Sunday Financial Recap: Best of the Week

It has been a great week for "Life, Liberty and the Pursuit of Money." As well as a great posting week in general. I found some new Blogs, some great new content, and we hit some neat milestones here as well.

Here are my Favorite Posts of the Week:

1. The Brightside of Debt - Setting Myself up for Failure -This is the second blog I ever read about Personal Finance on the web and a big influence! I this post she talks about the through process that came about deciding to fund her Emergency Fund over paying Credit Card debt first.


2. Catherine Lawson's Business Advice Blog - 16 Truths About Staring a Small Business - She is a go to blog for anyone that runs a business or owns one. This one fully discusses how the strengths of ownership, are also caution signs!


3. Dividends 4 Life - Instead of one specific read, this whole weak was a fascinating look inside investing in Dividend producing stock. IN DEPTH knowledge, must read if you own stocks at all, even in a 401K.


4. Mrs. Micah - Gazelle Intensity When You are in it for the Long Haul - I Agree with Dave Ramsey that you Need to take immediate action as every day you wait compound works against you. However, I also believe that you should run your budget life as a marathon, not a sprint. She logically walks through that argument in a great way!


5. We're in Debt - Day 618: My First Paycheck - This discusses that the beginning of the year is a great time to review your insurance deductions from your check.

It's been a great week her with traffic growing, being included in some great Carnivals and picking up more subscribers then I thought I would ever have! Thanks so Much!

Please subscribe if you are enjoying the posts, and please comment. Love to hear what you are thinking!

Common Investor Mistakes Revealed

You might not think of yourself as an investor, but you are. Most of us have a checking account and probably a savings account, even if it is for just Christmas or your Emergency fund. A good portion also have 401K accounts or some other retirement account available to them via their work.

But even if you are just starting out, or have been maxing out your 401K there are five very common investor mistakes made over and over again. Retirement is a compounding game, meaning that returns magnify returns. You really can't afford to drop even 1% a year over 30 years.

If you invested $10,000, never touched it again and earned 4% interest compounded yearly (BTW avoid any investment that only compounds yearly :) ) after 30 years you would have $32,433.98, but at 4% percent it would be $43,219.42 or $10,785.45 more...more even than your original investment.

So here are Five Common Mistakes to Avoid:

1. I Have Plenty of Time to Worry about That - Actually you don't. Using those 4% numbers above; if you have that investment for 20 years instead of 30, your out nearly $17,000! Time is the friend and enemy...use it wisely
2. It is too Late - It's never to late! Once again time is ticking and every second lost is money lost. This goes for everyone: The best time to invest is now!
3. I Won't Take any Risk - While I believe we should all invest within our own tolerance level, unfortunately risk equals reward. You have to balance out the two. As shown above, every percentage is very important over time.
4. I am Captain Cowboy, Let it Ride! - OK, as I have stated before risk management is key here. You need the returns, but risk is still risk. If you want to bet on every tip out there go to Vegas, but read Viva Wall Street first.
5. All in your Company's Stock - One word that should scare the heck out of you at night; the 20th Century Frankenstein...ENRON. The company would have pep rallys, tell the the working staff how great things were going, wait for them to buy to drive up the price of the stock, then sell! I am not saying don't buy any either, take advantage of ESOPs (Stock Options) if you can, just do not peg a higher percentage then you should have of that type of investment class. If you think you need 20% Mid-Cap stocks, and your company is a Mid-Cap stock company and it is run well, etc, fine put some, 5-10% of it in the stock. It is hard to be the nay-saying when your cube mate is high-fiving the janitor, but when/if it tanks, you may be out of a job, but you won't be starting over.

Look, take whatever I say with a huge grain of salt. I am not a stock broker, but I just see people tossing away $10,000's of Dollars. Get with a retirement fund helper. Find someone you trust, then...don't trust her/him! Ask questions, lots. Read blogs (especially this one :) )Don't feel stupid. People can feel dumb all the way to the poor house!

But whatever you decide, make a plan and start working it today. The investment interest you save may be your own!

Personal Finance QuickTake: Credit Card Rewards

As I have said many times, even though there are cash back and other rewards available, for most of us it is a slippery slope that leads us back into overcharging more then you can pay off every month and enormous fees.

That being said, if you are going to use them, or are using them for work, get the most out of them you can. It can cost a credit card company more than $100 to get a new customer through the process of signing up. That is why every major card company has a good sized retention department to try to keep you as well. But as this story from Yahoo Finance states, half of people enrolled never collect their points/rewards!

Talk about money being left on the table! They get you to hold a balance, then you don't even get the reward!

Some of these rewards are never retrieved since we might not find anything we want. I had this issue with my CitiBank card. I kept saving our ThankYou points for the enormo-dome sized TV, meanwhile we probably would have been better off taking the gift cards and using that for holiday spending. (Actually we would have been better off not charging at all!)

Here are a couple quick tips:

1. The longer you hold them the more likely you are to not use them - Sure the vacation to Mars would be nice, but are you really going to get to the 2,000,000 point minimum bid? Probably not. Get the $50 gift card to Home Depot and fix your deck!
2. Point on Business cards -All it took was me paying the $75 to join and my company let me keep my American Express Points! It couldn't hurt and it is often an easy perk to give an employee,especially when you are a smaller company. This leads to #2.
3. Always sign up for the Mileage Points on Airlines - I hear so ofter that I only fly 2 times a year...as long as you fly every 18 months you miles won't expire. I did this for years before I became a frequent flyer and I had a nice 30,000 point pool built up when I did get status.
4. Sign up for the Hotel points too - Even if you don't stay to often at the Royal Pacific in Hong Kong, get the card. For having it i got free bottled water and Wall Street Journal.
5. Donate them to charity - Still have nothing that you can do with these? So many United miles that they carry you to the plane? Donate the points. The charities can use them to sell off or for their own travel. Many medical charities will use the miles to fly families to be together!

