Category: Financial Management

How to Buy Gold: A Beginner’s Guide

There has been a lot of discussion about buying gold in the media over the past several years.  You may have wondered how exactly do you go about making such a purchase.  Mark Griffith, a former floor trader with the London International Financial Futures Exchange, gives a concise introduction in this topic. In this EHow video, Mark outlines the options available in purchasing gold in the marketplace.

Further aspects of using precious metals for achieving financial freedom will be presented in future editions of FFN.  FFN Editors

(Disclaimer: The views expressed in the above video are strictly those of the presenter.  They do not necessarily represent those of FFN.  Please use due diligence prior to applying the concepts, recommendations and/or in purchasing any products or services from the presenter). FFN Editors

The Reality of Achieving Financial Independence

The road to financial independence is not a simple one.  Lisa Smith, writing for Investopedia, outline the issues and dilemmas we face on that journey in the following article. With over 20 years as a financial writer, Ms. Smith offers a very clear analysis of the pitfalls that can slow or even divert us on our way to financial freedom. FFN Editors

Two Roads: Debt Or Financial Independence?

By Lisa Smith  on August 17, 2012 for Investopedia

Here is a very basic plan for achieving financial independence:

It sounds simple and straightforward on paper, but in reality, earning a high income does not automatically translate into a high net worth. This article will explain why.

Income and Expenses
When most people are starting out, they rent a small apartment. Getting married or setting up a living arrangement with a significant other generally results in a higher income, but it is also likely to lead to the desire for more space – often at the cost of the desire to make maximum contributions to a pair of individual retirement accounts (IRAs) or 401(k) plans. Unfortunately,there are many things that people may not know about an IRA, and the opportunity to increase savings often takes a back seat as living accommodations are upgraded to a single family home.

After a decision is made to have children, buying a minivan, paying for clothes, toys, soccer, hockey, ballet, and other associated costs results in an increased outlay of cash, not only eliminating the ability to save more, but potentially resulting in a diminished savings rate. Having children can also result in moving to a larger home in a better school district and,the decision to pay for tuition at a private school, and then maybe even a college education. All of these things start to take precedent over funding your own retirement savings.

Lifestyle
Lifestyle decisions can also have negative impacts on savings rates, even as income increases. Scrimping and saving simply isn’t fun. If we can afford to take a luxurious vacation, buy that sports car, upgrade the wardrobe, spend a weekend at the spa, buy that place at the beach or chalet in the mountains, don’t we deserve it for all the hard work we have done?

The desire to spend instead of save is also fostered by a quick look at the shenanigans on Wall Street and the poor investment returns in our portfolios. Anybody holding Enron, Worldcom or dozens of other failed firms in their portfolio aren’t likely to be singing the praises of savings. A look at most investment statements during a bear market also serves as a reminder that a 20% loss is not recovered by a 20% gain. If we’re going to be cheated by the firms we invest in and watch our portfolios decline in value even when we diversify, it’s easy to justify the purchase of something we will at least be able to enjoy in exchange for our money.

Geography
Geography can also work against the ability to save. In Silicon Valley, a modest ranch house can sell for $500,000. In New York City, private school tuition for three children can reach six figures and mortgage payments of $150,000 per year are not uncommon. Moving up in the world also places one in a different position on the socioeconomic scale.

If you are living the upscale lifestyle of an investment banker to the rich and famous, driving to a client meeting in a Ford Focus is out of the question. Similarly, if everyone in your social network has a housekeeper and vacations in the Hamptons, those items become an expected part of the lifestyle in order to maintain your social network and class. That correlation between standard of living vs. quality of life is very common.

The Eye of the Beholder
Although it might sound extravagant to those of us earning the national median of around $50,000 (according to Census Bureau figures), having more money (even much more money), doesn’t always put people farther ahead. In fact, those earning more almost always have a lifestyle that leaves them with more things to pay for. That said, before class envy takes hold, those of us at the lower end are also not skipping our lattes, nights on the town, cable television, cell phones, cigarettes, alcohol, new cars, and other nice-to-have-but not-strictly-necessary expenses.

