Should I Invest in Stocks?

The U.S. Stock Market is at an all-time high, and many are wondering how much longer this can be sustained.  People are asking themselves if it is still worth investing in stocks at this high.  The simple answer is: YES!

Below is a chart of the S&P 500, which covers the broad range of the stock market.  The chart below illustrates performance from 1950 until the end of last year.

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Should I Invest in Stocks?

As you can see based on the chart, there are rises and falls, some of which are quite big.  If you look at the chart as a whole, you can ultimately say that U.S. stocks have increased in value over time.  Here are three reasons why one should consider investing in stocks.

Should I Invest in Stocks? Reason 1:

U.S. stocks have outperformed almost every other investible asset over the past 100 years, especially government and corporate bonds.  People often think of bonds as a safer alternative to investing in stocks, but what they really mean by “safer” is less volatile.  Yes, stocks can fluctuate with higher highs and lower lows in a given period of time, but over the long-run they will outperform bonds.

Should I Invest in Stocks?  Reason 2:

Stocks are the easiest and safest way to build wealth.  What I mean by this is that continual investment in stocks will yield higher and higher returns over time if you let your returns compound.  Compounding interest is a great thing when it comes to building wealth and all it takes is two simple steps:

Step 1: Continued investment and reinvestment

Step 2: Time

By continually putting money into your stock investment on a consistent basis and allowing your returns to reinvest, after a period of time you will be able to build a substantial amount of wealth.  And again, since stocks outperform other investments over the long-term, you are compounding a greater percentage each year.

Should I Invest in Stocks?  Reason 3:

Because Warren Buffett says so!  At the time of this post, Buffett’s net worth is estimated to be in excess of $75 billion USD.  It has been said that he is the greatest investor the world has ever seen.  How did Warren and others like him make their great fortunes?  Through investments in stocks.  Warren has constantly invested in companies throughout his time via stock purchases in what he calls “value investments”, which is a simple way to say in companies he believes to be cheap in valuation.  Buffett has gone so far as to say that even upon his passing he would like the remainder of his fortune to be placed in a low-cost index fund that mirrors the S&P 500.  The greatest investor ever believed and still believes in the power of stocks.

Hopefully by now you have been convinced that investing in stocks is the right thing to do, but how do I get started?  Simple, to begin investing in stocks I would recommend investing in a mutual fund that covers a wide range of the U.S. Stock Market.  Investment firms such as Vanguard and Fidelity offer these sorts of funds that will allow you to get exposure to the broad range of the U.S. Stock Market and begin reaping the rewards.

What is the Starting Credit Score?

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Starting Credit Score

Having a credit score can have many benefits.  Wait, having a good or great credit score can have many benefits.  As we go through life, credit becomes an essential tool for an individual to progress through society.  You can use credit to purchase everyday items, a car or a house.  Without credit, some of the essential purchases we rely on to carry us through our lives every day would be unavailable, such as a car for transportation to and from work.  Having a credit score and a good one at that can allow you to get the best deal on large purchases and also helps create a financially responsible person.  But just how does one get a starting credit score, and where do you begin?  I will lay out some of the easiest way to start down the path of a good credit score.

Step 1 to getting a starting credit score:

The first thing you need to do to get a starting credit score is simply to get credit.  The easiest way to do this that I recommend is by opening up a $0 annual fee credit card.  Your monthly limit won’t be all that much, most likely less than $1000.  Commit to making a couple easy purchases on it every month and paying it off at its due date.  For example, a couple tanks of gas or a visit to the grocery store is all it takes to start building your credit.  It is vital to pay off the full amount after a month’s time before the card’s due date

Step 2 to getting a starting credit score:

The second step to building a starting credit score is to continue purchases with your credit card and meet the monthly payment date, along with exploring an additional option of building your score.  If you rent an apartment, sometimes the apartment complex allows you to report your on-time payments to credit agencies.  Additionally, if you have student loans you are paying back, this also will show up on one’s credit report.  Time is a big factor in your credit score.  It usually takes at least six months for you to build your first credit score.  Image result for credit score rangeIf you make on-time payments in full, you can expect a score anywhere in the range of 675 to 740.

