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Teaspoon Finance. Achieving your own personal finance goals one teaspoon of wisdom at a time.

Updated: 2017-12-10T19:11:17.890-08:00


Don’t Put Your Money In Your Mattress! – Or, reduce your information footprint, so that bad guys are less likely to rob your piggy bank.


For years we’ve all been hearing news stories and commercials that try and drive home the importance of identity protection.  My favorite commercials are the Citibank commercials with someone speaking in a voice that is all too obvious it is not theirs.  You can see a great compilation here at Fight Identity Theft.  I just love this one (with two little old ladies on the couch – with blazing saddles cowboy voices coming out of their cute teetotal ling little mouths): Wooohoooo Weeewww, Spending Limits, who cares?  Not Use, cause those aren’t our credit cards …. With all the new technology it’s becoming almost second nature to put yourself on digital display.  Facebook, Twitter, and many more social media sites and apps make it far to easy for folks to put themselves on almost automatic update to tell the world what they are doing ever second of their day. To show just how potentially dangerous this practice has become the site has datamine’d twitter accounts to show that real people are giving away their location and essentially saying: Hey I’m not at home right now, so if you want, this is a perfect time to rob me. They also show how easily you give away your home location too. For anyone that has comcast cable at home (you can find it in the on demand movies section), you should check out a great new documentary video called Erasing David.  If you don’t have comcast, no worries.  Here’s a list of locations from Erasing David's website that you can download (like Amazon, etc.): Erasing David is an enlightening movie to show how much of a digital footprint we leave all over the place and how others can use it against us.  In their own words: Erasing David is a documentary about privacy, surveillance and the database state. David Bond lives in one of the most intrusive surveillance states in the world. He decides to find out how much private companies and the government know about him by putting himself under surveillance and attempting to disappear a decision that changes his life forever. Leaving his pregnant wife and young child behind, he is tracked across the database state on a chilling journey that forces him to contemplate the meaning of privacy and the loss of it. That’s right Bond, but not James Bond :- )… For those that watch Celebrity Apprentice, you’ll notice that in the last few weeks they had to do a challenge to create an advertorial for Lifelock.  This is the commercial membership program that protects your identity.  After a little research and a bit of ringing my memory I remember Clark Howard (of CNN shows of same name), mentioned a DIY way of setting up for yourself what basically amounts to the cornerstone of Lifelock service. Whch is to freeze and thaw your credit accounts. This freezing of your credit accounts makes it impossible for anyone to open a credit account or otherwise run a credit report on you.  You must be careful and follow all instructions, becuase this also means that you yourself are restricted, unless you ‘thaw’ the credit report for when you are actually on the credit/new account hunt.  Clark Howard put together this great tutorial for how you can do it all online at each of the credit bureaus for a most nominal fee. His instructions are at Clarks Credit Freeze and Thaw Guide.  Here’s clark’s introduction before all the specific instructions:  Credit freezes are one of the most effective tools against economic ID theft available to consumers. They allow you to seal your credit reports and use a personal identification number (PIN) that only you know and can use to temporarily "thaw" your credit so that legitimate applications for credit and services can be processed. That added layer of security means that thieves can't establish new credit in your name even if they are able to obtain your ID. Freezes have been available for free to victims of ID theft for some[...]

Count the Dollars, Not the Pennies! = max out your 401K + reduce insurance bill …


That's right I said it ... all you frugal folks, please don't faint ;- ).
I've been living this philosophy for many many years, perhaps a couple decades. It fits with my no budget philosophy. Now, I can't take credit for this phrase, it's the cornerstone to a 6-step strategy in a great book I picked up at Borders recently. The book is called All Your Worth by Elizabeth Warren and Amelia Warren Tyagi. It's an oldie (from 2005), but definitely a goody that you should take a look at.

For folks that consider themselves frugal or thrifty, this might sound like sacrilege to a frugal lifestyle. But, give it a minute to sink in and you'll realize that it really fits quite nicely with frugal living. This philosophy of counting the dollars and not the pennies, just simply means being frugal about all the big ticket items that you 'must have' and spend on reguarly (i.e. insurance, mortgage, rent, car, etc.). You see, you stand to save huge dollars by taking a bite out of your monthly expenses when you can take a bite out of these items.

I love chatting investing, personal finance, deals, frugality, etc. with friends. Many of them get a little preachy and naggy with me about spending here and spending there. My come back for decades has been something along the lines of "I focus on Saving Dollars, not Cents! ... So, tell me, Did you max out your 401K last year?". I then procede to tell them how they can be saving big money by investing a little more sensibly when they invest in stocks (maxing out their 401k, using stop-losses, knowing when they're going to sell a stock before they buy it, getting a mortgage to save on taxes, etc.). All these things are big big ticket items that can save all of us $thousands$ a year.

So, the next time your friend nags or preaches to you about why you don't use coupons or don't seem to be as frugal or penny-conscious as them ... ask them this simple question and if their answer is yes, then listen to them they've probably got the dollars and cents stuff already figured out :- ). My simple question back at them is always

Did you max out your 401K last year and this year?

If they answered no, then give them a little education that's going to save them thousands this year and next and then learn what you can from them about pinching-pennies :- )...

Retiring Abroad - Consider India and Kerala in Particular as a World Lesson In Economic Quality of Life


From the last post on Retiring Abroad - Or, Maybe Sailing Around The World for Free! I've received some mail and recommendations to dive a little deeper into consideration of India as a retirement location abroad.   There are quite a few resources and blogs dedicated to the subject.  A great post to dig into was at Retire To India by Nigel with his post last year 10 Best Places to Retire in India.  Nigel used the following guidelines in building his 10 best list: Good location with interesting local activities and places to explore. Good infrastructure, including medical facilities. A significant retiree population is a plus. This eliminates some of the more exotic locations. Not excessively crowded. This rules out most of the bigger cities in India. Safe, with a cosmopolitan outlook and open to outsiders. A sizable expatriate population is a plus. In reviewing Nigel's list for myself I looked for one more guideline to be on the coast, because I love the water and I think others are of like mind.  This puts Goa at the top of my list and Kerala, Mangalore, and Puducherry as honorable mentions. The former Portuguese colony of Goa is known for a fine climate and a cosmopolitan culture. Renowned for its beaches, Goa is visited by hundreds of thousands of international and domestic tourists each year. Located on the west coast of India in the region known as the Konkan coast, Goa is home to a growing number of Europeans and Indian expats from abroad. Looking at cost of living in Goa and you'll find that the dollar does indeed go a long way.  Nomad4ever gives us this cost of living data and it is really helpful to see how far the dollar or euro will stretch.  I only wish we had this similar data for the other 3 coastal cities of interest.:   exchange rates 1.12.08 Avg price in rupees in USD in EUR Cigarettes (10 Local Brand) 24.00 0.48 0.38 Cigarettes (20 Imported, Marlboro) 80.00 1.61 1.27 Clothes - FlipFlops ('Bata' or non-branded) 120.00 2.42 1.91 Clothes - T-Shirt (non-branded) 130.00 2.62 2.07 Clothes - Sports Shoes (non-branded) 200.00 4.03 3.18 Clothes - Pair of Jeans (non-branded) 200.00 4.03 3.18 From wikipedia we can see the coastal location of Goa.  Located on the west coast of India in the region known as the Konkan, it is bounded by the state of Maharashtra to the north, and by Karnataka to the east and south, while the Arabian Sea forms its western coast.: Finally I wanted to take a look at Kerala.  From wikipedia we can review the coastal location and climate variations of Kerala. Kerala is wedged between the Arabian Sea and the Western Ghats[35]. Lying between north latitudes 8°18' and 12°48' and east longitudes 74°52' and 72°22',[36] Kerala is well within the humid equatorial tropics. Kerala’s coast runs for some 580 km (360 miles), while the state itself varies between 35 and 120 km (22–75 miles) in width. Geographically, Kerala can be divided into three climatically distinct regions: the eastern highlands (rugged and cool mountainous terrain), the central midlands (rolling hills), and the western lowlands (coastal plains). Located at the extreme southern tip of the Indian subcontinent, Kerala lies near the centre of the Indian tectonic plate; as such, most of the state is subject to comparatively little seismic and volcanic activity.[37] Pre-Cambrian and Pleistocene geological formations compose the bulk of Kerala’s terrain.   I found an interesting post Kerala: A Lesson In Light Living with a perspective on Kerala that goes beyond cost of living and dives more into quality of life.  In conventional economic terms, Kerala is one of the poorest places in the world. Annual per capita GNP in 1986 was $182 (that's less than 50 cents per day in total economic production for every person in the state), compared to $290 for the whole of India and a whopping $17,480 for the United States. If Kerala were a separate country, those figures would place it 9th on a list of t[...]

