What’s in Your Investment Portfolio?

April is Tax time, and with it, a great opportunity to think more about your finances, and in particular, your financial goals and investment portfolio.

Here is an example that might help you with planning your own portfolio:

==

Michael and Janice are a couple in their early thirties. They don’t have any children, nor do they plan on having any. While they’ve started saving and investing for retirement, they haven’t made a lot of progress to date. They currently invest 3% each in their respective 401(k)s. Their employers match contributions at 50 cents on the dollar, up to 6%. The Stuarts also have a few thousand dollars in savings bonds that Michael got from his grandmother. They make over $150,000 a year combined and have minimal debt.

They do, however, have a rather extravagant lifestyle. Janice is a major shopper, and while Michael doesn’t buy things frequently, he likes his expensive toys.

Clearly their priorities are not conducive to having a prosperous retirement. Their 401(k)s offer a great opportunity to amass a lot of wealth over the long haul, but they aren’t taking full advantage of it.

Everyone should make every effort to get the full match from his or her employer. It’s free money; no one in their right mind should leave free money on the table. You might think you are barely able to make it from paycheck to paycheck, but if it is tax free and taken out before you ever get your hands on your money, then you will hardly miss what you never saw, but it can add up to big dividends long term.

While savings bonds are better than nothing, they are a very poor choice for someone with a long-term time frame. This couple would be much better served with more growth-aggressive investments.

Appropriate stocks and some bonds for diversification would be more in line with their goals.

Their combined income is quite high, but it is largely being wasted on non-essentials and luxury items, as it often is when people are young and have no real financial goals yet.

Considering they don’t have children and minimal debt, saving 15+% of every paycheck should be easy for this couple. They would be well served to examine their spending and eliminate the excess.

This couple still has time before they retire; they certainly have every opportunity to turn things around to provide for a wonderful retirement and any other goals they might have, especially if they do not have any children.

Share

Why Seniors Need to Beware of Financial Fraud

Sometimes our advantages can become our weaknesses. If you’re retired or getting close to retirement, you may have some great things going for you, such as an excellent credit rating, your own your home, without any mortgage, and a substantial retirement nest egg.

However, these great things, along with your age, can also put you at greater risk for a range of frauds targeting older people, who usually have more savings but are looking to earn more. We are going to look at a few of the most common frauds perpetrated on seniors, and what you can do to avoid being taken advantage of.

Job Contractor Fraud

If you own your own home, sooner or later it is going to need repair, especially if you have been living in it for some time and your health prevents you from making the repairs yourself.  Contractor scams happen when the contractor asks for the money up front and does not do it, does work that was not agreed upon, and then demands to be paid, or worst of all, does repairs that are bot necessary and then often overcharges for the work, too.

Other common variants include:

* Using admittance into your residence as a means to burglarize it

* Convincing owners to be part of fraudulent insurance claims

Reputable contractors don’t generally go knocking on doors to drum up business. If your house needs some work done, it is usually better to ask around for referrals, or investigate contractors listed by your local Better Business Bureau. See what reviews are posted about them, and look to see if there are any complaints against them before you ever agree to any work being done. Do not pay them until the work is completed to your satisfaction and as agreed upon.

Reverse Mortgage Fraud

Reverse mortgages can be a legitimate technique used in order to gain access to the equity, the money invested, in your home. These are most commonly referred to as home equity conversion mortgages (HECM). HECMs are insured by the Federal Housing Authority (FHA). They were created so that people 62 years and older could easily get hold of some of the equity from their principal residence and make life easier for themselves financially once they retired.  The mortgage would be paid off, and a reverse mortgage would value the house and then give you either a lump sum, annual payout, or monthly pay out for you to live on, but still let you and your partner stay in the house until both of you passed away.

A problem can occur with non-HECM reverse mortgages, however, especially ones that sound to good to be true. Some seniors have ended up as an unsuspecting pawn in a property-flipping scheme, or billed huge fees by an unscrupulous “advisor” that simply handles the standard paperwork involved with a normal HECM loan. If you’re interested in a reverse mortgage, your bank or a reputable mortgage broker is a good place to start. Again, no one reputable will never need to go door to door to drum up business.

Investment Fraud

While people of all ages are taken in by various investment frauds, seniors seem to be targeted the most often, most likely because they have substantial savings that can usually be accessed quickly.

Always be skeptical and double check with a trusted professional when it comes to your life savings. Don’t succumb to any time pressure tactics; if it’s something that you have to decide right now, your answer right now should be “NO.” False time limits are a common technique to get people to commit their hard-earned money to a fraud. They are not giving you enough time to think and make any sort of sensible decision or be able to dig deeper, such as on the Internet, to find out if the offer is a scam or not.

