Identity Theft on the Rise

According to a recent survey by Javelin Strategy & Research, identity theft is on the rise. Moreover, the “core millenial” group — those between the ages of 18 and 24 — are at greatest risk because it takes them much longer than other age groups to figure out they’ve been victimized.

Apparently it takes young people an average of 132 days to to detect credit and bank fraud as compared to 49 days in older age groups. Thus, once their identity has been compromised, fraudsters have over four months to take advantage of the information before young victims figure out what’s going on.

Overall, 14% of those surveyed reported having fallen victim to identity theft, a 12% increase over the past year. Not surprisingly, criminals are increasingly relying on high tech methods of capturing personal information, including phishing, SMiShing, and keylogging.

Another cautionary note is that small business owners fall victim to identity theft 1.5 times as often as other adults, apparently because they often use personal accounts when making business transactions, and also because they make more transactions than “typical” adults.

Interestingly, though identity thieves steal an average of $4,841 per victim, the ultimate cost to the victim averages $373 (median = $0) because banks usually cover most, if not all, of the losses. Identity theft can be a big time suck, though, as the average victim spends 21 hours filing claims and getting their money back.

Fortunately, I’ve never had to personally deal with identity theft. If you have, I invite you to share you experiences in the comments.

Source: Javelin Strategy via WashingtonPost.com

Published on March 18th, 2010 - 6 Comments
Filed under: Identity Theft
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Repay Second Mortgage or Student Loan Debt First?

This past Monday, I sent Lending Club a final check for $1,582.05 – thus settling our Lending Club loan and reducing our creditors to four. The debts we owe are now limited to two student loans and two mortgages. Today, I’m asking for your advice as to which we should repay next.

Only student loan and mortgage debt left

Remember the Jeep that I totaled and had in the shop for 8 months last year? Well, I didn’t technically own it until three days ago. Last August, I consolidated the amounts owed on my Jeep and the debt still owed on the credit cards that I shredded with a Lending Club loan of $11,000. It took less than seven months to settle those debts once we got focused.

Now the only affiliation I have with Lending Club is that of an investor extraordinaire, and I’m setting my sights on the next debt in line – I’m just not sure exactly which one to pick. Here’s a list of our remaining debts we have left:

• First mortgage = $118,950 at 5.5% fixed with 20 years remaining (recently refinanced)
• Second mortgage = $39,700 at 8.8% fixed with 27 years remaining
• My student loan = $31,850 at 6% fixed
• Her student loan = $34,200 at 4% fixed

Unless something unexpected happens, we should have at least $1,500 in extra cash to put toward our debts each month. This is above and beyond our regularly scheduled payments, so we should really be able to accelerate our debt reduction.

I was planning to shift our debt snowball to our secpnd mortgage until it dawned on me… What if the housing market rebounds?

Repay student loan first?

Should I repay my student loan before my second mortgage? Here are some of the factors that are influencing my thinking:

• The housing market might rebound. We plan to sell our home as soon as we can get what we owe on it. If we focus on the student loan and the market rebounds, then I can repay my mortgages with the proceeds from the house sale, and my student loan will have been greatly reduced.
• The mortgage interest deduction. If I repay my student loan first, I’ll still have a much larger interest deduction to claim come tax time 2010 and 2011.
• Student loan debt is not dischargeable. Not that I would ever file bankruptcy, but the simple fact that student loan debt is not dischargeable in bankruptcy makes me question if it would be wise to make this a priority over a second mortgage.
• The psychological factor. I’m the type of person who would rather focus on paying off a higher interest loan to realize the savings (i.e., our second mortgage), rather than paying off a smaller loan for a psychological boost.

Repay second mortgage first?

I’m already leaning toward paying off our second mortgage first, chiefly because the rate is 2.8% higher than my student loan rate, and 4.8% higher than my wife’s. So… If you think it’s better to pay off my student loan off first, you’ll need to convince me.

