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Start Treating Your Finances Like a Bank [Rich Credit Debt Loan]

Tue, 17 Nov 2009 02:08:17 +0000

If you want to start making money, you’ve got to stop looking at your finances like a regular person and start treating your checkbook like you work for the bank. This is the key towards successful management of your finances and will help you grow your current income and create more streams of income at the same time. By getting the right mindset in place, you can easily start making more money and get on the road to financial independence.

In the event that you’re not good with managing your own money, it’s definitely time to take a crash course in good debt management principles. Remember, you’re going to need a little bit of debt to build up your credit and if you want to get ahead and make more money, you’re going to need to leverage that debt properly. The first place to start is to make a budget and force yourself to keep it. Put aside enough money every month to pay your bills so that you can keep your finances running smoothly.

A banker looks at things a bit differently than the average person. They are all about returns – and making more money. Bankers want money to go to work instead of sitting there collecting dust. If you want to start managing your money effectively, you’re going to need to adopt this mindset. Instead of thinking, “cool, I’ve got an extra $500 I can blow,” start thinking, “How am I going to invest that $500 so it becomes $1000?”

After all, who wants to settle for a little money, when you could be making a lot of money? The next step towards thinking like a banker is understanding risk. All banks take risks every single day and while some are more conservative, other recognize that in some cases, big risks have big payoffs. The key is knowing how to read an opportunity and knowing how to take advantage of it.

Let’s say that you’ve got a chance to get in on a stock that is bargain basement priced, but has the potential to quickly take off. You don’t have a lot of spare cash on hand. In this situation, a banker would go to the board and get a loan in order to get in on the opportunity. You need to do the same thing. Once you’ve determined how risky the investment is, and come to the conclusion that if it does fail you won’t be ruined, go out and get that loan to take advantage of it!

Bankers also know that the bottom line is essential. They don’t run around overspending your money, so why should you? Never get into debt over your head and curb your spending habits so that they’re in line with your income, not your desires. By thinking like a banker, you’ll be able to turn your finances around and start seeing some amazing returns in a very short time. Give it a try and see what kind of a difference it makes.

Photo Credits: 1

Originally posted 2008-11-15 16:48:25. Republished by Blog Post Promoter

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Need a Job? 10 Companies Hiring for the Holidays [Money Hacks]

Wed, 04 Nov 2009 12:40:31 PST

Here’s a link to a list of 10 companies that are hiring for the holiday season. Most of it’s retail…but that’s not a bad thing. Everybody needs to know how to sell. YOU especially need to know how to sell yourself and you need to know how to interact with customers.

For at the end of the day, business is selling and all of selling’s associated components.

Plus, if you’re currently looking for work, it’s not a bad idea to fill in that resume. Hiring managers and HR folks get turned off pretty quickly by unemployment gaps. A seasonal job addresses this concern.

10 Companies Hiring for the Holidays : The Work Buzz

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2010 Roth IRA Conversion Loophole [Amateur Asset Allocator]

Mon, 16 Nov 2009 11:00:51 +0000

Current Roth IRA rules restrict high-income savers from participating, phasing out eligibility from $105,000 to $120,000 for single filers and $166,000 to $176,000 for married couples filing jointly. Currently, Roth IRA conversion rules follow similar guidelines. Only taxpayers earning less than $100,000 annually (and not married filing separately) are eligible for a Roth IRA conversion under current law.

The 2010 Roth IRA Conversion Loophole

All that is about to change, starting in 2010. While the Roth IRA contribution limits will remain, the Roth IRA conversion income limits will disappear. If you have a Traditional IRA, non-deductible IRA, or any other kind of IRA you will be free to convert to a Roth in just a few months. Here are a few things to keep in mind.

Convert only if you can afford the tax hit – Converting any tax-deferred IRA (such as a traditional IRA) is a taxable event, meaning you will owe regular income tax on the amount you convert. If you can’t afford to pay the taxes without dipping into your account’s balance, it’s best not to convert.
Keep your tax situation in mind - Since a Roth IRA conversion increases your taxable income for the year, converting may boost your income enough to make you ineligible for certain unrelated tax credits or deductions.
It might pay to delay converting – All else equal, it’s preferable to pay taxes later rather than sooner. If you can manage it, why not delay converting until 2011 or later? Or perhaps you are planning on attending graduate school in 2 years at which point you plan on quitting your job to study full-time. Since your taxable income will be practically non-existent once you quit work, that would be a perfect time to initiate a Roth IRA conversion since your tax rate would be lower.

How High Earners Can Convert To A Roth IRA

The 2010 Roth IRA conversion loophole is basically a cheap trick to allow high earners to share in the tax advantages Roth IRA’s offer. Sure, the income limits are still there, but starting next year there’s nothing to stop anybody from contributing to a non-deductible IRA and converting to a Roth at the end of every year. Since there are no income limits for non-deductible IRA’s, there are effectively no longer income limits on Roth IRA’s.

One caveat to look out for when taking advantage of this loophole is that you must keep deductible and non-deductible IRA contributions separate. If you make non-deductible contributions to an IRA you’ve previously made deductible IRA’s to, it muddies the waters and you could end up owing taxes on contributions you’ve already paid taxes on.

Government Intervention Is a Lose-Lose Situation For the Poor [PennyJobs.com]

Mon, 16 Nov 2009 14:00:00 GMT

If given the choice of being shot in the chest or forced to work for everything you have, which one would you choose?

That is the difference between government intervention and free market capitalism.

In the last few days, I've read a few more articles that blame the greed of the free market for the recession.

Almost every book or article against the free market always blames capitalism for the problems that
socialism and government intervention cause.

