stock portfolio

Monday, May 2, 2011

Young Investors Blog

I found this blog and thought it was pretty cool. He uses many of the same principles as Dave Ramsey or other financial gurus.

Friday, April 15, 2011

Net Worth Calculator

The best net worth calculator I have found is at CNN Check it out. It is a great tool. Although Net Worth does not give you the whole picture its a starting point on what needs to be worked on most such as debt or savings.

John Dorfman

John Dorfman from Bloomberg is awesome in the way of personal investing. He does interesting things with stocks and actually tracks them.  Here is one of his articles check it out!

Dorfman Article

Thursday, April 14, 2011

Good Wealth Building Article

This article talks about how to become a millionaire using plain and simple steps. This mostly follows Dave Ramsey's ideals. Read it and let me know what you think!

Baby Step 2

Baby Step 2- Pay off your debt using the debt snowball method.

The Debt Snowball is paying the minimums on all of your debt accounts except one, paying that one off quickly and aggressively, when that debt is paid off you roll the entire amount you were paying onto the next debt.  So the amount you pay on the next debt is significantly larger so you pay it off quicker.

For example, if you have a $100 car payment and a $15 credit card payment you would pay the minimums on the car payments and lets say you can by $50 extra on the credit card. You put $65 down on the credit card each month until it is paid off then you would roll the $65 to the car payment once the credit card is paid off. So your new car payment would be $165 and you would continue that until the car is payed off quicker also.

There are a few different methods to the snowball. One is more mathematical, one emotional, one is a combination.
The first method is your first debt that you focus on is the one with the highest interest rate and then the next highest interest rate and so on until you pay off the debts.  This method is best if you want to save the most money seeing as you will pay less interest in the long run but it can be hard to stay focused with this method because it is hard to see your hard work paying off.
The second method is the pay off the debt with the lowest balance first and then the next lowest balance until you pay off the debts. The idea here is to use emotional "wins" to keep yourself motivated. This is the method that Dave Ramsey advocates.  It is not necessarily the best way mathematically but it helps most people stay on track and turns better in the long run because people actually get out of debt and not stay in it by failing.
The third method is a combination. Pick the debt you hate the most maybe its a credit card at a bank you no longer like, or a car, or those pesky student loans. Attack this one first and then follow on with the first method.  This method helps because you stay focused to get out of debt. You really want that one debt gone more than the others and then after that you have your huge emotional "win" because it feels so good to not have a debt that you hate so much you can continue with the plan more easily.

Any of these methods are good as long as you stay on track and stay focused. If you are a mathematical person go with the first, if you need emotional help to stay on track there is the second method, if there is just one debt that just really angers you every month when you see that bill get it gone!

Check out which method is best for you with this Caclulator.

Sunday, April 10, 2011

Baby Step 1

Baby Step 1: have a baby emergency fund of $1000.

Is that enough? Let us take a closer look a possible uses for that emergency fund.

Average cost of a new transmission: $2000
Average time a family can last on a job loss with $1000: Two weeks
Average time to find a new job: 2 months
Average emergency medical bill: $5000

Obviously $1000 doesn't go that far anymore. The main problem with this step is that it is outdated. The idea is good but the amount is not enough anymore. 3-6 months expenses is what most advisers suggest but for a baby emergency fund while you accelerate getting out of debt 3-6 months may be to much. I suggest $3000 or 2 months of expenses which ever is less.

Modified baby step 1: Save $3000 or two months of expenses which ever is less.

Thursday, April 7, 2011

Your FICO Score

Credit scores are designed to measure the risk of default by taking into account various factors in a person's financial history. Although the exact formulas for calculating credit scores are secret, FICO has disclosed the following components:
  • 35% — Payment history – Late payments on bills, such as a mortgage, credit card or automobile loan, can cause a FICO score to drop. Paying bills on time will improve your FICO score.
  • 30% — Credit utilization – The ratio of current revolving debt (such as credit card balances) to the total available revolving credit or credit limit. You can improve your FICO scores by paying off debt and lowering the credit utilization ratio. Alternatively, applying for and receiving the credit limit increase will also drive down the utilization ratio. The closing of existing revolving accounts will typically adversely affect this ratio and therefore have a negative impact on their FICO score.
  • 15% — Length of credit history – As your credit history ages it can have a positive impact on their FICO score.
  • 10% — Types of credit used (installment, revolving, consumer finance, mortgage) – You can benefit by having a history of managing different types of credit.
  • 10% — Recent search for credit – Credit inquiries, which occur when you are seeking new credit, can hurt your score. Individuals shopping for a mortgage or auto loan over a short period will likely not experience a decrease in their scores as a result of these types of inquiries, however. While all credit inquiries are recorded and displayed on your credit report for a period of time, credit inquiries that were made by yourself (to check your credit), by your employer (for employee verification) or by companies initiating pre-screened offers of credit or insurance do not have any impact on your credit score.
There are other special factors which can weigh on the FICO score.
  • Any money owed because of a court judgment, tax lien, etc. carry an additional negative penalty, especially when recent.
  • Having one or more newly opened consumer finance credit accounts may also be a negative.