In the end, everybody wants whatever they can afford, and instant gratification is a whole lot more fun than watching a quarterly brokerage statement for 20 years or more. As a result, most of us end up financing our lifestyles with debt. And many are worried that standard of living vs. quality of life is very common.

The Bottom Line
Sticking to the seemingly simple plan of earning more and saving more requires serious discipline and sacrifice. It means living below your means, regardless of the level of your means, and making savings a priority. If requires having a plan, saving and maximizing the amount you invest in our 401(k) and other savings vehicles before spending on the extras. It may not sound like fun, but years from now, when you look back at all the people who seemed to have it all but were really just getting by, you’ll be one of the ones laughing all the way to the bank

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Lisa Smith


Lisa Smith
Lisa Smith has been a professional writer for nearly two decades. Smith has worked for many of the nation’s top mutual fund providers and banks in addition to numerous magazines, websites and other publications. Smith specializes in financial services and travel, and is currently the head of communications for a large mutual fund company.
 
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Don’t Retire, Strive for Financial Independence Instead, Part 2

Our featured writer, Richard Eisenberg, continues his analysis of the benefits of planning for financial independence instead of retirement.  This, the second part of his article, includes a review of several retirement calculators. These calculators can give you a sense of what sort of capital is needed in order to realize the type of retirement you wish to have.  As you will see, not all calculators are the same.  So, choosing the right one is important. FFN  Editors

Plan For Financial Independence, Not Retirement (Continued)
Richard Eisenberg, Contributor to Forbes Magazine, Personal Finance Section (www.forbes.com)

Two Types of Retirement Calculators

If you’re trying to figure out your Financial Independence day, should you bother using an online retirement calculator? I think it depends on the tool.

Most retirement calculators are actually best for people in their 20s, 30s and early 40s who have years to save furiously once they see their “number.” The electronic number crunchers typically ask few questions, partly because younger people can’t possibly determine for sure their retirement income sources or expenses.

“When you’re further away from retirement, these calculators are directional in nature,” says Kent Allison, a PwC partner and leader of the firm’s financial education practice, based in Florham Park, N.J. “When you get closer to retirement, you really have to get into a nitty-gritty cash flow analysis.”

He’s right. If you’re three to 10 years away from retirement, that’s the time to figure out where the money will come from to cover what Pat O’Connell, executive vice president for the Ameriprise Advisor Group, calls the three types of expenses:

Essential expenses that’ll be covered by guaranteed income sources, like bonds, Social Security and a pension.
Lifestyle expenses purchased with money from your investment portfolio.
Unexpected expenses, like health care and long-term care costs, paid for out of your emergency savings fund.
Three Good Calculators for People 50+

There are, however, a few excellent calculators – not always free – that are specifically geared for people in their 50s and 60s. They can help you firm up a retirement cash-flow analysis.

One is Retirement Works2 for You, created by retirement adviser Chuck Yanikoski primarily for what he calls “nonaffluent people trying to play their cards as smartly as they can.” It costs $189 for the first year; annual renewals are $44.50.

RW2, as it’s sometimes called, asks a lot of questions; Yanikoski says you should plan to spend one to three hours answering them. (“Retirement is an extremely complicated thing,” he says.) But the results can be valuable.

As soon as you input your data and answer the questions, you’ll get an online report card with retirement planning advice and letter grades telling you how well you’re set under “normal” circumstances, if you live an extra long lifetime, if your investments don’t perform well, if inflation shoots up and if you run into high medical expenses, including long-term care.

You’ll also see how your cash flow would be affected if you delayed retirement and lowered your standard of living.

Two other calculators worth considering:

The free Ballpark E$timate from the Employee Benefit Research Institute’s Choosetosave.orgsite and the American Savings Education Council; Next Avenue has a link to the Ballpark E$timate calculator.

E$Planner, created by Lawrence Kotlikoff, an economics professor at Boston University. There’s a free version of E$Planner Basic as well as one that costs $40, with “what if” investment scenarios and Social Security options. The downloadable $149 product also offers “retirement spend-down” strategies, helping you determine how much to withdraw from your portfolio.

Use an Adviser to Plot Your Findependence

Whether or not you use a calculator to come up with your Financial Independence Day, I strongly suggest you work with a financial adviser to run the numbers.

