Moneymonk

Friday Quote

2009-12-04T09:00:00.001-05:00

My money looks better in my bank than on my body!

-Greg, @eliminatethemuda.com

Step Five: Investing

2009-12-03T13:30:00.010-05:00

This is the final part of our five-part series on building your financial empire

So you've learned how to manage your debt, save money , choose the right insurance for you and your family, and draft a Will to pass down your assets. The next and final step of is concentrate on growing your money.

What type of Investments should I choose?

If you're not already enrolled in your 401k plan at work now is the time to start educating yourself on investing. If you do not have the time and skill set to educate yourself on picking individual stock. You may want to invest in a Index fund.

Very few mutual funds (about 10%) actually outperform the S&P 500. So if you want to at least remain average in your investing, picking an index fund that track the stock market maybe best for you.

An S&P 500 index fund tracks 500 American companies. You can start with a Vanguard index fund or a Vanguard Total Market Index Fund. Their expenses ratios are very low both are under 0.50% which is less than a half of a percentage.

If index funds are not available in your 401k choices, you may want to start looking at funds expense ratios that are under 0.50% and reputable fund families such as Fidelity, Vanguard, TIAA-CREF and T. Rowe Price.

Maxing out your 401k is probably not the best move, maxing out your 401k up until the match is more appropriate and putting some into a Roth IRA can be a better move. I say that because with a ROTH IRA you are in control of your choices. 401k's accounts have limited mutual fund options and fund families.

Investing vehicles may include:

Retirement accounts (401k, IRA)

College savings (529, ESA and UGMA accounts)

It can also include saving for a home remodeling project such as a new kitchen or saving for a new car.

Long Term investing is always five years or longer. Anything under five years is considered savings.

Where can I find these investments?

Vanguard

TIAA-CREF

Fidelity

T.Rowe Price

Visit the website and contact a specialist on setting up a Retirement Account, College Savings account or a Regular Mutual Fund Account. Don't be afraid to ask questions. Let them know how much you would like to invest each month and make it automatic. You can have them set the day of the month you would like the funds deducted out of your checking account. Easy a pie!

This concludes the five-part series on creating and building your financial empire!

If you enjoyed this article, you should follow me on twitter here

Step Four: Wills

2009-12-02T20:02:00.003-05:00

This is step four of our five part series in building your financial empire

After you have found the proper insurance for you and your family, now is the time to get a Last Will and Testament drafted.

Yes, we all are going to die one day.

Just like Life insurance, if you having anyone depending on your income, you may want to draw up a will. If you have any assets you may want to have a will.

Yes, I know what you are thinking, if I'm married my assets automatically to go my children and my spouse. Yes, this is true. However, if your mother, cousin, or sister wants to detest it, guess what? Without a will, your spouse or children may be waiting a long time to get your assists.

Financial Tip:

Without anything in writing its only he say, she say. So please get a Will.

Where to Get a Will?

You can have a Lawyer create a Will for you, for a flat fee of $300-$400 dollars.

I don't have that type of money.

Another way to get a Will, you can go to Office Max, Office Depot, or Staples and get a pre-printed Will and Estate Planning form for about $8 bucks. Fill out the form and get it notarized from a notary or a bank. Do not sign the form until you get to the notary. They will need your driver's license to verify you and then you sign the form in front of them.

A will simply determines who get what and how much. If you have three children you may not want all assets to be divided three ways. You may just want your spouse to get 80% and your children to divide the remaining 20%.

If you are a single mom, you may want everything to go to your children. You must have it in writing.

If you want your children to get everything and not your spouse, a Will can make this happen.

Step Three: Insurance: What kind and How much do I need?

2009-11-30T09:00:00.004-05:00

This is step three of our five part series in building your financial empire

Now that you have your savings underway, this can be a good time to start looking for insurance.

What kind of Insurance do you need?

Life (if you have dependants)

Disability (if you draw an income)

Auto

Home

Medical

Umbrella (if applicable)

Depending where you are in life, there are various insurance that you may need. Insurance can be a good buffer to protect your Savings

If you have children or anyone depending on your income, Life insurance is essential. I recommend Term Life Insurance, because it is cheap and affordable for most households.

How much Life insurance is acceptable?

I prefer you to get 8 times your income. So if you earn $40,000 a year, $320,000 in term life insurance is more than enough.

Disability insurance can be used if you have any sort of illness or condition that will cause you not to work.

