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Money and Life

Money & Life is a passionate and inspirational essay-style documentary that asks a provocative question:
Can we see the economic crisis not as a disaster, but as a tremendous opportunity?
This cinematic odyssey connects the dots on our current economic pains and offers a new story of money based on an emerging paradigm of planetary well-being that understands all of life as profoundly interconnected. Money & Life invites us to meet the challenge of our time: to participate in the great transition to a sustainable, equitable and restorative economy that meets the needs and realities of the 21st century.

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How to Choose a Financial Advisor

While personal finance and investing can be complicated subjects, there are certainly thousands of DIY investors who have earned huge returns on their investments.  Even for the most talented do-it-yourself investor, there are subjects that may require the assistance of a professional financial advisor.  In this week’s article, we’ll examine the traits that you should look for when hiring someone to provide financial advice.

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The Frugal Art of Saving Money

Wonder why saving money is considered an art? Like any time-honored art form, like the most beautiful, breathtaking masterpieces in the world, saving and the creative process demands one thing: practice.

It’s not enough to do it once or twice. You need to perfect it. You won’t get it right the first time so you’ve to take it step by step. You’ve to finger-paint first before you can use the paintbrush. You’ve to use primary colors before you can blend them into different shades.

Like painting or any kind of artistic venture, saving isn’t an overnight process. Below are a few things to remember so you could master the art of saving money too—long though the time it may take:

1) You don’t need instant satisfaction.

This goes for two things: your spending habits, and the sum of your savings account.

a. Spending Habits:

A new appliance, a stress-free day at the spa, or that mobile phone you’ve been waiting for just came out in the market—you will see or hear of certain things you will want to buy. That’s what businessmen want you to do, after all. They want you to buy everything you want. Always ask yourself if it’s something you actually need. Weigh the pros and cons before making a purchase.

b. Your Savings Account:

Now, it’s normal to want fast results, especially if you’re making plenty of sacrifices. However, if you see that your savings account isn’t living up to your expectations, don’t beat yourself up over it. As mentioned above, saving money takes time and baby steps. Lower the targets you’re aiming for and only gradually increase those targets to make sure you always reach what you aim for. That way, you’ll feel like you accomplished something every time you reach your goal, which in turn, will inspire you to continue until you’ve made a habit out of saving.

2) Pick quality vs quantity.

A lot of people love to shop in bulk. Everyone just loves cheaper items, especially the ones on sale! However, are you getting items that’ll break or rot overnight? Let’s say you purchased a new furniture set, are you sure you’re getting your money’s worth? If you got it at a cheap price, are you sure it’ll last for a good amount of time or at least serve its purpose? Sometimes, you might be compromising long-term use for money saved short term.

This means you’ll have to invest your money on the right things. Items on sale or by the dozen could be a ruse to make you spend money for goods and services that won’t last very long. On the other hand, if you’re buying something costly with lasting use in mind, make sure these items come along with excellent warranty conditions.

3) Mind the little things.

Some people might just tell you not to sweat the small stuff, and if you listen to them, then your savings account won’t likely grow any time soon. Making little adjustments in your life is the key to save money the easy way. For instance, it might be your daily visit to Starbucks that’s draining your allowance and hindering your efforts to save. And do you really need to call a cab whenever you go out? What about those regular weekend dates or parties? Why don’t you start living without them?

These things aren’t always evil at first glance, but they’ll eventually wear you out, and destroy your resolve to save. To avoid this, have a budget, or plan your purchases in advance.

4) Wise credit card use.

Just as you know how to save your cash and coins, it’s most important to know how to use your credit card with extra care. To enjoy perks or benefits, consider getting a rewards card. However, make sure you practice the following:

• After purchasing something, pay the item back in full in the next 2-3 months

• Pay above the minimum so the debt won’t grow

• Don’t use your card to make sudden purchases like food or clothes

• Don’t open new accounts and just focus on one account to increase your credit score

Mastering the art of saving money is very doable. For as long as you keep on practicing these principles every single day, you’re certain to see great results—sooner rather than later. So, good luck and happy saving to you!

