eFIPO Finance and Politics

As I have told you many times in the past few months, I knew that the stocks that I owned were going down. A lot of my portfolio relies on the consumer action for it to see stock prices soar. I have retail store holdings (like Best Buy & Circuit City) that usually only see profits in the non-business markets. Today a story in Wall Street Journal directly pointed out what I was saying in the past (I can’t link to the article I am referring to because you need a subscription. Sorry!)

“Forecasters are more divided than usual over what kind of holiday shopping season retailers will see this year, with predicted gains for overall sales ranging from a 2.5% hiccup to a gangbusters 7.5% advance.” I’m more on the optimistic side of the argument. A lot of those retail giants receive over 50% of their yearly revenue in less than two months of selling.

“Depending on who is counting and how they do the tallying, shoppers are expected to spend anywhere from about $250 billion to $786.6 billion.” That’s a lot of money to be made during just a few months. Last year a huge change happened in the retail market. Increase of sales happened without products moving off the shelf.

Who’s to blame for that phenomenon? Gift cards! Gift Cards stole a huge amount of revenue from products. This really doesn’t change the profits of large companies; it just changes their selling strategy. “Thirty-eight percent of the value of gift cards purchased in the 2005 holiday shopping period were redeemed in January 2006.”

What does this mean to you? If you have extra month laying around after your holiday budget is done, buy some stock so you can actually MAKE money while shopping.

I received an email today with a great question. Here it is “Hey Jeremie I’ve been reading your blog for about 2 months now and I have a question. I just ran into a pretty large amount of money. Well to me it’s big money. My grandmother gave me $2,500 and I am trying to decide what to use it for. I don’t have any debt, I’ve already maxed out my IRA for this year, and I have six months savings already built up. What should I do?”

First, I would like to congratulate you on your successful savings habits. It seems you are on the right on track to a very early retirement. I would love to be in your position right now! There are a few recommendations that I would do based on the information you sent me.

Do you own a home?
Yes- See if you need to purchase anything around the house that might need to be replaced. Small home improvements are always a great investment too.
No- Open a separate savings account for your home. Try to save around 20% of the down payment. I know it seems high but that’s just a target. Use a high interest online savings account.

Are you currently married?
Yes- Consider taking a small vacation with your wife. It’s always nice just taking a quick getaway before the holiday season.
No- Save for a ring so you don’t have to go in a huge amount of debt when you decide to pop the question. It’s always good to have some sort of down payment on the ring.

Do you have kids?
Yes- Start saving for their education. As you know even a little can go a long way with compound interest. “Compound interest is the most powerful force in the universe.” - Albert Einstein
No- Put more money into your online savings account and save it for the holidays or an extra rainy day fund.

You can also invest some into something that will create passive income. These are just a few suggestions I would consider doing.

Mutual Fund Performance (All grouped together)

* Friday, October 27, 2006 – Full Value $10,628.86

* Friday, November 3, 2006 – Full Value $10,485.46

* Decrease of $143.4 which is a ~1.4% decrease.

Individual Stock Performance (All grouped together)

* Friday, November 3, 2006 – Full Value $2,233.81

* Friday, October 27, 2006 – Full Value $2,281.27

* Decrease of $47.46 which is a ~2.1% decrease.

I expect 2 more weeks of a down market till my portfolio starts hitting homeruns. I finally calculated how much money I needed to achieve a 20% return on my mutual fund portfolio and 22% on my stock portfolio. It took me a while because I added money into both portfolios which makes it harder to calculate a needed return.

Mutual fund balance January 1st, 2006 $9548.45
Needed money to return 20% – $11,458.14
So I need another $972.68

Stock Performance balance January 1st, 2006 $2042.78
Needed money to return 22% – 2492.19
So I need another $258.38

(Congratulations…now you’re
down to only one boss!
Happy Retirement!)

Are you worried about retirement? Probably not… I mean you’re young and you don’t have to worry about it for such a long time. I don’t think so. The “Are you worried about retirement” question is so vague. I better question would like “When do you want to retire, and how much money do you want when you retire at that specific age?” Personally, I want the ability to retire around the age of 40 and then dedicate my life to public service. What are your retirement goals?

Everyone has their own ideas about retirement. Do you want to live lavishly or comfortably? The real question is - how do you plan to fund your retirement? There are so many options out there such as: 401(k), IRA’s, real estate, investing in business, owning your own business, ect. I plan to use pretty much all of the above.

According to the U.S. News & World Report, there are 5 keys to resting easy concerning retirement. Beside the key points are some articles that may interest you concerning that precise topic

1. Plan for the financial transition. Couldn’t find any, which means I will be writing on this very soon. If you find an article on this subject please leave it in the comments!
2. Pay down debt before you retire. Jeremie (me!) from eFIPO.com article on Why save when you’re Broke.
3. Evaluate your assets. 2million article on Asset Allocation
4. Health insurance is a must. Jeremy from Generation X Finance article on Why do I Need Insurance? - Part 2
5. Take care of your health. JLP from AllFinancialMatters article on Health Care.

Go to

According to a new study conducted by the American Institute of Certified Public Accountants, Generation Y (eFIPO generation, 17-35) are not saving money and are engulfed in debt. Why is this happening? Times have changed. We live in complex world that promotes the need for immediate gratification. Whether it’s the media (TV & radio) or celebrities, we just can’t help but want more.

Americans aged 25-34 had a median net worth of $3,746 in 2004, which is a significant decrease from $6,788 in 1985. Debt accumulation has also increased from $3,118 to $4,733. The net worth figure is also skewed because it doesn’t encompass inflation. The value of $6,788 in today’s dollars would be about ~13,000 (using a 3.7% inflation rate). If I used the savings rate it would be even higher. What does that mean for you? Start saving, spend below your means, and invest in your future. You can’t use the ignorance card anymore. Don’t come up with more reasons why not to save for retirement. Learn from your mistakes and start being proactive.

I know this data seems very frightening, but the eFIPO Generation have a few aces up our sleeves. First, we are the most educated generation in American history. The baby boomers have to retire at some point, and who do you think will fill those spots? Illegal immigrants? Of course not! Second, time is working with us. We are young and we can correct the screw ups that we’ve made over the years. Start to pay down your debt, and use the awesome powers of compound interest and market returns in your favor. Learn your investment strategy and begin building your nest egg.

