Here's where a focus on finances gets brutally honest. In This Is Not Your Parents' Retirement, Patrick P. Astre asks readers to do a realistic evaluation of assets (those things we own that have value) versus current liabilities, both good debt (a mortgage) and bad debt (of the credit card variety), and all things we "owe." Subtracting liabilities from assets comes up with our net assets, what we're truly "worth." This was a shocking exercise. Here are the sobering results:
Our assets: $373,750 (take into consideration with this figure a home's total worth, not just what I have invested in it), 401(k) and IRAs, savings, car values, valuables, etc. Seems like a lot, but now look at the liabilities: $354,213 (mortgages, a couple's student loan debts, final year of a car payment, etc.). Our net worth comes only to $19,537. The good news here is that we are worth something, that we own property, and that I'm maxing an IRA and 401(k), and planning to build our savings. The bad news is that I have a few years yet to work my way out of those student loans, and I'll probably need more before I'm done my terminal degree.
In one way, I haven't yet gotten to how much to invest, and when to do it. I'm still laying out my financial realities. Astre is right in that knowing where you are is a good start to taking you toward a satisfying end goal: those beautiful 30-plus years in retirement (I know I'm going to live a long existence) when I can live off investments and portfolios while drinking mimosas and reading tawdry paperbacks in my chaise lounge.
One caveat: The book itself is written more for my parents' generation (the baby boomers). This hearkens back to my last entry, when I was complaining about the lack of volume of investment tomes written by women. Now the focus seems to be that those who really need to worry about this stuff are at least 20 years closer to retirement than I am. Hopefully more of us will get interested in our financial futures.
References Cited
Astre, P. (2005). This is not your parents' retirement: A revolutionary guide for a revolutionary generation. No City: Entrepreneur Press.
Tuesday, April 10, 2007
The Laundry List
I've decided that I want to go beyond the Internet with my quest to learn more about investing. My first post-Web stop was the local (Reston) library, where I picked up these gems:
1. Charles Schwab's New Guide to Financial Independence, by Charles R. Schwab;
2. Straight Talk on Investing, by Jack Brennan;
3. The Smart Investor's Survival Guide, by Charles B. Carlson;
4. This Is Not Your Parents' Retirement, by Partick P. Astre; and
5. Personal Finance Planning, by V. Victor Hallman and Jerry Rosenbloom
Here are some things that struck me while picking out these books, and maybe this says something about the state of finances in our county: hardly any of the authors for the books I was interested in (investments and retirement planning) were written by women. There were many books out there by women, but they fell into a few categories: "You're newly single!" or "Girl, get out of debt!" or even, and I say this will all honesty, "Picking the right money man." What?
I get the impression that money is and has been, for a variety of reasons, that finance has resided within the den of men for most of modern history. Of course there are exceptions, certainly I was drawn to following Suze Orman's CNBC finance show, and I also read her books. That's a start. But where are the rest of the women? Why are books on money for women focusing on debt management mostly, and those for men generally about "getting rich"? Is it true that men are just more monetarily inclined? This is something that I'll definitely be thinking about as I attempt to absorb this data. And there's a lot of it (Personal Financial Planning itself has 626 pages). I've gotta go read now...
1. Charles Schwab's New Guide to Financial Independence, by Charles R. Schwab;
2. Straight Talk on Investing, by Jack Brennan;
3. The Smart Investor's Survival Guide, by Charles B. Carlson;
4. This Is Not Your Parents' Retirement, by Partick P. Astre; and
5. Personal Finance Planning, by V. Victor Hallman and Jerry Rosenbloom
Here are some things that struck me while picking out these books, and maybe this says something about the state of finances in our county: hardly any of the authors for the books I was interested in (investments and retirement planning) were written by women. There were many books out there by women, but they fell into a few categories: "You're newly single!" or "Girl, get out of debt!" or even, and I say this will all honesty, "Picking the right money man." What?
