Basics of Investing in Stocks

As you work on getting out of debt and building wealth, you will need to begin learning about the basics of investing. Today’s post will discuss how to purchase stocks for your investment portfolio.

What are stocks? Stocks are basically shares of ownership in a company. For example, if someone wants to invest in a company in order to build wealth, that person would want to consider owning shares of stock in the company. I feel safe to say that most people have heard of McDonalds as it is a global company, so I will use it as a sample illustration. I decide to take time to research McDonalds, and then decide that McDonalds is a company I believe will continue to be a strong company. Be cautioned here; do your research! Don’t just invest on a whim without analyzing the numbers. Never invest in stocks if you do not understand how they work! There are many free investing webinars and videos on the Internet that teach the basics of investing.

To purchase shares of McDonalds stock, a brokerage account would be required. E*TRADE, Charles Schwab, Ameritrade, and Scottrade are examples of brokerage firms. Once an account has been opened and funds have been deposited, buying and selling of stocks can begin.   If a share of McDonalds stock is trading at $112.57 and you have $1,000 to use to purchase the stock, divide $1,000 by $112.57 to see how many shares you can purchase. In this case, you could purchase 8 shares of McDonalds stock and would have a little less than $100 dollars left. Brokerage fees vary per trade but $9.95 is what I usually pay per trade.

You might be wondering how money can be made on stocks. A realized gain on stock is the result of selling the stock at a higher price than you paid for it. An unrealized gain is when you still own the stock, but the price has increased. I call this a gain on paper. In other words, I will only realize the gain if I sell the stock at a higher price than I paid for it. If you sell the stock for $126.50 and you paid $112.57 you would earn a gain of $ 101.49 [($126.50 – 112.57)*8 -$9.95].

Another way to make money by investing in stocks is through dividend income. A dividend is money that is paid out of earnings to investors. McDonalds currently pays a dividend of $3.76 per share of stock. If you own the 8 shares of McDonalds stock from our example above, you would also receive $3.76 per share per annually which equals $.96 quarterly or 4 times per year. The total amount you would receive annually in dividends on 8 shares of McDonalds stock this year is $30.08. The current dividend yield is 3.34% for McDonalds stock.

Check out a few videos on stock investing found at http://www.investopedia.com/university/beginner/.

Teaching Your Kids About Money Management

When I was a child living at home with my parents, we never really talked about money and personal finance topics. In those days the mentality was to keep the financial issues from the children. Thinking back I realized this probably wasn’t the best thing to do, as I had to experience many financial ups and downs because my parents and I never had the “money talk.” You can help your children learn how to manage money and avoid many of the financial mistakes that the majority of us made simply because we were uneducated on the subject.

There really aren’t many good excuses to make to avoid having this talk with your children, grandchildren, nieces, and nephews. Think about the potential costs of avoiding the subject. Do you really want your children and others to go through the same things you experienced? I know I don’t.

How old do they need to be before you begin discussing the topic with them? The best time to start teaching them is when they are young. You can start out simple and begin teaching them about money and the value of saving money. The first topics might include earning, spending, and saving and later on could include giving, borrowing, and other topics once they are a bit older.

#1) Earning – Children should be given tasks around the house they are responsible for without being paid. Everyone in the family needs to have certain tasks that just should be done. When teaching children about earning, try to come up with extra tasks other than their normal tasks so they do not feel like they should get paid for everything they do. You might encourage them to rake leaves for money, walk dogs, mow lawns, babysit, etc. to teach them how to earn. They will gain a sense of financial independence in this way. It will also help them build good work habits.

#2) Spending – Give your child the opportunity to spend a certain amount of the money they make if they choose to spend it. I don’t recommend making children save every cent they make. This can make for an unhappy life. They need to know they can enjoy some of the money. Teach them moderation in spending and let them take part in paying bills. Have them sit down with you when you write out checks or pay bills online. They will eventually understand that money should be managed well. Introduce the topics of wants versus needs and help them establish the difference in the two.

#3) Saving – I remember as a child going to the bank or credit union to make a deposit in my passbook savings account. It was such a big deal to me! I would save my money until I had enough to make a deposit. Then my parents would take me to bank and credit union to make my deposit. I enjoyed walking up to the teller’s counter and giving them my money and my passbook. The teller would write in the amount of my deposit and stamp the date in my passbook. I wanted to fill up an entire page with my deposits and watch my little savings account grow. It was really a big deal when they wrote down the interest I had earned! To me, seeing the numbers grow was a big incentive to continue saving. Another reward for making a deposit was a piece of candy the teller would give me. It may not seem like a big deal but it was to me at the time.

