Assess Your Risk Tolerance

EXCITING NEWS: I was selected to deliver a national training in San Francisco this November entitled: Personal Finance Solutions for Busy Mental Health Professionals. This 3 hour workshop includes material from my upcoming eBook. Stay tuned to get first crack at the NEW EBOOK. And it’s FREE to my readers.

“Risk comes from not knowing what you’re doing.” Warren Buffett

I’ve been investing for many many years. In my 20’s all I could think about was “the great depression” and how so many lost so much. Although I had a Bachelor of Science degree in Economics and had taken a class or 2 in the stock market, I was scared of stock investing. I was terrified of risk and I certainly didn’t know much about investing.

As I acquired some cash, I went to visit a stock broker who respected my preferences and introduced me to some bonds and bond funds. He introduced me to the dollar cost averaging  and answered my investing questions by loaning me his investing training manuals. After dipping my toe in the investing pool, learning a bit about investments, and watching my net worth grow for a while, I gained some confidence. A lifelong passion was born.

MAIN TOPIC; Risk tolerance THEN and NOW

Although my investment portfolio went up and down, I got used to the volatility. I was still afraid of “losing it all,” but learned through study, that if I diversified my assets, the ups and downs of my portfolio would even out. I didn’t know it at the time, but my RISK TOLERANCE was governing my investment decisions.

For those of you just starting out, or learning about investing, start with introspection. When your investment value goes down 10-15%, are you a nervous wreck? Does this small percent drop in your portfolio terrify you and keep you up at night? If so, you need to titrate your portfolio to honor your temperament.

WHAT THE HECK DOES THAT MEAN?

Riskier assets with more ups and downs usually offer HIGHER RETURNS.

Stock investments: Individual stocks, stock mutual funds, international stocks offer the possibility of greater returns along with more risk.

Bond investments: Individual bonds, bond funds, corporate, and government bonds offer lower returns and less volatility.

SOUNDS SIMPLE; JUST INVEST IN STOCKS, GET HIGHER RETURNS.

OR –  SCARED OF RISK? INVEST IN BONDS AND ACCEPT LOWER RETURNS.

Wait a minute, not so simple.

These investing maxims have held up over the long term IN THE PAST; but what about the last 5 years? According to Morningstar.com,  during the last 5 years, bonds outperformed stocks by a large margin.

5 YEAR RETURNS-annualized

Morningstar US Market Index-0.67%

Morningstar Core Bond Index-6.04%

Practical Application: What should I do?

Are you totally confused? To summarize, long term stocks offer higher return with more risk; bonds have lower returns and lower risk. But in the past 5 years, stocks had high volatility and low returns and bonds outperformed stocks by a huge margin.

Welcome: DIVERSIFICATION

Those rules of risk and return have held true in the past over the long term, > 10 years.

 NO ONE KNOWS WHAT TYPE OF RETURNS AND VOLATILITY THE MARKETS HOLD IN THE FUTURE.

Protect your investments by spreading around the risk.

During the past 5 years, if your investment portfolio looked like this:

50% STOCKS

50% BONDS

Your annualized return would have been 3.36% with moderated volatility.

The lesson is to choose investment funds in a variety of asset classes. The ups and downs will balance out and moderate the returns and risks.

Conventional wisdom recommends a greater percent of your investment in stocks if you are younger and can tolerate more risk. If you are older and/or more risk averse, raise the percent of bond assets.

Continue reading this series and you will learn how I invest our family assets.

BEFORE YOU INVEST YOU MUST READ 10 STEPS YOU MUST TAKE BEFORE BEGINNING AN INVESTING PROGRAM.

Caveat: This article is for information purposes only and may not be appropriate for your individual situation.

ACTION STEP:

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.

Take a RISK TOLERANCE QUIZ or 2 and jot down whether to weight your portfolio more toward stocks or bonds.

MSN Money Risk Quiz 

 Risk Tolerance Quiz from Rutgers University site by 2 finance professors (Source: Grable, J. E., & Lytton, R. H. (1999). Financial risk tolerance revisited: The development of a risk assessment instrument. Financial Services Review, 8, 163-181.)

image credit; purplemattfish

RECENT PERSONAL FINANCE CARNIVALS & Link Round up

I am honored to have my work showcased at these sites recently. Why not stop by & check out the fine articles?  

 How to Design a Budget with Room for the Fun Stuff was selected for a link round up at KNS Financial

Carnival of Money Stories at Eventual Millionaire published No Brainer Money Management for College Students

Carnival of Wealth at Personal Dividends posted Follow these Instructions and Get Wealthy

YAKEZIE PERSONAL FINANCE BLOGS

After every article for the next several weeks, you will be introduced to several Personal Finance web sites in the Yakezie network. Each one has their own unique voice and style. The consistency in all is their desire to help others. Consider visiting a few each day!

My Personal Finance Journey
Narrow Bridge
Not Made of Money
One Money Design
Out of Debt Again
Parenting Family Money
Peak Personal Finance
Personal Finance by the Book

EXCITING NEWS: I was selected to deliver a national training in San Francisco this November entitled: Personal Finance Solutions for Busy Mental Health Professionals. This 3 hour workshop includes material from my upcoming eBook. Stay tuned to get first crack at the NEW EBOOK. And it’s FREE to my readers.

“Seek the lofty by reading, hearing and seeing great work at some moment every day.”
Thornton Wilder

Thornton Wilder offers some provocative advice. Are link posts in alignment with Wilder’s thinking or is this a stretch?

MAIN TOPIC: Help me out, please

I want your advice.

Yes or no, do you read link posts and find them useful or not?

Here is what I’ve been reading this week-end. There’s so much worthy info in the blogosphere, what do you think?

Would you prefer a typical article or do you enjoy the diversity of a link post?

