Protection From Financial Chaos

 

THIS POST MAY CONTAIN AFFILIATE LINKS.  SEE MY FULL DISCLOSURE FOR DETAILS.

I stay in tune with the health of our country’s financial progress by taking in information from several sources.  I read Investor’s Business Daily on a regular basis.  They provide a gauge of the market and print it right on the front page: Market in Confirmed Uptrend, Uptrend Under Pressure, or Market In Correction.   I take cues from reports on CNBC and daily newspapers and combine the findings to make good decisions.  Ever since I’ve taken my financial position into my own hands, my level of attention is critical to its success.

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It’s Time To Go Shopping

invest

It’s time to go shopping!  Stocks are on sale!

The bull run is over.  Anyone that was waiting for a correction got what they wished for.  In spite of the  1,175 point loss, it’s still not a “bear market”.  That’s based on the percentages of the Dow Jones and S&P averages and their respective losses.  A bear market would be a result of a 20% drop.  The Dow Jones has only lost 8.5% from its record high, nowhere near 20%.

Don’t wind yourself up into a tizzy over the stock market.  I giggle when I read headlines like, “This pullback is the largest seen in the last 236-and-a-half days.”  There’s always some arbitrary measure of time in an offbeat number of days, weeks or years.  As I write, Marketwatch.com has two side-by-side headlines that contradict each other.  One promises a bear market, the next link calls this slump a correction, not a bear market.

The way I see it, this downturn is taking some of the fluff off the top.  If you bought high, like some Bitcoin investors did, your losses don’t feel so good right now.  But, hopefully you didn’t chase investments that have topped off, hoping that they’ll continue their increase.  That’s Investment Sin Number One: buy-high, sell-low.  If you’ve done this (again), it’s time to step away from the Quotron.

I don’t have any control over the jobs report or the GDP, and neither do you.  But I do know that I can control my reaction.  This is the time to test yourself.  Are you thinking about getting out of stocks? Or are you prepared to wait it out?  Better yet, are you thinking about buying?  My mouth starts to water when stocks go on sale.  When I don’t buy after a price descent, I regret it later.

It’s time to run when companies are buried in debt, when credit dries up, when new trade laws block commerce and when growth has come to a stand-still.  Entire industries can be wiped out based on one piece of legislation.  But if that’s not happening and fundamentals are strong, you’re looking at an emotion-filled selloff.

My best example of this was back in 2009.  I followed a number of stocks, mainly out of curiosity, one being GE.  When stocks were at their lowest, GE’s stock price was below $10.  I couldn’t believe my eyes.  There were no bad reports on GE specifically, just an underlying nausea associated with the economy that sent all stocks south.  I knew that GE was here to stay, and that the low stock price was related to the pessimistic aftermath of the near-collapse of the global economy.  I bought 1,000 shares at $7 a share and knew that it was going to double in a very short time.  It never felt more right and within several months, I cashed in my shares at $14.  That money paid off a car loan.  GE went on to move into the twenties.  I was anxious to pay off a debt, but easily could have quadrupled my money.  Even better, I could have bought more using idle cash but I stayed conservative and made it work for me.  As Jim Cramer says, “No one ever got hurt taking a profit”, and “Pigs get slaughtered.”

I’m watching GE again and deciding if I want to grab a few hundred shares.

My plan at this time was to make some alternative investments, but this is a rare opportunity to jump on.  If stock prices get too low to pass up, I may split my cash between some good buys and the TIPS.

 

5 Things You Need To Know About Bonds

 

investment allocation

Investing.  The word alone connotes stocks and bonds.  Diversification is the sister term associated with investing.  Subtract your age from 100 to figure out how much of an allocation in bonds you should own.  Why do we need to have bonds? And what makes bonds a necessary portfolio companion?  While trying to understand portfolio allocation a little bit better, I came up with the following five points.

 

THIS POST MAY CONTAIN AFFILIATE LINKS.  SEE MY FULL DISCLOSURE FOR DETAILS.