Investing for Retirement: Aspire To Be Worth Your Weight In Gold!


I'd like to propose an aggressive retirement investing aspiration that just might help to focus the vision on a rich and fulfilling retirement: aspire to be worth your weight in gold when you retire.  I've been reading a number of posts lately that piqued my curiosity about the familiar phrase: "Worth Your Weight in Gold".  Something inside was telling me that there was some kind of inspirational analogy here to motivate would be investors.  We've heard the lines in movies before where the sultan or the king will pay the winner/  knight/ warrior/etc. their weight in gold.  It's an unbelievable sum of money when you first think about it.  But, with a little help from our finance bloggers out there you'll see that it is actually within reach. How much would that be for the average US man and woman?  Well, let's take the average height and weight.  The average man is 5'9" tall and weighs 185 pounds.  The average woman is 5'4" tall and weighs 163 pounds.  Let's just average out that weight and we get an average human weight of 174 pounds.  So, the magical Your Weight in Gold calculator tells us that is worth $2,234,243.52 based on the latest spot price of gold. This one aspiration can lead us in the right directions to a happy retirement.  To aspire to be worth your weight in gold is to aspire to be healthy, wealthy and wise in retirement.  Healthy because if you aren't healthy and happen to be gaining a few extra pounds, you need to work hard to save up enough gold for each pound, namely $12,000 per pound.  So, you keep in shape because it makes you feel great and happens to help you achieve your new gold aspiration.  So a few extra pounds isn't so bad, but more than that and we just may need that extra savings for more medical bills.  Wealthy because you've aspired to knock the socks off of the average American's retirement savings nestegg ($250,000). While some are forced to make due with social security and meager savings, you're probably investing, mentoring, giving to family/friends/community, and thriving in retirement. Wise because you're a student and a teacher of personal finance philosophies.  You're a reader and likely even a blogger of personal finance ideas.  Most definitely a practitioner of the some of the very best advice and philosophies in personal finance.  Ok, you're asking: "It sounds great to have that aspiration, but just thinking it isn't going to make the numbers work.  That sounds like a hefty nestegg to prepare.  How to do it?  Some numbers please?".  Well, luckily I stumbled upon a blog that got me to thinking about all of this, Hunter Nuttall of outlines How To Create A Seven Figure Residual Income.   Take a look and I think you'll be inspired that this is quite doable.  Now Hunter's goal was to show you that it's possible to build a portfolio that paid you a seven figure income from it's returns annually.  We don't have to go that far into the horizon to get our weight in gold, so let's see how that would work out.  Play around with this handy compounding calculator using 11% as S&P 500 annual return on a $12,000 annual investment to tweak for your horizon.  You'll find that it only takes us 27 years to get to our magical weight in gold ($2.3 million).  So, you say "I definitely am a believer in the power of index fund investing for S&P, Small Cap and EAFE (foreign index)."  That's great, me too, but I propose that you get aggressive in your savings and take advantage of all the free money around you.  When I say aggressive, I don't mean to get into risky investment vehicles.  Stay with the standards and easily managed index funds.   Facts are that every other mutual fund tries to beat the S&P500, so why not stick with the S&P500 :-)... Read up on all the financial blogs where they detail about maxing f[...]

My Favorites - from the Carnival of Personal Finance #134


This week MrsMicah hosts: Carnival of Personal Finance 134: Building on the Basics you'll find the following post from Teaspoon: Retiring Abroad - Or, Maybe Sailing Around The World for Free! There's a good number of posts to read. Here's some of my favorites: Patrick from Cash Money Life has a new take on your assets. He believes that Your Greatest Asset is the Ability to Create Income. Really enjoyed this post. I really like to review ric edeleman’s articles every now and then I find something that makes a new paradigm shift. He did this same topic from the point that you need to get your disability insurance before any other type of insurance … cause like Partick says, you’re protecting your most important asset! I never thought much about disability insurance until this concept hit me, afterwards I’ve maxed out my, virtually free, disability insurance offered at work and learned more about the short term vs. long term disability insurance. Definitely an eye opener, kudos on a great perspective. Morale of the story: Educate and insure yourself … you’re worth more than your weight in gold and maybe more! At 190lbs I’m worth at least $2,402,208.00 in gold :-) David from My Two Dollars gives us some Tips On How To Avoid Internet And Financial Scams. This post is especially timely as I've been helping my mother lately clean up her computer from all the crazy internet ads.  It's sad that there's such a plethora of these scams and advertising adware (which is another scam to get you to click and make other people money).  Like David, I'm familiar with what not to click on for pop-ups and ads and mail internet scams, but our parents and loved ones might not be.  It's frustrating that they're held hostage from breathing easy when they use their computers.  David has some great suggestions to watch out for.  I even suggest that folks look up more info on PF Bloggers on scams and identity theft to help get even more educated. Marcus Hochstadt tells us how to Pay Business Expenses Wisely And Travel For Free.  Great post.  I was a total late bloomer to this concept but am a believer now.  My card of choice is the Alaska Miles Visa.  I push all bills and expenses through that card and pay it off and get great miles for it.  Recently I was looking for a refi and found that they give 1300 miles for every 10K that you finance.  I thought it would be bad choices, but all mortgage companies were premium choices and quotes gave my bank a run for the money.  I've been able to do a lot more free/discount flying as a result.  Love it! Hunter Nuttall of Hunter outlines How To Create A Seven Figure Residual Income.  You'll like this post.  It's fun with numbers and puts the power of aggressive savings and investing into perspective.  All you whipper snappers out there, take a look, you've heard it before saving early and not that aggressively will pay off handsomely!  This is the other half of the equation that makes sure you are worth your weight in gold! MoneyNing from Personal Finance Blog with Money Ning reminds us all to Increase Your 401k Contribution Rate During the Beginning of the Year.  Great post to read right away and get yourself started on the right track with your 401k for 2008!!! I like the concept of squeezing the 401k tournip a little at the beginning of the year. Like you say at 2% you’ll hardly notice (especially as it’s often pre-tax contribution). Goes along with my 2008 resolution to max my ESPP to get all of it’s free money out and try and max my 401k (which isn’t an easy task!).Teaspoon [...]

