I knew [...]]]> Last week, a coworker in her mid-40′s asked me if I knew anything about mutual funds.  While I know the basics of mutual fund investing, and I know specific stats on the mutual funds I own, I can’t say that I’m anywhere near an expert.  Still, I asked her what she wanted to know.

I knew she had just come into some inheritance money, though I’ve never asked how much, and I was glad to see that she was really investigating her options for where to put her money.  She was looking specifically at Sharebuilder and buying mutual funds that way.  She had picked out a few, both general funds and industry specific funds.  I advised her to do more research, but from what I knew, the industry specific funds she selected were likely riskier, but with more risk comes the potential for more reward.

I also asked her what her timeframe was.  Investing should always be a long term effort, but I wondered if a Roth IRA was the way to go for her.  I suggested she do some research on that, but that a Roth (for the most part) meant she was locking up her money for a number of years.

She then mentioned that she was looking at putting her money into CDs, but her bank was only offering large CDs, and she wasn’t sure she wanted to lock up all of her money that way.  I told her that there were a number of other banks that offered CDs at perhaps a lower rate, but where she could put in as much money as she wanted.  Since she had Sharebuilder, I suggested ING Direct.

She wrote all of this down, and then a while later, said “Oh, wait, ING Direct isn’t FDIC insured?  You mean my money’s not safe there?”  I’m not sure where she got that – ING Direct is absolutely FDIC insured or I wouldn’t have my money there.  But the statement raised a flag for me.  If she was that worried about loss, she probably shouldn’t be looking into investments and definitely not into those specialty funds.

I made sure she realized the difference between CDs and mutual funds and that with a mutual fund, she could very possibly lose everything (not likely, but possible).  I’m not sure she realized what she was getting into with investing and she decided to go the CD route, probably something in the one to two year range, with the expectation that by then, interest rates will go up (cross your fingers, savers).

I was really glad that I was able to help my coworker (who I also consider a friend as she’s a crazy runner like me), and I’m glad I got to share what knowledge I have.

We don’t talk about money a lot with our friends and coworkers, but I do think it’s important to help each other out and share what we know.  Not everyone spends time reading personal finance blogs, after all, and I know I’ve picked up a few nuggets of information over the years.

Before I started PF blogging, I knew very little about Roth IRAs, for example.  Definitely the most important thing I’ve learned thus far.  What’s your favorite tip that you’ve picked up?

I’m not sure that I agree.  I think on average, this is correct.  I look at my male coworkers and I’m sure [...]]]> There was an interesting discussion about money and gender on the Today show yesterday.  The experts started out by stating that it costs more to be a woman – dry cleaning, shampoos, cosmetics, etc.

I’m not sure that I agree.  I think on average, this is correct.  I look at my male coworkers and I’m sure I spend more on cosmetics and toiletries, because while I don’t spend a lot on makeup, most of them spend nothing.  Dry cleaning?  Questionable.  But then I have female coworkers who wear little to no makeup (and look beautiful), so they clearly spend less than me and probably less than the average man.

One interesting statistic was that women often spend in little amounts without thinking about how it adds up, whereas men are more apt to go and splurge on a big ticket item – a new tv, car, etc.  Overall, women usually end up spending more in this manner.  I was surprised by that stat.

A big part of this discussion was about investments.  For the most part, men do most of the investing for the family.  But when women do invest, they do it better than men!  Why?  Women ask for directions.  They do research and ask questions.  But when they do, they stick to the plan.  Surprisingly, men are more emotional when they invest.  They buy and sell a lot.

One reason that was given to explain why more men invest was because investing is a traditionally male activity.  Generations ago, men handled the money and most women weren’t even given a view into the family finances.  Those men taught their sons, and those men taught their sons.  The message?  Teach your sons and your daughters to invest.  Teach your friends, both male and female.  Learn about investing.

Well I did it.  I just didn’t mean to.

I did a bunch of research on stocks and picked out one to start with (I decided to do the investing in chunks – choose one stock, buy it, do more research, choose another stock, [...]]]> Remember when I posted that I was going to start investing in stocks?

Well I did it.  I just didn’t mean to.

I did a bunch of research on stocks and picked out one to start with (I decided to do the investing in chunks – choose one stock, buy it, do more research, choose another stock, buy it, etc).  I was pretty satisfied with this choice, so I logged into my Sharebuilder account, set up the buy, and transfered in funds.  I set it up as a one time automatic investment, so it wasn’t going to happen for a few days.