In almost every case the authors end up talking about how the growing inequality of money between the rich and the poor is the primary reason against the free market.

This age old issue of inequality is at the center of the 'social justice' movement that led congress to create the housing bubble that is now busting and has taken the rest of the economy with it. The issue of social justice is the primary reason that Obama was elected, as he promised more government intervention to solve the problems that decades’ of government welfare have been unable to solve.

The promises of socialism and inflation continue to fail, yet millions are still holding on to the hope that one day when the government gets large enough to control the entire economy - it will be able to give everyone a high paying job. All the while, the expanding government is the cause of declining jobs.

The Evil Side of Capitalism

The evil side of capitalism is a condition of the human heart and has always existed since creation. When we can be, we are all greedy and selfish - despite the belief that people are generally good. A few months ago Obama said in a speech that he places the hope of the future in the goodness of people.

The trouble is that he doesn't believe that. If he did, he would put less faith in expanding the government and more faith in the good will of the people.

Our founding fathers were not so easily fooled. They knew that no man could be trusted with too much power (“the heart of man is deceitful and wicked, who can trust it” Jeremiah 17:9) as evident in how they created the founding documents of our great nation.

The good news is that the free market forces greed to compete with itself. The result is that it is very difficult to remain greedy in a free market. The free market forces greedy people to make a decision to reinvest their money back into the market and if they make a bad investment decision or they mistreat their customers or employees, they will lose their money to someone else that conducts business in a much less greedy way.

The only way to remain greedy in the free market is to create a competitive advantage that protects your business from competition. And that is accomplished by using government influence to control your industry with excessive regulation, trade agreements, labor, political contributions and other policies.

Controlling government policy is the only way to remain greedy in a free market. The way to stop businesses from controlling government policy is to not allow government policy to interfere with the economy.

The more influence the government has in controlling the economy the more likely that greed is going to get involved. Government intervention opens the door for capitalism to fail and that is exactly what happens.

The Effect Of Government Central Planning

Government central planning is the notion of allowing the government to plan the economy rather then letting the free market consumers guide what products are produced and purchased. Government central planning results in government intervention to control labor, capital and production with the misguided idea that someone is wise enough to manage the economy.

The evil side of capitalism is a condition of the human heart, as stated above. But the same condition resided in the hearts of the government leaders - only without the constraint of competition. The result is massive government corruption and a destroyed economy.

Just look at Russia for example. They have perhaps one of the largest gaps of wealth inequality, yet billions of dollars have been given to Russia in the last few decades to help the starving poor - to no avail.

Government expansion doesn't help inequality, it only accelerates the trend. Capitalism is the lesser evil of the two, but government intervention opens the door for capitalist to use the government to create barriers for their competitors.

Using government central planning to solve inequality allows capitalism to corrupt government and the result is far greater inequality.

The empty promises of more government programs results in greater inflation and higher taxes, which gives capital markets even more leverage over the poor while prices increase.

Government intervention is a lose-lose situation for the poor. Yet they lack the understanding to see through the empty promises of the politicians that promote more government intervention.

The Free Market is the Best Solution

The free market is the best solution, because it allows competition to squeeze greed out of the market and supports a profit motive that creates jobs for everyone. We desperately need to return to a free market before we are going to see an economic recovery.

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Increase Your Financial IQ Book Review – Part 3: Budgeting Your Money [Rich Money Habits]

Mon, 16 Nov 2009 04:00:26 +0000

Today, you will learn Financial IQ #3 – Budgeting Your Money. This article is part 3 of Rich Money Habits’ review on Robert Kiyosaki’s book Increase Your Financial IQ: Get Smarter with Your Money.

To read part 1 and part 2 of the book review, you can checkout the following links.

Increase Your Financial IQ Book Review – Part 3: Budgeting Your Money

After learning to make more money and finding out ways to protect your money, you next need to learn how to budget your money for maximum utilization.

According to the book, a budget is a plan to coordinate your most important resources (such as money and time) and expenditures. There are 2 kinds of budgets:

Budget deficit
- excess of spending over income
- you spend more than you earn
Budget surplus
- excess of income over spending
- you earn more than you spend

The reason most people are poor is because all their lives, all they’ve known is not having enough money, hence, they only have a plan for “budget deficit”. They have never experienced having more money than they could ever expect to spend. They think only lottery winners, corrupt politicians, or greedy businessmen can have a “budget surplus”. The key to having a budget surplus is realizing that it is possible for you to have it.

There are 2 ways to generate a budget surplus:

You can apply Financial IQ # 1 to make more money, thereby increasing your income, or
You can cut expenses, and reduce your spending.

Both strategies will tip the equation to your favor such that your income will be greater than your expenses and you create that extra cash a.k.a. “budget surplus”.

Most people and businesses only know how to cut expenses, especially in these times of financial uncertainty. But you can only do so much in terms of cutting expenses without sacrificing your mental, emotional and physical health. You don’t need to starve yourself to create a budget surplus. If you apply Financial IQ # 1 – make more money, you can stretch the other side of the equation and achieve the same thing. The same applies to business. A business without sales is NOT a business. So aside from minimizing the costs of your business, you also need to learn to sell more and boost your income!

