ING Direct Shout Out - Free $25 for Signing Up!

I have been banking with ING Direct for the past 3 years and have been a strong advocate of them all along the way.

I always recommend that people set aside money in an emergency fund that is 100% liquid. Usually I will direct them to ING Direct because of the 4.3% rate as opposed to the whopping 0.25% that local banks offer in their savings accounts.

I feel that when interest is paid TO YOU this is good. When you can get more that is BETTER!

I have talked many times about alternative income streams and this is a major component on what comes in (from me just sleeping).

Plus right now all ING Savings accounts are paying 4.30% and are FDIC insured up to $100,000. What this means is, it is not risky. ALSO, by following a link from an existing member, ING will IMMEDIATELY GIVE you $25 if you open your savings account right now with at least $250.

You can even set up your account to automatically draft your account on a set frequency (weekly, monthly, etc).

INTERESTED? Just click one of the following links below.

These links are one-time use only links so if you see this message:

"We're sorry, but the referral link within the email you received has expired and is no longer valid. We recommend that you contact the sender and ask them to re-send the referral email. Or click 'Continue' to proceed with the application process without the account opening bonus."

Then just go on to the next link.

Link #1

Link #2

Giving God Control Part 3

This is my last post on Giving God Control by following what He says through scripture. There are so many other verses we can talk about but I have narrowed down a few as they are fresh bread to me

Matthew 10:16 "I am sending you out like sheep among wolves. Therefore be as shrewd as snakes and as innocent as doves."

This sounds very un-Jesus like, but we can take it very practically and I believe it to be wisdom that we can take in our daily lives. The context of this passage is Jesus sending His disciples out to preach the Gospel. His advice was not to go where the wind takes you and THEN you will be provided for; he's saying "I have already provided with you what you need, don't get ripped of."

Practically speaking this means that we are called to read the fine print. It is wisdom to not put yourself in a position that you will be taken advantage of. I'm laughing right now because recently I did this and it was so obvious that it was my fault because I put myself in a position to be taken advantage of. Another practical example is debt: HAVE YOU READ THOSE CREDIT CARD CONTRACTS!! If you did you would see things like "We reserve the right to change the account terms for any reason" In other words, "Dear Customer - You have NO rights!"

Bottom line, Jesus says make every effort to not be taken advantage of, be shrewd as snakes. However, the verse also says be "innocent as doves." I was about to leave that last part out but I do not want anyone to misunderstand this passage of scripture. While we are making sure we are not taken advantage of, we are also called to NOT TAKE ADVANTAGE OF OTHERS. I know this is a no-brainer but it needs to be said because I know first hand of people who got the first part of that passage down but trample over people in the meantime.

Matthew 25:14-30 Parable of the Talents

Man I am not saying it is wrong to try to make money. In fact I say the opposite. What I really harp on is what you do with that money once you get it. Like my example yesterday, when you get stuff be missional with it. Our lives are 100% Jesus, not 98% Jesus and 2% HDTV.

I am an advocate of investments and in Matthew 25 the Parable of the Talents shows that Jesus is too. A talent in this example I believe is a days wages, maybe more. God gave us "talents," it is wisdom to turn them into more talents. It is simple. Do not bury them, this is what is known as hoarding. Live with an open hand. Yes it allows money to go out of your hands, but with an open hand it is also easier for money to go into your hands. When you are tight fisted neither is possible.

Along with that parable, the guy who sits on what God gave him is punished, the guy who multiplied his talents(money) is told he did good. And I honestly believe this is not supposed to be because we can have more "stuff" because after all you cannot take a u-haul with your hearse. But I believe that it WILL advance the Kingdom by doing so. Its as simple as living on mission in every area of your life and that includes your money.

A Glimpse of Compound Interest

Have you ever thought about being a millionaire but then just laughed it off. I am going to show you the key to becoming a millionaire; compound interest.

$100 a month, that is all it takes. If you invest $100 a month for the next 40 years you will have invested $48,000 by the end of it. That is a lot of money.

But after 40 years of compound interest that $100 a month would be $1,176,477.25!!! (This calculation was done with the assumption of the market average over the last 75 years, 12%)

I think most people could plan to set aside $100 a month; but the problem is nobody is doing it.

Compound interest is your greatest friend or your greatest enemy. (By the way, that exponential growth works against you for your debt)

Fear of Investing

I was talking with someone about a month ago about his financial situation. Just to paint a picture: he is married, does not own a home, is debt free, and him and his wife are in a situation where they are not incurring a lot of expenses. He makes a regular income; She does not. His regular income covers all expenses that they have. His wife has irregular income coming in due to things on the side she does. All money she brings in goes to savings.

He wants to invest the extra money they have coming in but says he is scared to do so. My advice to him is what I have heard from many financial guru's in the past. Knowledge Eliminates Fear.