Retiring Abroad - Or, Maybe Sailing Around The World for Free!


Many thanks to Millionaire Mommy Next Door and her post on 10 Ideas on How To Retire On Less.  It's a great read and will give you some ideas of how to enhance your situation so that retirement is a little more comfortable. One of the ideas was to 'Retire abroad'.  This really struck a chord with me, as I've always been interested in what it would take and if it was possible for the average Joe?  I had the perception that this was for those with big cash and resources.  So, thanks to Mommy's initial research links I wanted to dive in and uncover the high level requirements for this goal.  The bottom line is that for many Americans it will be impractical to retire on small savings and your social security check in the US. OK, there's so much to research about this topic of retiring abroad, that I'm sure I'll be putting together a few more posts.  For now I wanted to focus on a quaint retirement dream that I've had and perhaps others as well... At EscapeArtist you'll find a plethora of information about every related topic to living and working overseas.  They have 4 different ezines and all are free with tons of great content.  I've always thought that a great way to retire is on a large sail boat and sail around the world.  Although my expectations were that you'd probably have to be rich to do that realistically.  There was a really interesting article at EscapeArtist called Sailing Around the World For Free.  Wow, now we're talkin!  There's a method to this mad goal, that you should prepare ahead of time getting some experience.  Of course, that makes sense: There are many different positions that crew can choose from on boats of all sizes.  At the bottom of the crewing job pile (and the easiest to get) is a position on a cost-sharing boat.  This is where the crew pitches in some money (usually $20 - $70 dollars a day) to help the owner cover food, fuel, and marina costs.  Beware of the boat that advertises “cost-sharing” of $1000 or more for a week. In this case, the boat owner is usually trying to make money and calling it a cost-share instead of a charter.  In a true cost-share arrangement, you are simply paying your own way and the owner makes no profit from you. Ok, this is actually a pretty nice deal.  Paying from $560 to $1900 a month for all expenses paid for living the life sailing the world is pretty tempting!  But, it get's better.  With some planning and learning you and your significant other can gain experience and certifications that will elevate you up to fully PAID living on the sea, without a lot of super hard work: The next step up for crew would be a totally free ride, where the owner covers all costs.  In this situation, the captain can sometimes be a professional skipper, or the owner.   This free ride arrangement is frequently available when boats need repositioning or delivery.  In exchange for your help moving his boat, the owner covers food, boat costs, and some will even pay your return airline ticket home. OK, getting better.  Definitely, but looks like you need a little experience to get to this point, right? A delivery is a great way to gain experience and sea time, without having to pay for it.  Sea time is needed if you wish to pursue any sort of a career on boats, racking up certifications such as the coveted Yachtmaster; which allows you to pilot a commercial vessel.  In addition, after a delivery, you are no longer inexperienced! Hey, looks like you might even be able to add some cash to your little nest-egg while enjoying the rolling sea: Should you land a paying job, keep in mind that since many boats are registered offshore your wages may be tax-free. Since all your living expenses are covered, you can save almost all your paycheck.  The top paid yacht captains on large private yachts over about 200 [...]

My Favorites - from the last Carnival of Personal Finance for 2007


This week wereindebt hosts: Carnival of Personal Finance #133 - Last of 2007 Edition you'll find the following post from Teaspoon: - My Favorite Site for Everything on Mortgages

There's a good number of posts to read. Here's some of my favorites:

Free Money Finance takes another look at paying off your credit cards versus investing.  I like this post and agree with Money that you should try and fund both 401k and paying off credit card.  Especially if you get a 50% or more match from employer on 401k, since that would be likely greater than any credit card debt.

My Dollar Plan has 181 personal finance accounts. Talk about complex. They do have a strategy for managing all of those accounts though.  Now this was the followup post that I was looking forward to.  Remarkable to see how Madison manages money finances and credit card arbitrage.  Keep up on her site, as she continues in a series of posts to go into additional detail of her unique personal finance account management strategies.

The Financial Blogger looks at adding your property into your net worth calculations.  I agree with Financial Bloggers message: that your equity should be included in your net worth calculation.  Especially since it's readily avail via HELOC, Cashout Refi, Homesale as tax-free capital gains.

Millionaire Mommy Next Door has 10 tips to help you retire on less.  Lot's of good ideas to think about in this post.  The one idea that hit a chord with me the most was 'Retire Abroad'.  I've always been interested in this and had never taken the time to research.  Millionaire Mommy adds some great links for more info on researching this option.

My Favorites - from The Carnival of Personal Finance #132


This week The Digerati Life hosts: Money, Finance and Fancy: The Carnival of Personal Finance #132, Whimsical Christmas Edition you'll find the following post from Teaspoon:HELOC + ESPP (or 0% Credit Cards) = FREE MONEY (15% to 60%+ returns)!This was a really big holiday carnival and there's so many good posts to read. Here's some of my favorites:Spend Less Than You Earn - The Wrong Way To Think @ Brip Blap: Instead of thinking about “spending less than you earn” to make it, why not think about “earning more than you spend?” An interesting perspective that may have you opening up your limits on what you can earn and think of the many endless possibilities!2007 PF Blogger Net Worth Comparison @ Million Dollar Journey: With personal finance bloggers writing about finance so much, do you ever wonder how much they’re really worth? Here’s your chance to find out what kind of net worth some of us have! OK, this is just car-crash interesting to look at published net worths of some of your favorite PF Bloggers :-)!Our Credit Limits: Over $1,000,000! @ My Dollar Plan: Madison covers her credit with great detail, slicing and dicing and taking note of her household’s credit accounts and limits. I'm going to keep an eye out for Madison's upcoming posts. This is one person that know's how to manage credit! I'm looking forward to many of the future posts, based on her many comments on this post, to describe the methods she uses to manage the multitude of credit accounts.I Will Teach You How To Become A Millionaire @ Worldwide Success: Here’s a list of ways to become a millionaire, prioritized according to likelihood of occurrence (from least to most likely). The 10-10-30 formula is one everyone should be employing, then look at all the other 'gravy' ideas Worldwide Success shows for building your million. Don't forget that 'mortgage' for your home can take you pretty close to becoming a millionaire too!!!Ding Dong - Did Someone Order Groceries? @ The MotherLoad: Grocery deliveries have become very popular as people have become more & more busy. This post offers some tips for shopping at grocery delivery websites as well as a helpful listing of these sites. I'm a real proponent of online groceries. I've often use it to stock up on all those heavy items for parties and such (bottled water, soft drinks, etc.) and have them delivered to the door for an incredibly reasonable fee (often only $10).15 Money Pitfalls To Avoid @ Millionaire Money Habits: Here’s where you can read about 15 common money pitfalls to avoid becoming another case study. This is a really great collection of common money pitfalls. I encourage everyone to check it out and see if there's any new positive money habits you can build in 2009.How to Become a Famous Blogger (or) I’m a Closet Millionaire No More @ Millionaire Mommy Next Door: One of us has been discovered by Montel Williams! Woohoo! If you want to see what Millionaire Mommy and her family look like, read her post. And make sure you tune in to Montel Williams this Friday, December 28 to catch this PF blogger on television!Comparison: Major Presidential Candidates on Monetary Policy and the USD @ Currency Trading: In this presidential race, monetary policy is a hot issue. Many Americans are fed up with government excess, a failing health care system, and faltering personal wealth. This post covers how some of the major presidential candidates stack up on these issues and more.[...] - My Favorite Site for Everything on Mortgages


