How to play by the new money rules

STAGE 1: The Early Years.

Traditional advice: You’re finally earning a decent income. Now put that money to work for you.

• Buy a home ASAP to begin building equity (aim to put at least 10% down).
• Stash enough in your 401k to get the company match, and tilt heavily towards stocks for growth.
• Start funding a 529 college savings plan as soon as the kids arrive.

Changes to financial system:

Leverage is out; saving more to meet your goals is in.

Don’t count on supersize gains in stocks and real estate going forward.

Expect the market’s sharp zigs and zags to continue.

 

Right moves now:

Buy that house if you plan to stay in it.

Save for a hefty down payment.

Go all out for retirement.

Smooth the roller-coaster ride.

Set priorities.

Read more about this at CNNMoney.com>>>

Dave Ramsey's Baby Steps to Financial Success

As I have always mentioned, the intention of this blog is to provide you with solid information that will allow you to make sensible decisions when it comes to money and personal finance. After reading studying many books and reading many blogs, one starts to have a sense as to what is good information from what does not work. Even though money management is different for different people in different situations, certain information works very well in general. This blog posting on The Digerati Life provides a great and simple breakdown of Dave Ramsey's basic steps to financial success.

I have listed the steps briefly; click Dave Ramsey's book to purchase from Amazon. Highly Recommended.

DAVE RAMSEY'S BABY STEPS

1. Save up for a small emergency fund.
This is very important and is usually very liquid cash that you can access quickly in the case of an emergency.

2. Pay off your debts with the debt snowball strategy.
A very important step in being free of financial distress.

3. Grow (or extend) your emergency fund.
This should equate to approximately 3 - 6 months of your expenses.

4. Save and invest in your retirement.
Put money in your employers 401k or 403b; enough to get the matching. Next, open up an IRA; a traditional or a Roth IRA depending on whether or not you think you will be in a higher tax bracket closer to retirement (which means that you should have a Roth IRA now).

5. Save for your child's college fund.
Open up a 529 plan. Save for your child's college fund. Let's face it, it's not getting any cheaper. The earlier you start the better.

6. Pay off your home mortgage early.
Once you get to this step, you can contribute more to your mortgage.

7. Continue saving, build your wealth, invest and give.
This is a great position to be in; just focus on growing your net worth.

 

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10 Important Money Skills for a Bad Economy

These are a great set of tips to keep in mind, especially this challenging economic environment. These are skills we all can learn and adopt through practice. The purpose of this blog is to provide financial education; I believe this article from Zen Habits, done by J.D. Roth from Get Rich Slowly, has a lot of great material on it.

I will share with you some of my takes on the 10 skills that are stated in the article.

 

1. Set up a budget - Know what your fixed expenses are and know what are not. Set up how much you would like to spend on various things and stick to it.

2. Track your spending - I actually use Mint.com and MS Money. They are both great applications and really allow you to see where your money is being spent. I also recently tried Quicken Online since it somehow integrates with Turbotax, which is what I use to file taxes. The point is not what you use, but that you actually start tracking where your money goes. Even a simple Excel sheet can work. Knowing where your money is going is the first step in understanding your finances and taking control of it. Just do it.

3. Check your credit report - Your credit score is very valuable and should be kept in order. In the long run, having great credit can be very beneficial and save you a lot of money from lower interest rates in mortgages to cheaper insurance. Take care of your credit and it will take care of you.

4. Stop Junk Mail - Stop them or throw them out. Don't even look at them. They are meant to tempt you into getting things you do not need.

5. Optimize your bank accounts - Be sure that your money is in high yield savings accounts. I recommend ING Direct. Great online high yield savings account.

6. Open an investment account - It is never too early to start investing. Utilize your employers 401k or 403b and also consider opening a Roth IRA. Read the article to see the benefits. I opened my Roth IRA through Sharebuilder, which is where I do my investments as well.

7. Call around for better deals - Check around for better insurance rates, better credit cards etc.

8. Educate yourself - Learn as much as you can about finances. See link below for great recommendations.

9. Set financial goals - Set some short-term financial goals and some long-term financial goals. For example, I intend to put $5000 in my Roth IRA account by the end of July and plan to increase my investment portfolio by $100,000 in 5 years.

10. Create a money file - Have a secure place to keep all your financial data; passwords, account numbers etc.

Click here to read this great article by Zen Habits>>>

Understanding Retirement Investing

If you have not already noticed, I have posted a lot of articles around retirement, IRAs and 401ks etc. Why? It is all part of my personal investment philosophy of preparing for the long term and having the right strategies. 360 Degree Wealth is meant to provide you with all the necessary information to assist you in making a well-informed decision. With the right information, and the right understanding, I believe most people will be able to become great financial planners. I think this article adds to that mission.

Retirement Investing is very important because it allows you to start thinking long term. The mind-set that is created when thinking long-term is valuable when it comes to investing. There are many wealthy people out there and a large majority have become wealthy because they are able to plan well; they are very responsible with their finances. An important part is retirement.

I encourage you to read this article below and get an understanding of the various options that are available to you; IRA, Roth IRA, Roth 401k, 401k, 403b etc. Understand the difference between them and know the contribution limits. Your decisions here can have a huge impact on the quality of your lifestyle closer to your retirement years.

Enjoy!!

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401k tips

During this difficult period, I have come across several of my young colleagues who have switched much of their 401k or 403b plans to bonds. When I say "young", these people have 25+ years to retirement at least. This is fundamentally a bad idea because those who do not intend to take out their money early and accept the huge penalty (10%), have nothing to worry about and should be concentrated in stocks. Now is the time where equities are very cheap, so you will actually be purchasing units at a very low price. When this downturn is over, and I do not know when that will be but I do believe it will eventually happen, you will fully benefit from the market recovery. Please do your research on this very important and seek the best financial advice for your personal situation.

One piece of advice that John Bogle, the founder of the Vanguard Group, says is that your percentage investments in bonds should be equivalent to your age. For example, if you are 25 years old, you should have 25% in bonds and the remainder in stocks. This is a basic yardstick to use if you are not the sophisticated investor or ignorant of how investments work.

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Investing and Tax Tips for 2009

This site briefly describes some valuable tips one can partake in for this upcoming year. Please understand that everyone's investing and tax situations vary, so do research on what makes the most sense for your given situation.

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General Investing Questions Answered

This site by Dan Solin answers some very basic investing questions people have, and he does it "very candidly" as he put it. Don't take offense to any thing, just open up your mind to the ideas. They are actually some very good comments. Enjoy!!

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