• Higher interest rate. As I mentioned above, our second mortgage interest rate is considerably higher than the rate on my student loan, so I stand to save more on interest paid by attacking this debt first.
• The housing market probably won’t rebound quickly. I’m not a real estate agent or an economist, but I believe that both would agree that the housing market will not rebound to 2007 values anytime soon.
• We want to sell ASAP. To be honest, I would like to sell my home tomorrow… And I certainly do not want to wait 5 – 10 years or possibly longer for the market to get our heads above water. By paying down this debt, we’ll be able to sell sooner.

Value of my home vs. amount owed

Lastly, I wanted to throw out some more numbers to help you understand the decision we’re facing. It’s important to keep in mind that I live in Michigan, and that our housing market is worse than most. My home was originally appraised at $170,000 in April of 2007, and our purchase price was $165,000. When we refinanced our first mortgage last week, the lender estimated the current value of the home at $120,000 though I’ve seen online estimates as low as $107,000.

Which should we pay off first?

If you were in my shoes, would you focus your debt sledgehammer on the second mortgage, thereby enabling us to sell our home and downsize ASAP? Or are we better off knocking attacking our student loan debt? Whichever you think is better, I’m very interested in hearing your reasoning.

Published on March 18th, 2010 - 28 Comments
Filed under: Debt Reduction, Education, Mortgages, Real Estate
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Quicken Essentials for Mac – Taking a Step Backwards?

I just received a mailer yesterday announcing the arrival of Quicken Essentials for Mac, which is the long-awaited update to Quicken 2007 for Mac. Quicken Essentials was actually released back in February, but I somehow missed the announcement.

On the surface, this update sounds great. The new software runs natively on an Intel chip (requires MacOS X 10.5+) and the interface has been completely re-designed to make it more user-friendly. According to the mailer:

“Built from the ground up for Mac, the 2010 Edition delivers the intuitive ease of use and clean, modern look you’ve come to expect from a Mac application.”

Unfortunately, the early reviews on Amazon are abysmal, averaging 1.5 stars on over 100 reviews. While Intuit claim that “this is the upgrade you’ve been waiting for,” it appears they’ve paid too much attention to form, without focusing on function.

Here’s some info from the Setup Guide that I gleaned from one of the reviews. Note that you wouldn’t otherwise learn about this until you had bought and begun installing Quicken Essentials:

As much as we improved the experience of using Quicken when we rebuilt it from the ground up, there are some features you may have been used to using in Quicken for Mac (or Quicken for Windows) that we didn’t include in this version of Quicken Essentials.

Investments - Quicken Essentials lets you to track the overall value of your investment accounts and the value of specific holdings, but the software does not track individual buys and sells, nor will it provide some advanced investment performance reports.

Exporting to TurboTax - Quicken Essentials does not currently support the ability to export your data to TurboTax.

Direct bill pay - You can track your bills in Quicken Essentials, but the program doesn’t have the direct bill pay capabilities that allow you to pay your bills directly from the program.

Other advanced features - Quicken Essentials does not include many of the advanced features in other versions of Quicken, including Business features, Rental Property, lifetime planner, cash flow forecast, spending plan, debt reduction plan, emergency tax records, tax planner, and home inventory manager.

Wow. Seriously? You can’t track individual buys and sells in your investment accounts? It’s unclear if this information is actually lost upon import, and cannot be entered going forward, or if Essentials simply fails to provide a way of viewing/reporting it.

And beyond that… No direct billpay? No TurboTax integration? This all makes me wonder what else is missing. In the three years since the last update, you’d think they could’ve found of way of incorporating these essential features into a product called Essentials.

All in all, this is very disappointing news. I’ve been pretty happy with Quicken 2007 for Mac, and was looking forward to an equally useful replacement – especially given Intuit’s history of sunsetting online support for older versions. For now, it looks like I’ll be sticking with the 2007 version.

The good news is that Intuit offers a 60 day money back guarantee, so if you buy Quicken Essentials and are unhappy with it, you can get your money back. The only downside here is that they don’t cover return shipping.

