| The subject of personal finance is very
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| | Iwould have missed out on the Internet
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| broad, but as abeginning, I would like to
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| | revolution, email, websites and the
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| discuss what I consider thefoundation of
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| | majority of the income I now enjoy.
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| personal finance: security.
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| | Keeping myself informed and up to date
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| Security
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| | takes time andresources, but it helps me
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| Security to me means that I am prepared
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| | protect my current income andexpand my
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| for the "hit by abus" scenario.
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| | skills to help me earn income in other
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| I have life insurance to provide for my
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| | areas.
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| wife and children.
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| | This increases my stability by allowing
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| Health, disability, auto and home
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| | me to not have torely on one client,
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| insurance policies alsoprovide me
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| | employer or source of income. A chairwith
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| additional protection in their respective
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| | four legs will always be more stable than
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| areas.
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| | a stool withonly three.
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| I also have a list of where these
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| | Growth
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| policies are, who myagents are, phone
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| | The next level of personal finance, as I
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| numbers and basic policy information
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| | alluded to before,is growth.
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| (#s, amounts, costs, etc.) I keep this
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| | Once you are secure and stable, you can
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| information both in afile at my house and
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| | begin to think aboutbuilding your wealth.
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| in a safety deposit box at the bank
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| | Not that you have to figure out howto
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| (afriends home will also work - think:
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| | become the next Bill Gates or Warren
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| "house burns down"scenario). Also my wife
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| | Buffet. But youhave to start building the
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| and my brother and sister-in-lawwho live
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| | "nest-egg" that you will rely onwhen you
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| nearby also know where these things are.
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| | retire.
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| I also try to maintain an emergency fund
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| | And don't think that Social Security has
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| of cash in a bankaccount or money market
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| | you covered, orthat your 401k will grow
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| account (with checks) so that I
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| | back to what it was a couple yearsago. Or
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| amprepared for a financial disaster,
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| | that your current employer is going to
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| layoff, or naturaldisaster. It took
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| | re-institutethe generous pension plans of
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| several years to build up this cash fund.
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| | yesteryear. 401ks are muchcheaper to
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| I started with a goal to have enough cash
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| | administer and you, the employee, take
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| for 6 months of mynormal financial needs
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| | the hitwhen the market goes down, not the
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| (mortgage, food,
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| | employer.
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| insurance,transportation, etc.). Now I am
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| | My father is nearing retirement age and I
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| trying for 12 months'worth. I do this by
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| | think he has agood plan. He has done some
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| saving a little each month, and
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| | research and estimated what hisexpenses
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| "investing" a portion of all "found"
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| | are going to be when he is retired. He
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| money (gifts,inheritances, tax returns,
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| | then took alook at his potential sources
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| anything unexpected).
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| | of income during hisretirement.
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| I have a will and update it each year
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| | He figured that Social Security would
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| around New Year's toreflect any changes
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| | cover about a third ofwhat he wanted to
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| in my life during the past year
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| | live on. Only a third! And he has
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| (newchildren, new home or business,
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| | workedhis entire life. Would you like to
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| etc.). Most people don'tneed an extensive
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| | instantly have to liveon only one third
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| will, the forms you buy at your
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| | of what you currently make? Retirement
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| officesupply store will do. But in some
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| | issuppose to be the golden years, so
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| states if you die withoutone, watch out.
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| | where's the gold?
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| What happens to your money and even
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| | Luckily throughout his career, my father
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| yourchildren could be entirely up to some
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| | has worked forcompanies that have had
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| state or courtappointed official.
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| | pension plans and he had worked
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| Stability
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| | longenough at each company to be eligible
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| The next level of personal finance is
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| | for some pensionmoney. This is rare these
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| stability.
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| | days because today the averageworker will
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| Stability to me means that first of all I
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| | change jobs and companies at least five
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| live within mymeans. I don't spend more
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| | timesduring his/her career. Also, as I
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| than I earn. Otherwise I amspending my
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| | mentioned before,companies are switching
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| savings, investments, emergency money,
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| | to lower cost 401k plans that do
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| orgetting into debt. I have a lot of
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| | notguarantee you any fixed payments.
