National Financial Literacy Month: What it means to you!

financial literacy month, april, my birthday, this that and the mba, thisthatandthembaWhat a great success the Roth IRA Movement was.  In a few days we are going to enter National Financial Literacy Month, what a great month to celebrate it, ohhhh the coincidence it also happens to be my birthday in April too!  National Financial Literacy Month came about in 2004 when the Senate passed Resolution 316 which officially recognized April as my birthday National Financial Literacy Month.  Originally started as youth financial literacy, it was realized that we all need to be well versed money and personal finance.  For my Canadian friends sorry we will have to wait until November to celebrate your financial literacy month!

Financial literacy plagues many of us in the sense that we live our day to day lives and forget to plan for the future.  No matter what country you live in around the world there has to be some end goal that we are saving for, which is usually retirement.  Living pay check to pay check and not setting aside funds early on can wreak havoc on your financial situation as you near retirement.  Sitting at work about to turn 30, 🙁 I cannot imagine coming to work at 75 and flying through excel spreadsheets at the same speed I do now.  Granted employers are not to age discriminate, but realistically when I get older I do not see myself as having the capacity to do the complex functions I do now. 

What am I doing about it?  I am saving for retirement so that when I am 75, I can be sitting around with my grandchildren enjoying the fruits of my labor with my wife.  What I am asking is for you to take a moment and look at your financial situation and decide what you are going to do about it!  If you look at your retirement portfolio at the moment, is it large enough that you could see yourself living on that for the 20-25 or more years in retirement?

I am not telling you to put aside your whole paycheck to retirement but see if you have any wiggle room to increase your contributions, if you can’t see the money outlasting you.  Every now and again we get caught up in the daily routine that we have to look at the big picture.  This month is not only to make you aware of financial literacy but also to look at your own situation!

Take inventory and maybe you will find an opportunity to save some money by refinancing a car loan or a mortgage now with the low interest rates.  Even a personal loan with low interest rates to consolidate high interest credit cards, there are many ways out there at the moment to save a little money. 

What tips or tricks can you offer the readers as ways to either make additional money or find ways to save?  Any interesting side hustles like the mobile hotspot?  How does your retirement portfolio look at the moment?

PHOTO BY: Yourdoku

Monday edition of the Five for Friday, Weekend Recap or whatever you want to call it!

Justin Timberlake, sexy back, taking sexy back, im taking budgets backFor all of you that missed the Friday edition, we were taking part of the Yakezie blog swap.  Basically what takes place is that we sign up for the blog swap and we are partnered with a fellow blogger.  We post an article about a particular topic, which this time the topic was the best investment advice I ever received.  I traded posts with my buddy over at Short Road to Retirement.  Be sure to stop over there and check out his site and also to check out my article!

I don’t know if you have been following along in the personal finance world but there is going to be a big movement that is going to take place tomorrow.  It is the Roth IRA Movement orchestrated by Jeff Rose over at Good Financial Cents

What a busy week last week was, I read so many great publications but here are a few that stuck with me as always in no particular order:

While I am no Justin Timberlake fan, I have heard the song Sexy Back but this is a remake of the popular song that finance nerds like me would chuckle about.  Take a look these shirts and be sure to rock your shirt around town! 

Take a look at a very powerful article written by Shilpan over at Street Smart Finance, about turning financial setbacks into success. 

We all do it and we know we do it sometimes.  Take a look at this great post by Daisy over at Add-Vodka!

We think we know but we really have no idea how to market ourselves, enter Nell of Housewife Empire.  Bookmark this site because I know you will be returning like I have been or better yet print it out and put it under your pillow. 

Ever wonder if there was a discrepancy in the three credit reporting agencies.  Make sure you pull your reports from the three!  Come visit Along for the Journey and see what they had to say!

Unfortunately this edition is on Monday, which means as you read this, I am sitting at my desk buried in excel spreadsheets singing Justin Timberlake in my head…Ahhhhhhhhh until tomorrow, enjoy the day!

I almost forgot, I got around this week so take a look at where I was: 

Is a degree worth the debt?  over at Life and My Finances

Make Money Make Cents

Short Road to Retirement

The College Investor

Odd Cents

Carnival of Retirement: Editors Pick!

The Frugal Toad

Personal Finance Whiz

I feel that it is always an honor when a fellow blogger takes the time to recognize one of my posts to be worthy to share with their readership and for this I say THANK YOU!

That is not me in the picture dancing. 🙂
PHOTO BY: rjhuttondfw

The Best Financial Lesson I Ever Learned

money, this that and the mba, blog swap, short road to retirement, retirement, investing, blogThe rule of thumb is that bonds are for retirees.  I am 35 years old and I love bonds.  When I was really young, I remember receiving savings bonds for my birthday.  I had no idea what they were at the time.  I was told by my father that they were going to be worth “a lot” of money some day.  Every year I would get these pieces of paper that were going to be worth “the number listed at the top left corner”.

