Sol's Financial Blog

Boosting That Credit Score

2012-06-12T14:17:00.000-07:00

Luckily for us, we can get our credit report absolutely free 3 times a year. Many times, people will get all three of their free credit reports at once. The smart thing to do would be to access 1 free report from 1 bureau every 4 months. After a year you’ll have gotten all 3 credit reports for free. But because we spaced it out, you can keep a better eye on your credit as events change.

All 3 credit reporting bureaus are required to give you one free report every 12 months.

You get them from AnnualCreditReport.com. Some people confuse this with FreeCreditReport.com which isn’t always free, so be careful. (Note: FreeCreditreport.com's link is to their funny Vids)

Once you have knowledge of the credit score game, your score can start climbing rapidly. But, it won’t budge an inch if you don’t first find out what’s on your credit report.

Now that you’ve got your report...

It’s time to see what’s on it and what we can do to fix it.

Your credit report will give you facts about the last 7-10 years of your credit history. This includes late payments, debt defaults, collections and even who has checked your credit recently.

Roughly, our credit score is weighted like this...

* 10% by Recent Credit Approval: Believe it or not, getting approved to borrow more money can actually raise your score... and make it easier for you to borrow even more! But only up to a point - too much credit available will eventually lower your score.

* 10% by Types of Credit Used: You can raise your score by using multiple types of credit. If you just stick with a credit card, your score will be lower than it could be.

* 15% by Length of Credit History: If you open a credit card account, plan to keep it active for 4-10 years. Accounts that are quickly shut down will lower your score, while older accounts will give it a boost.

* 30% - Debt to Credit Limit: Each open credit account should report to the bureaus once a month. The bureaus then look at your total debt from all accounts and divide it by the total credit available to you. This gives you a percentage called the Debt-To-Limit ratio, and if it’s over 33% you’re going to see your score lowered.

* 35% - Payment History: Late payments and delinquent accounts hurt, even if your account is currently all caught up. If you’ve been 30, 60, 90 or more days late paying anytime in the past 7 years, then it’s going to lower your credit score. The more recent the mark, the worse it is. Debt defaults, collections and bankruptcies also hurt you here.

Investing rule of Thumb

2012-06-08T12:49:00.000-07:00

While cruising around the web I found a suggested guideline for investing. To find out the percentage of your assets which should be exposed to risk, simply use the Rule of 100:

100 – (Your age) = Percentage of your assets which should be invested.

I am 25, so 75% of my savings should be exposed to some risk, and therefore a larger chance of gain. The other 25% should be tucked away in a fail-safe account such as a CD or other savings device. This is by no means the correct method for everyone, but for my needs it seems right. As a semi-active investor I’d like to see more of my net worth exposed to some potential gains. I think it is better to learn financial mistakes while you are young and can easily recover rather than when you are older and have bills to pay and a family to support.

To restructure my finances to meet this 75% mark, I am going to be channeling my funds into my dividend portfolio after I have saved up 6 months of expenses. The current yield I look to be earning is between 8-10% annually, without counting for any stock price fluctuations. The risk is that the companies may not choose to disperse any dividends(they have a 25-year record of paying dividends), but the reward would be making extra $$$ on a quarterly basis.

While it's awesome to be paid for saving your money, it's a better feeling of having the moolah to fall back on.

Retirement Tip: Boosting your Social Security

2012-06-08T12:31:00.005-07:00

A Simple Tip to Boost Your Social Security Checks

The average retiree currently receives just $1,177 in Social Security benefits per month. Which works out to about $36.72 each day. That's way less than holding down a minimum-wage, full-time job.

It's a sobering thought...

But this number isn't set in stone. Which is important because if you're going to be receiving a pension, or have even modest savings for retirement, there's one step you can take to boost your Social Security payouts by as much as 25%.

Simply delay collecting benefits.

You may be aware that the longer you wait to collect Social Security benefits, the higher your payout will be.

But you may not know that for each year you hold off on claiming Social Security, your benefit could increase by as much as 8% per year.

There are some caveats, of course: You can't delay past age 70, and the annual rate of increase depends on the year in which you were born. But here are the specifics:

Year of Birth	Yearly Rate of Increase	Monthly Rate of Increase
1933-1934	5.5%	11/24 of 1%
1935-1936	6.0%	1/2 of 1%
1937-1938	6.5%	13/24 of 1%
1939-1940	7.0%	7/12 of 1%
1941-1942	7.5%	5/8 of 1%
1943 or later	8.0%	2/3 of 1%
Note: If you were born on January 1st, you should refer to the rate of increase for the previous year. Source: U.S. Social Security Administration

And you can delay even after you retire from your current job.

It's easier, of course, if you've got a pension coming in, a decent-sized portfolio or savings account you can draw down on, or you're planning to pick up a part-time job to stay busy.

But even if you don't want to work for a paycheck ever again, many retirement experts advise that it's actually better to live off of retirement savings for a few years and delay Social Security than to immediately claim benefits and let your savings grow.

After all, an 8% annualized gain isn't something you can guarantee in your brokerage account. But each year you delay taking your Social Security benefit, you are locking in an 8% return.

There's one exception: Dallas Morning News columnist Scott Burns summed up a recent study by the Center for Retirement Research this way, "Married women should take Social Security benefits early. Married men and single women should take Social Security benefits late."

Why is this?

Because married men earn more over their career on average, their Social Security benefit tends to be higher.

Furthermore, women tend to outlive men and widows can receive half of their spouse's Social Security payment if it is higher than their own. So if you're married, this is often a smart move you can make to benefit both you and your spouse.

If you're still not convinced Social Security will be enough...