These are just a few recommendations for teaching your children about money management. There are many more ideas out there so find the ones that work best for your situation. Search for additional techniques you can incorporate when tackling the topic of money management with your children. Make it a fun experience for everyone!

Ways to Save Money on Groceries

One of my family’s largest expenses every week is food. I am always looking for ways to save money on food since this category is a large portion of our budget. With a little extra effort each week, your family should be able to trim the money budget, too. Several options for saving money on groceries are:

1) Make a plan for grocery shopping ahead of time and stick to the plan – Even though this make take time away from your schedule, the savings should make it worth your time. When you shop for groceries without a list, you are tempted to purchase items that you may not need. Create the list and only purchase the items listed.

From time to time we have cleaned out our pantry and have thrown away outdated food items that were not longer usable. The money wasted on food could have been used in other areas to either pay off debt or build up savings.

2) Look for meal planning options that help you create cost effective meals – After a Google search for “free cost-effective meal plans,” many options were available. One interesting article I read was found at http://www.rachaelray.com/2014/05/weekly-meal-planner-21-cost-effective-ideas. This article lists 21 ideas for meal planning. A simple click on the meals listed and I was redirected to the full recipe for that meal. Several of the recipes result in leftovers that can be used for another meal which leads to even more cost savings.

3) Find the best place to shop for grocery items – Take a weekly look at the grocery store advertisements to find the best place to shop. Many stores will double coupons up to $1.00 each and some offer $.01 mystery deals. You can only find out the item that is $ .01 once you are in the store. Some stores will price match so look over the competitors’ advertisements and bring a copy with you to the grocery store.

4) Buy generic when possible – I always look for generic options for most grocery items that I purchase. Generic items are generally the same as the name brand but sell at a lower price. Save money anytime you can by buying generic.

5) Shop by yourself – In my experience it is better to shop for groceries alone. There will be fewer temptations to purchase items not on the list. When the entire family shops, you may make purchases you would not have made otherwise.

6) Eat before you shop – When you are hungry you tend to purchase more food. I always try to at least eat a snack before I head to the grocery store. This helps keep the temptation down to purchase items just because you are hungry.

7) Avoid purchasing items in the check out aisle – Beware of impulse purchases while waiting in the checkout aisle. The reason there are items at the checkout is to tempt you to make those impulse purchases. Stay focused on the purchases you have already made and don’t blow the budget by grabbing a few items that are tempting. Just say no to these temptations.

Following a few simple tips can add up to a large amount of savings on groceries. Be diligent in your quest to trim the grocery budget and use the cost savings to either pay off debt or build up your savings accounts.

5 Reasons To Make a Will

One topic many people seem to avoid, though we know it is necessary, is making a will. I assume one reason we avoid the topic is that we just don’t want to consider our own mortality.   But it is something we all have to eventually face. To make the process less stressful for our loved ones, we need to have a will made that will give instructions for those who are left behind. While there are certainly many reasons to make a will, we will take a look at just a few of those reasons in this particular blog.

Reason 1: You decide who will be the guardian of your minor children. If you do not have a will in place and you meet an untimely death, someone else (the court system) will choose who will be the guardian and will take care of your minor children. Just think about whom the court might appoint to raise your children. Would that be the choice you would have made? Probably not. So don’t leave that extremely important decision up to someone else. Specify in your will your choice for guardian.

Reason 2: You decide how your assets will be distributed. Again this is another decision you do not want to leave up to the court system. Leave instructions in the will as to the recipients of your property and assets. The final decision should be yours since it is your property and you spent your life acquiring the assets. Sadly,  people will come around wanting part of your estate once you pass away.  Don’t give them the opportunity to take things that were meant for your heirs.

Reason 3: You can simplify the probate process. By having a will made, you will streamline the probate process. The instructions have been made and should be followed. If you die without a will, called dying intestate, the probate court will decide how all of your property is distributed. This process could take months and you don’t want your family to have to wait any longer than necessary to receive their inheritance.

Reason 4: You can make gifts and donations. If you choose to make gifts and donations from your estate, state the amount and recipients in your will. Just telling your family that you would like to donate money to a charitable organization does not necessarily mean it will actually happen. Specify in the will what your wishes are and the administrator (executor) is required to follow your instructions. Remember that a will is a legally binding document and the administrator of your estate is required to follow your wishes.