Published on March 17th, 2010 - 9 Comments
Filed under: Miscellany
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Banks With Consistently High Interest Rates

Are you interested in earning the highest interest rate possible on your hard-earned savings without having to constantly chase rates from bank to bank? If so, then read on for a rundown of banks with a history of paying the highest rates.

The NY Times “Bucks Blog” recently compiled a list a list of banks that have consistently offered the highest yields on their money market accounts and certificates of deposit (CDs) over the past two years. By choosing one of these banks, you can increase the odds that you’ll continue receiving an attractive rate without having to jump from one bank to another.

There are some pretty familiar names on the list, including Ally Bank, Discover Bank, and EverBank. Notably absent are popular banks such as ING Direct, HSBC Advance (formerly HSBC Direct), and FNBO Direct.

First up, here are the banks that offered high rates for all eight quarters:

• Ally Bank
• American Bank
• BankDirect
• Discover Bank
• EverBank
• First Natl. Bank of Baldwin County
• Intervest National Bank
• M&T Bank, NA
• MetLife Bank
• Stonebridge Bank
• UmbrellBank.com

Next, the banks that offered high rates for seven of eight quarters:

• iGObanking.com
• Imperial Capital Bank
• UFBDirect.com

And finally, the banks that offered high rates for six of eight quarters:

• Corus Bank
• First Trade Union Bank
• giantbank.com
• Nexity Bank
• Salem Five/directbanking.com

We have an Ally Bank account dating back to when they were GMAC, and I can vouch for their consistently competitive rates. The same goes for Everbank, though they do have a fairly significant minimum balance requirement to avoid fees.

Interestingly, we just recently became the proud new owners of a Discover Bank account when our old E*Trade bank account was transferred over to Discover. I don’t have much experience with them, but I’ve heard good things.

Published on March 17th, 2010 - 11 Comments
Filed under: Banking, Saving & Investing
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How to Handle Irregular Income

It’s been a busy last couple of months, but I’m amazed at how well everything is going so far in 2010. Among other things, I just received a small windfall from my freelance and blogging business. My freelance income has otherwise been fairly steady, with some irregular income for bigger projects and other things.

I try to make my irregular income go as far as possible. With so many options at my disposal, I want to make sure I’m not wasting these great opportunities. Since I’ve had the opportunity to chat with some readers, I know that some of you have also created, or are currently building, some extra income streams. I thus thought it would be worth sharing some tips on handling the unpredictable cash flow.

Handle your tax obligations first

My first piece of advice is set aside money for taxes before you budget the rest of your side income. You don’t want to have an unexpected tax bill come due, and you definitely want to make sure you avoid underpayment penalties. If you need help figuring out your estimated taxes, you can use Form 1040-ES.

This year, I’m paying estimated taxes on a quarterly basis for my freelance business. I want to make sure I have the right amount when the next quarter becomes due April 15. I’ve put aside 30% of my freelance income aside into a savings account and then pay I pay taxes directly from that account.

I use EFTPS (Electronic Federal Tax Payment System) to handle the payments. It’s free, and you can manage everything online. You do have to register in advance and apply for a PIN for the account, but I found it to be an easy process.

Reinvest back into your business

You may think that since I’m usually writing about reducing debt and building up some savings, I’d mention that as then next goal. Actually, my advice is to make sure that you allocate some money back into growing your business. If you want to continue to grow your business, you can’t afford to take any shortcuts.

Some areas you might want to consider investing in include:

• Office equipment and supplies: Don’t go out and buy brand new computers and software just because you have some extra money, but do look to see if there are any equipment upgrades that will help you stay ahead of the competition.
• Training and seminars: You want to stay at the top of your game so you can provide more value to your clients and generate more business.
• Bookkeeping: If handling the bookkeeping or accounting for your freelance work gets in the way of “real” productivity, consider outsourcing it to a professional. This will pay for itself down the road, and allow you to spend more time working on your project(s).
• Business savings: Yes, I’m suggesting that you put some money in savings for future business expenditures. Since you can’t always predict your busy and slow months, having a cushion reduces your chances of going into debt while weathering the storm.

