The 5 Best Articles of the Week

Here are 5 more great articles I came across this week. They are all worth a couple minutes of your time. Check them out.

Planning Advice for the Extreme Saver

Your 20's: See How Your Wealth Measures Up

Compensation Advice for New Grads

Five Investment Tips for Recent College Graduates

Climbing the Corporate Ladder Two Rungs at a Time

Move Up the Career Ladder

I think that tendency for American's to job hop more now than ever before can be a good thing...for you that is. It sucks for employers but they have to deal with it. That is just the way we are now. No one stays in a job for 30+ years anymore. Here is why this can be a good thing for you:

1. You can keep moving up the pay ladder. Often, the best way to get paid a substantial amount more money is to a) Leave and get a higher paying job or b) Threaten to leave and force your employer to pay you a substantial amount more to stay. Often this tactic is the only way you will get anything more than a 2 or 3% standard of living raise every year.

2. If you want to stay with you current company, you can often move into a higher ranking position very quickly because of people constantly leaving the company. If you have proven that you are a capable worker, often you can move into a team lead or management position pretty easily. Companies are generally more likely to promote capable workers that already work for the company, rather than take a chance on someone from outside the company.

3. Doing a little bit of job hopping can help you obtain a lot of experience in a shorter period of time. The more well rounded you are, the more marketable you make yourself to prospective employers, thus giving you more choices. I suggest staying at each position for at least a year if possible. While moving around a bit can be beneficial for you, it can also be detrimental if you do it too much. Nothing will turn a recruiter off more than someone who has worked at 6 jobs in 2 years.

With all that being said, I really hope that you can find your dream job and never have to look for another job again. However, the majority of us just go to our jobs to receive a paycheck and feel that we are doing something with our lives. It can't hurt too much to move around a bit and see if you can fall into that dream job that we all hope is out there. You'll never know unless you give it a shot and aren't afraid to leave your current situation every now and then. Especially if you think you found a better opportunity.

I Changed Brokerage Firms Today

So I decided to change brokerage firms today. Now don't get me wrong. I liked Fidelity and what they had to offer. However, I happened to like TDAmeritrade more. I started using Fidelity a couple years ago because my current employer used them to house my Employee stock that I received from a discount purchase plan. After that, I decided to start my other accounts with them as well. However, I decided that today was a day for new beginnings. I started the process of moving my accounts over to Ameritrade.

I chose to move to Ameritrade for 2 main reasons:

1. They had awesome customer service. Not only could I call them on their 800 number, but I could pop up an IM window and speak with representative without having to wait for 30 minutes before speaking with someone to answer one short question that I had. They also happen to have some awesome stock tracking/analyzing tools which I haven't seen anywhere else.

2. The cost of trades are cheaper. I currently pay $20 for a trade with Fidelity. Ameritrade is only $10. It doesn't sound like much, but for a small time guy such as myself, I would rather keep that extra $10. It was also nice that their IRA accounts don't have a minimum to open. When I wanted to open a Roth IRA through Fidelity, I had to put in a minimum of $2500 or setup a $200 automatic withdrawal from my account. Now this wouldn't be bad if you had that money to spare, but I know a lot of young professionals need to start with even smaller amounts than that until they can get on their feet. I would have to give the edge to Ameritrade in this category 4 sho (who says you can't use slang when talking about personal finance?).

Anyway, I can't give Ameritrade my full recommendation yet because I just started rolling over my account today. I am sure I'll give everyone an updated opinion a couple of months down the road but so far, things look good.

Book Review: Rich Dad, Poor Dad

Awhile back I decided to immerse myself in the world of personal finance, entrepreneurship, management, etc. Basically, I just read a bunch of books pertaining to each of these subjects to try to give myself a good overall idea of "best practices" that each of the authors would try to pass on to the readers.