My 'go to source' for all the best info has been The Mortgage Professor and I'd just like to pass this on to folks that may also have lots of questions on mortgages. I've been spending some time there reading quite a few of the incredibly informative articles and FAQs that Jack has on his site. Let me take you through some highlight articles and faq's that I really enjoyed reading and felt helped to get me informed for mortgage discussions. Another wonderful thing about Jack's site is that you'll find the articles and topics have frequent updates as Jack uncovers new answers to similar questions, examples and info on that topic.Buying a new house before selling the old one - This was really educational as I'm currently contemplating this scenario and couldn't find any real good info on the web about it. If you're like me, you might have rolled this question around in your head:"I need to use the equity in my existing house to buy a new one, but it looks like I am going to have to close on my new house before I am able to close on my old one…How do I handle this?"I learned that you have many options and what kinds of questions to discuss with your bank/mortgage broker when discussing loan options. You can draw from your current equity via a HELOC and use as down payment on your new place. You can request a bridge loan. Often loan officers will want to know that you've listed your current home before going down this road.Another article discusses the different scenario options in Buy or Sell First? a similar question is asked:“I currently own a home which I would like to sell, and then buy another. What is the best sequence of steps in this process?”I'm not fortunate enough to need an answer to this question but enjoyed the article Sell Now to Avoid Future Capital Gains Taxes?"If a House Has Appreciated by $500,000, Does it Make Sense to Sell it and Buy Another For the Sole Purpose of Avoiding the Capital Gains Tax That Is Due on Gains Above $500,000?"Quick Tips on Major Hazards - As much as we are trusting souls when we discuss money matters with professionals that send us quoted estimates, there are hazards to look out for. This is a great article and jumping off point to many other related article topics: Quick Tips on Major Hazards. You'll definitely want to read up on the lender tactics to avoid that try to tack on costs as closing approaches in Legal Thievery at the Closing Table.I mean an almost 200% increase in quoted fees is outrageous, like this:"I paid $2240 in lender fees when my loan closed, compared to the $880 I was quoted at the time my rate was locked. It was a total surprise that hit me at the closing table. With my house purchase at stake, there was nothing I could do. This is outrageous…why doesn’t the government do something about it?"apparently the whole design of the GFE (good faith estimate) is designed and allows for fluctuations like this.[...]

HELOC + ESPP (or 0% Credit Cards) = FREE MONEY (15% to 60%+ returns)!


For anyone that has available Equity in their home and an unused potential in their employers ESPP program should really pay attention! For those that are playing the shell game with 0% credit card interest rate arbitrage and ask, "Hmmm, where could I get a guaranteed 10% or 15% return?", well read on, how about a 40% or even 60% annual return! I've been giving away some free money and I'm not happy about that. I'm correcting that, toot-sweet! I hope all of you will review your circumstances and consider doing likewise, if it makes sense and you have availability to your ESPP that you aren't currently funding to it's max potential.I have available equity, like most people, that I just realized I could be putting to work. Recently I've pulled back on my ESPP contributions, for at least the last year now, in favor of maxing out my 401k. Of course that's a good option, but I've been thinking and came up with a novel idea. So, no more wasting the potential of my ESPP. Here's a simple example. My employer offers an ESPP that plan with 15% discount on stocks every quarter. So, that's a 60% annualized return. Take a look and see how that works out:Jan-Mar: Contribute 0-15% of your income and purchase your companies stock at 10% discount. At which time you can sell immed for 10% gain or hold and sell at a later date. Let's look at an example of $50K (take home pay) after taxes. This would break down to about 4200/month after taxes. Example: 15% of $4200 = $630. contributed montly x 3 months = $1890. Sell immed to lock in 15% gain of 283.00. Apr-Jun: same thing as above. Total contributions of $1890.00. 2nd 15% gain of 283.00. Jul-Sep: same thing as above. Total contributions of $1890.00. 3rd 15% gain of $283.00. Oct-Dec: same thing as above. Total contributions of $1890.00. 4th 15% gain of $283.00. Total contributions for year: $1890 from Heloc x 4 (i.e. recycled 4 times) Total of 15% quarterly returns: $1132.00 Total return on initial $1890 HELOC contribution: 60% annual return!!! Now that rocks!Now, please correct me if you think I missed a point, as I'm just thinking about all of this and planning to implement shortly. I plan on starting this Jan 08, so I'll see how it actually works out. Here's how the quarterly draw and money management would work:Jan 08: Draw $1890.00 from your HELOC Account that you'll be contributing from your payroll for Jan-Mar contribution period. Deposit that amount in your checking account that you normally use for bills, etc. Make min payments to HELOC every month. Jan 08: Max out your payroll contributions so that $1890 is drawn from payroll during Jan-Mar 08 contribution period Apr 08: Stock is purchased with your contribution. Sell this stock immed, or put stop loss to increase potential returns even more! Apr 08: Deposit the $1890.00 from your stock sale proceeds into your checking account that you normally use for bills, etc.remaining $283.00 is your 1st 15% return (use in your checking if you want to help bridge between subsequent stock purchase and sell periods or apply payment to HELOC to reduce principal). Apr 08: Max out your payroll contributions so that $1890 is drawn from payroll during Apr-Jun 08 contribution period Jul 08: Stock is purchased with your contribution. Sell this stock immediately, or put a stop loss on it to increase your potential returns even more. Jul 08: Deposit the $1890 from your stock sale proceeds into your checking account that you normally use for bills, etc. The remaining $283.00 is your 2nd 15% return (use it in your checking if you want to help bridge between the subsequent stock purchase and sell periods or apply payment to HELOC) Jul 08: Max out your payroll contributions so that $1890 is drawn from payroll during Jul-Sep 08 contribution period Oct 08: Stock is purchased with your [...]

You Are A Great Investment, Don't Be Stingy!


You've heard it before, one of the best investments you can make is to invest in yourself. When it comes to making yourself all you can be, you shouldn't be stingy with your money. This can be simply relaxation, exercise, papering, reward and the most important investment: EDUCATION.Free Money Finance has a great quote from Money Magazine that puts some real dollar values to education:The money you spend on a college degree still yields a sizable return on your investment. Over a working lifetime, the typical college graduate earns about 75% more than a high school grad does. On average, that difference totals $1 million more -- easily enough to re-pay those student loans and then some. The payoff from graduate school is even bigger: People with advanced degrees earn two to three times as much over their lifetimes as those without a college degree and increase their average total earnings by as much as $2 million.As much as we hate paying off those student loans, they really had a huge impact on our earning potential. Now, traditional college degrees aren't the only type of education that has a substantial impact on our earning power. Whatever job or profession you are currently in, you should look around on the web and see if there is a professional certification for your profession. This is a great way to add dollars to your pocket at your next raise request or job hunt. Just about any professional job, has some kind of association that manages and gives certifications that say you are someone that is aware of the complete body of knowledge for that profession. This certification means substantial dollars from employers!Take a look at a very interesting article on called CertMag's 2006 Salary Survey, you find many interesting bits of info. In particular the following list of top certifications by salary: Another interesting view of their data is average salary by professional specialization: Certifications are a great way to let your current employers and your future employers know that you are serious about your profession and deserve a serious salary bump!Certification: The Benefits and BeyondBeyond gaining technical skills and advancing one’s career, the reasons individuals have for getting certified can vary, in some cases coming down to their sense of stature or the respect they feel they command in their chosen field. A consistent majority of IT pros polled in the 2006 CertMag Salary Survey agreed certification makes them more confident in the work they do, gets them more respect from management and colleagues, and leads to a greater demand for their skills. There are more benefits to getting your professional certifications: “There are a lot of aspects that the certifications cover that I didn’t directly deal with in my job, but I think learning those helped me to be able to pull from a lot of different areas and experiences and contribute to that job better,” he said. “It’s not necessarily a requirement for our job,” Helferich said. “It was new equipment to us, and it struck a fancy with me. I wanted to make sure I knew the equipment and went after the certification to have bragging rights.” “It comes back to risk and the fact that a candidate who has a CCIE has proven him or herself from a technical perspective already,” he said. I'll say it again: Don't Be Stingy! Spend the money to join your professional organization, get study materials for the test, the fees necessary for the test. All of these can sometimes be substantial, but well worth it when you consider the many tens of thousands of added salary you will earn from them over the coming years. You'll find much about this topic in the survey results article linked above. Here's some info on average cost of certification of survey respon[...]