Author’s Bio

Mark Yasay is a social media enthusiast and a writer for MoneyMax, the Philippines most comprehensive online platform for comparing financial and telecom products. MoneyMax aims to consistently find the best broadband plans, credit cards, loans, and other services and products that suit your needs.

What is myRA?

The concept of a pension is quickly going extinct as businesses look for ways to reduce legacy costs.  This places a large part of the responsibility upon workers to begin saving for retirement, using defined benefit plans, such as IRAs and 401(k) plans.  Last night during the State of the Union Address, President Obama made brief mention of retirement accounts called “myRA,” a retirement savings option for middle-class Americans.

Many employers don’t offer their employees with more traditional savings plans, such as 401(k) or 403(b) plans.  Workers looking to save are forced to use IRA or Roth IRA accounts, either bearing the risk of their own investment options, or at the cost of hiring a financial advisor.  The perceived complexity and inconvenience of doing so prevents many entry level or low-wage workers from setting up retirement accounts.  The President’s plan aims to make saving for retirement easier on working class Americans.

President Obama’s plan has some familiar attributes.  The myRA plan, unlike Social Security will be voluntary for all workers.  Savings will be made via automated payroll deduction, and invested in government bonds, which provide favorable tax treatment to investors.  All accounts would be treated like US savings bonds, backed by the full faith and credit of the US government.

When the myRA (which many pundits are calling a “starter IRA”) account reaches a certain size, through savings or capital gains, the account will be rolled into a more traditional IRA, and the worker will have to make investment decisions on their own behalf, or hire the services of a financial advisor.

Offering new means of automated savings for retirement could open up the world of investments to millions of Americans who’ve never saved due to inconvenience or complexity.  Investing millions or even billions of dollars in government bonds could help to repair a collapsing American infrastructure.  More people saving could potentially

The myRA plan could provide a great solution to all of these problems.  The problem for President Obama is going to be getting the idea off of the ground.  With Washington at a standstill, we’re at the point where partisan bickering prevents Congress and the President on agreeing for what to eat at lunch, let alone a new government-backed retirement plan.

The myRA is certainly an interesting concept with a lot of possibilities.  I’m excited to see where Congress and the President land on the measure.

401(k)? 403(b)? I’m Confused!

To a new investor, knowing which type of account to use to save for retirement can be daunting.  You’re hit left and right with acronyms and numbers, 401K, 403B, IRA, and Roth IRA.  Each account has different features, restrictions, and tax implications that will be enforced by everyone’s least favorite acronym, the IRS.  In this ongoing series, we’ll discuss the features of each type of account, so that you can make an informed decision on investing for your future.

401(k) and 403(b)

The most common types of retirement accounts are 401(k) and 403(b) accounts, which are provided by an employer, and they operate in much the same way.  Companies offer 401(k) plans, 403(b) plans are offered by nonprofits and public sector employers.  For the sake of convenience, I’ll make reverence to 401(k) plans as they are more common, but know that they terms are basically used interchangeably.

A 401(k) savings plan works as you make systematic contributions (usually a set dollar amount or percentage of your paycheck) to your account.  These funds accumulate and are invested with the goal of providing you income in your retirement, supplementing Social Security.

Funds that you contribute to your 401(k) plan are made with pre-tax money, similar to health benefits offered by employers.  This can lower your annual tax burden.  When you retire, as you withdraw money from your account, it will be taxed as income.  The government is always going to get its share, but better later than now in some cases.  Withdrawing from your 401(k) early comes with steep penalties and taxes, and is usually considered a really bad idea.

Your company’s HR department will provide you with options to invest these accumulated funds in.  Most popular are “target retirement fund” allocations, which are designed to invest aggressively while you’re young and can tolerate risk, and moving to a more conservative allocation as you near retirement and retaining your investment is necessary.  Note that 403(b) plans typically include more conservative investment options than their corporate-sector counterparts.

In many cases, an employer will match your contribution.  For example, if you contribute 6% of your salary towards your retirement, your employer may contribute an additional 6%.  That is known in the real world as “free money,” so you should take advantage of any employer matches available.   The catch is that any money your employer contributes usually adheres to a “vesting schedule”, meaning that if you leave your job, you may not be entitled to everything your employer has contributed to your savings plan.