Know this:

97% of the 5-year periods in the entire market history made money
100% of the 10-year periods in the entire market history made money

Just pick any random 5 or 10 year period in the market's history and you will find these statistics are true. By the way, this includes during September 11 and the Great Depression.

Your money will go up if you just leave it. Here is some knowledge to steer you away from short term investing.

Only 66% of the 3-year periods in the entire market history made money

That is a 1 in 3 chance that I will LOSE some of my money. I am not taking those chances; I would much rather stick with the 97% and 100% figures.

Realtor or No Realtor

I know several people in my life that are currently either selling their house or thinking of selling their house. The age old question in this is, "Do I NEED a realtor?"

The positive to not getting a realtor is you save on the commission that is rather sizable depending on how much your house will be sold for.

However, if you had to ask me I would say yes, I do recommend you have a realtor when you sell your house...BUT, I do not just want a realtor, I want you to get a high quality, highly motivated, won't slow down realtor with a great track record.

I have heard Dave Ramsey say to interview people when they are going to make money off you. So that is my suggestion. If you go in there and have questions ready for them and they don't want to oblige or are being a jerk, move on quickly and thank them for their time. If they don't feel that they are good enough to exceed all your expectations and know that they will stand up to a tough grader then you did not want them in the first place.

Interview Questions to ask:

1) Why should I list my home with you? (Find out what the agent will do to help your home stand out.)

2) What’s your company’s track record and reputation? (If one agent or company sells more than the rest, ask why and what they’re doing differently.)

3) Does your broker control the advertising or do you? (If your agent doesn’t control the advertising, your home may compete for ad space with listings from every other agent in the brokerage.)

4) On average, how close is the selling price to the asking price? (This information is available from your local Real Estate Board. The agent’s performance in this area can help predict how much you’ll get for your home.)

5) On average, how long does it take your listings to sell? (This information is also available from the Real Estate Board. It will help determine about how long your home will be on the market. )

6) Do you have a reference list of clients I could contact? (Make some phone calls. Ask them to describe their experiences with the agent.)

7) What if I’m not happy with the job you do? (See if the agent will cancel your contract without penalties if you’re not satisfied with the service they provide.)

Thoughts on Insurance

Insurance is an essential Financial Planning tool. The purpose of insurance is to transfer risk. Especially for those at a younger age just starting out adulthood; you don't have a large cash amount and certain losses could bankrupt you, so wisdom says to transfer the risk.

These are 6 Basic Types of Insurance

Homeowners or Rental Insurance
Auto Insurance
Health Insurance
Life Insurance
Disability Insurance
Long Term Care Insurance

The ones that I am going to highlight today are the first four: Homeowners/Rental, Auto, Health, and Life Insurance.

Homeowners/Renters Insurance

When you own your home, it is a must to have homeowners insurance. If you are renting, you NEED rental insurance. It is extremely cheap (usually about $10/month) and if you do not have it you are no longer covered under your parents insurance.

Auto Insurance

I recommend that once you have your emergency fund, you should raise your deductible. The reason for this is because you will save a lot on your reduced monthly payment. Be smart with that and save it up so that it becomes your "Car Emergency Money" that will pay for the deductible when you have to pay it. Make sure you carry adequate liability.

Health Insurance

Along with auto insurance, I have the same recommendation for health insurance to raise your deductible because when you have an emergency fund in place you can save money on your monthly payment. And after a certain period of time you end up saving the whole amount of the deductible from the monthly savings anyway. If you are self-employed you can save money using an MSA (or Medical Savings Account). I will post on tax tips in the future and more will be included on the MSA then. But for now, the MSA is a tax deductible medical savings account for medical bills that works with a large deductible.

Life Insurance

This is a must if you are married and have a house. If you were to die without life insurance and the two of you have a mortgage together your spouse would be responsible for the amount. Chances are she was depending on your income for this which is why you are protecting her by taking out life insurance. However, if you both are working and have no debt (no mortgage, loans, cards, etc.), she really isn't depending on your income. In this situation it is not vital to have life insurance.

Life Insurance is to replace lost income due to death. It is actually more like "death insurance." There are 2 types of Life Insurance: Term and Cash Value.

Term insurance is for a specified period, is substantially cheaper, and has no savings plan built in. Cash Value insurance is normally for life and is more expensive in order to fund a savings plan.

A common misconception about life insurance that it is permanent need. That you will ALWAYS need life insurance.

What I recommend is for you to get a 20 or 30 year term life insurance and invest the monthly savings into a diversified portfolio of mutual funds (ex. 25% growth, 25% growth & income, 25% aggresive growth, and 25% International).