Prepay your monthly expenses

If your income varies, my advice for your next step is to play it safe and deposit into your checking account enough money to cover your regular monthly expenses for awhile. Everyone has a different comfort zone, but having an additional buffer for the lean times will make your life less stressful. We try to put in an extra month or so as our checking buffer (in addition to our regular emergency fund, which we’ve also bulked up), and it has given us some peace of mind.

In the past, we’ve used some of our side income to go ahead and take care of things like major car repairs or other household needs. I’ve also set up an automatic transfer from my business checking account into our joint savings account at ING Direct so we can earn a higher interest rate than is available at our local bank.

Reduce debt and invest

Once you’ve taken care of taxes, re-invested in your business, and taken steps to smooth out any bumps in the road, the “regular” financial rules apply. If you’re carrying any debt, you should consider directing at least some of your excess toward debt reduction. Investing for the future is also an important goal. And guess what? There are some special tools available for the self-employed, including the SEP-IRA and solo 401(k), which are great retirement savings vehicles.

Freelance thoughts and tips

Do you own your own business? Or maybe you generate side income in another way? If so, how do you budget and handle the resulting irregular income?

Published on March 16th, 2010 - 7 Comments
Filed under: Debt Reduction, Retirement, Saving & Investing, Self Employment, Taxes
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Roth IRA as an Emergency Fund?

Building an emergency fund is one of the critical first steps to personal financial success. With that in mind, a reader named LG recently wrote in with a question about using a Roth IRA as an emergency fund:

I know you’ve written a lot about emergency funds, but my question is can a Roth IRA serve as an emergency fund?

At first blush, the answer seems obvious. Roth IRAs are designed for retirement investing, not for use as a short-term savings vehicle. Thus, nobody in their right mind would use a Roth as an emergency fund. Or would they?

Making Roth IRA withdrawals

Did you know that you can withdraw your Roth IRA contributions without paying any taxes or penalties? This rule applies only to your contributions, but it provides a significant degree of flexibility when it comes to managing your Roth IRA.

At the same time, I would caution against pulling money out of a Roth IRA unless absolutely necessary, as your future contributions will still be subject to the normal contribution limits. In other words, you won’t be able to simply put the money back into your account.

Roth IRA as emergency fund?

With the foregoing information as a backdrop, let’s return to the original question… Can a Roth IRA serve as an emergency fund? Yes, with some limitations, it can.

More importantly, should you rely on your Roth IRA as an emergency fund? In my opinion, the answer is no, except under very specific circumstances.

Beyond the inability to put your money back into your Roth IRA after you recover from whatever emergency happens to crop up, you also have to consider the issue of liquidity and accessibility.

If your Roth funds are invested in a “normal” fashion, then you likely have at least some of the money in stocks. If you rely on your Roth as an emergency fund, you might be forced to sell investments when the market is down.

As for accessibility, even though you’re allowed to withdraw your contributions whenever you want, it could take a week or so to receive funds from your IRA custodian. Thus, you shouldn’t rely on a Roth IRA to cover you in circumstances that require immediate access to your money.

When you should consider it

I noted above that relying on your Roth IRA as an emergency fund is a bad idea except under very specific circumstances. The circumstances that I’m talking about are when you have a healthy emergency fund in place, but not enough excess to contribute to a Roth IRA.

In this case, you might want to consider using a portion of your emergency money to fund a Roth IRA, secure in the knowledge that you can always pull the money back out if an emergency crops up.

There are two important caveats here. First, be sure to keep enough cash in a local account to cover any short-term, immediate needs that might arise. That way you won’t find yourself in a pinch as you wait for the check from your IRA custodian.

Second, don’t invest this money in anything that is subject to market fluctuations. Instead, keep it in a money market fund, or something similar. Once your emergency fund recovers (more below) you’ll be free to invest more aggressively.

Once you make the contribution to your Roth IRA, it’s time to buckle down and rebuild your emergency fund. If something goes wrong and you need to pull the money back out, there was no harm done. After all, you wouldn’t have contributed to the Roth in the first place, so you don’t really lose anything by withdrawing your contributions.

