Smart Saving and Investing

We’re nearing the end of the month and for those of you who get paid at the beginning of the month, make it your goal to open an online savings account this weekend at one of the following if you haven’t done so:

• HSBC Direct or
• Emigrant Direct or
• …the online saving account of your choice.

I’m only going to give a couple popular choices and if you want to take the time to search the Internet for online savings account reviews go ahead. The purpose of this site is to get going instead of doing nothing or get stuck in analysis paralysis.

The two online savings accounts I suggest are popular, easy to use, and besides, I use them and my daughter does too. But again, the disclaimer monster makes me say, “That’s the way I save, I’m not telling you, that you have to save the same way I do.”

This is also the first action of the three actions I talk about to make your saving and investing life easy and automatic. A lot of folks have written about this automatic stuff but I guess the person who made the biggest splash with automatic savings is David Bach and his The Automatic Millionaire, A Powerful One-Step Plan To Live And Finish Rich.

What you’re going for here is the automatic part of saving for your “Rainy Day” funds. I don’t separate rainy day funds and emergency funds because a lot of people can’t afford to separate to that degree.The Top Ten Reasons To Start Saving Money:

1. You’ve lost your job and you need some funds available to carry yourself or family for some time go to Puerto Vallarta and open up a Parasailing business. That’s what I’m talkin’ about.
2. You need a $1,100.00 brake job. And no, you don’t know any good mechanics who will do it tomorrow and have it done by the end of the day.
3. You’re puppy needs an arthritic joint removed in her hind leg. Poor puppy.
4. You’re family member needs some money and your their bank (I don’t know about this one)
5. You’re Sump Pump stopped working during the largest rain storm you’ve ever seen and you’re not home when it happened.
6. You built a Pergola over your deck. You went out of town for three days and no one was watching your house. You come back and discover the support boards for the Pergola that you built were not screwed into the joists that you thought were there and now the who freakin’ thing has crashed through your sliding glass doors. There’s glass all over the kitchen floor. Dang!! I hate when that happens.
7. You live at the end of a T street. At the top of the T, a car careens down the shaft of the T with no one in it. It barrels up your driveway (at the top of the T) and smashes through your garage door. Well, hopefully insurance would cover this.
8. You’re in a car, careening down a street about 25 miles per hour (careening?) and you think you lost your brakes. So Fred Flinstone images come to mind. You decide to open the door and stick your foot out and use it to act like a brake. Actually your brakes didn’t go out. You’re car stalled and you didn’t even know it.
9. You meet your girlfriend at the pool when your in junior high during the summer months. You’re in the pool and watching your girlfriend take her shirt and shorts off because she always wears her swimsuit under her clothes. Well, not this time. Just her under garments. I have no idea why you’d need rainy day money for that. Oh well.
10. Geepers!! I’ve run out of ideas and have to hire a writer.

When you’ve setup an online savings account and you’ve connected it to your bank account and you’ve setup the amount you want automagically transferred each month, every two weeks or whatever your time preference is, you can sit back and watch the confirmation emails come in when the transfers happen.

And since we’re ending the second quarter of 2007, if you haven’t checked your account in a while, you might want to do that. Make adjustments to it if you need or want to. Add more automatically or even decrease the amount you automatically transfer because it has grown so much over time.

That’s what it looks like when you’ve set up an automatic transfer to your online saving account from, let’s say a checking account.

Here’s something to ponder, some folks need a prize when they purchase stuff. You buy a new book and lay down your hard earned cash. You get something physical in return. It looks good. It feels good. It smells new and fresh!!

With an online savings account you don’t get anything physical in return…yet. You just send money to it and it grows but you don’t get anything physical in return like a new dress or the daily coffee you buy for $2, $3, $4 bucks a day. Gee, that sound like extra savings money to me.

Look at any repetitive thing you buy on a daily or every other day basis and just stop it. Send that money away to your online savings account. You will not miss it and whatever your habit is, it might even make you healthier if you stop and make you become a more better person.

That’s it for this post I’m heading over to www.LearnHowToUseMoreBetterEnglish.com.

written by Bill Stevens

Here’s a real budget for a 75 Year-Old woman.

I rounded the numbers so they were a bit more understandable. The property insurance, car insurance are split out over 12 months even though they are not paid every month, just when they’re due, once and twice annually.

Her assets include (rounded of course):

• Home - Paid off for some time now - Approximately $125,000.00
• Credit Union - $20,000.00
• Vanguard Funds - $15,000.00 in Prime Money Market Fund - VMMXX - Yield 5.14%
• Vanguard GNMA Fund Investor Shares - $30,000.00 in Bond Fund - VFIIX - Yield 5.34%
• Checking Account - $10,000.00
• EE Bonds - $3,000.00

Some attributes to be concerned about:

• Weekly visits to the casinos
• Honoring her husbands wishes to update certain aspects of the house both minor and major

Work Ethic and Mindset:

• Born in The Great Depression era
• Clipped/Clips coupons
• Food was the topic of daily life
• Normal day jobs - 9 to 5
• Lived in two houses over their life and ended up in the current house for more than 40 years with one major addition to the house.
• Always looking for deals and how to save money on purchases of anything
• Only takes the Required Minimum Distribution from the Vanguard Funds - around $2,000.00/year
• “The money in the Vanguard funds will never be spent!!” she proclaims.

