Fortune Watch

Planning your financial future may not sound like the most glamorous of things, but it can make a huge difference. The key is to understanding the value of time.

They say death and taxes are the two things you can’t avoid. Well, they are wrong. There is a third thing – time. Time passes us by no matter how we try to fight it with exercise, diet and, in some cases, plastic surgery! From this description, it may sound as though time is a bad thing. It all depends on how you use it.

You can turn the passage of time to your financial benefit if you understand it. In truth, we live in a “now” world. Give me convenience or give me death! So many of us are used to getting things now, that the idea of doing something for a positive effect in ten or twenty years sounds ludicrous. Heck, most of us find it difficult to do such things even if we are talking about a benefit five years down the road. This is where you can make a major mistake in planning your financial future.

At its core, financial planning is really about time. The goal is to use dollars today in such a way as to maximize their future effect. Let’s look at a simple example.

The dream for many people is to own their own home. Millions of us clamor forth to find our first home and come up with the money for a down payment. We then apply for a loan, go through the application process and wait/pray for an answer. Most of us never even think about the term of the loan – the number of years it will be paid back over. We are just praying we get the financing and will worry about the detail later. This is a big mistake because it discounts time.

The traditional mortgage has a term of 30 years. This means you will be making that mortgage payment for 30 years or 360 months assuming you don’t sell it before then. Think about that for a minute. If you are 30 years old when you borrow the money, you will be making your final payment when you are 60! And they say people are unwilling to commit to things!

For a person that understands the importance of time in financial planning, a different approach is usually taken with a mortgage. Instead of a 30 year term, they go with a 15 year term. Since there is less time involved in the payback, each dollar of their monthly payment is converted into a greater percentage of principal, to wit, they pay much less interest over the length of the loan. Ah, but the monthly payment is more? Yes, but you can buy a lower price home, build up equity for five to seven years and then trade up for something nicer. You effectively have more money and a better home in five to seven years instead of the financial anchor of a 30 year mortgage. This is why understanding time is so important!

As hard as it may be, you should take into account time as a factor in your investing. If you can come to grips with the future benefits of action taken today, you will really be happy when those future benefits come around.

Does it sometimes seem as though you cannot afford to do things because your financial obligations are holding you back? If you find that you are asking yourself these sorts of questions, perhaps you should take a look at your financial situation and assess whether you are practicing good personal finance management or not. Good personal finance management spends within their income, plan for the future and solve financial problems as they arise. Poor personal finance management pay more, do without and fall behind. If you find yourself in the second category, you can do something about it. You can learn to take charge of your finances by planning your personal finances.

Planning your personal finances doesn’t always come naturally, and even if you’re just beginning to take your financial matters seriously, then you likely need a few personal finance tips.

Evaluate your current financial situation. One of the most important goals for most people is financial independence. Collect accurate information about your personal financial situation. Calculate your net worth which includes the real estate, saving and retirement accounts, and all other assets. This will help you decide how much money you can set aside for meeting future needs and goals.

A basic personal finance tip is to make a budget. A personal finance budget is information made up of your income and expenses and the more accurate this information is, the more likely you are be able to meet your goals and realize your dreams. A personal finance budget should be made for at most one year at a time and include a list of your monthly expenses.

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When your marriage breaks up, the last thing you feel like doing is crunching numbers. You’re hurt, perhaps angry, and possibly overwhelmed with anxiety, fear and despair. You’re focused on the past and present, not the future. But as many divorced couples learn the hard way, this is precisely the time you need to get a grip and pay close attention to your assets and your financial future, lest both slip away in the flood of emotion.
First and foremost, it’s a business deal. That means you’ve got to get rid of your emotion any way you need to, whether through therapy or going to a gym. Because your divorce should be based on one thing: your property settlement. It’s a matter of numbers, that’s all it is. At least 80 percent of money is about self-management, about emotions, and 20 percent is about quantifying and computing, the counting part is easy; it’s the emotional part that’s hard. Since money is a major cause of divorce, it’s safe to assume that splitting the financial sheets won’t be easy.

