Extreme Investing for the Adventurous In All of Us

ExtremeInvesting

You’ve probably heard of extreme sports, sports “perceived as having a high level of inherent danger or difficulty”. Well how about extreme investing!

Extreme Investing
I’m a pretty non-extreme investor in general; most of our money is in index funds with a small percentage in other industry specific funds.  But I do like to use a small portion of our money for “extreme investing”.  What exactly is extreme investing you ask?  Well it really depends on the perception of the person that is risking the money.

To someone who trades stocks on a daily basis and is very comfortable with the market, making margin trades might be their version of extreme investing.  On the other hand, to a person invested only in CD’s or bonds, simply buying a stock might feel a little crazy.

Why Extreme Investing?
Of course the point isn’t to get an adrenaline rush or an extreme buzz from watching your investment’s progress.  The reason you might want to do a little extreme investing is that it can help broaden your financial horizons. As creatures of habit we tend to stick with what we know, whether what we’re currently doing is the best thing for our situation or not.

Extreme Investing Options
Extreme investing basically entails taking a small percentage of your financial capital and using the money to invest in something you typically wouldn’t but think could be a good opportunity for you. Maybe you’re interested in starting your own business, investing in someone else’s idea, or just trading a few shares of stock.  Ideally, you’ll do research on the topic before jumping in so you can learn the risks and opportunities of what you’re getting into.  The money you invest should be money you’re willing and able to lose 100% of, after all this is extreme investing : )

Investing Growth
The cool thing about extreme investing is that once you make some money with it, you can use that capital to reinvest into training, research, or more growth with the same idea.  My version of extreme investing has been dabbling in online businesses and I’ve invested the money I’ve made back into new ideas.

Investing Guidelines
As I mentioned earlier, it’s important to only use a small portion of your financial assets for extreme investing, an amount you’d be willing to lose. If you lose it all don’t continue to pile your money into it. Make sure you research the investment area and understand what it is you’re putting your money into. When you make money invest it back into your venture for future growth.  The last rule is to learn from your mistakes and widen your horizons!


Personal Finance Review – Money Sucks Edition

Do you ever get discouraged and decide that money just sucks?  We have to work so hard for money and yet it seems we never have enough of it.  We’re trying our best to build up money but everyone else seems to be working equally hard to take it away. So many of our decisions are based mostly on money, wouldn’t it be nice if we just didn’t have to worry about it?

Of course, then you have to snap out of it.  Money is here to stay and we just have to do our best to minimize it’s negative impact on our lives.  If we can learn how to accumulate money without making it the focus of our lives and use it wisely we should be okay.  Here are some articles from last week that just might help us do that:

When Owning a Home Isn’t Always All It’s Cracked Up to Be @ Generation X Finance

10 Facts About Buying and Selling A House of Horrors @ The Digerati Life

Things You Should Know About Percentage Traps @ Money, Matter, & More

New Features make Lending on Prosper Better than Ever @ Lazy Man & Money

2007 Consumer Reports Ultimate Money Guide (I) – Spending & Saving @ Suns Financial Diary

Seven Ways to Find Time to Invest in Yourself @ Mighty Bargain Hunter

No Credit Needed Notebook #1 and Notebook #2 @ No Credit Needed

Open Enrollment Time @ Five Cent Nickel

Save Money by Asking for a Discount and Paying in Cash @ Free Money Finance

MD 529: Prepaid College Trust vs. College Investment Plan @ Blueprint for Financial Prosperity

How Do I Find a Good Lawyer or Accountant? @ Get Rich Slowly

Mother of All Tax Bills @ Moment on Money

How to Create A Nifty Visual Savings Goal Reminder @ The Simple Dollar

Thanks to Millionaire Mommy for hosting last week’s Trick or Treat edition of the Carnival of Personal Finance.


How to Save Time & Make Money on eBay With a Sales Partner

EBayLogo

Do you ever feel like there’s not enough time in the day?  As I juggle my family time, work, and online endeavors I always find myself wishing for extra hours in the day.  I’ve been looking for ways to make better use of my time and last night I made some progress!

No Time for Selling
I’ve been selling on eBay for a few years now and it’s been a nice way to earn some extra money on the side.  Unfortunately, I’ve gotten busy enough lately that now I have thousands of dollars of eBay merchandise that I’ve purchased but is just waiting to be listed online.  I’ve been looking to outsource the work or partner with someone for a while but hadn’t run across the right relationship, until last night.

