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Saturday, December 21, 2013

Investing In Gold

Gold has been on a 13 year rally dating back to 2001 when it was trading at 271.04.  It currently trades at $1202.80 the troy ounce.  This may be the first time in 13 years where gold closes the year at a loss.  Investors like to have some exposure to gold as a hedge or just to diversify their portfolio with one of the most popular commodities worldwide.  During an economic crisis gold seems to be even more popular that pretty much explains the ascent of the commodity from $695 in 2007 to $1917 an ounce in August 2011.

As an investor or someone trying to make some profits there are a few ways to invest in the precious metal.  The most obvious way is through the purchase of gold bars, jewelry or gold coins. Your best bet is to buy the gold bars and store them in a safe box at a bank.  You can also invest in gold without actually purchasing the physical commodity but instead you can buy the futures contract on Comex this will give you the same exposure to the actual price of the commodity which currently trades at $1202.80 (GCG14.CMX).  You can also buy gold through your 401k or through a mutual fund.

An investor can also invest in gold exchange-traded products that aim to track the price of gold and are traded on the major stock exchanges such as London, Mumbai, Zurich and New York.  These products include close-end funds CEFs, exchange-traded notes ETNs and exchange-traded funds ETFs.  The most popular exchange-traded product is the ETF which is an investment fund traded on stock exchanges just like stocks.  It can hold commodities such as gold and silver.  Investors like them primarily due to their low costs.  A popular gold ETF is the SPDR Gold Shares (GLD).

Another way to have exposure to gold is through an index such as the Philadelphia Gold and Silver index (^XAU) which trades on Nasdaq the index is made up of different companies that mine/produce gold and silver. You can also pick one of the gold mining stocks from the index and invest in that company such as Goldcorp Inc. (GG).

If an investor wants to fully invest in gold I would suggest to invest in the actual physical commodity either through gold bars or a futures contract.  Any other investment may be easier and less expensive but it will not move 100% in congruence with the price of gold.  Since the financial crisis started in 2008 gold stocks did not rise in value as much as the actual commodity.  When a recession as severe as the one we just lived through hits, people want the physical commodity not a stock.  This year gold prices have dropped about 25% yet gold companies have lost about 50% of their value.  That is why I prefer to go for the actual commodity I bought gold back in 1998 when it wasn't hot came very close to buying at the 1999 low.  I was just a kid back then I wish I would've had more money but I did buy some more in late 2007.

Whether you pick the physical stuff or a mining stock you risk buying high and waiting a lifetime to get your money back or if you buy a futures contract you may get stuck accepting physical delivery of the commodity or with a monetary loss from trading.  The declining prices may be a signal to buy especially for mining stocks yet prices may continue to fall.  The economy is improving which may lead investors to drop gold and move onto other investments.  Buy gold now at your own risk or wait for prices to drop even lower to enter.  As for me I like to buy when no one is interested as I did in 98.  At this point the prices are a bit too high for me and I would invest a very small amount of money if at all.  I believe there are better investment opportunities out there.

Wednesday, December 11, 2013

How To Manage Your Money

Growing up I had no clue how to go about spreading out my hard earned money.  I went to several networking events to look for answers.  Some professionals offered no help and some would only help me if I had a certain amount of money.  In the end I decided to figure it out on my own. There isn't a universal answer and what may be a good investment today may be a bad one a few years down the road.

What should you be looking for when allocating your money?

You first need to take care of your basic needs and then set aside some money for emergencies once that is taken care of you need to think where you will place your savings.  Money that may be lost or money that you may not be able to touch for a while.  We all differ in the way we view risk whether you are a risk taker or a bit averse you need to know our current interest rate which has stayed at 0.25% for several years now.  This is why CD rates have dropped dramatically if the interest rate which banks charge each other to lend money has gone down then all interest to lenders will go down as well.  When you buy a CD you are basically lending the bank money for a period of time.  During 2008 rates were dropping your best bet would have been to have locked in your 2007 rates for at least a year or two.  Even if you had kept them for 4 years you should have not locked in all your money as the stock market was dropping and come 2009 you should have had a good amount of money in liquid form to buy stocks at a bargain.

By 2010-11 you would have more than doubled your money had you left it in stocks.  Had you bought more in 2011 you would have doubled your money once again in 2013.  Had you chosen to buy a CD in 2010 you would have not made any returns.  Then again you wouldn't have lost much as inflation stayed very low during the recession.

That brings us to the second indicator you should be looking out for: inflation.  Inflation will destroy the value of your money in the long run.  If interest rates are low you will have a hard time finding good returns.  Since inflation is currently low you can settle for returns that are not as high as long as you are staying above inflation.  The ideal would be to risk big and get 7% returns in a low interest rate low inflation environment but not everybody has the stomach to handle the stock market volatility.  This is when you start deciding how much of your money will go to stocks.  If you are young you should be putting a good amount of money into securities.  I like to do my own investing and go big but it is ok if you take small steps at first.

Stocks and CDs are not always the answer back in the 1980's inflation and interest rates got out of hand real estate or gold would have been a better choice.

The 10 Yr Bond is currently at 2.8440 which is higher than the 0.25% interest rate and higher than our 1% inflation rate yet this is not where I would place my money.  Ten years is a long time and at some point inflation should average higher than 2.84% and we also need to consider that when interest rates go up bond prices go down.  At this point interest rates have no other way to go but up making bonds not desirable.  As a financially educated investor you have to know what to look for and when to take action the signs may not always be clear but taking risk and educated guesses is the name of the game.

Monday, November 18, 2013

What The Next Few Years Will Look Like

Stories of young adults not finding work or settling to start off at a low paying job upon graduation has become the norm.  Expensive degrees that do not guarantee high paying salaries or young adults that work as bartenders or waitresses to get by is what we are seeing now a days.  Computers and robots taking away jobs and creating new ones for those that are savvy enough to understand and take advantage of new technology.  The middle class that is disappearing and not likely to come back in our generation blame it on the stagnation if you will. The recession of 2007-09 pretty much brought a correction to our economy.  Unlimited credit can't be given to all without appropriate measures, security markets can't go unregulated forever if so they will eventually take us down a sour road.

Young adults with less experience may not be able to land a full time job therefore are becoming free agents and taking on gigs or several part time jobs to survive.  Others may like the freedom and flexibility that part time employment offers.  All of these young adults are adapting to what the economy and job market is telling them.  We either learn to make more with less or pretty much sink into poverty.  The fact that the Internet gives us an enormous amount of services and information for free has pretty much changed the way things are done.

The point is you don't want to be a one trick pony in this new economy.  Be good at many things and your ability to do better than average or survive will increase.  During the recession stocks and real estate which most Americans have some exposure to brought a rude awakening.   At the same time gold, commodities and education were performing well.  Those that diversified and did not just own real estate did better during the recession.  Even now that we are out of the recession you should still diversify for example if you own an online business and this is your only source of income you could get burned.  Just consider a malware or virus attack on your site, Google could take your site off searches and this can quickly mean a loss of money or possibly the end of your business if you are living paycheck to paycheck.

