasury note fell 17
basis points to 3.99%.

To read Vanguard(R) Economic Week in Review in its entirety, go to:
http://www.vanguard.com/visit/econweek062708

 

Beating Inflation

If the inflation rate grows faster than your investment’s rate of return, it can cause your savings–and your purchasing power–to erode. To maintain your purchasing power, you need to earn a rate of return higher than the inflation rate. Currently, the US inflation rate is about 4%. 

 

Saving When You Have Immediate Financial Needs

Unfortunately money isnt taught in school. If you go to college for finance, sure, but not in your everyday classroom at least. It’s tough to understand, and even more so because no one has a magic formula when it comes to creating a guaranteed, secure financial future. 

Lots of Americans can’t even think about the future because they’re worrying so much about today. It’s time to start investing in your future today. It’s only going to get tougher the longer you wait. Think about your whole financial picture and where you can cut back to ease up your cash flow to help get you further ahead, faster.

 

Ever wonder “How Do I..” or ” When Should I…”? What about “What Happens If…” or “Why Should I…”?

If you ever wonder:

How Do I…

When Should I…

What Happens If…

Why Should I…

Please let me know and I’ll see if I can help. If not, at the very least, I should be able to give you a referral to someone that could.

 

Damn Obama! Raising Capital Gains to pay for all of his new ideas

My 2 cents: Nice way to reward us savers and investors. Thanks a whole bunch for penalizing those of us trying to get ahead too. He says that he wont go over 28%! 28%!??? Tag on inflation and we’ll be losing over 30% on our money we are trying to earn.

By Jeanne Sahadi, CNNMoney.com senior writer, June 20, 2008 

Barack Obama has made one part of his plan for the capital gains tax perfectly clear: He wants to raise the rate above 15% for high-income investors.

But to what level: 20%? 23%? 27%? All Obama has said is that it would be at least 20% and less than 28%.

The choice the presumptive Democratic nominee for president makes will matter to investors and to federal coffers. It’s one of the many crucial tax details he and his advisers have yet to settle as they campaign against Republican rival John McCain.One reason Obama says he wants to raise the rate is to establish more fairness in the tax system. A low rate directly benefits high-income taxpayers the most since they hold more taxable investments than everyone else.

Yet Obama is also banking on revenue from a higher capital gains rate to help pay for some of his proposals, such as new tax cuts for less-than-flush families and a system to make health insurance affordable for all.

“What I want is not oppressive taxation. I want businesses to thrive,” he said in a Democratic presidential debate this spring.

So Obama knows he can’t afford to raise the tax so high that it stifles investment and the free flow of capital. But where’s that magic dividing line, above which he risks losing needed revenue and creating economic distortions in investor behavior?

The big debate

“They’ve been debating this question for at least 70 years,” said tax historian Joseph Thorndike.

Any change in capital gains rates can create a short-term boost in revenue since investors are more inclined to sell before a rate increase or soon after a rate decrease. But the long-term effects on revenue are more of a question mark.

Bob Carroll, a former Treasury official and now vice president for economic policy at the Tax Foundation, which favors a flat tax, said some research shows that somewhere between 26% and 28% is the level up to which the capital gains tax could increase revenue. But even at those levels, Carroll said, “there’d be significantly negative economic consequences.”

By that he means: the higher the rate, the longer investors are likely to hold onto their investments and the more likely it is their decision to sell or invest in a company will be based on the tax consequences rather than on the merit of the investment itself.

On the other hand, Tax Policy Center Director Len Burman, also a former Treasury official and author of the book “The Labyrinth of Capital Gains Tax Policy – A Guide for the Perplexed,” has done research suggesting that raising the capital gains rate even above 28% might not hurt revenue or create much negative distortion in investor behavior.

Theoretically, the capital gains tax “is the easiest tax in the world to avoid – simply don’t sell your assets,” he said. “But in the real world, there’s lots of selling. … [Either] people don’t pay that much attention to taxes, or they think they can beat the market so selling is worth the tax. In any event, my research suggests that capital gains are way less responsive to taxes than one might think.”

Narrowing his sights?

So, if Obama is looking for scientific clarity, he won’t get it. “There’s no empirically determinable bright line around this,” said Clint Stretch, managing principal of tax policy at Deloitte Tax.

Obama himself has virtually said that 20% to 25% is the real range he’s considering. “I talk to people like Warren Buffett or others and I ask them … how much of a difference is it going to be if it’s 20 or 25 percent. They say, look, if it’s within that range then it’s not going to distort, I think, economic decision-making,” he said in a CNBC interview.

And Obama occasionally makes it sound like he’s really aiming for the lowest end of that range, telling Fox News, “in terms of capital gains I’ve suggested we might go back up to 20 [percent].”

Maybe that’s the political pragmatist talking. At the end of the day, “it’s going to come down to politics,” Stretch said. And since many Democrats along with Republicans back the idea that lower rates encourage investment, the politics suggests he won’t be able to raise the tax above 25% and may not be able to get it much above 20% – where it’s scheduled under current law to be by 2011 unless lawmakers decide otherwise.

Ultimately, Stretch said, “There’s what Obama wants to do, and then there’s what he can get past Congress.”

 

How Do You Determine Market Cap (company size)?

A company’s MARKET CAPITALIZATION , aka MARKET CAP, is the total value of a company’s publicly traded stock. 

Market cap equals the number of publicly traded shares multiplied by the current share price. SO, let’s say a company with 10 million shares outstanding and a share price of $10. This company would have a market cap of $100 million.

The market cap fluctuates as it’s price moves up and down.

 

What Makes Hilton Hotels a Mid-cap Stock?

Mid-cap Stocks: Companies with market caps of $2-$10 billion. Hilton Hotels is an example.

 

-the range can vary

 

Micro-cap Stocks: What are they?

Micro-cap Stocks: Companies with market caps under $100 million. These stocks are typically traded on markets other than the NASDAQ,  NYSE, or AMEX.