Spreading the eBay Bug
I managed to get one of my friends and former co-workers hooked on eBay about a year and a half ago.  He sat in the cube adjoining mine and after hearing me talk about my success on eBay he asked me to help him get started as well.  He’s sense moved onto a different job but we’re still friends and we had his family over for dinner last night.

eBay Partners
During the course of the evening I mentioned my search for an eBay partner and he immediately expressed his interest.  Since getting started online he has opened his own eBay store and now sells more than I do.  We haven’t figured out all the details yet but we’re going to work together to get my backlog of merchandise listed and sold.  He’ll likely list, sell, and ship the products and we’ll split the profits after fees.  It’s a pretty good setup, he’s looking for more items to sell and I’m looking for help getting my products sold. 

Win/Win eBay Relationship
It feels like a win/win relationship to me.  Of course, we’ll decide on the terms up front so there are no misunderstandings, we don’t want to jeopardize our friendship over eBay sales.  I’ve been stressing over this for some time now so it’s nice to find a solution. I love it when things like this just fall into place.  I really should have thought it up sooner instead of just stumbling across it but I guess that’s the way life works sometimes.  I think becoming eBay partners will save me time, free up my cash tied up in merchandise, and him make more money.


American Express Rewards Progress

AmericanExpressSecurity

I wrote a while back about my plans to score some money from a credit card signup with American Express but my plan was somewhat delayed due to disorganization.  I’m to the point now where I’ve earned my rewards points and am ready to use them with only one problem, I couldn’t find it anywhere.

I haven’t been using the card so it hasn’t been in my wallet. I searched in all the typical spots but for the life of me, I couldn’t find it anywhere.  So I called up American Express customer service to see if I could get a new card. 

After verifying my information the service rep quickly canceled my old card and ordered me a new one.  She offered to ship it overnight mail since I’ve been an American Express card holder for six or seven years now. I didn’t really need it ASAP so I told her that wasn’t necessary, just First Class mail would be fine.

The expedited shipping offer was a nice customer service touch, when was the last time any company offered to rush you anything overnight delivery free of charge? Of course it is in their best interest to get the card back in my wallet so I can start spending money on it.  They’re so good at helping people spend money which in turn makes them more money.

The day American Express shipped my card I received an email from them, pictured above, that notified me of the new card and warned me to contact them if I hadn’t ordered it.  Another nice customer service feature but also a good way to protect their bottom line. It makes me feel good about my account safety with them and can also prevent them from losing money on fraud.

Anyhow, now that the card is on the way I’m almost ready to take the final steps to redeem my rewards.  It hasn’t been a lot of work but it does help to be a little more organized when taking advantage of credit card offers.


Why Are Some People So Ignorant About Money?

Some people are good with money and others make downright horrible financial decisions.  What’s the difference between the two groups?  Why are some people so bad with money?

My wife was watching Suze Orman give people advice on credit card debt and home loan issues last night on Oprah and I was amazed at how clueless some of the guests seemed when explaining their problem or asking questions.  I imagine the majority of them have access to an abundance of personal finance materials such as online content, books, or magazines so why don’t they know more about money?  I came up with several money ignorance factors:

Upbringing Factor
They were raised in settings that gave no thought to money management and may have demonstrated unhealthy financial habits. People affected by this factor just never knew any better and it’s hard to break old habits.

Friends Factor
In addition to family, another huge influence on most people’s lives are their friends.  If none of their friends show any interest in money or ability to manage it well a person is less likely to be financially informed or make healthy financial decisions. 

Time Factor
Life is busy.  People get involved in their families, jobs, health, communities, hobbies, etc and just don’t make time to learn about money. The unfortunate part is that finances can have a big impact on all the parts of life I just mentioned so if people ignore money long enough, it will eventually affect other parts of their life.

Intimidation Factor
Personal finance involves a lot of numbers and concepts that can be intimidating.  If they don’t have friends or family they can ask financial questions of, they may not feel comfortable learning about money on their own.  As they try and slog through all the details of confusing financial topics they become overwhelmed and just decide to make an uninformed decision.