The future seems to break down into two roads.  One road being for those that make good use of free information/technology who will learn to be resourceful and live a humble lifestyle.  The other for innovators that will cash in quickly on the opportunity to make much with less just like the creators of Facebook, Twitter or YouTube have done.

Sunday, November 3, 2013

What To Do If You Want To Buy A House

Interest rates for a 30 year fixed mortgage are currently at 4.25% a few months ago the same 30 year mortgage was at 3.5%.  With that said rates are pretty low and your first step is to head to your bank and get a pre qualification letter.  Make sure you have good credit and can make a 20% down payment although there are banks outside of NYC in small towns that may ask for a lower down payment.

The pre qualification letter tells the real estate agent that you are serious about buying and not just wasting their time.  Your mortgage banker will ask you a few questions in regards to the state you want to buy in and a range you would like to consider as low or as high as your budget allows.

The letter will only last you 3 months then it will expire.  Take a look at a few homes and then make your choice.  Plan ahead set enough time to see the homes you want in the 3 month period you can go beyond that period but don't get another pre qualification letter as this will lower your credit score.

What to look for when inspecting a house?

Make sure you look at your home on different sites such as Trulia, Century 21 and Zillow.  Once you narrow your search get in contact with a real estate agent. If you are not familiar with the neighborhood then make sure you inspect the area to get a glimpse at who your neighbors will be and what the local economy for the town looks like.  Once you get to the property before you go in take a look at the roof.  Are there any shingles missing and are there nails sticking out? You also want to inspect for any cracks around the foundation of the home anything bigger than 3/4 of an inch may mean trouble.  If the home has a crawl space take a look if the floor inside looks wet that means rain is coming in and this can be costly to fix. Once inside the home look at the windows and make sure they don't look foggy or blurry. Make sure to check out the walls and floors for cracks.

Know the zoning on the home you don't want to buy a home that will not allow you to rent out to multiple unrelated tenants if that is the reason you are buying the home. The next steps will be to get the home inspected professionally and get the paperwork done once you have come to an agreement in regards to the price.
  
One thing to remember is that you don't need to get your mortgage from the bank you normally do business with, if a better rate is offered by another bank then this is another option to consider.  If you are buying a home in another state you may be better off using another bank either to save money because your bank does not have a branch in that state or if your bank will make the process more lengthy and more costly compared to the banks in the state you are buying.

I have seen banks in small towns charge less and demand smaller down payments to their locals due to the fact that the town's people have lower incomes.  Buying a home is a lengthy process but it can be a very good investment.  As with any major purchase careful planning and good counsel is a must.

Tuesday, October 22, 2013

Wealth Money and Family Part 2

To have a fighting chance to transfer wealth successfully you must have strong family values and a mission statement that will always be taught from one generation to the next.  Without strong moral and ethical values your family will surely destroy itself.  You must treat the family's wealth as a business.  Conduct annual meetings and constantly educate one another.  Outside advisers will need to be a part of the team, trust funds will be the vehicle to transfer the wealth. Remember the point is to control but not own.  Legal advice must be sought out regularly when it comes to taxes although it won't be the biggest concern you face it is good to get counsel as the law changes often.  The trustee will need to be picked wisely as the relationship between trustee and beneficiary will be of the highest importance.  You don't want needless lawsuits or a lack of communication to destroy the families wealth.

Careful planning is necessary when you plan on transferring wealth you must consider all possibilities and anything that may go wrong.  You don't want to destroy your future generations ability to dream and find meaningful work.  Money not transferred with proper instructions and principles can easily rob future generations of finding a purpose in life.  Plan accordingly and don't try to hide family problems this will only bring hostility to your meetings.  Enjoy your life and promote the same to your family. When you realize that a families wealth consists of social, human, intellectual and financial capital you will see the importance of community and communication among your members. The start of the journey or the continuation of one is a sign of courage let that ignite your day as you plan accordingly for your future generations.

Monday, October 21, 2013

Wealth Money and Family Part 1

Whether you were born in a wealthy family or are creating your wealth in this generation the European saying "clogs to clogs in three generations" should always be on your mind.  All over the world families face the same dilemma.  Wealth that does not make it beyond the 3rd generation and in many families it is lost much earlier.  At first I thought that creating wealth was hard and the answer to all problems then I realized that keeping the wealth, multiplying it and successfully transferring it is the hardest task of all.

You risk hurting your future family by not being responsible in the way you transfer your wealth.  Why doesn't the money last beyond three generations?  Consider the lottery ticket winner who blows off the entire prize money in a few years.  This happens because the lottery winner skipped all the steps required to create the enormous amount of money.  Steps that include good money management skills, budgeting, risk taking, saving, trial and error, diversification, hard work etc.  You can't expect all your family members to want to follow your exact footsteps and continue creating wealth the same way you have.  If they do then that is excellent if they don't they must choose a career that makes them happy as this will not mean the end of the family fortune.

When analyzing a families wealth it is important to realize that money is the last thing that should be considered.  You must first realize that all the family members which make up the human capital are the most important aspect.  Then we must consider the intellectual capital which is all the education, wisdom and experiences all the family members possess.  We also need to consider the social capital which is what the family contributes to society.  Are they giving back by teaching what they have learned?

To be continued ...





Thursday, October 10, 2013

The New Benjamins

The new U.S. hundred dollar bill just made its debut on October 8th 2013. Yes, they do look awesome and so far are a bit hard to come by.  Most banks in NYC have not received them yet and it may take at least another week for those banks to get them.  Banks with the older hundred dollar bills will go through that surplus first before they order a new supply.

The last time the hundred dollar bill was redesigned was in 1996 when we got the "Big Head Benjamins" in circulation.  The new design as you can see below has small 100's on the back and front plus a 3-D blue security ribbon.

The new design has collectors worldwide interested and trying to get their hands on them via ebay. What collectors should look out for are the very rare ones those that have a straight serial number such as "12345678" or very low ones such as "00000001" get your hands on these and you might get up to $10k or more per bill.  As a collector you can just hold on to them especially if they are uncirculated meaning no one has ever touched them before like the ones in the pictures provided.


Wednesday, October 9, 2013

Are You Ready For Another Recession?

Although it seems the U.S. never really got out of the Great Recession that started in December 2007 it did technically end in June 2009.  Wages remain rather low which have left many people having to work more than one job.  High tuition costs no longer guarantee a high paid job, how could it when there aren't too many to go around.  A recession is a business cycle contraction, the U.S. has had at least one every decade dating back to the Copper Panic of 1789. The longest period we have gone without a recession has been 10 years which was during the 1990 dot com bubble.  If you believe we are about to set one for the books and go beyond 10 years before we see another recession then you have nothing to worry about. If you are a bit more realistic you will expect for us to go through another recession at least a mild one for the 2010 - 2020 period. Recessions on record vary in regards to length and how often they occur.

Knowing where you are at and what you have seen how do you think another recession would impact your life?  Have you recovered economically from the last one? Knowing a bit about the past and the impact this last recession had on the world can help you prepare for the next storm which according to history will happen again.  The only question is when? What do you think will protect you this time around?  What lessons did you learn and what will you do differently this time? Do you think you will cash in on this one? Recessions do bring opportunities for some.