Robert Kiyosaki offers 4 tips to plan for a budget surplus:

Budget tip #1 – A budget surplus is an expense
- Make spending for budget surplus a priority
- Pay yourself first, even when income is less than your expenses
- Use the pressure of not having enough money to think of ways on how to generate that extra cash
Budget tip #2 – The expense column is the crystal ball
- Discover what you’re spending on, and you will know if your plan is working to give you a budget surplus or a budget deficit
- Robert Kiyosaki’s Rich Dad says, “you can tell a person’s future by looking at what they spend their time and money on.”
Budget tip #3 – My assets pay for my liabilities
- Instead of using your hard-earned money to pay for your liabilities like a car or a flat screen TV, make that money work for you by using it to build assets and use the income from those assets to pay for your car or your flat screen TV.
Budget tip #4 – Spend to get rich
- Know when to spend and when to cut back. Most people only know how to cut back. Spending wisely to grow your money is a harder skill to master.
- Learn to do more with less and use the pressure to become smarter in making more money

Rich Money Habits Review Notes:

Budgeting is boring. That’s what most people say. However, it is one the most important rich money habits that you will have to learn. A budget is like a map. The only way to get to your destination is to know where you are right now, and use your plan to discover how to get to where you want to be.
Consciously working on your money habits is a life-long process, and it starts with taking care of the resources that you have – that is budgeting your money and time. What others don’t realize is that we all have 24 hours in a day. Some people multiply their impact by providing livelihood to thousands of people and generating more money not only for themselves but for the whole community. Others just sit around all day never doing anything to make their lives easier. To me, it is not a question of do we need to budget or not. It is a matter of realizing that to live your life to the fullest, you need to make the most of what you have.
Be patient. The problem of TV shows is that everything is fast. Yesterday a child was born. The next day he’s already a teenager. The next week he himself is already having his own kid. Life is not a TV show. It is a series of small steps earned each day. So have a plan and learn to adjust that plan along the way. As Robert Kiyosaki says “take it one day at a time.”

P.S. You’ve just read part 3 (Financial IQ #3: Budgeting Your Money) of Rich Money Habits’ review on Robert Kiyosaki’s book Increase Your Financial IQ: Get Smarter with Your Money. How about you? How are you budgeting your time and money today?

P.S.S. Enjoyed reading this article? Get more FREE practical and interesting Rich Money Habits articles delivered directly to your email or Feed Reader by subscribing to Rich Money Habits by akosiallan.com! It’s FREE! Look for the “Get Money Tips via Email!” and/or “Get Money Tips via Feed Reader” buttons located at the upper right side of this website.

Increase Your Financial IQ Book Review – Part 2: Protecting Your Money Today, you will learn Financial IQ #2 – Protecting Your Money. This article is part 2 of Rich Money Habits’ review on Robert Kiyosaki’s book Increase Your Financial IQ: Get Smarter with Your Money. To read part 1 of the...
Increase Your Financial IQ Book Review – Part 1: Making More Money Every month at Rich Money Habits, we will take a deeper look at some of the best business, personal finance and investing books out there. For this month of November, we will feature Robert Kiyosaki’s book Increase Your Financial IQ:...
Your Money or Your Life For the past couple of days, I’ve been reading the book Your Money or Your Life by Vicki Robin and Joe Dominguez. It’s a book I bought out on a whim as I saw it on sale at 20% discount. ...
Building Rich Money Habits 101: My personal finance story I have always thought there’s only one formula in making money. That is work hard and at the end of each month, you get your paycheck. Growing up in a family of farmers, I have seen what working hard really...
Bo Sanchez’s Truly Rich Financial Seminar (Part 1 – Money and Religion) Last weekend, my wife and I went to attend Bo Sanchez’s Truly Rich Seminar. It was an amazing experience meeting Bo face to face. Bo Sanchez is a preacher who talks about money. You can learn more about his Truly...

Weekend Link Love [Amateur Asset Allocator]

Sun, 15 Nov 2009 17:02:20 +0000

Carnival of Personal Finance

Muchas gracias to Tom at Canadian Finance Blog for including my article Beware “No Cost Refinance” Loans in this week’s Carnival of Personal Finance #230. Other great articles from this week’s edition:

Use Your Emergency To pay Off Your Debt by Gather Little By Little – I am taking the opposite strategy. I could easily afford to pay off most of my mortgage in cash right now, but I’ve chosen to keep it in reserve instead. Losing your job tends to make you more conservative.

Travel Hacking For Noobs by Man Vs Debt – Most people are under the mistaken assumption that traveling is expensive. In actual fact, traveling is generally CHEAPER than staying home if you do it right (you have to pay rent at home, not so on the road). Of course, couch surfing can get old, but it just goes to show how completely unnecessary what most people consider “necessities” are. Baker shows you how to travel on the cheap.

Mas Links Muy Buenos

Extended Home Buyer Tax Credit May Not Benefit Existing Home Owners – by Free From Broke

Open Enrollment Health Insurance Options – by Cash Money Life

Interview Your Interviewer – by The Wisdom Journal. Job interviews are a two-way street. They need to impress you as much as you need to impress them.

2009 Roth IRA Contribution Limits by Four Pillars

Great Stocking Stuffer Idea – A Short Beginner Investing Book by ABCs Of Investing. It might not be as fun as a Playstation 3, but it will benefit your children far more in the long run.

You Tell Me: Overdraft Opt-In Rule” by Being Frugal. What do you think about the new overdraft fee opt-in rule?

Top Low-Cost Canadian DRIP Stocks Ranked by Yield, Dividend Growth and Discounts by Million Dollar Journey

$8000 First Time Homebuyer Tax Credit Extension: Take Advantage Of Incentives Through June 30th, 2010 by Bible Money Matters

Tips For First Time Credit Card Users by Studenomics

Open Enrollment Window for health Insurance Benefits by Military Finance Network

Scottrade Review – Online Discount Broker by Dough Roller. I personally prefer Tradeking, but Scottrade was the pioneer in the super-low-cost online discount brokerage industry.