We don’t have to be the debt generation. We are Generation Y and we have the ability ask “Y not?” Y not be rich? Y not retire young? Y not get involved in politics? We have the ability to break the cycle. It’s up to you if you want to be part of the experience or sit on the sidelines.

Continuation of “A Different kind of Investing”, Goals Equal Success #1, and more things that I’ve learned from “The Richest Man Who Ever Lived” by Steven K. Scott.

Dreams are nothing more than the completion of goals set by the individual. Like I said before, I truly believe that every dream is possible if you have a detailed plan to achieve it. The world cannot stop you when you have the drive and plan to succeed.

Here’s the story of two groups of people that share a common dream, but have two totally different ways to attain it. They both want to be popular musicians in two different genre of music. They both have great bands, vocals, talent, and lyrics, but one band lacks motivation and planning skills.

The first band started small, but they all had the dream of greatness. The band developed a plan on how they would be able to accomplish that dream and make it a reality. They played at every place they could and always try to get their name out there. They also saved as much money as possible to be able to record their songs in a studio. They spent countless hours trying to perfect their sound. When everything was done, they finally released a studio quality CD. They found a music manager to market the band to record labels and are on the track to stardom.

On the other hand, the second band’s popularity ignited much faster. They were invited to play at some big bars in Atlanta and everyone liked their sound. After hearing a couple of their songs, I asked them to play at a party I was having. They were incredible. They just had that sound that everyone liked, but lacked the most important aspects to achieve true success.

They didn’t have any motivation or anything that resembled a detailed plan. They had less motivation than a college student wanting to study calculus (Which means they had zero motivation). After playing at a few bars, they decided that they were too good for those places and declined the offers to play again. They thought someone was just going to listen to their album and give them millions of dollars.

Instead of practicing they partied. Eventually, they couldn’t play anywhere. The band to this very day doesn’t know where they went wrong. Even with all their talent they still crashed and burned. I guess they just felt they were too good and didn’t need to practice, play, and promote.

Continuation of “A Different kind of Investing” and more things that I’ve learned from “The Richest Man Who Ever Lived” by Steven K. Scott.

You ever wonder why some people are successful and others fail? According to this book, there are two significant things to do to become successful. The first thing is to plan correctly, and the second is to seek consul. This post will discuss how planning correctly can really change your life.

Let me first ask a question that I know everyone has heard before. Do you want to be rich, successful, and have loving relationships? I would say everyone I know would want to answer yes. Here comes a question that most people don’t hear after that first question is asked. How are you going to be rich, successful, and find loving relationships? Isn’t that question much harder to answer? Let me show you some steps to make this process as fun and easy as possible.

1st. What are your goals? Everyone has there own individual goals like: being rich, successful, loved, and popular. Everyone also has a dream job that they would want to do: movie star, rock star, politician (my dream), doctor, astronaut, stand-up comedian, and etcetera. Write out all your goals. They can be short term, mid term, or long term. Make them as broad as possible. After you have them all written down, list them in the order of importance to you.

Here are my broad, but arranged goals: Relationships, eFIPO & other Websites, Knowledge, Career, Money, Charity, High School, House, Higher Education.

2nd. After they are to your liking, write how you plan to achieve those goals. Again, make these pretty broad. Here’s my first goal with broad steps to achieve that goal.

Relationship
Spend as much time with wife and kids (I’m not married or have any kids, but still a dream of mine)
Get my kids involved in school activities
Take trips with my wife and kids as much as possible
Bring kids to grandparent’s house as much as possible

3rd. Take your most important goal and describe it in detail. My most important goal is relationship building within my family. Here is the definition of the family life that I would like to achieve in the future. -Spend as much time with my wife and kids and have a loving family. I would love the ability to have a really strong family by always having an open door and an open heart. I want to love and motivate all my children to be whatever they dream to be. I want a loving wife that shows that we will be in love till we are grey and old. I want to be with her sitting in a hammock at 65 and still cuddling and loving each other like the first day we met. Our home will be warm and inviting to our kid’s friends, and family. I want to participate in as many activities with my kids in and out of school. I want them to feel loved, secure, and a bond that cannot be broken.-

4th. Take your description and add a short, mid, and long term steps that are easy to accomplish. The way I want to achieve a loving family is to begin with a loving relationship with my future wife. Here is how I hope to accomplish it.

Have a great relationship with my girlfriend

*
Be kind and gentle
*
Be respectful and listen
*
Do not overreact
*
Spend time with her instead of my friends

Save for a ring
Prepare a speech to deliver to her parents to ask for her hand in marriage

*
Outline how long we have been together
*
Say how much I love her and her family

Propose
Get married

*
Help in the wedding, let her make most of the decisions because it’s her day

Have a lot of fun with my new wife

*
Do things we both enjoy
*
Do things she enjoys
*
Have nights for just us
*
Have nights with friends
*
Always tell her what is on my mind

Develop a very strong relationship before we decided to have children
Move to a house with a good school district and neighborhood
Have the kids
Be there for my wife in time of need
Decide whether she should work or I should work
Play sports with my kids and share my wisdom with them
Talk to them and be supportive of their aspirations and dreams
Make them feel secure by promoting a safe and comfortable household
Show my kids that their mother and I have a great relationship and bond
Promote a healthy lifestyle and exercise with my family
Have family discussions and keep an open door policy
Always stay true and loyal to my wife and kids

5th. Do this with all your goals. I know this seems long and tedious, but it works wonders. You may be asking yourselves “Jeremie do you do this?” Yup! I have about six pages of ways to accomplish my goals and its growing. I truly believe that if you have a detailed plan, you can achieve anything. If I were to give you an address to my house, it would be nearly impossible to find. But if I gave you detailed directions then it would be extremely easy to find. Your life is not much different.

More to come soon….