Teaspoon's 2008 Financial Goals


This is Teaspoon's resolution for 2008 ;-) ... I encourage you to create your own. Stop by Cash Money Life and check out how you can submit your resolution. You could win an iPod (you don't need a blog you can just email Cash Money with your resolution by Dec 5th) ... so give it a try!

For myself, this is a great way to set some 2008 goals:

  1. Post at least one post a week!
    I've been lacking here, as of late, while I do some studying for a professional certification. I really miss posting and love to ponder think about financial matters. So, I should at least give myself the opportunity at that fun once a week :-).
  2. Start to generate real estate investment income
    One way or another I'd like to get some Real Estate investment income in 2008 started. I plan to either rent out current property and get a new place or as soon as I sell current property and move into a new place, get an investment property online in 2008.
  3. Have 0 revolving debt in 2008
    It's been a long time coming for Teaspoon, but I should finally hit 0 revolving debt in 2008. That means lots more cashflow and freedom ... hurray! Be sane with that cashflow and start investing it. Plan will now be building a non-retirement portfolio and that should be fun.
  4. Maximize ESPP Free Money!
    Teaspoon's been focusing on maxing out 401k contributions and paying off debt. So, with the debt gone, it's going to be so nice to start to get all that ESPP Free Money! Remember this post? >>> Your Personal Stock Market Army - The Stop Loss! It had a great concept on maximizing your free money that's available to you from ESPPs:

I love free money with ESPP's. If you have an ESPP available at your employer, this is like free money and the stop loss can maximize your profits and limit your loss of profit. What I do, is every time my employer buys my ESPP stocks, I immediately (the day it becomes avail in my broker account), go in and set up a trailing stop loss of 3%. I encourage you to adjust your %percentage based on your stocks volatility. 3% for my employers stock works perfectly. If the stock keeps rising, then I keep locking in more and more profit. As soon as it turns around, it's sold for me automatically.

Funny Story - Plutonium or Spare Change?


Recently I bumped my fun-money savings ratio, just out of sheer annoyance and maybe some back-strain. I have this BIG JAR (actually a 5 gallon jar) that I have saved coins in for a couple years. I hate spending coins, so I pop them in there and see how much it will add up to. When I finally filled it almost to the brim, I was going to vegas :-).

Well, recently it was nearly full and I decided I needed to cash it in. With that puppy nearly filled I almost broke my back with 2 trips to the bank hauling change in my backpack to cash it in. I mean, the backpack was busting at the seams. I swear I must have looked like someone carrying plutonium or something!

It was a hefty $1000+, that easily paid for some fun in Vegas! For those of you curious how much change you've amassed, Coinstar has a handy little trivia estimator on their site (example: 1 gallon of change is estimated to be worth $228.34) Cool :-).

So, after that I decided not to focus on the change and instead focus on $1 bills. So much easier to carry $50 to the ATM adn deposit. Since then my savings rate for fun-money has tripled. Which tells me I'm having too much fun, or I need to tighten up the screws on my automatic withdrawal savings to my 401k, ESPP, or Mutual Funds :-(.

Carnivals - For Week of 9-3-07


Teaspoon Finance posts appeared this week in the following Carnivals. I picked my favorite post at each carnival:

I encourage you to stop by and find your favorite personal finance posts.

Your Personal Stock Market Army - The Stop Loss!


Stop losses can bring you peace of mind, profit, and minimize your losses.  If you own stocks right now and don't know what a stop loss is, then I encourage you to sit a spell, grab some coffee or tea, and sip of this important information. If you own stocks right now and know what a stop loss is, I sure hope you're using them.  If not, then please stick around for a spell. I had a friend many years ago that was complaining about his troubles investing in stocks.  He never seemed to make a decent profit on winners and he always seemed to collect a bunch of losers and never knew when to get rid of them.  I told him I'd listen to his troubles and offer advice where I could.  He had close to a million dollar portfolio invested in individual stocks.  Man was I envious of his assets!  But, not of his investing skills.  I asked him a simple question: "Do you have sell prices or sell ranges for all the stocks you own?".  His answer: "Not on a single one."  He allowed the market and his financial needs and emotions dictate when he would sell something.  After our couple hour discussion, of basically what you'll be hearing below, he vowed to have stop losses set on all of his stocks within the next week.  Note: at that time, there wasn't such a thing as trailing stop losses available on most online broker sites, so now days it's even easier! I've heard his thanks many times since for introducing him to the power of the stop loss.  You definitely want to get educated on the stop loss as your most important weapon in the war of personal finance with respect to stock investing. Keep in mind this is stocks, not mutual funds. With mutual funds, you are diversified. With stocks you are putting all your eggs in one basket, as they say. This can be a very risky proposition and you need some protection. Sometimes you need protection from yourself, and your ability to rationalize and accept deeper and deeper losses. Here's where the stop loss comes to the rescue! What is a stop loss? Here's a quick definition from wikipedia: With a stop order, the customer does not have to actively monitor how a stock is performing. ...Once the stop price is reached, the stop order becomes a market order. ...A sell stop order (also stop loss order) is an instruction to sell at the best available price after the price goes below the stop price. ...This can limit the investor's losses (if the stop price is at or below the purchase price) or lock in some of the investor's profits. There are 2 types of stop losses at many brokers and online brokers now: Traditional Stop LossTraditionally with the stop loss, you would select a price point at which you wanted to sell if the market price went below that price. If this is the only kind available at your broker or online broker, then please do use it. The use of the traditional stop loss might require a little extra maintenance on your part, as you monitor and decide to ratchet it up to lock in profits or limit losses. Trailing Stop LossThe traditional stop loss requires regular maintenance if your stock price is on the move and you would like to efficiently lock in profits or further limit your losses. It's great that brokers have added the trailing stop loss as an option with brokers and online brokers. This allows you to set a stop loss margin that will follow an increasing price. You typically have the option of choosing a trailing stop loss by $Dollar Amount or by %Percentage. I love this, because you can choose to follow a rising stock price with a trailing stop loss of for example: 5%. That way, as a stock price continues to rise, you'll be locki[...]

Carnivals - week of 8-27-07


Teaspoon Finance posts appeared this week in the following Carnivals:

I encourage you to stop by and find your favorite personal finance posts.