I’m not sure why, but I started to have second thoughts.  So I logged back in to Sharebuilder and cancelled the buy.

Or so I thought.

What I did was go into the automatic investment page and remove that buy from the page.  What I missed was that the automatic investment page can’t be blank if automatic investments are turned on (which they were).  So even though I’m sure the page popped up a warning, I missed it completely.  And therefore, bought stock.

Thankfully, I still think it was a good purchase, just not one I was sure I wanted to make.  It’ll be interesting to see where things stand this time next year, see if that mistake was a happy one or more of a “Oh well.”

I’ve been putting it off because the market has been so tough to watch.  It’s hard to look at how much my investment has lost and still [...]]]> Well, I did it.  I set up my automatic contributions to my Roth IRA for 2009.  I set it to max out the contribution by using monthly investments.  

I’ve been putting it off because the market has been so tough to watch.  It’s hard to look at how much my investment has lost and still be able to consider putting in more money.  But I have to have faith that I’m buying low and selling high.  I’m not retiring for 30+ years, so it makes sense to put as much money as possible into my Roth IRA while I’m still young and let that money grow.  It’s not like I’ll be able to catch up later.

I opted for automatic contributions as part of the “set it and forget it” method of investing.  I know that what I’m doing is the right decision.  I’ve researched the funds.  I know that right now, investments are losing money, but history tells us that they will come back.  I feel like a bad personal finance blogger admitting that part of my plan is to ignore my retirement funds.  After all, shouldn’t I want to know everything there is about my money?

Well I do.  Sort of, anyway.  I have alerts set up for all of my retirement funds so I know what’s going on with them.  I know when shares are falling or when reports are issued on those funds.  I just choose to not look at my personal balance.  If I know shares are falling then I know my balance is falling.  It just sometimes creates a sinking feeling to look at my actual numbers.  So while I know in general what my money is doing, I prefer to not know the actuals.  At least not everyday.  I check in on them at least once a month when I update my net worth, and usually can’t resist a peek or two throughout the rest of the month.

I would much rather look at my savings account balances.  At least those I have some control over.  I can’t control the markets, so I shouldn’t worry about it.  I should just remember that I’m putting away money for my future and that’s what’s important.

“Investing is easy.  Staying invested [...]]]> I have in front of me a report on the current financial situation written by a market strategist at one of the U.S. investment firms.  The report is titled “Stay Calm in the Midst of Crisis.”  The author makes some good points.  The one that resonated the most with me is:

“Investing is easy.  Staying invested isn’t – especially during a market such as this.”

It’s tough to not want to pull all of my money out of investments and put it into safer funds.  But with great risk comes great reward… or so I hope.  I have to remember that I don’t need my money for at least 30 years.  It’s going to go through cycles like this more than once, and just staying the course makes the most sense.  (I am very much wishing, however, that I hadn’t already completed my 2008 Roth IRA contributions though.)

Another issue raised in the report is whether or not we’re headed for another Great Depression.  As we all know, in the Great Depression, banks failed, and clearly that’s happening here.  But we also have FDIC insurance, which is why we don’t need to pull our money out of the banks.  Also, during the Great Depression, unemployment was at 25% and there were no unemployment benefits or Social Security.  The most interesting point, the one I think that the mainstream press misses, is that in the 1930′s, mistakes were made.  The Fed raised interest rates in an effort to boost the dollar and taxes were also raised.  Additionally, “Protectionist measures raised tariffs, which led to retaliation from other countries and led to a broad decline in world trade.”

Does this mean we’re safe from another Great Depression?  Well, I don’t think that you can ever rule out anything, but if we do fall into such a dire economic state, the reasons will be different.  

It’s hard to stay the course.  It’s not easy to know that my retirement accounts are losing money like water through a sieve.  But I take faith in the fact that things will recover.

After updating my net worth this month, I’ve decided that for the next month, I’m not going to look at my investment accounts.  Or at least, I’m going to try to not look at my investment acounts for the next month.  I might not even include them in my [...]]]> So.  The economy.  Not so fun, eh?

After updating my net worth this month, I’ve decided that for the next month, I’m not going to look at my investment accounts.  Or at least, I’m going to try to not look at my investment acounts for the next month.  I might not even include them in my net worth update and just look at my cash accounts and cds. 

