Drip Drip Drip

Dividend reinvestment program...

Some companies provide dividends, you can choose to recieve the dividend in cash, or you can choose to reinvest the dividend back into the company stock. I own several stocks that pay dividends and always choose dividend reinvestment.

The logic? Each dividend paying stock position will grow to earn more dividends. Over time, it can generate a large amount of income.

My recent dividends:
Taxable: 02/01/07
Boston Properties: $6.08 (purchased .0549 shares)
General Growth Properties: $18.00 (purchased .2943 shares)
S&P Index fund: $15.85 (purchased .1099 shares)

Retirement Dividends:
General Growth Properties: $18.00 (purchased .2943 shares)
S&P Index fund: $15.85 (purchased .1099 shares)

It may not seem like much, but when viewed on a larger scale, the reinvestment of dividends can lead to great things!

Until next time,
Thor

Fool.com dividend reinvestment story

Taking Inventory

Take a look around at the people you hang out with.

Chances are, you will end up just like them. If they complain, you will complain. If they are ultra-conservative, chances are that you will acquire some conservative views. The actions and behaviors of the company you keep will be one of your largest influences in your life.

I've been trying to figure out where I want to go in life and while I may not have specifics, I do have a general idea of where I'm headed, what I'd like to do, and the types of friends that I would like to have. I've had my fair share of involvement with negative people...and no matter who you are (I like to think I'm rather positive) you can't help but be dragged down by them. If you are curious and don't hang out with curious people, you'll lose your curiosity piece by piece. If you have a dream of becoming financially 'free' and independent, you wont get there by associating yourself with blue collar employees that want nothing more than a weekend with a 6-pack. I'm not saying that there is anything wrong with a specific lifestyle, if it makes someone happy to do what they do, more power to them...but I have been trying not to associate with people who aren't on my wavelength and more importantly aren't on the wavelength that I want to be on.

I want to become financially literate and life a life free of the traditional worries. I am willing to take the steps that are needed to reach this point. I will read, study, and think about the implications that my actions have on my life. I will accept responsibility for the path I choose.

By writing my self-declaration, I have established what my goal is and the basic steps that I will take to accomplish this goal. Do you have a goal? What are the steps you would take to accomplish your goal?

Until next time,
Thor

David Bach Puts it Simply

David Bach's Yahoo Column manages to put things into perspective.

He writes of a conversation with a woman that is trying to save for retirement. She was overwhelmed when faced with the 'need' for large retirement savings. 'It's a marathon, not a sprint'...by starting the habit of saving and building on it, you can establish quite the nest egg for retirement, marriage, or a vacation. The whole point is that you shouldn't take a quick glance at the numbers and give up when faced with a large figure, you should begin chipping away at it as soon as possible. Every dollar you put in today is a dollar that will be working for your future.

I tried to figure out how simplistic my approach towards finance is. It may be a little difficult when shuffling around credit card bills and fiddling with how much to contribute to a 401K plan but once all of the item are set up, you can just sit back and relax. My goal is to save at least $30/day for my 401K plan (currently at ~$20) and $10/day for general savings. (currently at $20 since I'm building my emergency fund) Instead of sacrificing my savings in order to contribute to my 401K, I am contemplating the sale of some of my stock in order to eliminate credit card debt and simply apply the monthly credit card payments towards extra retirement savings, emergency fund building, and some towards having a little fun. The best part is that once the system is set up, I can just make that weekly run to the ATM for my spending cash for the week knowing that my savings/retirement/investment plans are all taking care of themselves; I'll just have to check in on them for a while.

"The secret to life is to stop worrying and start living." -Dale Carnegie

Until next time,
Thor

One credit card down!

One of the goals that I had set myself was to build up an emergency fund. I'd been doing rather well but I decided to modify my plan a little.

In my last posting, I talked about the Cashflow game and the concepts that it teaches you. One of the key concepts in the game is that you are more likely to succeed in the game if you eliminate credit card/retail debt and only use loans to secure the purchase of an asset that will make you money.

I have the ability to margin out funds from my investment accounts if I 'really need to' but my primary source of funding in an emergency would ideally be savings accounts/money market funds.

