Personal Finance Review – When’s the Next Black Monday?

This article on Black Monday caught my eye yesterday.  The general idea is that although market losses are bad, they also represent a buying opportunity for long term investors.  The article lists the following three things that will help you invest successfully, despite market declines.

   1. The quality of the companies you buy.
   2. The price at which you buy them.
   3. The length of time you own them.

Although I agree the principles are correct, I can’t help but wince at the thought of losing 22% of a portfolio in one day, even if it means a monumental buying opportunity. 

I’m sure there will be another black day on Wall Street, it may not be a Monday and it may not be soon but I’m sure some variation of it will come again and we’ll all lose money : (  However, I’m not going to let that stop me from investing.  I’m going to keep putting money away and probably even build up some cash reserves so I can take advantage of any enormous market drop.

Until then, check out the money articles I ran across this week:

The Digerati Life has a TurboTax Review and Generation X Finance asks if you think we’re in a recession.

My Dollar Plan shares how you can get free money from Upromise and Brip Blap continues his causes of failure series with the latest reason, insufficient education.

The Suns Financial Diary reminds anyone who bought an HD DVD from Best Buy before 2/23 that they can get a $50 gift card.

The Lazy Man describes why so many people are feeling poor and talks a little about the Money Writers.

Million Dollar Journey covers Informal In-Trust Accounts, it’s interesting to see how other governments, in the example Canadian, give their citizens tax-advantaged ways to save.

The Mighty Bargain Hunter points out a good way to remember your bills that you can’t put on auto-pay and Free Money Finance walks through how to decide how much life insurance you need.

Five Cent Nickel found a calculator where you can estimate your tax rebate and Blueprint for Financial Prosperity talks about the power of impulse saving.

No Credit Needed gives us 5 ways to teach kids about money and the Simple Dollar covers a new site called SmartyPig that you can use to help kids set & reach financial goals with the help of a bank.

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Borrowing & Lending Money with Prosper & Lending Club

Peer to peer lending is making an impact on the way some people borrow or invest their money and the word is spreading about both Lending Club and Prosper.

Within the last week and a half, person to person lending has seen coverage on the CBS Evening News, the Wall Street Journal, and Entrepreneur.com:

• In Credit Crunch, Lending To Each Other – More Americans Turning To New Source Of Money: Person-To-Person Lending – CBS News
• Where Either a Borrower Or a Lender Can Be – Wall Street Journal
•  Business Loans Get Personal – Entrepreneur

While CBS focused more on the ability of individuals to borrow and lend money, the Wall Street Journal article looked at both entrepreneurs and consumers, and Entrepreneur.com covered how small businesses are using peer to peer lending to raise capital. 

The CBS report estimated the size of the peer lending industry to be about $1.6 billion dollar now and expects it to grow 800% in the next 2 years. One things for sure, if Katie Couric keeps reporting on the industry, that will speed its growth.  The next thing Chris Larsen (Prosper CEO) and Renaud Laplanche (Lending Club CEO) need to do is get on Oprah : )

You can watch the CBS clip below:

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Prediction: Housing Bubble Bursts, Bear Stearns $2 a Share, Fed Bails Out Investment Banks

If I’d have written that prediction several years ago I’d probably have received a lot of heat for making such impossible claims.  Of course, it is impossible to see into the future but I think it is possible and wise to think about what the future might hold based on a little common sense.

When money was flowing freely and the credit bubble was building, I can recall thinking that it wasn’t possible for things to go on like that forever.  I remember hearing a radio spot a few years ago about a family that “needed” to upgrade into a newer/bigger home but couldn’t afford the payments on a 30 year fixed mortgage.  They were “fortunate” enough to learn about adjustable rate mortgages from their bank and used an ARM to pay for a new home.

I wonder where that family is now?  I hope for their sake they figured something out but I imagine they’re no longer in the house they upgraded to.  I remember as I listened to the broadcast thinking something like, What are these people doing? Don’t they realize if they can’t afford the home now, borrowing with an ARM isn’t going to solve that problem? It just plays with the numbers a little bit and buys them a few years in the home until they’ll be forced to leave.

What this reminds me of is that common sense is the most valuable asset you can have in your financial portfolio. Just because you can get an adjustable rate mortgage, 4 credit cards, and a 72 month car loan doesn’t mean you should.  Sure, everyone else may be doing it and they might seem fine now but if it doesn’t make sense, don’t do it!

I think most people are guilty of this to some degree.  My family lives in a nicer home than we need to and have nicer things than we need, and I consider us pretty good with money.  A lot of people I know are way worse than us and we’re nowhere near perfect.