One of the first books I read was Rich Dad, Poor Dad by Robert Kiyosaki and I have to tell you, I was pretty disappointed. This book had pretty nice reviews and has sold a bajillion copies so I figured I was in for a good book. I wasn't. This book tries to tell a general story that would persuade you to take control of your life and put yourself in a position to have constant cash flows coming in. Now I have no problem with this concept, except the fact that he almost seems to dismiss the fact that traditional savings and investment strategies can also allow you to take control of your life. For the majority of people, they will need to get rich slowly. Kiyosaki seems to almost push everyone towards investing in real estate or other "riskier" investments. For the average person, these are not smart investments. I hate to break it to you Robert, but not everyone has the knack to know where to invest in the real estate market or the knowledge and leadership skills to run their own business. However, everyone does have the ability to become rich by using simpler means. For most people, this means being disciplined over a long period of time and allowing the power of compounding to work in your favor.

While Kiyosaki is a great investor and obviously a very successful entrepreneur, I do not think his methods will work for the average person. Maybe, I am just a pansy that is too afraid to take the leap and run my own large Real Estate corporation but I am pretty sure I will be just fine in the long run if I sock away 15-20% of my check each week. To each his own I guess.

3 "Must Do" items for 2008

This is an extremely simple post. I hope the majority of people reading this have already done these 3 things. If you have, then you are far ahead of most people.

1. Start contributing to your 401k. Make sure you contribute enough to get the full company match. Here's a tip: Don't ever pass up free money. If you fail to contribute enough to get the full match from your employer, then that is exactly what you are doing.

2. Start a Roth IRA. Besides your 401k, this is best investment account young professionals can setup. Put money in now and get it back whenever you need it (preferably at retirement).

3. Start a high yield savings account. It takes 10 minutes and you will make a lot more money by leaving your money in here instead of your current savings account.

If you have already done these three things then you are on the right track. If you haven't, then get these accounts open today. Not one of these things would take you more than 10-15 minutes to get up and running. That little bit of your time will make you a crap load of money (yes that is the scientific term) in the long run.

The 5 Best Articles of the Week

Here are 5 more great articles of the week. Some newer and some older but they are all great. Check them out.

Car Shopping: New or Used

The Top 5 Budgeting Questions Answered

Quit Complaining, Start Investing

7 Ways to Tell if You are on a Trail to Success

Too Broke to Save Money? Never

Track Your Money and Face Reality

A lot of people think they are better off financially than they really are. A good way to come face to face with your finances is to use a website I found to track your net worth month to month. NetWorthIQ is a great website that allows you to put down all your assets and liabilities into a easy to use table and gives you a break down of your total net worth and lets you track how well you are doing from month to month.

When you actually sit down for 5 minutes and input the numbers, you can take a step back an reevaluate what you are doing well at and what you need to work on. Personally, I keep it pretty simple. I try to make sure my net worth increases each month no matter what. I know its not possible to do every single month because of large purchases and the ups and downs of the stock market, but I do think it is a pretty good goal to have and it is usually a easily obtainable goal as long as you use some discipline. So go ahead and start tracking your net worth today.

Want to Take Risks? Start a Risky Investment Fund

I just recently started a "Risky Investment" fund of my own so I can invest in those investments that I was always scared to before. A Risky Investment fund is exactly what it sounds like. You put aside some money just for risky/new investments (i.e. Real estate, penny stocks, Prosper.com, etc.). Pretend the money doesn't exist. That way, if you blow your money on your risky investment, it doesn't hurt so much.

For example, I have always wanted to mess around with trading penny stocks. They are very risky but if you are lucky, you might be able to make some decent money off of them as well. Anyway, I will be the first to tell you that I don't know jack shit about penny stocks but I want to mess around with them and see what I can do. So here is what I decided to do. I automatically take a small amount out of each paycheck ($10) and put it into a high yield savings account each week. After a couple of months, I plan on taking that cash and seeing what I can do by investing in penny stocks. If I end up making money on the penny stock, then all is well. If I lose money, then no big deal. I planned on losing that money anyway. It might as well be money I set aside to go to the casino with. Just make sure you know how much you are willing to lose up front before you invest.

***I do not advise putting a very large portion of your money into a "Risky Investment" fund. This should account for only a very small portion of your portfolio.

Buying a House? Pay it off Faster

A lot of people buying their first house (and many people that already own houses) don't realize how much quicker they could pay off their mortgage if they just threw down a little bit extra per month. Making just one extra payment on your house per year can take 5-8 years off of your mortgage. Pay 2 extra payments per year and you could save more than 10 years off of your mortgage. I attached a link below so you can check out how quickly you can pay off your house (and how much money you can save over the life of your mortgage) by paying a little bit extra per month on your mortgage.