Wednesday, October 2, 2013

Are Certificates Of Deposit Any Good?

How good is a CD?

Let's consider 2006 back when I had some of my money in a CD the rates were at 4.4% APY.  In 2007 I locked another CD for 5.15%.  It was a good return with very little risk the only risk was that during the same time the Dow Jones was delivering higher profits. Come 2008 a risk free CD looked even better as I was not keeping my money in stocks just yet.  Had I known the stock market drop in 2008 would be so severe I would have locked my 2007 rates for several years enjoying a 5% yield in a near zero interest rate economy which has been the norm for several years now.  CD rates dropped drastically in 2008 in 2010 you were lucky to get .648% for an 8 month CD. In April of 2013 you would have gotten .349% for a 180 day personal CD.  When owning a CD you also have to take into account the taxes you will pay on the yield which will bring down your profit a bit.

As we can see you have to be strategic when it comes to placing your money in a CD even if a CD is about as safe as you can get.

Monday, September 30, 2013

Government Shutdown

The last time the U.S. had a government shutdown was from December 16, 1995 to January 6, 1996.
The reason behind the conflict was due to funding for Medicare and public health in the 1996 federal budget.  As a result the Dow Jones dropped from 5176.73 on December 15 to 5075 on December 18 the first Monday of the shutdown.  Stocks rebounded a few days after January 6, 1996 then collapsed once again. By the end of January stocks came back aggressively.

But this isn't 1995 we just came out of the worst recession since the 1930's.  Our economy is not healthy enough to handle a shutdown especially with unemployment at 7.3% and slow U.S. annual growth. The market is already showing the blow this will bring to a brittle economy the DJI closed at 15,129 a 128 point drop for the day.

Saturday, September 28, 2013

5 Ways To Get Ideas To Start A Business



If you find yourself with a strong desire to start a business but can't seem to get started or lack ideas read the following 5 pointers to get your creativity flowing:

1. Travel
Get out there look at different communities see what the daily routine looks like in every country or state you visit.  Check out the markets and the major employers. Do you see products/services that are to your liking that you don't find in your hometown?

2. Meet People
Think you have the people you need in your life think again there is always something to be learned from your fellow man.  We don't know it all and by meeting others we get to see how they think and how they view life.  It may surprise you that every so often you meet people that will need your help or may have the answer you are looking for.  They may also give you ideas about things you don't even know about.

3. Look at Art
When was the last time you went to a museum? Go to art galleries see what is in peoples' minds and hearts.  I have seen some original work that has blown my mind and exhibits that have inspired me.  Check out this artist's work Erik Plambeck to view this exhibit you have to clock in and out.  People that work in advertisement go to art galleries to get ideas for their next commercial I can see why.

4. Try To Solve A Problem
Start at home do you see a problem that needs fixing? Maybe you have a recipe to make vegetable chips that's what made Dana Sinkler and Alex Dzieduszycki the creators of Terra Chips rich.  If you don't find the answer right in your home then take a walk around your neighborhood do you see any services or products that would help the community?

5. Look At Other Businesses
Read about failed businesses and why they didn't work.  Look at businesses in your area see if you can think of ways on how to improve them.  Check out the businesses that are for sale on eBay to get ideas or to pick up where the owner left off.  Make sure you find out the real reason the owner is selling the business. Research the new trends in your local businesses as they may hold answers to what you should be looking for.

Get guidance before you start your business but don't take too long or over think the process.  You don't want to be a part of the take your dream to the grave team.  Good luck!



Monday, September 23, 2013

5 Ways To Save Money Year Round

I read a lot of articles about saving money and they either tell you to cut coupons or to shop for specific items during certain holidays. To me that sounds too complicated.  Here are a few simple ways to save no matter the season:

1. Buy Ahead of Time When Traveling
Nothing fancy here just book that flight well in advance.  When using Greyhound, Megabus, Metro-North and Amtrak the strategy is the same book your tickets well in advance and save the difference. You can travel in between states for cheap if you book ahead.  If you want to really be frugal bring your own food to eat on the ride.

2. Buy Used
When you buy new you pay for the depreciation on that item.  I draw the line when it comes to clothes and computers but there are lots of people that don't mind buying used clothing.
 
3. Barter
I love trading movies and electronics with friends.  Sometimes I just give items I don't need to my friends and when the time comes they return the favor.  Post your items online, you never know who wants your old stuff and what they are willing to trade for it.

4. Go Digital
If you have a computer/laptop you basically have all you need to entertain yourself.  Music, movies, information, games, books and just about everything else can be found online for free.

5. Use Promotional Codes
Before you buy an item online search for promo codes to get an extra 10% off or to get free shipping. You can also let the item rest on your shopping cart for a day or so to decide if you really need the item.

Friday, September 20, 2013

Hedge Funds’ Small-Cap Picks Crush The Market

By: Insider Monkey


Perhaps you've heard by now: Hedge funds have underperformed the S&P 500 year to date as the index is up 13% so far in 2013. Of course, hedge funds are often specifically designed to reduce an investor's exposure to the fluctuations of the overall market through long/short or other low-beta strategies, so this is not exactly the most level playing field on which to judge the utility of hedge funds.
In addition, when hedge funds can turn the full power of their research teams on under-served areas of the market, such as small cap stocks, we've shown that, far from being chronic underperformers, they can actually be excellent sources of alpha.
How can we determine this? Several weeks after the end of each quarter, each
files a 13F with the SEC to disclose many of its long-equity positions as of the end of the quarter. We track these filings in our database for a number of purposes, including to help us research investment strategies.

Last summer we found that, on average, the most popular small-cap stocks among hedge funds (measured by the quantity of funds in our database reporting a position) tended to outperform the S&P 500 by 18 percentage points per year.
At this point, we went to work stock picking — identifying which were the most popular small-cap picks based on 13Fs filed in November 2012. A number of these picks were merger targets;
is one of those low-beta strategies we've mentioned, as whether or not a deal closes is very weakly related to market conditions.

Let's take a look at the results since the beginning of this year for the five most popular picks which remain publicly traded: United Rentals (URI) is up 16%; Visteon (VC) has returned 34%; Tripadvisor (TRIP) is up 58%; W.R. Grace (GRA) is trading 13% higher; and Marvell Technology (MRVL) has soared 78%. You don't need a calculator to compare the average return of these names to the S&P's 13% gain, but we'll do it anyway: 39.8%. It's fair to note that small-cap stocks tend to outperform the overall market in good times, but still, Vanguard's small-cap ETF (VB) is up only 19% year to date.
Now consider: this portfolio comes from information released in November of last year, based on information about hedge-fund holdings from September. Buying these stocks at the beginning of 2013 would have been a very easy strategy to implement for investors with sufficient capital to buy five stocks and, even with a very substantial delay, would have resulted in a market-beating portfolio. These results are above what we've found to be typical, but demonstrate that strategies based on hedge-fund activity can realistically work.
Then why is it that overall hedge funds aren't beating the market? A few reasons. First, as we've mentioned, hedge funds often hedge by going short other stocks or the overall market in pursuit of absolute returns; they may also pursue more market-neutral strategies, such as merger arbitrage or investing in global macro instruments.
Second, the largest hedge fund positions — particularly for successful funds that raise billions in capital from investors — tend to be in large-cap stocks almost by necessity. Large caps are more closely followed by large institutional investors and the financial media, and so it is harder to generate alpha in these stocks.
When we looked at billionaire David Einhorn's Greenlight Capital's 13Fs over time, we found that he gets a good deal of his outperformance from small caps (read our analysis here).

