Credit Cards

What are smart ways to deal with credit cards? What are not so smart ways?

3 thoughts on “Credit Cards”

  1. Mike Finley says:

    Smart ways: (1) Pay it off in full each and every month. If you can’t do that, don’t use it. (2) Use a rebate card that pays you back each year with cash or other benefits you prefer like travel miles. (3) Read up on the other benefits (purchase protection, price protection, return protection, extending the warranties, car insurance, etc.), and use them when applicable.

    Not so smart ways: (1) Make a payment that does not cover the full amount. This eliminates your grace period and you are stuck paying high interest that will compound in some very bad ways over time. (2) Think of your credit card like it is a bank to borrow from whenever you like. People go bankrupt thinking like this. (3) Hang out with other people who misuse their credit cards. The wrong people and the wrong kind of thinking in the wrong environment can devastate you and your future plans. Be smart!

  2. Mike Finley says:

    Smart ways: (1) Pay it off in full each and every month come hell or high water. If you can’t do that, don’t use it. (2) Use a rebate card that pays you back each year with cash or other benefits you prefer like travel miles. (3) Read up on the other benefits (purchase protection, price protection, return protection, extending the warranties, car insurance, etc.), and use them when applicable. Basically, understand the good that comes with credit cards while avoiding the bad.

    Not so smart ways: (1) Make a payment that does not cover the full amount. This eliminates your grace period and you are stuck paying high interest that will compound in some very bad ways over time. (2) Think of your credit card like it is a bank to borrow from whenever you like. People go bankrupt thinking like this. (3) Hang out with other people who misuse their credit cards. The wrong people and the wrong kind of thinking in the wrong environment can devastate you and your future plans. Be smart!

  3. Mike Finley says:

    Smart ways: (1) Pay the balance off in full each and every month come hell or high water. If you can’t do that, don’t use it. (2) Use a rebate card that pays you back each year with cash or other benefits you prefer like travel miles. (3) Read up on the other benefits (purchase protection, price protection, return protection, extending the warranties, car insurance, etc.), and use them when applicable. Basically, understand the good that comes with credit cards while avoiding the bad.

    Not so smart ways: (1) Make a payment that does not cover the full amount. This eliminates your grace period and you are stuck paying high interest that will compound in some very bad ways over time. (2) Think of your credit card like it is a bank to borrow from whenever you like. People go bankrupt thinking like this. (3) Hang out with other people who misuse their credit cards. The wrong people and the wrong kind of thinking in the wrong environment can devastate you and your future plans. Be smart!

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Investing

When looking at your retirement plan options at work, what should you focus on and what should you ignore?

3 thoughts on “Investing”

  1. Mike Finley says:

    (1) Identify the cost of each investment within the plan. This is called the expense ratio and each mutual fund has one (some stable funds do not as they provide a guaranteed low return per year). You want to pay as little as possible when investing. Higher returns will follow.

    (2) You want to know what that fund owns in securities (stocks, bonds, cash, and Real estate). Does it own stocks (large, small, growth, value, etc.) in the U.S. or overseas? Does it own bonds (quality or junk, term?) in the U.S. or overseas? Does it own some combination?

    (3) Do they offer the Roth as well as the traditional? For low to moderate income people (under $60,000 per year), consider the Roth. For those making over $60,000 per year, consider the traditional. Current taxes and future taxes (estimated) will help you decide this issue.

    Get those two things figured out and you are way ahead of the pack. Here is a bit of advice. Get your expense ratio below .10% on your funds. If your employer doesn’t offer funds that cheap, RAISE HELL UNTIL THEY DO. High cost plans cost you a great deal of money over time. Squeeze out the cost!

    Go heavy on stocks when you are young (under 50). Time has shown that stocks will produce by far the most return with the inevitable ups and downs along the way. Reduce your stock exposure as you go over 50 and start winding down toward retirement. Read What Color is the Sky for specifics.

