Carlin got it…

Invest in peace…

Not Investing Soon Enough - I can’t agree more with this.  If you are not investing RIGHT NOW, you are jeopardizing your future.  Simple as that.  A lot of people are all, “I’ll be fine, the government this and medicare that.”   Fuck that.  Social Security probably won’t even be around by the time us 30 year olds retire.  You have to prepare for yourself and yesterday is the best time to start.  Even if it’s only a few bucks, get out of debt and start investing and saving now or you’ll regret it massively in the future, unless you want to be 70 and working at Walmart to make ends meet.

Chasing Past Performances - This is a good one.  Don’t buy something because it used to be good.  Buy something because it’s going to be good, or will continue to be good.  A few times I’ve had good runs with stocks and went back to them, not a good idea a lot of the time.  If you ride Disney from $20 to $35 and take that profit, don’t hop on Disney at $33 because it’s down a bit.  Look for another investment that has the room to run Disney did.

Experimenting with my IRA - Don’t.  Buy ETF’s for your IRA.  SPY, MDY, DVY are my choices.  Small Cap, Mid Cap and Dividend paying.

Not Paying Attention to Expense Ratios - Ratio is the key word here.  You have to look at things in the overall picture.  You hear a lot of people saying, “don’t trade, the trading fees will kill you!”  Well, if you have $100 invested and you’re paying $30 a trade, yes it will.  If you have $100,000 invested and are paying $7 a trade, who gives a fuck about the trade costs?  It’s smaller than a drop in the bucket.

Not Paying Attention to Distributions - DO NOT BUY MUTUAL FUNDS, THEY SUCK.  Don’t buy that garbage.  I’d buy a mountain of hubba bubba bubblegum as an investment before I bought a mutual fund.  They suck.

Ignoring Diversification - There are two sides of the coin here.  If you don’t watch your stocks, diversify!  Buy only ETF’s and you’ll be diversified automatically, if you watch your investments, diversification is stupid and kills your profits.  Don’t diversify for the sake of diversification, buy 15-20 stocks, no matter what sector they are in, if they are great companies.  Just because Microsoft and Apple are in the same sector doesn’t mean you shouldn’t own both if both are doing well and if Banking is in the toilet, why the fuck would you own it?  Get out of it!  Diversification, by definition, means you are holding losers and winners, which brings your overall profit down.  If you are paying attention to your investments, dump the losers and move that cash to winners when you see them.

Selling on Corrections & Buying at the Top of the Market - 1) Never buy a stock unless it’s below it’s 50 and 200 day moving averages and never buy a stock unless it’s a name monopoly in a long-term industry that everyone needs.  That solves the second half.  2) Corrections happen.  All the time.  The stock market goes up and down like a yo-yo.  Don’t panic when the market as a whole does shit.  That’s normal and ok and you haven’t lost anything unless you sell.  The stock market is a long-term game.  When you should panic is when the stock market is going up and your shares in Shrinky Dinks drops like a rock $30 in one day.  THOSE are the corrections to get out of.  When your company you are invested in fucks up, run. 

Some mistakes I’ve made that I’ll add here just for fun.

1) Never use a Market order - A market order simply says that you’ll buy X stock at whatever price it is whenever they get around to your order.  So, if Disney is at $20 and I put in a market order and it skyrockets to $35 before they get to my order, I just bought Disney for $35 and lost $15 profit.  ALWAYS use Limit orders and put in the exact price you’re willing to pay.  If Disney is at $20 and you’re willing to pay $21, you put it in a Limit Order at $21 and your order will only be executed at ANY PRICE below $21.  So if Disney drops to $18, you’d get it at $18.

2) If you can, use trailing stops.  A trailing stop is when you tell the broker (or the program you use) that you are willing to lose $x or x% from the current price and you want that sale trigger to move.  So, if you own Disney and it’s at $25 and you’re willing to lose $1 on it, you set a trailing stop at $1, so it would sell if it hit $24.  But, if Disney goes up to $27, because it’s a trailing stop, your sell order would automatically move to $26, $1 below the highest price the stock reached.  Everytime the stock goes higher, your sell price will move with it.

3) Don’t Assume a Company Can’t Fuck You - Fuck K-mart.  I invested a LOT of money into K-mart, knowing that they would be bought out when they were in trouble a few years ago.  The stock was around $1 or so, so I figured I’d jump in, they’d get bought out and I’d get the stock in whoever bought them at a low price.  Wrong.  K-mart bankrupted their stock, making anyone who owned it now have a stock worth $0 and the VERY NEXT DAY created a new stock that was $30 a share and THEN got bought out by Sears.  Don’t buy floundering companies.  Circuit City, The Good Guys, CompUSA, etc…fuck em.  Stay away.  Buy the companies that would buy them, Best Buy, for example.