(please note that this range can vary)

 

Small-cap Stocks: What are they?

Small-cap Stocks: Companies with market caps of $100 million-$2 billion. Chances are likely you wont know these companies. Some of you will though =)  Smaller-cap stocks tend to be more risky, but often have higher prospects for growth, allowing for higher returns. 

(please note that this range can vary)

 

Large-Cap Stocks: What are they?

Large-cap stocks: Companies with market caps of $10-$100 billion. Large-caps are also generally household names like Apple.  Large-cap stocks tend to be less risky, but usually offer less chance of huge growth and success (since they’re already so big)

(please not that this range can vary)

 

Mega-Cap Stock- What is it?

Mega-Cap Stocks: giant compaines with market caps over $100 billion. General Electric and Microsoft are examples. Mega-caps, along with some large-caps, are also known as blue-chip stocks.

(please note that this range can vary)

 

The 5 Market Cap Categories-what makes a small cap “small”? How about Large-Cap?

Based on the size of a company’s market cap, a stock can be placed into 5 general groups (these ranges can change).

*Mega-Cap Stocks: giant compaines with market caps over $100 billion. General Electric and Microsoft are examples. Mega-caps, along with some large-caps, are also known as blue-chip stocks.

*Large-cap stocks: Companies with market caps of $10-$100 billion. Large-caps are also generally household names like Apple.  Large-cap stocks tend to be less risky, but usually offer less chance of huge growth and success (since they’re already so big)

*Mid-cap Stocks: Companies with market caps of $2-$10 billion. IE-Hilton Hotels.

*Small-cap Stocks: Companies with market caps of $100 million-$2 billion. Chances are likely you wont know these companies. Some of you will though =)  Smaller-cap stocks tend to be more risky, but often have higher prospects for growth, allowing for higher returns. 

*Micro-cap Stocks: Companies with market caps under $100 million. These stocks are typically traded on markets other than the NASDAQ,  NYSE, or AMEX.

 

 

Stocks, Bonds, ETFs, Mutual Funds

Here is a quick run-down on the major investment products available to you.

-STOCKS-investments in specific publicly traded company like Exxon or Apple. These companies issue shares of their stock to the general public. Each share that you own represents a fractional percentage of the company that you own.

-BONDS-loans that investors make to corporations and governments when they are raising capital. The corporation or government then makes FIXED interest payments to the bond investor over a set period of time, known as term. At the end of the term, the investor gets back the original investment amount, called the principal.

-MUTUAL FUNDS- Investments that pool money from many investors and invest in a specific set of stocks or bonds. A typical fund, an index fund, attempts to mimic the performance of a specific market index. Market Index funds are  groups of funds that benchmark the performance of other investments.  IE-the S&P 500 index fund tries to replicate the performance of the S&P 500, which is a widely known index of 500 of the most widely held US stocks.

-ETFs-these are funds that track indexes but are bought and sold like stocks.

 

 

What does Value Stock mean?

Value stock investors look for companies whose stock appears to be undervalued. It could be considered undervalued based on sales, earnings, dividend yield, etc. 

Value stocks are usually older stocks that pay dividends and tend to be less risky and volatile as growth stocks, though they also tend to offer less opportunity for large returns.

Beware though, Value Stock Investor, there are things out there called VALUE TRAPS. This is when stocks appear to be cheaper than they really are, but are actually suffering from huge company problems or industry problems, which would depress the stock price. 

 

What is a Growth Stock?

Growth companies tend to be newer, rapidly expanding companies whose sales growth and earnings growth are expected to outpace that of the the growth of the market as a whole. Though the share prices may rise more quickly than the share price of value stocks, growth stocks are still considered riskier.  This is because they tend to be priced at a premium to the overall market and rarely pay dividends. 

 

Dividends-What are they exactly?

Dividends-some companies generally the older, more established, like GE for example, return a portion of their profits to investors in the form of dividends instead of reinvesting it back into the company. Dividends can be paid in cash or in additional company shares. 

A stocks dividend yield is the ratio of the dividend to the stock price. For example–a stock that has a $100 share price and pays annual dividends of $5 per share has a dividend yield of 5%. This will change with time as the share price fluctuates. 

 

Why Invest in Stocks?

They’ll help you build wealth in two ways:

Capital Appreciation & Dividends

Note: There are about 10,000 publicly traded companies in the US Stock Market, and you can purchase any of them.  How do you know what to buy!? How many? So, if you have trouble, please do seek professional investment help.  HOWEVER, that does not excuse you by any means from learning the basics about stocks.

I’m going to do my best to make this all easy for you, so stick it out. You’ll gain so much knowledge that eventually you can invest the money yourself! That will add extra money to your pocket because you’ll cut all of your advisor’s fees. Ha. With time though my friend. 

Back to Capital Appreciation and Dividends.

Dividends-some companies generally the older, more established, like GE for example, return a portion of their profits to investors in the form of dividends instead of reinvesting it back into the company. Dividends can be paid in cash or in additional company shares. 

A stocks dividend yield is the ratio of the dividend to the stock price. For example–a stock that has a $100 share price and pays annual dividends of $5 per share has a dividend yield of 5%. This will change with time as the share price fluctuates. 

 

Time Value of Money. Check out what $5 bucks can do for your future

$5 per day over one week= about $150/month

If you invested that $150/month and earned 10% annual return, you’d wind up with:

1 year=$1885

2 years=$3967

5 years=$11,616

10 years=$30,727

15 years=$62,171

30 years=$339,073

40 years=$948,611

That’s just with 5 bucks a day!  Let’s check out $10/day (300/month)!

1 year=$3770

2 years=$7934

5 years=$23231

10 years=$61,453

15 years=$124,341

30 years=$678,146

40 years=$1,897,224

And just for fun, $20/day or $600/month:

1 year=$1885

2 years=$3967

5 years=$46,462

10 years=$122,907

15 years=$248,682

30 years=$1,356,293

40 years=$3,794,448

 

The Cost of Playing it Too Safe

The fact that many people have so much of their money in cash reserves isnt that unique with conservative instincts. None of like to lose money–a truism that economists call “loss aversion.”