Mortgage Payoff Calculator

The 5 Best Articles of the Week

Here are 5 great personal finance and entrepreneurship articles I came across this week that are worth a read. Some of them new and some of them old but they all have good information so check them out.

5 minute Guide to Money in Your 20's from MSN Money

To Get Rich, Start Saving in Your 20's also from MSN Money

The Winning Young Entrepreneurs of 2007 from BusinessWeek

102 Personal finance Tips your Professor Never Taught You from Ask the Advisor Blog

Extreme Early Retirement from Kiplinger

The Latte Factor explained

A couple of years ago I read a book called “The Automatic Millionaire” by David Bach which I think is an awesome book for anyone who wants to learn some easy ways to save money and retire rich. Most of the concepts are very simple but everyone can benefit from them. One of the most basic concepts that Bach talks about in his book is “the latte factor”. He coined the term latte factor because buying something small like a latte and a muffin each day can make a huge difference in your savings. He tries to show you how much money you could save if you skipped buying that latte and muffin every morning and invested it. Here is his example:

5$ per day(the average cost of a latte and a muffin) x 7 days= $35 per week

$35/ week=$150 per month

$150 per month invested at an annual rate of return of 10%

1 year= $1885
2years= $3,967
5 years= $11,616
10 years= $30,727
15 years= $62,171
30 years= $339,073
40 years= $948,611

Not everyone's "latte factor" includes buying latte's. Your latte factor could be buying a new DVD or two every week(you know will probably only watch it once or twice) or maybe its buying a newspaper from the newsstand every day instead of getting a subscription. I'm not saying you can spend money on some of these things, but I am saying that you should step back and reevaluate some of your purchases and see if there are little things you can cut back on or eliminate in order for you to give yourself a better life in the long run. A little saving can go a long way.

There are so many investment choices...What should I choose?

Many new investors have a hard time deciding what they should invest in. It's a tough decision. How do people with little to no finance expertise pick stocks or mutual funds to invest in? The easy answer is to let other people do it for you. I suggest that many new investors try out Target Funds. These funds are called Target Funds because you choose the fund depending on your target retirement date. If you are planning on retiring around the year 2030, you would pick a Target Fund with the year 2030 in the title. Want to know the nice thing about Target Funds? The fund managers make all your decisions for you based on classic investing fundamentals. For example, if you pick the Fidelity Freedom 2030 fund, initially you will have a high balance of stocks and a small amount of bonds. The closer you get to the year 2030, the less stocks you will carry and the more stable investments(such as bonds) that you will have. All of the investment choices are taken care of for you by the fund managers and require no effort from you at all. They get paid to make smart decisions for you. I suggest shopping around for target funds with no fees. That way you aren't wasting your money on people managing your account. Check out these two articles talking about the good and bad of Target Funds before investing.

Target Funds Make Investing Easy

Target Funds are Simply Flawed

*By the way, I am not saying that Target Funds are the best way to invest. However, I do think they are the best way to invest for finance newbies. You can start picking and choosing other funds once you become more comfortable in wild world of finance.

Keep the Change

I just ran across a great new bank promotion today. Bank of America started an awesome program that allows you to "keep the change" when you make purchases using your check card. For every purchase you make with your check card, Bank of America will automatically round it up to the next whole dollar and put the extra change into a savings account for you. There are three great things about this program:

1. It automatically makes you save. It sounds like a few cents here and there but that stuff adds up over time.

2. It makes it a lot easier to balance your check book. Everything that comes out of there is now a whole number. Stop worrying about subtracting those pesky numbers behind the decimal point.

3. Bank of America matches the amount of change you save dollar for dollar for the first three months and after that they will match 5% of the rounded off change you accumulate(up to a maximum of $250 per year). You can't go wrong with free money.

Basically, this is a super easy way for you to start saving money. Also, make sure you check out any and all possible fees associated with this account (I believe there are zero fees if you keep a certain balance). If you have a Bank of America near you, go in and sign up for it (or just sign up online).

*By the way, I am not affiliated with Bank of America in anyway. I just really think this is a great plan.

Save some money...NOW!!

