Category Archives: Smart money tips - Page 3

CD’s or Money Market?

Posted by on May 31, 2007 1 comment

money-market.jpgScenario: So you’ve got a nice stash of cash just laying around and you want them to be put to work. You also figured that you didn’t want to be too aggressive buy investing directly in stocks and at the same time you don’t want to invest in long term either so that rules out mutual/index funds.

So then you ask, “should I put my money in a CD or a Money Market”?

Good question. In order to make the right decision, you have to define your goals and needs. Getting it wrong the first time is all it takes for it to cost you the big bucks so you want to make sure that you do your homework first.

For those who do not know, Certificate of Deposit or simply CD, are debt instruments issued by banks and other financial institutions to investors. In exchange for lending the institution money for a predetermined length of time, the investor is paid a set rate of interest.

While on the other hand, Money Market offers many of the same benefits as CD’s but with the added features of a checking account. As far as the interest rates go, they are fairly close. Last I checked, CD’s were running at 4.90% and Money Market at 4.80%.

Here are a short Pros and Cons of Money Market and CD’s.

Money Market:

Pros: Depositing money in a money market is as easy as depositing cash into a savings or checking account. Cash is immediately available for alternative investments so you’re a lot more flexible with Money Market.

Cons: Money Market’s interest rate is not fixed. The rate of interest is directly proportional to the investor’s level of deposited assets, not to maturity as is the case with certificates of deposit. Hence, money markets are disproportionately beneficial to wealthier investors.

Certificate of Deposit (CD):

Pros: The investor can calculate his expected earnings at the outset of the investment since the interest rate is fixed. Certificates of deposited are FDIC insured for up to $100,000 and offer an easy solution for the elderly who desire only to maintain their capital for the remainder of their life.

Cons: Not as flexible as Money Market and will be penalized for withdrawing before it reaches maturity. If the investor opts for a longer maturity and, thus, higher rate of interest, he will lose access to his funds and forgo alternative uses of his capital.

Final Analysis: So if you are absolutely certain that you will not be needing that $10,000 for the next year or so, then I say go for the CD, but if you are not sure, then Money Market is the way to go.

[photo credit]

Time is More than Money

Posted by on May 10, 2007 6 comments

treemoney.gifTime, more than money, can help you achieve your life goals.

If you have a future in mind, whether it’s a home, starting a family, going to college, or building a nice nest egg, the main problem of achieving your goal is that money is tight and hard to come by.

The best tool you could use to help achieve that goal is time. It doesn’t take that much,  but just good time management and a simple plan which you can stick to. When is the best time to start investing? The sooner the better.

There are certain circumstances in which you might want to wait before starting to invest. An example would be, say you have a credit card debt of 5,000 and your interest rate is over 12%. In this case, it’s probably a smarter move to pay off your credit first before starting to invest because you don’t want to be losing 12+% each month from your debt.

Otherwise, the sooner you start the better. You don’t even need a lot of money to invest. You can start with as little as $20, $50 or more a month.

The more you save, the more you will have. The more you have, the harder your money will work for you.

Start now while time is on your side. The younger you are the more time your investment has to potentially grow. What is why it is important to start investing as soon as possible.

Lets do a recap of your possible future investment lineup:

Say you invest $100 a month at an 10% return.

1 year —- -$1,320.00 ($120.00+)

5 years  —-$8,058.73 ($2,058.73+)

10 years —$21,037.40 ($9037.40+)

15 years—$41,939.68 ($23939.68+)

20 years—$75,603.00 ($51603.00+)

In twenty years, you can turn $24,000 into a little over $75,000. And this is just with $10o a month. The sooner you start, the longer you have to let it grow.

When is the best time to start investing?

I’d say today is looking pretty good.

5 Basic Concepts To Teach Kids About Money

Posted by on April 14, 2007 9 comments

piggy2.gifOne of the most important life lessons you can teach your kids is to develop successful money management habits  and  a sense of financial responsibility. When it comes to teaching your kids about money, the sooner they learn the better.

