Financial Idea's Blog

What Kind Of Money Should I Put Away Before 2010?

This is the kind of question that depends completely on you. By that I mean it depends on your goals and your needs. Let me explain a little more about what your options are. If you might need access to that money in the next few years, then you might not want to put it in an IRA or a company 401(k) where there’s a penalty to take it out before you’re age 59 ½. In that case, you’ll pick a regular taxable brokerage account for the money.

Or, maybe you know you’re okay with having it locked away until retirement (because you actually have a budget and you actually follow it), so the money is going into some sort of retirement savings plan, but which? The three most basic choices are a company 401(k) plan, a traditional IRA, and a Roth IRA and the decisions revolve around company matching funds, vesting schedules, investment choices and tax considerations.

In the case of a company 401(k), employees typically can save 15% of their gross income, up to $16,500 (in 2009). That money will be deducted from the gross income used to calculate how much tax you owe, and accordingly, a lower amount of tax will be withheld from your paycheck. You will eventually have to pay taxes on the money, but you can defer them until much later. The following chart shows just how wonderful that is.

Read More …

Technorati Tags: 401K, Compound interest calculator, Retirement, Roth IRA, rule of 72, traditional IRA, young investors

What Does Buying A House Do To My Investment Plan?

Ideally, nothing! It really should be a part of your entire plan, unless home ownership is not a priority to you.

Should it be a priority?

For many people it is, but like nearly anything on the planet it really comes down to solid understanding of the individual choices you could make, and why you’d make them. This is probably slightly different advice than you’ve heard other places, so I’ll tell you why I say what I say.

More important than anything else is, why are you buying a house?

If your answer is because it will be worth a lot more in future years, know the historical appreciation rate for your market, and the likelihood that people will want to move there in the near future.  The appreciation rate must be higher than inflation for your investment to grow and actually BE worth more in the future.

If your answer is Read More …

Technorati Tags: Buying a home, Debt consolidation, Home buyer, Invest in a home, Invest young, real estate investing, what to invest in now

What’s The Difference Between A Stock And A Bond?

This poses an interesting question because it highlights how many people really have no idea about the different type of investment “vehicles”, as they are often called.

*You know what “equity” is, right?

Especially if you own a home, it’s the difference between what you owe and what you own.  If you have a $300,000 house and you owe $200,000, then you have $100,000 in equity, or ownership.

Stocks are much the same thing, except that what you own is (typically) a VERY small piece of a major company.  In most cases, you’ve already paid for it in full, and therefore you own it outright with no debt.  (It is possible to borrow ownership, but that’s a level 200 course).

This is why stocks are often called equities, and vice versa.  Think of yourself as a part owner, you can attend the annual meetings and vote on issues as requested by the board of directors – using what are known as “proxy statements”.

You will probably have a very limited impact on the direction of the company unless you own 5% or more of the outstanding stock, what most people buy stocks for is to Read More …

Technorati Tags: Bonds, Compound Interest Formula, how to invest in stock, How to Invest Stock, Rule of 72, Stock Market, stocks and bonds, What to Invest In

Why Did The Stock Market Drop After Last Week’s Unemployment Report?

The stock market dropped after last week’s unemployment report for one reason, and one reason only.  That reason is short-term investors.

We’re not talking about the proverbial day traders here, but ordinary people with ordinary fears and concerns who are not able to distance themselves emotionally far enough from their money to do serious investing.  We’re talking about most people.

We’re not just talking about unemployment reports.  We’re talking about any economic “news”, such as housing starts, manufacturing orders, foreclosures, mortgage rates, trade deficits, and a few dozen other factors which can be interpreted to mean different things by different people.  Primarily though, we’re comparing what actually happens with what “experts” forecast.  Even though we’ve seen a marked decrease in the number of new jobless claims, the unemployment numbers last week were a tiny bit higher than what was forecast.

This is not unlike the famous, or infamous, “guidance” which many companies offer as to how much money they will earn per share of their stock.  For example, Read More …

Technorati Tags: Financial Ideas, how to invest in stock, How to Invest Stock, Interest Only, play the stock market, recovering economy, Stock investing, Stock Market advice, stock trading, US finance, What to Invest In, what to invest in now, young investors

Invest For The Long-Term? What’s That? I’m Young!

Okay, one of most common pieces of “conventional wisdom” out there regarding investing goes like this: Young people can be really aggressive, and they should!  They might hit it really big, and if not, well, who cares?  They’re young and have plenty of time to start over and do it right the next time.
Technically, that’s correct, and yes, it’s true that hindsight is golden!  In this case, here’s why: it’s almost impossible to adopt that mindset and simultaneously hold the thought in your mind that you’re going to get older and someday not have plenty of time to start over. Instead, what we humans do is talk ourselves into believing that we’ll do it right the next time.  But wait a minute – why not just take the pressure off for your whole life and do it right the FIRST time?  If you’re past that, okay, take some of the pressure off the rest of your life and get started doing it right!

