A major challenge for most income orientated investors is finding a way to increase their overall returns in fixed income areas. This is because interest rates are at the lowest levels in decades (which makes it difficult to see higher levels of income). Once inflation is calculated into these figures the position could be taking a loss. To deal with these challenges most investors will seek out areas that are paying higher amounts of interest. The problem is that this could increase the overall risks to the portfolio exponentially by purchasing bonds with lower credit ratings. To avoid these kinds of issues, most investors need to use certain strategies that will increase the overall return without the risk.

The Use of Laddering

The best way to improve the overall return for the portfolio is through a technique called laddering. This is when investors will take the fixed income securities in the portfolio and will spread them out over the range of maturities. For example, if an investor wanted to see higher rates of interest in CDs. They will concentrate on spreading out this portion of the portfolio over the course of several months to years. This means that they will have a mixture of shorter and long term CDs (ranging from three months to 15 years). The basic idea is that the short term instruments will provide income and will mature at certain points. This allows them to invest in new CD offerings when interest rates are rising. While the long term CDs, will provide the portfolio with higher amounts of interest.

Advantages of Laddering

The biggest advantage of laddering is that the interest rates in the portfolio will continue to remain high. When they are increasing, the shorter maturities that are coming due will provide investors with the chance to capitalize on this opportunity. Over the course of time, this causes the average interest rate to remain consistently high (without increasing the risk).

During times when interest rates are falling, investors can place the amounts that are maturing into medium term instruments. This is designed to prevent the portfolio from being adversely impacted by sharp declines. Once this takes place, is when investors are able to maintain higher yields in comparison with the markets.

A second advantage of this approach is that it always protects against inflation. The main reason is due to the fact that the highest rates are continually being locked in. At the same time, the investments that are maturing can ensure the portfolio takes advantages of potential increases. The combination of these factors will keep the average yield higher.

Clearly, prudent investors will use tactics such as laddering as a way to structure their fixed income securities. This is because it is providing them with a number of advantages that other strategies are unable to achieve (higher interest rates with lower risks). Together, these tools will protect the portfolio against inflation and sharp decreases. This is when there will be more consistent income levels regardless of what is happening.

Photo by: artct45If you’re between 20-40 years old, don’t do anything. Stay where you’re at, markets fluxuate. That is their nature and that should have been something you learned before you got it. If this is your first time hearing about it, don’t worry and more importantly, don’t run. Let the traders panic. That is their job. They’re pounding down 15 cups a coffee per day and enjoy the stress. Let them deal with it. You’re paying a person that the traders are relaying information to in your mutual funds. You’re 3rd tier on that – sit back and enjoy the cheap stocks you’re getting into.If you haven’t sold, you haven’t lost. Stick to your guns and don’t get scared out of the market, recessions happen. But they always come back. As long as you still have a job, you shouldn’t be worrying. If you HAVE lost your job, you should probably not be reading this blog, try this one.

I got to thinking about this today after reading Hot Air’s post about how they had to pull a lottery game in the UK because the goal of the game was in reference to temperature; more specifically, negative numbers.  People were supposed to scratch the ticket and find if they had a lower number than the ticket number.  Once the numbers started getting into the negatives, people got confused:

“The Cool Cash game – launched on Monday – was taken out of shops yesterday after some players failed to grasp whether or not they had won.To qualify for a prize, users had to scratch away a window to reveal a temperature lower than the figure displayed on each card. As the game had a winter theme, the temperature was usually below freezing.

But the concept of comparing negative numbers proved too difficult for some. Camelot received dozens of complaints on the first day from players who could not understand how, for example, -5 is higher than -6.

The story quotes player Tina Farrell, 23:

I phoned Camelot and they fobbed me off with some story that -6 is higher – not lower – than -8 but I’m not having it.I think Camelot are giving people the wrong impression – the card doesn’t say to look for a colder or warmer temperature, it says to look for a higher or lower number. Six is a lower number than 8. Imagine how many people have been misled.

It’s slightly alarming to learn the average person on the street has difficulties with something as simple as negative numbers, though with 15.1m with poor numeracy perhaps Camelot is at fault for making it too complicated.”

Absolutely astonishing, but there is a story to be learned from it – clearly you’re not investing your money when playing the lottery and it’s not as much of a no brainer as you’d think it would be:

“In a 1999 survey by the Consumer Federation of America and financial services firm Primerica, 40% of Americans with incomes between $25,000 and $35,000 — and nearly one-half of respondents with an income of $15,000 to $25,000 — thought winning the lottery would give them their retirement nest egg. Overall, 27% of respondents said that their best chance to gain $500,000 in their lifetime is via a sweepstakes or lottery win, the survey said.”