“The decisions are major,” Allison says. “A wrong one could cost you a lot. So even if you don’t normally want to spend money on a financial planner, this is the one time to do it.”

Richard Eisenberg is the senior Web editor of the Money & Security and Work & Purpose channels of Next Avenue. Follow Richard on Twitter @richeis315.

(This article is available online at: http://www.forbes.com/sites/nextavenue/2013/07/01/plan-for-financial-independence-not-retirement/)

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Don’t Retire, Strive for Financial Independence Instead, Part 1

Our featured article in this edition of Financial Freedom News recommends a very different approach to the idea of planning for retirement.  Richard Eisenberg, a contributing writer for Forbes magazine, recommends that we focus on attaining financial independence instead of planning for retirement.  In this two-part article Richard outlines his views on how to make this goal a reality. 

In this article, we are given the 5 rules for declaring our financial independence.  The second part of this article, in our next edition, will discuss several types of retirement calculators and their role in the planning process. FFN Editors

Plan For Financial Independence, Not Retirement
Richard Eisenberg, Contributor to Forbes Magazine Personal Finance Section (www.forbes.com)

 Declaring your Financial Independence Day is a better idea than trying to come up with “the number” you need to retire, especially if you’re in your 50s or 60s and don’t have much time to pump up your savings.

What exactly is financial independence or, as some call it, financial freedom? That depends on your own definition.

In a new Capital One 360 survey, 44% of U.S. adults said financial freedom meant not having any debt, 26% said it meant having enough saved for emergencies and 10% defined it as being able to retire early.

I go with Jonathan Chevreau, the Toronto-based author of the new U.S. edition of Findependence Day, a “fictional finance” book, and creator of the Findependenceday.com site. His novel is about a young debt-ridden couple, Jamie and Sheena Morelli, and their road to reaching you know what.

Chevreau says that when you’re financially independent, you work because you want to, not because you have to. “Findependence is necessary for retirement,” he says. “You can be findependent and not retired, but you can’t be retired without being findependent.”

Chevreau targeted April 6, 2013 – his 60th birthday – as his Findependence Day and reached that goal, but he still edits Canada’s MoneySense magazine. “I have a job I like, so why would I quit?” he asks.

5 Rules to Declare Your Findependence

Chevreau’s five rules for achieving findependence:

1. Pay off your home in full. “That’s really the foundation,” he says.

2. Find multiple sources of income for retirement. These can include interest and dividends from your investment portfolio; rental real estate; freelance or consulting work; Social Security; an annuity; and perhaps a guaranteed pension.

3. Develop “guerrilla frugality” habits. Chevreau calls this “becoming a Frooger.” Keeping expenses low while working full-time will make it easy to live that way in retirement and reduce the amount of savings you’ll need for a comfortable retirement.

“If you spend like a millionaire, you’ll end up a pauper,” says his book’s protagonist, Jamie. “Spend like a pauper and you have a shot of becoming a millionaire.”

4. Save 20% of your gross income. This will be impossible for many people, but not for others. If you can’t save 20%, try for 15 or 10%.

5. Invest with a “Lazy ETF” portfolio. That means selecting, say, three exchange traded funds– a U.S. stock fund, an international stock fund and a U.S. bond fund – and holding onto them.

Review their performance once a year. Then rebalance your portfolio if the markets shift and you discover you have a higher percentage in one of these asset classes than you want. (Use index funds instead of ETFs, if you prefer.)

Women, Men and Money

At the risk of overgeneralizing, I think many women gravitate toward the concept of financial independence, while men often prefer focusing on “the number.”

In the initial episode of the two-part Consuelo Mack WealthTrack public television series on Women, Investing and Retirement that premiered June 28, Jewelle Bickford, senior strategist for GenSpring Family Offices, said the first question her male clients ask in their monthly or quarterly meeting is “how has their portfolio done, whereas the women tend to think: ‘Will I have enough?’”

(This ends part 1 of this article.  Part 2 will follow in our next post). FFN Editors

Let us know your thoughts iregarding this nformation in the Reply Section below.  Also, please click “Like” and “Share” this artilcle with others who may be interested in achieving financial freedom.