Women that may become pregnant and need to be put on bed rest may be able to also use their disability income.

Disability insurance usually pay 60% of your income and need a doctor's note to verify your illness.

So instead of eating up your saving, having a good insurance plan can avoid you from dipping in your savings. I prefer you to get Long Term disability. You can go here to compare various companies that offer disability insurance. If you work for an employer, you may automatically have long term disability insurance.

Auto insurance can be full coverage or just liability coverage. If you own your car, you’re only required to have liability insurance. However, if you do not have enough cash savings to self insure your car; you may want to get full coverage. When you are financing a car, you are required to have, buy law, full coverage auto insurance.

State Farm, Progressive, Allstate and Direct auto insurance are all good reputable companies to start with. Go to their websites and compare rates.

If you own a home and a car, most insurance companies will give you a discount by having both products insured under the same company.

Umbrella insurance is for mainly business owners. If you want all your assets insurance under one policy having to umbrella insure is a great start. Umbrella insurance covers all assets, including your home, business, cars, life, health etc.
Go to www.insweb.com to compare rates.

Medical Insurance is essential whether you work or not. This can help as buffer to pay for accidents and emergencies that occur. If you have kids medical insurance is vital. Once again if you are employed by a company, you may have the option to join a health insurance plan. If you are self employed you may want to go to a broker and check different companies rates.

In Step Four, we will discuss Wills and estate planning!

Friday Quote

2009-11-27T08:44:00.000-05:00

"He who marries for love without money has good nights and sorry days." - Anonymous

Step Two: Saving: How much and where?

2009-11-25T09:00:00.003-05:00

This is step two of our five part series on building your financial empire

Once you have your debt under control, next you want to start your saving.

Depending on your household status, you should save anywhere from 3-6 months. If you have a two income household, three months is sufficient. However, if you are the sole income earner of your household you may want six months of expenses saved.

How can I determine how much money is 3-6 months of expenses?

Start by list all your necessary expenses. Expenses that you need in order for your household to operate, such expenses may include:

-Mortgage/rent
-Food
-Transportation
-Phone
-Utilities

Add up the monthly costs that it takes to operate each of these necessities; your total balance is considered your monthly expense. This number should be multiplied by any number between 3 and 6. That will be the amount of cash to save for your emergencies.

Where should I put this money?

A money market account, bank or credit union.

You really don't want to spend much time chasing what institution has the highest interest rate. This is short term saving so interest rate does not matter at this point.

The best way to save money is to make it automatic. I prefer you to set up an auto draft from your checking account or your paycheck to make monthly, weekly or biweekly contributions to your savings account.

I personally like ING, I have set up bi weekly payments to automatically be deposited from my checking to my savings account.

Savings can enable you to avoid consumer debt. Having a nice cash cushion also makes you sleep better at night.

On Monday we will discuss Insurance!

Have a Happy and Safe Thanksgiving

Step One: Debt: Where to start?

2009-11-23T09:00:00.014-05:00

This is Step One of our five-part series on creating your Financial Empire

If you have debt, you want to figure out how much debt do you have and what to pay off first.

First, separate your consumer debt from your non-consumer debt.

Non-consumer debt usually includes your mortgage and student loans. Consumer debt may include credit cards, personal loans and car debt. Begin with listing your consumer debt first.

If you do not how much you owe or to whom, you can start by pulling your personal credit report:

Experian www.experian.com 1-800-397-3742

TransUnion www.transunion.com 1-800-888-4213

Equifax www.equifax.com 1-800-685-1111

Or you can go to www.annualcreditreport.com and pull all 3 reports from each company. You are allowed to do this free once a year.

Dispute all debts that does not belong to you or that is paid off already. Any accounts beyond 7 years should be automatically dismissed. Seven years is the statue of limitations of any consumer debt, it maybe less depending on your state.

Once you have knowledge of the debt that you legally owe, you are ready to start paying down your debt. You can start paying off your high interest rate first or you can go by the lowest balance first. Pick whatever strategy you are comfortable with.

From there, start a system where you can throw any extra cash towards paying down debt. There are only two effective ways to get extra cash flow.

Earn more income

or

Decrease your expenses

The choice is yours. Decreasing one's lifestyle (cutting out some expenses) probably is easier and faster to do than earning more money. However, I encourage you to do both.

This process may take anywhere from six months to 3 years depending on how deep you are in consumer debt. Try your best to avoid debt consolidation companies looking for a quick fix; you can do the exact same thing they can do. No need to pay a company to do what you can do.

