Stock Investing: Getting Started

By Rob Rens

When starting to invest in online trading there are many different aspects you must look into. I am here to explain different aspects along with a few tips I have learned over the years.

Investing: An investment is defined as an item of value purchased for income or capital appreciation. In reference to stocks, traders who label themselves "investors" usually play stocks from the Big Boards (which we will discuss later) and choose their investments based upon cold hard facts, fundamentals, and the overall quality of the company behind the stock.

Daytrading or Swingtrading: Especially online, people will throw around the terms daytrading, swingtrading, and flipping a stock. In essence, they are all similar and overlapping styles of trading. Daytrading is when you buy an sell a stock within the same day once, twice, or many times (intra-day trading). Swingtrading is usually looking for a movement within the month of purchase. Flipping a stock is a style of trading built by targets set by looking at past performance. Flipping a stock is done by buying any given stock at its bottom support levels and selling at its resistance. All of these methods are short-term trading styles. They are influenced by what is going on right now; not what/where this company is going in the future. These indicators of market movement ATM (at the moment) include Technical Analysis, Press Releases, Stock Momentum (public sentiment) and general trends in different sectors.

Trading on Margin: Many investors are timid when opening a margin account. However, opening a margin account is the only way to avoid the "3-day" rule. When you open a margin account, you no longer have to wait 3 days for you funds to settle after a stock purchase/sale. Most online brokers require a $2,000 balance to open a margin account. If you are able to open one then you have the ability to purchase more stock than a normal cash account would actually allow. With $2000 in cash, you would have the ability to purchase $4,000 in stock. However, use caution, because if your purchase goes into the red, you loss also doubles

Shorting a Stock: Shorting a stock is another perk of opening a margin account. When you short a stock, you are actually selling something that you do not have. Usually this is done with the intention that a stock will decrease in price (for a various number of reasons). When it decreases in price enough to make you a profit, then you purchase that stock back (called covering your short position). Basically it is trading, only backwards. This ability gives you a method of making money by catching stocks in a downward (bearish) movement as opposed to looking for stocks on the rise (bullish stocks).

FYI...You cannot short OTCBB, Pinksheet, or any other stocks under $5.00.

Risk Tolerance: If you were to hire a "big-shot" broker or financial analyst than they would discuss your risk tolerance, and probably do it very extensively. I will address it shortly however, becasue I believe it is an essential question you must answer before you begin trading, however the answer is very simple.

First, figure out how much you can start to trade with. $500 will open you an account to help you learn, but will not offer much return. Others may recommend different amounts, but I believe that $1500 - $2500 is a decent amount to begin with if possible. This way, you can play approximately 3 stocks at once and erase a red play with two green ones.

Second, never invest (especially in pennies) what you cant afford to lose. When you begin, it is a learning experience. Don't think of getting rich quick. The more you know, the safer your money will be. Protecting you initial capital comes first. It is better to not take a loss than to not take a gain. Pennies are not your kid's college fund. Trusts and Mutual Funds handle that type of low risk, slow growth.

Finally, when it comes to risk (sorry for the cliche) Knowledge is Power. The more you know, the safer your money is. Play safe, play smart. Make the You need to know smart trade.

$$$ Practice, Predict, Profit $$$

Opening an Account: The next step is opening an account. By addressing all of the above issues, it will make your decision about a broker much easier. Knowing how often you plan to trade, what your average trade size will be, and various other aspects of your trading style/interests will determine the broker which best suits you. The next post will layout the key points/attributes, pros/cons, and customer service experiences with the most popular, affordable, and reliable online brokers.

Rob Rens is the owner of Penny Stocks, Stock Picks - Stockhideout.com

Article Source: http://EzineArticles.com/?expert=Rob_Rens

Saving for College With a 529 Plan

By David Grimaldi

It's never been more important for the children in your life to receive a college education. Studies show that over a lifetime, the earnings gap between a person who has a high school education and one who has a college degree may exceed $1 million.*

According to the college board, a not-for-profit, education association, for 2004-2005 average costs for one year at a state university totaled $5,132 +10.5%, and $27,516 +5.6% for a private university.** Should you also be thinking of graduate or professional school, the costs will really skyrocket.