How to Budget in Less than 20 Minutes a Week at Moolanomy  

How many of you earn over $100,000/year  It’s all about the comments! I Will Teach you to be Rich

Spending too much Money and Course Correcting at Financial Samurai

10 Money Lessons every College Student & Parent should Know at PT Money

Blogging Essentials at Free from Broke    

How to Invest in Vanguard Funds using ETFs and Save Money while you’re at it at Invest it Wisely

Financial Automation at Dividend Monk

Gather Your Data: Debt and Net Worth at Eventual Millionaire Millionaire

Making Money Challenge at Aspiring Millionaire

Are Gen Yers Different? Do I Follow the Stereotype? at My Journey to Millions

ACTION STEP:

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.

Spend a few minutes reading something which will grow your wealth.

 image credit: Rachel Sian

RECENT PERSONAL FINANCE CARNIVALS & LINK ROUND  UPS

I am honored to have my work showcased at these sites recently. Why not stop by and check out the fine articles? 

The Yakezie Carnival at Aspiring Millionaire presented Reduce Money Stress; Get Rid of Dysfunctional Money Behaviors

Beating the Index published How to Design a Budget with Room for the Fun Stuff

 YAKEZIE PERSONAL FINANCE BLOGS

After every article for the next several weeks, you will be introduced to several Personal Finance web sites in the Yakezie network. Each one has their own unique voice and style. The consistency in all is their desire to help others. Consider visiting a few each day!

Personal Finance Journey
Personal Finance Student
PF Firewall
Planting Dollars
Punch Debt in the Face
Rainy-Day Saver
Redeeming Riches
Retirement Investing Today

EXCITING NEWS: I was selected to deliver a national training in San Francisco this November entitled: Personal Finance Solutions for Busy Mental Health Professionals. This 3 hour workshop includes material from my upcoming eBook. Stay tuned to get first crack at the NEW EBOOK. And it’s FREE to my readers.

“Life consists not in holding good cards but in playing those you hold well.” Josh Billings

Build skills in all areas. Set goals. Success will follow.

MAIN TOPIC: Pay attention to your Spending

Esmerelda  is a college student with lots of money trouble; ATM fees, overdrawn account fees, credit card late and interest fees, rescinded credit card, late fee on tuition account, and overspending in general. Hundreds of dollars in fees and interest ate up her meager savings and caused her LOTS OF STRESS!!

I want to save you from Esmerelda’s troubles.

At the beginning of the school year, you college students are on your own for the first time with worries about friends, school and MONEY. I’ll leave the friends and school worries to someone else. But I CAN TEACH YOU WHAT YOU NEED TO KNOW ABOUT MONEY MATTERS while you are in college.

IT IS YOUR RESPONSIBILITY TO HANDLE YOUR OWN MONEY whether you get cash from mom & dad, loans, jobs, or any combination. Follow these steps and you’ll have LESS MONEY STRESS NOW & LATER.

PRACTICAL APPLICATION: Get Control of your Cash

1. Open a checking account and savings account with NO FEES, for college students.

2. Arrange with employer to have check AUTOMATICALLY deposited in your savings account.

3. Use an on line account or bricks and mortar bank or credit union.

4. Ask these questions and only open if they say NO FEES in writing:

Do you have an account for college students with no fees at all?

Does this account offer free ATM withdrawals?

5. If you need a loan for school expenses, go straight to the Financial Aid office for HELP. Work with them as long as it takes to get the money you need. That’s what they’re there for!

6. TOTAL ALL YOUR INCOME- Estimate income from job, loans, parents, scholarship, and aid. WRITE DOWN YOUR INCOME IN A NOTEBOOK or chart like this one. Categorize by month or lump sum.

7. Complete a chart like the following and write down every expense you are responsible for; cell phone, tuition, rent, utilities, car payment etc.; include amount; date due; how paid. These are charges that are FIXED and don’t have much flexibility.

8. Add up your expenses write in the last line of the chart.

9. Next, add any expenses that you control; beer, restaurants, entertainment, etc. These are your DISCRETIONARY EXPENSES. These are the easiest places to cut spending.

10. TOTAL ALL YOUR EXPENSES.

11. If you have a credit card, use only for emergencies. If you don’t have the cash, don’t spend it!

12.  If you have a credit card, PAY THE BALANCE DUE IN FULL AT THE END OF EVERY MONTH.

13.  The money that is not due monthly, like your tuition or insurance, should be in your savings account. Make sure that the amount you will need for these infrequent payments stays in the savings account until you need it.

14.  Pay every bill early. At least a week before the bill is due, pay it.

15.  Bunch up bill paying into 2 times per month.

16.  Look at your income and expenses-Are you spending on things or experiences that are worthwhile to you? REALLY THINK ABOUT THIS ONE. If not, curb your spending.

17.  Read The Secret to Saving without Sacrifice here.

18.  Studies come first, but if you have extra time, consider partying less and get a part time job.

19.  Every month, put your discretionary money from each category in an ENVELOPE and label it. For example, $80.00 cash goes in an envelope at the beginning of the month. After you spend that $80.00 you are done with entertainment for the month!!!

20.  At the end of the month, analyze your income and spending. Complete another Income and expense tracking sheet. Make changes according to the info from the prior month.

ACTION STEPS:

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.

1. Read the entire article again.
2. Choose one or two steps to begin immediately.
3. Write in your planner the steps to take.
4. After completing the first steps, repeat until all are completed.

Write in with your questions and experiences.

YAKEZIE PERSONAL FINANCE BLOGS

After every article for the next several weeks, you will be introduced to several Personal Finance web sites in the Yakezie network. Each one has their own unique voice and style. The consistency in all is their desire to help others. Consider visiting a few each day!

 The Debt Hawk
The Millionaire Nurse Blog
The Saved Quarter
The Wealth Artisan
Ultimate Money Blog
Watson Inc

BarbaraFriedbergPersonalFinance instructs and motivates you to become wealthy by teaching basic personal finance principles with engaging stories and understandable examples. Learn to become rich and happy from a real Portfolio Manager

“KNOWLEDGE IS POWER.” Sir Francis Bacon

Who would have thought this quote, from the 1500’s would still ring true today?