Solving Our Savings and Budget Issues - The No-Budget Budget Way


Our budget and savings goals always seem to be at odds with each other. The more we want to save, the more our budget's suffer and the more we budget, the less we always have left for savings. The struggles are not easy nor are the solutions. While it seems like more money is the only solution, we shrink at the task of balancing our budget and explaining why our savings accounts just aren't adding up. I'd like to propose a way of looking at handling your savings and budgeting that has worked for me for the last 10 years, I call it the no-budget budget.Budgets and money issues are tough to deal with and incredibly stressful. The issues we have with our budget and savings can actually be symptoms of common mental disorders, like described in this article by Liz Pulliam Weston:The manic or "high" phase of bipolar disorder, for example, is characterized by impulsive and often self-destructive behavior, which can include big shopping sprees, said Los Angeles psychiatrist Deborah Nadel. Overspending likewise can be an issue with depression, Nadel said, as those afflicted try to distract themselves and alleviate their distress with purchases. Feelings of hopelessness can make it difficult to plan for the future or to care whether the bills get paid. The symptoms that define ADHD -- impulsivity, inattentiveness and/or hyperactivity -- make finances a trial for many who have the disorder. Problems with planning and organizing stymie their attempts to deal with even simple money tasks, like bill paying, while lack of impulse control can result in big credit card debts, over-limit fees and bounced cheques.We've heard at one time or another that financial problems are the most common cause of relationship problems. According to this article: money is the number one reason for divorce. We all have enough stresses in our lives that challenge us. Let's try to look at solutions to lessen those stresses involved with building our savings and creating or balancing our budgets. You may already be incorporating some aspects of this. If not or if only in part, I encourage you to take some time to digest these thoughts when you next sit down to work on your financial matters. I think these methods can be a step or two towards relieving the stresses on our minds and relationships.I always enjoy an opportunity to refer back to the book that started me on the right track regarding personal finance: The Richest Man In Babylon. There are many great concepts in the book, that we can always find new ways of interpreting. The two that resonated most with me for budgeting and savings and make up the no-budget budget are:"For every ten coins that thou placest within thy purse take out for use but nine. They purse will start to fatten at once adn its increasing weight will feel good in thy hand and bring satisfaction to thy soul""Budget they expenses that thou mayest have coins to pay for thy necessities, to pay for thy enjoyments and to gratify thy worthwile desires without spending more than nine-tenths of they earnings"When you think about these principles, they are the key to what I've called my no-budget budget. I started using this method about 10 years ago, because I just couldn't keep a budget. The more I tried to concentrate on a budget the more I seemed to mess something up. Whether it was a missed payment, a ding on credit score, a late fee on a credit card, final notice on a bill, someone not getting paid, etc. I'm sure you have many more examples from your own experiences. I'll cover the basics of the no-budget budget and then touch on some ideas of how you can add more sophisticated touches o[...]

Carnivals of Fun For Personal Finance Posts #3


This week a there have been some great personal finance carnivals out there.  I encourage you all to stop by and take a look at all the great posts.  I guarantee you'll have hours of enjoyable reading and find some new favorite posts.  Teaspoon Finance is proud to have a post participating in the following Carnivals.  The Teaspoon Finance post participating this week at these carnivals was: Do You Have an Emergency Fund? - If Cash is King, Then Don't Neglect His Good Looking Brother, the Prince of Credit! Carnival of Personal FinanceThis weeks Carnival of Personal Finance #114 is hosted at The Simple Dollar.  Trent at The Simple Dollar spent a ton of time reviewing the 60+ posts submitted and choosing his editors choice posts.  I confess that I haven't had a chance to read all the posts, yet.  I plan to by this weekend.  I did go through and read all the titles that caught my eye and from those, read many many of the posts.  From those, I found 2 that are my favorites from the Carnival of Personal Finance #114. I covered these in: Carnivals of Fun For Personal Finance Posts. 101st Carnival of Debt ReductionThis weeks 101st Carnival of Debt Reduction is hosted at I've Paid For This Twice Already...  Paidtwice reviewed 25 posts submitted and I'm very excited that Paidtwice picked Teaspoon Finance's post as their favorite!  I've reviewed all of the posts at Paidtwice and I'm sure you're going to find some great info and new insights into personal finance in one or more of the 25 posts.  You can find more about my favorites at: Carnivals of Fun For Personal Finance Posts #2 Festival of FrugalityThis weeks 88th Festival of Frugality - About Me Edition is hosted at The Happy Rock.  The Happy Rock reviewed 35 posts submitted and you can visit to find all of them.  I was happy to have my post in their carnival.  I read through all the posts and here are my favorites from the Festival of Frugality: Why We Shouldn’t Be Careless With Automatic Bill Pay and Why The Pentagon Should Really Use FedEx For Shipping by MoneyNingI liked this post, because it served as a reminder of one of those pesky things that I keep on my mental to do list, but never really get to regularly enough!  Stop by and check this one out.  Make sure you're not making someone rich, by being too trusting and lazy. eight ideas for saving money on books by plonkee moneyAnother great post to save some money on something that 'really' adds up, books!  Like plonkee, I find myself reading the covers and a couple of pages, and then grab this book and that book.  Then when I get home with them, I'm not always satisfied.  This is a great reminder for me to take a little more time browsing at the bookstore (they really encourage it with all the comfy couches and chairs).  Also, get my library card going again.  I haven't visited my library in the last 3 years, that's not good. Baby Steps to Wealth: My $2 a Day Challenge by Frugal DuchessI always love reading about how folks incorporate baby step approach to all areas of self improvement.  This is another great example. OK, I think I'm sticking to 1 carnival a week from now on.  This is a lot of reading, I'm enjoying it.  I just need some recovery time to process all these great ideas that I have rolling around in my head after the reading fest.  I encourage you to stop by the carnival sites and read through and find some new favorite posts of your own. I think that's it for this week :- ), otherwise ... I'll be followin[...]

Carnivals of Fun For Personal Finance Posts #2


This week a there have been some great personal finance carnivals out there. I encourage you all to stop by and take a look at all the great posts. I guarantee you'll have hours of enjoyable reading and find some new favorite posts. Teaspoon Finance is proud to have a post participating in the following Carnivals. The Teaspoon Finance post participating this week at these carnivals was: Do You Have an Emergency Fund? - If Cash is King, Then Don't Neglect His Good Looking Brother, the Prince of Credit!Carnival of Personal FinanceThis weeks Carnival of Personal Finance #114 is hosted at The Simple Dollar. Trent at The Simple Dollar spent a ton of time reviewing the 60+ posts submitted and choosing his editors choice posts. I confess that I haven't had a chance to read all the posts, yet. I plan to by this weekend. I did go through and read all the titles that caught my eye and from those, read many many of the posts. From those, I found 2 that are my favorites from the Carnival of Personal Finance #114. I covered these in: Carnivals of Fun For Personal Finance Posts.101st Carnival of Debt ReductionThis weeks 101st Carnival of Debt Reduction is hosted at I've Paid For This Twice Already... Paidtwice reviewed 25 posts submitted and I'm very excited that Paidtwice picked Teaspoon Finance's post as their favorite!My favorite article this week was from Teaspoon, with Do You Have an Emergency Fund? - If Cash is King, Then Don’t Neglect His Good Looking Brother, the Prince of Credit! posted at Teaspoon Finance . Honestly, I loved this article, despite the fact that I don’t agree with the whole basic concept presented in it. It is a well-written, very well-thought out discussion and drew me in despite the fact that it is contrary to my opinion. Enjoy!I've reviewed many of the posts at Paidtwice and I'm sure you're going to find some great info and new insights into personal finance in one or more of the 25 posts. I had fun going through the posts at Paidtwice. I actually read every one of these carnival posts! Here's my selection of 3 favorites that I enjoyed most: glblguy with Key Steps You Can Take Now To Get Out of Debt posted at Gather Little By LittleOK, I love posts that have tidbits of wonderful wisdom that I may or may not have heard before and intended to implement, but haven't. They're like little reminders to say "Um, you know I'm right, now when are you gonna put me to work?". This post has a great little tactic that I've read about before and loved, fully intended on implementing, but never have. I'm losing money every day by not even trying! Please don't let this happen to you. Get over there and read this post. Oh, what's the wonderful little tidbit? It's listed as #3. Reduce your interest rate. Now go learn and become enlightened by this and more :-p...David at My Two Dollars brings the next installment of his excellent “Get out of Credit Card Debt” Series, The Start Digging Out Of Credit Card Debt Challenge - Week Five.David also gets my attention as a favorite for a couple of reasons. First, same as above, he touches on that little tip of reducing your interest rates in this week five of the series. The other thing I like is that this is part 5 in a series of great info and several steps to help reduce credit card debt. I'll be keeping an eye out for future installments. I love info in bite sized chunks and David puts that together in this series. From this week five post, you'll find his links to previous weeks. I definitely encourage you to start reading from week one, read them all and look to see what items you want to[...]