That’s pretty sad considering that the chance of winning the Powerball is something like 1 in 140,000,000.  That is 0.0000007143% chance of winning, and think of it this way, if you buy 10,000 tickets, what does that improve your chances?  Well, move the decimal 4 places to the left and you’re now a hefty 0.0071428571% chance to strike it rich!  Buy $1,000,000 worth of tickets and you’re ALMOST to a 1% chance of winning (0.71428571%) – but you better make sure the pot is really big because it sure would be a waste of money if you had to dump $1,000,000 in lottery tickets, and it sure would be a shame to have to share that baby!

The DilbertBlog I ran across also made an interesting post about it also:

“I don’t want to accuse the Powerball people of fixing these lotteries. But I notice that the people who win are coincidentally the people who would be best for marketing future Powerball lotteries.”

Isn’t that how it is supposed to be?  It’s just called “marketing”.  What kind of chump is going to play the lottery if the only people that win it are rich people?  They’d accuse them of fixing it the OTHER way then.  Either way, I think it’s a pretty bad investment.  You’d be better off day-trading because then at least you have some chance of learning something.  In the lottery, it is 100% luck that your numbers get picked, and if you’re part of the 78% of the people that play the same family members birthdays each time, your odds of winning it all are dropping at the same rate you’re dropping the $1 per day to win the lottery.

Just as a point, instead of starting gambling at 18, if you want a nest egg, take that $1 per day and invest it instead, get 10% on your return per year, and retire like the long haul trucker at 64 with $262,000 you’ve built by NOT buying a lotto ticket…

Photo credit: osseous

Coupon use has increased dramatically over the last few years, with many families looking for ways to cut costs during the recession. It has also been popularized by television specials on extreme couponing and hundreds of blogs that post guides on how to get started and what deals are going on. But many people looking into the coupon world from outside are left wondering if it’s really worth it. For most, the answer is, “It depends.”

Types of Coupons

If you’re new to coupons, you may be surprised to learn that they’ve come a long way since the basic cents-off coupons you find in the Sunday paper. Although these still exist, and are often some of the best coupons, there are tons of other places to find them these days.

Printable coupons allow you to search by product and print just the ones you need. These can be very helpful when you’re putting together a shopping trip and want to save money on things you were planning to buy anyway.

Digital coupons are also becoming increasingly common. You can load them to your smart phone and have the cashier scan them at the register. Many stores also allow you to load coupons to your loyalty card to get discounts in the store as well. And Upromise, which specializes in building college savings, has coupons that don’t take money off your purchase, but instead put it in your savings account.

Most coupons are manufacturer coupons, which the product’s manufacturer prints in an effort to sell products, especially new ones. The store submits these to the manufacturer and gets reimbursed for them. The other type, store coupons, are printed by the store and do not trigger a reimbursement. Most stores allow you to use both a manufacturer’s coupon and a store coupon on the same product, which can add up to big discounts.

Saving with Coupons

Although buying every product for which you have a coupon will technically save you money off retail price, it probably won’t impact your budget much. That’s because you’re buying products you don’t necessarily need, and at prices that may be above what you’d ordinarily be willing to pay for a similar product.

The big savings come when you match coupons to each other and to sales. If a store has an item marked down and you have a manufacturer’s coupon and a store coupon for it, this can bring the price down to a tiny fraction of retail. Sometimes you can even get the product for free! The people who see big savings are doing this, carefully planning their shopping lists to match coupons with what’s on sale in that week’s circular.

You can sometimes even get paid to buy things if you use coupons on products that have rebates. The drug stores Walgreens, Rite Aid and CVS all have programs that print rebates on your receipt, good for dollars off next time you’re in the store. These can in effect make your products free in some cases.

Is Couponing Right for You?

If you stay organized, use blogs to get lists of products on sale that have matching coupons, and use these to help you strategically buy items you actually need, you can save quite a bit of money. The process does take time though, so plan on spending at least a half hour each week getting ready for your shopping trip and finding the exact products you have coupons for. Many stay-at-home moms who have time on their hands feel that the savings are worth the hassle.

For others, couponing won’t do much. Unless you’re matching coupons with sales, most coupons just bring name-brand products down to the price of store-brand products. Therefore, you could get all the savings without any of the work by just switching to the store brand. Busy people whose time is in high demand may prefer to just buy store brand items and what’s on sale without bothering with the coupons.

Have you tried using coupons? Do you think it’s worth the time and effort?

Plonkee inspired me the other day in writing “would you move for a lower cost of living? to craft up an “other side of the coin” post to ponder – How much would it cost for YOU to move to a war torn area for a year in search of big bucks?