  1. Help your child understand the value of saving money.  Here is where you start showing them the importance and the  benefits of saving money. This can be done with a simple but balanced form of an allowance. While they are young, giving them small amount of money will help them prepare for the future when the amount becomes larger.
  2. Discuss the privileges and pitfalls of owning a credit card.  Show that credit cards can be a very powerful tool which could help you dramatically with your finances and also in return, how you could misuse a credit card and how much that could affect your life.
  3. Give your teen ‘real world’ experience with money and budgeting. Instead of buying their yearly school clothes yourself, give them a set amount and let them decide what they need and what they don’t need. Emphasis that that is all they are getting so chose wisely.
  4. Teach your child how to track spending. Get them in the habit of tracking their spending by either getting a notebook or a creating a simple excel spreadsheet on your computer.
  5. Cover the basics of investing. It’s never too early to start explaining the general overviews of investing. The earlier you start, the better they’re equipped when it’s actually time for them to start investing.

10 Tips On How To Master Your Saving Skills

Posted by on April 6, 2007 5 comments

save-money.jpgGetting tired of trying to save and not seeing any results? Well follow these simple steps and watch your savings account grow.

  1. Set a goal or a target. Write down the amount you want to save and also a date in which you want to accomplish this goal. Get a general idea on how much you have to save per week or month to meet your goal.
  2. Don’t let your money stay idle. Keep idle cash in an account that pays interest.
  3. Keep your checking account low. Have enough money in your account to pay bills and move the rest to somewhere else to gain some interests.
  4. Put savings account on Auto-Pilot. Set up an automatic monthly or weekly transfer to your savings account from each check.
  5. Shop around for the best interest rates. There are many places that offer more than 4%, places like gmac bank. Their money market savings account which also serves as a checking account are current running at 5.10%!
  6. Fees are bad. Find checking/saving accounts with low minimum balances and little to no fees.
  7. Avoid ATM fees. Find banks who can reimburse you on those annoying ATM fees.
  8. Take advantage of banks that show transactions online. This way, you don’t have to wait for that monthly account statement to come in the mail and you can balance your account when it’s best convenient for you.
  9. Overdraft protection. We all make mistakes – avoid those overdraft fees by having overdraft protection for your savings and checking accounts.
  10. Learn to reason. The rule is simple, if you don’t need, you don’t get. Learn to differentiate between your needs and your wants. It’s good to treat ourselves every now and then but let’s not make that a habit.

Tax Deduction in 5 minutes

Posted by on April 4, 2007 No comments

taxprep.jpgLets make this short and sweet.

Most Individual taxpayers have a choice when it comes time to prepare for your Federal tax returns. Generally, you have two choices when it comes down to tax deductions:

  1. Standard Deduction – A base amount of income in which is not subject to tax or deduction used to reduce income by taxpayers who do not itemize. The standard deduction for 2006 is $5,150.
  2. Itemized Deduction - A deduction based on a list of allowable items that a person can claim.

In other words, the taxpayer may generally deduct the total itemized deduction amount, or the standard deduction amount, whichever is greater. Everyone should explore their options and opportunities for itemized deduction before choosing to go with standard deduction. Here are some things you can deduct if you choose to itemize.

  1. Home ownership – For the most people who itemize, mortgage interest and property taxes are the largest deductions. You may also be able to deduct “points,” a type of fee paid when obtaining a mortgage.
  2. Sales tax – Taxpayers who itemize deductions can still deduct either state and local sales taxes or income taxes on their 2006 returns.
  3. Charitable gifts – Almost anything you donate to a charitable organization is deductible
  4. Work related costs – If you paid expenses for your job that weren’t reimbursed, you can deduct them, as long as they add up to at least 2 percent of your adjusted gross income
  5. Students/Teachers – If you’re a student or a teacher, you may qualify for two new tax deductions authorized by Congress late last year. Higher education expenses or out-of-pocket expenses for teachers.
  6. Property losses – For items not covered by insurance, you can deduct property losses from theft, vandalism, fires, storms, hurricanes, floods, tornados, and earthquakes.
  7. Medical and Dental expenses – You can deduct these expenses, but only if they’re more than 7.5 percent of your adjusted gross income.