How to Buy a Slow Cooker or Crock Pot by Squawkfox. I’ve been wanting to buy a crock pot for a while but being lazy, I’ve never gotten around to it. Squawkfox turned me onto the joys of soaking dried beans, though. Delicious, nutritious, and cheap.

Rules and Limits for the Traditional IRA by Good Financial Cents

Weekly Wrap - Cheaper Online Stock Trading and My New Costco-Amex Card [Saving to Invest]

Sun, 15 Nov 2009 16:34:00 +0000

I recently completed the application process and got started trading with my OptionsHouse broking account (bought CAT Shares), and so far has been a very smooth trading experience. The reason I switched trading from my current brokers – E*trade and Zecco (with whom I will continue to maintain accounts) – to this relatively new online broker, is simply for the cost. They offer flat $2.95 stock trades and $9.95 all in option trades (with no minimums!), and using this special new customer promotion I got 100 free trades, which means that for the next few months my trading is all free. Signing up with them was pretty straight forward (give yourself about 20 to 30 mins) and a day or so later they FedEx you the final forms to sign and return in their pre-paid envelope. If all the paperwork is good, you should then have your full account access in a couple of days.

The best thing is that as soon as you sign up online you get a virtual account, that you can try their trading platform with (using virtual money off course). This is a good way to get an idea or their trading platform before committing any funds and also a good way for new investors to learn about trading. As you can see their online trading platform is great and for an ultra low discount broker their available research was excellent. I also had to use their live online help feature to confirm a fund transfer and found it really easy to use, and unlike a lot of helpdesk's they were able to answer my questions. If you are looking for an alternate or cheaper broker - they are definitely worth trying.

Getting Rewarded For My Costco Shopping

After moving to my new home, one store I have been visiting a lot is Costco (equivalent to Sams Club or BJ's wholesale clubs). Have never shopped there much before buying a house, I now seem to be there every other weekend and despite their low prices (which they can do because of their volume sales and in-store brands) I have probably spent over $5000 with them in under 3 months! And with the upcoming holiday season I can see myself shopping there even more. So when I found out about their expanded and upgraded no fee Amex-Costco card, I quickly signed up for it. You can earn 3% cash back for annual gasoline purchases, 3% cash back for restaurants, 2% cash back for travel, and 1% everywhere else. If I am going to spend money there, I might as well get back as much cash back/benefits as possible. Even without the Costco related benefits this card has a decent rewards program, which is hard to find following all the new credit card regulations. A final thing – make a list when you go shopping. It may not lower how much your essential spending, but at least it will reduce the amount of impulse shopping at these big warehouse stores.

I participated in the carnival of personal finance @ the Canadian Finance blog this week, and also liked these articles I came across over the last few days:

~ Travel Hacking for Noobs: How We Save Hundreds on Airfare, Get Free Accommodation, & Make Money while Overseas @ Man vs Debt
~ How to Spend Smarter This Holiday Season @ Consumerism Commentary
~ Increased efficiency – Good for earnings, Bad for workers @ Keep My Dollar
~ Is Saving for Old People? @ The Simple Dollar

Have a Good Week Folks!

Past Weekly/Weekend Updates:
~ Weekend Review: Dude - Where's My Stimulus Jobs Gone?
~ Weekly Wrap: Jobs, Housing to Buying Gold in a Low Dollar Environment
~ Moving Words on Living Life in a Presidential Eulogy

Simple Investment Strategies [Millionaire Acts]

Sun, 15 Nov 2009 07:10:09 +0000

There are a lot of technical advices out there telling different investment strategies to grow your money. If you are a first-time investor, then you have to start from scratch. You need to understand basic and simple concepts in investing.

The first step in investing is to understand how the different types of investments relate to each other. Then you can do an asset allocation in each of these types to determine which amounts of your total portfolio to invest in each of these categories.

For the first-time investor, here are some simple investment strategies that you should learn:

Keep some cash. Everyone needs a cash reserve to meet life’s various emergencies. Investment cash isn’t just the currency and coins in your pocket, but money that can be changed into that quickly.

You can keep you cash in checking and savings accounts, money market accounts, and short-term certificates of deposit and treasury bills. The key is to make sure you can cash it within 90 days without forfeiting principal.

Loan your money. Bonds are simply loans to governments and corporations. When you buy a bond, you get an IOU with a fixed interest rate and a promise to return your principal at the end of a certain time period, sometimes 20 years or longer. Interest is paid on a set schedule, so you know exactly when and how much income you’ll get.

Alternatively, you can also loan your money to your friends or relatives as a way to fund their business or in cases of certain emergencies where they can use it an emergency fund. Just remember to loan your money to trusted people whom you can expect payment and write a legal agreement such as promissory notes especially if it involves a large amount.

Own a piece of the company. With stocks, you have a chance to make more money, but there’s more of a risk you’ll lose it. Stockholders are actual owners of a company - each share of stock is a piece of equity. When a company makes money, it divides up the profits, and pays each owner a dividend. However, stockholders never know how much they’re going to get.

You can make good money by selling a stock whose price is going up but you can also lose a lot if it goes down. However, be alert on some “bubble” situations, which begin when the price of a particular stocks or group of stocks rises rapidly. Investors drive up the price as they rush to get on the bandwagon. Eventually, though, the bubble bursts. Those left holding the bag are big losers when the stock drops back to its true value. This happened on The Great Depression that caused a lot of poverty in the US and in most countries during the late 1920 to early 1930s.

Invest in your home. If you’re a homeowner, you’re a real estate investor. For many people, their home is the biggest part of their investment portfolio. Alternatively, you can invest in real estate through real estate mutual funds and real estate investment trusts.