    (4) What not to focus on? Ignore the past returns. They mean little to nothing. The past does not tell you what the future will hold. Go right past those 1, 3, 5 and 10 year returns as you focus on the important stuff like cost and the securities owned. Financial freedom to follow!

  2. Mike Finley says:

    (1) Identify the cost of each investment within the plan. This is called the expense ratio and each mutual fund has one (some stable funds do not as they provide a guaranteed low return per year). You want to pay as little as possible when investing. Higher returns will follow.

    (2) You want to know what that fund owns in securities (stocks, bonds, cash, and Real estate). Does it own stocks (large, small, growth, value, etc.) in the U.S. or overseas? Does it own bonds (quality or junk, term?) in the U.S. or overseas? Does it own some combination?

    (3) Do they offer the Roth as well as the traditional? For low to moderate income people (under $60,000 per year), consider the Roth. For those making over $60,000 per year, consider the traditional. Current taxes and future taxes (estimated) will help you decide this issue.

    Get those two things figured out and you are way ahead of the pack. Here is a bit of advice. Get your expense ratio below .10% on your funds. If your employer doesn’t offer funds that cheap, RAISE HELL UNTIL THEY DO. High cost plans cost you a great deal of money over time. Squeeze out the cost!

    Go heavy on stocks when you are young (under 50). Time has shown that stocks will produce by far the most return with the inevitable ups and downs along the way. Reduce your stock exposure as you go over 50 and start winding down toward retirement. Read What Color is the Sky for specifics.

    (4) What not to focus on? Ignore the past returns. They mean little to nothing. The past does not tell you what the future will hold. Go right past those 1, 3, 5 and 10 year returns as you focus on the important stuff like cost and the securities owned. Financial freedom to follow!

  3. Mike Finley says:

    (1) Identify the cost of each investment within the plan. This is called the expense ratio and each mutual fund has one (some stable funds do not as they provide a guaranteed low return per year). You want to pay as little as possible when investing. Higher returns will follow.

    (2) You want to know what that fund owns in securities (stocks, bonds, cash, and Real estate). Does it own stocks (large, mid-size, small, growth, value, etc.) in the U.S. or overseas? Does it own bonds (quality or junk, term?) in the U.S. or overseas? Does it own some combination?

    (3) Do they offer the Roth as well as the traditional? For low to moderate income people (under $60,000 per year), consider the Roth. For those making over $60,000 per year, consider the traditional. Current taxes and future taxes (estimated) will help you decide this issue.

    Get those two things figured out and you are way ahead of the pack. Here is a bit of advice. Get your expense ratio below .10% on your funds. If your employer doesn’t offer funds that cheap, RAISE HELL UNTIL THEY DO. High cost plans cost you a great deal of money over time. Squeeze out the cost!

    Go heavy on stocks when you are young (under 50). Time has shown that stocks will produce by far the most return with the inevitable ups and downs along the way. Reduce your stock exposure as you go over 50 and start winding down toward retirement. Read What Color is the Sky for specifics.

    (4) What should you not focus on? Ignore the past returns on each fund. They mean little to nothing. The past does not tell you what the future will hold. Go right past those 1, 3, 5 and 10 year returns as you focus on the important stuff like cost and the securities owned. Financial freedom to follow!

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Asset Allocation

Why is it IMPORTANT to know your current asset allocation as it relates to your portfolio?

2 thoughts on “Asset Allocation”

  1. Mike Finley says:

    Your asset allocation, how much you have in stocks (or other short-term risky assets) vs. bonds (and cash), will ultimately tell us what your future returns will be. Basically, how your portfolio is broken down ultimately dictates futures returns.

    If you decide on a cash heavy portfolio, then you should expect yearly returns under 2% going forward. Bonds? Maybe 2 – 4% (based on the type of bonds you own). Stocks? Maybe 8 – 12% (based on the types of stocks you own).

    Now, all those returns are before cost. To get anything close to those returns you would be wise to focus on no-load index mutual funds that keep your costs below .2% and ideally below .1%. Learn more on this issue by reading What Color is the Sky. Financial freedom to follow!

