It's Not About What You Make, But What You Spend (or Don't Spend)

Life is all about choices. Good choices lead to good results. Bad choices lead to bad results. If we change our choices, we change the results. This is so true when it comes to money management. So many people are never satisfied when it comes to money. Many people say that if only they made x amount of dollars, they would be on easy street, with no worries about money. That is not always true. Often times, the more we make, the more we spend. How many times have we heard about famous athletes or celebrities that have made millions, only to end up broke due to poor money management? People need to think before they spend. I am convinced that debt is the number one thing that leads to financial ruin. Let's look at two scenarios:

scenario #1: an individual makes a gross yearly income of $30,000 per year
mortgage: $0
credit card debt: $0
car loan: $0
student loans: $0
other debts: $0

scenario #2: an individual makes a gross yearly income of $100,000 per year
mortgage: $300,000
credit card debt: $5,000
car loan: $25,000
student loans: $20,000
other debts: $15,000

Some people automatically assume that anyone who makes 6 figures has it made, with no money worries at all. The person in scenario #2 has a lot of their income eaten up be debts which require monthly payments where varying rates of interest are charged. I would rather be in scenario #1. The person in that situation has no debt obligations so they can put a large percentage of their pay towards retirement investments. That person may actually retire earlier than the person in scenario #2. The person in the first scenario may be able to put 15% of their income towards a 401k where the second person only can contribute 3% due to all of their debts. Person #1 may very well have more disposable income to spend on enjoyable activities. Now, these scenarios are extreme, and avoiding debt all together may not be realistic, but still it is food for thought. The term "rich" is relative. Someone can make one million dollars per year and be poor, and another person might make a modest salary and be rich in comparison when debt load is considered. So, next time you see someone driving a brand new Cadillac, they may not be rich at all. The person in the 10 year old car that has been paid off for years might be better off. You can't judge a book by its cover.

Apple will Pay a Dividend to its Shareholders

Apple (AAPL) has become the most valuable company in the world. It will start paying a dividend of $2.65 per share, each quarter, starting July 1. The yield will be about 1.8%, which is lower than dividend yields of Microsoft (MSFT) and Hewlett Packard (HPQ). Dividends are a nice way for shareholders to get some extra money out of an investment, but the dividend numbers are dwarfed by the percentage rise of the Apple stock. Apple's shares have rocketed upwards an amazing 45% this year. The 52 week range for Apple has been between $310 and $609, and the current price is $596. Ten years ago it was $12 per share. Five years ago it was $92. Owning this stock is a no-brainer, but at $600 per share, how many people will go and buy 10 shares? That scares a lot of people away. Microsoft seems more attainable for the masses, at $32 per share. I wonder if Apple would consider a stock split?

Earlier today, Apple's stock dropped 9% and the trading was stopped due to volatility circuit breaker regulations. It looks like the wild swing was due to a computerized trading error that affected stocks with symbols between A through BF. The BATS exchange issued the trades and they blamed it on a software error. More and more stock trades these days are executed via computer programs, which use logarithms to track the most minute moves in stock prices.

The key to Apple's success over the past 5 years or so have been its innovations, like the i-pod, i-pad and i-phone. But, with Steve Jobs gone, one has to wonder what else they have up their sleeve as far as new ideas.

* Some information from cnbc.com

A Way to Invest in the Smart Phone Craze

Smart phoes are all the rage right now. Many people use them for surfing the web, texting, and of course, talking to others. In his latest book, "Getting Back to Even", Jim Cramer recommends investing in smart phone technology. Originally he recommended investing in Qualcomm (QCOM) but has recently said that Broadcomm is a better bet (BRCM). These companies produce chips that are used in smart phones. Smart phones are still not widely used in developing countries, and this is an industry that will see major growth over time. Here are some specifications regarding the 2 companies:

BRCM price: $36.38 52 week range: $27-$41 P/E: 19.9 Dividend: 0.40/1.10%
QCOM price: $63.93 52 week range: $45-$64 P?E: 21.8 Dividend: 0.86/1.35%

Cramer's website, thestreet.com, gives a "buy" rating for both.

Three Years After, the Dow Has Gained Back its Losses

In March of 2009, things seemed grim for the stock market. From the last quarter of 2008 to March of 2009, the Dow was in a free fall, thanks in large part to the banking/housing crisis. On March 9 of 2009, the Dow was at 6,547. Today it is at 12,922, and it has gained back 97% of what it had lost. Many people were not in the buying mood in March of 2009 but that was a great time to buy. No doubt, many probably liquidated their 401k accounts, which is the worst thing they could have done. Kiplinger's magazine talks about 10 stocks that have surged since the 2009 bottom. The maker of the Sleep Number bed has been an amazing success story. Their stock (SCSS) has surged a staggering 12,000% in the past three years, going from 25 cents per share to $30. That company has been able to shed its debt load. Another success story is Pier One Imports (PIR). That stock has risen 11,000%, from 11 cents to $17.20.

