Investments & Loans

Here is a quick tip for increasing you productivity at work.

It is not always the case that you need to work harder at work to progress.. sometimes you need to find ways to figure out how to work smarter.

One tip that I could give you in the work place is to make people stay on task when they call you. Do not get caught in “hi, how are you going..” type of phone calls. 5 of those before lunch and your morning is shot.

Make people stick to the point.

Investments & Loans is a personal finance blog. Personal finance blogs love to talk about saving money. And, we love to talk about being sensible with your money. And on some of the better personal finance blogs we love to talk about how to make money.

Investing

Investment strategy that is smart, that you can understand and that you can control is one of the foundations to increasing net worth. Here we support two basic investment philosophies.. The Bogel Style and The Buffet Style.

(At least that is what we like to call them..)

Bogel Style

Bogel Style is all about index fund investing. The Bogel style is one that thinks Index Funds are good. No make that great. (Obviously not mutual fund employees here..)

What are Index Funds?

Index funds are essentially a snap shot of the market. They are passively managed, pooled investor funds, which are placed against stocks that make up a reflection of a market index (for example the dow jones, or the all ordinaries). The fund buys stocks in the exact proportions they exist in the market index. So, what happens to the market happens to the fund.

Natural market forces is the idea here.

If you ask the theoretical experts, like your friendly Harvard professor for example, if it is ridiculous to believe you can outperform the market for the long term, they will agree.

Index funds match the market. And the market does very well over the long term. So, if you are looking for a place to keep your money. Index funds might be a good start.

Buffet Style

When it comes to out performing the market, no one does it better than Warren Buffet. Buffet Style is one that goes for Value. Warren Buffet famously seeks to buy undervalued investments, and will wait years for the right price.

This is the essence of the Buffet style. Value investing.

The Buffet style waits patiently until it finds an investment that is under priced. And then it holds nothing back in its acquisition. This principle can be applied to wealth accumulation, your career, your private business ventures, whatever represents value to you in your life. Wait for great opportunities and then seize them.

This is especially so in direct stock investment.

If you are one that is keen to dabble in the stock market, whether seriously or just for fun. Value investing is worth investigating. To be a good value investor you need to understand the stock you are looking at, you need to do your research and you need to understand the market for that company too.

The better you understand these fundamentals the better your eye for a good buy will be.

A pretty easy way to make money is to renovate your principle place of residence.

Like all money things this is not what suits everyone. And I have decided lately that the only reason there is not a billion people doing it is because some people just hate the idea of it altogether.

The basic point is that you do not pay capital gains tax on you principle place of residence. So, you can by a property that you can work on and fix up, thereby increasing the capital value of the property.. flip the property for a profit, and pay no tax. Sweet.

This is a common dilemma with many people. Am I better off if I buy a house or if I continue renting? As with all personal finance questions, the answer is “it depends”.

It depends on what is most important to you.

Pure Finance

If you are looking at the pure finance of the decision then you are better of renting. It is a fact that unless you buy with a view to add value via development, you will come out miles in front if you are renting. The cost of a mortgage is so HUGE, and the opportunity cost of having money tied up in the mortgage, versus out in the market place earning all sorts of ridiculous interest at the moment is very high.

Something to ponder. Next in the series: Is money everything anyway? The downside of pure finance.

Retirement planning is crucial. The wrong move can be very hard to correct when it comes to retirement. So, what are the top 5 mistakes people make in retirement?

1. Withdrawing money too soon
By withdrawing your money too early you can get hit with an early withdrawal penalty. Generally, 10% if you withdraw before age 59 and a 1/2. There are rules that allow you to withdraw from age 55. But, you need to follow the guidelines carefully.

2. Withdrawing money outside the tax sheltered environment
If you withdraw your money outside the tax shelters of your company plan or a tax deferred haven like your IRA, you will have to pay state and federal taxes.

3. Taking a check
If you role your savings into an IRA, make sure you get the money sent direct. If your company plan cuts you a check you will have to pay state and federal taxes.

4. Not seeking professional advice
All these pitfalls are easily avoided by interviewing and hiring a trusted, professional financial adviser. (And if they mess up.. you have the legal system to fall back on..)

5. Company Stock
If handled correctly you can just pay tax on the purchase value of your company stock. Not the market value as it stands today. But again, you have to carefully follow the guidelines. The difference between purchase price and market price can be substantial over a 30+ year career.

Okay so maybe a million dollars is a bit of an exaggeration, and maybe I was just trying to get you to read the post.

But, here we present the popular Simple Living series for another week, and this week take a look at how to save big, long term, dollars through huge savings on your food bill.

How?

Keep reading →

Bogus overseas banks.

The con man, the promoter gets people to think that there are high-return, low-risk financial instruments sold by elite overseas banks. These prime banks do not exist. Using complex terms and promising that their funds are guaranteed, promoters collect money that they then often use to pay for cars, vacations, homes and risky investments that the investors have no idea about.