4) Don’t Watch the Stock Market When it’s Open - Don’t watch during the day, things change too much.  Wait til it’s closed and then look and make decisions based on non-moving numbers.  You’ll be much less stressed and make better decisions.

5) Just Because You Own X Shares, Doesn’t Mean You Treat It As That - If you buy 1000 shares of Disney, you don’t have to sell 1000 shares of Disney.  This is HUGELY important.  If you buy 1000 shares at $10, you have $10,000 invested.  If it goes up to $12,000, you’re up $2000.  Many people sell all of their shares and take the $2000 at a 30% tax hit, pay off $600 in taxes = $1400 in pocket.  What I do is sell off $2,000 worth of shares.  So, 2000 divided by $12 (the cost per share now) = 166.6666 shares.  I’d sell off 166 shares for $1992.  Now, do I pay taxes on $1992?  Hell no!  I pay taxes on $332 for a tax bill of $99.60!  How?  Because you only pay taxes on the gain.  My 166 shares gained $2 per share, so I’m taxed on $2 times 166 shares.  That’s it.  And I still got $1992 in cash out and still have my original $10,000 invested in Disney.  THAT is the key to trading stock in my opinion.  Defer the taxes, use the cash from gains to increase the number of shares you own, the number of shares you own is the most important factor in trading stock, period.

Hope these ideas help!

Invest in peace…

Invest in peace…

Let’s say you’re using my strategy of having a savings account jointly and a checking account jointly and you’re getting your ‘fun money’ in cash.  And you create a 3rd account for your ‘fun money.’  You’re going to get in the habit (if you aren’t already) of going to the ATM to pull out cash like it’s a money tree.  When your fun money account runs out of cash, or you find yourself $20 short for that new Hanna Montana CD you want, you’re going to go, “Oh, I’ll just pull the cash from our joint savings account and put it back later.”  That’s not going to work.

By using gift cards, which is the same as a debit card with no trip to the ATM to get cash out, you are keeping yourself away from ATMs and banks.  It also makes you think twice because a gift card mentally tells you, “I will run out eventually!”  A debit card doesn’t have that deterrent, it gives a mental picture of, “hey, when this runs out I have overdraft!  And I’ll put more money in next paycheck, so it’s ok to overspend now!”  Not good when you’re trying to get your financial life in order.

As for it being a pain in the ass, how fucking lazy do you have to be when you are already at the market buying FOOD, which you need to survive and probably do on a weekly basis, to just reach 5 inches from where you place the food on the conveyor belt to grab a Visa gift card and throw it on top of your Hungry Man Dinner and Hot Pockets?

Ultimately, the goal is to make your brain think differently about money.  A bank is a place to save money, it’s not a tree to get money out of.  Keep your spending money on you ween yourself away from thinking bank = spending and I think you’ll find staying on course with your finances much easier.

Invest in peace…

Great question!  Simple answer.  Take your cash to any supermarket and you will find gift card displays.  These are GREAT!  You can buy a Visa gift card or a Mastercard giftcard.  You can get Paypal ones, iTunes ones, Amazon.com ones.  Just convert your cash to a gift card, now you can use it to ‘charge’ a purchase, but it’s simply coming out of your cash.  No accounts, no pins, no risk of over charging and running into debt, no hit on your credit even.

You can use these gift cards for anything, renting hotels, getting airplane tickets, buying meals and internet purchases.  If you buy a whole bunch in $25 increments, you can even give them away as gifts.

Invest in peace…

Car insurance - This is a yearly, bi-yearly or monthly bill that always falls on the same day.  If you’re surprised, you’re a moron.

New purchases like a couch or lawn mower - You don’t NEED a couch and a lawn mower is about $30 at a garage sale.

Vacations - This is a surprise?  It’s not even an expense, it’s a choice.  It’s like like, “OH shit, I’m on a cruise!  Surprise!”

Taxes - Does anyone not know when tax day is?  Seriously?

Christmas Spending - Last I checked, same day every year, not to mention every store in the world starts warning you right about October, so you have 2 months of decorations, sales, christmas music and Holiday Movies on TV to remind you it’s almost December.

Birthday presents - Um, buy a calendar?  They are the same time every year.

Graduations - You have a year of heads up there too.

I’ll give them weddings and auto/home repairs, however auto and home repairs fall under emergency fund expenses, so not a big deal.  I’m sorry, but vacations, taxes, christmas spending, birthday presents, gifts of any kind, car insurance, etc do not fall under the ‘emergency fund’ and shouldn’t be paid out of your emergency fund at all.  If you do that, you may as well call it the ’savings for bills I’m to lazy to remember’ fund and start ANOTHER fund for real emergencies like medical, damages, repairs, injuries, medicine, etc….

Buy a calendar or use the one that’s free on your computer or free at google calendars and enter in all of the bills and birthday lists and all of that.  Tell it to let you know 30 days in advance.  Use www.iwantsandy.com (an awesome FREE service) and have Sandy remind you bills are coming throughout the year.