It probably doesn’t seem fair that you as a senior have to constantly be on the look out for fraud in your golden years, but you have worked too hard for your money and house to lose it to scammers. Always ask the right questions, and remember, if it sounds too good to be true, it usually is.

If you think you have been the victim of a scam, or a scammer has come to your door and is pressuring you, report it to the police. Hopefully the scammer will be stopped before he can harm anyone else. Don’t be an easy victim. Remain alert, and fight fraud.

FURTHER READING

For more great tips on how to make the most of your money, visit the Eternal Spiral Books Money Matters section.

Share

How To Double Your Dollars to a Million Dollars

Here’s a simple game that can take you from absolute poverty to real wealth. In fact, all you need is a penny to get started. Even if you think you don’t have a cent to your name to spare, you can still try this game.

After all, almost anyone will give you a penny if you ask for one. Or, dig around in your pocket or sofa cushions and find a cent.

Once you have that penny, double it and keep on doubling your money until you reach $1 million.

The game is divided into 28 steps. The first steps are so small that you can’t possibly fail. You will start to succeed immediately, before you ever start to worry that you might not be able to succeed.

Steven Goldsmith, the inventor of this program, has also made starting easy, whereas programs with really big bold claims are often difficult to get going with.

So, here are your 28 steps to $1 million dollars:

Step 1 Find one penny on the ground, or ask someone for it.

Step 2 $.01 becomes $.02

Step 3 $.02 becomes $.04

Step 4 $.04 becomes $.08

Step 5 $.08 becomes $.16

Step 6 $.16 becomes $.32

Step 7 $.32 becomes $.64

Step 8 $.64 becomes $1.28

Step 9 $1.28 becomes $2.56

Step 10 $2.56 becomes $5.12 (Let’s round it down to $5 to make your math calculations easier.)

Step 11 $5 becomes $10

Step 12 $10 becomes $20

Step 13 $20 becomes $40

Step 14 $40 becomes $80

Step 15 $80 becomes $160

Step 16 $160 becomes $320

Step 17 $320 becomes $640

Step 18 $640 becomes $1,280

Step 19 $1,280 becomes $2,560

Step 20 $2,560 becomes $5,120 (Round it down to $5,000 to make your calculations simpler.)

Step 21 $5,000 becomes $10,000

Step 22 $10,000 becomes $20,000

Step 23 $20,000 becomes $40,000

Step 24 $40,000 becomes $80,000

Step 25 $80.000 becomes $160,000

Step 26 $160,000 becomes $320,000

Step 27 $320,000 becomes $640,000

Step 28 $640,000 becomes $1,280,000 (Round it to $1 million to make it simpler.)

Basic Rules

1. You must ask for or find the first penny to get started.

2. You can only use the money that is part of the game to earn more money. You are not allowed to add any additional funds once you start.

3. During the first 15 steps, up to $160 dollars, you can only use the actual dollar bills and coins that you have generated to that point.

4. If at any time you more than double your money, you must spend the surplus on yourself before you move on. You’re not allowed to use the extra toward future steps in the game.

5. The doubling does not have to occur in a single transaction. You can find multiple ways to double your money until you reach the next step.

6. You must keep a diary of your progress as you work your way through your steps in order to track your progress in doubling your wealth. Do you beg, borrow, turn the cash into more profits, what?

7. Only worry about the step you are on. Just worry about doubling up to the next level. Once you are on that level, then you can start coming up with more strategies to reach the next, higher step.

8. You are not allowed to spend any of the money until you have reached a million dollars. You are not allowed to borrow it and pay yourself back later, or add more than you already have. Use only the money in the game and make it work for you.

9. If you lose money, you must drop down to the step which is nearest the one that you currently have in your possession and start to double up again.

10. You can use your own labor, but that will not usually help you much in the later steps unless you plan to make$1 million very slowly. But if you want to use it to make more money through your work, you can.

What You Will Gain (Besides a Million Dollars)

In playing this game, you will learn that:

1-You can achieve great things, even if you begin with nothing. The only resources you need to get started are a penny and yourself.

2-As your money grows step by step, you grow with it. As you work your way through the step, you will gradually change your money mindset to start thinking more about how the wealthy really manage to become wealthy. They do it in a number of ways, and you can too.

Becoming wealthy is about sales, marketing, and people. You can’t trade your time and labor for a significant amount of money. Most people believe that making a million dollars is about working harder and longer, because that’s the only experience they have when earning money.