I get the impression that money is and has been, for a variety of reasons, that finance has resided within the den of men for most of modern history. Of course there are exceptions, certainly I was drawn to following Suze Orman's CNBC finance show, and I also read her books. That's a start. But where are the rest of the women? Why are books on money for women focusing on debt management mostly, and those for men generally about "getting rich"? Is it true that men are just more monetarily inclined? This is something that I'll definitely be thinking about as I attempt to absorb this data. And there's a lot of it (Personal Financial Planning itself has 626 pages). I've gotta go read now...
Sunday, April 08, 2007
An Attempt to Recover Information...
Note: Starting this blog with research is akin to finding a needle in a haystack: where to begin? Using the NVCC libraries for academic papers is generally a good place to start, but it all depends on the context of the writing. In my case, I’m writing about investments here, so while the library does have good information, using a search engine like Google to hunt down active, legitimate investment sites is not a bad action either.
Beginning with Basic Research
One of the websites I've found is Investopedia, and I like it for its diversity: its name is a play off “encyclopedia,” as other sites like Wikipedia have done on the Internet. But don’t confuse it with anonymous tidbits of cultural trivia. It’s much more dynamic than an encyclopedia: Investopedia has tutorials and training links, “ask the expert” functions, financial articles from taxes and investing to retirement, stock quotes, calculators, and quite a bit more that I haven’t even qualified yet. I'm still reeling over how much there is for me to learn. I think it's good that I start with some definitions and then place myself as a “newbie” within those terms depending on my future actions.
So here are a few useful definitions: Stocks are actually part of “debt investments” (Orman, 2002), in which people like me give their money to corporations (buying a share) As defined by Suze Orman in The Courage to Be Rich, using the stock market is a must to build wealth: "invest in the market for growth and to use as your approach ... dollar cost averaging" (2002, p. 317, emphasis mine). So what is “dollar cost averaging” (DCA)? It is investing small amounts of money, say $25-50 per month, in the markets without starting off with a lump sum. Tim Middleton, in his article "The Costly Myth of Dollar-Cost Averaging" disagrees with this position, describing DCA as similar to what we do with our monthy contributions to a 401(k) but it is slightly different when working the markets. He provides samples of DCA and lump-sum investing in the same fund, with lump-sum approaches netting an 11.7% return and the DCA only 9.8%. That doesn't seem like too much of a difference, but with the right amount of money over the long term, this could be significant.
My goal is not a small one: I want to get confident enough to invest in the stock market. Hopefully this will happen within the next month and a half. Londo Carver, another blogger in our group, suggested that a $2,000 start is a good one for stock investment purposes. I'm going to see how this pans out. According to Chad Langager, an Investopedia advisor, investing with a sum as small as $1,000 is certainly possible, but it's pretty hard to build that base into something much bigger quickly. He falls between Orman and Middleton. Langager states that the intitial money investment isn’t even the only thing to worry about, because
So, on top of managing my basic needs, like bills and creating a 3-6 month “emergency” cash stash, and now debate between having an initial fund for additional bonds investments. Orman might get us in the game earlier, but Carver, Langager, and Middleton suggest starting with a bit more to lose. The research continues...
References Cited
Langager, C. (2007). Start investing with only $1,000. Investopedia. Retrieved April 2, 2007, from http://www.investopedia.com/articles/basics/06/invest1000.asp
Middleton, T. (2007). The costly myth of dollar-cost averaging. MSN Money. Retrieved April 3, 2007, from http://moneycentral.msn.com/content/P104966.asp
Orman, S. (2002). The courage to be rich. New York: Riverhead Books.
Beginning with Basic Research
One of the websites I've found is Investopedia, and I like it for its diversity: its name is a play off “encyclopedia,” as other sites like Wikipedia have done on the Internet. But don’t confuse it with anonymous tidbits of cultural trivia. It’s much more dynamic than an encyclopedia: Investopedia has tutorials and training links, “ask the expert” functions, financial articles from taxes and investing to retirement, stock quotes, calculators, and quite a bit more that I haven’t even qualified yet. I'm still reeling over how much there is for me to learn. I think it's good that I start with some definitions and then place myself as a “newbie” within those terms depending on my future actions.