Given the benefits of a 401(k), it’s advisable by investing the maximum amount possible.  A good rule of thumb is 10% of your salary.  The IRS allows contributions of up to $17,000 annually (not including employer matching) if you’re under 50.  For those over the age of 50, you’re allowed a “catch up” contribution of an additional $5,500 annually.  These figures change often to keep pace with inflation, so be sure to discuss maximum contribution limits with your human resources department or a financial advisor.

A 401(k) or 403(b) plan is a great way to save for your retirement, and a wonderful benefit as an employee.  Talk to your HR department today to see what’s available to you.  Compound interest (a topic we’ll explain in the future) is one of the most powerful forces known in finance, and saving from a young age could make you a millionaire in retirement!

5 Ideas for Saving Money pt.3

1. Use the right ATM. 

Try to avoid using an ATM that is not owned by your bank. If you use an ATM owned by another bank you will be charged with a fee from that bank as well as your own bank.

2. Avoid credit cards with an annual fee.

There are credit cards with and without an annual fee. Credit cards with an annual fee usually have some special offers or features added to it. These are rarely applicable or offer very little in terms of saving money, compared to just getting a free annual fee.

3. Go to the grocery store on a full stomach.

When you go to the grocery store to buy groceries, try to make sure you go there on a full stomach. If you’re hungry when you go into the store you’ll be more inclined to buy food/items you don’t really need, but have a craving for at that time.

4. Shopping items on sale.

If you just happen to be in a store and find some items that happen to be on sale, then you might be tempted to acquire them immediately. However, before you jump on that sale, really think about whether or not you need the item. Although the item may cost only half of its original price, you still should not buy it unless you actually need it.

5. Avoid the vending machine.

If you want a snack and decide to buy it from a vending machine, you will most likely be paying a lot more for that snack compared to buying it in a grocery store. So next time you’re at the grocery store, buy some snacks to have ready for when you want it.

Risks of Investing in the Stock Market

There are many types of investment options and account types available to the average investor looking to save for retirement or other goals.  Each strategy features risks.  Today we’re going to focus on a few types of investments, and the pros and cons of investing in each.

Managed Funds

Think of a managed fund as a pool of investor’s money, with a management team choosing how it’s invested.  The fund can invest in various securities including stocks, bonds, cash, money markets, and similar vehicles. The investment decisions are made by a money manager, who attempt to produce capital gains and income which are stated in it’s prospectus.

Managed funds can have many different strategies and goals, including:

  • Target Retirement Funds – seek to provide aggressive gains while the investor is young and can assume risk.  As the investor nears retirement, the manager moves the fund into more conservative positions.
  • Growth Funds – aim to provide growth of the initial investment.
  • Income Funds – invest in dividend paying securities to provide the investor with income, while maintaining the value of the principal investment.

Pros:  Managed funds give investors without massive sums of money access to professionally managed portfolios of equities, bonds, and other securities.  Shares of a fund can be redeemed as needed.

Cons:  Some managed funds have various types of fees and charges.  Fees for management, administrative costs, and commissions can range from as low as 0.2% all the way to 2% or higher.

Individual Stocks

Individual stocks are a claim of partial ownership to a company; it’s earnings and assets.  For example, as a Christmas gift, I was given one share of Apple Stock (AAPL).  There are currently approximately 900 million shares of Apple outstanding.  This means that I own 1/900,000,000th of Apple.

Pros:  Stocks are very easy to invest in.  You simply find a company you like, sign up with an online brokerage, and purchase a share.  Some stocks are very low-cost.  There is the potential to find a diamond in the rough and make huge profits quickly.  You have constant control over what you earn.

Cons:  Stocks are extremely volatile.  Without the assistance of an advisor, you’re susceptible to falling prey to “hot tips.”  Research is never-ending.  When trading, brokerage firms charge large fees $6-$20 per trade.