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| debt, but most of it isreal estate which
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| | In my father's situation, his pension
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| is producing some income. I try to
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| | money would coveranother third of the
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| avoidcredit card debt and purchase
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| | retirement income he wanted. So now hehad
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| everything with money Ialready have. I
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| | to either figure out where the last third
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| don't buy things expecting that next
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| | was going tocome from, or start cutting
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| month
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| | out expenses during retirement,like not
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| I will have more money or I will get a
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| | visiting his children so much. None of us
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| big raise orpromotion. You can't sell me
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| | likedthe sound of that.
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| a car based on a monthlypayment amount; I
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| | So my father started learning about the
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| want to know the final price!
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| | stock market andinvesting in stocks and
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| In order to make sure that I am living
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| | mutual funds. He made a plan forgrowing
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| within my means, Icreated a simple budget
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| | his wealth and then educated himself as
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| and I track my expenses using Simple
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| | to how hecould accomplish his plan.
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| Joe's Expense Tracker. I can tell how
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| | I wish I could say that he is doing
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| much I have spent ineach budget category
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| | better than he is, butluckily he has some
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| and I know when to keep a closer eye
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| | time still to put his plan into actionand
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| oncertain types of expenses, or when and
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| | ride out any market downturns. (He can do
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| where I can cutexpenses and what I can
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| | this becausehe has the security of
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| live without in order to stay withinmy
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| | insurance and emergency money, andthe
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| budget. Counting pennies is pretty
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| | stability of little debt and a strong set
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| tedious, but trackingwhere the dollars go
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| | of skills.)
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| can be eye-opening.
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| | By learning about how stocks, bonds,
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| Another aspect of stability is avoiding
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| | mutual funds, indexfunds, options,
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| or eliminating debt.
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| | futures, commodities, real estate and
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| Debt in itself is a form of stability;
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| | otherfinancial tools work you lay the
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| you always have tomake those payments
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| | foundation for growing yourwealth. You
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| until it is all paid off.
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| | may start with just $100 in a bank CD,
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| Some recent reports show that the average
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| | but asyou learn more and become more
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| American is $7,000
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| | sophisticated, you can investin more and
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| - $20,000 in debt. Most of it is consumer
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| | more opportunities.
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| debt: creditcards, store accounts,
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| | You will learn about how risk and reward
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| rent-to-own, auto loans, etc. Andthose
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| | are related, thatas the risk increases so
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| types of consumer debt usually charge a
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| | does the size of the potentialreward.
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| higherinterest rate than any savings
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| | Just like at the race track, you'll make
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| account, CD, or money marketaccount; even
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| | more onthe long shot, but the odds are
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| more than most high-flying risky
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| | against it. Also you canlearn how to tilt
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| investments.
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| | the odds in your favor and
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| This means that $1,000 in debt at 18% is
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| | protectyourself against risk.
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| costing you 9 timeswhat your $1,000
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| | For those who are just starting out in
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| savings account at 2% is producing.
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| | the growth phase orwho want to dabble a
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| Consumer debt is a dangerous spiral that
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| | bit before completing the other levelsof
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| is very hard to getout of.
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| | personal finance, my suggestion would be
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| The first problem is, as mentioned
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| | to look intoindex mutual funds.
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| before, living withinyour means. Don't
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| | Especially no-load index funds (noinitial
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| get further into debt to support
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| | sales fee).
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| anextravagant lifestyle. Or even if you
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| | These funds are made up of the same
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| are frugal, if youare using credit cards
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| | stocks that make up thepopular market
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| and debt to finance your purchases,you
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| | indexes like the Dow Jones, S&P and
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| either need to stop purchasing luxury
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| | NASDAQ100. The costs are low because
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| items or find away to increase your
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| | management is simpleand as a mutual fund
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| income to support thesepurchases
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| | you can invest a little at a time.
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| payments.
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| | Also they are easy to follow since you
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| You may even have to lower your
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| | see them on all thenews shows and in the
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| standard-of-living becauseyou have racked
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| | newspaper.
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| up considerable debt and need to free
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| | Protection and Management
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| upsome money to pay it down. But don't
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| | The final level of personal finance is
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| wait to start. Thoseminimum payments are
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| | the protection andmanagement of your
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| often designed to keep you paying
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| | wealth. Most people never develop
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| 18%interest for 40 years! That's longer
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| | wealthenough to need this level. But some
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| than most home loans.