You may want to downgrade your car or take on a second job just to expedite the process.

This is the hardest part of creating your financial empire. Debt is easy to get into and yet hard to get out. A two income family may be able to get out of debt faster compared to a single income family. Regardless of where you stand stick to your debt plan, don't give yourself excuses not to pay it off. Set a payoff date and stick to it.

The reason why most people don't get out debt is because it's not hurting them yet. They are not fed up! They are still comfortable in their debt cycle lifestyle. Please do not get wrap up into that comfort zone. Get mad and get out of debt.

Getting out of consumer debt should be the first step of building your empire.

Friday Quote

2009-11-20T09:43:00.001-05:00

Don't tell me where your priorities are. Show me where you spend your money and I'll tell you what they are

- James W. Frick

Your Financial Empire: Five steps to building your financial well being

2009-11-18T09:08:00.008-05:00

I have put together a five part series in creating your financial empire

Topics of discussion will include:

Debt
Saving
Insurance
Wills
Investing

On Monday, I will kick off Debt, structuring it and paying it off

My Lazy Portfolio(s)

2009-11-15T16:46:00.009-05:00

Roth IRA

VTSMX
VGTSX
VIPSX

401K

iShares
American

Daughter's UGMA fund

PRGFX
PRMSX
RPMGX
OTCFX

I do not own any individual stocks; sold them all

Friday Quote

2009-11-13T09:11:00.000-05:00

Don’t worry about your credit score because all it does is show you’re good at borrowing money. Not impressive! Worry more about saving up cash and paying off any debt you have.

-Jason, blog reader

BudgetPulse.com introduces Online Fundraising Tool

2009-11-11T09:12:00.000-05:00

During one of the worst recessions in decades, consumers saving for a financial goal both short term and long often have difficulties raising the money necessary to reach their goals. BudgetPulse.com is a free personal finance website offering customers the ability to set savings goals and then have their family and friends directly contribute funds (via PayPal or Amazon) or pledge money to their goals helping them out. The goals can then be tracked for and integrated with the transactions involved within their personal budget allowing users to raise money and budget in one centralized location.

Now our customers can collect funds (via PayPal or Amazon, or pledge money) and budget the goals transactions within the personal budgeting software so they can keep organized and don’t have to use multiple systems.”

I love this tool because you can manage cash flow and organize bills all in one place. This is a one stop place for your personal finances. Keeping track of your donations is an added bonus. I don't know of any personal finance software does that.

Craig Kessler is the founder of this incredible tool. Watch a demo version here

Get the e-book free: Recession Proof Graduate

2009-11-09T09:00:00.007-05:00

Charlie Hoehn's e-book is available for download. If you're a recent college graduate or know someone that is soon to graduate this free e-book makes a good gift in times like these.

Steps to make yourself recession proof:

Step 0 Step acting like you're entitled to a paycheck

Step 1 Choose a few areas you'd like to work (and a few people you'd like to work with)

Step 2 Get some skills under your belt

Step 3 Build your online presence

Step 4 Find a way to pay the bills and cut costs

Step 5 Research your target, and reach out to them

To download Recession Proof Graduate click here.

you should follow me on twitter here

Friday Quote

2009-11-06T09:00:00.001-05:00

Money, if it does not bring you happiness, will at least help you be miserable in comfort.

- Helen Gurley Brown

Ramit's Boot Camp: Videos -Negotiation mistakes that cost you thousands

2009-11-05T11:15:00.010-05:00

I just wanted to share with you a few videos from Ramit Sethi's blog. These are videos that can help you negotiate a higher salary.

He is launching the I Will Teach You To Be Rich Boot Camp, which will help you automate your finances in 6 weeks.

Boot Camp members will get the full videos of the negotiation training, as well as: Weekly curriculum to automate finances, Live webcasts with me, where I'll answer your specific questions, Weekly guest speakers on entrepreneurship, where experts will cover pricing, marketing, sales, hiring, common mistakes, growing your idea to leave the rat race, and more

Surround yourself with hundreds of people who've invested in themselves to automate their finances -- who you can share/learn unrevealed tips from

Sign up for the Boot Camp here

Here are the videos!