Make your investment plan. Map out your investment plan. Once you understand these categories, decide how much you want to invest in each one. You can balance your risk by putting some money into safer places, especially if you’re investing in something volatile like the stock market.

Put a certain amount in the stock market, and then temper your risk with investments in other investment categories.

To get articles, you can subscribe using your favorite RSS feed reader or have them delivered directly to your email address.

The Psychology of Bubbles: Using Hindsight to Examine Why We Bought into the Hype [Steadfast Finances]

Sun, 15 Nov 2009 04:45:22 +0000

I’ve been pounding the table pretty hard on investment bubbles lately. Probably because in the last decade, I’ve experienced more popped bubbles than I care to remember.

Or perhaps it’s that I’m constantly amazed by the herding behavior of humans. After all, we’re not that different from the rest of the animals on Earth, so it’s not difficult to believe that if our neighbor, our dentist, the stock analyst on CNBC, and even our local 6 o’clock news anchor says that everyone is doing it, that we’re afraid we’re going to be the Poindexter standing in the corner all by our lonesome.

Hey, if it worked so successfully for Obama’s behavioral psychologist dream team, why shouldn’t the “people want to do what they think others will do” vibe work on investors after the quick buck? It’s not mind control per se, it’s just a few highly intelligent prognosticators coming up with clever ways to get you to do something… before you know you want to do it.

Psychology of an Investment Bubble

Since I’ve gotten a fair amount of feedback — both for and against the presence of a gold bubble — I thought it would be fun to graphically examine the psychology of an investment bubble as it’s forming and after it has popped.

Moreover, what the emotions are like as different types of investors (value investors, fast money momentum traders, and Everyday Joe retail investors) were thinking as the newest investing fad forms a bubble, then quickly bursts.

Stealth Phase

More than likely, these are the value investors and buy on the dips investors. They’re probably the most infuriatingly patient and purposely coy investors on the planet because they will wait for months or years to get the right P/E ratio or the bad earnings report, and swoop in to buy as much as they can while it’s cheap as dirt. They really don’t care what the rest of the world is investing in at the time, they just want to get maximum value for their money invested. These are the Warren Buffett’s and Wilber Ross’ of the investing world.

Awareness Phase

These are the big money institutional investors who pour over stock charts and fundamental analysis screening programs 18 hours a day, and have a dedicated research team to be on the lookout for new opportunities. It’s their job to do the research, read everything down to the 10Ks, and beat the bushes to find the growth of a sector or commodity before anyone else does.

Mania Phase

This is when the investment goes 100% mainstream. It will get mentioned in every publication from the Wall Street Journal to The Today Show. This is when the bubble often traps the retail investor by showing past performance and gives the illusion of future appreciation (there is a reason why investments say past performance does not guarantee future returns). Then it begins to act a bit of a euphoric or narcotic like effect where it blinds the part of the brain that says “Wake Up You Smuck!” and all they think about 20% gains in a month and two stock splits a year. In other words, it’s purely unobtainable mania brought about by something proverbially spiking the punchbowl.

Blow Off Phase (aka – Bailout Phase)

Usually accompanied by a “it will come back” mentality and a general lack of comprehension that you’ve just been screwed but haven’t gotten the morning after thank you call. The big institutional investors and fast money traders will have predetermined stop loss orders in place, and when those are tripped in mass quantity, the bottom completely falls out and panic selling begins. The best traders will also begin to pile on the shorts accelerating the sell off. IN the end, the value will be pushed below the historical trendline since we’re just as likely to overreact on the downside just as much as we’ll overreact on the upside.

Examples from Bubbles Past

Oil Bubble

Who can forget that pesky thing called an oil bubble? You know you loved paying $4 to $5 for a gallon of gas… especially when you drove a SUV that cost around $100 to fill up every five days.

Notice the massive run up to $147 and the horrendous sell off back down to $35 per barrel. It took 5 years to create this bubble, but when it popped, man … look out below! [echos]

See any similarities between this chart, and the psychology of bubbles graphic above?

Real Estate Bubble

It almost makes you say WTF! Take a look at the massive deviation from the historical trendline. It begs the question if the real estate bubble was artificially created (thank you Rubin, Greenspan and Wall Street) or if we had legalized marijuana back in 2000 and got happy with the mortgage paperwork.

Nasdaq Tech Bubble (aka Dot Com Bubble)

Who can forget the good ol’ tech bubble? That much loved period when America could do no wrong and any crappy company could create a website and double in value two months later. Sad thing was that these companies had great fundamentals (according to most everyone) and the huge run up in prices was sufficiently validated.

And you were vilified if you said anything to the contrary.

It was such a fiasco that finally in late 2009 — a decade later — that a small number of those high flying tech stocks are finally breaking even on their old 1999-2000 highs.

The Gold Bubble?

Now that gold has breached $1000 and apparently destined to above this price point forever, it almost makes you wonder if we’re just setting ourselves up for the same thing.

But take a look at the chart, the newspapers, and the people around you. Can you see the similarities between gold and the rest of these bubbles? Can you connect the dots?

Sure, gold has some good fundamental reasons for being above $1000 per ounce, but if you’re late to the party, do you really want to invest at these levels knowing that going long gold (and shorting the U.S. Dollar) are the most crowded trades on Wall Street in late 2009?

~ ~ ~

Disclosure: I’m neither long nor short gold. I’m just a guy on the sidelines making observations about the gold rush.

This was an original post from Steadfast Finances. For more, follow me on Twitter.