Carnivals of Fun For Personal Finance Posts


This week a there have been some great personal finance carnivals out there. I encourage you all to stop by and take a look at all the great posts. I guarantee you'll have hours of enjoyable reading and find some new favorite posts. Teaspoon Finance is proud to have a post participating in the following Carnivals. The Teaspoon Finance post participating this week at these carnivals was: Do You Have an Emergency Fund? - If Cash is King, Then Don't Neglect His Good Looking Brother, the Prince of Credit!

Carnival of Personal Finance
This weeks Carnival of Personal Finance #114 is hosted at The Simple Dollar. Trent at The Simple Dollar spent a ton of time reviewing the 60+ posts submitted and choosing his editors choice posts. I confess that I haven't had a chance to read all the posts, yet. I plan to by this weekend. I did go through and read all the titles that caught my eye and from those, read many many of the posts. From those, I found 2 that are my favorites from the Carnival of Personal Finance #114:

  • 110 Personal Finance Calculators (@ millionaire mommy next door)
    Now this was an amazing piece of effort by the millionaire mommy to put together this amazing resource list of calculators. I plan to have fun browsing these calcs over the coming weeks and I'm sure they're going to give me lots of wonderful ideas :- ). I'm sure you'll find at least one, if not several here that are of immediate interest!
  • How To Know Instantly You’re Being Conned (@ dough roller)
    I've been watching Mind Control with Derren Brown on the SciFi Channel recently and that dude can have your mind reeling! So, previously to that show, I figured, 'Hey, I probably can't be conned. I'm a very logical street wise Joe'. But, after this show, geeze, there's just may be a whole new level of con men out there. I enjoyed dough roller's post and it has some great advice on thinking about those 'too good to be true situations'. Definitely check this out. If you don't think you can be conned, go check out an episode of Mind Control on SciFi channel and you'll be back at dough roller's site double checking ;-)!

Wow, that was a lot of reading! I couldn't read all 60+ articles, but definitely viewed all post titles and read through each post that caught my eye. I encourage you to stop by the carnival site and read through and find some new favorite posts of your own.

I'll be following up with additional Carnivals that Teaspoon Finance was a part of with my post: Do You Have an Emergency Fund? - If Cash is King, Then Don't Neglect His Good Looking Brother, the Prince of Credit!

Zen and The Art of Personal Finance in 4 Steps


We have web browsers that let us tab through 10 different websites in seconds. You can kick off your TPS reports processing, while you skim through your email. You can do all this as you listen to your favorite tunes on your cell phone, and driving down the highway, while your cellphone also hollers out GPS directions to that favorite restaurant and politely pauses while you receive a call! Ok, that would be a seriously dangerous driver, but I doubt it's far from the truth for some current road warriors.Technology seems to encourage us and our children to multitask-everything. I've always experienced the greatest personal strides in life, when I've reduced the clutter and focused my thoughts and efforts. Kind of reminds me of my limited understanding of just a few of the principles of Zen. Perhaps the learning's from Zen can be applied towards personal finance. I've always been intrigued by the various Art of Zen books and haven't seen one on the topic of personal finance, yet. So, let's take a high level journey as to what one of these books 'might' cover. This isn't considered a how to of personal finance, as much as it is an exploration of some alternative methods of how we might learn about and practice our lessons in personal finance.Step 1: Zen What?Quite simply Zen is a flavor of Buddhism, where learning from experience is favored over that of any religious texts. In it's depth, Buddhist monks can spend a lifetime achieving the wisdom of it's highest teachings. Westerners have westernized our perspective of Zen in various pieces of literature like: Zen in the Art of Archery, The Dharma Bums, Zen and the Birds of Appetite, and the bestselling Zen and the Art of Motorcycle Maintenance. Now, many Zen and the Art of ... topics follow this framework. Which is to subtlety introduce the Zen mentality to contemporary subjects. Even more simply the basic steps to performing any activity (i.e. Zen and the Art of Personal Finance).Like Zen and Art of Motorcycle Maintenance, this post doesn't seek to enlighten on aspects of Zen Budhhism. As an excerpt from the book on wikipedia points out:He explains that, despite its title, "it should in no way be associated with that great body of factual information relating to orthodox Zen Buddhist practice. It's not very factual on motorcycles, either."So, the focus of Zen that I'll follow in this post is the subtle application of some of the principles of Zen to benefit our personal finance learning. Namely Zen's principles of understanding of oneself, kind thoughts, right action, and right effort.Step 2: Zen of Your FinancesOne of the principles of Zen is to understand oneself. Look into your self and see what methods have been best for you to learn new information in the past. Do you need repetition? Do you like analogies? Do you just like to digest the straight facts? Are you a logical person, and you must see the how and why before it becomes organic to you?Never be to quick to make personal finance decisions. Sometimes taking some time to sleep on it is better advice than we realize. Allow yourself to meditate on new decisions, information, and problems. Zen is based on the ability for the practitioner to learn from their inward meditations on a problem. Some Tibetan monks even beleive that dreams are the key enlightenment. Great figures in history have practiced the art of lucid dreaming to unravel some of the greatest discoveries.Albert Einstein claimed the inspiration for his Theory of Relativity came to him while in [...]

The Fed Discount Rate Cut - What Does it Mean to You and Me?


Thanks to the recent rate cut by the Federal Reserve, things should be looking up in the financial markets. The fed discount rate was just cut from 6.25% to 5.75% on Friday. The move was designed to bring some sanity back to the market that has been uneasy with the subprime mortgage issues.

According to an article on MSN Money, the fed discount rate cut has already had an impact:

Analyst Robert Lacoursiere said Countrywide's move Thursday should help address its liquidity concerns...

Another MSN Money article speculates this is just the move needed to alleviate the problems with the latest mortgage meltdown:

If I'm right, the market will turn around when the hedge funds have raised enough money to cover their margin calls. When is that going to be? It depends on the collateral value of the subprime mortgages that the hedge funds have decided to keep. This is why today's Fed announcement is so important.

Much of this positive outlook is due to the fact that the fed announced that subprime mortgages can be used as collateral. This means that banks will be able to once again sell their troubled subprime mortgages to pay for their credit lines.

