Update!

I have found a novel way for anyone with as little as $100 to invest each month a means to invest that $100 in the stock market and bond market. Before I explain this exciting discovery, it is useful for you to understand what conventional brokerage houses like E*Trade offer their customers. This will help you understand the stark difference between these brokers and the service I’m going to introduce you to here.

Three Basic Challenges

Beginning investors are faced with three principal challenges—diversification, risk mitigation and selection. The conventional brokerage house does much more than putting a buyer and seller together. The traditional brokerage house has a staff of resident stockbrokers that are responsible for researching the markets and making sound investment recommendations to the brokerage’s customers. These customers consist not only of individual investors, but pension funds, private foundations, university trust funds and charities. The traditional brokerage can also offer margin loans enabling approved clients to buy stock on credit. This all sounds wonderful, but the costs are high. These professional analysts must be paid!

Choosing a Stock or Bond

While meeting the investor’s need for assisting with stock and bond selection, the traditional brokerage house is just too expensive an option for the small investor of limited means.

Portfolio Diversification

The traditional broker can meet your need to acquire a diversified portfolio, but most of us just starting out don’t have the kind of money required to build a truly diversified portfolio of stocks and bonds. The only alternatives the novice investor has are exchange traded and mutual funds. These will achieve diversity but rarely do they provide the impressive returns we see touted in the financial news media.

Limiting Risk

Risk mitigation is something expected of the agent stockbrokers at any traditional brokerage. The intensive analysis performed on the various corporations and government entities should allow the stockbroker to inform the client of the potential risk each transaction represents.

What About the Little Guy?

In the true spirit of entrepreneurship, these traditional brokerage houses, sensing there was money left on the table (by the small investor), created the discount brokerage, later morphing into the online brokerage. E*Trade is a great example of an online brokerage. Online brokerages harness the latest in technology to provide the small investor market access via the internet with substantially reduced commissions and fees. They do not give free advice, they do not help you assess risk, and you are still pretty much relegated to exchange traded and mutual funds to achieve diversity. I’ve explained why this is so in “How to Invest Your First $500 in the Stock Market” so I will not repeat myself here.

It Takes Money to Make Money

Well, yes, it certainly requires some money to make money (there is no free lunch). Still, as I’ve said before, $500 will get you started with an online brokerage like E*Trade, and if you invest in exchange traded and mutual funds you will do as well as most who play the stock market.

Not good enough—are you sitting down?

What if I told you…

• that you could start investing in the stock market and bond market with as little as $100 invested per month?

• that you could achieve diversity without limiting your investment dollars to exchange traded and mutual funds?

• that you could control the degree of risk you are willing to accept?

• that a mix of stocks and bonds will be selected for you that best matches the risk you are willing to accept?

• that a company exists that will do all this for a fee that is a fraction of what traditional brokerage houses charge and less than many online discount brokerages?

• that they would track your investments and provide you information on your gains and losses online?

• that they would allow you to establish goals for your portfolio and help you track your progress?

Would you be interested?

Enter betterment.com, an excellent alternative for the beginning investor. Betterment.com does all the things I’ve described above. Betterment.com could be the answer to your investment dilemma.

Would you be more inclined to start down the path of investment if you could begin with just $100 instead of $500? Knowing what you know now, would you choose an established online discount broker like E*Trade or an innovative investment alternative like Betterment.com?

The post The Secret to Investing in the Stock Market When You’re Scared appeared first on Your Finances Simplified.

What about the other side? What about paying for college in 19 years when your new baby is ready for college. What about paying for college if you have some money now, but are concerned about paying for it in the future? Look, we all know the price tag for higher education hasn’t come down in recent memory. What are new parents and grandparents supposed to do? Relax, you are in luck. There are 5 easy solutions you can start using today.

Number 1

You may have heard the term 529 plan thrown around in the press in recent years. The term 529 actually is short hand for Section 529 College Savings Plans. You could say that a 529 plan is sort of like an investment plan, but with some important differences One enormous advantage of a 529 plan is that any growth in this plan is tax free. Also, when the funds are taken out of the account, they aren’t subject to federal tax as long as they are used for higher education expenses.

Number 2

Prepaid Tuition Plans are another way to pay for higher education in the future. A prepaid tuition plan fundamentally is a lock down on your child’s future tuition. This means you are paying today for educational expenses that won’t come due for some 18 years or so. The obvious advantage is your price lock down, and once your child gets to college, his tuition is already paid. However, you do need to understand that prepaid tuition plans are state specific. If you prepaid for tuition in Maryland, your child will need to go to go to school right there in Maryland to get the full benefit. If your child absolutely positively has to go to college in another state, you better be prepared to open up your wallet. In this case, the prepaid tuition plan will only pay the average in-state rate. Guess who has to cover the balance? That’s right; you are now on the hook for any differences.