(Disclaimer:  The views in the above article are strictly those of the author.  They do no necessarily represent those of FFN. Please use due diligence prior to applying the concepts, recommendations and/or in purchasing any products or services offered by the author).  FFN Editors 

How to Protect Against Indentity Theft

With the latest announcements of major consumer I.D. theft still fresh in the news, here is an article that offers important advice on protecting your financial information.  This comes from the TransUnion organization and describes how to reduce the potential of identity theft.

As a major credit reporting agency, TransUnion is well-known in the credit information and information management field.  For more than 40 years, it has worked with businesses and consumers to gather, analyze and deliver critical financial information. FFN Editors

How to Prevent Identity Theft
By the TransUnion Staff

Identity theft is a serious problem affecting more people every day. That’s why learning how to prevent it is so important. Knowing how to prevent identity theft makes your identity more secure. The more people who know how to prevent identity theft, the less inclined others may be to commit the crime.

Preventing identity theft starts with managing your personal information carefully and sensibly. We recommend a few simple precautions to keep your personal information safe:

 

Only carry essential documents with you.

Not carrying extra credit cards, your Social Security card, birth certificate or passport with you outside the house can help you prevent identity theft.

Keep new checks out of the mail.
When ordering new checks, you can prevent identity theft by picking them up at the bank instead of having them sent to your home. This makes it harder for your checks to be stolen, altered and cashed by identity thieves.

Be careful when giving out personal information over the phone.
Identity thieves may call, posing as banks or government agencies. To prevent identity theft, do not give out personal information over the phone unless you initiated the call.

Your trash is their treasure.
To prevent identity theft, shred your receipts, credit card offers, bank statements, returned checks and any other sensitive information before throwing it away.

Make sure others are keeping you safe.
Ensure that your employer, landlord and anyone else with access to your personal data keeps your records safe.

Stay on top of your credit.
Make sure your credit reports are accurate and that you sign up for a credit monitoring service, which can alert you by email to changes in your credit report – a helpful way to prevent identity theft.

Protect your Social Security Number.
To prevent identity theft, make sure your bank does not print your Social Security Number on your personal checks.

Follow your credit card billing cycles closely.
Identity thieves can start by changing your billing address. Making sure you receive your credit card bill every month is an easy way to prevent identity theft.

Keep a list of account numbers, expiration dates and telephone numbers filed away.
If your wallet is stolen, being able to quickly alert your creditors is essential to prevent identity theft.

Create passwords or PIN numbers out of a random mix of letters and numbers.
Doing so makes it harder for identity thieves to discover these codes, and makes it easier for you to prevent identity theft.

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Top 10 Forex Trading Tips for Any Level of Investor

Here are 10 forex trading tips from investing guru Vince Stanzione of 50WallStreet.net. Vince suggests an approach for taking advantage of the huge forex (i.e. Foreign Exchange) market that does not follow the suggestions commonly cited in the media. Instead, he uses an approach that is more like investing by using longer time frames. This is different from trading the forex market in a more short-term, day trading style.

Let us know what you think of this information in the Comment section below.  And, please “Like” and “Share” this information with others who may be interested in achieving financial freedom.  FFN Editors

(Disclaimer: The views expressed in the above video are strictly those of the presenter and their sponsor(s).  They do not necessarily represent those of FFN.  Please use due diligence in applying the concepts, recommendations and/or in the purchase of products or services offered by the presenter).  FFN Editors

10 Financial Freedom Lessons You Can Start Applying Today

Given the challenges in achieving financial freedom, here are 10 lessons from Street Smart Finance that can help keep you on track.  These are seminal recommendations taken from 10 different financial management thinkers.  They represent the best thoughts on the financial independence process and broaden the range of expert knowledge available to us. 

Let us know your thoughts in the Comment Section below.  Also, please “Like” and “Share” this information with others interested in achieving financial freedom.  FFN Editors

Achieve Financial Freedom: Awesome Lessons to Spruce up Your Finances
Posted by Shilpan for Street Smart Finance (www.streetsmartfinance.org)

“An investment in knowledge always pays the best interest”. — Ben Franklin

Achieving financial freedom is no small feat to undertake. Bogeyman is around the corner to snatch up your money before you even know. Even brightest among us face peril of losing wealth, if few major bumps come along the way.