Third, of course, investors in hedge funds pay performance fees. There are other reasons less positive for hedge funds as well — for example, a number of funds have been long gold this year, with disastrous results thus far.
Paying heavy fees to invest in a hedge fund is probably not worth it for most investors who don't have to concern themselves with finding investment opportunities uncorrelated with the rest of their portfolio (as many institutional investors do).
However, on average, hedge funds' consensus small-cap picks tend to do quite well. We believe that there are other strategies waiting to be discovered as well, and of course, investors can take advantage of 13Fs and the more up-to-date news from 13D and 13G filings (which occur when a fund or other major investor owns at least 5% of a publicly traded company) to identify free initial investment ideas.

Disclosure: none

Tuesday, September 17, 2013

What You Don't Know Can Hurt You

Many people end up in debt early on in life and I believe it is because they don't quite understand how credit cards and interest rates work.  I would advice them to read the fine print on their credit card disclosure and guide to benefits.  It is important to get into the habit of reading contracts, disclosures and benefit statements to understand how you can evade catastrophe as well as to understand how to protect yourself.  Not all the print is negative your benefits guide will list price, purchase, extended and return protection all good tools that will benefit you.

I once met a young lady who applied to as many department credit cards as she could to get the free gifts that were used to lure her in.  She also loved the concept of buy now and pay later.  Years later I found out she got together with a guy not that she really wanted to but she felt trapped by the enormous amount of debt she had accrued on all her credit cards.  I still don't think she quite understood how much debt she actually had amassed.  A $20,000 charge on your credit card can actually mean you will owe $40k or more depending on the APR and if you only make minimum payments.

Credit cards with high interest rates are dangerous and are best to stay away from.  You don't want to give a company or another person so much power or control over your well being. There are kind people out there but some people will take advantage of you and your situation.  You also want to be able to manage the budget in your home and pass healthy financial habits to your children.

Having a credit card is a big responsibility and for those that live on a tight budget it seems to cause them more harm than good that is why informing oneself is the best way to go.  There are cases where authorized users have been reported to credit agencies for not paying off the balance on a deceased family members credit card.

With a tough economic environment especially for young adults it seems that the American Dream has changed it is no longer to own a home but to be debt free.  Inform yourself and please learn the right way to use a credit card to be financially free and live the new American Dream.




Wednesday, September 11, 2013

Could You Handle Receiving A Large Sum Of Money?

We all fantasize about receiving large sums of money either through the lotto or any other act of luck.  What figure do you dream of: $50,000, $250,000 or $1,000,000?

As we work hard everyday we figure a nice windfall would be the answer to our problems.  Would you be able to handle a substantial amount of money if it were given to you today? Let's say you happen to receive 1 million dollars and you find yourself working a 9-5 job what would you do?  Would you quit your job? If so what would you do with your free time?

Without a plan how long would you be able to survive without running out of money?

Would you take a nice vacation? Would you buy a house? When you think about it this way lots of cash seems like a good thing.  Money well spent can be good if it brings joy and an answer to a problem.

Would you spend too much wiping your entire windfall in a few years or even end up in debt?  The large gift could leave you missing the big picture of how hard it is to create wealth.  The million dollars would be a big responsibility assuming you would want it to last this generation and the next.  You would have to learn to make more of it otherwise you would run out eventually.

You would have to educate yourself about preserving, multiplying and transferring the money you just received.  You did not create the million dollars so you missed out on all the steps therefore you would have to get advice on the matter otherwise it would be bye bye windfall.

Yes, the money can do much good if used wisely.  It can be used to have a good time with family, friends and to give to good causes.  

It could become a burden if you are not prepared and have unrealistic expectations.  You may end up in the same place you started due to bad money management skills.  In this case you might have been better off not receiving the money at all. 

Would the large sum of money received make you dependent on it instead of on your qualities and skills? Would it disrupt your life's calling or pursuit of it?  Would it make you proud and take away the humility that is necessary to learn and excel in life? Would you be a good friend to those around you? Would you still be a compassionate person? Would you give back to society or would it all be about you?

Money can be a blessing but only when it is used wisely and when it does not disrupt your view on life and the pursuit of happiness for you and your family.  You may come across a large sum of money someday why not become better prepared by educating yourself financially and emotionally to be ready when it does come.  If it doesn't then maybe you are better off without it, all you do need is already around you and most likely it is free.



Tuesday, September 3, 2013

Why You Should Network

Feeling out of ideas?

Getting to know people can be a good way to get new ideas.

Even if you work very hard there is always something that can be gained by reaching out to people. There are periods in our life where we may not grow any further until we meet the right people.
Whether it is business or any other profession it is important to go to networking events and conferences to seek help.

Growing does require a large effort on our behalf but we also need others to improve ourselves and to get encouragement.  You are also of high value to others who need your expertise and special qualities. We are called to help each other out and by only keeping what we know to ourselves we hold ourselves back and those who need our help.

I once attended a special event at a college, the speaker was a venture capitalist, he told me something I never forgot.  It was during the financial disaster of 2009 I asked him if it was a good time to venture and invest given the financial situation, he did not like my comments.  He stated that we will always need people for ideas and for goods and services and as long as that is true there will always be a reason to invest. Although at the moment it did not make much sense I later on understood what he meant.

Connect with others not only will you grow and learn you may also make good friends.  As you grow you may need to hire people or may be given a better job opportunity.  At the right time your ideas may lead to a business where you may need investors or staff and this contributes to the overall economy recession or not.

Networking an artistic piece by Gerson Santillana (c)

Thursday, August 29, 2013

How To Deal With Failure

Failure is something we look down upon.  It usually starts in school when we raise our hand if we say the wrong answer we feel bad and probably will hesitate to raise our hand again.  People love to hear stories of success and glory.  The media loves those who come in 1st place. Those that come in 2nd and 3rd are forgotten.  Yet success comes with a prerequisite; failure.  Great salesmen know that it takes a lot of rejection and failure to become the best.  The earlier in life we learn to deal with failure and rejection the better off we will be.

It doesn't feel good to fail that is why we must work hard and learn from the past to evade it.  There are failures that can be avoided if we have discipline, seek out good friends and mentors.  The journey is ours but getting good quality friends, acquaintances and mentors makes the trip less bumpy.  If you haven't failed much you must not be living to your full potential.  If you plan on living a life free of failure you must plan on living a very mediocre life.  It's like playing poker and expecting to have winning hands all the time. In poker it's not about having winning hands all the time but the way you play the cards you have been dealt.