Take a look at this chart I found. It shows you how much money you would make if you invested $2000 a year into a mutual fund or stocks starting at age 26 and continued until retirement versus putting 2k a year away from when your 19 and till you turn 25. As you can see, starting just 7 years earlier can make a huge difference. The earlier you start, the less money you have to sock away to become rich later in life. I don’t care how old you are. Start saving now. You’ll regret it if you don’t (Sounds like something your parents would say huh?).

click on the image to enlarge

401k...The Cliff Notes Version

Most companies of any reasonable size offer a 401k retirement savings plan with some sort of company match. This means when you put money aside for your retirement, so does your company. Is it just me or is that not badass? Here is the scenario of someone learning the basics of a 401k. Check it out.

Person A: "Hey, I saw that our company offers a 401k plan. What the heck is that?"

Person B: "It's a plan that allows you to take money out of your check and set it aside for retirement. If you contribute to the 401k plan, our company will even give you some of their own money to help you retire richer."

Person A: "So you are telling me that if I put aside some of my own money, our company will give me some free money to help me out towards retirement?"

Person B: "yeah"

Person A: “What if I don’t want to contribute?”

Person B: "Well then you are dumb. Only idiots turn down free money."

Person A: "Ok. How do I get started?"

It’s as simple as that. My suggestion is to start your 401k plan as soon as possible. The earlier you start, the more free money you can get from your employer. I also recommend that you contribute as much to your 401k as your company will match. If you company matches up to 5% of your total pay, then put 5% into your 401k. If they match more, then put in more. Simple as that. Also remember that the most important part of your 401k is getting started, not necessarily about what investments you choose. So go grab someone from your work who has already setup their 401k and ask them to take 5 minutes to show you how to setup yours. You won’t regret it when it comes time for retirement. Trust me.

Fun Fact #1: 54% of 20-29 year olds eligible for 401k plans at work do not participate at all

Fun Fact #2: 54% of 20-29 year olds are dumb.

Do you want to find out how much money you will save for retirement if you sign up for your 401k? Check out this calculator at Bloomberg's website.

Bloomberg 401k Calculator

Introduction

Let me start off by giving everyone a background on myself and explain what I would like to accomplish with the launch of my new blog.

First and foremost, I am a 24-year-old recent college graduate (I was on the 5 year plan) and I just landed my first “real” job 6 months ago and even though I am writing a personal finance blog, I will assure you that I am no financial genius. In fact, I am not a genius in any sense of the imagination. I am a normal 24-year-old guy who got average grades in high school and college and I currently work in a semi-normal career as an IT recruiter. So please don’t go thinking that the only reason I can make/save/invest a bunch of money is because I am a lot smarter than you are. I doubt that I am. However, I would like to point out that you do not have to be super smart to become rich. You just have to give yourself a little financial education and teach yourself some discipline (I know, I know, easier said than done). That is where this blog comes in.

There are two reasons I started this blog. Reason #1 is because I want to share what I have learned about personal finance with as many people as possible. How fun would it be to have $10 million dollars and be retired if all your friends were still plugging away at their office all day every day? Who are you going to hang out with? Your wife’s crappy cat? I don’t think so. Do yourself and your friends a favor and have them read this blog so you live the high life (and no that doesn’t mean drinking that shitty Miller High Life beer).

Reason #2: I need some motivation to keep learning about money. If I don’t give myself some sort of reason to keep learning about finance I fear that I will stop learning and/or caring all together. How much money do you think I could make if I stopped caring about it all together? Probably not enough money to retire comfortably. I am not saying people need to be obsessed about money but you definitely need to keep an eye on it and make some smart moves in order to set yourself up for a relaxing, early retirement.

With all that being said, I would like to encourage comments on each and every post I write. Like I said, I am by no means an expert and your feedback will help me become more well rounded in my knowledge of personal finance.

One last note. If you do disagree with my posts, feel free to comment about it. Let me know what you disagree with, why you disagree with it and what you would do differently. I absolutely encourage constructive criticism and I feel that everyone reading should be able to see some of the pros and cons of the personal finance theories that will be discussed. With all that being said, I hope you enjoy my first attempt and blogging and I encourage everyone to give me feedback on how to make this place better. Thanks.