  2. Mike Finley says:

    Your asset allocation, how much you decide to have in your portfolio in stocks (or other short-term risky assets) vs. bonds (and cash), will ultimately tell us what your yearly returns (they will vary) will be. Basically, how your portfolio is broken down ultimately gives us a peek into the future.

    If you decide on a cash heavy portfolio because you are risk averse, then you should expect yearly returns under 2% going forward (no risk, no return). What about bonds? Maybe 2 – 4% (based on the type of bonds you own). What about stocks? Maybe 8 – 12% (based on the types of stocks you own).

    Now, all those returns are before cost. To get anything close to those yearly returns you would be wise to focus on no-load (no commission) index mutual funds that keep your costs below .2% and ideally below .1%. Learn more on this issue by reading What Color is the Sky. Financial freedom to follow!

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Credit Cards

Why is the use of a credit card safer than a debit card?

One thought on “Credit Cards”

  1. Mike Finley says:

    Using a credit card is like taking out a small loan from the lender. You are using their money with a promise to pay them back. If someone steals that credit card and commits fraud, it is against the lender, not you. Report it within 30 days and you will be out $50 at the most and most likely no money. Your risk of loss is almost nothing.

    When you use a debit card, you are using your money and if someone commits fraud, they are stealing YOUR money. Yes, the lender will try to assist you with getting your money back, but let’s just say, their motivation changes a bit when it is your money instead of their money.

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Social Security

Why should you consider waiting on taking your Social Security benefit until age 70?

One thought on “Social Security”

  1. Mike Finley says:

    Waiting until age 70 will increase the monthly benefit by over 70% if you would have taken it at 62. Every year you wait after your full retirement age (FRA), it increases by 8% per year AND there is an inflation adjustment to boot. Patience is needed when deciding when to take this benefit, but it is worth it for those who see the big picture.

    But you could die early many will say? Yes, that is possible, but if that happens, you have no regrets because you are not around to worry about that (death has no worries). If you live into your 80’s and 90’s (likely for many, especially women), you will be happy to have waited with that much bigger monthly benefit.

    All of this applies to a spouse as well. By waiting until age 70, you are locking in the biggest benefit either for you or your spouse if he or she outlives you (they end up taking your benefit if it is bigger than theirs). This is a BIG deal for a couple who has one person with a much bigger benefit than the other. This decision should be made together.

    Try to see Social Security for what it is. It is an insurance program to help you or your spouse avoid living in poverty in old age (the retirement benefit is simply one of the many benefits under the program). The decisions you make along the way are HUGE. Read the books, Get What’s Yours and Graduation!, to better understand the situation and your many options. Get informed!

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Why should you invest your savings?

Why should you invest your savings?

One thought on “Why should you invest your savings?”

  1. Mike Finley says:

    You invest your savings to stay ahead of inflation. Without properly investing, your savings (in the bank or credit union) will end up being eaten up by the inflation monster. A dollar today will be worth 96 cents next year and if you earn 1 cent that still shows a loss of 3 cents. The compounding effect of that scenario can be devastating to a person’s financial future.

    This is why we must invest and that means taking risk in the stock and bond markets. Stocks specifically have produced a return over time around 7% above the inflation rate, which means your 1 in the future will be worth more even after inflation with that compounding effect in your favor now instead of working against you.

    Focus on investing wisely and at a low cost when implementing this basic idea. That means you own no-load index mutual funds that own entire markets all over the world at the lowest possible cost. A good start would be the Total Stock Market Index Fund at Vanguard or something similar within a 401(k) plan. Financial freedom to follow!

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Why is Passive Investing the Wise Choice?

Why is passive investing the wise choice?

2 thoughts on “Why is Passive Investing the Wise Choice?”

  1. Mike Finley says:

    This answer could make up an entire book (and it has, read The Power of Passive Investing by Rick Ferri), but let’s get down to the nuts and bolts of the matter. Passive investing, index funds, ETFs that are not traded, actively managed funds with very low turnover, keep your costs low and in the game of investing costs are very important.