But because we can only prevent losses that we recognize, we tend to lose focus on immediate costs , while we ignore more subtle costs and even savings. For example, it’s important to recognize that getting a $4 discount is worth the same amount as avoiding a $4 ATM surcharge.  It sure is folks.

With that said, until recently, people in general never thought of things like inflation as a loss. That costs us more than typical bank savings accounts pay us! But, since it doesn’t really feel like a loss, it’s easier to ignore, or accept as a part of life. In reality though, it’s costing us about 4% currently in the US. That’s more than a savings account pays, and many people dont realize they never end up beating inflation when it’s all said and done.

There is a certain level of irrationalness that comes along with this school of thought. It goes along the same sort of path as those that drive all around town looking for the cheapest gas. Driving 5 miles out of the way as a way to save you 5 cents per gallon, combined with the wear and tear of your car will cost you about $4.50–six times the 75 cents you save buying 15 gallons at the lower price claims SmartMoney.

It all adds up so learn to become aware of how to get the best ROI for yourself. You may need to take a notepad around with you and track your expenses and such to see how you really use your money. 

 

Should I Hire an Investment Advisor?

Some people are comfortable handling and investing their own money. Hopefully with time, you will too. Until then, it may be best to hire someone to help you make your investment decisions, especially if you know little or nothing about investing. Same thing if you have no interest in ever learning about money either. With that said, it’s probably worth the time and money required to hire an advisor. They probably will end up earning you a higher return on your money than you would be able to do yourself.

They can help you:

-Decide whether to open a brokerage account, retirement account, or both.

-Determine your risk tolerance, although I prefer you learn this on your own.

- Build a diversified portfolio

- Place orders to buy and sell investments for you

BUT, they are going to charge you something for their time of course.  Some advisors charge an hourly rate, some commission, and/or annual fees to manage your money. Yep. 

To help you select an advisor, check out consult your state’s securities licensing department, the National Association of of Security Dealers (www.nasd.org), or the US govt’s Securities and Exchange Commission (www.sec.gov).

These organizations should help you verify whether an advisor is licensed, has received complaints, or has ever committed violations. 

 

How to Set Up an Investment Account

1. Choose broker or brokerage house with whom you’d like to open your account. 

2. Fill out their application for the type of account you’d like to open. Most forms consist of general information that you should be able to handle on your own. Once you have your investment advisor person selected, they too may be able to help. Make sure you dont skimp on your answers because you dont want trouble accessing your money later.

3. Make your initial deposit. For Vanguard I mailed a check. You could also wire money or drop cash off if there is a local office. 

It’s actually pretty easy. Did you find opening your checking account tough? This is just the same until you decide how to allocate your portfolio. But by the time you are ready to open your account, you should already have this planned out so it should be a matter of just writing your choices down.

 

How to Buy Investments

Assuming you’ve set up your investment account, and are ready to start purchasing. How do you do that?!

If you’re working with a BROKER: You’ll confirm your order with your broker, generally over the phone. He or she will then place orders on your behalf for the investments tat you’d like to buy or sell.

If you’re with a BROKERAGE: You can log-on to your brokerage’s website, or you can call their toll free number to place your orders. To do that though, you’ll have to know the ticker symbol and the amount you want to buy or sell for your investment. 

 

How to Get Started Investing

Before you start investing, please make sure to read my post on making sure you’re ready to start investing.

So let’s say you are. Congratulations and good work.

By the way, I used quamut.com for this blog.

First, start by deciding what kind of investments you are looking for and select a brokerage firm or broker. Are you looking to buy gold, stocks, etc.?  I own mostly mutual funds, and I invest my money for myself. I use Vanguard for my funds. I really like their low fees, that I read about them ranking well often, and they are easy to do business with. Oh, helpful too. Anyhoot, not everyone can safely do that, and will see much better returns paying someone else to do it for them. Once you’ve got these decisions made, you’re all set to start investing!

Types of Investment Accounts-

As we talked about in previous blogs, an investment account is a special type of financial account where you can but, sell, or hold investments.  There are two main types of investing accounts.

1. BROKERAGE ACCOUNTS- also called taxable accounts. This are what I think of as shorter-term investments. They allow you to invest and withdraw money at any time, for any reason. When you do, however, dont think you can escape Uncle Sam. You’ll have to pay income taxes on all dividends received AND capital gains tax on all assets sold that made profit.

2. RETIREMENT ACCOUNTS-These accounts allow your money to grow without taxation on dividends or investment gains, which can help increase your returns. BUT, some retirement accounts have restrictions. Like most have maximum limits you can contribute each year, and you receive penalties if you withdraw early. Popular types of retirement accounts include the Roth IRA, 401k, 403b, Traditional IRA.

 

Diversification

It’s important to diversify your portfolio within your asset allocation, just like it’s important to have investments in various asset classes. Both help reduce your risk.

For example. You may have 75% of your portfolio invested in stocks.  Of that 75%, you’ll want to make sure you have stocks that are invested in different industries so when one industry tanks (like financials currently) and another skyrockets (energy) you’ll still come out ahead. 

It has been proven over time that it will decrease your risk without compromising returns over the long haul. 

 

Risk Tolerance. How Risky are you?

How much risk are you personally comfortable accepting with regards to investing?

To make sure you invest the way you are comfortable, find out what your risk tolerance is. Everyone should know. 

How to determine your risk tolerance. Right, YOUR Risk Tolerance. Not your husbands, or your daughters, YOURS. 

1. What is your time horizon? How long until you retire? Not how long until you WANT to retire, but the reasonable date when you will retire. How long do you plan to invest (for example, less than 5 years, 10 years, 20 years, 30 years or more). There is a direct correlation with time horizon and risk tolerance. The younger we are, the more risk we tend to be able to take, especially if you have more than 10 years until retirement. The more time you have, the more stocks you should invest in. Some people, like me, should invest for growth by buying stocks almost exclusively.