Denial Factor
There are a lot of hard working people that don’t get paid well, don’t have good benefits, and just have bad luck.  I can imagine if I was faced with dire financial circumstances it would be discouraging to think about money.  Rather than dwell on a negative part of their life, people choose to ignore it completely and hope the details will work themselves out.

What Can Be Done?
These factors don’t stand alone; a person could be affected by some or all of them so it’s easy to see why some people are so clueless about their persona finances.  Unfortunately the reasons behind why someone can’t manage their money won’t help them when the bills are due.  Debtors don’t want to hear “excuses”; they just want to be paid. 

I guess the billion dollar question is how can our society help address these different factors so more people are knowledgeable about money and fewer people run into the sad stories we hear about on Oprah.


Can You Get Paid to Learn?

Is there a job in your industry where you can get paid to learn about a topic that you need to know about anyways?

Get Paid to Learn
If you’re going to be spending a lot of time at a job, mine as well find one that creates value for you other than just a paycheck.  Of course the income is most likely why we show up every day but if you learn a skill that will benefit you personally or professionally and get paid to do it then you have two good reasons to go work in the morning.

My wife started a job not to long ago where she makes money training or tutoring parents on how they can help their children learn.  Her employer has the mission of helping parents learn the best ways to teach their children as they play and spend time together.  She has received an enormous amount of training and support in this area through her new job.  This is a perfect scenario for her since we can use all her newly gained knowledge in raising our son.

Professional Development
Of course this is a personal example where the skills learned through a job can be applied at home but there are many ways you can make use of things you pickup at work to further yourself professionally down the road. One way to do it is find a job that will teach you specific skills you need in order to break into a certain field. It helps if you have an idea of what you’d like to be doing in the future so you can try and target certain skill sets when interviewing. 

Of course, this can also work to some extent in a job you already have.  If there’s an area you’d like to get into professionally but don’t have the experience you can always work with your boss to see if you can incorporate some projects into your existing job that would help train you in those areas.  Basically this is a way of investing in yourself, not just thinking about your current paycheck but how you’d like to earn your income in the future and positioning yourself so that can become a reality.


Juggling Funds So Our Mortgage Check Won’t Bounce

Ever since my wife left her full-time job to stay at home with our son our bank account has looked a lot more bare towards the end of the month.  Losing a salary has required us to pay better attention to our nickels and dimes so we can ensure all expenses are covered.

Bye-Bye Buffer
My paycheck is split between our high interest savings account at ING and our regular checking account with our bank.  It used to be we always had a nice cushion in the checking account so there was always a buffer when the bills came in at the end of the month.  Now we’re having to watch that balance much more closely to make sure the funds are available when the checks are cashed.

New Income Source
One thing that has helped cover some of our expenses is a new job my wife started a few months ago that lets her set her own schedule and spend the majority of the week with our son.  Due to some administrative issues direct deposit hasn’t been setup yet so she’s still receiving a paper check each month.

Bounced Mortgage Payment
As of this morning her most recent check has not yet been deposited in our bank account and our mortgage payment goes out tomorrow. Needless to say I’m a little worried our mortgage check could bounce for the first time but she assured me she’s got it covered.

Financial Organization Needed
As I mentioned early, part of my check goes into an ING account so we have the money there to cover the mortgage, the only problem is it takes 2–3 business days to transfer money between the accounts. Basically, it boils down to the fact I need to be more organized in tracking our cash flow. I used to have an expenses calendar that mapped out what part of the month each bill was due and approximately how much it would be.  I need to dig that calendar out and be more attentive to it so we don’t end up in this uncomfortable situation again.


Seven Major Obstacles to Financial Success from the Quiet Millionaire

One of the most important steps towards building wealth is learning what NOT to do.  If you can avoid the biggest pitfalls then you have a much better chance of being successful.

As I read through the Quiet Millionaire I ran across a list of things that can be damaging to our personal finances.  I’ve given my take on each one:

1) Undisciplined Spending
Discipline is not a fun word; a lot of times we associate it with the opposite of fun.  However, the truth is that being disciplined doesn’t mean you can’t have fun.  It really just means you have to do a little more planning for your fun and be able to find ways to have fun that don’t cost so much.

2) Materialistic Thinking
Being happy is not about what you own but rather what you look forward to.  Take this sentence for example:

“I can’t wait to drive my Mercedes to our $1 million home, catch an episode of “The Office” on our $2000 TV, and then enjoy dinner with my wife at our $1000 dining room table.”