Many years ago I read a letter written to Dear Abbey. (Yes, I read Dear Abbey, please don’t laugh.) The gist of it was this, a 38 year old guy writes that he wants to be a doctor, but is worried that he’s too old to go to medical.  He complains that he will be 42 years old when he finishes med school. Dear Abbey writes back, if you go to medical school now, in 4 years you will be a doctor, if you don’t go to medical school, then in 4 years you will just be 4 years older.

That letter stuck with me when I was deciding to return to school for a second graduate degree in mid life. It stuck with me when I began writing a book. And it was a factor in spurring me on to start a blog. In fact, my life is characterized by taking risks and moving forward no matter what. In the past, I was a huge procrastinator, insecure, and afraid of failure; I am proof of the power of stepping forward in spite of fear, age, obstacles, and criticisms of others.

On that note, I want to share my 6 month anniversary celebration as a personal finance blogger with you. My success in readership has far surpassed my expectations. I began with an Alexa ranking in the 1,000,000 range and have dropped to an impressive level of less than 160,000. I owe a large amount of that success to the YAKEZIE PERSONAL FINANCE NETWORK and Len Penzo dot com  who encouraged me to join. The Yakezie mission is in alignment with my own; selflessly  promote financial literacy and personal finance.  El Carino, my biggest cheerleader, promotes my blog both to those interested as well as the uninterested and loves me no matter what. In fact his support has given me the confidence to “try anything.” My daughter is my social media consultant extraordinaire, offering many ideas, strategies, and tips to touch her generation.  Additionally, she constantly provides insight into the GEN Y mind. Finally, my outstanding MBA professor, Dr.  Oranee  T.  encouraged me to start the blog and continue with my book.

On this 6 month anniversary I want to share the links that “Google Analytics” the blog analyzer, said are your favorites. Some surprised me, others not so much. The TOP articles cover a variety of topics from investing, to mental money problems, and the financial challenges of the poor.  If you haven’t read them before, please check them out and let me know what you think.

 I am honored by your support and look forward to offering you quality PERSONAL FINANCE information to help you become wealthy.

# 1 ALL TIME FAVORITE: GET RICH WHILE YOU SLEEP WITH THE MAGIC OF COMPOUNDING

“Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it.”
Peter Lynch   

One of the greatest investors of our time attests to the simplicity of investing in the stock market. Read this post and find out why. Following is the “Cliff Notes” version of why you need to put part of your long term investment dollars in the stock market. 

Main Topic; Stocks  

The historical long term growth of American business is amazing. American business is frequently represented by the Standard and Poor’s 500 Stock Index (S & P 500). This index of 500 stocks is considered a barometer for the complete US Stock Market. 

Forget about the recent recession and downfall of the stock markets for a minute and take a peek at some historical returns of the S & P 500. Although historical returns do not guarantee future returns, take a look anyhow. When looking at these returns, think about the stock market as a collection of U.S. businesses, not mutual fund or brokerage account statements. Then ask yourself if you think U.S. businesses and the economy will grow over the next 20, 30, or 40 years?

Click here to read more.

# 2 RUNNER UP: HOW TO AVOID LIVING PAYCHECK TO PAYCHECK

“Have compassion for all beings, rich and poor alike; each has their suffering. Some suffer too much, others too little.” Buddha

Wealth requires a commitment and responsibility to those with less. Offer your knowledge and expertise to those without.

MAIN TOPIC: The Problem with Check Cashing Services

I just returned from a quick trip to Wal Mart to pick up some groceries. It’s Friday afternoon and my check out lane was directly across from the “Money Center.” This “Money Center” is a place where you can cash checks; for a fee, buy money orders; for a fee, and do a lot of other financial tasks; FOR A FEE. It is not a bank.

Because at a bank, if you have the right type of account, you can get your paycheck deposited FOR FREE!

The line was really long at the money center. In fact, there were people trailing out into the main part of the store. Many lower income people DO NOT HAVE A BANK ACCOUNT.

I remember back to my first full time job as an invoice clerk; I was amazed on payday when my co-worker and I went to the bank. She CASHED HER ENTIRE CHECK AND TOOK ALL OF THE MONEY! I thought it was quite odd that she didn’t put any of it into the bank.

But I digress, back to the Wal Mart Money Center. I got very despondent after seeing the enormous line-because I knew most individuals were there because they didn’t have a bank account. And they were lower income and paying a fee that higher income people didn’t pay, just to gain access to their money.

 I was struck by several things:

1. How can one save, if he/she has NO BANK ACCOUNT?
2. How can one move out of living “paycheck to paycheck” without a BANK account?
3. Where are those individuals in the Money Center line going to learn the principles of Financial Literacy?

Click here to read more.

#3 THIRD PLACE (it was a tie): REDUCE STRESS-GET RID OF DYSFNCTIONAL FMONEY BEHAVIORS-part 3

Money & Relationships-Make it Work!

“I’d marry again if I found a man (or woman) who had fifteen million dollars, would sign over half to me, and guarantee that he’d be dead within a year.” Bette Davis

 You gotta take relationships with a bit of levity or you’ll never make it through! This quote is the perfect solution for money and relationship problems. Unfortunately, it’s a bit unrealistic. Maybe a million or two is more doable.

No really, read on and find out how to handle money stress in a relationship.

MAIN TOPIC: She’s a Saver, He’s a Spender

This article is the 3rd in a series relating poor money behaviors with stress (#1-Shopping to Solve your Problems & #2 Procrastinating Dealing with Financial Matters). The topics are inspired by an article entitled Emotions, Money, & Financial Stress by Nancy Losinno, published at the US Department of Energy, Brookhaven National Laboratory website . 

You know who I’m talking about. Bluetooth came out, he got it. Iphone, Ipad, flat screen TV, etc. he bought them all. New car every few years was required by him. Meanwhile the debt piled up. She tried to save, but his spending counteracted all of her efforts. 

I’m hesitant to continue, as the story is so familiar. We all know how it turns out…… fighting, stress, anger, depression, marital discord and DEBT.

Overspending in a relationship is unhealthy whether practiced by one or both partners.