If you have a shorter time horizon, the lower your risk tolerance tends to be, understandably. This is because a short-term dip in the value of an investment might happen right as you planned to use that money to purchase more assets or make a large with drawl. Those with moderate time horizons, 5-10 years, generally have a moderate risk level and should invest for growth and income by investing in stocks, bonds and cash equivalents. Investors with low risk tolerances tend to be those that have short time horizons, 1-5 years. These investors should invest almost entirely for income by holding bonds and cash. 

2. Personal Feelings.  Another thing to factor into your willingness to take on risk, is how you feel personally about taking on risks and losing money. How willing are you really to watch your investments, your life savings, fluctuate up or down over time, based on market conditions? 

If you avoid risk in your everyday life, and/or worry easily, I would suggest buying less risky investments, even if you have a long time horizon. Better to have your money in investments returning you something, than you fearing risk and not investing it and keeping it under your pillow. Consider investments that will fluctuate a bit, but have the potential to offer you higher returns in the long-term.

On the other hand, if you enjoy risk and don’t worry easily, if at all, you should feel comfortable taking risks if you’ve got time on your side. With that said, it is important to keep the timeframe of your retirement date in mind, because although you might have a high-risk tolerance, you may have a short time period until retirement. If that’s the case, you may not be able to ride the ups and downs of the market, and still meet your savings goal. 

 

 

Risk and Risk Tolerance

I’m going to give some pointers below to help you determine your risk tolerance, but I have one thing that I want to say first.  

I’ve read tons of books about creating wealth, and all of them stress that “NO ONE IS GOING TO UNDERSTAND YOUR RISK MORE THAN YOU WILL.” I couldn’t agree more. This is why I like to empower myself so I can make my own investment choices. Think about it. Your investment broker down the street has pressure to sell certain investments. He has weekly meetings with his boss asking about updates on numbers. Therefore, you certainly have a great chance of becoming a “victim” of salesmen. They may sell you investments that are in the best interest of THEIR PAYCHECKS, not what necessarily is in your best interest. Even though you may have earned a promising 18% last year, how much did you really earn? You may have actually lost money. Competeing funds may have delieverd returns of 22%. Not only did you lose out on 4%, but you have fees up the wazoo that reduce your piece of the pie even more. 

Risk refers to the uncertainty of an investment’s return. Some investments like savings accounts have guaranteed interest returns, so they are considered to have no risk. Stocks, mutual funds, etc. on the other hand, carry a lot of risk. 

The return on any particular stock is always uncertain. Depending on the performance of the company, a company’s stock could triple in value or could lose all value, and you end up with nothing. 

Volatility is the degree in which an investment tends to fluctuate over time.

Risk & Volatility tend to correlate with investment returns. So, for example, the higher the risk of an investment, the higher the potential returns, and the higher the Volatility.

 

Should you be investing?

Only invest with money that you wont need for the immediate future. Please. Otherwise, if you invest with money that you need, you’ll be forced to sell at a time when your investments may have temporarily declined in value. Here are a few things to consider before while figuring out if you have enough money to begin investing.

1. Can you cover your monthly expenses? Invest money only that you have leftover from your monthly expenses. Make sure you take into effect an emergency cushion that will allow you to stay afloat for 6 months or longer. If you have outstanding credit card balances and are only sending the minimum payment needed, pay them off first. If you have okay to bad credit, chances are most likely your credit card rate is a much higher rate than what you’d be able to earn investing. Example-You have a credit card with a rate of 19%. Youch. Where have you recently invested and gotten a 19% guarantee on your money? That’s why you need to pay that off entirely before you invest!! Nobody can afford that. I think it should be illegal for the credit card companies to charge rates like that, but then they put it back on the consumer. 

Just so you know, although I do not recommend this for about 99% of people, some people that have a 0% or low rate card, will NOT send in any monthly payment, and instead, use the money they would have paid on their credit card, to invest in the market where they will earn more than what they are charged.

2. Consider your short-term expenses. If you face major expenses within the next 1-3, like the purchase of a new home, paying for your college education, put the money for those things aside upfront in cash accounts that will earn you interest until you need to use it.

3.  Emergency Fund. I mentioned it above, but I want to reiterate it. Make sure you have this on hand so you dont have to sell your assets. You’ll wish you didnt drink as many beers as you did once you have to sell your car. 

 

Growth vs. Income. Ways for you to build Wealth

The two main ways to build wealth.

Growth: growth investors aim to buy investments that will increase in value over time, so they can then sell the investments off for a higher price. 

Income:income investors aim to buy investments that can provide regular cash payments. These payments can come in several forms like dividends, as in when a stock gives a certain portion of company earnings to shareholders. Bonds typically pay interest, periodic cash payments that investors receive in exchange for buying the bond.

You’ll notice over time that some investments only provide growth. Some just income. Some, like dividend-paying stocks, provide a mixture of both. 

 

Why Should I Invest? What Are You Doing To Beat Inflation?

So far, investing has proved to be the most effective way to build wealth. It also helps you beat inflation, which since about 1925, the United States has averaged 3% per year inflation.  Currently though, we are seeing inflation at about 4%. People believe it will only get worse and I sure as heck think so too. The huge issue with that, as you know, is that most people cant keep up. Many dont beat inflation when it’s all said and done at the end of the year and have no idea they didnt. Many people earn amounts like .02% on their normal savings accounts. The local limit to drink and drive is higher than that.

Luckily though, taking some risk with stocks and bonds can help get you ahead of inflation and hopefully allow you to feel like you’re actually getting ahead in the world by earning, hopefully double digit returns =) . At the very least, historics will show that you’ll beat inflation–at least when you use a 15 year average.

Check out these statistics:

-Due to inflation, in 30 years, you’d need $2,427.26 to equal the purchasing power of $1,000 today. 

-$1,000 kept in a savings account would grow to $1,811.36  after 30 years, trailing the effect of inflation.