How can you achieve financial freedom amid the ocean of financial information to explore? If you’ve felt hapless finding your safe harbor of financial freedom, you’re not alone!

Isn’t it a fabulous idea if you can get valuable advice to achieve financial freedom from 10 brilliant articles of financial wisdom on the blogoshpere? Of course, it is.

1. Saving money is the key to achieve financial freedom

The first step is to save aggressively. I’ve been saving 50%-75% of my after tax income every year for the past 13 years. I try not to be a miser and have done my best to try to spend money on things I enjoy e.g. vacations, food, a home, and tennis. Where I did “sacrifice” was not buying higher-end new cars (all but one were second-hand and under $20K) and going on less exotic vacations. Amanpulo I’m coming for you eventually!                     www.FinancialSamurai.com

2. Live Modestly

A lot of rich people constantly stress about their financial situation, all the while spending like there’s no tomorrow. If you’re making $500,000 this year and spend $400,000, you’d better hope that the economy doesn’t crash because once you’re out of a job, good luck funding that $400,00 a year hole in your pocket. By living modestly, you can relieve your stress and sleep well at night. Ostentatious living creates stress over your bills. – www.ModestMoney.com

3. Become a Renaissance man

What does becoming a Renaissance man mean? Think of a man like Leonardo da Vinci. Not only is the man famous for his inventions and scientific studies, but he is also one of the most famous painters of his time. His talents and interests were broad and deep, and there was no shortage of things to work on and explore. – www.InvestItWisely.com

4. You can’t go wrong with an Index fund

A portfolio of 100% stocks, which is what VTSAX(Vanguard Total Stock Market Index Fund) gives you, in study after study provides the greatest return over time. The only downside, and I mean only, is that the ride will be very rough at times. Admittedly, it’s a big one. If you are not tough enough to stay the course, if you get scared and bail when the storms are raging you are going to drown. But that’s a failure in you, not a downside of this asset class. – www.jlcollinsnh.com

5. You are responsible for your financial destiny; choose well

It is widely believed that small changes, practiced regularly, lead to out-sized results. Many great accomplishments began with tiny actions, implemented again and again. There’s research supporting the financial and personal benefits of quite a few of these habits. – www.barbarafriedbergpersonalfinance.com

6. Ordinary people can do great things too

I used to think that only geniuses and superheroes could achieve fantastic things in life. Or, at the very least, I felt that to have any success you had to be a totally go-getting, risk-taking, all out entrepreneurial maverick. At heart, I’m a cautious, down-to-earth kinda guy. My personal experiences, though, have shown me the potential that comes when you take positive action – even if it is only one step in the right direction. Extraordinary things are happening around us every day … all achieved by ordinary folk like you and me. — www.Vividways.com

7. Learn to invest in dividend growth stocks

The goal of Dividend Growth investing once retired is to maintain and grow your income from the dividends your portfolio produces. You maintain steady uninterrupted monthly retirement income as long as collectively your stocks will continue to produce 4% or more income annually and the dividend is not cut. – www.SeekingAplha.com

8. Think like a hamster, live like a hamster

Think less about money, more about time. Stop thinking of physical possessions in terms of money and start thinking of them in terms of time. Mentally convert money into minutes and you’ll achieve financial freedom faster. – www.FreeMoneyFinance.com

9. Save as if you were a 60 years old

Three things saved us: 1. Our unwavering 50% savings rate. 2. Avoiding debt. I’ve never even had a car payment. 3. Finally embracing the indexing lessons Jack Bogle perfected 40 years ago. – www.Mr.MoneyMustache.com

10. Learn from the Greatest Investor

Making money isn’t the backbone of our guiding purpose; making money is the by-product of our guiding purpose.” If you’re doing something you love, you’re more likely to put your all into it, and that generally equates to making money. – www.WarrenBuffett.com

Achieving financial freedom is all about developing mind-set to develop laser sharp focus on every aspect of your financial health. If you follow these articles of financial brilliance, you will be well on your way to the road of prosperity and happiness.

Disclaimer: The views expressed in the above article are strictly those of the author.  They do not necessarily represent those of FFN.  Please use due diligence in applying any concepts, recommendations and/or in the purchase of products or services from the author). FFN Editors