The Psychology of Bubbles: Using Hindsight to Examine Why We Bought into the Hype

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eHow Article Sweeps – The Good, Bad, and Ugly [Passive Family Income]

Fri, 13 Nov 2009 12:35:21 +0000

For those of you who write for eHow, I am sure you know by now that the latest article sweep is in process. I see this as a good and bad thing to be honest. Nobody wants to have their hard work deleted and thrown away, but the sweep process can help improve the quality of the site.

I wasn’t immune from the latest cleaning of the eHow article library. Yesterday, I received an email from eHow stating they are “… making great strides to clean up the eHow article library…”. I knew exactly what that meant – its sweep time again! I have mixed emotions about this process whenever eHow goes through these sweeps. This round was no different, so I thought I would break it down into the “Good, Bad, and Ugly” below.

The Good

Since posting my number one problem with eHow, it appears they have made some changes for the better. Here are a few changes that eHow is communicating -

Deliver article clean up communications every week.
Members of eHow will be notified shortly after an article has been published if it will be removed.
Articles will be pre-screened once they are submitted to ensure they meet the standards.

All of these items seem to be a very positive step in the right direction to fix things. The other thing I always notice (and can never really complain about) is the nice earnings jump that seems to follow immediately after the sweep is complete. I noticed it once again during this round.

The Bad

I don’t enjoy losing my hard work and articles that I have submitted. I lost 3 eHow articles to the latest sweep, one of which was a big earner for me (almost $40 in 3 months). The other two were not as big of a deal.

Fortunately, I have made copies of my articles and can quickly turn them around on a different site somewhere else.

The Ugly

I can live with the Good and Bad that I noted above as it is part of a cleansing process that I always seem to benefit from (even though I lose articles along the way). What I can’t tolerate is the continued poor communication between eHow and it’s members. As noted earlier, it appears they have listened to their members and have made some changes to improve the communication process. Unfortunately, they introduced new communication issues that I find to be unacceptable.

This is a portion of the email communication that I received about the article cleanup –

“For your reference, this email has been sent to you because one or more of your articles have been removed from your account for violating eHow submission guidelines. Please click on the link below to find a list of all affected titles with reasons for removal next to each of them.”

When I first clicked the link in the morning, I had one article show up. Several hours later, I noticed that my number of published articles dropped again, so I clicked the link and three articles showed up. Wouldn’t it have made more sense to send out the communication once the article cleaning process was completed? This is just another example of how poor the eHow site is at communicating with their members.

To make matters worse, notice the phrase in the quote above – “… reasons for removal next to each of them.”. Guess what? There were no reasons (AGAIN!) next to my articles telling me why it was removed. This is one of the most frustrating things that I find with eHow. Don’t tell me that there is a reason noted next to my article on why it was deleted when it isn’t even there!

Obviously they are still working out the communication kinks.

Oh yeah – and may I add that there is no security or privacy around the links that eHow sent out. If you got the link, you can simply change the username to someone else you know and see what articles they lost. Not cool!

Want to see my articles that got deleted? Check them out (it is obviously public information) – PFIncome Deleted Articles.

How did you make out on the latest eHow article sweep? Are you frustrated with the poor communication they use with their members? Is it enough for you to leave?

Obama’s Recession and His Job Destroying Agenda [PennyJobs.com]

Fri, 13 Nov 2009 18:07:00 GMT

As the unemployment rate crossed double digits, the Obama administration cannot seem to figure out why the economy isn’t creating jobs.

To address the issue, President Obama announced that he will hold a ‘jobs summit’ next week to finally get to the bottom of this problem and find a solution. He has assigned some of his top advisors to gather research and propose solutions.

Here are a few comments for Peter Schiff’s article today,

“That's a relief; for a while there, I thought we were in real trouble! In fact, the absolute last thing our economy needs is more federal government interference. If Obama really wants to know what's behind entrenched joblessness, he should start by looking at the man in the mirror.”
“Obama is pursuing, with unprecedented vigor, the same policies that have for decades undermined our industrial base and yoked us to an unsustainable consumer/credit driven economy. This doubling down on Washington's past failures is destroying jobs at an alarming rate. Today we learned that the September trade deficit surged by 18.2%, the largest gain in ten years. Much of the deficit resulted from Americans spending Cash-for-Clunkers stimulus money on imported cars – or “American” cars loaded to the sunroof with imported parts. In exchange for more domestic debt, we have succeeded only in creating foreign jobs.”

To really fix the problem;

“To really fix the unemployment problem, the President must look past his peers in government and academia to understand how jobs are actually created. In the private sector, all individuals have a choice to either work for themselves or someone else. Since labor is far more productive when combined with capital (office equipment, machinery, business models, and intellectual capital), those who lack these assets themselves often choose to work for others who have sacrificed to accumulate them. This increased productivity is shared between the worker and the owner of capital, and both are better off.
However, for one person or company to choose to offer a job to another, there must be an incentive to do so, and they must have the necessary capital. In the first place, employers must commit to paying wages and benefits, comply with government mandates and regulations, and subject themselves to potential lawsuits from disgruntled employees. All of these costs must be measured against the extra profits an employer hopes to earn by hiring an additional worker.
If profit opportunities exist, jobs will be created. Otherwise, they will not. Of course, anything the government does to raise the cost of employment, such as a higher minimum wage, mandated health care, or greater regulatory burdens, not only prevents new jobs from being created but also causes many that already exist to be destroyed. Anything that diminishes the profit potential of extra hiring will diminish the number of job opportunities that are created. Also, since it is after-tax profits against which employers measure risk, the higher the marginal rate of income tax, the less likely employers will be able to hire.
Finally, in order to hire workers, employers must have access to capital to expand operations. Anything the government does to discourage capital formation automatically diminishes job creation. By running the largest federal deficits in history, Barack Obama is diverting all available capital to the Treasury, and is in effect waging a war against private capital formation.”

