Times are tough out there, but hopefully you are still looking out for your longterm investing goals. I’ve decided to take a page from the “Animaniacs” cartoon series and start a “Good Idea”/”Bad Idea” type segment on the blog. The topic for today is aimed at investments (focusing on the beginners here - some things might not be applicable, depending on your level of market/investment knowledge)
Good Idea:
Start investing for retirement through a tax advantaged vehicle such as an IRA or 401(k).
Assess your tolerance for risk and choose your investments accordingly - Morningstar has some great tools to “screen” funds based on a list of criteria (hint: before shelling out $$ for a subscription, your library probably has access to it for free - go to their website or ask a librarian).Be sure to go with a reputable broker and use “dollar cost averaging” to your advantage - a few recommendations for the new investor:
While this strategy isn’t “fool-proof” by any means, it’s a little less volatile and is more likely to produce results over the long term (read: 10-15+ years)
Bad Idea:
Get involved in schemes that tout “easy money” in the stock market/involve so called “fool-proof” strategies. You’ll often see these advertised on Google Adwords (if any show up above this post, please don’t click on them and let me know so I can block them).
They usually involve one of the following “winning strategies”
Investing in so-called “penny stocks” : Such low-end stocks are EXTREMELY volatile and subject to “pump and dump” manipulation, biased recommendations - read the sordid details over at Forbes’ Investopedia. If you are still seriously considering putting your money into these, here’s a better alternative: Take your money and light it on fire. You’ll still lose money, but you will at least have some ashes left over from the burned money to cover yourself with to go along with the sack-cloth you will be wearing while mourning the loss of your hard earned cash.
“Automated” Forex Trading: The foreign exchange markets aren’t all bad in and of themselves. If you spend time learning and studying them (emphasis on learning and studying), they can be a high-risk/high-reward place to invest your money if you are an aggressive investor. However, note the term “high-risk” - the forex trade is EXTREMELY VOLATILE AND CARRIES SUBSTANTIAL RISK OF LOSING MOST OR ALL OF YOUR PRINCIPAL INVESTMENT (yelling in case you didn’t catch my drift).Unfortunately, there are many unscrupulous characters who try to pretend that with their “fool-proof” system, you will make thousands in your sleep using automated trades - even if you know nothing about forex. You will get skinned alive if you throw your money in willy nilly. This is definitely an area that you can look at once you grow more skilled in your investment-fu.
“Easy” Options Trading: Options can be a powerful tool in the advanced trader’s arsenal - they are complex beasts that carry high upside potential and allow for advanced techniques, allowing one to do well in a variety of market conditions. However, certain types of options have potentially infinite downside potential - as in, you can lose all of your principal investment, plus be on the hook for a potentially unlimited amount of $$$ (ex: uncovered calls) - putting you on the bullet train to financial ruin. Like with the rest of the “bad idea” examples I’ve used, many people try to sell you a system and pretend they are instant money-makers with no possible problem INVEST NOW DO IT YOU PANSY INVEST ohbythewayriskisinvolved BUT YOU CAN MAKE THOUSANDS OVERNIGHT! Again, this types of scheme is probably not looking out for your best interest.
While there are a plethora of ways to get involved in the investing world, not all of them are suitable for beginners. You wouldn’t try to learn to ride a motorcycle on a Hayabusa turbo-charged racing bike, would you? Likewise, you don’t want to start out with the fiscal equivalent when you are getting into the investing scene. Once you understand more about investing and the markets, you can always move into those markets later if that fits your investment strategy.
Disclaimer: I am not a licensed financial planner/stock broker, nor do I claim to be. All advice given on this blog is to be taken as general financial comment and should not be used by itself to base investment decisions on. All investments involve risk - talk to a certified financial advisor and/or read all prospectuses carefully before investing.
Let’s face it - cell phones have become an important utility for many people, replacing the land line and pagers of old. Cellular phone service has dropped in price significantly from the days of $1.00 a minute calls and provides more features than ever. If you don’t keep an eye on your cell phone bill, however, you could end up paying way more than you need to for a plan or features that you don’t take full advantage of.
Here are a few things to look at on your next bill or to look into that might help you cut costs.
1. Check for an employer discount - Many companies get deals from large wireless providers in order to entice them to switch company issued cell phones over to their service. However, what many people don’t realize is that many times, the wireless providers offer a discount to employees for personal lines as well - discounts that can be upwards of 15-20% - this can add up quickly! I personally save 20% a month on my voice plan with Verizon Wireless - just by taking advantage of the discount plan.