Step 3 to getting a starting credit score:

By step 3, you should already have shown a positive pattern to creditors through making payments on a timely manner.  The most important part of this step is just to be patient.  Building a good or great credit score takes time.  Two of the bigger factors that impact your credit score are the length of time you have had credit and the number of accounts you have that required credit.  Chances are as you start building your credit both of these factors won’t be too much in your favor.

In summary, there are many benefits to building a good credit score, but it all boils down to a few simple factors.  Firstly, you need to begin building credit through a $0 annual fee credit card, student loan repayment, etc.  Secondly, you MUST make your full payments and make them ON TIME.  Finally, you need to be patient.  It takes time to build a great credit score, but if you budget correctly and make sure not to spend above your income level then a great score will eventually come.

How To Trim Your Budget

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With the new year in full swing, people are doing their best to stick to the freshly made New Year’s Resolution’s they mapped out for themselves.  The most common resolution always seems to be losing weight.  Instead of going with the status quo resolution this year, why not try to trim something else?  Your budget perhaps?




How to cut my expenses? Is a question often asked by many in order to free up funds in their daily lives.  Maybe they are living paycheck to paycheck, maybe they are trying to save up money for a special purchase, either way trimming your budget is the best way to go about doing this.

For starters, you need to have a budget.  You can download a free budget template and simply put in your income and expenses.  The best part about budgeting is you get to see where your hard-earned money is going every month.  Perhaps you are spending a large portion on eating out, can you bring your lunch instead of going out to eat?  If so, you might be able to not only cut some expenses but trim your waistline also.

The free downloadable budget allows you to choose the expense categories you have for a given month.  Say for example you spend $100 a month on your cellphone bill, can you change service providers and possibly get the monthly expense down to $80 per month?  If so, you have freed up $20 per month or $240 for the entire year.  Can you trim $10 a month off your grocery bill by purchasing generic products versus name brand?  This can be an additional $120 in savings for the year.  Attempting to save as little as $10 to $20 per category for a few of your monthly expenses can add up to some awesome end of the year savings.

Below is a quick easy way to trim your budget:

  • Create a budget: If you don’t already have one, now is the best time to start budgeting. This will determine where you are spending your money every month.
  • Track all of your expenses: See just how much you are spending in the various categories every month. Some may surprise you.
  • Pick 2-4 categories: By selecting a few categories where you think you can cut some expenses you will maximize your yearly savings.
  • See how much you can cut: It can be $5, $10, $20 or maybe even more per category per month. Living on a little less each month won’t change your quality of life for the worse.  Instead, you can use the money saved to enhance it by saving up for a vacation or a future purchase.
  • Don’t incur new expenses: While trimming your budget to save up money is the ultimate goal, don’t incur new expenses during the process. A car payment or a gym membership will quickly eat away at the money you are trying to save.

Stick to it: Trimming your budget will only be beneficial to your wallet if you stick to it.  Developing discipline for sticking to a budget can be tough but also very rewarding.

 

Build an Emergency Fund with this 52 Week Money Challenge Printable Version

As the end of 2016 approaches and a new year is on the horizon, it is time for a new year of financial goals.  According to a recent USA Today article, nearly 70% of all Americans have less than $1,000 in their savings accounts. That means when someone has an unexpected expense they must turn to high interest pay day loans, or credit cards that can’t be paid off at the end of the month. The interest paid on these will cost way more than the original amount in the long run. Even something as simple as $1,000 in an emergency fund can help offset these costs. So if you’re interested in avoiding the pain of credit card borrowing, it pays to have some financial security.