Reason 5: There are no guarantees of tomorrow. We all know that tomorrow is not promised so we need to help make our loss less painful for everyone involved. Making a will gave me peace that if something happened to me without notice, my family would be financially taken care of in the way I felt was best for them. Planning ahead for an event that is certain to happen will take away some of the stress for your family.   There will be fewer opportunities for fighting over who gets what assets.

Families have been broken apart due to the lack of a will. Don’t let that happen to your loved ones. Make an appointment with an attorney to create your will.  There are even websites that will allow you to create a will for free.  The small amount of time and expense it takes will be well worth the cost and the peace of mind.

 

 

 

 

 

Simple Ways to Begin Building Wealth

To obtain financial independence and financial security, you will need to build wealth. While there is no one size fits all in this regard, there are things that everyone can do to begin building wealth.

#1: It takes money to make money, so the first step is to make enough money to invest. If your income is less than the cash going out of your budget each month you won’t be able to build wealth quickly if at all. You have to earn enough money to cover your expenses with enough left over to use for building your wealth.  Earned income that you work for and passive income should be part of your wealth building plan. If you don’t currently have a passive income stream, seriously consider creating that type of income. This can be obtained through rental properties, creating digital content such as eBooks and selling them online, etc. Another option is to create a pattern or maybe a lesson plan that you create once but sell over and over. I like to crochet and I have purchased patterns online for just a few dollars. If you created one of these items you could create a stream of passive income.

#2: Once you make enough money, you need to save money for investing and wealth building. Take a look at your expenses and see if there are any areas where you can cut expenses to free up money for saving and investing. Remember, the earlier you begin saving, the more time you have on your side to build wealth. Waiting until you feel like you have enough to invest may be a mistake. Cut corners where you can to make investing a possibility. Each time you receive a raise or a bonus, make an intentional effort to save the money as opposed to spending it.

#3: Making the right investments is key to building wealth. While you are building your savings begin researching the different types of investments and begin tracking the stocks or funds you are interested in. A good website to use for financial research is finance.yahoo.com.  In addition, meet with a financial planner for expert advice on the investment strategy that is right for you at this particular time. A certified financial planner will help you create the appropriate plan for each stage of your life. It relieves stress when you have a plan in place to help insure you are building wealth. From time to time go back and review the plan to ensure you are on track to reaching your goals. A good

Don’t make the mistake of waiting too long to implement your wealth building plan of action. Even if you find it difficult to immediately begin investing, at least you can begin the planning process now. Make it a priority to get rid of debt so that wealth building can begin!

Things For the Recent College Graduate To Avoid

For those of you who will be graduating from college soon or who have recently graduated from college, there are a few personal finance tips that will help you avoid making mistakes that many new college graduates make. Unfortunately, families often will not discuss personal finance topics so you have to learn for yourself. This way can lead to trial and error. To avoid costly mistakes, consider the following:

  1. Don’t base your budget on future earnings: While it may seem exciting to dream about the things you can do and buy when you settle into your career, the reality is that sometimes it takes a while to work up to the position you are wanting with the salary you desire. Even with a degree, you will need experience to advance in the career. When I graduated with my bachelor’s degree, I still had to start at the entry level. With experience came career advancement, but it certainly didn’t happen overnight. Your budget should be based on your current salary. Don’t get in over your head in debt that will take you years to pay off.
  1. If you can’t afford to pay cash for something, don’t use your credit card: We tend to use credit cards as crutches when we can’t pay cash. Crutches are designed to hold you steady, but why would you use crutches if you didn’t need to? In other words, avoid the debt of credit cards and you won’t be dependent on the crutches. Living on credit cards is a slippery slope. Save up and pay cash. It may take a while longer, but you won’t have to incur interest expenses and payments.
  1. Don’t automatically up your lifestyle when you get a better job: Too many times, people will automatically spend more once they make more. Why not maintain your same lifestyle and save more or get out of debt? If you could survive on the old salary you should certainly be able to live the same lifestyle with the new salary and build wealth.
  1. Don’t wait to start contributing to a retirement account: Start contributing to a retirement account as soon as possible. Once you are eligible to begin making contributions, start making them even if you can only contribute a small amount. Time is on your side. Don’t be like many individuals and wait until you are in your forties or fifties to begin your retirement savings.
  1. Don’t wait to build your savings: Automate your savings by having a specific amount transferred from your checking account to a savings account every week or every pay period. It will be easier than manually making savings contributions. The compounding effect will help your savings grow exponentially over time.

Take it from someone who wishes she could go back and change past financial decisions. Begin making wise financial decisions today!