As Peter said, Obama’s liberal social agenda is in effect waging war against capital formation. Capital is fleeing the country and taking jobs with it. The last decade of government overspending is the reason behind the recession that we are in.

Obama is the exact opposite person that the country should have elected. He fooled the nation by promising the ‘change we need’ and delivered 10x of ‘more of the same’ spending that got us the second largest recession is history.

We really need change, but it’s not a bigger spender that we need. We need a free market economist to drastically cut the budget and save the nation from the pending currency crisis. The daily record price of gold should be a clear sign that the dollar is in big trouble.

Jobs come from Enteprenuers, like me who take calculated risks that are in their favor. In the current environment, their are very few ways to make a profit - until the government gets their hands out of the economy.

Here is part of an article I wrote last month;

"Until the government stops flooding the market with money, it’s very difficult to determine which industries are phony and which are real. What are consumers going to purchase after the government stops printing money?
If an entrepreneur builds’ a business today, for example a construction business based on the high demand to rebuild the roads the bridges, the entire business is bases on government stimulus money. The owners of the business are completely at the mercy of the government’s willingness to continue to borrow and spend money on rebuilding the roads and bridges.
This is not a good business model because it does not depend on the free market and therefore the business owners cannot control the risk of loss to their business.
Therefore, small businesses are not able to see which industry is going to be viable in the future, because they cannot control which industry the government continues to create competitive advantages for with policies and easy money.
Government policy is the biggest risk. If the government was not part of the risk, it would be much easier for a business to manage the risks that they need to take.
Risk management is a large part of the decision that small business owners are constantly planning for and government intervention in the economy drastically increase their uncontrollable risks. "

Government central planning of the economy undermines the ability of the free market to support itself. The free market is not capable of creating jobs without economic freedom. The more the government reduces economic freedom, the fewer jobs will result. That's why government stimulus packages never work and why the bigger they are the more damage they cause - and the last one was a real doozey.

The real economic recovery will start with a change in government monetary policy, perhaps within the next six months.

---
Related Articles at PennyJobs.com:

Weakness Returns as Volume Jumps in Nasdaq [The Rogue Investor]

Fri, 13 Nov 2009 08:01:06 +0000

Just as the rally was getting back in the swing of things, weakness returned as Smart Money began another wave of selling.

Volume in the other major indexes was not as elevated, but the Nasdaq has been the most volatile of the bunch so it would make sense that the professionals are most active here.

Based on recent trends, I’d expect the markets to go into a decline now and the severity would be based on how much more selling the Smart Money has to do.

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What NOT to Do With Your 401K and IRA Retirement Plans [Saving to Invest]

Fri, 13 Nov 2009 04:04:00 +0000

No doubt everyone who has a company sponsored retirement account (401K, 403b) or self managed plan (IRA, Roth IRA) has read about all the right things to do like regular investing, diversification and choosing low fee funds. However, it is just as important to consider what NOT to do with your retirement accounts so that you avoid the various pitfalls and traps ahead of you, and to ensure you have enough in retirement.

1. Do NOT Borrow from your plan. A plan loan may be a convenient way to pay for a big expense—but it is not free money. You have to pay back the principal plus interest to your plan account—usually within 5 years. Loans also reduce the amount of money that's available to compound and grow. Worse, if you leave your employer before you have repaid the loan, you may be forced to repay it quickly. If you cannot, the outstanding balance is considered a taxable distribution. If you are under age 59½, you have to pay a 10% early withdrawal penalty as well. Consider the following example: Jack, who had $50,000 in his 401(k) plan account, took a $25,000 loan for a new sports car. A month later, he left his job and had to cash out of the plan. After the required 20% withholding and automatic loan repayment, Jack, who is 45 years old, received a check for only $15,000. He had to pay income taxes on that sum plus a 10% early withdrawal penalty. He was left with less than $10,000, a new car, and no retirement savings. Make sure you explore all of your borrowing options before taking a loan from your retirement account. With interest rates so low a personal bank or credit card loan may be cheaper – especially if the need is only for the short term.

2. Do NOT Contribute only as much as your company match. If your company offers a match, it is important to take full advantage of it. But contributing just enough to get the company match may not be enough. A good goal is to contribute a minimum of 9% to 12% of your income to your retirement plan, which would include any employer contributions. Ideally, higher-income workers should consider contributing 12% to 15%, including employer contributions, to maintain their current standard of living in retirement.

3. Do NOT Chase hot-performing funds. It is a mistake to chase hot performance. Just because gold or any other investment is performing well now does not mean that it will in the future. Instead, select a diversified mix of stocks, bonds, and short-term reserves that's right for you—then stick with it for the long term.

4. Do NOT Avoid risk. There's a risk to devoting a large portion of your retirement savings to short-term reserves—the risk of inflation. Inflation eats away at your investment return, giving your bucks less "bang" over time. How you invest should always be based on how long you can keep the money invested and your tolerance for taking risk. While a short-term reserve fund does offer stability, these investments do not offer much opportunity for growth. Stocks and bonds, in comparison, have historically had higher average annual returns over long periods of time, with stocks offering the greatest long-term return potential. If all, or most, of your assets are invested in a short-term reserve fund, such as a money market, you may want to consider reinvesting some of this money in stocks and bonds. No matter how conservative a long-term investor you are, consider allocating a portion of your savings to stocks to help defend your portfolio from inflation's ravages.