For more success stories, check out the link:

http://kiplinger.com/columns/picks/archive/10-stocks-that-surged-since-the-market-bottomed.html

Gold Prices Fall

The price of gold has fallen by 5%, to below $1690 an ounce. Those investing in gold will not like this news, but it could be an economic indicator that precedes a rebound in the overall economy. A fall is the gold price is desireable for those who invested in an exchange traded fund which invests in the inverse of the gold price (DZZ). That fund was up an impressive 11.83% earlier today. The daily volume for that investment was double its normal amount, with 3.2 million shares trading hands. I think that DZZ will be a good investment to track, as the Dow climbs, the price of gold will fall. Barron's magazine predicts that Dow 15,000 may not be that far away. But, of course there are always different opinions out there. One asset manager predicts that gold may top $6000 per ounce, more than triple what it is now. For that article, here is the link:

http://www.cnbc.com/id/44373049

A Rebound in the Dow is a Positive Sign

Today the Dow Jones Industrial Average hit the 13,000 mark for the first time since May of 2008. Unemployment numbers are down, housing sales are up, so the Dow responded to positive economic signs. If things are cleared up in Europe concerning their financial woes, the Dow could go above its all time high of 14,164, and keep climbing. That all time high happened in 2007, before the housing/banking crisis crippled the economy. All of this is more proof that the market is resilient, but it just takes time to gain back what was lost. Most Americans have lost a good portion of their retirement accounts due to the blue chips' tumble the past few years, but things are headed in the right direction.

* Some information from CBS News.

Facebook IPO is Coming Soon

You have probably heard about the social media juggernaut Facebook "going public" and having an upcoming IPO or initial public offering. Is it worth it to invest in this company? Some will say yes, some will say no, but there are various factors to consider. We'll have to see how much the price per share is. A part of me thinks that Facebook's most significant growth is in the past. So, why invest in a stock if you think that growth has already happened? Good question. Past growth is great, but future growth is the main factor when evaluating stocks. Buying a stock is an investment in the future, not the past. If it has a dividend, that could entice investors, but many tech stocks do not offer dividends. Facebook is no doubt constantly thinking about how to re-invent the service to keep it fresh and to avoid becoming the next My Space.

Founded in 2004, Facebook has 845 million active users as of the end of 2011. 3200 people are employed by Facebook and it is available in over 70 languages. If Facebook would have started issuing stock in 2004 or even a couple years later, then investors could have witnessed meteoric growth. When it started, Facebook was not used by the public, it was only used by college students at select universities. At the end of 2004, they hit one million users. Growth from 1 million users to 845 million users in less than ten years is staggering.

Considering the amount of information that people put on Facebook, it's a dream site for companies seeking to target consumers. From a marketing standpoint, it is an amazing warehouse of information where people share their preferences when it comes to movies, music, TV shows, politics, current events and even what brands they like. Of course, the downside to having a site that is so popular is that it has become a frequent focus for hackers and identity thieves.

We'd all like to be part of the next Google (GOOG) type of IPO, where we buy a stock at $100 per share in 2004 and it rises to over $700 per share in three years, but every IPO is not like Google. Groupon (GRPN) had an IPO late last year and has ranged between $15 and $26 per share. Zynga (ZNGA), the company behind online games such as Facebook's Farmville has ranged between $8 and $13 per share. Facebook is hoping to launch under the symbol FB sometime in May. If it's less than $100 per share, it might be worth it to buy a few shares and see what happens, but I'm not going to bet the farm on it. Many Facebook employees will become instant millionaires since they have been acquiring shares at a low price. Founder Mark Zuckerberg owns nearly 534 million shares. The Facebook IPO will be the biggest internet IPO in history, raising $5 billion, surpassing Google by $3.1 billion. It might be a good short term investment, we'll have to gauge the volatility. But, then again, I have been wrong before. After all, I bought Toyota (TM) stock a few years ago when it was above $100 per share, and I am patiently waiting for it to rebound. It's been a long wait.

***Some information from http://newsroom.fb.com/default.aspx, www.google.com/finance and http://money.msn.com/business-news/article.aspx?feed=AP&date=20120201&id=14751191