Lottery Ticket

Click on the Lottery Ticket and read the article "Buy a Mega Millions Lottery Ticket and Safeguard Your Family’s Financial Future" by Jon Dressner, Senior Vice President of the LIFE Foundation.

It is superb!

Life Insurance

This is one topic that most scoff at or avoid. It can be a touchy subject, but it is a very important subject that needs to be discussed.

We never know when it is our time to go. What would happen to your family right now if you were to pass away? Would your family be able to live in the current house they are in; would they have enough to live on for over a year to get their feet on the ground. Will the bills be paid in full?

If you answered no to any of these then you need life insurance.

I have $120,000 of life insurance on my self so if I were to pass away my wife and child would be able to live for a year without any financial worries. I have no worries for them. When I leave the house I know that if something were to happen that they would be fine.

How do you calculate how much insurance you need?

The simplest way to get a quick idea is to take your: short-term needs + long-term needs - resources (such as social security, 401k, IRAs, cash, etc) = life insurance you need.

I strongly suggest that you all take 15 minutes and calculate how much insurance you need and then act now and get insured. There is a great feeling of peace by knowing that your family would be taken care of if you were to pass away.

Financial Advisor

What to look for in a good financial advisor.

1. A good Advisor listens
2. Will restate what you have said
3. Will ask you questions to better understand you
4. A good Advisor gives advice not commands (hence the name advisor)
5. A good advisor will not use financial jargon to confuse you, but will explain things to you
6. Involves you in the planning
7. Realistic (it is okay to go out to eat once a month, or to do something spontaneous now and then)
8. Delivers a comprehensive financial plan that is tailored to your needs.
9. Meets with you at least once a year to review how you are coming along
10. Is not afraid to direct you to a person who is a specialist in a certain area outside of their knowledgeable arena.
11. Holds a CFP, CHFC, or other designation from a respected source.

These are a few of the traits that I would look at in a financial advisor. As other traits come to my head I will post them.

Annuities

What is an annuity? The simplistic answer is that it is an investment where you make either a lump sum payment or monthly to an insurance company that puts it in a portfolio account (think of it as a savings account). Then at some future time specified by the contract the insurance company pays you back over a specified time period normally with interest.

There are many different types of annuities that one may find in the market but they can be summarized as fixed or variable.

Fixed annuities offer a very low-risk retirement because you will be receiving a fixed amount of money for the rest of your life. Downside to this is if the financial markets are doing well then you are forgoing the potential gains. Upside though is that you have a low risk fixed interest rate with a guaranteed income for life.

Variable annuities offer a chance to have your money grow while still receiving an income from the annuity. The payments you receive from the annuity will fluctuate; they will be larger when your account does well in the market or small when it does not do as well. There is typically a guaranteed minimum income stream which is obtained by having a guaranteed income benefit option.

The downside to a variable annuity is that you will have an income that fluctuates, so if you are not good at budgeting your income this might not be you. Also, if you need a fixed amount of income each month this would not be an ideal investment.

With that said if you have a great fixed income that is coming in and you would still like to have some growth exposure then a variable annuity might be a good option.

Always check with your financial advisor first before making a decision.

Caveat Emptor (let the buyer beware)

Some financial advisor will try to push you into an annuity. There are a few bad eggs out there and you need to be aware of it. Do not let them make you feel stupid and think that they know what is best for you.

I will publish an article later on this week on keys to knowing you have found a good financial advisor.

Certificates of Deposit (aka CDs)

I have been asked recently by several people what would be a good investment vehicle for their children's savings. After listening to the requirements that the investment needs to meet, I would suggest using a certificate of deposit.

The reasons being are:

1. Risk free investment (if opened through a bank)
2. Better yield (the return one receives on the CD) than a savings or money market account.
3. Automatic renewal (Worry and hassle free if you want it to continue to be renewed)
4. More liquid than a mutual fund or stocks and less risky! (liquid means that it can be turned into cash in a short amount of time)

The company that I would suggest using is ING Direct. Their CDs can be opened with as little as $1. The current APY on a 1 year bond is 5.10%

It is not as high as some companies, but the majority of banks require a minimum of $1,000 for a high rate CD. So for those that do not have a lot of money but still want a high rate this is the bank for you!

Orange Kids

Orange Kids is a website designed by ING Direct that teaches children all about money. You are taken on a journey through Planet Orange. You will visit Money Land, Investors Island, South Spending, and the Republic of Saving.

It is a fun site to visit. I strongly suggest this site to all of those that have children to get on the site and play around on it.

This would make a great family night activity!

Oakmark Funds

Oakmark Funds is only open to new investors that open accounts directly from them. The minimum that one may open an account with is $1,000.

Two funds of theirs that I prefer is their Oakmark Equity & Income I fund and the Oakmark Global I fund. They have preformed well in the past 10 years.

The Future Value of $14,000

This is for those that are currently faced with the decision on what to do with a certain sum of money. I would suggest that one invest it in a mutual fund that Morningstar has rated as a 5 star fund. This is the highest rating and difficult to achieve. Less than 10% of all funds have achieved this milestone.

