Archive for March, 2007

The most solid route to wealth is by acquiring financial knowledge. Everything that you can learn about money aids in your quest for financial independence. The following books are recommended reading on your path:

The McGraw-Hill 36-Hour Course in Accounting by Robert L. Dixon and Harold E. Arnett

Own Your Own Corporation by Garrett Sutton

Courage to Be Rich by Suze Orman

The Millionaire Next Door by Thomas Stanley

Guerilla Marketing by Jay Conrad Levinson

More Wealth Without Risk by Charles J. Givens

A lot of people jump into loans without much thought on the actual consequences of having a loan. The payments, the interest, the actual cost to you… The list goes on. You need to know the ins and outs of loans.

I was recently contacted to write a little review about the loan site, Credit Loan. Most of the time I would pass these over, even with the cash incentive. But this site is full of useful information for all our readers and thought it would be good to write about. 

The site has articles on everything from getting auto and home loans, to helping you repair bad credit. Repairing bad credit can be a big issue you haven’t done your research in books, asking loan officers, or reading sites like this.

Another good thing about the site is that it has financial calculators all in one place. Most of the time (since I don’t utilize a browser bookmark system) I have to google all the different calcs when I need them. This site has a bunch all together. Sweet!

Taking on a loan should be a big decision with a lot of research done. Unfortunately it’s often just a “sign on the dotted line” type of transaction which has come to bite many many people looking to increase their credit score.

CNN features a terrific article on teaching your kids the value of a dollar and a whole lot more. They remind us that children learn about money by watching us every day. Be sure to take this opportunity to model the right lessons for your child’s financial future.

Here’s a quick summary:

1. Don’t say “We can’t afford it”

Use the right language to teach your child about money. Help your children learn that they have choices about how to use the money they have. Use an allowance to help your child understand the concepts of spending and saving.

2. Show them the money

Use cash as much as possible and educate them on credit cards if and when you use them. Talk with them about your checking and savings account balances as well as any credit card balances or outstanding loans. Let them help you make payments and do simple bookkeeping.

3. Talk about how much things cost

Discuss today’s expenses with your child as they occur. Give your child ideas about money that they can understand, relating costs to values they can grasp. Children pick up a lot about finance just by discussing it regularly.

4. Buy something that isn’t on your list

Sometimes we need to be flexible and buy things off the list. Being smart with money can also mean spending wisely, taking advantage of a sale or capitalizing on an unplanned opportunity.

5. Be open with your spouse about money

Some partners hide spending to avoid criticism from the spouse. Kids learn distrust from this and that money is a secretive topic even within one’s own family. Take steps to foster the right kind of attitude about money in your child.

Here’s the entire article.

The price-to-earnings ratio, or P/E, is determined by dividing the closing price by the most recently available earnings per share (EPS), based upon primary EPS for the past four quarters. The P/E ratio is one of the most commonly used measures to analyze the price of a stock. It cannot be used alone to make investment decisions, you must contrast it with the company’s past P/E ratios and with the P/E ratios of similar companies to assess value. The P/E ratio generally indicates how fast the market expects the company’s earnings to grow. The higher the P/E ratio, the greater the potential growth in earnings is likely to be.

Many investors use the P/E ratio of the Dow Jones Industrial Average (DJIA) as a standard of comparison. For example, if the DJIA has a P/E ratio of 10 and an individual stock has a P/E ratio of 7, earnings are considered to be underpriced when compared to the market.

Gross National Product, or GNP, is a number that represents the total market value of the output of a nation’s good and services annually.The GNP is generally held to be the best indicator of a country’s economic health.

To consider GNP as an equation, here’s how it adds up:

GNP = C + I + G + NE

C = consumption expenditures
Personal consumption expenditures on consumer goods and services.

I = investment expenditures
Gross private domestic spending by business firms on future productivity, including changes to inventory.

G = government expenditures
Federal, state, and local governmental spending on finished goods and resources.