Creating Additional Streams of Income

Would you like to have additional sources of income even though you may be working full time? I know I would like to generate income while still working full time in my career. You may be thinking that you don’t have time to go out and get a part-time job and neither do I but there are ways to generate extra income.

One way to created additional income is to open a store on Amazon and sell items online through the store (https://services.amazon.com/selling/benefits.htm). Some of the categories of items that can be sold on Amazon are:

  • Baby products
  • Beauty products
  • Device accessories
  • Automotive & power sports
  • Books
  • Cameras
  • Cell phones
  • Clothing
  • Collectibles
  • Electronics
  • Handmade items
  • Home & garden
  • Jewelry
  • Household

Please note that some categories require approval by Amazon before they can be sold. I personally buy items from time to time on Amazon and I have found that often shipping is much quicker than on Ebay. Amazon offers one-click purchasing and paying and I find that as an added advantage.

Another way to generate additional income is to leverage skills you already possess. For example, if your job is graphic design you could do freelance graphic design on the side. If you are an expert in a particular subject, you might want to consider becoming a tutor. You could tutor online through websites such as www.tutor.com, www.tutapoint.com, and www.tutorme.com. These jobs would allow you to work from home in your spare time.

If you have photography skills you could become a wedding or special event photographer. Social media would be a great way to advertise. Generally, photography classes are taught at community colleges or local photography companies. With this type of side job, you could set the hours that best work with your schedule.

If you enjoy writing and have specialized knowledge, create an e-book to sell online. The one time effort of the writing the e-book can payoff multiple times. A great article with tips on selling e-books is found at http://jakonrath.blogspot.com/2013/02/how-to-sell-ebooks.html. There are classes that teach you how to create and sell e-books. One such class on Udemy is https://www.udemy.com/how-to-retire-early-by-publishing-and-selling-kindle-ebooks/.

Creating and selling e-books is a great way to create a passive income stream meaning you do the work once and sell it over and over again. While you may not become a millionaire by selling e-books, you might just create an additional income that can be used to pay off debt or invest for the future.

Finally, create services such as pet sitting, lawn care, housekeeping, etc. Again this can be scheduled around your work schedule so that it does not interfere with your full-time job. Take time today to think of ways you can create an additional stream of income.

What Do Debt-Free People Have in Common?

If I asked you to list characteristics of debt-free people, what would your answers include? You might be surprised at common characteristics or traits debt-free people possess.

Debt-free people:

1) Set goals – Have you ever met someone who is sets goals and makes every effort to achieve those goals? People who possess this trait focus on what they want then take the steps to reach that goal. Debt-free people has to set a goal to get out of debt then implement the action steps for obtaining a debt-free life

2) Have confidence – With this I don’t mean arrogance, just confidence. There is a difference in the two. To have confidence means they don’t put there trust and self-confidence in material possessions. That don’t care that others may not understand why they don’t buy a new car every two or three years. Older used cars are not a problem to people who are confident. I have driven my car for 7 years and dread the day I have to purchase another car. My car has dings, dents, scratches and the paint is pealing in stops, but it doesn’t bother me. It gets me where I need to go.

3) Possess patienceNow, this can be a difficult trait for some people, myself included. I used to think I had to obtain everything now, which is called instant gratification. Over the years I have learned to be patient. It takes time to build get out of debt and build wealth but it can be done. Becoming debt-free requires patience and persistence, so don’t give up. The budget will change as you become financially independent.

4) Will make sacrifices – Anyone who is debt-free has had to make sacrifices along the way. You have to realize that you have to give up some things temporarily in order to gain your financial independence. Once you reach your goal, you will be able to pay cash for items or for investments. The sacrifice is normally a short-term process. Just think about those people who are physically fit. They didn’t get that way without making sacrifices but the sacrifices paid off for them.

5) Think of family before themselves – Debt-free people realize they want to give their family a better life meaning being free from the burden of debt. They don’t just think of themselves but their family and even future generations. Getting rid of the “me” mentality is key to putting others before yourself. We all can be selfish from time to time but we should keep that emotion in check. It can be dangerous if it gets out of control.

Debt-free people come from all walks of life and all socioeconomic backgrounds. Millionaires may make less than $75,000 a year or make hundreds of thousands of dollars a year.  There is no one size fits all for a debt-free person, put possessing these few characteristics can be helpful. Determine to get out of debt-free and work on the traits that will help you become debt-free.

 

Warren Buffett’s style of investing when the market is expensive

Wondering if the stock market is too high for you to invest in? Take a tip from Warren Buffett in these times of stock market highs. Buffett is considered one of the best investors of all times and learning about his investing style can be beneficial to even the most novice investors.