Overall point is that I wouldn't chase credit card points just to chase them. But is I am going to work my budget and clip a .20 off coupon for Peanut Butter, why wouldn't I take my $50 gift card to Home Depot!

Star Wars Economy: The Empire Falls

My son and I recently watched all six Star Wars movies together over a few days. It is really great when you share something you really enjoy. But something hit me while watching...The Empire only lasted about 30 years.

Why?

Was it that Vader threw The Emperor down the shaft of the 2nd Death Star? Was it the loss of so many men on the two Moon sized battle stations. I think not. I believe, like the Soviet Union the Galactic Empire fell apart due to dramatic overspending and a collapsed economy.

NASA's budget in 2007 was $16.8 Billion dollars and they can barely get the Shuttle to blast off. Even with using slave Ewok labor you still have materials and overhead, not to mention a massive military buildup and budget deficit! It would take a budget in the quintillions! The Emperor was just too focused on wiping out the rebels.

People think that he removed the Galactic Senate just because he didn't want to ask their permission to crush the Rebels. I believe that it had much more to due with the funding bills that they wouldn't pass.

Imagine the debate on the Senate floor when a Second Death Star came up to be appropriated. I am sure it was in the "Really Black Ops" budget, but some one had to ask the question, "If these are so strong...why do we need two?" Then the Emperor would have to explain that in the first design, they ran out of time and forgot to weld over a small hatch...oh, about the size of a womp rat. Probably no biggie, but just in case...

That was probably the straw that broke the dewback. The Senates got to go.

So let this be a lesson to you; Watch your budget and be careful with your spending or Vader will toss you overboard!

(Image from starwars.com)

Personal Finance QuickTake: Stocks Slammed

The stock market had a big turn down today with the stock market falling 250 points. Bad credit is hurts the best of us all. In fact if you never had a late bill, live within your means, and save 15% of your pay towards retirement.

How, like today unfortunatly not only companies that made bad desicions like Countrywide are getting hit, but broadly the market is down. While you may not hold individual stocks, a good chunk of American's have a 401K that hold Mutual Funds or specific stocks.

This means that this could be one of those years that balance out the great ones. You know what I mean the kind of year that takes your portfolio from being up 20% to up 10% or even.

So what do you do? Credit is going to get tougher to get get for awhile, so manage what you have well. Have you Emergency Fund, well...funded! Also be prepared to see the Fed roll back a half point then mayby even more.

The point is act like the Boy Scout motto: Be Prepared!

(image by ImageBlowout)

The 861 Tax Argument Brought to you by Wesley Snipes

If all goes well in the US Governments plan this is pretty much the next picture you'll see Starring Wesley Snipes in. According to the IRS Mr. Snipes owes Income Taxes on $38 Million in income generated between 1999 and 2004. First, who knew being "Blade" paid that much, and two how do you have $38 MILLION in income and think that you can not pay taxes. That wasn't far enough for Mr. Snipes, actually he went a step farther and said the government owed HIM $14 Million.

Actually there are many arguments that citizens have filed saying that Federal Income Taxes are unconstitutional, or illegal, or not binding due to the way the statuette is written. Mr. Snipes is basing his argument on something called the 861 Argument.

This refers to Internal Revenue Code Section 861 titled "Income from sources withing the United States." This section deals with what income can be called income from within the United States. The tax protesters say that the statute excludes some portion of the income of US citizen and Resident Aliens.

The argument is that since the domestic activities of residents of the United States (Americans and resident aliens) are not shown to be taxable, the domestic income derived from such activities does not become taxable "gross income" according to Wikipedia. The argument goes on that even this small amount is still eligible for your deductions. This is how he believes that the Government owes him $14 Million as that is what was already withheld.

Wesley believes in this so strongly even after the IRS told that wasn't going to hold water, he continued to withhold payment for two more years. The potential fine? Up to 16 years in prison. Under that same Wikipedia article it goes on to tell of 10+ more of these type protests like 861 that is out there.

Just a quick moment of clarity...say he is right. not just right, but the sort of right where the US government goes, "Oops, he is right! We never even thought of that. We are going to have to refund 100% of all monies collected from US citizens since 1861." "Gosh we're sorry!" It would be mayhem and the government would default. So if the government couldn't let it happen, even if you were right (which courts have said over and over that you are not) what is the best possible outcome? That you won't get audited? To recap, he not only didn't pay, He asked for $14 Million back!

You may be able to fight vampires Mr Snipes, but you'll never kill the biggest bloodsucker of them all, the IRS...

Personal Finance QuickTake: World's Cheapest Car

Today Tata Motors of India announced that they had developed the World's Cheapest (my word not theirs!) car. This is a real-life functioning car for $2500 for the base model.

The car is missing some of the finer things in life like: radio, A/C, Right-side mirror and only has one wiper blade. It also has 2-Cylinder, 33-HP engine, but has a top speed of 60MPH.

Now this car will probably not pass US safety laws at this price, but still I could see a US version for $4000. This really reminds me of the Yugo back in the 80's that was going to take over the world since they were so cheap, but never caught on here in a mass way. They just weren't of enough quality.

Tata is no Yugo though, they are the largest car builder in India and currently the leading bidder to take over Jaguar and Land Rover from Ford. With the SMART car from Mercedes also coming to the US, along with $3 per gallon gas, it may just be the beginning of a new era of tiny cars...