If you invest $14,000 today in a mutual fund and leave it in for 20 years you would have the following sums:

With an average return of 10.5% you would have $103,127.29.
With an average return of 10% you would have $94,185.00.
With an average return of 9.5% you would have $85,982.57.
With an average return of 9% you would have $78,461.75.
With an average return of 8.5% you would have $71,568.65.
With an average return of 8% you would have $65,253.40.
With an average return of 7.5% you would have $59,469.92.
With an average return of 7% you would have $54,175.58.


One fund company that I like a lot and has several 5 star ranked funds is OakMark Funds. The website is: www.oakmark.com

Debt

Many people say that the power of debt is a good thing. Under certain circumstances I will agree that debt can be a good thing and that it can help people out in a time of need.

Debt is not a toy; and it should be used with extreme caution. The interest that people pay to creditors is incredible. The interest rates on the majority of cards are higher than the highest return the stock market has experienced.

With investments you invest in hopes of receiving a nice return, with a credit card you pay the creditor an interest rate most investors would die for.

With real estate investments one needs to really know what the market is like in his/her area. What is the average time it takes to flip the house. What is the average time it takes to find a renter. What is the going rate for rentals. If you have done your due diligence and still feel right about buying a house, buy a house that you can manage. Do not take a loan out for a house that is too much for you to handle if your were to loose your job.

Think first, dissect it, and then put it back together; and if it holds together as if it were still new then go ahead and do it.

Saving Made Easy

Have your bank take out 10 percent of each paycheck and have it deposited into a savings account. After a while you will be surprised at how big your account will have grown to.

Remember that the account is not to be touched. Try to forget about it, if you can do this your net worth will grow!

A good bank to look into is ING.

Cash Flow

Cash Flow the game is an eye opener for those who have no financial knowledge. I have had many people that were not for investing or saving, but after playing Cash Flow they had a desire to learn more and to invest their money.

I do recommend the game as a learning tool along with his first book Rich-Dad-Poor-Dad, for those who are wanting to learn or need an eye opener. The rest of his books I do not feel are worth the investment. There are plenty of better written books than those that he has produced.

"When you thirst, you learn."

Sound Investment Advice

Best Investment Strategy:

In "The Intelligent Investor" Benjamin Graham states that you should never have more or less than 75-25% of your investments in stocks or bonds. It does not matter how old you are in-regards to how you weigh your investments. You should invest according to how comfortable you are with your risk allocation.

He also suggests that you reevaluate your portfolio twice a year to keep the percentage allocated to each category the same. E.g. Your portfolio consists of 64% stocks and 36% bonds, if your portfolio goes to 65% stocks and 35% bonds, sell the percent in your stocks to balance your portfolio. January 1 and July 4 are two great dates to evaluate your portfolio.

Also, instead of buying separate bonds from a company, invest in a mutual fund. You can also invest in ETFs (equity traded funds; for more information regarding ETFs go to http://www.sec.gov/answers/etf.htm).

Remember that investing should be a long term goal. If you are day trading you are gambling with your hard earned money!

Excellent website on Index Stocks

This is a terrific website on investing.

Go to www.ifa.com. He also has a great book that I would recommend buying. It is called the "Index Funds:The 12-Step Program." Another must have is MorningStar's (www.morningstar.com) book called, "The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market." You can find it by going to this link, http://www.amazon.com/exec/obidos/tg/detail/-/0471269654/qid=1130611483/sr=8-2/ref=pd_bbs_2/104-8357618-0855915?v=glance&s=books&n=507846.

For anyone that is seriously interested in learning about how to invest, look into these books and the ones that are listed under my favorites.

Savings lost by driving and not walking

Rexburg is a small city located in the north east section of the state. There are 11,000 students that live here, and a good portion of them have a car here at campus. The majority of the students are single and live with in a half of a mile from the school.
The average walking time to get to school from my house is 25 minutes, I am located a little over a mile from school. The average walking time it should take students is 13 minutes.

Our school is meant to be a walking campus. That means that the majority of students are within a very close proximity of campus. There are not enough parking spaces to accommodate all of the students that drive to campus. Because the number of parking spaces are so few, students drive around looking for someone to leave, so they can park and head to class.

My reason for writing this is to inform them, and others that read this, of the money they are losing by driving everday to campus. Gas here is about $2.80, that means for an average 10 gallon car it would cost $28 to fill up. With all of the driving around campus and then to the stores, you are looking at having to fill up twice a month. The amount of cash that will be spent for that month is $56. If we mulitply $56 by eight months we have a total of $448 used on just gas.

Lets take that $448 dollars and see what that would equate to in 10, 20, and 30 years from today with an APR of 3%.

For ten years that is a loss of: $602.07
For twenty years that is a loss of: $809.14
For thirty years that is a loss of: $1,087.41

For the first ten years you would have a profit of $154.07, not to shabby for doing nothing and adding nothing to it.
For the next ten years that profit will be at $361.14.
For the final ten years, the profit will now be at $639.41

Understand that I used an APR(annual percentage rate) of only 3%, this percentage can currently be found at many banking institutions around the USA.

If we had changed this percentage to the expected 8% yield, that the "experts" are perdiciting will be the average for the stock market, the numbers would be quite different.
At the end of thirty years you would have a profit of $5,495.92.

The seemingly simple and inexpensive trip back and forth to school is no longer so inexpensive. You will have forgone $5,495.92 in potential savings!

So next time you are tempted to drive somewhere, where you could have easily walkted too, remember the potential savings that you are burning up!