Why?  Because these are long term investments.  The point isn’t what’s happening over a few days or a few weeks.  The point is that they are supposed to grow for future use.  Worrying about them now doesn’t do me any good.  In fact, I’m finding it a little stressful. 

So for now, I’m going to just ignore those accounts.  Oh, I’m going to continue to invest, don’t worry.  Not quite ready to stop those 401(k) contributions yet.  But I’m not going to keep looking and worrying about what’s happening.

Of course, this experiment could very well fail sometime next week when I just can’t take it anymore and have to peek at my accounts.  We’ll just have to see.

I learned yesterday that a few months back, one of my co-workers, who seems to be a fan of “get rich quick” schemes (none of which have ever worked for him, of course) decided to start playing the stock market.  He took $3000 out of his savings [...]]]> Welcome to all the new readers from Smart Spending!

I learned yesterday that a few months back, one of my co-workers, who seems to be a fan of “get rich quick” schemes (none of which have ever worked for him, of course) decided to start playing the stock market.  He took $3000 out of his savings account and opened an investing account.  Apparently, he invested heavily in Fannie Mae and Freddie Mac.  Whoops.

From what I hear, he hasn’t quite lost all of his $3000, but he’s lost a large chunk.

Now, for some people, losing $3000 might not be a big deal.  But it was absolutely a huge deal for this guy.  He has a wife and two young children.  I’m not sure if his wife works or not, but if so, it’s part-time and she’s not bringing in a lot of money.  Though they would like to buy a home, they currently rent because they can’t afford a down payment.  He has mentioned his sizeable student loan debt and his credit card debt as well.  Now, I’m no expert, but this doesn’t seem like a person who should be taking his savings and putting it into the stock market in hopes of making a serious profit.

I admit – I’m very risk averse when it comes to my money.  To me, the stock market seems a lot like gambling.  I like mutual funds, and I do own a few stocks, but that’s more for fun than anything else. 

I think this co-worker was swayed by another co-worker who admits that he makes more day trading than he does at his job (of course, we work for the government, so perhaps that’s not saying much).  It’s easy to hear a stat like that and think “Hey, I should get in on this too.”  Day trading co-worker, however, has also lost a lot of money at times and has been playing the stock market for a number of years.  He’s got a lot of experience and knowledge and has gotten good at predicting trends.  Of course, it’s always a gamble, but at least he’s making educated gambles. 

There are a lot of people looking for an easy way to get rich.  I think we all dream of an easy way to get rich – how wonderful it would be to take a few easy steps, make our millions, and not have to worry about money for the rest of our lives?

Unfortunately, it seems to be the people who really can’t afford to participate in these sort of plans that are the most likely to try and they end up losing money they can’t afford to lose.

I’m not sure what my co-worker’s financial situation is at this point.  I know he’s very frustrated by the market, and I also heard that he was considering putting more money in.  While buying low and selling high is clearly the best investment strategy, sometimes you just have to cut your losses and run.

When I’m looking at my finances on a daily basis, or even every other day, I know exactly what I have in my budget categories. I know where I can splurge a bit and [...]]]> Over the past few weeks, I find that I’m focusing less on my finances. This is both good and bad.

When I’m looking at my finances on a daily basis, or even every other day, I know exactly what I have in my budget categories. I know where I can splurge a bit and where I really need to tighten the reins.

On the other hand, looking at my finances on a daily basis also means that I know how my investments are fairing. My retirement accounts should be “Set it and forget it.” Of course, by that I don’t mean never changing my investment strategy, but rather to remember that I’m in it for the long haul and not for day trading, so its best to not know that my stocks are rising and falling so much throughout the day. I think that peeking at my retirement accounts once a month when I update my net worth should be sufficient. And yet I can’t keep away.

Focusing on my finances and my budget also means that when things get out of my control, like they did this month with the cat’s surgery, I worry more. I have to continually see that large expense in my ledger and know that I’ll be working to “pay back” that budget overage for at least the next month.

Obviously, I think some combination of the two is best. I need to work more on ignoring my retirement accounts (but continue to make smart investment choices, of course), and about paying attention to my budget but also not fixating on it. I think it’s too easy to become a little bit obsessed about where every penny is going, and I think a lot of personal finance bloggers and blog readers probably fall into the same trap.

I look forward to the day where my budget can be more along the lines of “set it and forget it.” I’m already better at making smart choices and just knowing what I can spend and when. But I’m not quite there yet.

(As an unrelated aside, we are now less than 4 months from Christmas. Have you started your shopping yet?)