On the other hand, if all goes well and you get your emergency fund rebuilt before you need it, you’ll be a step ahead. You’ll now have a fully-funded emergency fund plus money in a Roth IRA. At this point, you’ll be free to invest the Roth funds more aggressively.

Obviously, you can repeat this process many times over, and don’t forget that it works the rules are essentially the same for a spousal IRA. Thus, depending on your circumstances, both you and your spouse can take advantage of this strategy.

Published on March 15th, 2010 - 4 Comments
Filed under: Retirement, Saving & Investing, Taxes
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Your Investments: Seven Common Mistakes to Avoid

Barbara Marquand is a business journalist who writes for GoTalkMoney.com and other financial web sites. She frequently covers personal finance topics, bank industry trends, and credit card news.

Even the brightest Wall Street mavens make investment errors, so don’t beat yourself up if you’ve made a financial misstep or two. Instead, learn from your mistakes and set a better course for your financial future.

Here are seven common mistakes to avoid:

1. Failing to strategize investments

Think about your risk tolerance as you develop a strategy, advises the CFA Institute, a global, not-for-profit association of investment professionals. Know how much money you can stand to lose before you invest, and take into consideration your financial goals and time horizon for investments. Your strategy should aim for a diversified portfolio, with investments in a wide range of industries, companies, countries, and asset classes.

2. Wishful thinking

You need look no further than recent investment scandals as evidence of investors’ wishful thinking. Even sophisticated people are too eager to trust investment pros who promise to perform financial miracles. In his $65 billion Ponzi scheme, for instance, Bernie Madoff reported unrealistically consistent performance to investors, which should have been a red flag that something was wrong. Texas financier R. Allen Stanford, accused of swindling more than $7 billion from investors, reeled in investors with promises of incredible rates on CDs.

3. Paying too much in fees for investments

Ask for the fine print when dealing with a brokerage or trading company, advises the CFA Institute, and understand the fee structure before you invest. Don’t let high fees wipe out investment returns. This goes for stock and mutual fund investments as well as for lower-risk vehicles, such as CDs. Keep in mind you’ll pay fees if you invest in CDs through a broker. Weigh the cost of the fees against the rates the broker offers, and compare the returns to the highest CD rates you can find on your own.

4. Holding onto loser investments too long

Why do investors hold onto obvious losers? The answer comes from the field of behavior finance. In a Wall Street Journal article, Santa Clara University finance professor Meir Statman notes that when faced with losses on paper, investors comfort themselves with the notion that perhaps the investment will go back up. Selling at a loss would mean facing pain squarely, so investors procrastinate and hope for the best, holding loser investments long past their time.

5. Overconfidence

Too many investors think by listening to some tips from financial gurus on cable TV they can do better than professional investors. Overconfident investors tend to trade too rapidly. They don’t do as well as investors who buy and hold diversified portfolios, and they pay more in transaction fees.

6. Neglect of investments

If the tough economy is keeping you from being proactive with investing, then get re-engaged. The CFA Institute recommends setting up a regular contribution program and scheduling regular checkups with your investment professional to keep you focused on your goals and to fix any problems.

7. Buying high and selling low

If you buy a stock after it’s peak, you’ve missed its growth potential. Likewise, many investors bail from the market when it tanks. But when stocks are down, that’s the best time to buy because prices are low and growth potential is high.

You can’t be a perfect investor, but you can prevent a lot of financial heartache by using common sense and avoiding the most common mistakes.

Published on March 12th, 2010 - 6 Comments
Filed under: Saving & Investing
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Show AND Tell: How to Raise Financially Responsible Kids

This is a guest post from WellHeeled of the Well Heeled Blog. If you like what you see here, please consider subscribing to her RSS feed or following her on Twitter.

My earliest memory of personal finance (though I didn’t know the term at the time) was when I was in middle school. My mother had always told me the importance of saving, but one afternoon, she pulled me aside and took out a few sheets of paper – the amortization schedule for the 30-year mortgage on our first home.