-$1,000 invested in stocks today would grow to $17,449.40 over 30 years, easily allowing you to outpace the effects of inflation over that time period.

 

What is an investment?!

by Molly Greaves

An investment is an asset, like a stock or bond, that investors buy to build wealth over a certain amount of time. The value of a person’s investment can rise and fall, which is why it’s great if you start young. The younger you are when you start, the more likely you’ll be to take the ups and downs of the market with a smile. You’ll think of market downturns more like a good sale, and will likely be glad you stuck with it in the long-run. Most of the ups and downs with the market have to do with supply and demand. 

There are investments that you can touch, like art, real estate, collectibles, etc., but I tend to focus on the more intangible investments like mutual funds, stocks and bonds.  These intangible assets are easier for investors to get rid of versus something physical like a home in Florida after a storm.  

 

Tips to Help Get YOURSELF Out of DEBT

by Molly Greaves

-First, you MUST pay your bills on time. You’ll avoid costly late fees, and save your credit. Good credit will reward you with the best rates possible on future help. 

- If you’re paying MULTIPLE credit cards, consider rolling the balances over to a lower rate card. Take note of any introductory rates that may expire leaving you with a higher rate.  

- Take a look at your credit report and get your score. Know it. Check it often. Monitor whenever you can. It could ending up saving you a lot of time, money and stress. I tell people to go to Freecreditreport.com and sign up to receive ONE report from each credit agency. Since they are all free reports, I suggest having them arrive at different times so that you get them once every 4 months for FREE*! Do you know what I mean?

    The kicker about this, which really bugs me is that you only get your CREDIT REPORT, NOT SCORE, which I find to be very misleading. SO, you will need to purchase your score unfortunately. I haven’t yet heard of them being free anywhere, unless with your bank, but it’s important to have, know and treat like gold.

-Depending on your comfort level and needs, you can save a lot of money by raising your deductibles on insurance policies like home and/or auto.

-Cut PRESCRIPTION costs by taking advantage of a mail-order pharmacy, which means your medicine will be cheaper, and you wont have to use gas OR your time driving to the pharmacy!

-Dont be afraid to play tough. Women especially. Call you cable company and try and get your bill down. Same with your phone plans. Internet, you name it.  Do you have a great payment history? What is their competition offering? You’ll have even more room to barter if you approach them with what their competition is offering you and threaten to switch. Try it. I’ve significantly reduced my bills, and I bet you too can significantly lower your rates too.  Use one of your phones that has speakerphone, take the phone and place it next to you while you do your emails, and before you know it, you might be $50-$75 richer!!  

-If you still have an adjustable-rate mortgage (ARM), and you’re planning on staying put, it’s time for you to refi to a fixed mortgage before interest rates start climbing back up. I cant imagine the Fed can sustain at our current rate or lower. 

-If you pay PMI (Private Mortgage Insurance) see if it can be cancelled. Under something called the Homeowners Protection Act of 1998, providers are required to automatically terminate PMI on loans originated after July 29, 1999, when the loan is paid down to 78% loan-to-value. That means you’ll have 22% equity in your home.  Good job! Some cases have cancelled PMI with 20% equity, so be sure to check that out. 

 

7 Common Insurance Mistakes

by Molly Greaves with help from bankrate.com…check them out!

1. Not shopping around- shopping around could make a huge difference in the price you pay.

2. Only comparing rates-You need to compare rates, and should also look at companies’ pay reputations.  You can look at insurance companies and see how they rank with Standard & Poor’s or Fitch Ratings.

3. Not comparing agents-First make sure your searching only properly licensed agents, and then ask them what they bring to the table. Not all are the same and should be created equal. Some have huge hidden fees or personal motives with certain policies. Make sure you get referrals. And yes, take the extra step to check the referrals too =) 

4. Not knowing your policy-What a bummer for people to only know their policy AFTER the unthinkable happens. It happens all of the time. Don’t let yourself become one of the statistics. Do an evaluation each year to make sure you always know. (Do this with your credit report too!) Learn what the fine print says. Many don’t even know what their deductible, nor do they realize what’s not covered until it’s too late. 

5. Not buying certain types of insurance. Dont skimp on health insurance even if you feel like a million and ten bucks. Even if it’s just catastrophic insurance.  Otherwise you could wind up with such medical debt that you can never get yourself out of it. 

If you have dependents, you may want to consider LIFE INSURANCE. This will help pay the bills after a working parent dies unexpectedly. It’s cheaper to buy when you’re young and healthy. It’s also easier too. 

Bankrate.com says that unless you have major assets to tap, think about getting long-term disability insurance. “It’s the single most important coverage for anyone who works.”  They also claim that “Disabilty income is more important than life, even though it gets more press. If you become disabled and cant work, the long-term disability insurance can help keep you and your family financially solvent.”

I also advocate picking up long-term care insurance. Some people think they should wait until they’re closer to retirement, or that they need to be at least 50 years old, or something like that. The truth though, is that diseases like Multiple Sclerosis (MS) can develop at 30 or 40, so dont make the mistake of forgetting about that. You could be come “uninsurable.” And yes, that can and does happen to people.

Check your family history too. L-T Care Insurance can help pay for the cost of expenses assciated with chronic illness and help cover nursing homes, and in-home caregivers.  

6. Buying unnecessary insurance policies-I know, I know. If you dont own a boat, you aren’t going to carry boater’s insurance. Just like I know that if you don’t have a house, you wont pick up homeowner’s insurance.

-If you have kids, they dont necessarily need life insurance. Although tragic, for most kids, you should be able to come up with the money vs. spending money monthly on insurance. It makes sense to have it if you have dependents. People that are single don’t really need it either. 

-Use the rule of thumb that if you see specific illness insurance like cancer insurance coverage, to always check the fine print and really triple cross check out the agent and his references. You could just end up paying double. 

-Dont buy Identity Theft Insurance until you check other policies you have first. Check you bank too. Many companies now have something like this built into them. Could save you some $$$.