If I had to make a prediction about the future of our economy, it would be that anyone who hasn’t had a good common sense slap from the current economic conditions is going to be in a world of financial hurt over the next decade.  I know it’s not real specific, pretty general, but I think it’s a pretty accurate prediction.  Use common sense when spending your money or you’ll go broke!

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Managing Your Money is Easier Said Than Done

Have you ever given anyone advice, then looked back later and seen that advice from a whole different point of view? Maybe it was good, maybe it was bad, or maybe it was part right and part wrong.

While writing about money every day I make lots of suggestions and judgments about a wide variety of personal finance issues and they all come from a distinct perspective.  A married thirty some year old male in a certain tax bracket, job industry, and zip code. As some of those things about my identity change with time, I look back on older articles and see them in a different light.

Financial Changes
Over the last two years my family has added another member and gone down to one income.  Prior to that, we had enough money to invest 30% or more of our income, pay our bills, and still have a disposable income.

With higher expenses and lower income, we have to make choices that we didn’t have to worry about before.  We have to balance quality time spent with our son against income and contribution levels to our retirement accounts. 

Money Decisions & Actions
We still have the same habits and lives but less money coming in and more going out so tough decisions are necessary.  I’m learning its one thing to say, “Invest 25% of your income” and another thing entirely to do it.  Life happens and you find there are more important things than money.

Not that we don’t follow the same basic spending and investing principles as we did before, it’s just now we have less of a margin to work with and sometimes building net worth, a retirement egg, or other financial goals have are a lower priority.

Money Perspective
Your perspective on money will likely change based on the amount that you have. I think the key to success is sticking with the basic financial principles and to also remember everyone around you is in a unique financial situation and faced with very personal financial decisions.

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Personal Finance Review – All the Top Money Articles

Guy Kawasaki has launched a new site that gathers all the top articles from the web into one place.  There is so much useful personal finance information available online, now there’s another tool to help you stay up on it all.  Here are some of the articles that Alltop helped me find this week:

• Smart Moves To Lower Your Health Care Costs
• Basketball Pools, Blackjack and the Lottery…. Do You Gamble
• JPMorgan Chase Buys Bear Stearns for $2 per Share
• Why Be Rich?
• Ladies and Gentlemen, Here’s $1,000 Gold!
• Frugal Recipe: Cooking a Whole Chicken
• Am I officially cheap?
• How I Plan to Quit the Rat Race
• Save Money by Fixing Things Yourself
• 5 Questions To Ask Your Creditors When Making Debt Reduction Payments
• Have you planned for your refund and rebate?
• How Online Bill Payment Adds Months To Your Life
• 8 Benefits to a Recession or Down Market
• Bear Stearns Meltdown Timeline
• Excited and Scared: One Week as a Full-Time Blogger
• Identity Theft and Family
• 17 ways to save on your taxes

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Setting Big Goals is the First Step to Achieving Success

Those that aspire for success are the ones that achieve it, I’ll give you an example.

For all of you non basketball fans, March is a big month for college hoops.  Weeks, months, and years of anticipation & preparation come to a head for hundreds of players & coaches in the NCAA basketball tournament.

The winner of the tournament is crowned the best team in the country, a legacy the players and coaches will cherish for the rest of their lives.  The important lesson to be learned from this tournament originates long before the tip off of the big game.

Always Have Big Goals
At the beginning of every season, players and coaches set personal and team goals.  What’s impressive to me, and what I think we can all learn from, is the way that the top teams set expectations for their season. If you look at teams like Kansas, Duke, and North Carolina, their goal every year is to win the national championship.  I don’t know if it’s stated in team meetings or talked about between players but the hope & expectation is always there. 

Take Baby Steps
Certainly, teams have to take the season one game at a time, but I’d bet that National title is always somewhere in the back of their mind.  Each game matters, win enough of them and they’ll be conference champs.  Win the conference tournament to get a good seed in the NCAA tournament and then on to the big dance.  Taking it one step at a time but always having that big goal in mind.

Decide to Work Hard
Granted, the teams I’m talking about have a long history of success and have the talent and experience to base their expectations & hopes on.  But just like you and me, they all had to start somewhere.  I’m sure each of those players put in uncountable hours of practice & dedication to put them in a place where they could be on one of those teams and maybe one day play for the championship.

Challenge Yourself
What I get out of this is to set my goals high.  Each day I need to aspire to high levels of success.  Whether it’s personal finance, career development, fitness, or starting my own business I have to expect the best from myself.  Even if my aspirations seem unreachable I need to commit to them.  Then I’ll have to find ways of making those goals a reality.