Losinno clearly stated, that in a relationship the partners have the choice of creating WEALTH or a “FINANCIAL HELL ON EARTH.” Money secrets are devastating. Unhealthy family money attitudes can be disastrous. Money problems in a relationship can be the beginning of the end.

Click here to read more.

#3 THIRD PLACE (it was a tie): WHEN NOT TO SPLURGE

“If I splurge on anything, it’s cologne. I love smelling good.” Zac Efron

This quote suggests that Zac Efron, the wealthy movie star sensation from High School Musical and many more projects, is so financially savvy that his one indulgence is cologne. If that’s his lone indulgence, then this guy is on a path of financial strength.

Personal disclosure: I have never met nor spoken to Zac Efron. (Although I wouldn’t turn down an invitation to meet him!)

MAIN TOPIC: I am ALL FOR SPLURGING

I carefully plan my our family splurges:

• El carino (my hubby) indulges in his hobby of collecting sports memorabilia.
• I go out to work at a coffee shop once or twice a week and buy a coffee.
• Special occasions find me at the COACH outlet for a nice bag.
• Travel is planned and a big priority for our family. This week-end it’s a quick family get away to Atlantic City! (No gambling for us!)

I do not covet expensive jewelry, cars, fine dining (my birthday dinner was at Applebee’s this year). In fact, when el carino wants to tease me, he goads me with the offer to buy me jewelry (because he KNOWS I don’t value spending our money on expensive jewelry). In fact, I totally don’t get the women who want a huge diamond (bought on credit). Give me the cash any day to stick in the investment account.

Please don’t think this is a condemnation of cars, jewelry, or fine dining; it’s not. It is a recommendation to spend on those activities that YOU value, not what your neighbors, TV, or society tells you to value.

Click here to read more.

ACTION STEP:

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.

Commit, write down, and take one step towards financial responsibility today.

Image credit: Kazeee

YAKEZIE PERSONAL FINANCE BLOGS

After every article for the next several weeks, you will be introduced to several Personal Finance web sites in the Yakezie network. Each one has their own unique voice and style. The consistency in all is their desire to help others. Consider visiting a few each day!

Zordane.com

Yes I am Cheap; Digging my Way Out of Some Serious Debt

Young and Thrifty; Saving Generation Y

Well Heeled Blog; Savvy Living through Personal Finance

Wealth Pilgrim; A Journey to Self, Wealth, & Health

Wealth Informatics; Financial Freedom through Education

EXCITING NEWS: I was selected to deliver a national training in San Francisco this November entitled: Personal Finance Solutions for Busy Mental Health Professionals. This 3 hour workshop includes material from my upcoming eBook about Investing. Stay tuned to get first crack at the NEW EBOOK; and it’s FREE to my readers.

The following is a guest post from Crystal at Budgeting in the Fun Stuff, where she writes about finding the balance between paying your bills, saving for your future, and budgeting for the fun stuff along the way.

Free Money Finance (FMF) had this post  which went over an article from Yahoo that listed the worst paying jobs for doctors.  The absolute worst paying position still brought in $175,000*.

Well, based on past posts  at FMF and others I’ve seen online, some commenters argue that doctors still carry high debts because they “have to”  live in the nicest neighborhoods, drive the best cars, and send their kids to expensive private schools.  They also have student loans.

FMF’s post argued that even with liability insurance and student loans, a doctor should be able to build wealth quickly.  I completely agree.

Let’s say a doctor has to spend 50% of his/her salary on insurance, taxes, and expenses like that.  That would still leave the worst paid doctor with about $87,500 a year.  I’ll also say that this hypothetical doctor has $150,000 in student loans as the average college debt for doctors was listed at $140,000. 

Well, if  I made $87,500 a year, I’d live and save a little off of $40,000 and put the other $47,500 towards my student loan debt.  I’d be debt free in less than 4 years.  Then I could send that extra towards my average $200,000 mortgage in Texas (paying it off in less than 5 years) or even add more to retirement savings.

This would mean that I could be completely debt free within 9 years of graduating and own a really nice house to boot.  I’d also have $2 million saved for retirement within another 21 years if I could get an average return of at least 6%.

What about the nice car and expensive private schools?

Well, do you know what your doctor drives?  I have no idea.  That $40,000 a year budget could easily include a car payment of $350 a month (ours did).  If I was a doctor, I’d drive whatever I’d like that could comfortably and consistently get me from Point A to Point B.  I like the Toyota Prius, so I’d buy one of those with cash or use my awesome credit to get a low rate in the beginning when I’m strapped.  I’d still have it bought outright within my first 2-3 years out of college.

I don’t have kids, but even if I did, the public schools where I live currently are one of the highest rated districts in Texas.  My kids could go there.  If they needed more mind stimulation, I could hire them a personal tutor or even afford to send them to private school with cash by the time they were in middle school.  I might have to drive a worse car or retire on less or push back retirement a few more years, but I could remain debt free.

Some of you may argue that it is impossible to live on $40,000 a year.  It’s not – we do it and live pretty happily.  We make about $60,000 a year after taxes, insurance, and benefits.  We save about 40% of that ($24,000) - 30% for retirement and 10% for shorter-term goals.  We live on the other $36,000 a year.  We have a pretty nice house (1750 sq.ft. 3 bedroom that was built in 2004), 2 cars, and even fun extras.

This article made me regret not liking science, math, or college enough to pursue a medical degree. 

*That $175,000 is an average and doesn’t take into account the doctors that make scraps working for charities or non-profits – please don’t yell at me for them. 

How about you, could you build wealth pretty quickly by taking home “just” $87,500 a year?

YAKEZIE SHORT CARNIVAL

Enjoy this personal finanance reading; stop by their sites to read more.

 How to Create a Budget-Setting Goals at KNS Financial

 How do you know if you are rich? at Living Financially Free Ministries 

Crank Up Your Money Saving Goals With SmartyPig at Free From Broke 

Grab a drink, a snack, and relax by the pool; Check out these excerpts of my favorites reads from around the blogosphere, then stop by the websites to get the full articles!