Number 3

You may or may not have heard of a Coverdell Education Savings Account (ESA), yet another alternative for paying for higher education down the line. Think of an ESA as sort of like an IRA, only different. The ESA is used only for educational expenses. An ESA has annual contribution limits just like an IRA, but the money you put in grows tax free. Additionally, your money isn’t taxed when it’s taken out for valid educational expenses.

Number 4

Yet another option for covering higher education expenses in the future is with Custodial Accounts. These accounts are essentially savings accounts with your child’s name on it but that you control, at least until your child reaches legal adulthood. Like some of the other options already discussed, there are tax advantages associated with Custodial Accounts. The first $850.00 of account earnings is not taxed, and the next $850.00 is taxed at your child’s tax rate which is normally about 15%. Also, unlike an ESA, you can put as much money as you want into a Custodial Account. However, you must understand that once your child reaches legal adult status, he/she has complete control of the money.

Number 5

Finally, the fifth option available for you is the familiar Individual Retirement Accounts (IRA) accounts. Both the traditional IRA and the ROTH IRA allow you to set aside your money now for higher education expenses. In the future, you can withdraw funds to cover educational expenses. Depending on which type of IRA you have, you may end up paying taxes on your withdrawals, but you won’t face any early withdrawal penalties.

Conclusion

Bottom line, if you have it right now or you know you will have some money left over in the coming years, there are options available to you to cover those future college bills. Of course, each person’s situation is unique, so you will want to carefully examine each of the choices available to you. Also, be aware that some of the above strategies can be combined.

The post 5 Things Smart Parents Do to Pay for Their Child’s College Education appeared first on Your Finances Simplified.

Apartment Deal

Would you buy it or not? I’ve actually made my mind up on this one already, but I’m interested on what you would do and why? For a help check out what the numbers for rental property number four here.

Leave your answer below

The post Would you buy this apartment complex? appeared first on Your Finances Simplified.

I must admit, I’m a planner by nature so, I thought of this long before we had a child.

My wife and I structured our current life/budget with the end game in mind.

As many of you know my wife and I live on 50/30/20 ratios of our net W2 income.

This is harder than it seems. We purchased a house at 1.5x our income, work feverishly to increase our total income and take a few relatively modest vacations per year. Typical American stuff but with a twist. Instead of living for now, we are living to change our family tree.

Our goal is generational wealth… So my daugther’s, kids, kids, kids don’t have to grow up like I did.. I touch on that here and here quite a bit.

I say that to say this.. it’s all about balance.

So when my daughter was born…

Olivia Madison Brown

Actually around 2 months prior to her birth when we knew medically, she was going to be here, we did something very simple.

We transferred $33,000 into a taxable account and called it “Olivia’s college fund”

That’s it!

Why $33,000?

Well the way I see it, $33,000 growing on average by 8% over 19 years equals

Now I know 8% isn’t guaranteed and I know 150k may not be enough, but that’s not the point. The point was to make a decision and stick with it. We simply passed up on another rental house or 2, due to what we felt was a more important priority.

This was a complete behavioral finance move, and this decision makes us feel good. Just like in my last article how people would rather pay off 1% APR debt rather than gain 15%+ in real estate gains per year. This is the same exact decision but with a different outcome.

Also, we know we can add more it if we wanted to to add more, point blank, period.

Why didn’t you use an IRA or 529 etc etc…

It amounted to restrictions and rules of the various “save for college education plans” that I didn’t like for our particular situation. One size doesn’t fit all when it comes to personal finance decisions and this is especially true for “high income earners.”

What did you invest the money in?

Very simple again… 80/20 split between S&P500 index fund and total bond market fund. I find (stock market) investing very boring and don’t care for looking up various stocks to chase yield.

Unlike other places in life, I don’t care about squeeze out the most bang for my buck (like real estate). I wanted simplicity and that’s what we have. As we get closer to her using the funds I will change the asset allocation from “risky” to ultra conservative principal protecting assets.

So that’s it.. I know it’s not glamorous. I know it’s not the average story of putting $500 bucks way a month to achieve a result. Frankly, that’s not our style, and we work better by attacking goals in lump sumps instead of the drip approach.

Right now we know she will have something, so now we are focusing our efforts on bringing in more money (stuff we like) so, if shit does hit the fan and her college fund gets wiped out due to a dip in the market we have the capital to just pay for school out right.