She then showed me how much interest we could save over the life of our loan if we accelerated payments on the principal during the early years of the loan. Although my mom first framed the session as an applied math lesson (percentages! subtraction!), that would be my most memorable lesson in financial decision-making.

Many experts say that leading by example is the way to show your kid show to be financially responsible adults. Show, don’t tell, they say. I agree that action is important, but my experience with my parents lets me know that parents should show AND tell. Kids learn from your actions, but they also benefit tremendously from words that explain the reason behind the actions.

Growing up, frugality was the normal state of things for me. My mother was aggressively paying off our mortgage. Every month whenever there was something extra, she put it into the house. As I grew up – and as I ventured into the homes of friends or classmates and become more exposed to malls and advertising – I come to realize that my parents led a very frugal lifestyle.

They bought reliable cars new, but then drove them for over a decade; they almost never went out to eat; and they refrained from buying a DVD player until a few years ago, when it was utterly clear that VCRs were truly machines of the past. Married for almost 30 years, my parents have rarely been on a vacation by themselves.

So I grew up in an environment where saving money is normal. Had my mother not told me later the reasons behind her aggressive payment of the mortgage (financial freedom, she would explain to me patiently), however, that lesson may not have stuck with me for all these years.

Even when I was a little kid, looking at the papers and the rows of figures under the Interest Saved, Years Remaining, Principal Paid columns, I knew I was looking at something powerful. Those numbers were the reason we sat in faded fabric couches when my parents might have upgraded to leather, and had the thermostat set 66 degrees instead of 72 in the winter.

Because of the choices my parents made, they were able to ultimately pay off their mortgage a decade early, invest in other real estate ventures, and pay for my college education. I didn’t quite realize it then, but I realize it now – that amortization schedule was much more than an applied math lesson.

It was a show and tell of a careful weighing and calibration of dreams – of choosing to forgo something (nicer cars, bigger TV, more stylish clothing) in exchange for gaining something else that my parents deemed more important – the ability to pay off our home years ahead of schedule, thus freeing up cash flow for other goals. To this day, I think that amortization schedule explained to me the essence of personal finance more than any expert every could.

Note: Also check out GetRichSlowly’s post on how to raise money-smart kids. JD Roth polled readers who provided tips on how their parents helped prepare them for financial independence.

Published on March 12th, 2010 - 12 Comments
Filed under: Debt Reduction, Education, Family & Life
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How and Why to Diversify Your Income

Time and again we hear that investment diversification is a must, and rightly so. Diversifying investments – by investing in a variety of different types of index funds and/or ETFs, for example – is a wise strategy for reducing risk.

In contrast, how many of us maintain a similar diversification perspective with respect to our income? Multiple streams of income can be one of our greatest allies in the pursuit of financial security, and yet few pursue this sort of thing. Having additional sources of income serves to hedge against job loss and other employment variables, so shouldn’t income diversification be sewn into the fabric of our daily financial strategy?

Multiple streams of income

How much time you’ve spend diversifying your income (or even thinking about it) probably depends on the circles in which you run. I can say with confidence, however, that our culture generally does not place enough emphasis on the concept… So we need to think outside the box and adopt it ourselves.

In 5 years of marriage, I have had three separate employers and my wife has also had three (jobs in Michigan are particularly unstable). Since January of 2009, we have been focused on expanding our income sources to increase financial security and buffer risk. The possibility of job loss, pay cuts, furlough days, and dubious markets fed our desire to assemble a sprawling network of income sources that we continue to build upon today.

In 2008, we had 2 sources of income; today we have more than 10. The sources we have developed usually center around our passions, tend to be at least partially passive in nature, but also have the potential to grow with additional effort. We get out of them what we put in, and have become addicted to the direct control of our own success.

Don’t quit your day job

Do not misunderstand my appeal for income diversification as a call to quit your day job. The idea is to diversify income sources, not eliminate or constrict them.