A Tough Decision

My friend was making a decent 60k to do his I.T. job here in the states and was contacted by the Department of Defense to do the exact same job for $290,000, but the caveat was clearly that it was in Iraq.

It is/was an interesting situation to be in for sure.  The lure of 290k certainly has its justification, but at what price I thought.

I know we have soldiers over there doing it for much less in much more dangerous locations; yea, I wondered the same thing, how is there a “safe” spot to be in Iraq I thought.

That’s like saying there are some spots in the ocean that are wetter than the rest.  I’d be un-nerved either way. I have a TON of respect for our troops over there!

But as this relates to a financial situation I had to ask him about what his wife and kids thought of the situation.  I can tell you plain and simple that his wife didn’t like it.  She didn’t like it one bit.

I think that I am good at seeing both sides of the coin though:

Her Point

He has 3 kids and a wife to worry about at home.  I don’t recall if he said she is working now or not, but let us just assume that she isn’t for now.

At 290k she could probably afford to stay home if she wanted to, but clearly that’s not her concern.  He’s got a family to provide for and without him around in a worse case scenario there really isn’t a dollar value you can put on his replacement.

Furthermore, I’ve done the long-distance relationship thing and that doesn’t work. She’s mentioned that also. A year apart from your loved ones can really wear on you and can’t be predetermined what the end result will be.

His Point

He came from a company that recently went bankrupt.  He completely lost his retirement account to which he had 100k+ saved up.  He is 38 years old and has nothing to show for it.

He’s squeaking by on 60k a year in Seattle with a wife that isn’t working and 3 growing kids and doesn’t see a light at the end of any tunnels.  He’s got to start fresh and that’s a lot of bank to come up on.

His kids are starting middle and high school and eventually will have to get into college.  He wants to be able to pay for their college, and with nothing left for him afterwards, he’s looking out for his wife and himself.

One year there and he could be back to what he lost in his retirement account.  He’s pushing 40 now and the idea itself carries some weight, but I’m lost honestly.

I haven’t been put into that position to need to make that type of decision.  Right now, where I’m at currently, I can’t see going, even for that kind of $.  My wife and kids need me and even though I’ve got  a pretty decent insurance policy I just couldn’t do it.

My days would likely be spent 18 hours on the job and back to my re-enforced bunker to hide out until I went back to work.  Wouldn’t I?  Would it be that bad?  I don’t know.

I suppose I’d need some more info on the setup, but from what I’ve seen and heard there isn’t a lot of downtime or sight seeing.

You’d Be Helping Your Country

Yes, I buy that.  I would be and that would make me proud but it comes down to options. I have the option to move or not to move.  I have no clue about anything in regards to firearms or warzone tactics.  Is that risk worth taking?

I’m sure I could be trained and they likely would put me through a civilian “boot camp” of sorts, but still, the guys that are over there now are very well trained, I’d just be mediocrely trained.

Conclusion

It’s high risk for sure – especially not knowing what you’re getting in to, but money can make you do some very risky things, including putting your life on the line. What is your break point?

I can’t see myself bending for much more than $1MIL right now, but hell, even at that price I’d have my doubts.  Until it was actually put in front of me, I couldn’t actually wrap my head around it.

I’ve tried. Believe me, I’ve tried to wrap my head around it and what the pros and cons are, but am still coming up empty.

What are your thoughts?  What would be your tipping point to considering heading to Iraq for a year without your family?

What would be enough to make you comfortable in doing so? Would your significant agree with you?

****Update****

So I’ve gotten a handful of emails and comments in this section asking where to sign up for jobs like this and there are plenty of places to look for a job there – Google turns up a few:
http://www.alliraqjobs.com/
http://iraq.jobs.com/
http://federalgovernmentjobs.us/job-location/iraq.html
http://www.careers.state.gov/iraq-jobs/index.html

Hope that helps those of you interested!

photos by: soldiersmediacenter

The Pacific Northwest has some pretty strange weather patterns. It was 45 degrees yesterday and today it’s almost hitting 90 in the area. It’s a warm one so it is nice to see the weather changing for the better.

MyInvestingBlog fired off some goodies this week dishing out the successful Hanks Holiday Handouts #2, how to reverse engineer the EntreCard system, and some interesting “procedures” in how delivery food is sent to you.

Around the blogosphere we had a lot of new-comers to the list including:

1. Anthroflex gives some do’s and don’ts of financial freedom.

2. WatsonInc provides the 2nd installation of “budgeting, your foundation for wealth” which is a great starting point to wealth management.