There’s no excuse for getting surprised by bills that fall on the same day every single year.  Plan for them, add them to your budget and pay for them, but don’t fall into your emergency fund for this stuff, Dave Ramsey would slap you upside the head.

Invest in peace…

Here’s what you should do:

1) Take 15% of each of your paychecks immediately off the top, that goes to savings/investing.
2) Take whatever your budget is for your monthly bills and put that in your bills checking account.  This includes groceries, fuel for the cars, insurance, taxes, electricity, gas, water, trash, gardeners, fees for gyms, fees for kids activities, etc.  I’d imagine that $2500 a month would work for most people, but that’s just a rough estimate. 
3) Take 10%, or whatever amount you have decided works with your budget, each and have it in CASH as your funny money until the next paycheck.  This is the money each of you can choose to use on anything you’d like.  A new computer, going out to dinner, movies, whatever.  It comes from the cash fund.
4) Take whatever is left after savings, bills and ‘fun money’ and either put 100% of what’s left on your debt or put 100% of what’s left into the savings account.

BTW, that savings account and checking account are joint accounts.  The only thing separate is your cash and neither one of you have a say as to what the other does with their cash.  If she wants to buy a $5000 Hello Kitty watch, that’s her money to do that with.  If you wanna buy front row seats on the 50 yard line for the Superbowl, have at it.  Blow it all weekly or save up for something bigger, but it’s good to have that cash on hand to do what you’d like with.

Keep the ‘fun money’ IN CASH.  It doesn’t go into a bank, you don’t have an ATM card to use it, it’s cold, hard cash in your wallet.  When the cash is gone, you’re out of money until the next check.  There is no running to the ATM to get $20, etc.  As a matter of fact, you probably shouldn’t have the ATM card in your wallet at all.  Leave it at home, then you won’t make wacky purchases because you have plastic on you.  90% of the items you want to buy are cheaper online anyway.

Read the comments on that thread over at freemoneyfinance.com and just go, whoa…people are nuts. 

Invest in peace…

Invest in peace…

First of all, the economy is in the shitter, right?  I mean, gas is up over $4.50 where I live.  It’s even higher in Canada.  Unemployment is up, inflation is rising, stocks are sucking, the housing bubble is bursting!  Dogs and cats are living together, mass hysteria, right?  RIGHT?!

Then explain a few things to me.  Why did Grand Theft auto make a gazillion dollars the first day it came out?  Why are movies opening with $50+ million dollar openings in 3 days?  Why are people paying $2.50 for a coke in a restaurant when they could buy 2 liters of Coke at the market for a buck?  Why are restaurants stuffed with people paying $10-30 a meal?  Why are the malls full of people?  Why do people pay $2+ for a bottle of water?

When you think about the gas prices, sure they’re up, but realistically, we’re paying $20 more to fill our tanks.  That’s one meal for a lot of people.  Sure, it sucks if you have a long commute or you drive as part of your work, but for most people, I think they fill their tank once a week or so.  Maybe twice.  So, $20-40 more out of pocket.

If the gas prices were really killing people as much as we hear, what about all of the money people are spending on frivolous things.  Where is the money coming for the $12 movie with the $6 week old popcorn and the $60 copy of GTA and the $100 Wiifit that’s sold out all across North America and the $500 PSIII’s and Xbox 360’s that are flying off the shelves.

For a country that’s complaining about a $2 rise in gas prices and how it’s killing the economy, people sure are finding a lot of money to spend on wants, rather than needs.  Something to think about.

Invest in peace…

1) Do nothing for a year.  He should just collect the cash for a year.  He’ll build himself up $160,000. 

2) Don’t buy a freakin $9.9 million dollar apartment. 

3) Take the $160k and invest it in the SPY and MDY ETF’s and let it sit.

4) Decide what job he would love to do more than being a doorman.  Take a vacation and really think about what he’d like to do for the rest of his life.  If doorman is his lifes ambition, that’s great, but he shouldn’t quit his job.  If he decides he has a different passion, spend the money for the first year on schooling to achieve that goal.

5) Keep working and live off of that income.  Sure, he can use 10-25% of his winnings for fun stuff like trips and the like, but if he saves up the lotto winnings as if he didn’t win them, that $5 million will be closer to $8 million by the time it’s all paid to him if he just invests it.

The worst thing this guy can do, (and what 80% of lotto winners do and what I would bet this guy will do) is start buying things like he’s rich.  He’s not rich and won’t be rich for years.  He’s going to go in debt, the interest payments are going to build and build and he’s going to be bankrupt eventually.  That’s what happens to almost all lotto winners.  It’s sad, but that’s what happens when people who don’t understand money think they’re rich.

If you win the lotto, my best advice is pretend you didn’t win and put 100% of it into savings until you retire and then start playing with it.  Continue to buy everything with cash and chop up the credit cards and you’ll be set forever.

Invest in peace…