What does Mr. Buffett do when the market is high?

1) Focuses on great businesses – He continues to focus on great businesses that are priced right. Mr. Buffett is quoted as saying, “It is far better to buy a wonderful business at a fair price than a fair business at a wonderful price.” His strategy here is to buy a great business at a good price. In other words, if it is a great business, it should do well and an investor will reap the benefits of investing in that type of business. This reminds me of times when I have purchased a great product even though I may have paid more than for a lessor product. I could have saved money by purchasing the lower priced product, but the outcome would have been less than desirable. In the end, I was glad I paid more because the product was worth the cost.

2) Invests for the long-term, not the short-term – I am always impressed by this strategy that Mr. Buffett uses. He doesn’t look to make quick, short-term gains, but realizes his investments are for long-term results.

As I have learned over the years, trying to time the ups and downs in the markets is extremely difficult. If we could exactly predict when the price would go up, then we could become wealthy. Since we cannot predict the market, make your investment strategy for the long-term and be prepared to ride out the bad times to reap the benefits of the good times.

3) Build positions in your portfolio over time – Use the dollar-cost averaging method to build your portfolio. Choose a stock that you want to invest in and then invest a specific dollar amount in that stock each month. For example, invest $100 every month in a stock of your choice. Each month you will purchase a different number of shares based on stock price at the time of purchase. Once you have initially purchased the stock, you are allowed to buy partial shares using dollar-cost average.

For illustration purposes, let’s suppose that you own shares of GE and have chosen dollar-cost averaging to continue purchasing the stock. Today shares of GE are trading for $31.29 and you have chosen to invest $100 using the dollar-cost averaging method with a $3 per transaction fee. You would have purchased approximately 3.1 shares of GE stock [($100 – $3)/$31.29]. Each month the amount of stock purchased will vary based on the price of the stock at the date of purchase.

Choosing the dollar-cost averaging approach will gradually build your holdings in the stock you choose to invest in. You will be investing at a slow and steady pace over the long haul which levels out the ups and downs of the market.

http://www.fool.com/investing/2016/09/04/3-pieces-of-warren-buffett-wisdom-for-an-expensive.aspx

 

 

 

 

Unique Ways To Create Income

Have you ever wanted or needed to create an additional source of income? Maybe you want to pay off debt or save more for the future. There are many ways to create an additional stream of income while still working your current job

1. Create items to sell online – If you enjoy crafting you could set up an account on Etsy and sell your items online. I have looked at many different sellers’ websites on Etsy and often sellers have sold thousands of unique handmade items through their Etsy store. Be aware that buyers can be located around the world, so make sure you understand the costs of shipping and include those costs when selling the item.

Another place to sell items online is through Facebook. My local community has a Facebook page dedicated to selling and trading. The cost is free to list your posts.

2. Sell at flea markets – Flea markets can be a good place to sell items that you have around the house. Some sellers go to yard sales throughout the week and purchase items to take and sell at the flea market on the weekend. Remember, one man’s trash can be another man’s treasure.

3. Become a freelancer – If you have a skill that can be used to complete special projects, you might want to consider becoming a freelancer. For example, if you are an expert at web design you could become a web design freelancer. Maybe you enjoy writing and could become a freelance writer. Some people will pay you to write for their blog.

4. Become a tutor – Take the knowledge and skills that you have and become a tutor. My background is in Accounting, therefore,  I could choose to become an accounting tutor online or through the local high school, college, or university.

 

5. Become a caterer – You could start out small and offer specialties such as desserts or cook meals for families. These days many families are pulled in many directions and having a healthy home cooked meal is sometimes not an option. This is where you could create a menu that can be prepared and delivered to families.

6. Become a personal shopper – The Christmas holidays are just around the corner and people often do not have enough time to complete all their holiday shopping. How this would work is you would be given a shopping list and then you purchase the items. I would suggest charging a fee either based on the total cost of the items or based on the amount of time and effort needed to complete the shopping. Additional services you could offer are gifting wrapping, shipping, and delivery.

7. Become a House sitter – Take care of someone’s home and animals while they are out of town by house sitting for them. On several occasions, my family has paid someone to come in and take care of our pets twice a day and bring the mail in. They would also change the lights to make it appear that someone is home. A house sitter could even stay at the home if necessary. A flat fee or per day fee could be charged for this type of service.

 

While this is certainly not an exhaustive list of ideas to create additional income, it should serve as a starting point for creating your own additional stream of income. The possibilities are many so find the one that work best for your particular situation.