Pull your credit report before the divorce so that anything in dispute can be resolved before the divorce is final. The reports are the quickest and easiest way to get an overview of outstanding loan balances, mortgages and credit card debt that you and your spouse will eventually divvy up.

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Investing in conservative blue chip stocks may not have the allure of a hot high-tech investment, but it can be highly rewarding nonetheless, as good quality stocks have outperformed other investment classes over the long term.

Historically, investing in stocks has generated a return, over time, of between 11 and 15 percent annually depending how aggressive you are. Stocks outperform other investments since they incur more risk. Stock investors are at the bottom of the corporate “food chain.” First, companies have to pay their employees and suppliers. Then they pay their bondholders. After this come the preferred shareholders. Companies have an obligation to pay all these stakeholders first, and if there is money leftover it is paid to the stockholders through dividends or retained earnings. Sometimes there is a lot of money left over for stockholders, and in other cases there isn’t. Thus, investing in stocks is risky because investors never know exactly what they are going to receive for their investment.

What are the attractions of blue chip stocks? Great long-term rates of return. Unlike mutual funds, another relatively safe, long term investment category, there are no ongoing fees.You become a part owner of a company.

So much for the benefits – what about the risks? Some investors can’t tolerate both the risk associated with investing in the stock market and the risk associated with investing in one company. Not all blue chips are created equal.

If you don’t have the time and skill to identify a good quality company at a fair price don’t invest directly. Rather, you should consider a good mutual fund.

Selecting a blue chip company is only part of the battle – determining the appropriate price is the other. In reality supply and demand for a stock sets the stock’s daily price, and demand for a stock will increase or decrease depending of the outlook for a company. Thus, stock prices are driven by investor expectations for a company, the more favorable the expectations the better the stock price. In short, the stock market is a voting machine and much of the time it is voting based on investors’ fear or greed, not on their rational assessments of value. Stock prices can swing widely in the short-term but they eventually converge to their intrinsic value over the long-term.

Investors should look at good companies with great expectations that are not yet embedded in the price of a stock.

Creating an investment plan can be a tricky but rewarding experience. The key to having a solid and fully customized plan is to know what your financial goals are and make sure your plan fit your needs. Investment plans are extremely popular because many people, due to the unstable job market and insufficient social security, are trying to save for their retirement.

Investment plans help investors buy a set number of stocks, bonds, and funds at regular intervals. This occurs automatically and does not require the investor’s constant attention. If you are interested in an investment plan below are some basic information and helpful tips about investment plans and how to choose the one that best fits your needs.

How does it work? Investment plans automate the investment process. Initially the investor picks out stocks which they want to regularly invest in. Then money is automatically removed from one of your financial accounts (checking, savings, or money market) and stocks are purchase for you by the investment plan coordinator.

As the investor you can make adjustments to how much money, how often, and what type of stocks will be purchased. Most brokerages, which offer investment plans, allow you to make changes at a small fee. However, one of the benefits of online investment firms is that many of the traditional fee based options, like adjusting your financial plan, are free of charge.

How much? Deciding how much you should invest is never an easy question. Only you know your financial situation and how much you can afford to put toward an investment plan. It is important to not over invest only to leave yourself short in paying your monthly obligations. You need to make sure the money you choose to invest will be available at the same time each month in the same amount. Think about the future. Perhaps this month you have more disposable income available however, most months you do not. It is better to invest less and not run short at the end of the month.

Becoming wealthy is not a matter of how much you earn, who your parents are, or what you do, it is a matter of managing your money properly.

Money earned can either be consumed or saved. When money is saved it can either be hoarded or be invested to enhance its value. An investment project requires information about the various avenues available.

Money is often a scary thing to deal with, especially those who have never worked with it in detail before. Investing for the future can be even scarier. Still, even young men and women as well as those preparing to retire need to know the basics of investing to prepare for the future and insure their financial freedom. An understanding of what assets are, what kinds of assets are out there, and specific tricks of the trade will help beginning investors start on their journey to economic security.

