• Home
• Personal Finance
• Economy
• New School
• Asked & Answered

• ABOUT
• FAQ
• RESOURCES
• ADVERTISE
• CONTACT

A New Year - More Resolutions

For many of us the New Year brings resolutions to get our financial house in order.  One of the most popular resolutions is creating a household budget.  This is great and very important but there are other things that are just as important.

I certainly will not discourage people from creating a monthly budget.  It’s incredibly important and can be extremely beneficial particularly if we align our budget with financial goals.  The important thing to remember is that it’s not enough to just draft that monthly budget and store it where it will never be seen again.  There’s a second part of a monthly budget - budget management - periodically (monthly is best) reviewing how we are doing with the budget and making adjustments if necessary.

There are two other very important items that should be included and are often overlooked:

1)  Regular checkbook balancing or reconciliation - that’s right as soon as we receive that checking statement.  This should be habit forming.  Balancing checkbook/reconciliation is absolutely important to understanding where our money is going and can help with the budget management process.

2)  Put savings on auto pilot.  This means better utilization of direct deposits of payroll checks or direct withdrawals into some form of savings accounts.  Technology and most employers allow for direct deposits and direct withdrawals. 

These three things, which are not very difficult to do, can go a long way to getting our financial house in order starting in 2011.

Good luck. 

Higher Risk Means Higher Returns and Vice Versa

This risk-return tradeoff is often forgotten by people particularly when we are targeted by high pressure sales people.  But this tradeoff is very real and anyone who says otherwise may be a ‘snake oil’ salesperson.  Understanding this tradeoff is essential in developing investment portfolios for all kinds of purposes from retirement savings to small business operations.

Higher risk means higher returns.  It’s common sense - if an investor is assuming high risk they want to be compensated for accepting that higher risk with high returns.  This is tradeoff provides one important way to compare investments. 

Consider returns on Certificates of Deposit (CDs) vs. Stock market.  CDs are relatively very low risk so their current returns (1 yr) are 1.03% compared to S&P 500 (stock market) which year to date return is 14.96%.  Sure that stock market return is high and very attractive but it’s also much much more risky than CDs. 

Just remember the next time someone is trying to sell you an investment product that they claim has ‘high returns with low risk’ - WATCH OUT.  Actually a better idea is to ignore them and move along. 

Good luck. 

What’s All This Gold Business?

There’s not a day that goes by where we are not exposed to some advertisement about gold.  You know the ones that use alarming rhetoric and usually have some reference to the Fed and printing presses.  And now with gold at a recent high of $1340 per ounce there’s even more talk about the miracle nature of gold.  Hold on. Wait a minute.  Let’s just wait before we go and liquidate all other investments and plow it into gold. 

Many people and gold promoters believe gold is a good hedge against inflation.  It’s not.  Gold prices fluctuate with level of speculation in the market.  Yes, that’s right price of gold is very much dependent on psychology of the investors.  Right now, gold is on an incredible bull run which may be driven by speculation by hedge fund investors and a marketing scheme by gold miners. 

But some gold bugs/promoters will say but gold is a good hedge for short-term inflation.  Warning: the measure of a good hedge is its consistent performance over time and not just some brief period in time.  Another warning: when some has to give a qualifier such as something performs well in “short-term” situations - hang onto your wallet. 

There are better hedges against inflation than gold.  Such as TIPs - Treasury Inflation Protected Securities.  The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index (CPI). When a TIPS matures, you are paid the adjusted principal or original principal, whichever is greater.  For more information on TIPS and how to purchase them go to - Treasurydirect.gov

Gold can serve a useful purpose in any investment portfolio.  Investing in gold, like other commodities, can provide much needed portfolio diversification.  But like most assets and commodities gold is subject to the whims and behavior of the market which we should know by now is not always rational. 

Good luck.

What to do?  Debt Management

Remember, Debt is Evil.  Debt should be treated like a hot potato - once we get it we should get rid of it as quickly as possible.  In the aftermath of Black Friday and the Christmas purchase season it’s probably best to review a few debt management strategies.

1)  Don’t use that plastic.  It may be too late for this option but if not - use cash or debit card.  Another option, but be careful of hidden fees, are pre-paid debit cards.

2)  Ok couldn’t avoid using that plastic then Pay the Highest APR first.

3)  Pay more than minimum balance.  New credit card disclosure rules should tell you how long it would take to pay-off balance if you just pay minimum payment. It’s quite an eye opener.

4)  Pay on time.  Don’t assume anything.  Late penalty fees can be high and any promotional rates can be forfeited. 

5)  Watch credit card statements.  Sometimes a late payment can trigger a much higher APR.  If that happens move balance to lower APR card or pay-off balance as quickly as possible.

Whatever you do - please avoid getting on the credit card debt cycle of hell.  It’s never too late to start budgeting and planning for big purchases (try to avoid using credit cards for meals and other non-emergency purchases).  But if someone is on that cycle of hell - don’t despair - take control.  It will require sacrifice to break that cycle and possible cutting up those credit cards.  Debt is an evil hot potato.

Good luck. 

Take Back Our Money - Guides to Better Banking and Moving Money

Two organizations have made it easier to shop for banking services and to move our money from big financial conglomerates that practically destroyed our economy. 

Center for Responsible Lending has assembled a simple and straight forward guide to shopping for bank services.  They provide what questions to ask regarding checking services, credit cards and a few other services.  The important thing is to shop and compare.

KEEP YOUR BALANCE: A Shopper’s Guide to Better Banking

Next guide or resource is from Move Your Money Campaign. Actually, they provide several very good resources for taking back our money.  First is a search tool to find credit unions or small banks.  Next is a 7 Step Checklist for actually moving your money.  The site also has some other good resources for moving other accounts such as IRAs and mutual funds.

These two organization have made the process of taking back our money from financial conglomerates easier.  Taking back our money or moving our money is a great way of holding these financial conglomerates accountable for their sometimes fraudulent and irresponsible behavior.  Remember - please shop and compare before taking back our money.

Good luck.

Page 3 of 23 pages  <  1 2 3 4 5 >  Last »