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| | of the concepts can beapplied to any
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| You could even end up paying more than 10
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| | amount of wealth you possess, $10,000 to
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| times the originalcost of the item just
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| | $10,000,000.
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| in interest payments. Is that newstereo
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| | Part of the protection harks back to your
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| really worth that much?
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| | will as wediscussed on the first personal
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| To help people get themselves out of debt
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| | finance level: security.
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| we created the
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| | With any significant wealth or valuable
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| "Pay Off My Debts" tool in Simple Joe's
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| | asset (your home,car, heirlooms, 401k,
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| Money Tools. It isalso available as a
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| | IRA, business, etc.) you will wantsome
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| stand-alone product called Simple Joe's
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| | way of disposing of that asset upon your
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| Debt Eraser. These tools help you create
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| | death.
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| a Rapid Debt
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| | Whether it is go to go your family,
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| Reduction Plan which shows you how much
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| | favorite charity, orlocal church, if no
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| to pay on each debteach month in order to
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| | one knows about it, "it ain't
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| save as much on interest charges
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| | gonnahappen".
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| aspossible and pay off your debts as soon
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| | As you start to accumulate wealth in
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| as possible.
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| | excess of $350,000, youmay want to
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| These tools can help you systematically
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| | consult an attorney about creating a
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| eliminate your debtswhether you owe
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| | trust. Atrust is an entity that can own
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| $1,000 or $100,000. The key is to
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| | property and pass thatproperty to anyone
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| startliving below your means and start
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| | you name in your will. Usually the
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| focusing on paying offyour debt.
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| | trustis designed to provide income to
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| It doesn't make much sense to be worried
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| | children from the assetsthat are placed
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| about whether ornot your 401k earns 8 or
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| | in the trust.
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| 9% this year, if you are paying 21%on
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| | The trust can survive you so that your
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| your credit card debt.
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| | assets and income maybe passed on to your
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| A third aspect that starts in the
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| | children or next-of-kin withoutexcessive
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| stability category andtranscends to the
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| | taxation and legal entanglements. Some
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| next personal finance level, growth,
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| | stateswill take up to 55% of your assets
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| isthe concept of investing in yourself.
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| | as taxes when you passaway.
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| By this I meanspending time to educate
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| | Protection also relates back to
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| yourself in personal financematters, as
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| | insurance. Now it may betime to look at a
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| you are doing right now and spending
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| | multi-million dollar umbrella policy
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| timegaining more knowledge and improving
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| | thatwill protect you from lawsuits
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| your skills or evendeveloping new ones.
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| | designed to part you and yourwealth. You
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| As an employee, this can have a direct
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| | may now be a bigger target, so purchase a
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| relation to who getslaid off during the
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| | suitof armor.
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| next round of cutbacks. If you havesome
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| | The management aspect comes into play
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| skills or have demonstrated some
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| | where you may start toconcern yourself
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| abilities that are notpossessed by your
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| | with taxation, ownership, distribution
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| co-workers and these skills make you
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| | ofincome and possibly endowments to
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| amore valuable employee, you are less
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| | charities or othernon-profit
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| likely to get thepink-slip.
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| | institutions.
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| Also while you are making yourself more
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| | You may hire a person or company to
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| valuable to yourcurrent employer, you are
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| | manage your wealth, oryou may choose to
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| also making yourself worth more tofuture
| |
| | do it yourself. Most people who
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| employers. It is much easier to land a
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| | haveearned their wealth through the
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| job if youhave some special skills that
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| | "sweat of their brow" havealready become
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| are in high demand or even ifyou bring
| |
| | adept at managing their assets.
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| some special knowledge or experience that
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| | Somecontinue to personally manage their
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| youfellow job-seekers may have overlooked
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| | wealth because of theenjoyment or
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| or failed to investin.
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| | challenge it gives them.
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| Being in the computer industry, I have to
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| | Others are ready to turn it over to a
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| spend hours eachweek reading trade
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| | trustworthy manager
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| magazines, exploring web sites,
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| | (who only gets paid a percentage of your
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| andreading emailed newsletters to keep
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| | increase) andtravel the world, or sit on
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| abreast of what is newin my field. If I
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| | a beach and count the waves.
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| stopped learning just five years ago,
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| |
|