A 529 Plan Can Help

Although funding a childs way through college will never be easy, some help is available through 529 College Savings Plans- also called Qualified Tuition Programs. These plans were created under section 529 of the Internal Revenue code to help U.S citizens and permanent residents meet higher education expenses and offer considerable financial benefits, such as:

Tax Advantages

Your plan can grow federal income tax deferred. Withdrawals are also free from federal income taxes when used for qualified educational expenses. There may also be state income tax advantages such as tax-free withdrawals and deductions for contributions for qualified purposes. Be sure to understand these important state tax benefits, because many states only offer tax incentives for 529 Plans investing to residents who enroll in their own or the beneficiaries own State's plan. This means that state tax advantages are generally not available to the persons who enroll in the 529 Plan of a state where neither they nor the beneficiary are residents. If withdrawals are used for non-qualified purposes, it may be subject to taxes and a 10% federal penalty.***

Gift and Estate Tax Benefits

Your plan allows you certain gift tax exclusions and offers special estate planning advantages, without triggering federal gift taxes, to encourage donors to contribute for higher education expenses for a loved one.

Flexibility

You can use your plans funds at any accredited institution of higher education.

Additional Contributors

Parents are not the only one who can contribute to a 529 Plan. Grandparents, other relatives, or even friends can establish accounts and contribute.

Investment choices

You can choose from a variety of investment strategies best suited to your individual circumstances and risk tolerance. You'll also benefit from the professional investment management skills.

Types of Plans

Prepaid tuition plans allow you to purchase tomorrows college tuition at todays prices. This may be an attractive advantage since you are assured your tuition is prepaid, but this type of plan generally requires your child to attend a school in your state or a particular school. Under a 529 Savings Plan you may create an account in your name and choose a beneficiary - your child, a grandchild, or the child of a friend. Your regular contributions to the plan can grow tax deferred until withdrawn and, if spent on qualified education expenses, will be tax free when withdrawn. **** In most cases, this can result in considerable savings. Best of all, the money can be spent at any college or post secondary educational institution.

Nearly 529 Reasons to Save

But the reasons to consider 529 Plans don't stop there. They also feature generous contribution limits, often above $200,000 per beneficiary-which can be used for another member of the family in case the original beneficiary doesn't attend college. Check the program guidelines for eligible family members.

For More Information

Although section 529 Plans make saving for college considerably easier, they may not be appropriate for everyone. There are other ways for saving for higher education like Coverdell Savings Accounts, Uniform Gift/Transfer to Minors Act Accounts, savings bonds, and regular mutual funds. But whatever route you take, be sure to begin early. To learn more how you can better invest for your childs education, you may call (866) 651-8625 0r (212) 883-8533 or send emails to david.grimaldi@morganstanley.com.

*Source: Trends in College Pricing 2004: Published by the College Board.

**Figures shown include tuition, fees, room, board, books, supplies, transportation and other expenses for residential students.

***Some states will impose a state tax penalty on non qualified and this penalty may vary by state but not exceed 10% under current laws.

****Under current federal tax law, the tax-free nature of section 529 Plans will be automatically appealed by the end of 2010. Thereafter, unless congress renews or extends the law, earnings withdrawn from a 529 Plan will be taxable income of the beneficiary if used for qualified educational expenses and taxable income of the contributor if used for non qualified.