7. Not updating your coverage.

-I say evaluate this annually. If you’re home goes up in value, make sure you increase your policy limits. 

-For health care, I say review this annually too. If you’re married, make sure you cross check and make sure that you are covered under the most cost effective policy. Sometimes it actually makes sense for couples to have individual policies. 

-When the kidos move out, hurry and call your insurance agent. They love knowing that the reckless teens are out of there. =)  Once your kids get to college, make them get good grades, and when they do, hurry and call your agent back again.  You’ll get a nice little reduction. Every bit counts. 

Last thing- if you do an annual review, do it about 30-60 days in advance of renewal time so you can get a thorough evaluation. Plus, you’ll have time to add to your list so you don’t forget anything valuable.

 

 

EVERYTHING YOU NEED TO CREATE A BUDGET

I think that a budget is desinged for all of us to make. The “rich”, the broke. You, me. 

I think it’s crazy when “the rich” think they make too much money to need a budget.  The truth though, is that most people arent as rich as they think they are, and they, probably more than anyone, need to make a budget. Americans in general are terrible savers. We appear to be great spenders though. We work hard, we get paid, and then all of a sudden we wonder when our next paycheck will arrive because we cant afford to put anymore on our credit cards.

I bet you’d have more money than you’d think at the end of the month just by putting yourself on a budget. That’s why I’m writing this blog.  Even if you can squeeze out an extra 5 bucks a day, that’d help you tremendously. I’m serious. Every bit helps and counts. $5 bucks each day can be powerful, and can really do some sweet damage to a retirement account. Only if you stay consistent though.   

Check these numbers out

$5 per day over one week= about $150/month

If you invested that $150/month and earned 10% annual return, you’d wind up with:

1 year=$1885

2 years=$3967

5 years=$11,616

10 years=$30,727

15 years=$62,171

30 years=$339,073

40 years=$948,611

That’s just with 5 bucks a day!  Let’s check out $10/day (300/month)!

1 year=$3770

2 years=$7934

5 years=$23231

10 years=$61,453

15 years=$124,341

30 years=$678,146

40 years=$1,897,224

And just for fun, $20/day or $600/month:

1 year=$1885

2 years=$3967

5 years=$46,462

10 years=$122,907

15 years=$248,682

30 years=$1,356,293

40 years=$3,794,448

 

One thing I’d like to add. If you think that $50 is a lot of money and you struggle to save that each month then try thinking about how tough it’s going to be to come up with $250 extra per month for retirement. Or $400 per month, depending on how long you wait. The amount you have to set aside each month only gets higher as time goes by. The risk gets higher too. 

 

Anyway, we’re here to get this budget in place so you can start maximizing your ROI on your HARD EARNED CASH.   

 

When you dont save each month, you are not setting yourself up for a stress free future. Save today for tomorrow. You know the saying. It’s true though. You want to be able to provide for a family I’m sure. So start today while it’s easy.

***Budgets that do not allow $$ for entertainment are doomed to fail. Life isnt over. You just are going to become more aware, and going to learn how to work smarter, not harder. Maybe instead of 

Track your spending for a month.  Record everything (even penny candy). Once you know where all of your money goes, you can best decide how to allocate your money.

Put savings on autopilot. I mean PAY YOURSELF FIRST. Have money automatically withdrawn to go to your account.

Prioritize Spending

Tackle credit card debt (more to come on how all of that works)

Build an emergency savings account. Some say 3 months. I think that’s crazy. I want you to be as stress free as possible, and I would like to see you have AT LEAST 6 months, if not MORE. I like to have at least a year. Think about too that if you have high insurance deductibles, where would you get the money to pay for an unforseen accident?

Learn to live within your means. If you MUST have coffee each morning, why do you have to make it Starbucks. Make it at home! Become aware of your latte factor. I can teach you how to do it since I’ve learned how to drastically simplify my life, and learned to just love it!

 

 

 

Renters/Homeowners Insurance. Do You Need It?

by Molly Greaves

We all hope that we never need to use our insurance, especially because it’s usually designed for catastrophic losses, not maintenance issues, and nowhere is this more clear the case than with homeowners insurance.

Not only do claims on your policy drive up your rates, too many claims can even make you “uninsurable,” which is totally possible. Did you know that too many claims can even make it difficult to sell your home in the future? Yep. Bankrate.com says that both insurance companies and prospective buyers look at the CLUE (Comprehensive Loss Underwriting Exchange) report for your home, and the claims reflected there are black marks on your home’s record that make it look less attractive. 

“If a prospective buyer is interested and a Realtor runs a report and sees that there have been two water losses, they might worry there’s mold in the house,” says Robin Olson, senior research analyst with the Int’l Risk Management Institute of Dallas. 

“It’s often better to have a higher deductible and set aside money in a bank account to cover small losses. But, for big losses, make sure you have ample coverage,” Robin adds.

“Standard Mortgage requirements are not enough, as we found with the San Diego fires. Many people dont carry enough coverage. Insurance companies argue their figures are only a recommendation and that their customers should get their own independent appraisal to determine their coverage needs,” Robin concludes. 

My 2 cents: It just seems to make sense to have it. A cool thing for renters at least, is that renter policies are actually A LOT cheaper than you think.  Call you insurance agent, or mine if you dont have one, and see what a $15,000 policy would cost you. For college kids that’s plenty and it would probably run less than $20 per month. Like with all insurance, it’s nice to have. I was happy I had it when my bike was stolen.

 

Running from the IRS!

I recommend paying up and going to the Fed before they come to you! Not the coolest people in the world to have hot on your tail.

Not filing can result in:

- interest charges (currently at 6% annually).

- steep failure-to-file charge (where as much as 25% of he tax owed or 75% of if the failure to file is deemed fraudulent).

-  failure-to-pay-penalties as well (also up to 25% of your unpaid tax).

-  In extreme cases, the result is jail time. 