What’s doing it right? Oh, that’s easy, we find the next Microsoft, like those lucky people did back in 1985 or so.  The key word there is “lucky”. Read More …

Technorati Tags: Compound Interest Formula, Invest young, investing microsoft, Microsoft, Rule of 72, what to invest in now, young investors

Fed’s Say U.S. Recovery Is Underway

By Mark Felsenthal and Alister Bull

WASHINGTON (Reuters) – The Federal Reserve on Wednesday upgraded its assessment of the U.S. economy, saying growth had returned after a deep recession, while reiterating its promise to hold interest rates very low for a long time.

The Fed also said it would slow its purchases of mortgage debt to extend that program’s life until the end of March, in a move toward withdrawing the central bank’s extraordinary support for the economy and markets during the contraction.

The U.S. central bank, as widely expected, held its benchmark overnight lending rates at close to zero percent.

“Information received since the Federal Open Market Committee met in August suggests that economic activity has picked up following its severe downturn,” the Fed said in a statement after its two-day policy meeting.

“Conditions in financial markets have improved further and activity in the housing sector has increased,” it said.

U.S. government bond yields ended lower on the news that the central bank had reiterated a pledge to keep rates ultra-low for an extended period.

“I think it confirms that the economy still needs a little bit of help and that rates aren’t going to go up anytime soon,” said Alan Lancz at Alan B. Lancz & Associates in Toledo, Ohio.

But a stock market rally fizzled on concerns Read More …

Technorati Tags: federal, how to invest in stock, Invest young, poor economy, recovering economy, Rule of 72, Stock investing, U.S. recovery, US finance

Warren Buffett Interview On How To Read Stocks

A Quick review on how Warren Buffett pick and review stocks he buys.  This is great!!!!!!!!!!!!!!

Technorati Tags: How to invest in stocks, How to read Stocks, Investing Stock, learning about the stock market, stock education, Warren Buffet, What to Invest In

Warren Buffett Gives Financial Advice to Girl Scouts at Dairy Queen

Youngsters wanting to make blizzards of money got valuable advice from financier Warren Buffett who was visiting his local Dairy Queen for the launch of the new Girl Scouts Thin Mint Blizzard.

Surrounded by a group of Girl Scouts in his hometown of Omaha, Buffett offered this tip for college students: “The biggest suggestion I have is to avoid credit cards. Interest rates are very high on credit cards. Sometimes they are 18 percent. Sometimes they are 20 percent. If I borrowed money at 18 or 20 percent, I’d be broke. . . . So if I had one piece of advice for young people generally it would be to just avoid credit cards,” he said.

And what advice does Buffett have for a new investor? “I would do a lot of reading before I invested,” he replied. “In other words I would prepare for it. I wouldn’t jump in the water until I know how to swim. . . .I read every book the Omaha Public Library had about investing by the time I was 11.”

On qualities Buffett looks for in employees? “The biggest thing I look for is if they have a passion for whatever they are going to do,” he said.

http://www.whattoinvestinnow.com/

Technorati Tags: how to invest in stock, Invest young, Rule of 72, Stock investing, Warren Buffett, What to Invest In

10 Investing Books Recommended By Warren Buffett

Over the years, Warren Buffett has recommended many books in a variety of venues about a variety of subjects. Continuing our ongoing series of books recommended by Buffett here we highlight ten books that Buffett has recommended on investing.

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Take on the Street: What Wall Street and Corporate America Don’t Want You to Know. What you can do to fight back

by Arthur Levitt

The Securities and Exchange Commission’s longest-serving chairman, supervised stock markets during the late 1990s dot-com boom. As working Americans poured billions into stocks and mutual funds, corporate America devised increasingly opaque strategies for hoarding most of the proceeds. Levitt reveals their tactics in plain language, then spells out how to intelligently invest in mutual funds and the stock market. His advice is aimed squarely at small, individual investors, as he explains how to look for clues of malfeasance in annual reports, understand press releases and draw more from reliable sources.

The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns

by John C. Bogle

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Technorati Tags: Compound Interest Formula, how to invest in stock, Invest young, Rule of 72, Stock investing, Warren Buffett, What to Invest In

Changing The Way You Think About Your Money

These are the times that everyone is beginning to feel a tightening. The ripple effect has touched us all now in some way. Our attitudes of “spend now, more money is on the way” has been replaced by the thoughts of “How do I find the money to pay my bills?” For many people this shift is a reason for great distress.

I have been one of those people who have felt the heavy weight of financial burden. I continue to feel the pinch, but I am starting to see signs of hope. Hope that is not only coming from the government and Wall Street, but hope that is coming with increasing confidence that I will get through this hard time.

I have found great confidence through making small changes. I would like to share a few things I have done that have made a big difference in both my quality of life and my budget’s bottom line. Read More …

Technorati Tags: Compound Interest Formula, Debt consolidation, Rule of 72, What to Invest In