This material was written to support the promotion or marketing of the transactions or matters addressed herein. It was not intended or written to be used, and can not be used by any tax payer for the purpose of avoiding penalties that may be imposed on the tax payer under U.S. Federal Tax Laws. Morgan Stanley does not render advise on tax and law accounting matters to its clients. Each tax payer should seek advise based on the taxpayers particular circumstances from an independent tax advisor. This article does not constitute tax or legal advise. Consult your tax or legal advisor before making any tax or legally related investment decisions. This article is published for general informational purposes only and is not an offer or solicitation to sell or buy any securities or commodities. Any particular investment should be analyzed based on its terms and risks as they relate to your individual circumstances and objectives. Investments and services are offered through Morgan Stanley DW Inc., member SIPC.

Article Source: http://EzineArticles.com/?expert=David_Grimaldi

Setting New Financial Goals For The New Year

The first step in managing your money is having financial goals. The New Year is the ideal time to review your financial goals.

Your goals help you to guide your finances on a daily basis. You have something that you are working towards every day. You plan and follow a budget, using your goals as your map.

Without your financial goals, you don't really have the proper motivation to get out there and save. Without a plan, you aren't getting anywhere. If you don't set financial goals, you may never see financial independence.

If you've never set yourself any financial goals, you need to sit down with a pen and paper and look at what you want to accomplish. There is a reason you want to change your finances. Make a list of the things you want.

Your list will probably start with getting out of debt, starting a retirement account, saving to buy a home, and the basics. But don't let that hold you back. Include everything you want to get out of your money to your list. If you want new furniture or a trip to Europe, include them. These are money goals that you can work towards.

Prioritize your list. While getting out of debt is a top priority, going to Europe would be something that could wait. Some goals you will be consistently working on at the same time. Others will wait until something else is accomplished.

Look at each of your goals and set yourself time limits. For example, you may know that you have 25 years to prepare for retirement. You might want to be debt-free in 6 years. Set these goals reasonably and remember that they can always be modified if necessary.

Then start breaking down your goals into short term goals. When you break a large task up into small steps, you are motivated to stay on task. Plus, it simply makes the tasks easier.

For example, if your goal is to get out of debt, your short term goals may be:

• Form a debt master list that lists each debt, contact info, interest rate, payment and balance for each debt you owe. (1 Week)
• Set up a budget and find ways to cut back on spending in order to put more towards monthly debt payments. (3 weeks)
• Call credit cards and request lower rates. If denied, start shopping for lower interest rate cards and transfer balances. (4 Weeks)
• Sell boat and put extra money towards paying off debt #1 on master list.

And so on. These lists can be never ending. As you think of a new "to do," simply add it to the list. Remember, things are set in stone. Management means that you are flexible, yet dedicated.
Once your goals are set, you need to review them often. Keep them in front of you constantly. Every time you pay bills or balance your accounts, you should look to see if you are working towards your goals. Keep them in mind. If you find that you aren't making progress on a goal, you should evaluate why you are failing and make the changes that are necessary.

Having goals helps you to stay on the right track financially. They are essential when you are looking towards financial freedom. But you must work towards them. Don't just set them and forget them. Review and revise as needed.

Martin Lukac http://www.MartinLukac.com , represents http://www.RateEmpire.com , an Internet consumer banking marketplace. RateEmpire.com is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 American Financial, found at http://www.1AmericanFinancial.com

Article Source: http://EzineArticles.com/?expert=Martin_Lukac

What are mutual funds?

By: Michael Saville

Mutual funds are very popular. In fact, they are the one of the most popular investments on the market today. What does that mean in numbers? There are over 10,000 different funds with over $4 trillion in investments!!

Why are they so popular? For some, it is because of their great returns. Others like funds because they are easy to buy and sell. Still others like them because they are diversified and less risky.

A mutual fund raises money from investors to invest in stocks, bonds, and other securities. It is a package made up of several individual investments. When those investments gain or lose value, you gain or lose as well. When they pay dividends, you get a share of them. Mutual funds also offer professional management and diversification. They do much of your investing work for you.

Mutual funds have been around since the 1800's, but didn't become what we know today until 1924. Even then, they did not become a household word until the 1990's, at which time the number of people owning them tripled. A recent survey shows that 88% of all investors have at least some of their money in mutual funds.