Unfortunately, you're right. Social Security should ideally just be a portion of your retirement plan. And like I said earlier, the only person you can trust to provide a wealthy retirement is yourself.

So if you're still working, it's time to become 100% laser-focused on building a rock-solid portfolio of your own -- large enough for your own circumstances that you'll be comfortable in retirement.

I'd like to empower you to achieve this end, so contact me if you have any questions!

Current Financials

2012-06-04T10:56:00.000-07:00

Well I can't say that this last month has seen any particular improvement over April, considering I actually spent more. however, I have lowered my monthly average loss by about $10, and a part of my expenses was funding my investment portfolio.

Here's my updated snapshot:

I'm looking into figuring out how I can use some of my equity to earn dividends. I had this idea in my head all worked out on how i would get dividends without holding onto the actual stock very long, but found out the idea has already been explored and (mostly) debunked. There a great article on Motley Fool that explains dividends and my idea of "dividend capture".

I'll keep researching and figuring out how to play this game. Live, love, and learn!

Happy Friday and Stock selection

2012-05-18T12:23:00.001-07:00

Happy Friday!

I hope you're having a great Friday! I just finished picking my first stock( PBI )! A few weeks ago it was trading at ~17$, but is now near it's 52-week of $12.81. There were two major factors that I used in selecting the stock I chose:

The stock should have a long history of paying regular dividends. Not every so often, but yearly, quarterly, or monthly for at least 5 years.
The stock should be trading at an amount that would allow at least a 5% yearly gain through dividends alone.

I set these rules in place because I don't believe in trading worthless pieces of paper. Most stocks (IMHO) are just tokens people buy and try to sell for a profit to someone else. Requiring regular dividends means that I don't have to care whether the stock's price goes up or down. This is because I'll continue to get that % return every year in the form of a dividend regardless of how much I paid for it.

Have a great weekend!

P.S. I forgot to mention the two main tools I used were Google Finance and Dividend.com's list of Stock that have increasing dividends for the last 25 years.

Two thoughts for Tuesday

2012-05-09T14:06:00.002-07:00

Hey guys! My aim if going to be the exact opposite of your kooky relative who is always giving you unsolicited stock tips. Instead, I would like to discuss and write about thoughtful, useful, and actionable financial ideas.

So, I decided to take the time to explore two alternative methods I might go to build some side income. My goal is to research and develop a process that would allow all my hard work keep earning me residual income. GAH! Pretty pretentious sounding, but stick with me.

Idea 1 - Digital Cash Machine
I'm currently user of Prosper.com, where I have noticed that there is a considerable difference between the rate at which an AA level borrower pays versus that of an A or B would. There is definitely room for arbitrage there. The process would look like this:

I borrow $2000 at ~7.4%(I'm around AA or A), then re loan those funds across notes on the level directly below me. The overall net would be only about 1%($20), but that's money I didn't have to work for AND it would boost my credit score.

Would this be worth the amount of risk/exposure I'd have? I'd be responsible to pay back the loan even if I didn't collect all that I had received. Of course I could pay it back faster than required and therefore make a better margin. Hmm.

Idea 2 - The Dividend Delivery
After looking at dividends .com, I've found a number of stocks that have a 30 year history of paying regular dividends. Most of these range between 3-5% of their current market value, meaning that's my effective earnings each year regardless of if there value goes up or down.

Please let me know your thoughts!

http://www.addpoll.com/solomonsk5/poll/202616

Ps. Does anyone know how to embed a poll directly into a site? Simple would be preferable to refined, but any suggestion or thoughts help. Have a great day!

----------------------------UPDATE 5/14/12----------------------------

So I have decided to use Scottrade as my online broker. Their $7/trade is competitive and the minimum balance is only $500. When you sign up they ask you to fund it and drop-off a sign-up form at a local office, but seem fairly lenient about enforcing it- It's been setup for about two weeks now and I haven't been warned or anything.

Oh yeah- Free trades for both of us if you'd like to let them know I pointed you in their direction!

Referred by: SOLOMON KNOWLTON
ReferALL code: OPRH6640

Goals for this Year (GFTY 2012)

2012-05-04T11:41:00.003-07:00

Quick thoughts on Goals for this year:

Hey guys!

So I've had some time to reflect on my finances the last couple of days and a thought occurred to me,

“Without goals, and plans to reach them, you are like a ship that has set sail with no destination.”
Fitzhugh Dodson

So I took a few minutes and figured these out.

1. Research and (maybe) buy stocks that regularly distribute dividends.
1a. Have enough invested by June 1, 2013 that it pays at least 1 month of my tuition repayments every year

2. Help people use their ESPP here at work. The experience of helping others with finances is something I really enjoy. Hopefully, I can get a deal where I help them finance it and extend my passive income too.☺

3. Save 80% of the money I'll soon be receiving from roommates.
3a. Get a 6 month fund, then pour it towards either paying down loans or building dividends

4. Build a basic commercial website- one that can sell products and isn't cheesy.
4a. Don't care if it's for me or someone else, the experience is what matters.

F***!

2012-05-02T13:47:00.000-07:00

Well crap. I'm starting this blog so that I can keep myself accountable to my spending and financial goals.

The screencap below is the major force behind this:

First, I should note that $2k of that was actually not an expense but a loan to a personal loan so they could finish their school. The other $2100 in January was an extra payment on my mortgage (I end up getting 26 paychecks a year, so i used the extra one on that.

Still, that's pretty fucking bleak looking. Definitely not eating out at all this month (or helping cover friends!) and I'll be reviewing my expenses compulsively for ways to cut back. I'm thinking I should do what my folks advised a year ago: get cash out for Groceries and gas, keep them separate, and once you're run out you're done.

**Update: I did eat out, but it was paid for by the friends who invited me.**