What does financial security mean? It is different for every person.  It could mean paying down student loans if you are a recent college graduate.  It might be tackling credit card debt that has plagued you for months or even years.  Maybe it is saving for a home.  Each person’s financial goals are different. Today’s focus will be on building an emergency fund for you to have in case you encounter any unexpected expenses.  The best part about an emergency fund is it can be done with little effort on your part and in just one year’s time.

Now if building a $1,000 emergency fund sounds good, building a $1,378 emergency fund will sound even better.  The best part is that there is a simple and easy way for almost anyone with an income stream to accomplish this.

Beginning in 2017, set a goal to accomplish the 52 Week Money Challenge printable version.  The challenge takes minimal effort and the downloadable sheet allows you to easily track your progress.  January 1, 2016 falls on a Sunday, so for simplicity reasons we will begin the challenge on Friday, January 6, 2017.  On the first Friday in the new year, simply put one dollar into your savings account or in a piggy bank if that is easier.  On the second Friday of the new year, put two dollars into your account.  Each of the Friday’s that follow, you will increase the amount you deposit by only one dollar.  It would look something like this for the month of January.

52 Week Money Challenge Printable Version Example:

Date Deposit Amount Total Amount Saved
1/6/2017 $1 $1
1/13/2017 $2 $3
1/20/2017 $3 $6
1/27/2017 $4 $10

52 Week Money Challenge Printable Version

By the end of January, you will have already saved ten dollars into your account and will be well on your way to establishing an emergency fund. Pretty much you just do the same thing for the rest of the weeks in the year, just for each week add one dollar to your weekly savings total.

Can you live on one less dollar each week?  That is how you need to look at this challenge.  Each week you train yourself to live on one less dollar than the previous week.  In the final week you will live on $52 less than you did the first week of the new year.  The total amount you will have saved up in just one year will be $1,378, which is more than what 70% of Americans have currently in their savings accounts.

Challenge yourself, a friend or a family member.  Take on and print out the 52 Week Money Challenge printable version sheet and get your new year off to a great financial start.

Budget Smart, Invest Wise

Budgeting With Credit Card Debt

I recently spoke with an individual who was excited to begin his budget.  He downloaded the spreadsheet available on my site and asked me to look over it.  Everything looked good except for one thing I noted.  This individual had a category as follows:

Credit Card Payment (minimum)

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This shocked me for a number of reasons.  First and foremost, the minimum part that was included.  Secondly, paying off your credit cards is not an expense.  For example, if you go to the grocery store and spend $50.00 on groceries but apply the charge to your credit card, then your budget should reflect a $50.00 purchase on groceries.  The credit card is simply a means to pay for it.  Finally, I recognized that this individual had credit card debt, and he assumed paying off in minimum installments would eliminate it.  Yes, theoretically, as long as no further debt was incurred, but it would take a while.

This ultimately led me to the following conclusion.  This individual had a significant amount of money remaining in their budget every month.  I advised him that if I was in his situation I would do the following:

  1. Make sure I am able to cover all of my necessary expenses in the budget.  This would include rent, gas, food, student loans, etc.
  2. See where some expenses can be cut.  Bringing his lunch to work versus going out to eat might be the smartest financial decision until he gets his credit card debt under control.
  3. Use any extra money at the end of the month to pay off the remaining balance on the credit card.  Credit cards are notorious for having extremely high interest rates.  The quicker you tackle this type of debt, the more you save.
  4. Set a goal for paying off the credit card debt.  We agreed by the end of the calendar year.  Once the debt is paid off we could redo the budget and include categories for savings, retirement, and other financial goals.

Credit card debt can be a nasty thing, but a budgeting approach to handling it can make your financial life much better.  Use a budget to pay off your debt if you have any, then you will be able to create additional space to begin planning for your financial future more aggressively.

 

Budget Smart, Invest Wise

New “Investing Wisely” Page

So the purpose of this blog is twofold:

Budget Smart, and Invest Wise.