 

First, Some Basics

Bonds are fairly simple to understand, they’re loans with a specific duration.  They pay interest at stated dates.  There’s an issue date and a maturity date.  The issue date is the beginning of the loan and the maturity date is when the principal is paid back to the investor.  Therefore, unlike stocks that you own forever, bonds are a temporary loan to the issuer.

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Improve Your Financial Knowledge

financial control

When it comes to your financial knowledge, stop pretending that you don’t know what you’re doing.  There are more resources than ever.  If you’re a book lover, read a few on personal finance.  If you’re a net surfer, start Googling up on financial terms.

 

Answer the following questions and take a few minutes to research anything that you don’t know.  Don’t be afraid, we all have an area that we need to focus on.  These items are off the beaten path, and from what I’ve seen, points that cause confusion.  Some are Yes/No or True/False, while others are thought questions.

 

I’m all about sharing knowledge.  I learn something new every day and never stop reading.

 

Earning

True or False:  I have a progressive career plan that will increase my earnings within the next five years.

 

The last time I improved my work skills was ______________.

 

Related Post: Money Learning Checklist 1         Earning/Saving

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Financial Independence Hokey-Pokey

 

financial freedomI didn’t focus on being financially independent until about three years ago.  I had an idea what my net worth was, but wasn’t fully clear on the exact number.   The lack of a plan made it a nebulous target.

THIS POST MAY CONTAIN AFFILIATE LINKS.  SEE MY FULL DISCLOSURE FOR DETAILS.

In my 20s at the start of my career, retirement seemed so far away.  I relied heavily on my accounting career to give me financial security.  After all, I chose the career knowing that I’d always have a job.  Consequently, every ounce of my energy went into working.  There were summers that I never saw the light of day. I never knew when I was getting home and I made many sacrifices.  Believe it or not, it was exciting and I enjoyed it.  I latched onto an upward trajectory of promotions and raises.  When I had full autonomy over my position, I liked being relied upon and the responsibilities that went with it.

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5 Ways Your Life Is Impacted By An Interest Rate Increase

 interest rate

Interest rates do not make for the most exciting chat topic. You won’t find it in the conversation starter game that you unwrapped for Christmas.  It’s probably easier to clear a room by yelling ‘Interest Rates!’ than FIRE!  Watch your friends and family run from you as you broach the topic of how the Federal Open Market Committee voted to keep the Federal Funds Target Rate at 1.00% – 1.25%.  Fed Prime Rate Info

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End of Year Money Moves

money management

THIS POST MAY CONTAIN AFFILIATE LINKS.  SEE MY FULL DISCLOSURE FOR DETAILS.

Now’s the time to be anticipating money moves for next year.  To avoid losing valuable compounding time or growth, you want to be able to pull the trigger on January 1st.  Check into what your accounts and plans offer and ask questions in advance.

With year-end bonuses and raises coming up, certain accounts require tweaking.  For example, with each year’s payroll increase, my retirement plan contribution percentages can be adjusted.  I examine every payroll deduction and determine if I am gleaning the maximum benefit from each.  See below where I will fund my 2018 Health Savings Account contribution using an IRA transfer.  Because I won’t need a payroll deduction for that account, I can adjust my Flexible Spending Account contribution and reinstate my vision benefits.  I don’t pay for vision benefits each year, only the years that I plan on buying glasses.

In the financial planning workshop I conducted over the past three weeks, someone posed a question as to how to manage changes in the economy and the tax code.

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How Money Plays a Role in Our Lives

financial control

I see everything through a money lens.  I realize most people don’t.  The notion of excluding money from everyday thinking is unrealistic to me.  Unless we live off the grid and grow our own food, then money may be considered trivial.  In the real world, money is the medium through which we manage our standard of living.  Ignoring the role it plays in life is downright naïve.  We exchange money for everything: food, shelter, clothing, electricity, heat, transportation.  Most people shun money topics, or think it’s too boring to talk about.   Reality is, money is the undercurrent of life.  People say they don’t care about money.  They say they want to ski all day or go fishing but they still have to buy the skiing gear and fishing rods.

This post is about how money is intimately interlaced into every area of life and why it’s critical to pay attention to monetary affairs.

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