A mutual fund is a special type of company that pools together money from many investors and invests it on behalf of the group, in accordance with a stated set of objectives. Mutual funds raise the money by selling shares of the fund to the public, much like any other company can sell stock in itself to the public. Funds then take the money they receive from the sale of their shares (along with any money made from previous investments) and use it to purchase various investment vehicles, such as stocks, bonds, and money market instruments.

In return for the money they give to the fund when purchasing shares, shareholders receive an equity position in the fund and, in effect, in each of its underlying securities. For most mutual funds, shareholders are free to sell their shares at any time, although the price of a share in a mutual fund will fluctuate daily, depending upon the performance of the securities held by the fund.

Most investors pick mutual funds based on recent fund performance, the suggestion of a friend, and/or the praise bestowed on them by a financial magazine or fund-rating agency. While using these methods can lead one to selecting a quality fund, they can also lead you in the wrong direction and wondering what happened to that "great pick."

Despite the distinctive characteristics of mutual funds - performance, management philosophy, & investment objectives - your specific selections should be chosen within the context of your overall financial plan. Examining features such as past performance are not where your studies should begin. The point of departure is you; your financial priorities; your resources; your approach to investment diversification; your willingness (or lack thereof) to accept market volatility; and your time horizon for a particular investment.

Total Returns are fun to look at and brag about, but simply looking at a fund's total return for the past year is not necessarily a good measure of a fund's quality. For example, investors often talk about how well a specific fund did last year and how happy they are with that performance -- say a 16% return in an equity income fund. Well, in a given year that may or may not have been a good return for an equity income fund. That fund may have under-performed many or most other equity-income funds for the year. Returns should always be measured in context with how other similar "categorized" (e.g.. equity income funds, growth funds, small cap funds, etc.) funds have performed. So don't get overly excited by a funds total return until you see how it compares to other similar funds over the same period.

As it is often said, past performance can't predict future results. But when comparing performance of funds, it is also wise to look beyond the results of one or two years. Most experts suggest that a larger "window" of 5 to 10 years gives a clearer picture of historical performance. Has your fund or the one you are considering performed well over this longer time horizon? Any fund can have one good or one bad year, but if you are investing for the long term, you want a fund that has a consistent track record. While that record doesn't guarantee future results, it gives you an indicator that may be to your advantage.


About Author

Michael Saville has over twenty five years experience in providing finance and investment advice. He has written a free five-part short course on 'no load mutual funds' which is available at http:///buy-mutual-funds.com

4 Benefits of Debt Consolidation

By: Dave Galahad

Debt consolidation is the process of combining all your monthly debt payments into one manageable monthly payment. So many people just keep doing the same thing and end up putting themselves farther behind. There are at least four benefits well worth consideration when trying to decide the best way to get out of debt.

First and foremost, you need to be committed to what you are doing. For any debt plan to work, you first have to fully commit to avoid taking on any extra debt while you are trying to dig your way out of the current situation. Have you ever heard the expression "If you find yourself in a hole, stop digging"? If you're not committed, then any debt plan you enter into is doomed to failure which means the hole you are currently in will only get deeper. If you're ready to make that commitment and stick to it, then you're ready to be free of your bad debts, and put the money towards something else that will benefit you instead of your creditors. Read on.

In using this method, you pick a specific day of each month that you would like to make your payment. Part of the stress of carrying debt is remembering to pay everyone on time. Of course, when your payments are late, you incur late charges, over the limit charges, higher finance charges and your once low interest rate may skyrocket because you are now perceived as a higher risk. With a debt consolidation plan, you make only one debt payment per month, which is usually set up as an automatic draft from your bank account. Making it automatic is a great carefree way to make sure the funds get where they need to be on time.

This also brings welcome stress relief because you are condensing multiple debt payments into one manageable monthly payment. The great benefit here is now you don't have to remember multiple debt payments on different days throughout each month. As long as you make your one debt payment per month for the life of the plan, all is well. All you have to do is make sure there is money in the account when the monthly draft is made.