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Consumer Lessons Learned from a Lawn Care Salesman

Do you hang up on telemarketers? Why waste your time, right?  I feel the same way but last night was different.

The phone interrupted our evening, “don’t answer it”, my wife said. “It’s that lawn care salesman calling back”.  Thirty minutes later, the phone rings again and I pick it up, thinking it might be important but quietly hoping its the salesman.

“What’s this guy going to offer”, I wondered.  Whatever it is, I’m not buying but I just want to hear his spiel.  Sure enough, he was calling to sell me lawn service and he launched right into his sales pitch. I didn’t ask questions or show interest, I simply said yes at the appropriate moments and took notes as talked.  Here’s the selling tactics I observed:

We’re Professionals, We’re Special

“You know the EPA won’t let consumer apply the same stuff as the pros, what you put down from Home Depot will only green it up but it won’t build up your lawn”.

My yard needs something I can’t give it. I need him to give my yard special treatment.

The Industry Sucks, But We’re Different

“The whole lawn care industry will sell you stuff to green up your grass and make it grow faster. You can do it yourself if you’d like but you’ll just green it up and grow more weeds.”

It’s a conspiracy, everyone’s in on it, EXCEPT him : )

The Special Sauce

“Anyone can make your yard green but we build up your root system for a healthier lawn.”

Perfect, he’s better than everyone else but I can’t see the root results, I’ll just have to take his word for it.

Here’s the point where I give my first thanks but no thanks.  I say he definitely knows a lot about grass but I’m not in the market for a lawn service.  I don’t tell him this but come on buddy, it’s just fescue.  There’s a lot more important things going on in my life right now than blades of grass.

The Fear Tactic

“Do you know how much a good lawn will raise the resale value of your house? It’ll bring it up 3-5%, bare minimum.”

If I don’t hire him tonight, I’ll get thousands of dollars less for our home when we sell it someday.

Tell a Story Tactic

I didn’t capture the whole story but his grandfather told his day 40 years there are two things that sell a house, the front yard and the front door.  His dad is a “dingbat”, he didn’t listen to his grandfather and couldn’t sell the house. 

So he makes the product more personal, it really does work, his dad didn’t listen and paid the price.

Experience Tactic

“I’ve been doing this for 20 years.”

I politely say no again and he turns up the sales pitch.

• You don’t have to start out with the full 7 steps
• What I want for your lawn is to put you on 5 step program
• Save money on grub control, weed & feed, and grass seed
• We’ll get rid of your grubs, guaranteed!

He’s pressing the right buttons, I can save money and don’t have to commit to a whole year. I’m not interested but he makes it seem like a good deal, if I was remotely interested he might have swayed me there. I thank him for his time, say I’ve learned something but I’m not interested.  Somehow I knew that wouldn’t be the end of it.

Free Trial Tactic

“Let me work with you, I’ll show you results.  What you’re spending your money on right now won’t work.  I’ll give you the first treatment free if you just try it.”

I’m starting to feel a little squirming from him.  He senses my disinterest and wants to close a sale so he starts throwing in free trials.  I probably could have talked him into an additional deal but I was starting to get irritated.  Again I come back with “no thanks” and he decides to give it one last try.

Guilt Tactic

“So you’re not looking to improve your lawn huh?  What you just don’t care about it?”

Now he’s really getting under my skin. Like a good sales person he won’t take no for an answer. Of course I have no intention of buying and don’t want to waste anymore time.  I brush off his next appeal of “just let Let me do the first two applications and you can see how it goes”.  He finally gets the picture. Now that he sees I’m a dead lead he’s off the phone in seconds, surely off dialing someone else who hopefully cares a little more about their blades of grass.

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How do You Spend a Bonus Check?

Annual bonuses are here!  Our company did well enough in 2007 that we’re getting a bonus, 3% of our salary is the rumor.  They’re supposed to show up in our bank accounts or mailboxes tomorrow so the office was buzzing with talk of different ways to spend the money this afternoon.

How to Spend a Bonus
I only heard one person say that the money was going in the bank, everyone else had plans for how they’d spend it.  Here are some of the things people are planning on doing:

• Buying a big screen TV
• Finishing their basement
• Going on vacation
• Buying new appliances
• Paying off a credit card

An Excuse to Spend
One of the things I noticed is that the bonus tended to be a spending enabler in the sample of people I talked to.  Many people had things they wanted to spend a lot of money on but just couldn’t pull the trigger.  Now that they’re getting a check for a grand or more they feel okay going ahead with a purchase.