The GOOD NEWS is that the IRS does like to make good with its delinquents. It is known that they are wanting you to correct the situation and try to cooperate with you. SO, tell your friends, relatives, or concious self to put some current paycheck money towards a CPA, and stop running from the Fed!

 

Overwhelmed? Disorganized? 3 super easy concepts to help clear the clutter, and your mind1.

1. Action Required

2. File it

3. Trash it

That’s it.  Use these 3 bullets for things that pile up in your life, paper and bills, clothes, ( for clothes you haven’t worn in forever, if at all, this method would translate to Try it On, Keep It or Donate it (and get tax write-off if you can), 

Clear the clutter, clear your mind.

 

Control Your Money Before it Controls You

It may require focus and discipline, and maybe sacrifice a little bit of fun, but you will be a more financially secure person and family. I always tell people to “Work Smarter Not Harder.” Email me at greaves.molly@gmail.com if you’d like help.

 

Vanguard Economic Week In Review—Week Ending Friday, June 20

I have all of my ROTH IRA investments with Vanguard. I like their low fees and find them very very helpful. They also seem well respected in the industry because I seem to read about them everywhere for having top funds.

Each Friday I receive a summary of the US Economy with the week in review. I’m going to start posting them here for your review. Whether you like to learn about money or not, I think it’s good to know. 

————————————————-

Economic Week in Review: Energy prices may be the frontline foe
———————————————————————
A slow-growth economy was on display in this week’s economic
statistics—-but perhaps more worrisome were energy-related cost
increases at the wholesale level that potentially could be passed
along to consumers. Industrial output and housing starts declined,
while the index of leading indicators, though positive, indicated
sluggish economic growth. Yet wholesale prices surged at each stage
of the production process, propelled by higher energy costs. (Another
indication of energy-anxiety: China’s cut in consumption-promoting
fuel subsidies was cited as helping lift the stock market a bit
during a declining week.) For the week, the S&P 500 Index was down
3.1%, finishing at 1,318 (for a year-to-date total return of –9.3%).
The yield of the 10-year U.S. Treasury note declined 11 basis points
to 4.16%.

To read Vanguard(R) Economic Week in Review in its entirety, go to:
http://www.vanguard.com/visit/econweek062008

 

YOUR Elevator Pitch….15 seconds to show you’re a rockstar!

Some say an elevator pitch should be 30 seconds or less. I say that’s old school and to try get it down to 15 seconds. Even 30 seconds seems like an earload in today’s world that is full of distractions. Plus, you know how they say almost all of us need to improve our listening skills? That includes the person you’re pitching to. You want to make sure you can deliver your message before your audience gets distracted.

Cover these 3 bases to effectively communicate your message to the world: Who you help, identify their problem, and your unique solution.

If your audience likes what you have to say, they will continue on dialog with you, which will then allow you to expand further. Make sure you have business cards that are consistent with your pitch. Make sure you carry them on you at all times, elevator or not.

 

General Motors: Shares Continue to Slide

 

According to SmartMoney June 2008 edition:

In 2007, GM logged it’s biggest loss EVER, $39 BILLION!

That’s a loss of more than $100 MILLION per DAY!!!

My thoughts:  Next time you need to buy a car, at least take a look at your domestic products when shopping around.   Just give it a try. You’ve got nothing to lose. Sometimes there are even carnival type events in the reception area of the dealerships. Free popcorn! Oh yea, sort of like striking gold.

 

Starbucks Shareholder Reality Check…

According to Smart Money June 2008, Starbucks CEO & Founder, Howard Shultz, said this is Nov 2007:

“I want to say this as loud and clear as I possibly can: 3-5 years, 20% revenue growth, and we’re heading to 40,000 stores.”

SmartMoney says that with a 28% drop in 2nd quarter profits the coffee house will now open only 400 new stores through 2011.  

My thoughts:

As the French say “C’est la vive.” Or in Austin, we say “Keep Austin Weird.”  I think both reflect the way our culture is starting to rethink things.  The demands of the world are changing, and people are starting to become more aware of how individually they can be change agents. Take “Going Green” for example.  Seems like everyone is participating. Take that thought, and then think about Walmart. It really angers many people when they even hear the name. Many people flat out refuse to have association with them regardless of the savings. I believe that it reflects how people in our country deeply despise big corporations. I think they recognize the impact on their local econmies, and in today’s struggling exconomy, and what some consider weak employment, people are starting to support small and local businesses whenever they can. Some make no exceptions. 

 

 

Volunteering for the Interactive Austin 2008 Conference…What A Great Day, Great Event

 

Today I volunteered for this conference, which I thought was a total hit. It was great working on the event planning side of things; business is always just so much fun! The good news, is that in addition to volunteering, I was able to attend the conference, so I was able to participate in all of the learning that was going on.  Awesome. 

I learned so much in fact, that I wanted to let you know that there will be an Interactive Austin 2009 conference, so stay tuned if you feel you missed out.  Hopefully I’ll even see you there….

Here’s what a recap of 2008-

“Business District Magazine’s Interactive Austin 2008 is a one-day conference designed to bring this technology down-to-earth with compelling dialogues and case studies from prestigious speakers and panelists who are the thought-leaders in the field of digital marketing and social media.

This is a “must-attend” event for entrepreneurs, C-level executives, investors, policy makers, and managers of large companies who are looking for strategies to incorporate digital media and social commerce into their businesses and marketing initiatives.”

 

 

Curb Appeal That’s made in the Shade

by Molly Greaves with the help of Susie Middleton, winner of House Beautiful Magazine Best Yard award in 2000.

Nothing sells your home better than a beautiful yard.  But before you plant a single flower, invest in trees.

 

Landscaping your yard can be one of the most cost-effective ways to boost your curb’s appeal.  Trees are the trickiest to get right, and often more expensive. 

 

Quantifying the value-added by tree is tough since real estate appraisers dont see it like a kitchen or bathroom. It is the overall effect, not to mention enjoying it while you live there. 