Fast forward to the 90’s and the Internet boom.  The Internet boom created a huge jump in the stock market.  Millionaires were being made overnight.  I became interested in the stock market in 1995 and bought my first mutual fund, The Fidelity Select Technology fund, because I figured technology was the future of the world.  To buy the Select Technology fund I sold the $3,000 I had in savings bonds that were given to me over the years.  In a little over three year’s time, the money I put into the Select Technology fund grew to $6,000.  At that point I thought, “Forget those stupid bonds that take almost 20 years to double, I am going to invest in these stock mutual funds.”  I figured if I could double my money every 3 years, I could be a millionaire in no time.

I got a full time job and started my first 401k plan in January, 2000.  I got a list of mutual funds that I could invest in within the 401k.  The first thing I saw was a list of bond funds. My first thought was, “Forget those things, they don’t grow fast enough”.  Then I looked at the returns of the bonds funds and thought, “DEFINITELY forget those bond mutual funds, 7% returns, what a joke!”  My eyes shot down the page to find the ones with the highest returns.  I noticed that I could invest in the same fund I already owned, The Fidelity Select Technology fund.  I saw the return and thought, “Holy Crap, this thing doubled in one year!”  At this point my savings bond money that I used to buy the Select Technology fund grew to $12,000.  I remembered the Human Resources representative who introduced me to the 401k plan talked about 401k diversification.  I thought, “Give me a break, I have doubled my money twice since 1995, why invest in anything else.”  I set my contributions to 100% for the Select Technology fund.

In 2000, I lost more than 1/3 of the money I put into that fund.  I asked my colleagues what had happened.  Every one of them said, “Don’t worry about it, it will come back.  You will get your money back in no time and will start doubling your money again.  Technology is the future and the technology mutual funds will benefit the most.”  So I kept putting my 401k contributions into the technology fund.  By the end of 2001, I lost another 1/3 of my money.  At this point, I decided to sell that fund in my 401k plan.  I kept the shares that I bought with my savings bond money because I still had a gain in them.  In 2002, I sold after the value of my shares fell to $2950. I couldn’t believe that after 7 years of holding those shares, I actually lost money in that investment.  I became really discouraged by stock mutual funds.

In early 2002 I was having lunch with a coworker, Terry, who was retiring.  I asked him how he was retiring after the stock market had just crashed.  He said, “Only half my money is in the stock market, the rest is in bonds. I have been investing for almost 40 years.  I learned that over time, there will be hot mutual funds that have huge returns, but when the tide shifts, those hot funds are the first ones to crash.  Remember this, when the stock funds don’t do well, the bond funds do well.  When the stock funds do well, the bond funds usually still do okay. Put half your money in stock funds and half in bond funds, and you will do just fine.”

I followed Terry’s advice in 2002.  Since then my 401k has grown nicely.  My bond funds have returned about 7% per year and my stock funds have returned about 4% per year.  During the craziness of 2008, when the market crashed again, my colleagues were in a panic because they lost 40% of their money.  They told me they sold their stock mutual funds because they couldn’t sleep.  They asked me if I was selling my funds like they were.  I said, “Nope, a wise man once told me how to invest so I can sleep at night.  I have been sleeping just fine”.

 

PHOTO BY: 401k

WTF (Wait That’s Finance) Part I: Deep in the Money Naked Calls

finance book, finance textbook, textbook, this that and the mbaOh no here come the financial concepts, time to clear the cob webs we are going to talk about derivatives.  Want to sound smart at work today, drop the word derivative in some random sentences and wait for the looks you get. 

This is how my wife fell in love with me. Except this was back in college and I was a Chemistry major at the time.  I started dropping some names of the elements off the periodic table and the rest is history. 

What is a derivative?

What does the word mean, let’s take the root, derive.  Derive means to have origins in something else.  The lakes name was derived from ancient Mayan mythology.  With that said the derivative in the financial market is a security whose underlying asset determines the price.  Fluctuations in the value of the underlying asset (stock, bonds, currencies, market indexes) determine the price of the derivative.  You are betting whether you believe the price of the underlying asset will increase in price or decrease in price by a certain amount over a certain period of time.  Generally speaking, a derivative is often very risky; if you are risk adverse you may want to proceed with caution.

Why derivatives and how are derivatives used?

The question is why not, they are used for speculative purposes; remember the name of the game is managing risk.  Remember the other day when you were reading my article about Beta?  Alright go take a look, I will wait for you! We are using the derivatives as a hedging maneuver to reduce the risk of our portfolio. 

Types of Derivatives

The list is quite long for the list of derivatives; I could go on for weeks explaining all of these.  Common types of derivative contracts are: forwards, futures, options, warrants, swaps which then is broken out into interest rate and currency swap.   The title of the article is one of the varieties of the options. 

Example of Derivatives

If you are still following along let’s take a look at an example:  British company buying shares of (TTaTM) This That and The MBA off the NYSE using a stack of Benjamin Franklin’s!  This company is exposed to fluctuations in exchange rates between the nations.  To try to minimize the impact (hedge) of these flucations the British company would purchase currency futures.  This is a maneuver to lock in a particular exchange rate for any potential sale of the underlying stock of TTaTM, and the currency conversion back into Euros, the currency to which the British company prepares its financial statements.  That scenario we minimized the currency exchange rate fluctuations, if the British company wanted to invest in my company without the options contract they would be exposed to the volatility of my stock along with the volatility of the exchange rates. 