Commodities

Commodities are ownership in a tangible resource, such as gold and other precious metals, oil, natural gas, and even things we don’t think of as investments like spices.  Commodities are complex trading vehicles and should be used carefully, and with significant research.

Pros:  Commodities provide an extra layer of diversification to your investment portfolio.  Commodities can protect an investor against inflation.  Commodities have real value, and will hold some value during unstable inflation or the weakening of the dollar.  Many commodities, such as oil, are always in demand.

Cons:  Commodities can be extremely volatile.  Energy and metals tend to have a high degree of “cycling” which makes for quick changes in perceived value.  Investing in commodities can be a complex task.

Bonds

Think of a bond as a loan that you give to the government or a company.  To complete projects, the government or company issues bonds.  They’ll then pay everyone who buys these bonds interest for the duration of the loan.  For example, if you buy a $1000 bond, paying 4%, with a 10 year duration, you will receive $40 per year for the next 10 years.  After the ten years has expired, you’ll receive your initial $1000 investment.

Pros:  Bonds provide great protection of your existing assets.  They tend to be less volatile than stocks, and offer a sense of security.  Bonds are rated by agencies like Moody’s, which determines the company’s (or governments) likelihood to pay its debts.

Cons:  Bonds just aren’t as sexy as stocks.  They don’t provide the potential for massive returns.  There are some bond issuers with a high credit risk.

Regardless of your situation, finding the appropriate investment strategy is time-consuming and requires a good deal of research.  If you find yourself confused, contact a licensed financial advisor in your area.

Author Bio: Adam Rahuba is a licensed financial advisor and freelance writer from Pittsburgh, PA. He enjoys his girlfriend and his cat.

stockmarket

Introduction to Investing in the Stock Market

stockmarket

The Stock Market is a place where stocks of various publicly owned companies can be bought and sold. Stocks can be classified as a share of ownership of the company you have invested in. The Stock Market helps you come in contact with various business owners and companies from where you can initiate investing in stocks. The Stock Market is also known as an Equity Market. Some famous Stock Exchanges include the New York Stock Exchange (NYSE), the Tokyo Stock Exchange (TSE), the London Stock Exchange (LSE) and the Australian Securities Exchange (ASX).

The Stock Market helps you invest your money in stock. These stocks automatically make you a small owner of the company depending on your type and percentage of shares, eventually entitling you as an official shareholder. These shares include the company’s assets and earnings. Earlier, stocks were represented in paper form but nowadays advanced technology has been incorporated at its best and now every transaction takes place electronically. The seller is linked to the buyer via a strong processing computer system. State of the art technology has made the Stock Market a very efficient and a hassle free trading place. Stocks and shares are two words that can be used interchangeably except for the slight difference that ‘stock’ denotes ownership of any company and ‘share’ denotes ownership of a particular company.

Before investing you should know that there are different kinds of stocks available for you to purchase:

  • Common Stock: Most common stock sold in the Stock Market. These stocks have the highest risks but on the same hand they also ensure highest return on investment. The returns are variable and the shares allow one vote per share to elect the board of members.
  • Preferred Stock: By investing in this you are provided surety for a fixed return in the form of dividends. Dividends will be paid out to preferred stockholders before common stockholders. Although it gives you ownership you do not get a voting right.

These stocks allow the company for some extra capital and in return provide the stockholders with profits. But that is not always the case since investing can also prove to be a huge risk. If the company does not perform well then your investment can go down the drains as well. Stocks are very variable in value. One day they may be sky high and the other day they might be on ground.

Never put all your eggs in one basket. Always invest in different companies in different sectors as this helps in minimizing the risk involved. The wise thing to do before investing in stock market is to make sure you only invest money you can afford to lose. One should always protect his or her capital. Always think of the losses before investing somewhere. Thinking about profits and neglecting losses can lead to massive problems.

Buying a stock leaves you with two choices:

  • Through a Brokerage: Brokerages help you buy and manage your stock for an amount of money. Brokerages are further divided into two categories. First is the Full Service Brokerage that manages your stock and provides you with expert service as well. They charge high but minimize the risk involved. Second is the Discount Brokerage that are cheaper but do not provide much expertise.
  • Through Dividend Reinvestment Plans & Direct Investment Plans: These plans can help you buy stock directly from the company for a small cost. These plans allow you to invest your money at your ease.