 

Follow these steps while you shop for your trees:

 

1. Seek Cover

 Shade trees are the blue-chip stocks of your yard.  The most valuable are the ones that take the longest to grow like stately oaks like we have in Texas, or elms.  Who has time for that though?  What you want is a hardwood that is reliable and are resistant that grows fast enough–up to 3 feeet/year so it can be enjoyed by you and your grandkids. How big of a tree depends on your time frame.   

 

2.  Beware of beauty in the nursery as it might not be the best fit.

 

3.  Branch out- have a diverse group of trees to keep them healthy and prevent disease.

 

4.  Plant trees, not a forest

 

8 Must-ask Realtor Questions:

1. What is your experience? Are you a full-time professional Realtor®? How long have you worked full time in real estate? How long have you been representing buyers? What professional designations do you have?

 

2.  Do you have testimonials?

 

3.  Do you help with pre-loan qualifications?

 

4.  Can you help stage my house? It’s an important thing to have done in today’s competitive marketplace, and this can save you an extra couple hundred bucks in consulting. You’ll likely spend money buying stuff to make your home more sellable. Have to in today’s market.

 

5.  Do you attend the signing? Make sure they are tehre from begining to end and work for you!

I think that you also should make sure the realtor places your home online and make sure they have a visible website.

6. Will you represent me or will you represent the seller? May I have that in writing? How will you represent me, and what is the direct benefit of having you represent me?

7. How do you get paid? Can I have that in writing?

8. Do you have a performance guarantee? If I am not satisfied with your performance, can I terminate our Buyer Agency Agreement?

 

Need to find an ARCHITECT? 6 Quick Tips

by Molly GreavesIf so find referrals here at American Institute of Architects: aia.org

 

And…

1. If you’re moving a wall, adding on to anything, or doing anything that requires plans, hire an architect.  Same thing goes if you begin second guessing yourself at any point in the game.

2. Like contractors, they should be licensed and insured too.

3. If you’re on a tight budget, hire an architect and then bid-out your contracting.  If you’ve got any wiggle room, design/build firms will take care of the entire project for you, from the first sketch to the last coat of pain. 

4. Ask friends, family member and colleagues for referrals, especially if you’re going green for the first time. Try and even identify someone with a project similar to yours that’s already done, and even visit the job site or finished home if possible.  

5. Draft up a sketch or provide photos of buildings or rooms that you like, from sources like magazines and other sources. I actually have a file where I keep pictures of ideas for my dream home. I just tear them out of my magazines and stuff them in a file. It will be easier for the architect to accommodate to your lifestyle and specific space requirements if they have visuals to work with, which will help save you time and money.

6. Dont forget about talking about how you’re going to pay your architect. Bring this up early so you dont waste any time. Fees for your job can be calculated a few different ways: it may be priced as a set price, it could be a percentage of total construction costs, or on an hourly time and materials basis. You’ll pay more for overtime and making changes to the plans; you’ll also be asked for a retainer before work begins.

 

HOW TO HIRE A CONTRACTOR In Just 5 STEPS!

 by Molly Greaves

1. Check your contractor’s license: http://contractors-license.org/

2. Make sure they carry Liability Insurance..this protects your house and property in case the contractor or his employees cause damage. 

 

3. Make they carry Worker’s Comp insurance.  Without it, you can be held responsible if someone is injured while doing work on your property.

 

4.  Also check and be sure you have insured subcontractors.  The same liability and worker’s comp. that your contractor has should be carried by all specialists.

 

5.  Check the Better Business Bureau…how many complaints have been filed, anyway?

 

Keeping up with the Joneses

If I could stress another important thing to EVERYONE. DONT try keeping up with the Joneses. Neighbors and friends that have the latest gadgets, jewelry may–and probably are–drowning themselves in debt. Although you may not have a 5-bedroom home for just you and your partner, be happy sleep well at night. 

 

 

The TINIEST ROOM in your house has the BIGGEST PAYOFF

A typical increase in home value as you:

Add a 1/2 BATH- 10.5%

Add a FULL BATH – 20%

Add a FULL BATH to a one-bathroom house-  23%

 

As per Money Magazine Sept 2007

 

What To Say To A Handyman So You Don’t Get Taken Advantage Of. Top 7 List

1.  I was referred by neighbor Bobby Joe Smith IV.  A company is less likely to rip off the friend of a good customer.

 

2.  Explain what’s broken, using as many technical terms as possible.  (do an online search to find proper names) Say something like my hot water is leaking, and I think it needs patching. Say what you need done if you know.  By doing so, you narrow the scope of the repair, and hopefully the cost.

 

3.  This is the second time that has happened.  If there is a history, let them know.

 

4.  Is there a way I can do this myself?  Sometimes he’ll tell you if he’s really busy.

 

5.  What are your rates Will there be a trip fee or minimum? Be clear on the pay system.  Most companies charge $50-100, but remember that verbal agreements are non-binding.

 

6.Can I email you a photo?  This can save you an unwanted fee if the repairman is the wrong person for the job.

 

7.  Can I buy the supplies myself?  If so, you could save 20%

 

8.  Are you insured.  Check contractors-license.org.  You can also use the site to get local listing numbers to see if contractor is legit

 

Pittsburgh Steelers’ Superbowl Parade!

I know these are kind of old, but I know there are tons of Steeler fans out there! Grab your Terrible Towel and enjoy. I used to live in the ‘Burgh, so I was able to go to the parade. Yipeee.

 

Howdy and welcome to my blog! Hope ya’ll enjoy it AND learn a bit too!

Hello, hello! I am so happy to be sitting here finally starting my own blog. I’m not sure what has taken me so long! Hopefully you’ll enjoy my posts, visit my page frequently and share comments often.  

I’ll be writing to you almost 100% of the time from my front porch in sunny Austin, Texas. It’s a great place to sit and enjoy life. I have palm trees that shade the sun, and bamboo that blows the wind. Just perfect. Much different from where I grew up in Vermont! I traded skiing for palm trees and haven’t looked back since.