So here are a few useful definitions: Stocks are actually part of “debt investments” (Orman, 2002), in which people like me give their money to corporations (buying a share) As defined by Suze Orman in The Courage to Be Rich, using the stock market is a must to build wealth: "invest in the market for growth and to use as your approach ... dollar cost averaging" (2002, p. 317, emphasis mine). So what is “dollar cost averaging” (DCA)? It is investing small amounts of money, say $25-50 per month, in the markets without starting off with a lump sum. Tim Middleton, in his article "The Costly Myth of Dollar-Cost Averaging" disagrees with this position, describing DCA as similar to what we do with our monthy contributions to a 401(k) but it is slightly different when working the markets. He provides samples of DCA and lump-sum investing in the same fund, with lump-sum approaches netting an 11.7% return and the DCA only 9.8%. That doesn't seem like too much of a difference, but with the right amount of money over the long term, this could be significant.
My goal is not a small one: I want to get confident enough to invest in the stock market. Hopefully this will happen within the next month and a half. Londo Carver, another blogger in our group, suggested that a $2,000 start is a good one for stock investment purposes. I'm going to see how this pans out. According to Chad Langager, an Investopedia advisor, investing with a sum as small as $1,000 is certainly possible, but it's pretty hard to build that base into something much bigger quickly. He falls between Orman and Middleton. Langager states that the intitial money investment isn’t even the only thing to worry about, because
One of the biggest considerations for investors with a minimal amount of funds is not only what to invest in but also how to go about investing. Not long into your investment journey you may find yourself bombarded with minimum deposit restrictions, commissions and the need for diversification, among a myriad of other
considerations. [Langager, 2007]
So, on top of managing my basic needs, like bills and creating a 3-6 month “emergency” cash stash, and now debate between having an initial fund for additional bonds investments. Orman might get us in the game earlier, but Carver, Langager, and Middleton suggest starting with a bit more to lose. The research continues...
References Cited
Langager, C. (2007). Start investing with only $1,000. Investopedia. Retrieved April 2, 2007, from http://www.investopedia.com/articles/basics/06/invest1000.asp
Middleton, T. (2007). The costly myth of dollar-cost averaging. MSN Money. Retrieved April 3, 2007, from http://moneycentral.msn.com/content/P104966.asp
Orman, S. (2002). The courage to be rich. New York: Riverhead Books.
Frustrations!
Just a note: when I went to the new Blogger functions, I lost my last post. I was wondering why this happened! Please make sure that, for your own records, that you print your posts out, or save them in Word, so that you don't lose valuable writing and ideas.
Now what was I saying about money?
Now what was I saying about money?
Thursday, March 29, 2007
What I know about finances, generally speaking:
What I know about my finances is tempered about what I don't know. Here's an example:
Today I checked my money market account and was dinged a $15 "maintenance fee." What was that? I called and it just so happens that that account has a $2,500 set bottom limit, and I went below it. I thought it was $1,500. What I don't know about my finances #1: my limit on my money market account. Wait, I know that now.
Another thing I don't know about my finances is investments, specifically stocks and bonds. I get my 401(k). I understand the principle of my ROTH IRA. What I don't know about my finances #2: How do I invest in the stock market? Do I need a broker? How much is a trade fee? How often should one be active/trade?
And here's what I know: I am not a typical woman when it comes to money (ask Suze Orman). I don't cosign for friends who need loans. I have, in the past, given loans, but then immediately regretted it because I knew they'd probably reneg on the money. I don't do that anymore. I also don't overshop. In addition, I don't have kids, who supposedly cost a fortune.
So that's what I think I know, for now. As you can see, there's a lot to learn. I'm currently reading Suze Orman's The Courage to be Rich. Do I have the courage? I don't know. Does it actually take courage? Maybe. There's a lot to consider when planning for the future. Is this whole thing a bit of hooey? Who knows.
What I know about my finances is tempered about what I don't know. Here's an example:
Today I checked my money market account and was dinged a $15 "maintenance fee." What was that? I called and it just so happens that that account has a $2,500 set bottom limit, and I went below it. I thought it was $1,500. What I don't know about my finances #1: my limit on my money market account. Wait, I know that now.