Other benefits include family members who are able to buy her things like new car, new TV, and other around the house items. Can move in with family members when the time comes.

written by Bill Stevens

Subtitle: We’re Goin’ To Hawaii!!

Don’t Buy Variable Annuities. Why? Because they could provide your money manager with a free trip to Hawaii on you right from the get go (when you first fork over your cash).

Well, that’s not the only reason and it’s not the only investment that could do that.

There are different annuities (variable, fixed, etc.), but here’s the downside on variable annuities and they’re just not worth getting into. Besides being confusing as heck for some folks, sometimes the financial person trying to sell them doesn’t come right out and tell you they are annuities.

Variable Annuities are a family of mutual funds you can invest in by an insurance company. They can:

1. Have the highest commissions and that’s why some of the financial folks sell ‘em. (Trip to Hawaii part)
2. You have a limited number of investment choices. There might be 20-30 funds in the annuity but there are tens of thousands of funds out there to choose from. What are the odds that the annuity has the best 20-30 funds to choose from?
3. Fees and expenses can be very high. Over time could possibly be 20% right off the top of your earnings. (Trip to Hawaii part)
4. Taxed as ordinary income - could be taxed much higher than investing in the same mutual funds outside of the annuity.
5. If you take money out the first year it could be charged 7% or more.
6. And a host of other rules and regulations. Just say ‘No’.

Again, it would be better to invest in mutual funds that are going to work for you from the get go.

written by Bill Stevens

A young person I know received $20,000.00 at 18 years-old. The grandfather had left thousands of dollars to his young grandchild when the grandfather passed away, while the grandfather’s son, the uncle of the 18 year-old watched over the money that was in a mutual fund until the child was of legal age to receive the money.

“The money is to be used for college”, the grandfather said. However, there were no rules, no stipulations and no guidance. The uncle gladly turned the money over to the 18 year-old when it was time for college. So, the young bright-eyed 18 year-old announced, “I’ve decided to go to Europe this summer before college starts. I’ll never have this time again.”

Oh no!!

So off they went, the 18 year-old and best friend. It was all over in a matter of weeks. Great times, photographs, stories, new experiences, you name it. Nothing could have been better.

Ready for college, the 18 year-old moved out of mom and dad’s house and into…”my own house. Everybody knows you’re throwing away money when you rent. Besides I have down payment money.”

Got a hand-me down car from mom. Bought a cell phone and plan. Needed to be safe driving around. Text messaging guaranteed closeness to all. Internet access to transfer pictures, videos, and get email. “Everyone has it.”

Fast forward, the 18 year-old is now 26. Called mom and dad the other day, “I need a $1,100.00 brake job.” On the third car between 18 years-old and 26.

“I don’t have enough money or credit. I know I went from college to a professional job of my choice. I know my finances went from nothing to something. I know in college I was earning $0.00. Now I earn $30,000.00 a year with full benefits.”

Ouch!!

Oh the house? New water heater, had to have professional tree trimmers come out and cut down a big tree that was about to fall on the neighbor’s house. New plumbing in the only bathroom in the house. The bathroom roof needs to be replaced because it leaks every time it rains.

I’m sure there’s more.

written by Bill Stevens

Here’s how to open a Roth IRA with $250.00. Go to Action 3 - Invest in a Roth IRA and follow the instructions.

You might want to eventually transfer your Roth IRA over to a brokerage firm like Charles Schwab or TD Ameritrade when you’ve accumulated quite a bit (thousands of dollars) in your Roth IRA. You can certainly do that now but there is a minimum $1,000.00 to open a Roth IRA at Schwab or the $1,000.00 is waived if you commit to a monthly transfer of $100.00 into the account.

Where as in Action 3 - Invest in a Roth IRA you can open up a Roth IRA with $250.00 and let it sit. Any deposits after that must be a minimum of $50.00. What I highly suggest is, to make the deposit from your main bank account to your Roth IRA automagically every month or whenever and however you get paid. Just like you make it automagic when you ______ (fill in the blank with any fun stuff you pay for in life especially on a regular basis).

Remember that saying, taking the first step is the hardest. Which reminds me, I have an older brother and when we were kids he used to help me do various things in life since he was always four years wiser than me.

Well we used to frequent the local swimming pool and when it was time for me to dive into the pool he babied me like my mother told him to while showing me how to dive into the pool. The problem was, when we were close to the edge of the pool he’d give me this quick snap with his elbow and I’d go belly flopping right in the pool.

From a distance my sunning mother watched, probably thinking, isn’t that so nice to see the older brother helping the younger brother learn how to swim and dive. When in reality my older brother was using me for his own entertainment. More to come about my older brother.

Don’t stress over this task. Just keep at it until it’s done and you can go on living your life. And if your doing all three actions, Great Job!!

Now I know for some folks $250.00 will be a lot. Make it a priority!!

Also, don’t forget to read the Roth IRA Rules for 2007. Yes I know, you’re trembling, “For Crying Out Loud, There’s Rules?” Well, here’s your virtual elbow from me to you.

written by Bill Stevens