Negotiation Mistake: Eeyore Syndrome #1
What's Eeyore Syndrome?
How it costs people THOUSANDS of dollars
You'll recognize your friends (and maybe yourself) in this example

[Watch Eeyore #1]

Negotiation Mistake: Eeyore Syndrome #2
More on Eeyore Syndrome

[Watch Eeyore#2]

Negotiation Mistake: "It's not worth it"
When people self-handicap by saying "it's not worth it," then complain about their financial situation for years and years

[Watch "It's not worth it"]

Remember you'll get more videos -- live & recorded videos -- in the Boot Camp.

Sign up for the Boot Camp here.

Friday Quote

2009-10-30T09:00:00.000-05:00

The art is not in making money, but in keeping it

-Proverb quote

When can you tell you are "financially comfortable"?

2009-10-28T09:22:00.011-05:00

When you can relax with money!

The day you become "above average" is when you enough money to not worry about money.

Here are a few other ways you may know when you have arrived:

When you can give/donate (a nice sum) of money without it hurting

When your bills can still be paid even if you miss a few paychecks

When you can order any meal at nice restaurant regardless of the price

When you can leave a tip above 15% without it hurting

When you can pay your car insurance in full instead of monthly

Do you have any more to add?? What are the indicators of being successful with your money?

Friday Quote

2009-10-23T09:52:00.004-05:00

Instead of a fancy car, I'd rather have an old car and a year of cash in the bank

- Paul Glen, IT consultant

Getting out of debt is not enough

2009-10-21T09:32:00.004-05:00

Most Americans say they have enough money to cover their expenses, to buy the things they need--and to have a good time. Only a minority have enough money for things beyond those bare essentials

- Jean Chatzky

So what does it takes to be in that minority? Perhaps, discipline and a higher income.

I often hear personal finance gurus say that you can have financial peace when you get out of debt and live below your means. Truth is, most people just don't make enough money to: Pay their rent/mortgage, have a good time AND save for retirement, college funds and emergencies. Most have just enough to cover the first two.

The average American household has an income of $50,000 a year, have two children and a car. How it is possible for this family to get ahead when taxes and medical insurance alone takes up half of their income?

I remember when a man called in to the radio show of Dave Ramsey. He mentioned that he got out of debt but he had trouble in the other areas, such as saving 6 months for emergencies and saving for retirement. According to Dave's plan you must save 3-6months of expenses and save 15% of income for retirement after you become debt free.

Dave could not understand why he can get out of debt but didn't have enough to save. The young man mentioned that he took on a second job to get out of debt; once he got out of debt he quit his job. Dave did not have a valid answer for him.

He neglected his children a lot by taking an evening job, so when he got out of debt he though his life will be free.

Trust me, to really feel free and comfortable you really have to spike up that income. Whatever income it took to get out of debt, will more likely take to have a healthy savings.

Unless he plans to downgrade his entire lifestyle, he needs to make a better income.

So remember when some personal finance guru tells you to follow his plan, make sure you have the income to do it.

In spite of increase salaries, why are Americans still broke?

2009-10-19T09:00:00.014-05:00

So as you can see, as income increased through the years so has expenses. And this is not including credit card debts, student loans and retirement. Yes folks, the middle class have been bamboozled!

Yes, we make more than our parents however, statistics don't lie. We are no better off as we in 1974. Due to inflation and taxes, we are actually behind.

So there you have it. We're broke because taxes and other expenses have slowly increased us on us. Thus, making us grab the credit card more.

What advice do I have to get ahead of the game? make more money!!!! As you are doing that, reduce your debt. We are going to always have expenses: water, gas, lights, and transportation fees. So try to reduce the consumer debt: car notes, credit cards.

As long as we work kids will need daycare. Unless you plan to be a stay at home parent, be prepared for this expense.

*table was swiped from Elizabeth Warren book: The Two-Income Trap: Why Middle Class Mothers and Fathers are going broke

Friday Quote

2009-10-16T10:23:00.000-05:00

Everything that irritates us about others can lead us to an understanding of ourselves.

- Carl Jung

Biggest Rip offs of the Middle Class

2009-10-14T09:22:00.006-05:00

Car leases- they tend to never let you get ahead. It's like a long term rental. Yes, you will never own the car. Buy you are guaranteed to have a shiny new ride every three years. And the price you pay for that in being caught in a contract the most people find it impossible to get out of. So if you want to remain middle class, lease a car.

Credit cards- love them or hate them; this is another product of perpetual debt. You ever want to find a quick way to enter debt; a credit card can get you there. But once you allow debt to remain on the card, most people never seem to get out of it. You become a victim of their game. Late fees, interest rate hikes, finance charge they can take advantage of you for either way. Once you're late, you are giving them permission to jerk you around.