Any questions class?  What do you think?  I know we are Personal Finance bloggers, but has anyone had the privilege of working with options contracts?  Care to share a story or two?

PHOTO BY: fanz

All good things must come to an end…It was a good run while it lasted…RIP Encyclopedia Britannica print edition

this that and the mba, encyclopedia britannica, britannica, encyclopedia

Childhood….Ahhh those were the days of no responsibility where my only recollection of money was that my parents had it and I needed it to buy candy or that new toy.  But what I do remember as a youth was that my parents subscribed to Encyclopedia Britannica.  I asked my mom a while back how they ended up with the encyclopedias and she gave me the spiel where a salesman came door to door saying something about how it was going to be the way of the future.  They had just had me as their first child and they didn’t want me to be left behind as everyone else was subscribing.

Well, Encyclopedia Britannica is calling their 2010 print edition of the famed 32 volume print edition its last.   What are your thoughts on this?  Well here is what I have noticed first hand in our community.  If you take a look at another post of mine…hmmm where is it…oh here it is, I am on the board of directors for an organization that does a lot of things for the community.

Part of the organization that I am part of restores architecturally significant structures in our community that have a historic presence whether they be related to a former president or some other prominent figure.  Well two buildings that the organization owns have fallen into disarray and at the moment we are securing large grants to restore the buildings.  We reached out to the community as one of the rooms has a library and we are trying to furnish it.  You would be surprised at the number of editions of encyclopedias that people were willing to give away just to get them out of their houses.  The organization didn’t receive many other books other than print editions of encyclopedias. 

The sad thing is that my parents spent a good deal of money back in the day to purchase these, so that they would be able to provide what they thought was the best for us.  You may not consider it an investment as you would think of but it was an investment in mine and my siblings’ futures.  There were a few times back in grade school where we used the encyclopedias but they basically sat untouched on the shelves for many years.  They are actually still on the shelves sitting there taking up space in the virtual age where you don’t even have books anymore, thanks to Kindle and Nook.

Has anyone reading this article subscribed to this recently other than libraries?  For $1,400 dollars that seems quite lofty to keep an updated edition every 2 years with the amount of information on the internet.  I am honestly surprised that they stayed around this long with the internet.  Don’t worry though they are not going away they are focusing more on their educational content and digital editions of the encyclopedia.

Thoughts…What are yours??

 PHOTO BY: peppergrasss

Shhh…. What do you think of that B*****?

budget, budgets are sexy, budgeting in the fun stuff, budgetinginthefunstuff.com, budgetsaresexy.com, mba, this that and the mba

Now that I have your attention, you are probably scratching your head wondering why that would be on a personal finance website.  Shame on you for thinking that!! What would your mother say?  The word is in the news all over the world now.  That magical word is BUDGET.  The congressional budget, state budget, city budget, your personal budget, budget for that trip, some websites use that as part of their web address…this budget that budget… What in the world does the word budget even mean? 

According to my good friends over at Merriam Webster here are the origins of budget:

Middle English bowgette, from Middle French bougette, diminutive of bouge leather bag, from Latin bulga, of Celtic origin; akin to Middle Irish bolg bag; akin to Old English belg bag. First known use: 15th Century.

Now that I read that I can understand what the word budget means, well can’t you?  Think about it, budgeting in essence is using the available resources that you currently have, you can’t spend more than you make.  Well you can, but it is frowned upon. A bag holding your instrument of trade could be seen as your bank or wallet holding your cash!

Lately, the wallet and bank of mine have been near empty up until February of this year when my wife started working.  She was working probably harder before; she was at home taking care of our two little kiddies.  (Cheeks if you are reading this and have made it this far in the article, I love you, sorry for the shameless plug for my wife)

Here is the modern day definition from Merriam Webster:

a : a statement of the financial position of an administration for a definite period of time based on estimates of expenditures during the period and proposals for financing them

b : a plan for the coordination of resources and expenditures

c : the amount of money that is available for, required for, or assigned to a particular purpose

Taking a few moments out of your hectic routine on a monthly or bimonthly basis can help you find hidden cash flow problems (money you are spending that you may not know that you are spending) and free up some cash to throw at your retirement or any other goals you have.  Budgeting also helps you to set goals and gives you a target to work to.  Working day in and day out can become monotonous as the weeks and months fly by we wonder what we have accomplished looking back.  Well you are in luck, we can use the budget as a tool to show what we have accomplished. 

Setting a family budget doesn’t have to be elaborate or be on a fancy spreadsheet.  Write it on a napkin if you wish, but make sure that you stick to it.  Speaking of that my wife and I need to sit down and straighten out our finances now that we have 3 different cash flows!  

PHOTO BY: darek.zon