According to recent reports from the U.S. Census Bureau, America has finally reached the 300 million mark. What does this mean for the U.S.? Well according to most economic statisticians it will not be affecting America for quite sometime. On the other hand, other developed countries are already seeing the impact caused by population changes. Most of Eastern Europe, where the population is decreasing, will be going through a ton of social changes in the next couple of years. Social security, health care, and other retirement benefits will be causing their taxes to increase even higher than they are now. Currently Scandinavian countries are paying over 40% of their income to pay for taxes (Man! And you thought America has high taxes?!? Check other countries taxes here).

One of the coolest things on the internet is the Census Bureau’s Population Pyramid graphs (Can’t get much cooler than this site eh?). As you can see America will be just fine till the year 2050. Check out Italy. They will be in serious trouble by the year 2025. When you have more 70 year olds than you do 20 year olds, serious problems will occur. They will not have enough people to support the retired population. When your country has an inverted pyramid, you should start worrying about the effects that will come in the future. Developing countries such as: China, India, and Pakistan have near perfect pyramids. Meaning they have large amounts of young people and very little older citizens.

What are some other issues that will come from the population increase in America? Is it a good thing or a bad thing?

Let me just start off with an example.

You have five years of return data from your portfolio.

Years/Returns

1- 10%

2- 18%

3- 21%

4- -3%

5- 17%

The way most people calculate their returns is to add all of them up and divide by the amount of years. Your average annual return would be 12.6% ((10+18+21+ (-3) +17)/5) =12.6).

This seems like the correct answer right? Not really. Let me show you another example so you can see the flaw using this kind of equation.

You purchased a mutual or stock at $100.00 per unit and it does not pay any dividends. The first year it goes down to $50.00 per unit. The second year it doubles up to $100.00 per unit. You would assume that you didn’t make or lose any money right? Well wrong again. Using the same equation your annual return would be 25%!

Years/Returns

1- 50%

2- 100%

(-50+100)/2= 25%

Now that you see why the conventional way of finding your return is flawed and delivers false returns, let’s view the real way to calculate your return.

1st. You have to change all your returns to decimals. After that use this equation to find your real return.

((1 + (1st yr. return)*

(1+ (2nd yr. return)*

(1+ (3rd yr return)*

(ect….)) ^ 1/ (number of years)-1

We will use the information from the first example.

((1+.10)*(1+.18)*(1+.21)*(1-.03)

*(1+.17)) ^ 1/5=.122 *100% = 12.2%

I know this equation involves a calculator and an extra one minute of work, but it shows you the real return on your investments which is crucial.

Conclusion of Things You Can Control

4th. Doubling up- If you are trying to diversify your investment portfolio, don’t double up on your funds. Let’s say you already have a large growth cap mutual fund. Buying another large growth cap fund would just be redundant. If you end up buying two large growth cap funds you will have a lot of duplicate stocks. “You think you’ve got a bunch of different investments; instead you’ve got one big investment of the same kind,” said Ross Levin.

5th. Reading your annual report- I know most people just throw out their annual report when they receive it in the mail. It’s scary, long, complicated, and boring, but there is one section other than the performance statistics you should be looking at. Investment future for the fund is very simple to comprehend. It just shows if the fund has a new manager, and if the fund will be seeking different involvement for your stocks. If you want small value stocks and it changes to small growth and medium value, then maybe you should seek a different fund.

6th. Big time changes- This is almost the same thing as the 5th thing you can control, but has one unique difference. Buying and selling changes. Let’s say you have a fund and it has been performing very well for the past five years. Then suddenly your fund starts going down hill. You call up the fund manager and ask why it’s been dropping so much. He tells you that it’s because of excessive trading activity and venturing in new markets within the fund market. The “stock picking” manager decides to sell some major stocks and purchase totally new ones. This will be reported in your annual report, usually prior to the major change. Sometimes it won’t list the individual stocks that will be traded, but it will disclose the selling and buying of securities. This will usually have a short term drop in your fund, because they are selling your high priced stocks and buying new low priced stocks. If excessive trading isn’t your bag, move to a more conservatively held mutual fund.

Portfolio returns are usually pretty unpredictable. You can never forecast what return you will end up getting. So you should just throw your money anywhere and pray for the best right? Wrong. There are a few variables which the investor has full control over.

* 1st. Portfolio manager selection- If you’re investing in mutual funds you can always read up on the manager and look at his/hers past performance. Look at what stocks he/she buys and sells, what his/her past long term returns were (8+ years), and what the managers philosophy is.

* 2nd. Expense costs-This is one thing that can really make or break your return. If your return for the year was 15%, but you have a 4% expense cost then your return shrinks to 11%. Expense costs are needed because you paying for peoples educated guesses and management fees. Studies have shown that low-expense funds are more likely to outperform more expense funds overtime. So definitely shop around.

* 3rd. Taking on the risk- No risk, no reward, right? Well sometimes risk can just be dumb. I always believe in sticking with the stuff you know. If you want to be in developing markets and extremely high risk ventures, more power to you. I’ll be just fine sticking with the markets I know. For example: My mutual fund portfolio does have an international fund, but always lags behind my other funds. Just because some international markets are doing well for a few years does not mean they will always do great. Overall the S&P has always outperformed international markets long term returns.

More control factors coming up soon. Do you have any that aren’t currently listed?

Why cant people beat the market? Everything I read talks about how most investors in the stock market always lag the S&P. Are people being stupid or just ignorant? I think it’s a combination of the two. The worst investor is an uninformed “in it for the short term” kind of investor. They buy the “hot” stocks when prices are high and sell when prices are low. Good strategy…. Not! The best investors on the planet always plan for long term results and they usually study the companies or sector they are investing in. Would you drive a car on the highway without first learning the basics about driving? Hopefully you said no, but most peoples investing styles is to jump right on that highway and learn as you go. This investing style will lead to many bad crashes and a lot of money loss.

There’s so much information for investors that it makes it hard to believe that people can still lag the S&P. First, if you don’t know what you are doing invest in ETF funds. At least you will be matching the return of S&P. Secondly, stick the companies you know and trust. More people lose their money in companies they know nothing about. Pick companies that have a long and positive history and seem to grow at a steady pace.