Well, I'm not in the ideal situation yet so I decided to take a small 'risk.' Instead of leaving my money in a savings account that is earning 4% interest, I flushed most of the funds out of one of my accounts in order to wipe out the balance on one of my credit cards charging me 11.75% and used the rest to pay down a card chargineg me ~14%. While I could have paid more towards the card charging me 14%, I decided to fully pay off one of my cards so that I have one less thing to worry about.

I wouldn't recommend flushing your saving account unless you have another source of emergency funds (like your parents/family or my margin account) but in some cases, it just makes more sense to use that $1,000 towards a debt costing you $100/yr as opposed to letting it earn you $40/yr. For me, I think it was the right decision.

One more step towards financial independence.

Until next time,
Thor

Cashflow

Cashflow- Definition


It is also a game that Robert Kiyosaki created.

The purpose of the game is pretty simple. You are a worker that is assigned a specific job (doctor, teacher, lawyer, etc...) you receive a paycheck, you have credit cards, and you roll the dice to see how many spaces you move. Depending on what square you land on, you can make decisions on what types of investments to make. You can buy houses, stock, and other businesses. Every time you make a transaction, you have to update your balance sheet in terms of income, expenses, assets, and liabilities. Throughout the game, you learn about your balance sheet and the impact that different decisions can have on your life via short videos that explain your choices.

The goal of the game? To get out of the rat race by purchasing investments that increase your 'passive cashflow' to the point where you no longer have to work. Once you achieve this goal, you get 'out of the rat race' and move to the 'fast track' where you can travel the world, donate to charities, and other accomplish the 'dream' that you chose in the first round of the game.

The game is pretty interesting in the sense that it teaches financial literacy in a manner that anyone can understand. I played the game with both of my sisters, who aren't major financial dorks like me, and they were able to gather the concepts rather easily.
Good debt (makes you money by acquiring an asset) vs. bad debt (fancy dinners and speedboats that you purchase with your credit card)
Assets vs. liabilities
How a balance sheet works

All of these concepts are presented in a simplistic way that anyone can understand.

I really liked the game because it showed me how to explain basic financial ideas in a straightforward way.

I'd recommend checking out the game. It is a little expensive (~$90) but you can play the game as many times as you want and the knowledge presented is just as good as a $300 seminar and the best part? Your teacher isn't an ivy league graduate talking about how you should be like him, your teacher is a cartoon rat dressed in a suit with a worrisome turtle sidekick that blurts out phrases like "GOOD JOB!" and "I think I woulda passed on that one"

You can purchase the game here

Until next time,
Thor

Credit Card Comprimised...

So, I logged into my e-mail the other day and recieved a financial alert.

One of my credit card balances had gone above the alert setting. The problem? It was one of the cards that I didn't used.

I logged into my credit card account and there they were... five transactions from the same place that racked up to almost $250. I immediatly called my credit card company to tell them and they were quite helpful with my problem. They are going to send me a form that allows me to contest the charges and once I mail out the form, the credit card company will take care of the rest. The credit card company will check with the vendor to see when the transactions occured along with whatever other items might show whether or not I made the transaction. I was told that it could take as long as 60 days before the transactions are cleared and I recieve a credit for the transactions.

The only reason that I caught the transaction was because of my account alert. Otherwise, I may have somehow glanced over the statement and paid it without a second thought.

How often do you review your credit card statements for transactions that you may not have actually made? Now I know to check my statement on a regular basis...

Until next time,
Thor

Sites walking you through how to contest the charges/Avoiding credit card fraud

http://www.ftc.gov/bcp/conline/pubs/credit/cards.htm
http://www.tamingthebeast.net/articles2/card-fraud-strategies.htm
http://www.scambusters.org/CreditCardFraud.html
http://en.wikipedia.org/wiki/Credit_card_fraud

Taxes...

Tax time!

2006 is gone and now it is time to start getting ready for taxes. Starting in January, you should have started receiving tax documents from your banking institutions.

The type of documents that you should be receiving are listed here.

The most important documents you should receive are:
W-2s (from your employer)
1099s (for your retirement accounts, brokerage accounts, and savings accounts)
Mortgage interest paid (1098) (from your mortgage lender...tax deductible)
Student loan interest paid (1098-E) (this can lead to a huge deduction)
Job-related expenses (union dues, job education, uniforms) (tax deductible)
Summary of educational expenses (college tuition),
Social Security statement (1099-SSA) (if you are collecting social security yet)

There are may other documents that you may receive. Check the above link for a more complete list.