If rejection bothers you then get a seasonal job in sales to overcome the problem.  This will help you learn how to deal with people turning you down.  As you gain experience rejection won't bother you as much. It will help you to overcome your fears of social interaction, this will come in handy when you need to conduct business.   Public speaking is a fear most of us have and the earlier we learn to deal with it the better. Make announcements at family gatherings, volunteer at a public event to get practice in front of small or large crowds.  Most of the time people will cheer for you or will be on your side.

Anything that will bring you wealth, success or fame will require some failure if not lots of it.  To dismiss failure will mean you won't do much in life.  The more you get out there and try the more you will become confident and learn that failure is necessary to become the person you want to be.  The lessons learned will make you better at dealing with losses and bad moments.  Don't be too hard on yourself we all make mistakes and success does not depend on making every decision perfectly.  The experiences make you and your loved ones better off as a team since you now have more ideas and knowledge to draw from.













Thursday, August 22, 2013

The Value Of Information

Growing up in the city I remember at an early age believing that money was the ultimate valuable object one could possess.  A funny thing happened as I started my quest for money I realized that information is just as valuable if not more.  The concept didn't dawn on me until I began educating myself through books, people, school and work.

A few semesters ago I had to leave early from one of my chemistry classes.  It was the first day of class so I asked a girl sitting next to me for her email address.  I emailed her to ask what I had missed. She gave me the book titles and was kind enough to share the site she was going to get them from.  The site she recommended saved me $100, she introduced me to the world of college book rentals.  We ended up helping each other out throughout the semester at that moment her information; that brief email was worth $100.  I always try to enter a friendship with the goal to help out but we don't always know what will happen.

A few years ago at a stock trading conference I approached this guy in his early thirties.  He introduced me to the world of prop trading that is where he learned some of his techniques.  I am glad I met him he gave me information I would have not found in books.  It saved me a lot of time.  He showed me a sheet of all the day trades he had done on a particular day that's how I learned how to make $200 in 2 minutes.  I had to see it to know it was possible at that moment that piece of information was worth $200 but the fact that it opened my eyes on how to make money quickly it was worth much more.  As you can see from the picture below my first attempt was with (GE) although I did not make $200 in 2 minutes It was a good try $110 in 7 minutes.

Information is all around us and easy to access yet we have to filter it to meet our needs and for it to be accurate. The beauty of information is that we can carry it with us and at the right time convert it into money or anything else of value to us.






Friday, August 16, 2013

How I Could Go A Year Without Cash

It all starts with a plan whether the goal is to become wealthy or to live cashless.  Anything is possible you just have to learn to be resourceful and creative.  My first step to live a cash free life for a year would be to get a job as a building superintendent this would allow me to live rent free; I'm not afraid to get my hands a little dirty.  I could also become a professor in the city and live on campus.  To get my desired job I would talk to people in person as well as online.  To get food I would get a part time job at a supermarket where I could get food in exchange for labor.  For transportation I would get a bike, a ride from a friend or plain old walking.

In regards to utilities I could go extreme and use candles, public outlets to charge my laptop and no need for a NYSE company owned gas; I would not be heating any meals.  I could also move to Utah County which has some of the lowest utility costs in the nation.  If I do decide to get light I would barter a service in exchange the person would pay the bill for me. The service could be walking a dog, administrative duties such as editing papers, freelance writing for a company or providing personal training to someone wanting to transform their body.  This is all possible you can read about Kyle who ended up trading one red paperclip on Craigslist for a house.

In regards to clothes I could barter with friends as I do for movies and video games.  I could also write to a company and offer to advertise in exchange for clothes.  As I did some time ago with a supplement company by the name of Cytodyne Technologies.  I used to work at a gym and while doing my extreme workouts I decided to take some meal replacement shakes and vitamins to get enough protein and save time with preparing meals.  I wrote to the company and let them know that I liked the product and that I saw some nice shirts with their logo if I could have one to advertise.  I sent them a picture of myself to let them know my progress.  I got the shakes through a magazine by the name of ProSource. I sent the letter to the magazine company. They forwarded the letter to Cytodyne and in a few weeks I got a six month supply of meal replacements, vitamins, protein bars and shirts not only was it more than I expected ProSource ended up sending me shirts and products with their logo as well.

Now for entertainment I would borrow books and movies from the library or get all my entertainment online for free.  I could also go to friends' houses for dinner in exchange I would create a board game so we could all play which I have done in the past, it is a lot of fun.  When you care for people they open their doors for you, its a win-win situation.

Going without cash for a year is possible it just takes some strong networking and adapting to a new lifestyle.  Sure it would be hard work but it could also be liberating.  I probably could go cashless for life. Anything is possible and as long as we challenge ourselves daily we will grow and surprise our own selves. Why don't you try going cashless for a few days see what creative ways you find to evade cash.





Friday, August 9, 2013

Shorting Stocks

When you buy a stock it is called going long which is what most people are familiar with, buying and holding stocks for the long run.  There is another side to trading stocks and it is called short selling or going short.  Most investors that are starting out seem to have a hard time understanding the concept or may not feel comfortable shorting a stock.  When you go long or buy a stock you anticipate that it will go up in value and that at some point you will be able to sell it and make some money.  When you short a stock you anticipate that the stock will drop in value.  You enter the position by selling, in other words you borrow the stock from the broker since you do not own the stock and then buy to cover to close your position.

Let's look at this trade I did below back when (GE) was trading at $16.55.  I entered a limit order to short 1000 shares (9:37am) of the stock at $16.55.  At this point I did not own those shares so my broker let me borrow them.  Since I was correct and the price dropped I went ahead and bought the shares back by entering a buy to cover limit order for 1000 shares at $16.40 (9:42 am).  This was a $150 profit in 5 minutes ($16,550 - $16,400 = $150) you make money by selling at a higher price and buying back at a lower price.  It's like borrowing your friend's printer that costs $100 and selling it to your neighbor for the same price.  You then buy that same model printer back for $90 and give it back to your friend to make a $10 profit.

On the other hand if the stock rises it can get ugly.  Technically the stock could go to the moon or at least very high and the longer you let it rise without closing the position, the more money you can lose. Let's say that GE had risen to $20.55 instead, I would've lost $4,000 plus interest based on the amount of days I kept the stock with a margin account.  Most of the time you may hold the short position for as long as you want. There are times when a broker may force you to close your position.  If during the time you shorted the stock there were dividends payed out, you will have to pay them back to the lender.  Shorting stock is another good tool to add to your trading but before you do so make sure you understand the risks involved in the art of short selling.



Sunday, August 4, 2013

Was Babe Ruth Richer Than You?

During The Great Depression George Herman "Babe" Ruth, Jr. was making a yearly salary of $80,000. In the early 1930s a reporter asked Babe Ruth if he thought it was right that he made more money than the president. The Great Depression was a troubled time for the world but let's give Babe some credit he had a tough upbringing and came from a rough neighborhood in Baltimore, Maryland. Babe played for the Yankees from 1920-1935 but was he really that rich? Even now a days an $80,000 yearly salary is considered pretty good.

Let us convert his 1931 salary into 2013 dollars using the CPI Inflation Calculator Babe was making the equivalent of $1,228,968.42 in today's dollars. Compared to Derek Jeter who according to Forbes makes about $16.4 million a year (not including $9 million from endorsements) Babe doesn't really seem that well off. Babe was known for his hitting, he set records for home runs during his time which still stand. Jeter is the Yankees' all-time career leader in hits. Should Derek make 13 times more money than Babe? Entertainment pays what can I say? We all like the guy.