For you and me, this is good news and means that mortgage brokers will be able to find funding again for their subprime mortgages again that they have been previously frozen out of. Last week it was sounding like only those with the better credit were going to be able to get loans, but now the market for subprime should be opening up again.

The feds rate cut by 50 basis points also leaves room for a future move, if this isn't effective enough (i.e. to still cut by another 25 or 50 basis points).

Quiz: Your Most Important Financial Asset. What is it?


If you're like me, you might not have thought of the right answer. This is also one of the reasons I love to browse through the articles over at Ric Edelmans financial planning site, I'm always sure to find a new bit of financial revelation! Ok, in case you're holding your breath I don't want you to pass out. You're most important, or as Ric put's it your largest financial asset is your ability to produce an income.Ric's article talks about the importance of protecting this prized possession:For almost everyone who is still working, your largest asset is your ability to produce an income. Thus, the most important type of insurance is disability income insurance (DI). You need it more than any other kind of insurance — more than life, health, homeowners, or auto insurance.Now, that blew me away. It's never been the topic of financial discussion for me before. I always choose no, no, no, on those pesky credit card applications and phone calls to activate your cards. They try and tell you that for penny's a day you can have all your credit card payments taken care of if you're disabled. Like everyone else, I just couldn't justify it in my head. Now that little credit card disability insurance is similar, but not exactly what we're talking about. We're talking about insurance that covers a percentage of your income, in the event you become disabled. Like many folks I felt it was adequate enough to opt into the insurance my employer provides. These typically pay about 60% of your income if you're disabled, and have a limited payout period. This just isn't enough.He talks about 2 big reasons that folks usually don't bother thinking too much about it:Reason#1: "It won't happen to me"Reason#2: "It's too expensive"After Ric hits you over the head with all the reasons why it's such an important financial decision, it really makes sense. I'm off to talk to my insurance agent this week and get me some disability insurance. I'm going to focus on filling in the gaps from my employers insurance. This should help reduce costs. I have some I got through work a long time ago, but I don't think that quite gets to the point of protection that you really need. If you have availability of disability insurance through work, and never really thought about it, take a second look and get as much as you can. As discussed in another article about getting the most out of your company's benefits:Life, disability and long-term care insurance. If your employer pays for these coverages, get as much as you can. But if you must pay for some or all of the cost, talk to a financial advisor or insurance agent to see if you can get lower-cost coverage elsewhere.It's a serious expense that seriously pays off if you need it. Obviously I hope none of us need it, but like any other type of insurance (the case can be made that it's more important than other types!), you want to be prepared. Bottom line, if you earn a living, then you will benefit greatly from disability insurance and it deserves some serious thought and discussion.[...]

What's Your Net Worth Grade?


I was curious about what the average net worth is at my particular age to see how I'm performing. The wonder of the web, is that if we want it we can probably find it. I found it. CNN Money has a nifty little calculator to give you an idea. You plug in your age and income and it will give you some stats. For example, I plugged in 40 years old with annual income of 70K, here's what I found out:

Median Net Worth For Your Age Is: $44,875

Median Net Worth For Your Income Is: $109,975

OK, that was cool. I now have an idea of how I'm doing against some national averages. Surely I could find more stats. But, of course. Here's another good site,, you can browse for stats on age ranges and it looks like more details if you register. Here it looks like you browse data of actual members. A quick browse through all data for ages 40-44 shows a median of about 324K. Hard to tell how accurate this is and how inflated the data may be.

I kept searching and found that Free Money Finance did some digging in one of their posts Median Net Worths - Are You Ahead or Behind? I liked this one, as I found I'm doing ok:

Age: 20-29
Median Net Worth: $7,900
Top 25%: $36,000
Top 10%: $119,300
Age: 30-39
Median Net Worth: $44,200
Top 25%: $128,100
Top 10%: $317,800
Age: 40-49
Median Net Worth: $117,800
Top 25%: $338,100
Top 10%: $719,800
Age: 50-59
Median Net Worth: $182,300
Top 25%: $563,800
Top 10%: $1,187,600
Age: 60-69
Median Net Worth: $209,200
Top 25%: $647,200
Top 10%: $1,429,500

Free Money Finance, warns you about how you might read and interpret these numbers:

If you're above these levels for your age, it doesn't mean you're doing well. Just because you're 65 and have a net worth of $300,000 (almost 50% higher than the median) doesn't mean you're in good financial shape. In fact, it's more of a reflection on how little everyone else has saved

Well, I feel ok about where I am. There's always something comforting about knowing that you're doing better than 50% or more of the rest of the folks out there. but, as Free Money Finance warns, don't mistake this for being ahead of the game. Get to work and build some wealth!

Do You Have an Emergency Fund? - If Cash is King, Then Don't Neglect His Good Looking Brother, the Prince of Credit!


That's right, credit can be just as valuable a tool as cash, when it comes to keeping an emergency fund. The next time you're thinking seriously about your financial house, take some time and think of the scenarios and options discussed here as possible tools to help you achieve your goals. Hopefully you'll think about having a Credit Emergency Fund from now on.What are the benefits of pursuing an all Credit Emergency Fund? How about:Being able to max out your yearly 401K contributionsMaxing out your company ESPP program for huge returns and free money!Getting immediate huge high-interest rate returns by paying off your high-interest credit cardsInvesting in stocks, bonds and mutual funds that return a higher rate of return than emergency fund savings accounts for your retirementInvesting in real estate and business venturesI'd like you to think about the possibility of having a credit-only emergency fund. Yea, I know, sounds scary ... just think about it. Grab a cup of coffee and just think about the info in this post. I'm sure that if you don't decide to get rid of your cash emergency fund, you'll at least think about it a little differently;-).First on the list is outstanding credit card debt. Do you have a sizeable amount of high-interest credit card debt? If you can answer yes to this, then here's reason number one to get rid of your emergency fund. Put it to work! That's right you can be a financial Warren Buffet and make 13%, 15%, possibly even 25%+ this year on your money. You must be absolutely positively sure that you are on track with your credit card spending habits before trying this method. Because if it was your out of control spending habits that got you this large credit card debt, then paying it off without fixing your spending habits isn't going to help. You'll simply end up with a Credit Emergency Fund of credit cards that are just charged back up with bad spending habits. That's a no no!You may have been diligently building an emergency fund for a rainy day. That fund has been sitting there earning 3%, 4%, maybe 5%+ if you've jumped into some of the great online savings accounts out there. Here's a chance to get a guaranteed high-interest return on that money. Knock out all that pulse pounding high-interest credit card debt. Don't cancel any credit cards. If you still have outstanding debt after this move, then continue to work to reduce it. A great post on puts credit card debt vs. emergency funds into perspective with this piece of advice:...While this may give you some peace of mind, it’s a false peace of mind - you will never really have a true emergency fund until all your credit card debt is paid off…it’s as simple as that.Second in the lineup, your HELOC. Think about using your HELOC as an emergency Fund. This is an excellent source of cheap money. Dr. Don, at says to make sure of these points:If you decide to take this route, it's important to have the credit line in place before you need it.If the HELOC comes with a credit card, you want to avoid the temptation to use the credit card for nonemergency purchases. ... Activate the card but put it somewhere safe and out of reach, like in your safe-deposit box.If you plan to use the HELOC for any other reason, make sure you get a large enough line to cover both needs. If you're planning to use the HELOC to finance an automobile, for example, you'd want to still have enoug[...]