Jonathan Clements, a writer for the Wall Street Journal, wrote “There's a lesson here for investors. Want to improve your results? Try sticking with funds that generate consistent performance. Take balanced funds, which typically hold 60% stocks and 40% bonds. These might seem like an unexciting choice. But that lack of excitement leads to better investor behavior. Over the past 10 years, balanced-fund investors have enjoyed a dollar-weighted return of 8.8% a year, not much below their funds' 9% average total return.” Boring investors usually end up making more money than bad active investors. Boring investors buy less risky securities and let their money grow, while bad active investors buy and sell at the drop of a dime.

Today I start the repayment of my student loans. This is the 2nd biggest debt I have other than the mortgage. For 15 years I will be paying ~$82.00 a month, but there some easy ways to getting that amount cut. 1st (the easiest one) is to auto-debit your account for .25% reduction. 2nd After 24 on time payments you will receive a 1% reduction on your rate. Currently my consolidated rate is 4.875%, but when I add the reductions it goes down to 3.625%. Easy things like that could save you a ton of money. Another great thing is that the most of the interest paid on the loans will be tax deductible. I think that when you have a full time job you should try to add some extra principle to your payments so you can get rid of your student loans as quickly as possible (Huge credit score boost).

Don’t be dumb and try to postpone your student loan debt. On my repayment schedule sheet it boldly says “Please remember that failure to repay your loan according to its terms and conditions may result in reporting the loan to a credit bureau as default, and may result in any or all of the following:

1. Loss of Federal and/or State income tax refunds
2. Legal action
3. Loss of eligibility for federal aid
4. Difficulty in obtaining credit”

One of the best things about your student loan lender is that they will help you out in hard times. If you cannot make a payment, alert them immediately. They can usually switch you to a plan that is more comfortable for your circumstances or place your loan in deferment if you meet certain circumstances.

Continuation of Build Your Wealth in Real Estate.

This is the second chapter of the trilogy. It gets a little meatier and requires a lot more education. This is the section where you finally start earning some income off of real estate. Here’s the big question: Do you want to be in real estate for the short or long term? Because I am more of a long term planner, I will only go over one short term plan of making money.

Step five: Short term money maker. Buy. Fix. Flip.

This usually only works when you find a great deal on a house. The property needs to be undervalued/great deal or needs to get fixed up before it gets put on the market. Where do you find these diamonds in the rough? The best places to look are the foreclosure market, and real estate owned (REO) departments of mortgage companies and banks. There are a few differences between both markets and you can check them out at EverythingRE.com.

If you plan to buy a “fixer upper” here are a few rules to go by. The fixing up should only involve cosmetic issues, and never structural issues (cosmetic is cheap, structural is much too expensive). Cosmetic meaning: Painting walls, new carpets, landscaping, and cleaning. Structural meaning: fixing roof, support walls need to be repaired and other aspects that directly impact the overall composition of the house. After all the repairs you need to put it on the market as soon as possible. I highly recommend advertising before you even start doing the repairs so you can sell the house much quicker. You then have to determine the price of the house you want to flip. Take the current selling prices of other houses that compare to the home you just fixed. Best case scenario is when you sell the house in less than a month. You didn’t have to make one mortgage payment, and the only cost to you was the repairs.

Example:

* Price of distressed property: 100k

* Price you end up purchasing the property for: 90k

* Average selling price of properties in the subdivision: 130k

* Repair estimate: 10k

* You sell it for 130k and profit 30k

Step six: Buy smart. Rent smarter.

You can purchase a “fixer upper” or a traditional, well established home and rent it out to tenants. Find a great house in an area that shows true renting potential? Shop around at the closest apartment homes first in order to determine a competitive price to rent the house for. Make sure you are covering your monthly mortgage payment (unless you paid cash, and don’t have one) or at least the interest on the mortgage payment. You don’t have to make money immediately when you rent a house. Find good tenants that plan on renting for an extended period of time. Your mortgage payments stay the same (assuming you got a 15 or 30 year fixed mortgage), but your rent gets increased by around 3% per year. After the fifth year of renting is when you usually see the extra money flowing in. The fact that they are paying for your mortgage and you acquire the benefit of appreciation is by far the best part of renting your home. Eventually, when the mortgage payment is all paid off, the rental house becomes a cash cow. Not only did your real estate probably double in value, but you are receiving a constant stream of monthly income. I plan to use my rental property to pay for my kids’ college tuitions and expenses when I decide to start a family.

Step seven: Lease-to-own

You have another option instead of having to worry about some of the hassles of renting your home. The lease-to-purchase method is a mix between renting and flipping. This situation can usually only be profitable if you have built a huge amount of equity in the home either by the “fixer upper” or “great deal” approach. When you find someone that really wants to buy your house but is unable due to credit score or money issues, lease-purchase is the way to go. It can be a win-win situation if performed correctly.

Example:

* Your house’s fair market value (FMV) is 150k

* Your mortgage balance is 100k

* Your monthly mortgage payment is $615.00 (30 year fixed with a rate of 6.25%)

* Lease-purchase option money= 1% of FMV or $1,500. *Pure profit money*

1. Legally this gives the leaser/purchaser the “option to buy the property” while preventing the owner to sell to another party during the term of the agreement. This is also a weeding out tool because it “weeds” out the people that aren’t very serious about the whole thing.

* Settling home price155k and has the option to buy for three years(price that you and the lease agree to). Remember, you cannot change the set price, so think of a price that will create a win-win situation. (Even if there is a huge jump in appreciation you must sell it at the price you have in the contract).

* Rent is set at $1000.00 (A 155k 30 year mortgage at 6.5%. Assume an increase in mortgage rates).

* Apply 10% of the rent payment ($155.00) to applied rent. Applied rent will be used for the future down payment of the house. I highly recommend this, because it shows that you want them to purchase the home and it shows compassion towards their situation. *Applied rent can be taken away if they decide not to purchase the home when the “option to buy” period expires.

* At the end of “option to buy” period, they purchase the home for 155kmyou walk away with the settling money, and they now own the home. (~55k, and the $230.00 per month overage payment:

1. $1000 (rent) - $155(applied rent) - $615 (mortgage payment) = $230 monthly profit.

Step eight: To Be Continued…..