I encourage you to price a plan for Cash Value and Term and the difference will most likely be a great deal. Usually a plan for Cash Value that is $100 will be for about $10 or $15 with Term. If you save and invest the other $90 per month for the entire term of 30 years you will have $314,546.77 at the end of it. You will be self insured and no longer need to be sinking payments into a life insurance savings plan.

You've got to start NOW

I wanted to talk about starting NOW. Being that I am considered younger I have excused myself from having to plan for things really far in advanced. In fact, I will test this. Knowing that my audience probably is younger as well please help me and test your reaction to my next statement. Today I am going to talk about planning for your retirement. If you are anything like me you kind of turned down the volume just a little bit.

That is my point, I am all for 5 year plans, 10 years plans, and maybe even a 20 year plan. But planning for something 40 years away is ridiculous. Well, it really shouldn't be and I can convince you. Check this chart out.

The Adventures of Sigmund and Alberto

Who had the better plan, Sigmund starting NOW, or Alberto waiting til he was "established?" Sigmund had a plan and followed it. It was hard for his first few years, but he benefitied from it the next 40 years and while those first few years are hard, that is what maturity is. It might be "hard" to set aside money right now. But let me challenge our definition of "hard." We have every basic need met (food, clothing, shelter, and transportation). This is more than most of the world gets. So if we have all that stuff met, what is so hard. I am sure that if we really evaluated where our money goes, it should be EASY to set aside $1500 a year.

This is what being an adult is. Children do what feels good, adults devise a plan and follow it. What you do now does effect the future, you might as well make a plan.

The roth IRA is a great tool that can help. This is a tax free growth tool that the US government as given us. For the year 2007 the maximum we can put in our Roth IRA is $4,000; in 2008 it goes up to $5,000. Just in case you don't know what this means: Normally when you invest in a mutual fund for retirement when you take the money out you have to pay taxes on it because you made money. Same reason why we pay income taxes from our job. However, with the Roth IRA when you check out that chart of Sigmund and Alberto, they do not have to pay any taxes when they take the money out at age 65...it is cash money.

You can open your roth IRA through any brokerage firms or any online brokerage places like E-trade or Ameritrade. I recommend http://www.zecco.com/ because it is just like e-trade but there are no transaction fees. Check into it, but before you invest you want to do research on which mutual fund you choose. I will go more in detail but make sure you go with something that has a long track record of success. Don't go after anything that is new but has skyrocketing returns. More on investing tomorrow.

Alternative Income Streams

I have been very interested in something that seems to be growing in the personal finance blogging world; it is called Alternative Income Streams. The idea is very simple, it is the idea of tracking side income that does not come from your job. Basically it is getting money outside of your job.

Now that I am tracking this I have naturally been looking for avenues to make this increase. I have already had an ingdirect.com account that has been earning me 4.5% interest. To put numbers to that if you have $4,000 in that account it will get you and extra $180 a year or I like to view it as $15 a month. With the idea of compound interest (my topic for tomorrow) that number will increase but just to put a round number it is $15 a month.

This is nice considering if you are saving up for something you are not using that money anyway, you might as well get paid a little bit each month while saving. I have recently opened up a Bank of America money market account that gives me 5.05% which given the $4,000 example would be about $17 a month.

However, recently I have been getting into prosper.com. This is a middle man for borrowers and lenders to meet. Banks are very profitable. They are charging people 10-12% (excellent credit ratings) for unsecured loans while we are giving banks loans and only getting 4-5% (if that). I am essentially a "bank" through prosper.com where I have access to their credit report history and prosper takes care of collecting and distributing the money to lenders. Also they have collection agencies that go after delinquent payments and this will hurt the borrowers credit the same as if they were in default for a bank.

This not a plug, I am not trying to sell you on anything but (whenever you say "but" it erases everything before it) if you want to get $25 for signing up and making a loan click this link to do the referral thing. You can do the same thing through ING Direct (you get $25) but you have to do it through e-mail, just contact me if you want a referral. Okay, enough with the shameless plugs.

To sum alternative income streams up, it is my goal that my AIS is greater than my expenses outside of my house payment. If you read a lot from me you will realize that I really want to pay off my house quickly because I like the idea of freedom in our finances. Owing someone money just sounds dumb to me. If I owe money than I do not have complete freedom because I HAVE to get a paycheck or my house gets foreclosed on. Don't get me wrong I am a strong advocate of working (and working hard) but I want to CHOOSE to work not HAVE to work.

So a mini plan (or goal) of mine is to pay off my house early and have my AIS be greater than my expenses (gas, food, utilties, clothing). Those are the 4 basic needs that I have after I don't have a house payment and I will make sure I never have a car payment. If this happens that is my idea of freedom. Imagine getting to work and devote your full time to something you really believe in and then say, "Nah don't worry about that paycheck, I'm good."