Before buying stocks make sure you know what you are getting into. Read material on what stocks are and how one can evaluate them. Know your limits. Never try to hit big based on insider tips as these tips are usually scams to sell stocks. Think wisely before buying any stock. If possible hire an expert that will do the job for you for a set amount of fee. If a particular company brings you profits then hold on to that company. Never sell your stocks quickly just so you can earn a little extra cash based on their popularity. Hold on to winners and regularly try to invest in some other companies based on some knowledge. Being patient is what is required in the Stock Market.

By using the right wits, anyone can become an accomplished stockholder. Investing in stocks is a wise choice but only if you have extra money, little time and zero idea what to do with the both of them. Being an owner of a company is not bad especially when you have to barely do anything except the decision making of choosing wisely where to invest and where not to.

If you are going to get into the stock market business then try to remain there for a long time, save regularly and keep your investment expenses down. It is your money and you have to make it work for you.

Advantages of Personal Finance Education in High School

Education Finance

The current generation of consumers seem to be lacking enough practical financial knowledge to be able to sufficiently handle high levels of personal debt, bankruptcy, and other financial crises. To be fair, no one really expected the housing bubble collapse and subsequent depression, the height of which was seen in 2008 and the following years, but still, the way people (mis)managed their debt after the fallout reflected the levels of financial literacy the world over.

“Some countries offer personal finance education in high school. With the increasingly difficult financial conditions brought on by recession and other fiscal challenges in most countries, it would be a great time for schools to help to give the next generations a fighting chance. Through high school personal finance education, students are provided with necessary and practical skills to make them more knowledgeable consumers of financial services.”

Teaching personal finance education in high school can guide the students to make informed choices with regards to their personal finances. The course will help them work with money better in general. Adding such a course to existing school curricula is essential because it can instantly be used in real life situations such as when dealing with mortgages, loans, insurance, pensions, and even daily financial decisions. If that isn’t reason enough, let’s go a bit deeper:

Students don’t know ENOUGH. Studies have shown that many young people have little understanding of finance and economics. They are spending and borrowing without knowing that interest builds up, or that credit cards aren’t free money.

There are more TEMPTATIONS as years go by. As high school students are older, innovations like online shopping (compared to what they were used to as high school students) makes things a little too easy. It’s important to tell them the value of saving and delayed gratification early on.

People are going BANKRUPT younger. Most bankruptcies are the result of accumulated debt, so people as young as 15 years old may already be on the road to bankruptcy.

They start saving LATER. If they learn the importance of saving and investing in high school, it will encourage them to get started saving earlier, and to work harder.

Not everyone is GIVEN the same chance. Studies have shown that financial literacy is concentrated in the middle and upper classes, but everyone is faced with the same financial decisions. Teaching all kids in schools helps to ensure that all kids are on the same footing when it comes to handling their own money.

Though it is not yet common at home for a parent to teach their child about financial obligations, they must be in a position to accelerate the literacy level of their children. They must understand that this is the time when a child will be able to make mistakes or develop their financial strategies in both saving and spending.

Adding personal finance education in existing high school curricula is nothing but beneficial since it will allow students to avoid getting into more problems when they enter adulthood and become solely responsible for their actions. Providing our youth with this kind of education can only have long lasting benefits.

About the author:

Gilbert Bermudez writes for CompareHero, Malaysia’s leading bank card, broadband, insurance comparison website. Loves fishing, swimming and a hobbyist. You can follow his activity on his Google+ and Twitter.

Are you in control of your money?

takemoney

Who really is in control of your money? Is it you, or is it some person that is offering you something? Being able to control yourself when you get offered a good deal can be hard at times, especially when it happens at such a high frequency as it does in these days. You get bombarded by commercials all day, every day. And what do they have in common? They all want your money. Thats why it is so important to always be in control of your own money.