 Mark Riddix at MoneyCrashers writes about Strategies for Earning Passive Income 

 ”One of the easiest ways to generate passive income is by investing in high yielding dividend paying stocks. You can buy high yielding stocks like Verizon or AT&T which are currently paying almost 7% in dividends. Real estate investment trusts (REIT) are also great income producing investments. REIT’s are required by law to pay out 90% of their earnings back to shareholders…..” 

Mysti at Budgeting in the Fund Stuff wrote We Decided to Use the Emergency Fund to Pay off Debt 

“As I mentioned about a week ago, Mr. BFS and I paid off his car.  Yay!  Well, we made the last payment of $4600 by using our emergency fund.  In fact, the entire last $7500 came from that account.  I’ve had a couple of people seriously wonder about our mental health since we’ve also had to raid our cash for dental expenses, vet bills, a major vacation, and grad school payments.  This means we went from having more than $20,000 in cash to about $4500 in cash in less than 2 months…..” 

Smart on Money wrote a wise post entitled, When you Make Financial Mistakes, don’t allow them to Snowball.   

“It’s fine to make mistakes – we all do it.  What sets the successful apart from those who can’t seem to find their way out of debt is that they learn from their mistakes, and they move on…”

Jaime at Eventual Millionaire wrote You are Not the Numbers. 

“Whether you like them or not, the numbers show reality. They exemplify what is important to you. You might say being home with your children is the most important thing to you, but unless you are spending money consciously then the numbers don’t lie…….” 

The Ultimate Money Blog wrote about how to Make Money Online; These are Sites I Use. 

“Expo TV has been a HUGE source of my internet income. Basically you review a product on video and upload it to the site. I have made more money than I ever thought possible from this one site. I highly recommend it…..”  

Not Made of Money presents some important lessons in 10 Steps for Keeping your Personal finances Organized

“Use accounting software.
There are a number of companies that have created software specifically for the purpose of helping individuals to manage their finances. Accounting software can help you track your spending over time and to help you successfully maintain a budget. You also don’t have to worry about missing bill payments again, because most accounting programs will allow you to set up reminders…..” 

Jason at LiveRealNow writes about something we all can realate to: OVERSCHEDULED.  

“Everybody takes on too much at times.  How do you avoid over-committing? Learn to say no. It is okay to refuse to take on more projects.   You probably aren’t the first person to turn down the project and you probably won’t be the last.  Don’t assume it’s your responsibility.  It is fine to leave it for someone else….” 

Mike at The Dividend Guy Blog discusses Dividend Investing with Less than $1000 . 

“It is true that $1,000 is too small of an amount to start investing in the stock market…unless you consider ETFs! Exchange Traded Funds have been one of the most discussed investment products in the recent years….”    

Heather at Wild West Adventure Writes Ditching Plan B.   

“I’m pondering something Tyler Tervooren listed on his “5 Pillars of Awesome Risk Taking” over at the Advanced Riskology blog: “throw away Plan B.”  The idea being that we all know deep in our infinitely wise and visceral hearts exactly what it is that makes us burn with energy and desire, and we should do whatever it takes to achieve that Plan A, because, as Tyler puts it, “If you know deep down what you want (and I think everyone does, but most are afraid to allow themselves to believe it) then you should avoid having a Plan B at all cost. If you already have one, you should do everything within your power to dismantle it. Plan B is a major distraction to Plan A….”    

Mrs. Accountability at Out of Debt Again wrote, Did I get a New Washing Machine or Not?  

“Mr. A and I were having a hard time forking out $400 or more on a washing machine which was working, aside from having a small tub, and oh, that pesky stopping mid-cycle problem which had escalated….”

Shawn at Watson Inc. had a guest post on his site entitled, Hey Broke People, Stop Overpaying for College. 

“I need only point out the handful of people who “made it big”, whether we consider financial, intellectual, or public merit, who did not complete a degree at an expensive, private university. Bill Gates: Harvard dropout. Warren Buffett: Started out at the more prestigious University of Pennsylvania, but transferred to the University of Nebraska-Lincoln after being dissatisfied with the quality of education at his first school….”   

Geoff at Car Negotiation Coach sponsored a guest post by Wealth Informatics called Find the Best Car Rental Price.

“A rental car can be a big chunk of vacation expenses. If you add in all the state & local taxes, airport fees, facility use fees, underage fees, insurance, additional driver fee, refueling fees… it could get very expensive, very easily. But if you spend a little time you can save a lot of money and get the best rental car deal…”

Neal at Wealth Pilgrim lists 19 Great Jobs without a College Degree and How to get them Fast .

“Going to a trade school instead might be a brilliant move.  I read recently that only 1 in 4 college graduates find jobs. On top of that, according to the U.S. Bureau of Labor Statistics, 8 of the 10 fastest growing jobs don’t require college degrees….”  

Kevin at Invest It Wisely writes, What is It All About?  

“In life, we have three main resources at our disposal: our health, our mind, and our time. We are not equal in our capacities for health and mind, but we all have the opportunity to make the best with what we have, and increase our life expectation. …”

My Financial Objectives writes I Hate  Overdraft Fees. 

“Overdraft Protection.  Do I use it? No.  Do I wish I had it? No.  Do I ever think I will use is? No.  Should you use it? That depends on you. Quite simply, I feel that overdraft protection is not necessary at all for someone like me. …”  

Craig Ford writes a thought provoking article for Wise Bread called, 3 Reasons Not to Invest Now

“A common piece of investing advice (which is generally true) is that the best time to start investing is now. But we must also remember that investing requires a personalized plan….”

Mrs. Money from The Ultimate Money Blog asks the timeless question, What are Necessities?

“I was thinking the other day about what would happen if I lost my job.  If I lost my job, both Mr. Money and I would lose our health insurance, matching 401k contributions, and about 1/3 of our total income.  We’d have to make some cuts to our lifestyle to be able to make it work….” 

RECENT PERSONAL FINANCE CARNIVALS

I am honored to have my work showcased at these sites recently. Why not stop by the CARNIVALS and check out the fine articles?  

Carnival of Financial Planning at The Financial Blogger  featured, Here is an Investment Guaranteed to Keep up with Inflation. 