Another thing I don't know about my finances is investments, specifically stocks and bonds. I get my 401(k). I understand the principle of my ROTH IRA. What I don't know about my finances #2: How do I invest in the stock market? Do I need a broker? How much is a trade fee? How often should one be active/trade?
And here's what I know: I am not a typical woman when it comes to money (ask Suze Orman). I don't cosign for friends who need loans. I have, in the past, given loans, but then immediately regretted it because I knew they'd probably reneg on the money. I don't do that anymore. I also don't overshop. In addition, I don't have kids, who supposedly cost a fortune.
So that's what I think I know, for now. As you can see, there's a lot to learn. I'm currently reading Suze Orman's The Courage to be Rich. Do I have the courage? I don't know. Does it actually take courage? Maybe. There's a lot to consider when planning for the future. Is this whole thing a bit of hooey? Who knows.
Monday, March 26, 2007
My Rationale for Working on Finances
This entry will "defend" the topic I have now officially chosen for my blog: working on my finances. I'm not going to go into every sort of detail here, but let's just say I realize that I am not 21 anymore, and that had I started some serious savings back then, I'd be in greater shape now. And for some strange reason, I'm starting to love money. Is that such a bad thing?
This blog is not about debt, as I am thankful I don't have multitudes of credit cards or a nasty shopholics addiction. However, I am now addicted to following my 401(k) and my ROTH IRA around almost daily, and I've taken to reading how-to finance/investment books, and so I want to know how to realistically (not on a rock-star's salary) keep my IRA and retirement accounts filling up, test the stocks/bonds markets, all the while handling a mortgage, car payments, school loans, and the always frustrating house repair without pulling my hair out.
I think I have a plan: keep reading and researching, mostly with investments and retirements, while trying to figure out how to pay off student loans/mortgage without losing hundreds of thousands in dollars in interest and fees. And what about financing a vacation in here somewhere? Everybody needs to take a vacation once in a while.
So here are some specific topics I'll attempt to discuss as the weeks progress:
- 1. How I'll invest (do I use a broker?);
- What to pay off first, and when (car, house, student loan);
- How much will home repairs get me in this market (is it even worth it to try?);
- How much money do I have to start with to do something with the stock market or the bonds market?; and
- How much do we really need to know to be financially successful?
I'm sure more ideas will come my way. I plan on using Money and Smart Money magazines; the The Motley Fool website; USAA, my investments and insurance group, for advice and help from a financial planner; The Wall Street Journal; and a myriad of other sources to really give me sound beginnings here. I also hope to take "lifelong learning" classes through Fairfax County Continuing education (pretty reasonable fees!) on investing, financial planning, etc. I don't know if I can start those classes before this semester ends, but a plan is better than nothing, right?
Thursday, March 22, 2007
Welcome, Spring semester ENG 112
It's now that time again to start blogging. What about? I've been wondering that myself lately. Of course, issues surrounding politics are always on my mind, and the environment, travel, and being in school again also make me think I can write for 7 weeks about those topics, too. There are so many things I think I want to write about, and now that we're not in the middle of midterm voting, it's a bit harder for me to buckle down and choose a topic.
I'm sure you'll feel the same way. My suggestion is to make a list of the things that interest you most: music and bands, maybe, or becoming a doctor. Maybe you've traveled a lot and want to explore writing a travel blog. I've recently gotten into "finance" and think I'll probably write about how I can learn and start investing in the stock market. The options are quite open, and so take some time to check out previous student blogs, the blogs listed in the writing parameters handout, and other sensational texts on the Web.
Julie
I'm sure you'll feel the same way. My suggestion is to make a list of the things that interest you most: music and bands, maybe, or becoming a doctor. Maybe you've traveled a lot and want to explore writing a travel blog. I've recently gotten into "finance" and think I'll probably write about how I can learn and start investing in the stock market. The options are quite open, and so take some time to check out previous student blogs, the blogs listed in the writing parameters handout, and other sensational texts on the Web.
Julie
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