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17 | § ¶Life Insurance
-- Is it worth it? How much?
People are afraid of dying, that is why it is so easy to sell people life insurance!
The idea behind life insurance is that if you die within the term of the insurance, someone else (possibly your kids, or spouse) will receive a certain amount of cash. Life insurance will not recover you from death: you will still be dead.
The question you have to ask yourself is: "How much does my family needs if I die?"
This is what will determine if you should go through the trouble and expense of acquiring Life Insurance. Sometimes, you are already covered, or need less than you might think.
For the easy answer you may want to go to: Smart Money and/or Bank Rate for their calculators. For the more detailed answer, keep reading.
25 23 | § ¶Katrina, Wind, and Floods
-- Time to Reflect About Flood Insurance
My heart is with the victims of the Hurricane in the southern part of
the US. Katrina has been devastating to many families. I
can truly say I understand the despair they may be suffering right now,
as I lived my first 19 years in a Caribbean island where category 4 and
5 hurricanes where common: once every few years.
The Red Cross, The Salvation Army, Lowes, and Walmart.com have provided
easy ways to donate money to help the victims of such natural disaster. If you can, contribute generously.
This should be a good opportunity for all of us to review our home and property insurance coverage.
A common mistake we do is forget about Flood Insurance,
which is
not covered by most Home Insurance policies and is so
devastating. Flood damage is so costly, and so common that most
insurance companies rely on government sponsored insurance, and they
just act as reseller to such policies. Check out the Flood Smart
government site. There you can find out what is covered by Flood
Insurance, how much of a flood risk a house has (yours, or the one you
want to buy), and who can sell you the insurance policy.
18 12 | § ¶Two Side Blogs
-- Extra Reading
Today I created two side blogs for special interest posts:
- Stocks For Me - http://StocksForMe.blogspot.com - (RSS) - On this website I will publish commentaries about the stocks I have on my portfolio, and the ones I would like to have if I had a chance (more money). I rarely publish my portfolio or specific financial situation on the http://www.MoneyAndInvesting.net (RSS) since this website is for time tested advice and general ideas, as opposed to telling you my financial life story. Stocks For Me will be more focused on what I have done and will be doing on the stock market.
- Side Business - http://SideBusiness.blogspot.com - (RSS)
- How much would an extra $100 a month help you? It depends on
your current financial situation. For a stay at home mom it could
mean she will be able to afford some simple luxury at last. For
someone without a job and without a car means that in a few months
he/she will be able to buy a car and get a regular job. For
someone at college means that he/she can save for a Spring Break
trip. For someone who says "I can't afford to save", means the ability to save from now on. And for someone deep in debt it means faster debt repayment.
Side Business suggest ideas on simple things that you can make to get those extra $100 a month, if there is the need. It is a way of changing from a "I don't have the means" mentality to "I can have the means if I want to" mentality.
9 26 | § ¶A Day Without Driving
-- Pick a Day Every Week
Most of us would like our cars to be more efficient. Some of us
may even dream about changing a gas guzzling SUV for a gas sipping
Prius or Hybrid Civic. Realities of life tell us we are stuck
with the car we have for a while: if we trade-in the car we have,
we will probably loose money or convenience, and our family size or
work requirements may require (or so we think) a light truck.
Then, what can we do to save fuel and save our nation from soaring oil
prices (oil prices have an impact in everything in society)?
I have a suggestion: Declare One Day A Week Without Driving! I tried it this week.
Let me explain you why I think this may be a good idea.
23 11 | § ¶Why Buy A Home? - 5 Good Reasons
-- Part of The American Dream
Home Ownership can be very rewarding. You should seriously consider the benefits of owning a home (condominium, townhouse, single family). In this article you will find good reasons for owning a home, and good things to keep in mind while owning the home.
There are many reasons why people buy a property. These reasons include:
18 17 | § ¶Home Equity Lines of Credit
-- And Why You Should Avoid Them
It is hard to understand how people could be so fanatical about Home Equity Lines, Second Mortgages, Equity Loan, whatever you want to call it: a mortgage applied on the Equity of your home. To be more specific:
A seccond secured loan on a real estate property that must be repaid, ussually at a higher interest rate than the original loan, in a shorter time period, and on which the bank has the right to reposess your house and auction it if you fail on payments. -- Jose Anes (My own definition).
Many of the goals of Ownership, Finantial Freedom, Investing, and Real Estate Laddering are thrown away every time someone gets a Home Equity Line. The Equity and Ownership that is so hard to obtain in a home is commonly eliminated or destroyed when people take these kinds of loans.
I do not want to say that that Home Equity Lines are absolutely bad. There are good times to use them, and bad times (mostly bad).
Lets start by the good reasons to use them (The Good): Read More
15 15 | § ¶Green, Socially Responsible Investments
-- For the rest of us
Sometimes I think that I would like to make money doing something that feels good. With the energy crisis right now I feel like it would
be nice to follow Danny's advice left on a comment on this website:
"By the way...I would venture a guess that, if someone has the $$$ for investing, they may want to consider investing in US companies that are working hard on producing alternative fuels. We won't be giving the $$$ to other countries, and it'll give the US an opportunity to produce another marketable, exportable product, one for which others will rely on the US." -- Danny>
Socially responsible investments are not always the most profitable,
nor are necessarily perfectly aligned with your specific definition of
'socially responsible'. I took the time to research potential
investments that performed well and contributed to a better
environment. The search was difficult, specially when the followed
the following criteria was applied:
- Returns - At least matching the Standard and Poor's 500 Index for the last year.