I got an email from a reader the other day letting me know the link to subscribe to the feed reader was down.. thanks! It is now all fixed up.. and we have (in case you did not notice) spruced up the site a bit, with a new theme. Most people think it looks a little more pro.. let me know what you think via email or leave a comment.. good, bad or ugly I do not mind.

Sound too good to be true? Is this personal finance guy really trying to tell me ANYONE can afford everything they ever wanted? Wait for it, I bet this is going to be another “positive thinking” and “personal power” Anthony Robbins style post.

No it is not.

This is a personal finance blog. We talk money here. And we do it with a lot of down to earth pragmatism.

There are 5 factors that will determine if you are going to live a life filled with the “stuff” you want, and the lifestyle you seek. But, I will say right up front here, none of this stuff is “hard”, absolutely anyone can do it, BUT the is an ART to it, a way of going about it that will mean some are better at it than others..
Keep reading →

If you are in your 20s what are some of the important things to think about with your money? How can you help create wealth? and grow your money? Here are some of my own suggestions, and if anyone has any other ideas or suggestions please leave it in the comments.. Keep reading →

Today I posted a link loving list of 25 ways to save money. I thought it was only fair that I sit down and put some effort into sharing my own sage wisdom of 25 ways to save money.

It is certainly an interesting exercise, to sit and think about the ways you save money. For me anyway, because my focus really is always on generating income, increasing my capacity to generate cashflow into our family businesses. The basic philosophy being twofold.. one, if you have lots of money, you do not have to really worry about how the bills will get paid.. but, two if you have no money, all the greatest saving strategies in the world are not going to help your situation much.

But, having just shot this whole series in the foot, let me redeem it a little by mentioning the two biggest factors in long term financial success are patience and discipline.. and they go very well with cost control and saving ideas. And, I think you need to have a flair for both sides of the balance sheet if you are going to accumulate $1M and retire in comfort.

Anyway, enough tangent activity.. here is InvestmentLoan’s list of 25 ways to save money:

Keep reading →

No it is not “the secret”.

But, something entirely more pragmatic.

The only sure-fire investment, no matter the market trend or the economic situation, is yourself. If you want to achieve financial freedom and independence, then you need to start relating to yourself as a business.

You need to invest in yourself. You need to market yourself. You need to differentiate yourself from your competitors. And you need to “grow”.

You are your number one, biggest, factor in achieving financial freedom.

But, very few will achieve it before they retire, from work alone.

Keep reading →

Over the last couple of years my wife and I have held onto the dream of working from home and making money on the internet. I am happy to say that we are closer than ever these days.

It is interesting as we have gone along to notice that each of us seem to have a natural inclination toward different aspects of the internet’s many and varied ways of making money.

My wife in particular is drawn to ebay.

She loves the idea of a global marketplace, and inparticular the idea that she can find “bargains” in almost any category, that are WAY in front of what you would pay in physical “offline” retailers.

But, as a result of her growing fascination with the ebay market place she quickly worked out that she needed Credit Cards. My wife worked out that at different times (seasons) different countries had increased supplies of various products and also at different times through the year the prices went up and down in different countries.

And for her to be able to pay for the things she wanted to buy (and in alot of cases re-sell) she needed to be able to use a credit card.

Previously, she had relied solely on bank transfers. Because all the purchases were in our home country. But, now, even to use paypal, she needed to have a credit card.

At first, to my frugal living loving (that’s a mouthful!) and credit risk averse wife, this was a little daunting to say the least. And she has come up with her top 5 tips for new credit card users as a result:

1. Set your own limit.
Although you may be approved for $2000, try to work out your own budget in advance, and set your own limit.

2. Learn. Study. Know more.
There is alot of red tape, it may seem, with credit cards. Make sure you know the ins and outs of your card. That way you can avoid unnecessary interest payment problems, but also utilize any loyalty program offers that go along with the card.

3. Pay of your balance.
Always pay your balance off each month. If possible, to avoid excess interest payments.

4. Keep receipts.
Especially if you are buying online. But, also to keep personal track of your spending, so you can track it against your budget.

5. Restraint.
Do you have the mind-set that just because you have a limit of $2000, you now have $2000 to spend.

Driving Home a Bargain

Petrol rebates from credit cards and the retail stores you shop at add up. You might save $1000 a year from becoming super disciplined about how and where you buy your fuel.

Emergency Cash

Where do you keep your emergency money? If you have it in a current account that pays 1% you might want to look around for some short term CDs that pay 3-4% or online savings accounts that also pay around 4%.

Small Change

Having a money jar is perhaps the all time frugal tip. It might be a common one, but it really can add up. We would save over $1000 each year in our family from the family money jar.

Big Bills

If you budget in advance for big bills by paying them off each week or fortnight (I would suggest you time it with your pay days) into a high yield account (for example the online savings account mentioned above) you will see the interest mount up over the months (and years). Plus the money will always be waiting for the bills when they come.