The general term used to refer to the investments made is ‘assets’. Assets reflect one’s investment in cash, bonds, stocks or other sources that generate income. Out of the various assets available for investment, the most common one is Stock. Stock refers to the shares of the companies.

Assets are investments in cash, bonds, stocks and much more. They are basically a combination and melding of everything someone owns or is owed. An asset class is basically a general term referring to the wide variety of investments that can be made by today’s investors. Asset classes include things such as stocks, bonds, and cash equities. Before investing, an understanding of assets classes and the pros and cons of each is a definite must.

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Does your spouse or partner complain that you’re spending too much money? When your credit card bill arrives, are you surprised to you find that you charged more during the month than you thought? Does your closet contain lots of shoes or clothes that you almost never wear? Do you own every gadget known to man (or woman)? Do you come home from the mall with items you had no intention of buying? Do you spend money on things that you didn’t realize you needed until you saw them on display in the store?

If you answered yes to any of these questions, you probably suffer from impulse spending. When people are unable to save money for the things that are really important to them, like a house, a new car, a vacation, or retirement, impulse spending is often the culprit. If you don’t have specific financial goals, it’s more difficult to resist spending money on items that don’t really have any meaning to you.

Once you’re already saving regularly towards your most important financial goals, you may want to have a fund to use specifically for occasionally spending money on unplanned items. Then you can indulge in occasional impulse spending without jeopardizing your financial future.

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…unless the stocks you own ARE beating the market!

There is no way on earth you could ever beat the market if the stocks you hold are not keeping up with the market. And hopefully, staying ahead of the market.

But yet, that’s what lots of people try to do. They’d rather keep all the dogs in their account and maybe “take a flyer” on one stock, hoping for a miracle. It’s like trying to win a Derby horse race with your Donkey. It just ain’t gonna happen.

But hey, maybe you don’t want to beat the market overall. Maybe you just want to own the BEST semiconductor stocks, or the best retailers, or the best utilities.

Seriously, how would you even KNOW if your stocks or mutual funds are beating the market, or are the best names to own in their group? Well, I can tell you this…the best indicator I’ve ever seen in twenty-plus years in the business has been relative strength. What is relative strength? It is simply the measure of how your mutual fund or stock is doing, compared to a group of other stocks, funds or indexes…or the market overall.

Perhaps you want to compare Intel with other semiconductor stocks. Maybe you want to compare Microsoft with the S&P 500 Index. Maybe you want to compare your mutual fund against the Dow Jones Industrial Average or the Standard & Poor’s 500 Index.

This is a very easy calculation. Here is how you do it: Simply divide the price of your stock or mutual fund against whatever yardstick you choose. You’ll get a fractional number as the result. But slide the decimal over so you can work with whole numbers. Then we begin plotting that result daily on a point & figure chart.

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Imagine, you need details of your last few transactions, but are stuck in a traffic jam on way to the bank. How you wish you could get the details on your mobile phone!

Well, you really can ‘bank’ on your mobile phone today, provided you have opted for the service from your bank. Just SMS (short message service) your bank’s customer service number and get the details in a few seconds – that’s how simple it can get, if you have a mobile phone, a personal identification number and a phone banking number from your bank. It’s the same with paying utility bills, transferring money to someone, whether in your home country or abroad, and making a purchase at a retail store.

Most banks already allow customers to make basic transactions over the phone. Banking might be getting a little easier than that. One of the largest banks, recently announced plans for a mobile banking service. To use the service, mobile users download an application to their cell phones, just like you would for a game or song, and use their cell phones to check balances, transfer funds, pay bills, or even find an ATM.

Having the ability to bank using a cell phone is an innovative idea, but will it make it easier for consumers to pay their bills? Perhaps. If your credit card payment is due today, this mobile banking service might allow you to pay it the second you remember it, rather than risk a late payment due to forgetfulness.

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