Carnival of Money Stories at Money Beagle 

Yakezie Carnival Link Round up at Not Made of Money

Yakezie Alexa Challenge Round up at Out of Debt Again 

Image credit: Visiteffingham

Summer’s a time when you can kick back, relax and read a bit more. In that vein, I’d like to recommend some enjoyable and informative articles I’ve come across recently. Get a taste here, and stop by the authors’ sites for the full versions.

Could the Free Market have Ended Racism?

Let me state, I am not a fan of racism (As a matter of fact, some might call me a “liberal.”)! I don’t think the free market is enough to end racism but read on to hear a fascinating discussion at The Amateur Financier:

“ ‘The free market, as usual, will address the problem.  It punishes racists.  A business that doesn’t hire blacks will lose customers and good employees.  It will atrophy while its more inclusive competitors thrive.’ (John) Stossel raises an interesting point: could the free market have ended discrimination without government intervention?  Or were the government actions like the Civil Rights Act and its prohibitions on employment discrimination a needed remedy to the segregation era?”

2010 Tax Brackets; Which Income Tax Bracket am I in?

No one is enthusiastic about paying taxes, that being said…. the more you understand about the system, the more likely it is that you will KEEP MORE OF YOUR CASH! Read on about this important issue at The Oblivious Investor:

“The Federal income tax is referred to as a “progressive tax.” Of course, it’s not progressive in the same way that a social movement could be said to be progressive. What the term means in this case is that, as your taxable income increases, so does the rate at which you are taxed. People will often make statements such as “I’m in the 25% tax bracket.” For example, as you can see in the table below, a single person with a taxable income of $40,000 would be in the 25% tax bracket. People frequently misunderstand this to mean that all of the person’s income is taxed at a rate of 25%. In reality, the person’s overall tax rate will be much lower.”

The TAO of the Intellect

Loved the title, and the content gets you thinking… just not too much! Read more at Early Retirement Extreme:

“Another very human trait is to weigh recent information more than historical information or worse, weigh it higher than  “what is not seen”. The latter causes an enormous amount of confusion. One might almost say that the entire field of economics is dedicated to solve this problem (the broken window fallacy), at least after a couple of beers.”

Six Tips from Yorkshire’s Top Thriftiest Grannies

Who wouldn’t want to read this post? The grannies have the best tips; here’s a sneak peek, read more at Miss Thrifty:

“TOP TIP 4 – Pack junk mail into the empty cardboard toilet roll tubes and use them as firelighters.”

Good Debt vs. Bad Debt 

I agree with MOST of the content here… but read on and see what YOU think. Young and Thrifty has a great writing style, enjoy….. 

“Yes.. I mentioned the “D” word. Debt. Just letting that word roll off your tongue makes you feel like you have halitosis. Well, get that tongue scraper and Listerine out, because as surprising(and somewhat crazy) as this may sound, there is such thing good debt AND bad debt.”

Crank up your Savings Goals at Smarty Pig

Right now, get a (relatively) high yield at this unique goal-oriented savings site as discussed at Free From Broke.

“Whether you want to save up $500 for back to school shopping, or $5,000 for a family vacation, it is possible to use SmartyPig to reach that goal.  The concept is fairly straightforward, and works simply.”

Could you Give it all Away?

The uber-wealthy Bill Gates and Warren Buffett are doing just that? Join the discussion at Beating Broke:

“At the real bottom of this is a more important question.  Why do we build wealth?  What purpose do we give our lives that we strive to attain wealth.  In Warren Buffetts case, I think you could argue that he has always seen it as a challenge.”

Buying Blogs, Selling Blogs: How I Built my Blogging Business

Sam at the Financial Samurai is somewhat of a “rock star” in the personal finance blogging world as founder of the Yakezie Network. This guest post on his site is a real peak inside the “business of blogging.”

“This is a guest post written by Mike, a young financial planner / web entrepreneur who is pursuing his dream of running his online business. You can follow his progress at The Financial Blogger and read his other financial blogs at Green Panda Treehouse and Intelligent Speculator. 3 years ago, I was told by many bloggers: “You will never make money blogging. And if you do, $200/month will be your highest peak ever”. Three year ago, The Financial Blogger was averaging 500 visits per month and I was ecstatic when I made my first deal of $10 for a link. Three years later, I now run three financial websites, bought 2 of them and flipped a blog within a year.”

My Teen-age Son, the Cell Phone, & a Bill for $1,055.20

Len Penzo dot com is one of the most hilarious personal finance writers around. He DOES NOT DISAPPOINT with this uproarious post about his son’s adventures with texting & a new cell phone:

 ”I can’t remember the exact day he first requested his own cell phone, but I am quite certain the first letters he learned in school weren’t A-B-C.  They were A-T-(T). When Matthew turned 12 last year, we decided it was finally time to grant his wish.   The only condition was that he had to pay us $25 per month to maintain his account.  Knowing that he could easily earn $40 per month by simply mowing the lawn and doing chores around the house, Matthew readily agreed – and so we got him his phone.”

CARNIVAL of Money Stories 2 featured my article this week; Reduce Stress Get Rid of Dysfunctional Money Behaviors-Part 2. Read my article as well as other money stories at this informative round up.

“Overcome a Passion for Procrastination (in dealing with financial matters). ‘Procrastination is like a credit card: it’s a lot of fun until you get the bill.’ Christopher Parker

This young actor hit the nail on the head! Avoiding and procrastinating seem fine, for a while. Later- the price you pay for procrastination is quite HIGH. Charge away with the credit card; if you don’t have the cash to pay it off every month, you are walking on a treadmill of pain.”

ACTION STEP:

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.

Today, and every day, LEARN SOMETHING NEW!

What do you think about this summer reading? Agree, disagree, join the discussion……leave a comment.

Overcome a Passion for Procrastination (in dealing with financial matters)

“Procrastination is like a credit card: it’s a lot of fun until you get the bill.” Christopher Parker

This young actor hit the nail on the head! Avoiding and procrastinating seem fine, for a while. Later- the price you pay for procrastination is quite HIGH. Charge away with the credit card; if you don’t have the cash to pay it off every month, you are walking on a treadmill of pain.