Books eFIPO recommends for Real Estate

Buy Low, Rent Smart, Sell High
The Automatic Millionaire Homeowner
The Beginner’s Guide to Real Estate Investing

Blogs eFIPO recommends for Real Estate

Zillow Blog
Nubricks
Searchlight Crusade

Technorati tags: eFIPO, Real Estate , Leasing & Renting .

Today was a big day for me. After watching an episode of South Park “Make Love, Not Warcraft”, I decided it was time to uninstall all my money saving computer games. Even though I played World of Warcraft only once, I still decided it was time to move on. I’ve been a huge gamer since I was kid, and it did end up saving me a ton of money when I was in college. When all my friends wanted to go out and party, I sometimes decided to stay in and play video games (saved me from getting in debt and trouble). I know how nerdy that sounds, but I know that most guys have done that at least once in their lives.

The years of enjoyment had to end at some point, and the time for me to grow up was here. What will I do with such an open schedule? Well, I am going to dedicate more time writing, reading, and school work. It’s been a life changing day. It feels like a 500 pound weight has been taken off my back.

Coldplay can sum up how I feel in the song “Fix You.”

“When the tears come streaming down your face
When you lose something you can’t replace
When you love someone, but it goes to waste
Could it be worse?

Lights will guide you home
And ignite your bones
And I will try to fix you

High up above or down below
When you’re too in love to let it go
If you never try you’ll never know
Just what you’re worth”

R.I.P.

Warcraft 3
Frozen Throne
Company of Heroes
DOTA
Command and Conquer
Wolfenstein
Doom 3

You will be missed, but never forgotten. *This post had a lot of sarcasm, but trust me it was still a hard day for me*

Do you have anything that you have had to give up for the greater good? Come on don’t be shy.

Let me tell you about my day. It was a beautiful morning in Georgia. It wasn’t too hot and it wasn’t too cold. There was sunshine gleaming through the trees in my front lawn, and the birds were singing a good tune. It was just perfect. But then…. I was getting ready to go to work and I noticed that my car had a flat tire!



Most people hate having flat tires, but I hate them even more. Want to know why? Well maybe it’s the fact that I have had over 12 flat tires in less than one year and eight months. Or maybe it’s the fact that I have had to get ten patches, and two tire replacement. It might also be the fact that I have had to spend over $400.00 on stupid patches! But luck was on my side. The general manager at Big 10 Tires, Bill, gave me a free patch because I am their best “patch-up” customer.

One of the tires that I replaced was purchased at Big 10. I bought hazard insurance because you know luck will strike again in the future (But then again. My luck shined and decided it wouldn’t be on the tire I have insurance on!). Get hazard insurance on all your tires, because the road is your enemy and it wants to send pieces of sharp metal right into your tire. I wish I could get it on all my tires, but that will have to wait till I get new ones on all my wheels, which according to my calculations should be in three months.

Over 21 only article –involves alcohol

Can drinking alcohol increase how much money you get at the end of the month? According to The Journal of Labor Research, drinkers usually earn 10-14% more than non-drinkers. You could read the whole article at CNN Money. A lot of writers on the internet have already thrown in their 2 cents on this new discovery. I am going to hit this subject from a different angle with an experiment of my own.

According to The Journal of Jeremie’s Research lab, people that drink liquor can save even more money than beer drinkers (and they won’t have bad beer breath). This “real” research lab found that if you purchase liquor instead of beer can save you hundreds of dollars by the end of the year. *The only real research that Jeremie has done is take down prices at a few different liquor stores, gas stations, and grocery stores.*



Most of time you need to purchase mixers such as: Cranberry juice, orange juice, soft drink, ect. Let’s make another assumption and you spend $6.00 for 2 bottles of juice (2 liters).

Check out the whole article to see all the data here.

Why do people have a savings account when you’re in big time debt? When I used to work at a bank in Atlanta, I used to see thousands of people that had a savings account (earning 1.5% interest) and a maxed out credit card with an interest rate of 15% or more. This makes no sense at all. When you have an interest rate that is higher than the savings rate, you need to lower down your credit card balances before you save. Some people think that having an emergency fund is worth having even though you are in debt. I don’t really think that is true.

Example: You have $2000 of credit card debt (14% interest
You have $2000 in a savings account (4% interest)

Credit card monthly payment is $40.00
Total interest paid monthly ~$22.00
Savings account interest yearly payment is $80.00.
Monthly interest ~$6.00
Total loss of $16.00 per month or $192.00 per year.

Now just look at the figures. As you can see that is a difference of 10%. If that doesn’t turn you away maybe this will. Your income on that 4% is taxed, while the credit card debt is not tax deductible. This kind of situation you are being penalized to save. Pay off your balances then save.

After you pay off your credit cards then you can start pumping money in your emergency fund. If a situation does end up coming up and you don’t have any money in savings then use your credit cards to save the day again. Yes, you will be in the same situation as before, but you will still be saving a lot more money by paying credit cards off first.

If you are currently in this position don’t feel bad. I’ve been looking around many financial blogs and there are tons of people doing it. *including some authors that run the blogs?!?*

Great Calculators

Debt Evaluation Calculator

Debt Reduction Planner

Question Sent from an eFIPO.com Reader

Hey Jeremie!
So I told you last month that I would start emailing you with lots of questions, so here they come! I recently got the life insurance package from my mother’s life insurance, and it was sent to me in the form of a bank account to jackson national life insurance. They gave me a check book and all that can only write checks of a min. of $250. The letter says that the interest rate for the account is 6%, I don’t know if that is fixed or not. They also said that I can take the money out at my discretion, so if I want to take it out and put it into anther account I can. The other thing that was said in the letter was that the IRS requires them to report payments made so they will be sending me the tax forms, and im not really sure how much of that money gets taxed and how that might work. My uncle had mentioned taking that money out and putting it into the trust account that is set up for my brother and I. So, my questions are, is it smart to leave it in that bank account, move it into the trust account, or open a different account??? Also, is there a way to avoid taxes taken out on that money, or do you know how the tax situation on life insurance money works? If ya don’t know that’s cool, i just thought id throw these q's your way because I’m completely lost and don’t really know what the heck I’m doing! I would appreciate any advice you have. I’m sure there are lots more questions ill think of, so you can prob expect a few of these in the near future! Hope your doing well! The website is awesome, I’ve started to get the chance to read up on it more and more and I showed it to my brother, he thought it was great! MadProps.
Talk to you soon!