    The lower you get those costs, the higher your returns will be over time with a diversified portfolio of passively invested funds that allow you to capture market returns (stocks and bonds) at the lowest possible cost. Education will set you free on this matter when you are ready to accept the reality.

    Read these books: What Color is the Sky, The Little Book of Common Sense Investing, The Smartest Investment Book You’ll Ever Read, Index Funds, Winning the Loser’s Game, and The Four Pillars of Investing. Wisdom, followed by higher returns to follow. Onward!

  2. Mike Finley says:

    This answer could make up an entire book (and it has, read The Power of Passive Investing by Rick Ferri), but let’s get down to the nuts and bolts of the matter. Passive investing, index funds, ETFs that are not traded, actively managed funds with very low turnover, keep your costs low and in the game of investing costs are very important.

    The lower you get those costs, the higher your returns will be over time with a diversified portfolio of passively invested funds that allow you to capture market returns (stocks and bonds) at the lowest possible cost. Education will set you free on this matter when you are ready to accept the reality.

    Read these books and wisdom will follow: What Color is the Sky, The Little Book of Common Sense Investing, The Smartest Investment Book You’ll Ever Read, Index Funds, Winning the Loser’s Game, and The Four Pillars of Investing. Higher returns followed by financial freedom can be yours!

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How can the Extended Warranty Protection on your Credit Card help you?

How can the Extended Warranty Protection on your Credit Card help you?

One thought on “How can the Extended Warranty Protection on your Credit Card help you?”

  1. Mike Finley says:

    Many credit cards provide an extended warranty protection on your purchases up to a certain period of time (usually a year). For example, you buy a computer and you receive a free 1 year warranty that comes with the new toy (do not buy the expensive extended warranties that are pushed on you when making the purchase).

    With the extend warranty protection on a credit card, you will receive a 2 year warranty that is absolutely free. Just make sure to save the receipts on all big ticket items when buying with your credit card so you can retrieve them at a later date as needed. Knowledge + ACTION will set you FREE!

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Social Security

What is the Social Security spousal benefit and who can benefit from it?

One thought on “Social Security”

  1. Mike Finley says:

    The spousal benefit has been severely limited with new legislation in 2015, but there is still opportunities for some. IF you were 62 years old at the end of 2015, you can still file for this benefit off of your spouses benefit as you delay your benefit, letting it grow at a guaranteed 8% per year.

    The strategy is fairly simple, but full of potholes for those who are lacking information. One spouse must file and then the other spouse files for the spousal benefit as they receive half of the other spouse’s benefit at Full Retirement Age (FRA). This smart strategy has pitfalls so keep reading.

    File the spousal benefit only when you reach FRA (65,66, or 67 based on birth year). If you were younger than 62 at the end of 2015, don’t do it unless you have little to no benefit yourself. You will end up being deemed and that means you will get the spousal or your benefit, whichever is bigger.

    There is plenty to learn on the this subject. Read Graduation! to better understand the issue as it relates to retirement and creating more fixed income. Also read, Get What’s Yours (updated version) to learn in more depth on the subject of Social Security and the many options you may have.

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Credit Cards

What makes a credit card evil vs. what makes it a trusted companion?

One thought on “Credit Cards”

  1. Mike Finley says:

    The user! Credit cards are stupid pieces of plastic. No more and no less. It comes down to how the individual uses that piece of plastic. That will tell the tale!

    A credit card becomes evil when the individual runs it up without thoughts of what the bill will be, makes minimum payments on it because “that’s all they require,” and allows compound interest to devastate their bottom line. Within a short period of time, the card ends up controlling their life and negative things flow quickly downhill.

    A credit card becomes a trusted companion when the individual uses it reasonably, pays it off in full every month and understands the many benefits that include fraud protection, price protection, extended warranties, car rental deductible protection, rebates, and more. It’s all in how the individual handles the credit card. Use it wisely or get rid of it!

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The Crazy Man in the Pink Wig