2. Unused calling features - While the Megavideomusicawesome bundle may have seemed like a great idea when the friendly commissioned salesperson explained it to you, it might not be cool enough to justify the extra $20 a month you get charged for it. Scan your bill for features that you may have signed up for when you first got service, but you no longer use.
3. Adjust your calling plan to better match your actual usage - Paying for more minutes than you actually use can be a good thing - as overage fees can really add up fast. However, if you are barely putting a dent in your monthly minute allocation on a regular basis, it might be time to move down a tier. Same thing goes for text messages.
These tips might not save you insane amounts of cash per month, but over time, even savings of $5 a month can add up quickly.
If you’ve been missing new content on here, you aren’t alone. I have been absolutely swamped at my job (like working until 7:30, then having conference calls with India at 9:00), so that would explain the lack of new posts. In the meanwhile, be sure to check out the blogroll - I’ve gone through and gathered a lot of high quality blogs and resources about personal finance in one place.
While browsing around on Get Rich Slowly, I found a post with an old documentary film from 1947 that discusses what, exactly, money is and what role it plays in our economic system. It is interesting to see the differences in how we viewed it then and contrast that with how we view it now.
If nothing else, you can marvel at what $5 bought you back then - like a tank of gasoline. When I moved out here to Northern California in June 2008, gas was at $4.65 a gallon. Unfortunately, with the printing-press at the Fed going into overdrive these days, that same $5 bill will require a few more zeros on the end to purchase even the most basic of goods. Hooray for hyperinflation!
When times get tough, the unscrupulous get crafty in their tactics to separate you and your hard-earned cash. This article from CNNMoney covers five scams related to money/finance that are starting to show up in people’s mailboxes - virtual and physical. They range from unscrupulous retailers following the advice of Steve Miller Band to “come on, take the money and run” to the shady sites that promote magical “stimulus grants” of thousands of dollars, all thanks to the porkul….I mean stimulus package that was passed in February 2009.
The prevalence of these scams provide another reason why people need to be very cautious and take control of their destiny when it comes to personal finance. By getting informed, you drastically reduce your risk of getting taken and allow you to ensure that others don’t fall for the same traps.
If you don’t take care of your finances, someone else will - and you probably won’t like the outcome.
Recently, I was ruminating a concept that I can conceptualize in my head, but could never get down on paper properly until recently - how does one effectively budget/track those expenses that occur on a quarterly/bi-yearly basis without having to fall back on credit cards/raiding the savings account?
When you look at it from a perspective of one who budgets regularly, it seems rather obvious - pool the money aside every month and then you will have the money to pay that bill when it comes due.
However, what if you aren’t the next Suze Orman and need a little help/guidance in getting to that point?
In my browsing around the PF blogosphere, I found an article at Moneyspot.org that explains the idea of “freedom accounts” - separate accounts that you pool monthly contributions to the irregular expense in and draw from when comes up. It is a good read, with some good actionable steps to follow up on. If this is something that perplexes you (or even if you are a seasoned pro), it’s worth reading.
As an aside, I’m thinking of having a few set weekly post types - such as this “PF Concept Friday”. What do the readers out there think of this idea? Too predictable or a good idea? Sound off in the comments.
Part II: Beg/Borrow/Steal - Book Sharing and Borrowing
In many cases, you don’t necessarily need to purchase a copy of a book outright. That’s where a second group of entities come in - book swapping sites and the staid institution known as your local public library.
Book Swapping Sites
In the online book swapping arena, there are a few good places out there that allow you to do pretty similar functions. The premise behind them is that you list the books you have and want to swap. If someone wants to request a book from you, they do so and you are notified. You can then choose whether you want to send them the book or no. If you want to send it, you just send it to them (you pay the postage, but no cash is exchanged). You then get credit that you can use to request books from others. It’s a fascinating concept and it works surprisingly well.
BookMooch: This is the only one I’ve used personally - I’ve had great success with it and highly recommend it.
* I have not used these sites personally, but have seen good reviews for them around the web. They seem to be pretty well established communities.
Advantages:
You can trade books you don’t want anymore for books that you do want - allowing you to get rid of those unused books easily.
Again, you help the environment by reusing resources/not driving to the bookstore
Disadvantages:
You have to give to get - you can’t just leech off of others, you must list your own items as well.
You have to physically ship the book on your own dime - it isn’t very expensive usually, but it’s a factor.
The Library
If all of this talk of online shopping/swapping is making your head spin/you don’t have the cash to spend - your local library can be your best friend. Depending on your location, many libraries have very good selections of titles ranging from novels to non-fiction to biographies and everything in between. They often have books on tape/CD as well. In addition, some libraries have entered into circulation agreements with neighboring communities to allow sharing of resources - for example, in Michigan you can request books from libraries around the state via a service called MeLCaT. Check to see if your local/campus library is involved in something like that - you can leverage the power of multiple libraries to find a ton of items that might not otherwise be available.