Whether we take the $80,000 salary or his inflation adjusted $1.2 million yearly salary and compare it to our own it is fair to say that he had more money than us common folk. But was he really richer? We have seen that baseball players in our time are better off than "the Bambino" but how about you and I? Did Babe Ruth have access to the internet? Could he warm up before a game using an Apple iPod to play his favorite songs? Could he watch movies online and take them anywhere he wanted? Could he have access to the world and access to just about any piece of information in seconds via Google? Could he text, email or IM his buddies? He had no tablet and could not open his own online business if he wanted.

Would you be willing to give up all the luxuries, advantages and technological advances we enjoy today for $1.2 million? Before you answer there is one more thing to consider; in 1946 Babe started to experience pain over his left eye and had trouble swallowing it was found that he had an inoperable malignant tumor at the base of his skull and in his neck. His fame gave him access to experimental treatments he became one of the first cancer patients to receive both drugs and radiation treatment simultaneously. Would he give up some of that salary if not all of it to enjoy the things you and I have access to that we sometimes take for granted? I believe he would.

Inflation does eat up the value of money over time but quality of life, medical advancement and technology is something we may fail to take into consideration when we measure how well off we are.











Friday, August 2, 2013

Should You Worry About Inflation?

Although inflation rates have been rather low people should not put down their guard. The inflation rate for last month was 1.8%.  In 2012 the average inflation rate was 2.1% and in 2011 we saw an average rate of 3.2%.  Modest rates make people less worried yet leaving your money idle for too long is dangerous.  The 10 Year Bond is currently at 2.62% and stocks have been on an upward trend since the beginning of the year.

Now let's imagine that you had retired 20 years ago and had a mixture of stocks and bonds that paid you a fixed income of $10,000 a year to use towards paying for your living expenses.  Although we are at a time that Americans are living much longer we will assume that the money will only need to last you for 20 years. If inflation in those 20 years had averaged a high of 10% your $10,000 would only be worth $1,486 in 2012 dollars, much less purchasing power as we can see.

A 10% inflation rate over a long term is not too likely but it could happen.  Now let's consider inflation at 3% which is likely to happen and yet in the short term does not seem too threatening.  With the same $10,000 payout in the past 20 years your purchasing power would have dropped to $5,536 in 2012 dollars.

Inflation is a part of life we can't afford to ignore, shop around for investments that will allow you to stay above inflation.  Allocate a percentage of your savings into securities an amount that will make you feel comfortable even if we see a drop in stocks.  In other years when interest rates were higher CDs have been good to fight inflation but do take into consideration the taxes you will pay on the yield come tax season.

Sunday, July 28, 2013

How I Got Started In Investing (Part 2)

Fortunately, I met this young lady (wolf whistle) who would come to see me at work so I told her my plan. She encouraged me and that was the push I needed.


I opened up an account with an online brokerage firm with only $3k to get my feet wet. As I continued to read and educate myself I added another $4k. A cash account is very basic no margin I could not buy and sell often. After a sale the money takes 3 days to settle so I couldn't day trade, otherwise I would be freeriding. I believe this was good it allowed me to take a breather on every trade I made as I had no structure. I added another $3k in the following 3 months. That was a lot of money for me at the time, being young it was a tough decision.  I had always wanted a flat screen TV but I passed it up so I could invest.  



Eventually I opened a margin account although some recommend not to.  I made sure I understood the dangers of buying with borrowed money. I also learned to buy options contracts as a way to hedge from high risk investments such as pharmaceutical companies going through the clinical trial process.  Yes, I did take big losses but I managed to recover. It was like a very expensive class that ended up paying off.  I made plenty of mistakes, I am not perfect but you don't need to be to make money trading stocks. I was fortunate enough to have bought at a time when everyone was selling and scared to invest but that is another topic I will discuss on a later post.  Young adults should not evade stocks. Being young is a good thing, we have time in our favor. Older people can also benefit from the use of stocks especially those that pay dividends.

Friday, July 26, 2013

How I Got Started In Investing (Part 1)

When I was a teen I felt attracted to the stock market but I didn't have any money to invest and I had no clue about how to invest. Growing up in a humble home I had no access to anyone that could help me I tried to ask teachers but they did not know how and were of little help. This was years ago when stocks traded in fractions and back when online trading was not popular it wouldn't have mattered I did not own a computer.  Not having the right computer skills and guidance I wasted a lot of time reading the wrong books and going to see the wrong people. I did know that blue chip stocks were considered safe and at the time I looked up a few companies to get better acquainted.  I knew I should buy at least 100 shares.  Blue chip stocks were pricey and even 100 shares would cost me about $7K too expensive for me at the time.


While working at a computer lab during my sophomore year in college I met a young math professor who was an investor.  He had made a $30k profit investing in solar power but ended up turning it into a $40k loss. Yikes! He was the only person I had met that actually risked his own money and chose his own stocks through an online brokerage firm.  Finally the right information I needed but now I felt a bit skeptical to invest my money.  How much of it should I put into an account? I had worked so hard for my money and I had never invested in securities I didn't know what to do.

to be continued ...










Saturday, July 20, 2013

How To Write A Budget

I think people have a hard time saving and investing due to the fact that they don't write down what they have and what they spend. If you write down what you will spend you are more likely to stick to what you write down. If you are sloppy with your finances you will end up losing money it's simple you have to learn to respect money. Before you right down your budget make sure you keep your money safe in a neat and tidy manner have a change jar and count it up at the end of the week; nothing must go to waste. Use your budget to reach a goal. The goal can be to buy a house, to be financially free, to get married or just to have extra cash so you can retire young if you like. This an example of a monthly budget for someone making $2500 after taxes:

Rent/Mortgage  - $1000
Food                    - $500
Clothes               - $200
Utilities                - $120
Entertainment   - $300
Car                       - $300
Misc                     - $100

Yes, writing a budget is good but if you are spending more or close to the amount of money you are making drastic changes need to be made. Don't ever use a credit card to buy more than what you can afford. If you don't fully understand how to use a credit card wisely then please consider not having one or only using it until you do some research on the dangers of using credit. If you have debt pay it off ASAP, there is no point of getting 1% interest on your savings if your debt comes with an 18% APR. Assuming your debt is paid off this is what your budget should look like:

Rent/Mortgage - $750 (rent should be about 30% of monthly income)
Food - $250 (don't eat out as much/pack healthy lunches)
Utilities - $100 (energy saving light bulbs and energy star products,unplug appliances not in use)
Entertainment - $0 (YouTube, Hulu, Library books/movies, museum)
Car - $300 (you should buy used,if you live in the city that should be the last thing you buy)
Misc - $50 (clothes should be bought as a need not as a way to feel good or splurge)
Savings - $1050 (this can be used for emergencies but mostly to be able to invest later on)

If you are not saving a good amount of money you must make changes quickly. Get another job if you have to and find other sources of income. A budget will help you keep track of expenses and make you more accountable. Saving and being strict about not spending in excess will make the difference whether you live a life free of unnecessary stress that comes with living paycheck to paycheck or whether you stay stuck in a job you don't like for life.