How to save on grocery

Posted by on March 29, 2007 No comments

costco.gifLets face it, we’ve all at some point tried to find ways to save money when going out for some grocery. I’ve come to this simple conclusion on how to save money. Buy everything in bulk. You can save so much money this way. Forget spending your Sunday mornings cutting out coupons, just get everything from a wholesale store. I have been buying things from wholesale stores off and on but it didn’t strike me until recently when I went to Costco and realized how much I actually saved.

Here are the things that I bought that saved me some money:

  1. A case of bottled water (36 bottles) $4.56
  2. A case of eggs (36 total) $3.29
  3. 24 variety pack of Gatorade (20 oz.) $10.79
  4. A huge box of Honey Bunches of Oats(46 servings) $5.67
  5. A case of 12 cartons of Soy Milk (4 servings ea.) 10.79
  6. A box of 32 Yahoo $6.29

The total came to  $41.39 but if I would have bought these at Safeway or Giant, I would have spent well over $50.  I know in Costco there is a one time membership fee of 50 dollars but it’s well worth it. You can split this in half with someone else to reduce the cost and you both can get a Costco membership card :) There are plenty of wholesale store. Some of the ones I know of includes Costco, Sam’s Club, and BJ’s. There’s probably a lot more out there so do your research and find the wholesale store near you!

How I plan on using my tax return

Posted by on February 23, 2007 1 comment

vm_tax_story.jpgSo it’s that time of the year where everyone is gathering all their paper works and getting ready to fill out those tax forms. Almost everyone I know has already filed their taxes, and so I guess that leaves me. Well the reason for that is because I have been pretty busy these last two weeks, and also I’m kinda paranoid that I might not file them correctly if I rush and not get back as much as I could, so I waited. My goal for this week though is to get all my paper work together and get it done this weekend. This past year, I paid a little over $4000.00 in taxes so it looks like I should be getting back around $2,500.

So what is my plan for my tax return this year? Buying new clothes? Adding more DVDs to the collection? Going on a nice trip to Hawaii with the Girlfriend for spring break? Nope, it’s better. Instead, every penny that I get back it’s all going to help pay off my debt on my credit card. So after my tax return gets here, I will be extremely close to being debt free. I can’t wait. That gives more of  a reason to file my taxes asap. So I hope that I will be able to do so this week.

After getting out of debt, I can finally start contributing to my Roth IRA and so much more other fun investment funds. :)

Debt management

Posted by on February 17, 2007 2 comments

debt-reduction.jpgDid you know that the average American household with at least one credit card has nearly $9,200 in credit card debt? That’s quite amazing isn’t it? Looking at the number, it is a little hard to believe that the average is so high, but when you realize that our nation is built on credit, it becomes a little more easier to gulp down.

There’s the good and the bad:

When I look at debt, I see it as two kinds of debt. There’s the good debt and the bad debt.

You accumulate good debt when you’re borrowing money for a student loan or for a home. You just have to make sure that you don’t borrow more than you can pay back.

Bad debt is using your credit card to buy things like food, clothes, DVD, etc. This is the easiest way to fall in debt. When you get in the habit of buying things with your credit card, in return you also want to get in the habit of paying it off in full that month.

The general rule is that you don’t want to get in a habit of using your card unless you plan on paying every back that month, this is the fastest way of falling in debt. Here I have gathered 3 general debt management tips.

