Expand your knowledge

                                                        Even if personal finance isn't your thing, how you manage your finances is going to be something you have to do. Commit 10 minutes a day, or a one hour block of time each week, to read literature to expand your knowledge on personal finances. When you commit just a small amount of time, it won't seem as taxing, and you'll be surprised how much of the knowledge sticks with you. When you notice some advice or money tip across different reading sources, it's usually a good idea to use it yourself. Catch you next time, Finwiz.

Build tax efficiently as you save

   Reducing taxable income allows you to keep more of your money. You get a tax deduction for contributions to 401k's and traditional IRA's. You also don't pay taxes on dividends or capital gains in these accounts. When withdraws are made, they are treated as income regardless of gains or losses in the investments. Annual income can be reduced by putting high yield investments in tax deferred accounts.Taxable brokerage accounts are reconciled every year at tax time. Put lower yielding investments and stocks that don't pay dividends in these accounts, and you're starting to think like a pro. See you soon, Finwiz.

Timeless investments ideas

   Diversify. Allocate your assets in accordance with your retirement goals and your risk tolerance.  If you have investments outside the 401(k) plan, allocate your 401(k) as part of an overall portfolio, not as a stand-alone account. If your plan is just average, try to choose the best couple of funds in the plan and focus your contributions there. This assumes you have investments outside of the plan and can balance out your overall allocation with those outside investments. Don't assume that your 401(k) alone will be enough for retirement. If you go with the plan’s target-date fund, make sure you understand the pros and cons of this option. Don’t load up on your company stock if that is a plan investment option. If you don’t know why this is bad, think of World Com or Circuit City.

Giving back , charities gain too.

                                              We can't forget how fortunate we are to live in America versus others around the world. We have freedom to speak, live, and invest as we wish.  At the end of the day wealth is saved, used to buy things, or to help others in need.  I encourage you to mark some of your investments for current and future charitable donations. In most cases both you and the charity gain by this. Rather than cash donations, donate stock that has appreciated. They get it tax free. You don't pay on the gains and even get a tax deduction if you itemize, which could leave you with even more to donate. Charity Navigator is a good place to start researching causes that interest you.  I would only consider organizations with three or four stars. At the end of the day "paying it forward" is the only way to take it with you.

The tortoise and the hare

                                                                                        Remember the story of the tortoise and the hare that you heard in school? The hare was faster and seemed to be a sure win, but in the end he didn’t. The tortoise kept moving consistently toward the finish line.

  What’s the lesson we can learn from this as adults?  Slow and steady wins the race. To reach any goals in your life, including your financial goals, you need to switch from the hare’s mindset to that of the tortoise.

  Pace yourself. Start with a reasonable savings goal, one that you know is achievable and still allows you some fun.  When it comes to debt, start off with a payment that allows you to still pay off your monthly bills. If you take on more than you can handle, you will end up like the hare and lose out in the long run. Finwiz.

Develop your own style for picking stocks

                                                          Deciding what companies to invest in is fun. Building a portfolio of stocks is an individual thing however, and no two people will have the same investments. I like stocks that pay a dividend or produce products I use or are familiar to me.  Many investors like companies that have a high growth rate but don't pay a dividend. There are many styles to choose from or blend together to create your own style. Please read up on these including, but not limited to: value, dividend, technical, contrarian, growth and momentum styles. I have a blend of 1/3 value, 1/6 contrarian, and 1/2 dividend. This gives me an income stream, as well as a chance for capital appreciation over time. See you soon, Finwiz.

Dividend reinvestment plans (DRIPs)

                                                          Dividend reinvestment plans, DRIPS for short, are the single best way to take advantage of compounding magic.  Most companies that pay a dividend will allow you one of the following choices:

       ·         reinvest that cash for partial shares

       ·          receive a check

Here's the magic when you take more shares in the company instead of cash…

  The next time a dividend is paid (usually every quarter) you'll also get a dividend on these newly acquired shares. You can win four ways here….

·         your money will compound four times a year

·          the company will usually increase the dividend over time

·         the stock can go up in price, including your partial shares

·          you can usually avoid brokerage fees on these plans

  This is the closest thing to free money I've ever learned.  Also, keep these plans in tax advantaged accounts to reduce income taxes.  Please share your money saving discoveries.  Finwiz.

    

The magic of compounding and the rule of 72.

    Compounding of money and the rule of 72 are the most important things an investor can grasp! So, what is the Rule of 72 and what does it have to do with compound interest? The rule simply states that if you divide 72 by the interest rate, it will tell you how long it takes for your money to double. For example, assume you earn an 8% rate of return on your money. To find out how long it takes for your initial amount of money to double, just do the calculation: 72 / 8% = 9 years. If you want to double your money in 6 years then the rule of 72 works backwards too:  72 / 6 = 12%. The rate at which you must invest to double in 6 years is 12%. Refer to the table below of a 25 year old who has $10,000 saved up in a retirement account.  The account is earning 7.2% per year, so according to the Rule of 72, the money will double every 10 years. By age 35, it would be $20,000.  As the decades pass, the numbers accelerate in value as they double, to a point where by retirement, a measly $10,000 has turned into $160,000.  Also keep in mind, this is simply using a single starting amount with no additional money being saved. When you consider that most people would be continuously adding money to this investment, the rate of compounding goes up significantly. More on compounding this week, Finwiz.

Age	$$
25	10k
35	20k
45	40k
55	80k
65	160k

Protect your savings

   Nobody likes to talk about insurance. Without it, however, any savings could be wiped out overnight. Discounts can be achieved by combining home and auto insurance with one company. Life insurance replaces income and can help families avoid withdrawing savings too soon. Annuities create an income stream so you don't outlive your retirement savings. Health insurance is also very important. There are many types of insurance products. This post just reviews a few options available to protect your family and assets. Great care and time should be given to what type of insurance and how much coverage/deductibles you need based on your individual circumstances. Please share how you've saved on insurance costs. Until next time…Finwiz.