The easiest way to prepare your taxes is to make sure that you save all your documents.

Once you have received all of your documents, you have several options.

1) H&R block:
You can file electronically or visit one of their offices for help. They have experienced individuals that will help you file your taxes step-by-step and maximize your tax deductions.

H&R Block Tax Cut program: Cost is $10-$50


2) Turbo Tax
It only costs about $30 and will walk you through all of the steps
You can even get a demo of the program from the website to see how easy it is.
I've used turbo tax for the past several years and usually do my taxes with my family. If you have someone to help you get through the program, it shouldn't take you more than a couple of hours to file your taxes. Turbo tax is the program that I would recommend to most easily file your taxes.


Filing your taxes is pretty frustrating but once it is all done, it's only a couple of weeks before you get that tax refund. You might want to use your tax deduction to open a ROTH IRA or pay down credit card debt or even start building your emergency fund.


Other Links:

Bankrate Tax Record-Keeping Tips
Yahoo Tax Tips

Keeping tags on liabilities (Yodlee part 2)

What os the best way to grow your net worth?

Your net worth is calculated by taking your assets minus liabilities.

Net Worth = Assets Liabilities
Net Worth = [401K, savings, checking accounts] - [credit cards, college loans, auto loans]

Your net worth can grow by wither growing your assets or by reducing your liabilities. Right now, I'm concentrating on reducing my liabilities while my assets keep their automatic growth via automatic payments.

I've identified my credit card debt, my college loans, and my personal loans as my larges liabilities. Their priority is:
1) Credit Card Debt
2) Personal Loans
3) College Loans

It is unlikely that I will try and pay down my college loans ahead of schedule. The interest on them is a tax deduction, the interest rate is low (~8.5%), and to focus the task of paying down my college loans would take many years during which time I would rather plan on saving to buy a house and getting some travel in before tackling that beast.

One of the best ways besides tracking overall debt paydown is to monitor your expense transactions. This way, you can not only track your debt paydown, you can accelelerate it.

check it out yodlee here

Here, you can track all of your financial accounts and the website will even download individual transactions and allow you to categorize them.


As you can see, Yodlee will keep track of your liabilities in a simple pie graph as well as allow you to track the nature of your income/expenses.

This is a rather simple yet powerful tool that can allow you to gain the upper hand on your financial progress.

You can set budget goals and see how your goals match up against reality in a real-time basis. You can track your net worth progress in real time. This website will provide you with all of the help you 'need' in tracking your financial life. The actual steps that you take will be reflected in your account.

The account is secure and free. All you need to sign up is an e-mail address. It is an absolutly great site.

Until next time,
Thor

PS: My Fiance is now in London, I have set a goal of saving up enough money for the plane ticket (found for as low as $208.00) and will plan on visiting for a week or so in Feburary.

Setting the goal: When? How long? How much will I need? How much do I need to save /day/wk/mth to achieve the goal?

Investing with play money

Generally, you should start investing your real money with mutual funds and Exchange Traded Funds (ETFs) because your risk is diversified. In reality, your best returns will come with purchases of individual stocks...but what stocks should you buy?

I won't try and push stock tips on you but I will offer some helpful advice. Start investing with play money via a stock simulator. Essentially, you are given a set amount of imaginary dollars (from $1,000 to $1,000,000) that you can invest any way you want. You can gamble away your money on penny stocks or buy only the safest of investments...but the key is that your progress will be tracked in the portfolio.

Join the simulator here

Make any investment you want but try and make note of why you made the investment. Bought Microsoft because their Vista operating system is soon to be released? Sony because of demand for the PS3? Try and keep track of why you bought an investment so that when you monitor your progress, you can be aware of what worked and made you money but more importantly, why you lost money. Because if you can avoid losing money, you've done the best possible thing: protect your investment.

Warren Buffet's Rules for Investing
Rule Number One: Don't lose money.
Rule Number Two: Don't forget rule number 1.

If you don't lose your money and still learn from your mistakes, your success isn't in question...only your timeline is.

Until next time,
Thor