- Clean Energy - Contributes to clean energy production.
- Low Minimum Investment - (Mutual Funds Only) Allows to start with a little amount of money: less than $2000.
19 17 | § ¶A Basic Savings and Investing Strategy
-- To Cover Most Needs In Life
Note: In this article you will find a good Savings and Investment Strategy and suggested investment vehicles for the beginning investor. ( Low minimum initial investment accounts at the end of article. )
Most people agree that they need to save and invest more.
However, most people find these three challenges (in that order):
- Priorities: Saving and Investing need to be perceived as a higher priority. There are many needs and wants competing for the money in your pocket.
- Cash: Investment cash has to be made available. My advice:
dissapear it from the pocket. Make some cash unavailable for your
needs and wants, and make it available for saving and investing. Automatic investment plans are a great choice.
- Organization: An easy to use savings / investment strategy and investment vehicle(s) have to be available and identified. (This is what you will find in this article)
I believe a basic Savings and Investment Plan should follow the Pay Yourself First Principle and follow the 10+/10/10 Strategy:
Read More 26 18 | § ¶Stop Buying Trinkets
-- Don't Make That Mistake Again
We in America tend to buy a lot of stuff. Stuff that we may not even use for too long or even at all. In the meantime we are giving away not only hard earned dollars, but the land of our nation, and the economy that sustains it. The proof is that the once all-mighty dollar has recently lost value.We sold our building to the Japanese, but it doesn’t make any difference whether it’s the Japanese or anybody else. We sold our buildings at ABC two years ago for about $175 million. That was equal to one day’s trade deficit with Japan. They sent up a bunch of VCRs and things, and we sent them the title to 54th Street and 6th Avenue. And we use up the one thing and they’ve got the other.
It’s got sort of a poetic justice to it. As a matter of fact, in 1626 I think, Peter Minuet handed a bunch of trinkets to the Indians and they paid him the island [Manhattan]. And now, people are handing us the trinkets, and we’re giving them the island. It happens every day. The trade deficit will be $100 billion plus, and that means we are giving out IOUs to the rest of the world that will draw interest, which are claims of future production of everybody in this room.
-- Warren Buffet, 1991
The recent bid from China for the Unocal company is an example. They did not succeeded on this big one this time, simply because of political pressure. But these figures may be surprising: Read More
10 24 | § ¶Margin
-- Risk Gets Riskier
I believe margin
trading, just like any other kind of loan, can be over-abused. I
have overextended myself with margin trading on a few occasions.
The best thing is that I have learned from it. My new theories
(soon to become part of my personal rules) are:
- Never keep a margin to assets ratio of more than 20%. Try to keep it under 10%.
- Never keep a margin amount greater than the amount of cash you can add to your investment accounts within three months.
- If you do not trust yourself on following the two above, don't enable margin trading on your brokerage account.
Then again, when done incorrectly, it can be a lot worse than credit card debt. Let me tell you why. Read More
15 23 | § ¶Are Your Retirement Accounts Ready?
-- Retirement Calculator
I have two financial milestones in life:
- Retirement At 60 - No more work, a lot of travel, time to
visit family, friends, and to teach at college. I feel like I am
already covered for this milestone between my retirement (401k, IRAs)
and taxable accounts. I am 30 and my mortgage will be paid off in
17 years. I will be able to live on a fixed income of $36,000
before tax money (inflation adjusted, of course). It will cover
my fixed expenses (based on current, except medical): real estate taxes
($500), Utilities/Food/Necessities ($500), transportation ($200), misc
($500), medical ($900), and taxes ($400).
- Financial Freedom by 40 (better if at 35) - To have no need for a salary.
To be able to cover my expenses (similar to above) from my taxable
investment accounts. Preferably it would be out of revenue
produced by the assets (dividends, rent, interest), as opposed to
eating into the accumulated assets. This topic will be discussed
in a different article.
To do so, I have prepared a Retirement Calculator spreadsheet that I want to share with others. Please, provide feedback on it. Read More
20 16 | § ¶Diversification: Can there be too much of it?
--
If you have been paying attention to the financial media industry, everyone recommends diversification (I agree on this first part). Every financial author and their grandma's cat also have the ideal diversification profile that they believe you should follow for your particular risk tolerance, age, and other demographic information.
I do believe in diversification. It did worked nicely for me during the stock market bubble: real estate and bonds compensated for the losses in the stock market. And now that the stock market appears to be recovering and everyone is talking about a real estate bubble, I may benefit again from a diversified portfolio. It does reduces risk, but only if done well.
And doing well do not means blindly following some Wise Financial Advisor diversification model up to the last .05%. Let me explain you why.
17 25 | § ¶Is my career an investment?
--
A friend of mine suggested that a professional career was a way of
diversifying your investment portfolio, reasoning that if other
investments where lousy, she would still have an income to support her.
Are professional careers an investment?
Absolutely! A career is a personal investment. It is a very
important thing to have. Most people need one, and the better
they build, the better quality of life they will have. Build up your career as much as you can!
But it is not a financial investment in a traditional
sense. Careers are a source of income. They can even
contribute to a diversified income. But I would not group them on
the same place as financial investments. A career is the way to
feed investments, and the better you build up your career, the more
investments you will be able to make.
Let me explain you why.