This means we keep buying more income producing properties. Oh.. and we are saving enough to send her to any college she wants to attend (preferably Ivy league, so she can milk those elite connections).

The post How We Saved for My Daughter’s College Fund appeared first on Your Finances Simplified.

1. Not Having a Budget

For some people this comes naturally, but for most of us it takes some practice to get it right. Understanding that your monthly bills must be paid on time when they come in requires that you acquire a system. A person who has a system together has worked out his or her budget so that all of his or her bills are paid on time each month. This will take some restraint on your part to get to where you can achieve this if you are currently caught up in the week to week system.

Unfortunately, just pulling out the bill that states final notice is not going to get you anywhere. Living week to week also means you are one pay check away from poverty. Many people do not see anything wrong with this system since nothing has been turned off, and there is no eviction notice on the door. When you do this, you get a false sense that you are doing pretty well. However, what happens when something unexpected comes up? You do not pay the cable or electric that month and eventually you find that you are a month behind on nearly everything. This is why you need to respect the boundaries of a budget.

2. Not Saving First

This should be the first thing you do when you cash or deposit your check. Set aside an amount each week (or each paycheck or each month) and without fail. Let me repeat this, without fail that amount goes straight into a savings account. You must pretend that you never had it. Do not make excuses that you have a bill or others things to pay. This money is not yours. This money is for is a rainy day. This account can only be used for a real emergency, not a large ticket item you have been wanting. You can save your change for that.

Have you ever done something stupid with your money? Tell me about it below!

The post 2 Dumb Mistakes You Make with Your Money appeared first on Your Finances Simplified.

Since, we get paid in 30 day arrears (1 month behind), we get paid last months rent the 5th of this month and etc etc.

So… what goodies did I get in my inbox for this month?

May Rental Income

Keep in mind I/we (wife and I) have 4 rental properties in which I manage with about 5 minutes a month from VA. The rental properties are 700 miles away, and I’m totally reliant on the team I put in place and my PMP skills to run this effectively.

Property 1 Income : $1393

Remember in the last rental property update I told you that this was $400 bucks short? Well the tenants sent my money promptly following the 3 day notice to quit. Moral of the story, always follow your lease to a T and always deal with your tenants in writing.

This is full rent + $400. However the tenants have been short changing me on the pet fee!

Property 2 Income: $910

This is full rent

Property 3 Income: $864

The full rent on this property is $850, but for some reason I received $864. I’m sure the government owed me some back rent.

Property 3 Income: $0

This should be $825, but my property manager filed the paper work for section 8 late. So, the payment was sent back to the government. However, we should get a double payment in the mail within 30-45 days.

Total Rent: $3,167

April Rental Expenses

Property 1 Expenses: $0

Finally!

Property 2 Expenses: $0

Finally!

Property 3 Expenses: $$435.17

Man here we freaking go again. Property 3 has sucked for the last 2 months with repairs. Ok this property has a bit of history and the repairs reflect that. The last tenant scrapped the broiler and messed up the plumbing a bit. I got some money back from the insurance, but now I’m seeing the residual effects of it. Fortunately, we figured out the issue and will have it fixed this money. The bad news is it’s going to costs around 300 bucks. Here are the actual repairs.

1. Replaced tile on counter top = 156.76
2. Fixed basement lights = 68.64
3. Replaced broken kitchen fixture = 49.81
4. Snaked bath tub drain 3x = 159.96

Property 4 Expenses: 0

Property Management Fees: 10% of Total Rent or $$316.70

Total Expenses: $751.87

Thoughts?

I’m a bit ticked off my property manager took to long to file the paper work. However, I’m not pressed for the money of property #4 right now. As long as I get it within 45 days, I’ll be fine. What I am ticked off about is the issues at Property #3. This property has been a thorn in my side since I purchased it, but when I look at my portfolio I feel great about the total return.

So how much did you really make in 5 minutes of work?

$2415.13

If you want more information about my deal check out my one on one real estate sessions by clicking this link

The post May 2013 Rental Property Report appeared first on Your Finances Simplified.

Olivia and I

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However, now they have went into cyber space, so instead of having to drive down to a brick and mortar location and have the possiblity being seen in public. You can borrow money at rediculous rates from the comfort of your PJ’s.

Now, their is a time an place for such a loan, but it’s very very very very very far down the list of options a person “should have”. I feel if you have to get an online cash advance you must be in a tight situation. I’ve scoured the internet and looked for benefits of such a loan. The only reason I found someone would settle for an online cash advance is if they need money like yesterday and it’s today.