Because the reality is that when someone tries to sell you something, anything, they just want your money. They don’t actually care if you need what they are selling. Well obviously, you might think. But consider how many times you get offered a service or an item throughout each day, both in the real world and on the internet. In most cases when you get an offer for something, you don’t really need it. If someone succeed in making you give up money for something you don’t need, then that person was in control of your money.

A phrase I like to have in the back of my head is; Everyone wants your money.

Always remind yourself that people just want your money. That is the sole reason to why they are trying to sell you an item, a service, or to “help” you. Now I’m not trying to say that you should consider everyone that speak to you as a seller wanting your money. However, it doesn’t hurt to be a healthy skeptic. Whenever you get offered something, really consider if you actually need the item, service or help that you are paying for. It might even be in good faith that someone tries to sell you something, they might actually have a really good deal, but do you really need it? If you keep accepting deals for something you don’t really need, then you’re giving the control over your money to someone else. And what happens when you give control over your money to someone else?

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The Bankrupt King

How Compounded Interest Bankrupted a King

chessKing

Any investment counselor will tell people that the best way to make money with investments is to leave it there over time.  That, even if they can’t put much into a retirement account, even a little bit now can add up to a nice nest egg by the time that they are ready to retire.  To help explain just how compounding works, use the following story:

The story goes that a long time ago, a young hero saved a princess from certain death.  As the man was already married himself, he had to decline the king’s gesture of his daughter’s hand in marriage.  Still, the king wanted some way to show his gratitude.  The young man noticed that the king had a chess board nearby and suggested that the king give him a penny and then double it once for each square on the board.  For those of you that don’t play chess, there are 64 (8×8) squares on the board.  The foolish king, without thinking through the offer, quickly accepted.  That was a mistake.

Starting with a single penny and doubling the amount each day, by the time they got to the end of the first row (8 squares) on the board, that single penny had increased to $1.28.  On the ninth day, it doubled again to $2.56 and by the end of the second row, the single penny had increased to $327.68.  Not much to retire on, but the young man still had six more rows’ worth of compounded interest to help him.  By the end of the third row, the amount was a little under $84,000.  By the next row, it was over $21 million!  The following row – over $5 billion!  The king stopped the young man at that point, realizing his mistake and gave his entire fortune over to the heroic (and smart) young man.

Now, obviously, the stock market does not double its value every day, week or even year, and kings don’t use pennies/dollars, but you get the point.  For a more realistic demonstration, consider a husband and wife who want to build a small nest egg for their newborn child.  They decide to put $5,000 into an investment to start and add $100 on the child’s birthday.  That’s only a little more than $8 per month.  Their investment will provide a 5% return annually.  At the child’s 18th birthday, the parents will have invested $6,800 ($5,000 + $100 for 18 years).  Now, because of the benefits involved in compounding interest, the child will receive $14,846.  By starting with only $4,000, but putting in $200 per year instead of $100, the child would actually receive just over $15,253.

The moral of the story: even if you can’t invest much, time is your friend and can help even a modest investment yield a good return.  After an investment has additional value, that value creates even more value in the future as the interest gets applied to it.

save money

5 Ideas For Saving Money pt.2

  • savemoneyBuy in bulk. This is a pretty common advice for saving money. However, make sure you buy in bulk things you actually use/ eat a lot. There is no point in buying 20 lb of rice if you never really eat it.
  • Need new furniture? Go to the stores asking if they have any damaged furniture. Sometimes the furniture get damaged on their transport to the store, this happens more often than you think. The stores will usually be more than happy to sell it to you for a fraction of the original price. It doesn’t have to be visible damages.
  • Make a habit of writing a shopping list whenever you’re going shopping. That way you’re less likely to do impulse shopping for things you don’t really need. This works for all shopping, not just groceries.
  • Pay your bills on time. Late fees on bills are really unnecessary and expensive.
  • Negotiate your insurance on a regular basis. You can easily do this once every 6 months. Call a bunch of different insurance agencies and be honest, tell them you are making a calling round to see if they want to offer you a good price on your insurance. Call your own insurance agency last and tell them you got better offers (if you did), else just ask for a better price than what you already have. You can make several calling rounds if you keep getting better offers.