In addition to the “Creating Your Monthly Budget” page, I have added a new page to the site, titled “Investing Wisely”.

 

There are many investment products out there and many places to turn to to do your investing.  How do you know which one is right for you?

Each person develops their own specific investment habits through a number of different avenues.  I prefer investing in a low-cost mutual fund.  However, others have a knack for picking the right stocks at the right time.  To each his own.  To help you decide which investment avenue is right for you, check out The Simple Dollar.  They weigh the pros and cons of various investment strategies along with the right investment company for each individual.

Budgeting is only the first part of building lifelong wealth, the second part, investing wisely, is ultimately what will help build and maintain that wealth.

 

Budget Smart, Invest Wise

Compound Interest

Some have called compound interest the unofficial 8th wonder of the world.  It is definitely a wonder when it is applied to your financial life.  The best part about compound interest is that it allows for exponential growth of a portfolio.  The concept is simple.  When you earn interest/dividends/capital gains, you reinvest them into your portfolio instead of withdrawing the funds.  The video shows just how powerful compound interest can be in increasing your wealth over time.

 

Budget Smart, Invest Wise

Book Review: The Surprise Millionaires

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I recently finished ready The Surprise Millionaires by Keith McDowell.  A great read indeed.  It is packed with amazing stories of ordinary people who passed along extraordinary wealth.  Keith did a wonderful job of including stories from all over the country that date back to the beginning of the 20th century.  You can purchase the Kindle version of the book for just 99 cents!  You can also follow his blog here: https://thesurprisemillionaires.com/

Here are my 3 main takeaways from his book:

  1. No matter your income level, everyone and I repeat everyone has the opportunity to create wealth over $1,000,000.
  2. Most if not all of these individuals valued relationships over possessions and money.  It was who they could impact with their wealth that was much more important than the amount of earthly items they could collect.
  3. Every single one of the stories ends with a person(s) creating a lasting legacy in their community.  When your time on earth is finished what do you want to be remembered for?  I’m sure the people in these stories asked themselves this question, and the legacies they created was beyond comprehension.

Budget Smart, Invest Wise

One Easy Way to Slash Taxes

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Reduce your taxes and increase your savings.  Sounds almost a little too good to be true right?

It’s possible, it’s easy, and I just did it and so can you.

Today is the final day for you to file your taxes for this year.  Did you pay more in taxes than you would have liked?  Do you want to lower your tax bill for next year?  If so, then here is how to do it:

Increase your 401k contribution to your company’s plan.  What percentage of your salary are you contributing to your 401k currently?  Bump it up.  By increasing your pre-tax 401k contribution to your plan you are in effect reducing the amount of income you take home, thus reducing your tax burden.

I recently increased my pre-tax contribution percentage by 8%, and found that I will save roughly $1700 this year on my taxes.  It’s that simple.  Increase your savings, reduce your tax burden.  This offers 3 key benefits.

Benefit 1:

You lower the amount of taxes you will be paying for the year.

Benefit 2:

You increase the amount of savings you will have at retirement.  The more you save now, the more you will have later.

Benefit 3:

Because you don’t see the additional money you put into your 401k plan on your paycheck, you won’t spend it, and most likely you won’t miss it.

 

Budget Smart, Invest Wise

 

Buffett’s 7 Investment Tips

Most of us are familiar with famed investor Warren Buffett.  He has amassed a fortune of over $60 billion in his lifetime.  He is known for picking great investments and sticking with them for the long run.  In a world where it is easier than ever to buy and sell stocks in the blink of an eye, day-trading has become more and more popular.  However, Buffett has always been outspoken about the negative effects of buying and selling equities over the short period.

So what does Warren think people should do to create wealth for themselves?  The link below tells you just that.  While creating a net worth equal to that of Buffett’s is highly unlikely, it is very easy to take just a few steps in the right direction to follow Buffett’s advice.

http://finance.yahoo.com/news/warren-buffett-best-investing-advice-201019702.html