Cash-Value Life Insurance - a life insurance policy that is used like a savings account. You feed this thing for 15, 20 years and you'll be lucky to receive what you put into it. You're better off getting a term life and investing the remainder that would have went into a cash life policy and saving or investing it yourself. Why is cash value much more expensive than Term life insurance? I tell you why because much of the monthly payments are eaten up by commissions and expenses for at least the first 3 years. Term Life is simple, flexible and low price. Save money on your own, not through a life insurance.

Bottom line if you want to stay middle class, make heavy debt payments for the rest of your life, However, if you want to slide into upper middle class or rich, get out of the payment game and into the investing game!

The price we sometimes pay to get out of debt

2009-10-12T09:07:00.001-05:00

I often read stories of people doing crazy things just to get out of debt.

People are willing to skip meals and drive a junk car just to meet your goal.

If you plan to pay off your house in 7 years, please don't make it so strenuous you don't have a life! Some people focus too much on a goal and neglect every single thing around them: Family, friends and health.

Working three jobs just to pay off your home early, please take a breath before you crash.

Paying off debt can take some people a long time, therefore it can get old fast. Sometimes, it’s OK to reward yourself in between accomplishing your goals.

I once knew a guy that had Five children and they all stayed in a 3 bedroom apartment, seven people in all. The relationship suffered because of this. Why they are sacrificing like this? because the husband wants to save up and pay cash for a home. The marriage suffered.

I was listening to a podcast on debt a few months back and the caller mentioned that righter after the became debt free her husband left her. Pay attention to what you are doing, certain things are not worth wrecking a relationship because you want to get out of debt fast.

What I'm saying that sometimes it's not worth it. When you tend to strain yourself financially just to meet a goal, you wind up crashing and not doing anything.

Wealth is never worth sacrificing your happiness, family or integrity

-Stewart H. Welch III

~~Wealth~~ DEBT is never worth sacrificing your happiness, family or integrity

-Marie Joseph

Here are some checkpoints:

-Make sure you AND your spouse both want this goal. Just because you want this does not mean you spouse will automatically participate in it.

-Make sure it's an obtainable goal. Paying off your $100,000 mortgage in 7 years when you make $30,000 a year is not possible.

-Make sure you are not sacrificing your health to pay off debt. Working three jobs to pay off debt in the short term is okay. Working several jobs for years to pay off debt is insane.

-Have quality in your life as you get out of debt. Paying on debt, while you need a new heater in the middle of a freezing winter is not smart. Your priority should be having heat.

You don't want to be debt-free and Divorced. Being debt-free should not come before your marriage. Make sure you are both on this journey together.

photo:istockphoto

Friday Quote

2009-10-09T09:01:00.000-05:00

One of the keys to happiness is a bad memory.

- Rita Mae Brown

Do whatever works best for you in personal finance

2009-10-07T09:06:00.003-05:00

In my 20s, credit was not important to me. Why? Because financing a car or house was not my main goal. I actually was satisfied with just having a job and a bus pass.

As I grew older, I wanted a nice car and a nicer apartment. Therefore, credit became important to me.

Once I got married, insurance became important.

We began discussing kids and eventually retirement and college savings became priority.

My point is to do what works best for you. A person with 3 kids cannot be given the same financial advice that a single 20 year old will need.

If you are good with credit cards, (meaning you only charge what you need and pay it off in full as the bills arrives) stick to your plan. You do not have to change because some personal finance guru told you it's better to cut up your credit cards.

If you are in your 20s and have been investing in Apple stocks because you love its products, don't stop because some guru said you need 6 months cash in your account before you can invest.

You have to take advice with a grain of salt.

If you have a company that is better off spending on equipment than hiring new employees and it has worked out better for your company, by all means do not change your strategy.

However, if you are not good with spending: BUDGET

If you are not good at handling debt: Stop using the tools that make you go into debt.

If you are better at investing than saving: keep doing it. Do what you are good at and perhaps have your spouse handle the saving and budgeting.

Again, do what works best for yourself and family. If you are married make sure both of you are in agreement.

Take time out to look at your assets and liabilities. If your liabilities are greater than your assets, regardless, of your plan, then your finances are not in order. Find ways to decrease the liability side.

On the other hand, if your assets are greater, whatever you're doing it's working in your favor.