Now compare that to this sentence:

“I can’t wait to drive home, catch an episode of “The Office”, and then enjoy dinner with my wife”.

Does it really matter whether it’s a Mercedes, a $1 million dollar home, an expensive TV, or high end dining room table?  What is it that you’re really looking forward to, that’s what matters the most.

3) Burdensome Costly Debt
Everyone wants to be in charge of their own future.  How can you be in charge of your own life when you owe everything to debtors?  Not only will debt prevent you from building wealth, it can also prevent you from building a life.

4) Taxes
This is a tricky one.  We have to pay taxes but they definitely eat away at the amount we have to spend now or invest for the future.  Tax planning to minimize or defer the amount of taxes you pay can give you more money to work with.

5) Inflation
This obstacle is a sneaky one.  Since you never have to write a check or pay a bill to inflation it’s easy to forget that it exists. The Quiet Millionaire refers to it as the “silent erosion of wealth and purchasing power”. You should factor the effect of inflation into all of your long-term financial planning and calculations.

6) Poorly Structured Investment Portfolios
“Undiversified investments possessing an unjustifiable amount of risk relative to the potential for reward.” The simplest way to overcome this obstacle is to put your money in index funds across the spectrum of asset classes. We met with a certified financial planner to help us evaluate our current investments and choose the best index funds for us.

7) Unforeseen Life-Changing, Financially Devastating Events
This is the scariest obstacle to me since a lot of it is largely out of our control. The book gives examples of things like medical expenses, divorce, job loss, disability, death, and law suits.  You can work to prevent some of these but the best defense is to insure against them so you have some help if and when they do occur.


Personal Finance Review – Count Your Blessings Edition

When you’re healthy, you can forget how bad it feels to be sick and how fortunate you are to be well.  I guess that’s the one positive thing that comes out of this miserable sinus infection that is still hanging around.  It makes me appreciate my health all the more and realize I shouldn’t complain so much about things that don’t really matter.  One of the many things I’m thankful for is the ability to read, what a boring life it would be if I couldn’t.  Here are some of the articles I enjoyed reading this week:

The Sillicon Valley Blogger is ready to quit the rat race, me too!  Money, Matter, & More highlights some selling tricks, some of which I’ve covered in my sales tactics series.

Gen X Finance is looking for some retirement trivia questions, Lazy Man tells about his experiences being on a TV show set, and The Sun wonders if the do not call list is necessary.

The Mighty Bargain Hunter has a great post on eight ways to invest in yourself, Five Cent Nickel offers a good quote on being rich, and The Simple Dollar discusses how we preserve the things money can’t buy.

No Credit Needed talks about the important issues of term life and long term disability insurance. Consumerism Commentary explains how some lucky Red Sox fans could win free furniture!

Blueprint for Financial Prosperity offers 8 job tips for new graduates and be sure to stop by Free Money Finance since he is giving away a free copy of Quicken Premier 2008!

Thanks to the Dough Roller for hosting last weeks Carnival of Personal Finance and congratulations to MoneyNing, the winner of the Are the Rich Necessary contest!


Personal Finance in the News

Freezing Your Credit Report
Thanks to recent legislation, you may be able to lockdown your credit report so that new creditors can’t access your credit report without explicit permission from you.  This should help prevent anyone from fraudulently borrowing any money in your name.  Of course it also causes a big hassle anytime you want to apply for a credit card or any type of loan. 

I put a fraud watch on our credit history after someone got a hold of our credit card and went on a shopping spree a few years ago.  Anytime someone applies for credit in my name, I’m supposed to get a call before it’s approved.  This doesn’t always happen so I think about into freezing our credit report.

Home Prices Keep Dropping
Good news for people in the market looking to buy a home, prices keep getting cheaper.  Bad news for people trying to sell.

The National Association of Realtors reported Wednesday that sales of existing homes fell 8 percent in September, the largest decline to show up in records dating to 1999. The seasonally adjusted annual sales rate of 5.04 million existing homes was also the slowest pace on record

The excess supply of homes for sale has put downward pressure on prices, who knows when the fall will stop.

People Keep Using Credit Cards
American Express reported higher quarterly profits due to higher spending on it’s credit cards.  Real estate prices are falling, the dollar is falling, but people keep on spending money and putting in on their American Express.



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