The bonus isn’t going to cover the big TV, a basement remodel, a vacation, or new appliances, most people are simply treating it as a down payment on those things, a green light to spend money.  Of course, I couldn’t help but wonder if they’d be better off just depositing the check for a rainy day.

Spending Wisely
Of course, I’m not saying that people shouldn’t spend their bonus check, as a matter of fact that’s just what I’m going to do.  We’re going on a big trip this year and the bonus will help pay for it.  The key difference is that we’d already planned the trip, we were already saving for it, the bonus will just help us get to our savings goal faster.

In my opinion, a bonus check that triggers random, unplanned spending is not being put to the best use.  Maybe put the check in the bank for a few months, sit on the money, and think about it.  Then spend away!

Oh and congrats to the lady that’s paying off her credit card debt, now that’s smart spending!

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Top Affiliate Challenge Could Make You an Internet Reality Star!

When I was in Vegas I met a guy named Thor Schrock, who I’d watched on Joel Comm’s Next Internet Millionaire internet reality show.  The show was a competition to see who could learn the most about marketing on the internet from industry experts and put what they learned into action.  Thor made it deep into the competition and just missed being one of the two in the final showdown for the grand prize.

Anyhow, I ran into Thor and his wife at an event in Vegas and got to spend a while chatting with them about the show, their family, and what they were up to now.  It was a nice visit, they’re from the Midwest like me and also have a toddler so we shared funny stories of the little guys waiting for us back home.

Top Affiliate Challenge
I found out that Thor is in the midst of launching his own internet reality show called Top Affiliate Challenge.  Below is the description from the site, basically, it’s a chance to get hands on experience marketing on the internet while being advised by an expert in the field. 

Top Affiliate Challenge is the web’s first real-time reality program. Over a three week period 12 internet marketers will be divided into three teams. Each team will be led by an established and successful affiliate marketing guru.

Individuals will compete personally as well as part of their team to maintain their place on the show. Teams will promote real affiliate products on the internet to real potential customers amid all of the normal competition that would naturally occur.

Why Do You Care?
I’m writing about Thor’s show for two reasons.  The first is that the show is accepting applications for contestants, you submit a video explaining why you should be chosen to be on the Top Affiliate Challenge.  You can see all the videos already submitted here, anyone can apply!  I’m sure it would be an experience you’d never forget, two of the experts have already been announced, Jeremy “Shoemoney” Schoemaker and John Chow.  I’d love to apply myself, just don’t know if I’d want to be away from my family for the whole time.

Of course, being broadcast to the world isn’t everyone’s idea of fun. The second reason I’m writing about the show is that you’ll be able to learn a lot just by watching. The show airs in July, you can keep up to date on the show’s progress at the Top Affiliate Challenge blog.  If you decide to apply let me know so I can vote for your audition!

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New Flexible Spending Account Strategy – Personal Finance Review

Every year I always scramble to try and spend my flexible spending account balance before the deadline.  As it comes down to the wire I start looking for anything to spend the money on that meets the FSA guidelines.  This year I ran across a promising strategy that should make it easier to clear out the FSA balance and ensure the money is put to good use.

During our last visit with the pediatrician I was pondering how I could spend our remaining FSA balance. I asked the lady at the billing desk if we could pre-pay for future services and she was more than happy to accept payment.  I know the money will be used because we’re regular visitors at the pediatrician’s office so it seems to be a perfect solution. 

I haven’t submitted the receipt to our FSA provider for reimbursement yet so I’ll let you know how that goes.  I don’t anticipate any issues, I’m excited to have hopefully found a good strategy for making sure we get to use all the pre-tax money we put into our flexible spending account.

On the topic of heath care and insurance payments, Blueprint for Financial Prosperity discusses HSA, HRA and FSA Differences and the Mighty Bargain Hunter reminds us we get what we pay for with health care. Here are some other recent money articles I enjoyed:

-The Suns Financial Diary has a Financial IQ Quiz

– Generation X Finance goes over Social Security Disability Benefits

– The Digerati Life covers Small Business Payment Hassles

– Lazy Man & Money complains about door to door salesman

– Brip Blap gives coverage of the classic book, Think & Grow Rich

– Million Dollar Journey is giving away the book Fast Profits in Hard Times

– Five Cent Nickel reminds us that Past Performance Does Not Predict Future Returns

– No Credit Needed reveals his biggest financial regret

– Free Money Finance hosts personal finance March Madness

Stop by the Travel on a Shoestring carnival and checkout how you can save money in Las Vegas and other US cities.  Or if you want to learn more about peer lending, visit the prosper lending review for the carnival they hosted that included some peer lending lessons.

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