*Quick background*

This reader and her brother received their parent’s life estate (money, house, insurance, and etcetera) and are in a pretty difficult position. They need some advice on how they should handle the situation. I am not specifically going to tell her what to do. I will give her the resources that are needed before she makes a proper decision.

Most of the money should not be taxed according to the estate tax law which is here. What you really needs is to set up a meeting and speak with a CFP (certified financial planner) and estate & trust lawyer. It seems like the insurance company is just trying to hold on to the money as long as possible until you become financially educated to make a proper decision. They will try to sell you a ton of products like variable/fixed annuities, saving accounts, and other retirement benefits. Even though the insurance company is trying to sell you a retirement advice doesn’t mean it’s correct. They usually try to sell you the products and fail to look at the whole picture. There are so many variables that need to be analyzed before making long term decisions such as: taxes (biggest one in this case), her desired retirement age, her yearly desired spending amount, her social security benefits (if allowed), and more. What I recommend is going to a fee only financial planner. Going to a commission based CFP is usually a bad decision. They don’t always have your best interest in mind. They get a commission from the products they sell. Some products have higher commissions which they will try to sell even if they are unsuitable for your current situation. Here are some questions you will need to ask your CFP. If you would like to find a fee only CFP in your area go to NAPFA. Ask if they also have an estate and trust lawyer on-site or around the area.

On the other hand, 6% is a real good rate on a savings account (that better be the rate that they are giving you, not a rate that they charging you). I would use that account for a cash only account. The bulk of the estate money needs to go towards retirement so you will be able to enjoy retired life at a younger age. One piece of advice I would recommend is to fully fund your Roth IRA every year (you can only fund the IRA if you are working), and use the cash account for all your purchases. One thing to keep in mind is to spend money on YOU! You should always be happy and level minded before you make these big choices. Remember to take all the advice you can get and only make a decision when you’re ready.

Aren’t vacations great? Giving yourself a week off from work and school is therapeutic for the body and soul. But when you get back from your dream vacation and your next credit card bill comes around and you’re shocked to find that you went over your budget by $250.0! Maybe next time you should consider not drinking so much at the extremely expensive bars. After recovering from the panic of seeing your bill you decide to take my advice. Save for trips now, and have a better vacation later on.

When you plan a vacation start a separate online savings account.
*Example*: You are planning to go on a one week cruise to the Caribbean in March, 2007 and all your expenses will be ~$1000.0. If you start saving in August 2006 you will need to put in $125.0 a month into your savings account. Let’s just make the amount $130.0 to make the numbers easy. In March after eight months of saving you will have $1040.0 and ~$18.0 in interest.

If you save for your trip early and you go over your budget by $250.0 then it wouldn’t be such a financial burden. Instead of paying $1250.0 ($1000.0(budget) + $250.0(too much partying)) you will only need to pay the extra $250.0 because you already paid off your trip. You can apply this principle to anything whether it’s a trip, a new TV, car, or a down payment for a house. Save on a monthly basis and get bigger and better things in the future.

If you have a trip coming up and what to start saving now, email me at JRBeaudry@efipo.com and I will send you a link from INGDirect.com (current APY is 4.40% 10-06-06). If you open your savings account with more than $250.0 you will receive an extra $25.0 just for opening the account! So start saving now and receive the extra money!

Buying “quality” instead of “quantity” is something that people just don’t do much anymore. They would rather something cheap and hope that it will last as long as a high-quality item (it never does). Your average person will buy something like a computer, for instance, and believes that the $300.00, bottom of the line computer will last as long as the $700.00 one. What they don’t understand is that you will probably end up buying nearly three of them while the $700.00 computer just needs some minor tweaking over the years.

You can usually apply this concept to nearly anything you buy. Instead of always buying the cheapest equipment, consider reading consumer reports and reviews of items before you make a purchase. Sometimes investing in a more expensive item might save you a ton of money in the future. Stop being “economical/extremely cheap”, and become an educated buyer.

Here is another great question from a subscriber. “I am trying to get rid of some credit cards that I no longer use. I currently have five credit cards. The ones that I want to close have a zero balance. Which ones should I keep, or should I just keep them all?”

Even though I have an answer for your question, this is pretty much a personal issue. I will have to assume a few things on the credit cards you want to close. First, you probably no longer need or want them anymore. Second, these credit cards are not the oldest ones in your repertoire.

When you close down credit cards most people think that it will automatically increase your credit score. Well, I have some news for you. Most of the time it will actually decrease your score. The reason for the decrease can be easily explained with some simple math.

Let’s just say you have $5000.0 of credit card debt and you have four credit cards. Two credit cards with $2000.0 credit limit and the other two have a $3000.0 credit limit which means that you are using 50% of your eligible credit ($5000/10,000). If you were to close your two $2000.0 credit cards you would be left with an eligible $6000.0 credit limit, but your debt ratio just went up to 83.3% ($5000/6000). *Remember that your debt ratio plays a key role in your FICO score*

Let’s take the same situation as described above with a different issue. Let’s say your two $2000.0 credit cards were open in 1997 and the other $3000.0 ones were opened in 2001. If you decided to close both of the $2000.0 credit cards and keep the others opened your credit score would probably go down a bit just because you closed four years of credit history. This will also affect your credit score, because the length of your credit history will change.

Before you start calling the credit companies and cutting up your cards make sure you look at the downside of it. If you do have to close some down make sure they aren’t the oldest ones in your wallet/purse unless they have a yearly fee. See, there are some good reasons why having several credit cards can be beneficial.

A new study has shown that in 132 of the 250 of the largest U.S. counties only about 50% of retired people live comfortably. Read this editorial to learn what effects are causing people not to retire on time and discover how to be proactive with your future. This article also breaks down how American cities are ranked one against each other when it comes to retirement. See where your city is ranked.