Debt management tips:

  1. Make a budget journal. Most people spend thousand of dollars without too much though as to what they’re buying and that’s why people are surprised at how high they’re credit card is. Get a nice journal and start writing down everything you spend. At the end of the month you’ll know not only how much you spent but also what you bought. This way, you will know what you can cut back on and how much less you want to spend the following month.
  2. Pay off your highest-rate debts first. On average, most people have more than one credit card. The key to getting out of debt is to first pay down the balances on credit cards that charge the most interest rate while paying at least the minimum due on all your other debt. Once you finished paying off the highest rate, then start tackling the one next highest.
  3. Expect the unexpected. You want to expect the worse can happen at any given time, so start making an emergency account. You want to have enough saved to last you 3 – 6 months of living expenses in case of those emergencies. If you don’t have an emergency fund, a trip to the hospital or damaged car can seriously upset your finances.

If you end up with more debt than you can manage, then you should get some help whether it’s from a professional or someone you know before it’s too late. It may be embarrassing to ask a relative for some help but that’s alot better than ending up with bad credit.

Quick saving tips to go

Posted by on February 13, 2007 4 comments

Although I enjoy reading a nice long article, I know sometimes I just want to get straight to the point.  So here I devised a quick “on the go” list for those who are trying to save on the daily basis about some daily stuff. Thinking to save is a good habit to get into so lets get to it.

  • Avoid ATM machines that charge fees. Those $2.00 fees will hit you like a ton of bricks when you do your end of the month net worth calculations.
  • Avoid eating out all the time. Learn to cook. I can cook ramen noodles and they save me tons of money.
  • Go cellular. I don’t even have a house phone, I just use my cell phone for everything. It’s more simple that way and saves me money.
  • Write letters or use e-mails instead of calling long distance. On second though, scratch out the letter, 37 cents can go a long way. Just write emails.
  • Resist peer pressure. If you have friends who like to go out to the movies or anywhere else, learn to say NO if you can’t afford it.
  • Learn to reduce your heating and cooling costs. Make your home more energy-efficient.
  • Try to buy things on sale. Don’t buy until you look around other stores and you’ve compared prices.
  • Use coupons, cut expenses. They’re everywhere, you just have to look.
  • Keep track of your spending. The more you know where you stand with your finances, the better your off.

If you have a tip or two you want to share, don’t hesitate to leave a comment. I would love to hear from ya.

The Importance of finding a good realtor

Posted by on February 12, 2007 No comments

realtor.jpgHello everyone,

This is Kris from Mill1on, I am guest hosting for andy today. I wrote an article called the Importance of finding a good realtor. It discusses the advantages and disadvantages of hiring a realtor. So lets get to it.

 

Studies have shown most people that are in the process of buying a home, or selling their home would never make the choice of doing it themselves again. Buying a house, or selling a house can be a difficult thing to handle, especially if it is your first time. Most people don’t know the first thing about finding a house, or selling their house. That’s why they have professionals out there to guide you in the process of making one of the most critical decisions one can make in their lifespan. So you ask yourself…

 

“What are the advantages and disadvantages of hiring a good realtor to sell my home?”

 

Here are a couple advantages of hiring a realtor:

  • A good realtor will determine what your property value is given in the area you live in. They will have a higher chance to sell your house at more than you could have done yourself.
  • A good realtor will also take care of all the legalities involved with selling a house. This can be very time consuming and difficult for first time sellers.
  • Last but not least, a good realtor will take care of your home as if it is their own. They will guide you through the process and make it very comfortable for you to sell your property.

Here are a couple disadvantages of hiring a realtor:

  • You must handle all the paperwork and legalities on your own. Disclosures, home inspections, valuation, negotiating the deal, closing, etc.  In addition to taking up a lot of your time, all this involves expert knowledge about real estate and the selling home process, which you may not necessarily have.
  • Buying or selling a house can be very time consuming. Not many of us have the time to go through the process of selling a house.
  • Homes that do get sold by their owners typically sell for lower prices than similar homes sold through Realtors.  This is because real estate agents are professionals in their field and know how to price your home for sale, as well as negotiate expertly with the buyers to get top dollar for your home.

I know when I buy or sell my first house I am going to hire a realtor to guide me through the process. Will you?