3. MySuperChargedLife lays out some good tips on legitimately raising your income. I love raising mine and several of these tips could work for you!

4. A new blog popped up this weekend theKimsta showed how they made 122k and lost 132k in the same timeframe; definitely ping on the assets vs. liabilities bit.

5. FinancialJungle shows the benefits of high yield dividend stocks in todays market.

6. MasterYourCard pops up some good points on watching your Fico score; everything you’d need to know.

7. MoneyAndInvesting knows the ropes of common mistakes in the investing world. There are certainly bumps in the road when this happens.

8. NancyZimmerman discusses how you’re going to get your taxes done by Saturday! Time is up sooner than you think! Keep an eye on the H&R Block site if you want them done free and soon!

9. Is insurance investment for the future? FinancePortal thinks so and brings up some good points in proving it.

10. Credit scores are a hot topic in the PF realm these days; CreditAddict lays out a few good ways to cook it up to the next notch.

This week I had a lot going on, but still managed to check out a few blogs of interest -

Millionaire Mommy gives some good advice on “What would I do in your situation“.
Beacon Financial shows you how to save for college AND retirement – an interesting read.
Essentials of Trading lets people know about NOT letting the markets drop a bomb on you!
Lazy Man let’s people know how to Eliminate debt, the ultimate way.
Green Trader has another green stock riding the wave: NLIA.
Terrible trader let’s people know a good way to drive traffic to your blog via blogrush, I like it, and agree.
Keep more income sings an ode to frugality with a post about finding cheap places to do laundry.
Mojostock lets us know we’re headed down further in the stock market.

Stumbling the blogosphere this week landed me on a lot of new sites. A lot of them themed around travel. I haven’t planned anything for this year yet, but last year landed me in the “land down under.” Where I will land this year is a mystery for now; for me, my wife, and the rest of my family so far. Enough said though, on with my favorites for the week.

1. DailyMoneyTips touched on the biggest benefit of a 401k if your employer uses one!

2. Consumerist interviews a WaMu banker and gets some confessions on how things work.

3. CashMoneyLife gives a few examples of ways to use the Economic Stimulus package that will help you in the long run; NOT the short, which is a better idea, eh?

4. FinancialBlogger gives a few tips to cash in on getting a promotion. I love ideas like this, and I’m certainly going to give them a shot in the next year.

5. SavingFreak saves heat. Harness the suns power? A good idea? SavingFreak gives some stong reasons and examples to do so!

6. ChangeYourTree destructs why thinking you can pay for something isn’t a reason to BUY something. Dig deeper.

7. FrugalDad reviews Dave Ramseys Total Money Makeover. It is still on my list of things to read, but haven’t gotten around to it yet.

8. MortgageGuideUK describes the best way to complain. If you’re going to complain about a product, you should have the right firepower to do it right. Some good examples can be found here.

9. FreeFromBroke wraps up a few quintessential quotes from the past Presidents. I love reading inspiring words. Tossing them around the realm of finance and I like them more!

10. WiseBread shows us how to keep “Budget” in Budget Travel. Many times people traveling on a budget find that budget really getting out of hand. I fell for this on my trip to Australia last year, spending 4k more than I thought I would.

I came across Mark Shead’s 10 Signs You Will Be Poor post today and realized how true it is. Often times it is the small things that can derail your financial future. Much of the population doesn’t realize or plan properly anymore. With mortgage companies lending money how they have the past few years, and the general mindset of America to spend, people haven’t been doing the right things when it comes to retirement.

Just touching on a couple big ones I’d put at the top of of the lists:

“You leave money on the table. Not participating in an employer matched retirement plan is one way people leave money on the table. Health savings plans and other tax savings setups are other opportunities you shouldn’t overlook. If you regularly skip over opportunities to get free money you are unlikely to do well financially.”

A 401k is FREE money if your company is matching. If you’re paying in 3% and your company matches what you deposit, that is IMMEDIATE 100% RETURN on your investment! Tell me another investment that is that good of a return for needing absolutely NO investment savvy, you just need to tell your HR folks to take the $, and give you the %.

“You look forward to getting a large tax refund. A large tax refund usually means you didn’t plan ahead correctly. Any extra money you gave the government is basically an interest free loan. If you plan correctly your refund should be very small or you should have to pay a small amount. ”

The whole point of a w-4 is to set you up to use your money properly throughout the year. A large refund means that you’re giving ol’ Uncle Sam a NO INTEREST FREE LOAN for the year. Yes, he’s just borrowing the money and putting it to work for him. Why let him have it? Use it yourself, and take what you can, every cent!