Wednesday, July 17, 2013

Redistribution of Wealth

The U.S. inflation rate for the month of June was 1.8, 1.4 in May and 1.1 in April.  When it comes to protecting your money you need to get interest above 1.8% for now, whether you get it from stocks or any other type of investment it is up to you.  The inflation rate is not fixed as we can see from rates in the past it can remain low or shoot up pretty high and these unexpected rates can redistribute wealth to the population.  Let's say a college student borrows $30,000 at a 6.8% interest rate and at the time inflation is 1.8% therefore the student will really only owe 5% interest (6.8% - 1.8%) on his loan.  The more the inflation rate increases the cheaper the debt will become for the student at the cost of the creditor's well being since the creditor will receive less valuable dollars.  The student will have his fingers crossed hoping the economy goes through a period of hyperinflation when it comes time to repay the loan meaning that prices and wages will rise so fast that the loan will become less valuable.  In this case the student will win and the creditor will lose.

Now let's see how the student can lose if inflation starts to drop and begins to flirt with deflation.  If the college student would have borrowed $30,000 in 2008 when inflation rates averaged 3.8 his loan still at 6.8% interest would not seem like a problem.  If the student started to pay the loan back in 2009 when inflation averaged -0.4% he would have been shocked to see that his loan would have to be repaid at 7.2% interest (6.8% + 0.4%) the 0.4 needs to be added to his 6.8% interest on his student loan as the U.S. went into deflation territory meaning negative inflation. Just as the student hopes for hyperinflation when it comes time to pay his loan, his creditor will pray that the inflation rates will start to drop making the dollars he will receive much more valuable than when he lent them.  If you anticipate high levels of inflation then this is the most appropriate time to take out a loan if you anticipate inflation will drop you will want to cut down on the amount of money you owe.  When inflation is not easy to predict wealth is redistributed among those who borrow money and those who lend it.  Therefore lending and borrowing money comes with risk especially if the inflation rates starts to move fast in one direction.


Saturday, July 13, 2013

5 Ways To Guarantee You Won't Be Financially Free

Most people dream about being able to travel and do what they really want to do and never having to worry about money and their financial situation. Then there are those who don't care, here are a few things that you can do to make sure you never become independent and financially free:

1. Don't Save
That's right spend every single cent you have this includes all your income and gifts from family and friends. If you happen to find some money on the street spend it immediately make sure it doesn't make it back home you might be tempted to save it or it could get lost at home which would make you keep it for a long time.

2. Work For Every Penny
Never let your money earn interest always work for every dollar.  If you didn't work for it then give it back this means no savings accounts that bear interest, no investing, no royalties, no passive income and no dividends. You have to work for your money never let your money work for you.  Go to work 9-5 every day and get as much overtime as you can try to get another job in the evening or on the weekend so you can work even more. Try to suck up as much as you can so you can move up and make a few more dollars at this rate you will be working well into your 70's.

3. Get As Many Credit Cards As You Can
It is never too early to get a credit card and the more of them you can get and max out the better. Get the department store credit cards those come with the highest APRs. Do spend as much as you can starting with the cards with the highest rates and only make minimum payments. Do get cash advances on your credit card make sure you accrue as many fees as you can and miss payments occasionally remember you will be making minimum payments for life.

4. Don't Invest
Why bother taking risks they may lead to more money and forget about the power of compound interest you might become a millionaire that way.  Why bother buying a stock and letting it grow in value not to mention that it can pay you dividends while you own it.  It doesn't feel good to know that while you are working or spending time with friends your money is growing even when you are not around to keep an eye on it.  While you sleep your cash can also make more money in other markets overseas as well as in the form of interest you can rest peacefully tonight knowing that this won't be you.

5. Don't Become Financially Educated
If schools don't bother to teach you how to manage money why bother learning, it must be useless.  So drop that financial book and never pick up an annual report from any company, you might learn how the world economy can affect your life or make you money for that matter.  Why bother learning how to protect your money from inflation or estate taxes you will never have any so what is there to protect.  Why bother learning how to make your money grow? You don't need to read about credit and how it can make you wealthier and financially free if used correctly.  What is the point of being able to retire at a young age?

If you still feel that there is a chance you will have some extra money left over after following these steps feel free to send it my way.  Of course if you do want to become financially free do the opposite of what I just wrote.

Sunday, July 7, 2013

Save Money By Living With Less

If you are single or married with no kids you don't really need a big place to live in.  Why dish out money to get a big place when you can get by on a small apartment?  Not that buying a big place is wrong but the way the world is changing we don't need much space to live in.  Over the past few years I have gotten rid of many material possessions and seem to have more and more space.  I no longer need to store movies, books, paper or CDs.  All I need are a few pieces of clothing, a pair of shoes, sneakers a bed and a computer in my room.

I have always wanted to live in a big place but during the process of saving I have adapted to the paperless society the internet and technology have brought about.  It is much more convenient to store movies, books and music online and take it on the go via an iPod/tablet.  Almost everything I need is stored or available online or on a flash drive which has freed up most of the space in my place. I seem to have trouble filling the space in my living room and closets.  Why do I need a bigger place?  The savings that come with the need for less physical space to live in is a great way to free up time and money for recreational activities such as traveling.  Having less material things frees up your mind since you have less things to worry about and keep track of as well as to insure.  It also makes packing, moving and traveling a breeze.  I can focus more on personal projects, studying and having fun instead of having to keep my place tidy; not much left to clean after.

This new digital era lifestyle is ideal for those young adults trying to make it on their own, now they can live on a smaller budget and look for a smaller place to live in.  Less belongings mean less stress I believe smaller living spaces will become the norm once people catch on. The media advertises big houses, big cars and big wardrobes yet living with less is much more liberating and economically it makes sense for most young adults and newlyweds.





Saturday, June 29, 2013

Money Saving Tips

Need a bit more cash to buy that nice house or to get that nice living room set, here are a few tips on how to save money.

1. Don't buy books just about everything you need is available online or at the library.

2. Don't buy movies you can get them online or at the library for free.

3. Share/trade with friends/family everything from unlimited MetroCards to car rides to bikes

4. Open an ebay account and sell your old books, clothes and games.  Get creative you might have some goodies at home that people may want, look around the street you might find free stuff that you can sell online.  I once made a good amount of money selling free street giveaways such as post cards and MetroCards online.  People overseas find it cheaper to buy U.S. items online than to travel here.

5. Use all your space at home if you got a room with plenty of free space open up your own business and you may be able to deduct expenses for the use of your home.



Sunday, June 23, 2013

How The Job Market Is Evolving

In a computer dominated world one can't ignore how the job market has changed.  We live in a world where more can be done with less.  Less time, less employees and less money.  A few years ago I told one of my classmates that I might need her help to do an online project but the more I learned about the internet and computers the less I needed her help.  I searched for all the answers online and I ended up doing it all by myself meaning I did not need to hire her nor pay her.  All the information and tutorials were online and free.  Speed is also a factor you can get more done in less time which has allowed for a lot of jobs to be given to freelance workers letting companies save on employee benefit plans.  Yes, computers are eliminating jobs but they are also making us more efficient and they give people access to a massive amount of information quickly.