I’m not going to say never get a online cash advance, I only ask that you exhaust all your option before you opt for such a loan. Most likely this will be the most expensive loan you can get and you need to realize that, before going in.

There is nothing wrong with the tool, the user must understand the advantages and disadvantges of using the tool.

Random Facts time:

Wikipedia:

To prevent usury (unreasonable and excessive rates of interest), some jurisdictions limit the annual percentage rate (APR) that any lender, including payday lenders, can charge. Some jurisdictions outlaw payday lending entirely, and some have very few restrictions on payday lenders.

In US law, a payday lender can use only the same industry standard collection practices used to collect other debts, specifically standards listed under the Fair Debts Collection Practices Act.

In many cases, borrowers write a post-dated check (check with a future date) to the lender; if the borrowers don’t have enough money in their account, their check will bounce.

Payday lenders will attempt to collect on the consumer’s obligation first by simply requesting payment, as they would rather retain a customer who normally pays on time but may have experienced an unexpected obstacle to repayment. If internal collection fails, some payday lenders may outsource the debt collection, or sell the debt to a third party.

A small percentage of payday lenders have, in the past, threatened delinquent borrowers with criminal prosecution for check fraud.This practice is illegal in many jurisdictions and has been denounced by the CFSA, the industry’s trade association.

The post Would You Get An Online Cash Advance? appeared first on Your Finances Simplified.

Any way, as you may know children tend to get sick and when they do parents often feel helpless. So… I normally don’t sing, but when your kid gets a fever you have to bring out all the stops.

Before we get into my singing. Here are few pictures of Olivia at 3 months. Wow time flys!

Here is a picture of me acting crazy before work :-)

Here is a picture of Mrs. Brown and I.

Here is a video of me singing to Olivia to alleviate her fever. Forgive me, I am a bit rusty and I did the best I could.

Don’t forget to check out Confessions of a father to be daughter edition!

The post How I healed my sick baby. It’s a Miracle! appeared first on Your Finances Simplified.

What you need to know about choosing an online broker:

Before you even begin your search, pause, take a moment and ask yourself a few basic questions. Start with answering the most fundamental question of them all, namely, what’s important to you? You want to be clear on this answer before you move ahead. You certainly would not want to set up a new online brokerage account only to end up closing it in a few months because it failed to meet your expectations.

Another thing to remember in your search for an online broker is to consider your possible selections in terms of value. Like everyone, you want to get the best value. But be careful to understand how you are defining value. In many cases, value may have little or nothing to do with prices paid. You are looking for the overall value.

So, at this point you have figured out what’s important to you and you have defined what and how you will define value for the online broker you choose. Now it’s time to move forward to the search phase, this is the place where you compare one broker against another.

When comparing one online broker to another, start with this list of questions.

• What are the commissions or cost per trade? Remember commissions are a two-way trip, you pay to get in, and you pay to get out. If you are a frequent trader, you may consider low commissions as a top priority.

• How many Investment options are there? Some online brokers support equities, options, mutual funds and more whereas other brokers only offer equities and mutual funds.

• How is customer service handled? For some people the ability to pick up the phone and talk to someone is extremely important, for others not so much, they are OK with email support. Again, it’s all about knowing what’s important to you.

• What about account security? You want to be sure you trust your online broker with your funds and your information. Make sure to find out what safeguards there are to protect your personal information.

• What trading tools are available for your use? That is, are there online trading tools, either as part of your online broker’s plan at no additional fee or charged extra as used?

• How fast are the trades executed?

• What about the Initial setup? For example is there a minimum balance required to setup the account? Is there a waiting period before you can begin using the account?

• Are there other ways to conduct trades? For example if you are suddenly without internet access, is there an alternative way to trade?

Are there other services are available? Some online brokers like share trading offer banking services, credit cards and more. Other online brokers are much more limited in the type and scope of services offered. However, keep in mind; it’s all based on those first questions you asked yourself.

One way to avoid overwhelm is to use something as uncomplicated as a scoring sheet. Here’s how this could work: you write down a simple matrix with the names of the online brokers as one column. Then take the list of questions above as the next columns from side to side. When looking at a particular online broker, simply write down a number from 1 to 5, with 5 meaning that broker fits your criteria perfectly, whereas anything else indicates not so much. Then when you are done, add up the scores. The online brokers with the highest scores are your semifinalists. You may have to dig deeper, but at least now you have narrowed your field of choices.

As you can see, there is a way to choose and select an online broker. It all begins with asking yourself what you are looking for and then moves into choosing from the specific features offered.

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