Library Related Resources
UNESCO Libraries Portal: Has a vast collection of links/information on libraries around the world.
lib-web-cats: Directory of information about libraries - primarily focuses on North America, but some international listings are here.
WorldCat - Searches libraries around the world to find items and displays where they are located.
Advantages:
Borrowing from the library is free, as it is usually supported by taxes or tuition.
They often have access to research databases that cost mega-$$$, such as LexisNexis.
It’s a good place to relax in relative quiet.
Librarians are available to help you out in your quest for knowledge.
Disadvantages:
You usually have to physically go to the library to access materials.
Some types of books are not well represented/editions can be out of date.
Overdue fines can add up quickly if you aren’t careful.
Hopefully this little series helped you out. Happy reading!
Looking to fill your shelves with a lot of books, but don’t want to eat Purina for dinner? This week, I’ll be covering how to feed your reading addiction/requirements without breaking the bank.
Part I: Why Buy New?
Unless you are someone who absolutely has to have a book the day it is released, buying a gently used copy of that book a few weeks after its release can often be a much better (and cheaper) option. For example, consider The Starfish and the Spider: The Unstoppable Power of Leaderless Organizations by Ori Brafman and Rod Beckstrom. A new copy is currently retailing on Amazon.com for $16.47. If you look at the used copies on Amazon Marketplace, you’ll find a “like new” copy that just has a small remainder mark on it for $10.79 - not bad. Unless you are a book collector, a few marks/wrinkles isn’t going to render a book unreadable.
With classics/older volumes - you can often save a bundle by purchasing used. I’ve seen some classic books on sites for 50-75% off of what you’d pay for them retail. They might be an older copy, but just think about it - “The Republic” by Plato has remained the exact same for thousands of years - there is nothing new that you are missing out on by buying a 10 year old book.
Finally, college textbooks in the US are often astronomically expensive. I know I dropped close to $500 my first semester in my freshman year (Fall 2003), when I was naive and didn’t know any better. After that fleecing, I vowed that I would give as little money to the book oligopoly that existed in my college town as I possibly could. I turned to the Internet for a solution - and it delivered. Every semester, I was able to rack up at least $100-200 in savings when you factor in all the costs - may not seem like much at first, but it definitely gives you some breathing room in the old budget.
Now the question is - how does one find these deals? Below are some of my top places to go to when looking for the best deals on books. I’ve used these sites before myself and personally recommend them.
To close out, here are some of the advantages and disadvantages of this method -
Advantages:
More $$$ in your pocket - small savings on each book can add up if you are a big reader.
Better for the environment - by purchasing second-hand, you are reusing resources. Also, you don’t have to drive to the bookstore - as it can be done from the privacy of your own home.
In the case of textbooks, you are often giving other students more money than they would have received by selling to the bookstore while saving money yourself - a virtuous cycle, if you will.
Disadvantages:
You might not be the first person on your block/in your office to read the latest Tom Clancy novel.
You are usually dealing with individuals, not companies - so there is a certain aspect of “caveat emptor”. In order to mitigate risk, make sure you check seller feedback and only deal with reputable ones.
The book might have some markings or writing in it - if you demand pristine quality, you might be disappointed.
Don’t feel like buying your own copy of the book? Stay tuned for Part II of this series, which covers book swapping and power-usage of the good old public library.
In my browsing around today, I came across an interesting new page on Google’s slice of the cloud. Part of the Google Moderator application, it focuses on the sharing and submission of ideas to save money/spend it more wisely. Each idea can be voted up or down by users and are divided into various sections. One real boon for the site is that a few heavy hitters in the PF blogosphere such as Ramit Sethi have taken notice and submitted some good tips - definitely adding to the value.
My take - it seems like a pretty cool idea and a neat way to showcase Google Moderator. On the other hand, I can definitely see how it could be abused by the less scrupulous if the community or Google doesn’t police it. If it keeps the momentum going, however, it could be a great repository of PF information.
The “global financial crisis” has been going on for at least 6 months, but to be honest, many people have little idea what forces collided to cause it. This video provides an overview of what went wrong, who was involved, and what it means - all without having to have a PhD in Finance.
by Ori Brafman and Rod Beckstrom. A new copy is currently retailing on Amazon.com for $16.47. If you look at the used copies on Amazon Marketplace, you’ll find a “like new” copy that just has a small remainder mark on it for $10.79 - not bad. Unless you are a book collector, a few marks/wrinkles isn’t going to render a book unreadable.