But it is actually about working smarter, and using what you have to make more.

3-You can reach your goals with different strategies.

Going from $40 to $80 will be easy compare to $160,000 to $320,000, but keep at it. As you’re going through the program, be sure to write down the strategies that you’ve used to accomplish each step. The way your approach varies throughout the game will provide valuable insights as you continue to grow your wealth.

4-You can keep going.

You might start to fear failure at about the half-way point, but if you keep playing the game and following the rules, you can win.

It is all about having a more wealthy mindset.

What will you do when you gain all this money? You will probably be running a successful business, and indeed, more than one, so you will deserve whatever you would like to do with the $1.28 million you have earned. Take that $280,000 in ‘mad money’ and bank it or spend it. Then start thinking about playing the doubling game more….

FURTHER READING

For information on how to start your own business, go into direct sales, and more, visit Eternal Spiral Books to learn more from their transformational titles.

Share

How to Earn Extra Money Even in This Recession, Part 2

(continued from Part 1)

3. Try Fiverr.com.
Fiverr.com is a website that allows anyone to post a product or service that costs $5. The website takes $1, so your earnings will be $4 per task. If the task only takes 15 minutes to complete, then you have the potential to earn up to $16 an hour. If you can think of offering a service that doesn’t take a lot of time, you can make some decent spending money. Logo design, for instance, does not need to take that long if you are skilled at PhotoShop. There are also several other websites similar to Fiverr.com that allow you to charge up to $25 for quick services or products. A Google search for “Fiverr Clones” should show you several sites that are worth considering. Even if you are working full time, you can use your spare time after work, or even before work or during your lunch hour, to start earning more.

4. Buy a storage unit at an auction.
Or more correctly, purchase the contents of a storage unit. This practice occurs when people put items in storage and then fail to pay their rental fees. Eventually the property devolves to the rental place, who will sell the items in order to recoup their rent. The items will be auctioned site unseen. This practice can be hit or miss, since people might be storing a whole bunch of clothes or other personal items with little to no resale value. However, if you think about the success of eBay, you will know that many people are actually making a living from purchasing the contents of abandoned storage units and selling what they find. CDs, old records, books, tapes, and other collectibles can all be found in this way and sold on. Sell the junk at a garage sale and the good stuff on eBay. With a little luck, that $200 storage unit could be worth $10,000 or more.

There are certain rules, tricks and tips to selling on eBay that you will want to become familiar with before making such a commitment, so start small with a few items in your home and then take it from there. Also consider selling the latest titles as used books on Amazon. Become familiar with good packaging and mailing practices to be sure that any parcels you send out go by a traceable means and arrive promptly and undamaged. Remember that you will get ratings as a seller at all of the sites you participate on, so be prepared to offer good customer service.

If you still have a job but you are underpaid, underemployed, or both, these are just a few of the ways that you can make extra money to pay off debts, start an emergency fund, or start saving for your financial goals for the future.

Further Reading

For more great ideas on how to survive and even thrive in this recession, see: Your Recession Survival Guide

For more information on creating wealth to start your own business, see How to Start a Successful Small Business Even If You Don’t Have Much Cash

For more information on how to start an emergency fund, see Emergency Fund 101: How to Save Money for Unexpected Expenses

Share

How to Earn Extra Money Even in This Recession, Part 1

If you have been affected by the poor economy and are struggling to make ends meet, it may seem almost impossible to come up with any ways to make more money. After all, unemployment is high and there are no jobs, right?

Not necessarily. While there may not be a lot of full-time jobs with high salaries and a good benefits package, the truth is that just because millions of people have been laid off does not mean their work was not important and no longer needs to be done. It is true that some companies have outsourced the work overseas in order to cut down on costs, the truth is that there is a lot of part-time work available if you are willing to take it. And there are jobs out there if you are willing to take a pay cut.

Before you make these decisions, you need to run your numbers. Look at your household budget and trim any luxuries. Then look at the bottom line for the minimum you need each month to keep your household afloat without using credit cards or biting into savings. If you are unemployed, how does your level of payment match up? If it doesn’t you will want to go back to work sooner rather than later, even if you do have to take a pay cut. If you are considering a part-time job, see how it would affect your benefit. You may find that it pays more, though perhaps not much more.

If you are still working but have decided you don’t earn enough and/or want to save for a rainy day in an emergency fund, or for a particular life goal, then you will also want to look at ways to bring in additional income. Here are a few suggestions.