NE = net exports, or total exports minus total imports
The amount of goods and services that are exported less the amount of goods and services imported.

If you are in the market for a financial planner, here are ten questions that you may want to ask your candidates before you choose an advisor.

• How many years have you been in business?
• Can you describe your typical clients?
• What is your ratio of support staff to professional staff?
• What is your reputation in the field and in the community?
• Can we meet at your office? (You’ll learn a lot about his or her personality)
• Do you understand what the advisor tells you or does he or she talk over your head?
• Do you have a clean record?
• What are your investment methods?
• May I get referrals from other clients you have?
• Do I have to sign a contract?

Maybe yesterday’s ideas to save on gas consumption got you thinking about buying a hybrid vehicle. If so, experts say this is the ideal time to test drive a hybrid if you are in the market.

Not only have prices dropped as supply begins to exceed demand, valuable federal tax incentives to purchase that exist now may be phased out over the summer. For example, the government currently offers a $2,600 tax credit on the purchase of a 2008 Mercury Mariner Hybrid but only on a certain number of vehicles. Also, note that state and local governments may offer tax incentives if you buy a hybrid, employers sometimes offer money back to employees that choose hybrid vehicles, and insurance discounts may apply.

In response to the phase out of tax credits for consumers, some manufacturers are offering more in the way of rebates and discounts to woo buyers. However, keep in mind that when summer comes and more folks are shopping for cards, prices are likely to stay high. The next few weeks may be your most economical opportunity to buy a hybrid.

CNN Money also offers a breakdown of the Top Ten Greenest Cars for your consideration.

Wayne Gerdes may just be the most fuel-efficient driver in the world; we can all learn something from his diligence. Through a thoughtful combination of coasting and accelerating with very little braking, Gerdes gets 59 miles per gallon driving a non-hybrid Honda Accord and over 100 miles per gallon driving a Toyota Prius on average. Apply these same ideas to think through any area in your life where you can save money. Remember, every cent counts when it comes to reaching your financial goals.

Gerdes’ ideas to achieve fuel economy include:

• Keep your car as empty as possible because additional weight reduces your fuel economy.
• Remove any unused racks or other objects on the outside of your vehicle.
• Inflate your tires to the maximum pressure and check the tire pressure frequently.
• Do not speed.
• Drive with road conditions to avoid using the brakes.
• Do not idle: “If you’re going to be stopped more than seven seconds, turn off the engine.”
• Don’t use the reverse gear in parking lots. Instead pull into a spot so that you are facing out.

For more of his economical thoughts, read the article about Gerdes on Mother Jones or listen to his interview with the Sierra Club.

CNN Money offers a few great ideas for making the most of your tax return. Instead of running out and spending the money, invest in one of these ideas and watch that extra money grow.

1. Contribute to your IRA

2. Contribute to your 529

3. Open a CD

4. Add the money to your emergency fund

5. Pay down your credit card debt

Visit CNN Money for further information about these ideas.

Google offers a tax refund calculator to help you see how this could add up.

The IRS audited 1.3 million taxpayers in 2006, an increase greater than 5 percent more than the previous year. With Bush’s new budget, more audits may be on the way. Watch that the new tax rules don’t trip you up this season. Avoid these mistakes that are likely to trigger an IRS audit this year.

1. Earning too much money
Once an income reaches the $100,000 range, the chance of audit increases. Most people would hate to have this problem, but high income earners are more likely to end up on the IRS’s audit list.

2. Giving too much to charity
Charitable contributions in excess of 5 to 10 percent of the taxpayer’s income may concern the IRS. The rules for charitable deductions have become more strict and require more documentation, a reaction to suspicions of abuse by taxpayers.

3. Taking too many credits
Tax credits are another flag, especially earned income credits and credits for education and seniors. People often take credits they’re not entitled to so the IRS monitors this closely.

4. Careless errors
Something as slight as a sloppy return can call attention to your return. Incorrect Social Security numbers, errors in math, and misspelled words are details that the IRS scans with care.