“Your wheels cost more than your car. It doesn’t just have to be the wheels on your car. Any time your financial priorities are out of balance it is a pretty sure sign you aren’t going to acquire any wealth. Other examples include: Your video game collection is the largest portion of your net worth. You don’t have any money to repair your car, but you a new plasma television.”

Is it any wonder that aside from sports athletes and musicians, the only people that have big pimpin rims on their car, usually drive it home to an apartment or shared housing? Yea, they’re slick looking, but there is a reason most business folks DON’T have them. They know how to manage their money, and that is NOT a good way to manage it; especially when you put them on a car that costs less than the tires.

The further drive the whole point home, a New York Times article says:

“…the most recent year for which comprehensive figures are available, the Federal Reserve’s survey of consumer finances found that the median savings in a 55-to-64-year-old American’s 401(k) or individual retirement account added up to $42,000, less than one-eighth the amount needed at 62 to achieve the retirement income…”

My 401k is almost hitting that mark at age 30 and I’ve still got 30 more to go. The staggering part is that that is the MEDIAN savings of these baby boomers. That means that if the 64 year old people were to retire in the next year, they’d have 42k to spend through retirement. You’ve GOT to be kidding me. Even at 8 times that amount as it says, that’s still only 320k.

Depending on what you “can” live on, that may not cut the cheese for the next 20ish years in retirement, especially when the average age of life expectancy is increasing more each year, pushing your retirement nest egg to the cracking point…

I’m a fan of fast food.  We grew up on hot dogs and top ramen. Our monthly “dine out” night would usually take us to McDonalds or Burger King. Well, fast food providers have really done well in the past 50 years and have fine-tuned their marketing schemes to milk you for a few more pennies on each visit…

I actually came across this image on StumbleUpon last week and got to thinking about it. How ‘hooked’ do you need to be on a product to actually just order without thinking anymore?

The main purpose of fast food is to get something quick and easy. Their marketing gurus know what people are going to the fast food joint for – something quick and something easy. Additionally, people don’t think about this tactic. People are thinking about getting their food FAST.

In so doing, they get you into thinking you’re getting a better deal by ordering 1 portion. Think again.  Apparently they can whip up a better deal with the cardboard manufacturer to toss out another package than they would to add another portion or 2 in the same package. Crafty, but deceptive.

Fast food chains spend a large amount of marketing to get the attention of children.

People form their eating habits as children so they try to nurture clients as youngsters.

It’s very important that the fast food companies make sure that their fast food meals for children are healthier.

Parents think that chicken meals are healthier than burgers, but they are not since they are fried.

Consumers are programmed into thinking that bigger size means bigger value. Larger portions are presented as a bargain for consumers because they’re relatively cheap for restaurants to offer. Food costs less than other operating costs such as rent, staff, and equipment.

Some Fast Food Fun Facts

Fast Food Nation: The Dark Side of the All-American Meal (2001) is a book by investigative journalist Eric Schlosser; some of the main points are as follows:

* This year Americans will spend over $110 billion on fast food more than they’ll spend on movies, books, magazines, newspapers, videos, and recorded music combined.

* Every day about one quarter of the U.S. population eats fast food.

* Roughly 12% of all American workers have worked at McDonald’s.

* The golden arches are now more widely recognized than the Christian cross.

* Children often recognize the McDonald’s logo before they recognize their own name.

* American children now get about one quarter of their total vegetable servings in the form of potato chips and French fries.

* The typical teenage boy in the United States now gets about 10% of his daily calories from soda.

* The rate of obesity among American children has doubled since the late 1970s.

* A fast food soda that sells for $1.29 costs the restaurant about ten cents, a markup of more than 1200 percent.

* McDonald’s is now the nation’s largest purchaser of beef, pork, and potatoes. It is the second-largest purchaser of chicken in the U.S.

* Hundreds of local slaughterhouses used to supply the United States with beef; today thirteen large slaughterhouses supply most of the nation’s beef.

* A typical fast food hamburger contains meat from dozens or even hundreds of cattle.

* Because fast food is so highly processed, much of its flavor is destroyed, so the tastes of most fast food are manufactured at a series of special chemical plants in New Jersey.

* Chicken McNuggets contain beef additives, while McDonalds French fries derive some of their flavor from “animal products.”

Conclusion

I’m not going to get on the high horse and claim I never have and never will eat fast food again. I enjoy it as well. I don’t make a habit of it, and likely will still consider mixing in a “super size” every so often.

I’m just saying to keep an eye open as to what is around the corner because what you buy isn’t always necessarily the best bang for your buck. Search the menu over if you’re crunching the numbers – you’ll likely find a sly way of milking a few more cents out of your wallet.