Low-Cost Funds

Low cost investments like index funds will see you save 1-2% minimum over regular mutual funds.

Credit Freeze

Another good ol’ tip.. freeze them cards in a pan of water. If you really NEED anything THAT badly, you will be able to wait for them to thaw out.

More and more of us are opting to follow our passions when we invest. This year, high-income families will place 22% of their assets in alternative investments, according to Capgemini and Merrill Lynch, up from 10% in 2002.

How do you invest?

It seems some of us feel an increasing need to connect emotionally with the things in which we investment our money.

It also makes good sense.

If you have a passion for the things in which you invest you are also much more likely to go deep with your research and also much more likely to pay careful attention to the balance and mix of your portfolio over time.

Passion is key to success

Passion is one of the fundamental keys to success. I was watching an interview with Christina Aguilera on the weekend and something she said stood out.. here you have a performer worth in excess of $60Million, just coming off one of the all time successful records.. and her comment was “You have to stay hungry”.

Finding those things that really drive us.. whether they are the good things that success and achievement will bring.. or whether success is the by-product that will come of investing ourselves deeply in our passions. The same line holds true.

Passion remains one of the fundamentals to success. If not the actual foundation itself. I remember the equation I was taught growing up that success = ability x effort. And the emphasis was always on the fact it was a multiplication sign (rather than a plus sign).

So, if you had 10 out of 10 for ability and 0 effort your results were going to be 0. But, if your effort was something, any ability was going to produce a result.

Passion in Investing

The same principles apply to any task. Investing included. If you have passion for your investments you will have a good chance of success. (At least one side of the equation will have some numbers on it)

As promised we are going to show what some paid posting look like as a case study (and make a little money..) please feel free to email me or post a comment and tell us how you feel about paid posting.. the jury is well and truly still out here at Investments & Loans.. some of our writers think the idea is okay and others think they are terrible and mess up the old school, hardcore finance writing they think they stand for (lol).

Anyway.. we will be posting a few over the next week.. they will all start with “Cash for Comment” so feel free to rip them apart on the comments or just skip over the post.. or whatever.. like I said this is just to show one of the ways you can make money on your blog. I will also do a summary at the end with how much each post was worth, and we might be able to work out a cost benefit comparison for this money making strategy. And hopefully at the end of this online money making ideas series you will have found at least a few ideas to put some extra money in your pocket.

An irregular round up of the best finance and business links being socially book marked on the web..

First from Digg.com

1. 1 Million borrowers may be at risk of defaulting on their mortgages
2. 25% of Americans say they have no savings, including retirement
3. The world’s cheapest cars
4. Meet the world’s new 2nd richest man

And from Delicious..

1. 101 ways to make money online
2. 102 personal finance tips your professor never taught you

Sometimes it is helpful to see how you are tracking against the national average with your money..

Credit Card debt

Does it surprise you that less than half of Americans (46%) carry credit card debt? It surprised me. Let’s have a look at the median level of debt. It is broken out as follows for the different age groups:

Less than 35, $1500
35-44, $2500
45-54, $2900
55-64, $2200
65-74, $2200
75+, $1000

How does your credit card balance compare? (If you are wondering, we only run a debit card in our household.. so our outstanding balance is always $0)

Mortgage Debt

Most people aim to have their mortgages paid off as they head into retirement..

Percentage of people with a mortgage..

Less than 35, 37.7%
35-44, 62.8%
45-54, 64.6%
55-64, 51%
65-74, 32.1%
75+, 18.7%

The statistic that 18% of the 75+ age group carry a mortgage blew my mind a little bit. I think I just had this picture of our elders as being debt free and living happily ever after.. (Did you see this article in our most recent speed links.. 102 year old man takes out 25 year mortgage?)

Median Mortgage Balances

Less than 35, $107k
35-44, $110k
45-54, $97k
55-64, $83k
65-74, $51k
75+, $31k

At least the oldies only have a median balance of $31k in their age bracket. So, how does you mortgage stack up? One stat that I looked for but could not track down (yet..), is the ratio of debt to income that people have in today. I have a suspicion this would be a lot higher today, than say, 30 years ago. And it is this type of statistic that might reveal what I suspect is the truth, that people are under a lot more subtle financial pressure because of high levels of personal debt, today than in days gone by.

So. How are your numbers? Are you in front of the curve?

References: 1, 2

Latest edition of Speed Links.. an irregular round-up of the hottest, socially book marked links in finance and business blogging..

First, Digg..

1. Ten things your restaurant will not tell you
2. 102 year old man takes out 25 year mortgage
3. Where company names came from
4. Ruling against Vonage signing any new customers

And, from Delicious..

1. How to change the world and get the attention of venture capitalists
2. Microsoft is dead
3. Interview with Eric Schmidt (CEO Google)