Both my wife and I still hold our “career positions” and intend to do so until our debt is eliminated, or until our alternate sources are earning us enough for us to bow out gracefully – whichever comes first. Neither of us are crazy about our “day jobs,” but any discontent we have is rooted more in the necessity to maintain them due to our debt load than in the jobs themselves.

If you have recently lost employment and are in the process of looking for work, then you have a perfect opportunity on your hands! When you’re not out searching for a job, brainstorm a list of several alternate income sources that you could develop and get started. You will be as successful as you want to be… More than anything, success is driven by hard work and consistency.

Trim fat and reallocate existing income

Always remember that there are two parts to leading a healthy financial life. Earning more and spending less. In addition to searching for more income sources, you should take a close look at your spending and see if there are any areas where you can plug unnecessary leaks. For example, if you’re spending a ton of money on servicing your debts, you need to get serious about debt reduction. In the long run, you might find that “trimming the fat” improves your bottom line more than some of your possible alternate income opportunities.

How to brainstorm alternate sources of income

I started with a highly technical approach that I like to call “doing whatever you can think of to make an extra buck,” then tweaked things over time by visualizing things with a mindmap.

Mindmaps provide an excellent canvas to freely sketch out ideas in digital format. If you are unfamiliar with them, mindmaps are diagrams used to represent words, ideas, tasks, or other items linked to and arranged around a central key word or idea (source).

The following image provides a fairly generic representation of my current income sources. I actually have a much more detailed and descriptive breakdown for my personal use that I update and refer to on a regular basis. Laying everything out in this manner helps me brainstorm and organize my projects with a much higher degree of success.

If you want to get started with mindmapping, here are some software options that I recommend:

• Mindjet MindManager – This is the software that I use. In my opinion, it’s the best option on the market, but it costs nearly $300. There is, however, a free 30 day trial.
• Freemind – A free and open source option that I recommend you use to get started with mindmaps.
• Xmind – Offers a free version and a more feature-rich pay version.

In closing…

Income diversification is a prudent practice that can increase financial security and even self-fulfillment. If you’ve never taken the time to map out a network of actual and potential income that incorporates all your gifts and passions, then I highly encourage you to do so. I promise that you will (at the very least) be intrigued by your findings, and you might discover some new possibilities.

Published on March 11th, 2010 - 10 Comments
Filed under: Miscellany
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Best Places to Invest for Retirement

A reader named KC recently wrote in with a question about investing for retirement:

I’m 28 years old with a wife and a six month old baby. We’ve always been money-conscious, but would really like to focus our efforts. We both have Roth IRAs, but are not satisfied with them. They are heavily loaded, and we weren’t that familiar with them when we were advised to set them up. My question is where you would recommend I go for a long-term investing vehicle? I always hear to go with no-load mutual funds but would like your opinion.

This is a great question. I’ve said it before, and I’ll say it again… Friends don’t let friends pay mutual fund sales loads.

My personal preference when it comes to long-term investing centers on low cost, no-load mutual funds. When I say low cost, what I’m really talking about is “passively-managed” index funds that seek to match the market as a whole, or some segment thereof.

As for my favorite places to invest, Vanguard is at the top of my list. We also have some money with Fidelity and have been quite happy with their offerings. A third option would be Schwab, who has a bunch of low cost mutual funds with a low minimum investment of $100.

A slight variation on the above would be to go with index ETFs instead of index mutual funds. The underlying premise is the same, but you get a bit more flexibility when it comes to trading shares. If you do go this route, make sure you select a good discount broker so the trading costs don’t eat you alive.

Of course, there are other options to consider, such as opening a Treasury Direct account so you can buy Treasury securities such as T-Bills, T-Notes, T-Bonds, Series EE Savings Bonds, Series I Savings Bonds, etc. This will allow you to purchase these securities direct from the Federal government with no middleman.

Just keep in mind that the optimal composition of your portfolio depends on many factors, so you really need to give a lot of thought to your time horizon, risk tolerance, etc. before you make any major moves.

Published on March 10th, 2010 - 4 Comments
Filed under: Retirement, Saving & Investing
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