5. Do NOT Cash out of your plan if you leave your employer. You may be able to cash out, but you'd take on a potentially large tax liability. You would owe ordinary income tax on the distribution plus a 10% premature distribution penalty if you were under age 59½. Instead, Consider a direct rollover into a low cost IRA account (Get 100 Commission Free Trades in an E*TRADE IRA) or into your new employers 401K plan.

6. Do NOT Try to "time" the market. It's impossible to predict with any consistency the market's ups and downs and how they'll affect your account. By frequently transferring money in and out of the market, you'll likely miss out on some growth potential and increase the fund's expenses. Leave market timing to the portfolio managers. They get paid to make informed decisions about buying and selling the securities within the fund.

Reference Source: Vanguard

Working Tax Credits: Money-Saving Credits for Workers [Money Dashboard]

Tue, 10 Nov 2009 15:16:20 +0000

In a previous Money Dashboard blog, we wrote about Unemployment Benefits and your entitlement. But there are benefits you may still be entitled to, even if you are in work. Whether you are self-employed or work for someone else, there are different benefits for people in different positions.

Read more »

Best New Car Deals [The Almost Millianaire]

Fri, 30 Oct 2009 00:29:00 +0000

So, I need a new car, which would normally be an exciting time for me…but each of the three cars that I want are newer and really cool models…and thus are currently expensive and don’t come with any good financing incentives or rebates.

I really do need a nice new car though, because I am, once again, getting tired of paying $2.75 a gallon for vehicles that only get 10-14 miles per gallon. (Why do I buy big trucks all the time?)

Anyways, I’m looking at the 2010 Buick LaCross, the 2010 Ford Taurus, and the 2010 Lexus ES 350. Each are beautiful vehicles with great Consumers Report ratings…but this comes at a price.

I wish I liked the Chevy Impala…I believe you can get rebates and 72 month, interest free financing…BUT IT IS SO UGLY!

Any of my blogging buddies bought a vehicle out there, I would love some advice and input on which vehicle you picked, why you picked it, and if it appears to be a good deal. All input is greatly appreciated as always! Believe it or not, I want my next car to be nice, but to actually be a decent long term investment…I realize that is a tough task to accomplish.

Peace and blessings to YOU, my online friends!

-TAM

What to Read. Now. [The UpSide of Money]

Tue, 27 Oct 2009 19:10:33 +0000

What do “Why Smart People Make Big Money Mistakes”, “The Laws of Money”, “Your Money or Your Life”, “The Millionaire Next Door” and “Your Credit Score” all have in common? These books all made it on to the PF: What to Read Now list.

For the full Sf Examiner.com article, go here.

Get Results with Incentives [The Strump]

Thu, 11 Jun 2009 20:33:53 -0500

Well, I'm back (sort of) after taking a bit of a break this past week. I have to say, I feel refreshed after not writing for a week - good to do this every once in a while.

The following is a guest post from one of my Colleagues, a local web designer, Shannon Chiarenza.

What's in it for me? Get better results with incentives

Incentives are enticements that encourage one into action, a reward for participating. It gives people a reason to read your flyer, visit your website, click on that link, sign up for your newsletter or fill out your survey. How many flyers and brochures do you get in your mailbox that you don’t even look at, just toss into the recycle bin? It’s just more background noise in our lives, more clutter we have to deal with.

Give people a reason to act so you don't lose sales.

Our time is valuable, no incentive means I have no time for you

I recently received a letter in my mailbox from a back treatment clinic I've used before. Their treatments are effective and did help my back pain significantly however at $75 a visit it adds up quick, so I can’t go as often as I’d like. When I received this letter saying I was chosen to participate in a survey to help improve their treatments I was happy, I read it front to back looking for my incentive, quickly realizing there was nothing in it for me.

Into the recycle bin it went and a shame to, they spent a lot of money on stamps for their return envelopes and printing, not to mention all the waste of paper. In addition I felt somewhat insulted, they assumed that my being chosen should be reason enough.

What would have made me take time out of my day to spend half an hour on the phone for an interview? A free treatment, that’s it…one free treatment and I would participate. Maybe that’s selfish but my time is valuable to me and that seems like too much work when I get nothing in return. If they offered a free treatment in return for my participation I would've been happy to do it, they get the information they need to improve their service and I get to have a visit to help my back, we both win.

They probably got some people to participate however I wonder how many more they would have if they just offered an incentive? It’s more than just what my time is worth it’s the appreciation for my efforts, a thank you not only for helping their business but a thank you for having spent so much money on them in the past.

What's your incentive?

This is one thing that is hugely overlooked by business owners, not too many people are going to take time out of their day to do anything for you if you don’t offer something in return. If your going to spend the money on mailouts make sure in bold front and centre is your incentive, like " $10 off coupon inside", "free shipping" or "mention this brochure and receive XYZ for free" something that will stop people in their tracks and open that brochure, visit your store or call you up. Make it easy to do and worth the effort, same goes for your website, give people a reason to sign up for your newsletter, bookmark your site or fill out your survey.

Incentives are more than just a way to get people to do what you want, they act as a thank you for doing it, it shows appreciation and that is worth our time.

Shannon Chiarenza is a web-designer here in Vancouver, BC, Canada.

Finally, one of my articles was featured at the Carnival of Finance over at Funny About Money last week,

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The Rogue Investor [The Stock Talk]

Wed, 22 Apr 2009 16:17:59 +0000

All of my attention will now be focused on The Rogue Investor. Check it out to strengthen your investing through alternative investing strategies and disciplined portfolio management. Also, you can follow me on twitter o become a fan on facebook.

-Alex Stewart
The Rogue Investor