Retirement 101

At what age do you intend to retire?
How many years will you expect live in retirement?
How much are you currently earning?
What will be your main sources of income during retirement?
How much money do you need (or want) to spend each month in retirement to achieve your goals and maintain your lifestyle?
How much have you already accumulated in employer benefits?
How much have you already saved or invested for retirement?
How comfortable are you taking risks with your investment dollars?
How many people must you support financially now and in the future?

Questions created byUniversity of Illinois at Urbana-Champaign

If you think you are prepared for retirement these questions should be a breeze to answer. If you are not prepared and you are struggling to come up with answers make sure you read some previous posts I made about retirement.

We are about to talk about budgets so hear me out before you click on the little X at the top of screen! Even though I do not believe in a strict budget, I still believe that a rough budget will help you. Make it a loose budget using percentages of your income instead of making a fixed amount for activities, bills, and food. Your life demands breathing room and flexibility, and your budget should be the same way.

The first step to making a realistic budget without it being chiseled in stone is to decide how much money you want to put into your budget. A lot of people don’t put in all their income in their budget. Most people will save a portion of their money before they want to pay for things. *Paying yourself first: see my top 10 ways to save money* Now, what should you do with the money after you’ve saved your 10-20%?

Here are my recommendations of what should be paid off beginning with the most important.

1. Rent or mortgage (40-45% of your income). This is a reoccurring cost that you will have to pay on a monthly basis - unless you like living outdoors. If you do not have any kind of living expenses because you have paid off your house, or if you are living with your parents, you should be putting the money you would be paying in rent/mortgage into your savings account. *A good mortgage calculator to make your rough budget*
2. Food and necessary bills (20-30%). What do I mean by food? NOT the food when you go out for dinner. Food you purchase at grocery stores that you will be eating on a daily basis. You need money for food or else you would die of starvation (I do not recommend doing that). The bills that are essential for a healthy lifestyle, such as water, electric, gas, and insurance bills are right after food. *Learn how to lower your utility bills*
3. Secondary bills (10-15%) - such as cable, internet, phone, and cell phones - come in third. These services are usually perks, but for some people these costs are also a necessity. Technically you could live without them, but a lot of people will argue this point. If you need to reduce these costs, but you cannot survive without them go for the bare minimum.
4. Fun and leisure activities (10-15%) are still a must. A lot of personal finance advisors, such as Michelle Singletary, recommend dropping any activities that will inevitably get you into serious debt. BUT, in my opinion, Singletary’s advice takes the fun out of life. She is a huge penny pincher when it comes to finance, and I don’t really agree on anything she has to say (sorry about the rant but I watched her show last night and I couldn’t help myself from pointing and laughing at the TV).

Most people invest a certain amount of money each week or month into an investment plan such as a Roth IRA, or traditional IRA. This investment strategy is called dollar cost averaging (DCA). Here is a formal definition explained by Investopedia “The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high.” This system can make you a ton of money if share prices are low when you buy and high when you retire and sell your shares. Here is a model that shows how DCA can sometimes be a negative.The best approach by far is value-cost averaging (VCA). Investment-FAQ explains it as “a strategy in which a person adjusts the amount invested, up or down, to meet a prescribed target.” You will end up killing two birds with one stone with this approach. You will balance your portfolio, buy more shares when prices are low, and buy fewer shares when prices are high.

Example:
You want to contribute $100 per month in a mutual fund.(1st month)

You contributed $100 End of month balance $70
(Share price decrease)
(2nd month) You contributed $130 End of month balance $240
(Share price increase)
(3rd month) You contributed $60 End of month balance $310
(Share price increase)
(4th month) You contributed $90 End of month balance $400
(Share price has no change)

You contributed $380 but your mutual fund balance is $400. Nicely done!

Even though value-cost averaging requires you to spend ten minutes a month looking at the performance of your stocks or mutual funds it is still more efficient approach than dollar cost averaging. Being a little more proactive can make you a lot more money. But whether you choose DCA or VCA the most important thing is that you are contributing to your nest egg. So give yourself a pat on the back and picture the mansion you will buy later on.

By Jeremie Beaudry

You ever see those “ret rich quick schemes” about real estate on TV at like 2:00 AM? Here’s an even better question: have you ever bought the “get rich quick scheme” system at 2:00 AM? I have to admit that I actually purchased one expecting the worst. I just wanted to read the first three chapters just to see how much credibility these “professional courses” actually had. And to my surprise it was just total crap (sarcasm). It was more of a semi-inspirational course that really didn’t get you motivated enough to go out and buy real estate. I give it two thumbs down! I returned the program just because I really didn’t feel like paying Carlton Sheets and, of course, because it was a complete scam. Another thing that I would like to point out is how much trustworthiness these people even have if they have an infomercial at 2:00 AM. I mean they are competing for airtime against some “5 minute ab work-out” infomercial and “Girls Gone Retarded”! Now back to the point… The one thing that I have learned about real estate is that it requires time and comprehension. It is not some kind of get rich quick scheme because if you are in it for the short-term you are going to lose big time. It requires you to be diligent and get as much knowledge in real estate as possible.

Step one: Develop your game plan.

Before you dive into the uncharted real estate waters, you need to develop a game plan. Figure out whether you want to invest in property, or just have a comfortable lifestyle (no more than two properties). This step is crucial because it makes your house hunting much different. Many factors come into play that you would probably overlook if you were just buying it as your residence. Examples would be the renting culture (how many homes are already being rented in the neighborhood), apartment prices (to stay competitive), proximity to grocery stores, malls, etc. (area renting incentives).

Step two: Already nice, or fixer upper.

Are you going to shop for foreclosures, houses that need some repairs, or homes that are already nice and ready to move in? These are some things you must read up on. Don’t just decide you’re going into the foreclosure market and fixing up the house without looking at cost analysis of the repairs (materials, labor, and time). This can get you into a lot of debt very quickly if done incorrectly. Buy Low, Rent Smart, Sell High is a great book that explains the costs of “fixer up’ers”.

Step three: Financing. Buying stuff with none of your own money!

Find your financing. I usually recommend finding your money source before you starting buying everything in sight. You can’t make a bid for a house without the Benjamins (money). When you are an early investor there is nothing else better than using other people’s money to buy stuff that makes you a profit. It’s a beautiful thing called leverage.

