It's Not about What You Make, It's about How You Handle it

Saving little by little over time and frugal spending habits can lead to a comfortable retirement. You don't need to make millions to have a secure retirement nest egg. The following link tells the story of a miltary couple and a grocery store worker who made all the right moves financially that helped them to have a comfortable retirement. Neither were making millions per year, they simply made the right choices. Read the article here.

Choosing a Financial Advisor

Anyone can call themselves a financial advisor. That is a generic term that requires no specific education or certification. Some who are financial advisors will push their clients into products that benefit the customer very little, but they generate a large commission for the consultant. Many annuities and whole life policies fall into this category. Many tasks regarding financial management can be done on your own, utilizing websites where one can buy and sell securities, and obtain advice and information online. But, if one wants to hire a financial expert a good option is to hire a certified financial planner (CFP). Those with the CFP designation must complete certain financial college courses beyond a bachelor's degree, and they must take an oath to act in the interest of the customer, not simply push them into investments that will generate the highest commission. A CFP must pass a rigorous exam and undergo continuing education classes to keep up-to-date on developments in the financial industry. They must have at least 3 years experience as a financial planner. High ethical standards and a thorough background check are required. Honesty and integrity in financial advising has always been an issue, but hiring a CFP is one way to lower your risk of being put into poor investments.

Nothing Ventured, Nothing Gained

Risk is a part of investing. But, you can control your amount of risk. If you are afraid of taking chances you can still invest, but don't count on a good return on your money. A certificate of deposit or a government treasury bill would be safe, but don't look to get rich off of those. Diversification will help to control your risk. Mutual funds or exchange traded funds are diversified since they are composed of many stocks bundled into one investment vehicle. Consider the Vanguard Total Stock Market ETF (VTI). The year to date total return on this is 7.00%. The 52 week range is between $84 and $103. It is currently at $101 per share. It contains large, mid, small and micro cap stocks. So this is an index fund that offers you a way to invest while controlling risk.

More risk can lead to more potential reward. Buy individual stocks to increase risk and potential return. But, don't put all of your eggs in one basket. Let's say you have $1000 to invest. Is it better to put 100% of your money into one individual stock, or better to split it up five ways and put 20% into different stocks, all in different sectors? It depends on your risk tolerance and also your investing time horizon. You might want to put $200 into a tech stock, $200 into an auto stock, $200 into a health care stock, and the like. Young people and those with more disposable income can afford to risk more and lose more.

Jeremy Siegel is a professor at the University of Pennsylvania's Wharton School of Finance, the premier business school in the US. In his book, "Stocks for the Long Run", he writes about how investing in the stock market over a long period of time is a proven way to build wealth.

Fight Back against the Big Banks!

Since the housing industry debacle of a few years ago, the banking industry has had a public relations problem. Their reputation has suffered and people are tired of the shenanigans of the powerful bankers who manipulate people. Not all bankers are bad, but those who came up with the sub prime mortgage schemes that almost led to a worldwide financial collapse a few years ago are despicable. Fraudulent mortgages were bundled together to make derivatives that people could bet on. They were called CDOs or collateralized debt obligations. The ratings services like S&P and Moody's were bribed to give them top ratings even though they were poor investments, the equivalent of penny stocks. Learn more about this in the documentary "Inside Job".

Anyway, the best way to fight back against the banks is to not give them your money. When we borrow money and pay interest, we help the banks. Learn to buy things only when you can pay for them one hundred percent. I heard a caller on Dave Ramsey's radio show who paid off $750,000 worth of debt. This was made up of student loans from medical school, a mortgage, credit card debt and more. It took him eight years of sacrificing, but he did it. Now he has zero debt payments of any kind. Imagine the feeling of freedom if you had no house payment, no car payment, no student loans, no credit card debt, etc.

A Penny Saved is a Penny Earned

When it comes to personal finance, little changes can make a big difference. We know that gas prices fluctuate frequently. Let's say that you normally put 10 gallons of gas in your car. And let's say that fuel varies between $3.50 and $3.90 per gallon. Try to always buy gas when it is at a low price. 10 gallons times a $.40 variable leads to a savings of $4.00 every time you get gas. If you fuel up once per week that is $208 saved in a year.

Do you go out to eat? Let's say you get lunch at a fast food restaurant once per week at work and spend $7.00 for each meal. Bring some inexpensive food from home instead, and you save $364 over a year's time.

If you make the above two changes to your budget, you will save $572 in a year's time. At the current stock prices, that money could be used to buy 7 shares of Procter and Gamble (PG) or 6 shares of Apple stock (AAPL).

Making small incremental changes like these over time will aid in building wealth.

The Psychology of the Rich

OK, so I'm not a rich guy but I find it fascinating to study the psychology of the rich. What do they do differently than poor people? You might say, that's easy, they make more money. Not necessarily true. It's not about how much you make, it's all about how you handle it. This blog entry is based on an article from Entrepreneur magazine. It listed the 9 habits of rich people. But get this, none of the 9 factors have to do with money. They are all about attitude, priorities and how the rich spend their time. If one wants to be rich, study rich people. It's just like weight loss. Want to be in good shape? Study those who eat right and exercise. Here are the habits of the rich.

1. They are goal oriented, and they write down their goals.

2. They have a to-do list that prioritizes tasks that need to be done.

3. They watch very little TV, especially staying away from reality shows. They use their time wisely, and often watching TV is a waste of time.

4. They read a lot, especially self-improvement books. They always want to get better and push themselves to succeed.

5. They enjoy audiobooks, often listening to them in the car while commuting.

6. At work, they go above and beyond what is required.

7. They seldom play the lottery. The rich know that the lottery is a foolish way to spend money.

8. They take care of their health by watching their diet and exercising. An unhealthy body can stand in the way of being financially successful.

9. They take care of their teeth, often flossing every day. Dental problems can be painful and expensive.

What do these have in common? They all boil down to properly managing finite resources, such as time, money and health.

Information from this article.