1. Get a part-time job.
This is the first idea that may pop into your mind when you think of sources of temporary income. If you have a certain set of special skills, then you can command a reasonable wage per hour. If you do not have a lot of skills, more menial jobs like shift work and waitressing can help you plug any gaps in your budget. Jobs that pay tips have the possibility of paying very well, though in this economy, don’t bank on it.

2. Freelance.
If you have skills that people need, such as designing websites or creating great graphics or PowerPoint presentations, your skills are in high demand right in your own city and indeed all over the world. Join one of the popular freelancing sites like elance, elancer, odesk or rentacoder and create a great profile for yourself and portfolio of your work There are a lot of people on there now due to so many others being in the same position as yourself, but quality and speed at the right price can help you stand out. You may be able to get enough contract work at one of these sites to keep you pretty busy and you might make more money than you would think. Just remember to stay in close communication with your clients and that good reviews will be the key to getting hired by others.

(Continued in Part 2)

Share

Credit Card Question, Part 2

Continued from Part 1
*Insurance Coverage
Also remember that charging certain items on a major credit card can confer some extra benefits. For example, car rental liability insurance is offered by some major credit card companies. If your card has this coverage, you don’t need to pay the incredibly high fees for the “loss and damage waiver” car rental companies try to charge you when you rent a car.

Insurance coverage for baggage lost when you fly is also available, depending on the credit card you choose. In fact, some credit card companies offering this insurance actually cover in addition to what the airline will pay you for lost bags. This baggage coverage is no cost on some credit cards and is well worth having. Travel insurance is also included, so that you would not lose the whole cost of the flight, and would just need to pay a ticket change fee of about $50 to $100 if an emergency cropped up. If the flight is a long-haul one, this insurance coverage is worth having.

*Consumer Protection
Price protection for items you purchase that drop in price after you buy them is offered by some companies. Stores must allow a 30 day ‘cooling off’ period with an unconditional money-back guarantee. They should honor any price differences and refund the money within 30 days. Some major credit card companies allow up to 60 days and will refund you such price differences.

*Fraud Protection
A debit card will not usually confer all of these perks. And indeed, the major difference is the most crucial one: You liability with credit cards in the event of identity theft or fraud will be zero or much lower with a credit card than with a debit card. With a credit card, if you suspect anything fraudulent, you have up to 90 days to report it. With a debit card, you need to report it within 2 business days. Otherwise, you will be liable.

If you do not look at your online banking account that often, or you are overseas, for example, this can be a major financial disaster. Therefore, use your debit card only sparingly for online purchases, and use a credit card instead because of all the extras it offers. Then pay off the bill at the end of each month.

*Determine Your Benefits and Weigh Risks Versus Rewards

One final suggestion is to take time to read all the fine print on a credit card application to determine what special privileges and perks you get with your card, or call customer service and ask. Then choose to use the card that gives you the most benefits in terms of cash back, benefits, insurance, and other perks.

Credit cards do not have to be a disaster and can indeed improve your credit score and even help you save money if you care cautious and learn how to use them to your advantage financially.

For more information on how to improve your family finances, see

Emergency Fund 101: How to Save Money for Unexpected Expenses

and

Your Recession Survival Guide

Share

Credit Card Question, Part 1

Q. I’ve finally learned my lesson when it comes to credit cards. After charging up four credit card accounts and spending four years paying them off, I don’t ever want to see my name on another credit card again. In fact, I want to cut all of them up and close all my accounts. However, my friend says that I should keep the accounts open and keep one card just in case of emergencies. Which one of us is right? And won’t a debit card work just as well?

A. Congratulations on paying off your credit card debt and being so determined never to get in that kind of position again. We are glad that you have found strategies that work well for you to help you manage your money.

However, your friend does have a good point about your credit cards, for a number of reasons.

*Your credit score and credit to debt ratio.
You credit score is in part determined by how much credit you are permitted by financial institutions. If you close all your accounts, you could be lowering your credit score. Therefore, now that your cards are paid off, keep the accounts open, but put the cards in a safe place where you will not be tempted to use them, except in the most dire emergency.

Keep one available with a low interest rate and possibly cash back points and only use if for essentials and items you could not readily pay for in cash, such as online shopping. The key for using a credit card is never to charge more in a month than you can pay off at the end of the month.

*Rewards cards
Some rewards are worth having, such as free airline miles for purchases, but only if you are a great traveller. Otherwise, go for the cash back. Just be aware that studies have recently shown that people who use rewards based cards tend to spend 4% more each time they use it than cards that do not carry such perks. So make your shopping list and stick to it.

Continued in part 2

Share