MAIN TOPIC: Behavior is Everything-Avoid Financial Procrastination

This article is the second in a series relating poor money behaviors with stress. The topics are inspired by an article entitled Emotions, Money, & Financial Stress by Nancy Losinno, published at the US Department of Energy, Brookhaven National Laboratory website.

Procrastination is an evil and insidious behavior. It starts out benign and continues until it ruins everything it touches. Our summer guest Juan, discovered the problem with procrastinating the hard way. When he got his first credit card Juan checked on the balance on line, charged a few things, and didn’t pay the bill the first month. OK, not too much of a problem. But the reminders to pay came, and JOSE ignored them! Avoidance is procrastination’s ugly brother. He pushed the card out of his mind. It seemed too “complicated and difficult” for him to deal with. 

Lo and behold, the second month, after not paying the bill, his card was refused at a merchant. It disturbed Juan, but he quickly put it out of his mind, with an explanation to himself, “there must be something wrong with the card, I’ll worry about it later.”

After several months of non-payment, Jose racked up late fees and finance charges equal to his original balance. But he didn’t notice as he continued to procrastinate and avoid dealing with his bill. 

Juan had the money to pay the bill, but continued to avoid paying because it seemed complicated.

In our efforts to get Juan on track, we walked him through the payment process. 

Total time spent paying the credit card bill online: 15 minutes

Total late charges and fees: $125.00

 

Unfortunately, the story does not end here. After paying the bill in full, he attempted to use the card to pay for his summer school tuition. THE CARD WAS DENIED.

All of this stress and expense, not to mention potential damage to his credit rating, occurred because he PROCRASTINATED. 

PRACTICAL APPLICATION; How to Combat Money Procrastination 

Money is a great big mystery and secret for many of us. There are couples who don’t talk about it, overspend, don’t tell their partners what they buy, etc. Individuals use shopping as therapy and then PROCRASTINATE dealing with the bills. Overspending is bad enough, procrastination in dealing with the spending is worse.

PROBLEM 2: PROCRASTINATE handling money matters.

PROCRASTINATION in paying bills leads to problems; poor credit, debt, and stress. Just like other unhealthy behaviors; eating junk food, lack of exercise, money procrastination can be turned around.

Begin changing the PROCRASTINATION HABIT & reduce money and life stress.

SOLUTION:  

1. Be honest and ask yourself: “HOW HAS PUTTING OFF DEALING WITH FINANCIAL MATTERS WORKED OUT FOR ME?”
2. Schedule time on your calendar to deal with money stuff.
3. Make an appointment with your partner to talk about money.
4. List your debts.
5. Put every bill in a basket near where it is to be paid.
6. Pay bills 2 times per month or better yet, arrange to have regular bills taken out of your bank account.
7. If you miss a payment, do not compound the mistake by “ignoring it.” Call the merchant, and inform him that you are paying immediately, then DO IT.

New habits do not occur overnight. Habits are developed over time with regular practice. Day by day, rehearse these “solution steps.” When you catch yourself slipping back into the “passion for procrastination”, immediately, correct course and go back into action.

DO A MONEY TASK TODAY and reduce stress.

Stay tuned for part 3: Money & Relationships-Make it Work!

ACTION STEPS:

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans. 

• Make a “MONEY to do” list of tiny action steps.
• Do one difficult money task each day.
• PRACTICE dealing with the bills even though it is unpleasant.

 Write in a talk about how you tackle the insidious passion for procrastination.

Image credit: [j]t

YAKEZIE SHORT CARNIVAL:

Check out these personal finance articles by talented Yakezie writers:

This 1 Question Will Change Your Spending Habits at Financially Poor           

Save on Gas-11 Extreme Tips at Car Negotiation Coach             

Is it OK to Splurge When You’re in Debt? at Cool to be Frugal                   

Categories: competition, life, saving, Yakezie

“Strength does not come from winning. Your struggles develop your strengths. When you go through hardships and decide not to surrender, that is strength.”
Arnold Schwarzenegger

 Alright, so this past month of pure spending cuts may not be the worst hardship imaginable, but it was a struggle. And I must give a shout out to Schwarzenegger for knowing about winning, as this guy does not have a college degree, and has a resume that includes a stint as governor of California, actor, and world champion body builder.

 MAIN TOPIC; Lessons Learned

 For those of you just joining, I was challenged to participate in a spending reduction challenge last month by Jacq at Single Mom Rich Mom. We were joined by Christine at Money Funk and Laura at Move to Portugal. The competition was: who could beat their own monthly averages in variable spending categories. The winner would be determined by reducing spending by the greatest percentage; WINNERS for individual categories and overall.

I thought it would be fun, and I was flattered to be asked. Not once did I think I would win, and I really didn’t know how the competition would affect me since I had NEVER DONE ANYTHING LIKE THIS BEFORE.

 I’ll start with the life and personal finance lessons learned from participating in the competition. Think about whether they would apply to you.

1. CONTROL: I love control. I like to control myself and those around me. The competition reinforced that there are some things one can control and others you cannot. For example, I could not control my husband’s spending. But I could certainly almost control my own. The fact that my bi monthly hair appointment came in June was out of my control. Jacq at Single Mom Rich Mom couldn’t control when her annual car tax came due.

 The takeaway: Control what you can, accept that you cannot control everything.

2. DO NOT GRADE YOURSELF: Throughout the month I wondered how I was doing. I was even tempted to check my progress. But, I refrained from checking, practiced smart shopping habits  and cut back where I could. I figured that even though I wanted to win; win or lose, I would benefit from the competition.

 The takeaway: My job was to compete, the results would come later. Obsessing about how I was doing wouldn’t make any difference. I don’t need to grade myself.

 3. COMPETITION IS MOTIVATING: If I did not have the June challenge, I wouldn’t have tried to cut my spending for the month. Our family spent almost $500 less than we normally spend. The competition was motivating, but it was also difficult and constraining. There were things I wanted to buy which I didn’t. I cut waaay back on groceries.