Step four: Advertising time baby!
Use as many free resources as possible before you start pumping money into other promotional devices. Use Craiglist's to advertising your new property before it goes on the renting market. You always need to start displaying ads before you buy the house, but make sure the deal will be going through. After exhausting your free advertising resources, use other online services (Rent.com), and local newspapers to announce an open house for rent. Use words like “New low price, Free Rent, Move-in Specials”.

Step five: More to come later on this week….

Books eFIPO recommends for Real Estate

Buy Low, Rent Smart, Sell High

The Automatic Millionaire Homeowner

The Beginner's Guide to Real Estate Investing

Blogs eFIPO recommends for Real Estate

Mind 2 Money

Real Estate Blog

The Real Estate Blog

Buying a house is one of the biggest moments in your financial lifetime. Doing it the correct way will save you thousands, and make you thousands (not to mention save time, and headache). If you think that all you have to do is find a house, make an offer, and move in you have it all wrong. Shopping for a mortgage, a real estate agent, and a house is just the beginning of the house buying process.

Personally, I did everything wrong. I didn’t shop for a mortgage which turned out to be a HUGE mistake. I ended having to shop for a realtor because my first one was dreadful, and I mean horribly dreadful. This realtor made me drive my own car, didn’t know where she was going, brought me to houses that were already sold (for more than a year), took me 15 miles out of the area where I wanted to buy, and knew nothing about the houses she was taking me to. I had to fire her, and get a new realtor. Having a really good realtor makes a huge difference in the home buying experience.

Here is a list of things to do before you start shopping for a house.

1. Get your FICO. Remember the article about why knowing your FICO can save you a ton of money. Well, this is one of the scenarios that involve finding your credit score. Before shopping for a mortgage you need to know what kind of rate and payment you are going to expect to get from lenders.
2. Find how much house you can buy. Like I said in an earlier post, do not buy a house that you really cannot afford. Having a house should be an investment, not a money pit. Use one of these mortgage calculators to estimate a payment that you can truly afford.
3. Now it’s time to shop for a mortgage. Check Bankrate and LendingTree to receive some offers from a lot of lenders without all the work. Another thing, I highly recommend going to the bank your checking or savings account is held at and ask them for their offers. They will sometimes offer you a discount just because you already have business with them. Another great lender is INGDirect if you want low rates and minimal closing costs. For first time homebuyers getting an ARM or hybrid loan is the way to go. Most of the time people who buy their first house usually buy another in 5-7 years. Getting a 30 year fixed mortgage will make your monthly payment higher, and you will end up paying more in interest. First time homebuyers should also look at NACA and other programs (like FannieMae) for first time homebuyers.
4. Make some choices. Choose an area where you want to buy, and decide how much you are willing to spend before you go to a real estate agent. Some real estate agents will bring you all over town which will waste a lot of time.
5. Get a real estate agent. It makes life a lot easier if you have a good agent that has your best interest at heart. Shopping without one can be very time consuming, and they have access to software and websites that non-agents do not usually have. They are also free for the buyer because they usually get a commission paid by the seller. Not too shabby.
6. Take a week off work. This was one thing I wish I would have done when I was looking to buy a house. You need to dedicate yourself and your time looking for the house. Making offers, signing papers and receiving phone calls from your agent and mortgage company can be stressful and extremely important. So, if you can, take a week off work.
7. Find a house that you really like. This house does not have to be your dream house, but it can’t be a dump that you regret buying. A lot of people end up settling and get a house that they truly don’t love. This will create problems in the long run, so shop around. It’s a big investment so take your time, and do not let the agent pressure you into something you do not like. It’s your money not theirs.
8. Hire a pro. Once you find the house you really like hire a construction engineer or house inspector to go through the house before you buy. I recommend getting the engineer if you can find one. Go to a local university or ask around for one. They know what they are doing a lot more than a regular house inspector.
9. Rent a truck or U-Haul and pay some friends to help you out. This is going to be your first house so you are not going to have enough stuff to need a moving company. It cost thousands of dollars to hire a company to do things that you and a couple of buddies can do just as easily. Pay your friends some good money to help you out. They are helping you out and saving you a ton of money (and trust me helping you move is the last priority on their lists).
10. Have a house warming party! It’s a big time in your life and you should be able to celebrate. A lot of times people will buy you gifts which is always a good thing. I recommend having a “stock my bar” party. Everyone buys a different kind of liquor to “stock” your bar. It’s the party that keeps on giving.

Have you ever purchased something that you used once then threw it in the back of your closet or garage? Most people don’t ever think how much money they loose by purchasing things they don’t really need. Sometimes buying your “wants” can be self-satisfying but extremely expensive when used only a few times. Here is a great example that has happened to at least ten people I know. You ever buy a shirt that you think will look great, wear it twice, and then you never wear it again. Try to apply this to other things in your life.

Before you head off to college and decide to get a fancy computer make sure you read this article. Consumers need to learn to shop for good deals that will save hundreds of dollars by going to websites like these: FatWallet, Woot, and NewEgg for electronics. Shop around for good deals online, and don’t buy things you don’t need.

Most people have a loose coin bucket in which they throw their change at the end of the day. After a few months of accumulating your pounds and pounds of change, you decide to go to a supermarket to cash it all in. It feels so nice losing five pounds of change and converting it into little pieces of paper that you can easily slip into your pocket. Now let me ask you a question. Have you ever willingly paid an additional 8%-10% on something for no apparent reason? If not, stop using automated cash counting machines in supermarkets.

Go to YOUR bank! They provide FREE paper rollers and usually supply you with a quick counter which makes your change counting easy. After about ten minutes of work you can save a ton of money. I went to the bank about three months ago and it took me around twelve minutes to count, roll, and deposit $246.87. If I had gone to a coin counting machine they would have deducted $19.75-$24.68 from my total after around ten minutes of labor. Man, wouldn’t life be incredible if you could make $20-25 for every ten minutes of labor? Now go ahead and start saving wisely. A penny saved is a penny earned. -- Benjamin Franklin.