Computers and information technology are changing exponentially which will only accelerate the way jobs evolve even more.  Keeping up, adapting and being able to predict change will be the name of the game.  Online social media has changed the way we get jobs; Twitter, Facebook, LinkedIn and even YouTube are some of the new ways of getting that job lead and interview all of which are free. These popular online social media companies make plenty of money but employ very few proving that doing more with less is the new way of life.  Are we to think those high paying jobs of the past are likely to come back?  The number of top paying jobs will only decrease and go to the ones creating or making the best use of the new technology.  A good example of how technology and science are changing exponentially is the rate at which synthetic DNA can be made.  The rate has increased and the cost has been reduced significantly, in the future it will become a consumer product via laser printing.



Sunday, June 16, 2013

Credit Card Vs. No Credit Card

In a world where cash seems to be disappearing some people are opting to get rid of their credit cards replacing them with cash, checks and debit cards.  Is a mountain of debt a good reason to let go of the plastic? When everything else fails then drastic measures may be necessary let's consider the pros and cons of owning/not owning a credit card (CC).

Pros of owning a credit card
1. You can build credit to buy a home, car or start a business.
2. Protection against wrong charges and help with items you want to return (insurance on purchases)
3. Some employers are looking at credit scores to see if you are good with money
4. Better credit scores mean lower interest rates on mortgages and other loans
5. Online shopping saves you money online shopping requires a CC
6. Access to money in tough situations (traveling, lost, running late)

Pros of not owning a credit card
1. You will spend less; research suggests that consumers spend more when using CC's than cash
2. Privacy,you can't be traced as easily when using cash (those really concerned will love the Bitcoin)
3. Lower-income individuals usually end up with high CC debt + high interest rates
4. Consumers are more likely to buy unhealthy food when paying with a CC
5. If you have friends with bad money habits you are likely to imitate their CC shopping patterns
6. You only spend what you earn

A credit card is a good financial companion only if you have the discipline to make payments in full and will not use it to shop until your balance becomes unmanageable.  We are visual consumers when we handle cash we take the purchase more to heart that is why keeping some cash is not a bad idea.




Sunday, June 9, 2013

5 Ways To Save Money

A little more cash never hurts especially if you are young and trying to make it on your own.  If you are a bit older you know that retirement won't be cheap.  The following 5 steps are geared to help you take control of your finances and your future.

Learn To Say "No" To Friends
We all get invited to parties, baby showers, weddings and office parties sometimes for people we don't even know.  Invitations come with an obligation of either buying a gift or a cash donation.  All of these costs can add up quickly not only from invites but from the lady selling Avon and the coworker selling M&M's for his daughter's basketball team.  Learn to say "No" only say "Yes" to a few of these solicitations don't feel bad about sending a thank you card with an explanation as to why you cannot attend.  Saying "Yes" will only make it harder to say "No" the second time around.

Use Your Credit Card Wisely
A credit card can be your best friend or your worst enemy.  Make it work for you not the other way around use a credit card strategically.  Do not use it as a way to buy items you can't afford.  Do not open department store credit cards, these come with the deadliest APRs known to man.  Use the card to build credit to buy a home or to get approved for a loan in the future.  Use it only for necessary purchases that you can pay back immediately.  See the card as an investment opportunity to buy inventory for a business or to start a business, purchases that will pay for themselves and will allow you to free cash to invest elsewhere.

Buy Generic
When it comes to buying prescription drugs and food as long as the ingredients are the same why not buy the less expensive item.  Do you really need to buy the expensive cereal box or the pricey medication?

Free Entertainment
With free sites like YouTube and Hulu there is no reason why you should be paying for cable or a night at the movies.  There are so many options and sites that offer free quality programming and music which can be customized any way you want.   We are talking about true reality shows, from the guy next door shooting a video of himself going to the supermarket to the man on the subway falling asleep while a rat creeps up on him.  You can even invite some friends to enjoy a movie all together whether you get it from Hulu, YouTube or the library it doesn't matter as long as you are all having a good time.

Don't Get Another Degree Unless It's Reimbursed
Education is a good way to secure a job but once you have gotten an undergraduate degree should you really go back to get more education? Let's consider an MBA at a top university which will run you a bit over $100k.  Does it make financial sense to work full time and go to school part time for the next 2-3 yrs to get ahead in your career while increasing your debt heavily?  Once you get your degree you will have to stay at your present job for about another 7 years (that's including a promotion) to pay off your new debt. What if you want to get married and buy a house during that period? Forget about it! You will be at that job for the next 10 years or more.  If you love your employer this will not be a problem but think about the way the educational system is evolving, while you get your expensive degree, online classes/degrees will gain popularity (at a fraction of the cost) when you graduate they may be considered just as good.  Try to get your employer to fund your career if not try to get a scholarship to cover you, otherwise think really hard about your future finances before getting more education.





Sunday, June 2, 2013

It's Not About How Much Money You Have

Would you be happy with a million dollars? Most people would answer "yes" but what if you had made $20 million investing in real estate or stocks and all of a sudden you lose it all but $1 million.  Now let's ask the question again would you be happy with a million dollars? The answer would be "No" you would have a hard time forgetting the $19 million you lost.  Losing large sums of money from an investment gone wrong is one of the worst feelings a human being can experience it can be unbearable.  It is not always about the sum of money you end up with it is about how you get there.  Developing good money management skills is essential to survive and avoid losing money.

On January 14th 2013 I bought 1000 shares of Facebook (FB) at $31.27 (10:43 am-10:45 am) I sold the 1000 shares at $31.38.  I made $110 on the day trade, sure I could've made a little more money had I kept it a few minutes longer but from experience I exited at the right time.  The stock was extremely volatile for the day it is not a stock to trade if you are risk averse.  Holding on to the stock for the long term would have been a mistake as the stock closed at $30.95.  On January 15th the stock closed at $30.10 I would've ended the day with a $1170 loss.  Had I continued holding it with hopes to pocket thousands of dollars in profits I would've gotten quite the beating.  Facebook never hit the $31.27 price point after January, fast forward to this past week FB closed at $24.35 I would be down $7000, on Wednesday I would've been down $8000.  Would you be happy with $24,300? Not after that trade! Right now I would be thinking how I turned a $110 profit in 2 minutes to a $7000 loss in 4 months.

What if the stock comes back up in the following weeks to $40 a share? It doesn't matter that trade should have been exited immediately, $31 would have not been the right entry point for a long term investment.  You lose time and money by holding on to an investment that goes wrong.  A bad trade should be exited at a 5%-7% loss, the moment the trade starts going against you it may be time for the flip, meaning exiting the trade, accepting you were wrong and shorting the stock to profit from the drop in price.  Traders need to know that an $80,000 loss starts out as a small loss that was not dealt with correctly.  Invest wisely remember the more money you have the bigger your losses will get.  The rule is to cut losses quickly to enjoy your ascent to financial freedom.