 Jacob at Early Retirement Extreme asked if I was going to continue. The short answer is, I might try another competition month, but I will not continue changing my spending to match the June challenge month. Our family has a budget which allows for saving, spending on what we value, and charity. We have emergency savings and investments. And it’s working for us.

 The takeaway: Competing with a partner or two towards a goal is a wonderful way to make a difficult task more fun and up one’s motivation. This was my first time, and I would definitely try it again!

THE RESULTS

If you hung in for the entire post, thank you. Here are the final results.

OVERALL WINNER: BarbaraFriedbergPersonalFinance

with a JUNE decline of 36.56% in the variable spending categories

 I was happy to win and also surprised. I never thought I would be the overall winner. It’s sweet to win, and it’s also fun to compete! 

ACTION STEP

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.

Ask a partner to join you in a competition; make achieving a goal more motivating and fun. Try it with spending, losing weight, or any other challenge.

Let me know what you think about competing towards a goal. Have you tried it before? How did it work out?

Image credit: McDuck 17

YAKEZIE SHORT CARNIVAL 

Check out these personal finance articles by talented Yakezie writers:

7 Wealth Building Strategies  at Invest it Wisely

How Would $1,000 Change Your Life?  at Financiallly Poor       

 “Enough” by John Bogle – Review & Introduction  at Engineer Your Finances

 

Categories: links, investing, money management, saving, make money

Welcome to a collection of amazing articles. Each one of these posts was chosen for its innovative ideas and thought provoking topics. After digesting this wonderful menu of diverse reading desserts, you will be smarter and wealthier.

Following are links to these delicious articles and a taste of their content. Go on and indulge.

The Oblivious Investor throws in a twist with 3 Good Stocks to Buy Right Now.

“Quick reminder: The fact that a company is growing (or is going to grow) does not by itself mean that its stock is a good investment. For a stock to be a good investment, there must be reason to think that its future growth is not already reflected in its price. Said differently, for a stock to earn above-average returns, the company must do better than the market expects it to.”

The Car Negotiation Coach at Findthebestcarprice reveals How to get Paid to Drive. INGENIOUS!

“Did you know you can make money just by driving your car? You can, if you are willing to allow a company to put an advertisement on it. These advertisements, called wraps, look like they are painted right on the vehicle, but they are just really nice decals. The programs are called ‘free car’ or ‘get paid to drive’ and they pay you for advertising for their product on the side of your car.”

In Best Way to get out of Credit Card Debt Fast, Wealthpilgrim offers a new take on an old subject!

“I don’t know about you, but sometimes when I face a daunting task I waste energy and time. Sometimes I spend too much time thinking about where to start. Other times I use the shot gun approach rather than focus my efforts. When I do that, my results are diluted.”

Littlehouseinthevalley reveals  how to make a quick call and increase your spendable income in Smashing the Bills to Smithereens! I love this.

“Constantly looking for ways to reduce our monthly bills, a few quick phone calls revealed a total savings of $63 a month without reducing our services! Here’s how I, er, my husband did it with my help. I keep an excel file that lists the averages of how much all of our bills cost on each month. I have everything listed in categories, for instance under the category of CAR I included auto insurance, car payment, and gasoline. Out of a total of about 25 items (a lot, I know!) I pay on a regular monthly schedule, I went through my list and highlighted the items I thought we could save on without downgrading any of our services. Those items took only a phone call and included the phone bill, DSL service, and auto insurance for a total savings of $63 a month, or $756 for the entire year.”

Something to think about…..from Investitwisely in How Rich are you?

“In the beginning of time, every man was equally poor, or equally rich, depending on how you look at it. Then we discovered agriculture, and the surplus of food enabled specialization of labour, which gave birth to cities and to civilization. Since then, we’ve been more or less divided into three economic groups: The poor, the reasonably well off, and the ultra-rich.”

As usual, Shawn at Watson Inc. keeps me thinking with this thought provoking Millionaires Make Return to Boom Levels.

“Additionally, don’t forget who the average millionaire is. Remember that the typical millionaire is not a Wall Street titan, a corporate fat cat or a celebrity but rather a hard-working entrepreneur (32%) or professional (19%). Moreover, even though both the 14th Annual World Wealth Report and the 2010 Global Wealth report rightfully exclude primary residences in determining HNWIs, keep in mind that approximately 97% of millionaires are also home owners.”

I’m a sucker for anything “efficiency related.” Hope you enjoy this one from Myfinancialobjectives entitled Bringing Your Efficiency Home.

“What I mean by the title, is how much more could you accomplish at home if you brought the same efficiency home with you that you use at work (assuming you are more efficient at work than at home)?  I recently posted about Time Management and how an efficient time management mentality allows me to save a lot of time both at work and at home.” 

Frugalconfessions writes about the positives of keeping an eye on your spending in Financial Limits and Boundaries Breed Creativity not Deprivation. She’s definitely a “glass half full”  person.

“then I would miss out on all of the great opportunities out there. For one, I never would have learned the Drugstore Game, which led me to write six columns called “Frugal Confessions” and start this blog! Having unlimited money would have caused me to spend more of it (necessity is the mother of invention, not abundance) as I never would have discovered great tools like Craigslist, followed many of the blogs that I do with people dedicated to saving me money, learned how to invest my precious resources, save for retirement, etc. Having limits in my life has only served me, not caused me deprivation. With limits, opportunities abound—have you taken advantage of yours?”

 Get the latest word on MOTIVATION research in Management Rewired by Charles S. Jacobs, discussed at Eliminatethemuda.

“More and more the science is showing that everything we thought we knew and understood about motivation may be wrong. Contrary to our perception, providing extrinsic motivators such as bonuses, gifts and rewards or even punishments for undesirable behavior may often be detrimental to our long-term objectives. There are more effective and efficient methods to motivate and manage, the author shares, but many of these methods are counter intuitive and challenging to implement.”

Let me know if you enjoyed the tasty tidbits of financial wisdom!

 image credit Chotda