You may be able to lower your overall debt payment. Would you like to use the extra cash to be put back into your consolidation plan? Maybe you'd rather sock away the extra funds and begin a savings account or dedicate more money to your retirement plan. People who enter into debt consolidation plans usually have several high interest debts they are trying to overcome. Depending on the method of consolidation (professional help, consolidation loan, refinance, etc.) the repayment terms of your loan are set for a fixed period and the interest rate is considerably lower.

Perhaps the best benefit of debt consolidation is lowered interest. Here's another chance to use extra cash for something constructive. Whether you secure a debt consolidation loan, complete a cash-out refinance, or work with a not-for-profit agency that has established relationships with your creditors, paying less interest on your debt means more money stays in your pocket. Also, more of your hard earned income can go directly to the principal balance. This allows you to pay your debts quicker and with less interest charged over the life of the plan.


About Author
Dave Galahad is a freelance writer for ABCMoneySource.com on topics of banking, finance, investing, credit, savings, and debt.

Implementing Wealth Strategies

By: Jeanna Gabellini

You always follow through with all the wealth strategies you learn and like, right? If you said no, you're not alone. I don't and most of my clients don't either. Actually, it's probably not a good idea if you want to keep balance in your life.

So, what do you do if you aren't implementing much of anything or just keep going for the small stuff? You have to step into the mentality of the "B" & "I" quadrants. (If you don't know what they are, read Robert Kiyosaki's, "CASHFLOW Quadrant"). That means you'll have to create a system for implementation and you'll want to only choose the things that will give you the best ROI in regards to both time and money.

Simple ways to make the changes are best.
Really.

1. If you haven't yet done your 3 wealth plans, decide when you'll do it. Get out your calendar right now, set aside 2 hours and JUST DO IT. Need help? Go to http://www.masterpeacecoaching.com/article2-wealthplan.htm

2. Clarify what hasn't been working and what's standing between you and implementation. If your answer is procrastination, look deeper. Why? Do you need more info, do you think it'll be hard, is there fear? Do you need assistance?

3. Focus on the essence of what your wealth plan will get you. Now say, "Yes, I CAN have that." The only reason you may not have it all now is because you haven't made the decision to have it. It must be a done deal in your mind. You have to believe it. You've heard it a million times. Do you believe?

4. Release any of your stories, proof and excuses of why you haven't/can't move forward with implementing the strategies that will get you out of the rat race. They are illusions. And if you say that the economy is bad or you don't know how to begin, I'll scream! You DO know what you need to do and there are tons of people prospering right now.

5. Create a specific focus. For example, set up automatic deductions from your checking into an account that will build to invest for real estate deals. Make two extra payments on your mortgage each year. Form a partnership with 3 other people to play CASHFLOW, mastermind and possibly do deals together. That's it. Three areas of focus at a time. Once you have one completed, pick up another. This sounds basic, but most people truly do not make this a priority. How much time do you spend talking about your lack of money, fret over spending money, feel guilty about what you're not doing about investing, stressing over your business and economy, etc.? Flip your focus to what's possible (in a good way) and channel your energy into solutions and actions.

6. Be accountable to someone. Friend, spouse, coach. Put post it notes up to remind you. Get psyched about moving forward. Talk about your successes and the place you were stuck in.

7. It is not complicated. Let this be fun. Everything to do with money is a game. Keep it light. Remember fear may feel real, but it is an illusion that you can replace with another emotion like being thrilled.

8. Say NO to:
* Anything that is not on your primary focus list.
* Your ego mind worrying about what other people think about your strategy.
* Getting advice from anyone who doesn't walk their talk.
* Holding on to what you have for fear nothing better will come.
* Playing and feeling small.
* Jumping into a deal before you feel confident about your choice.
* Your old stories that keep you at the level of wealth you're at(unless you are right where you want to be!)
* Guilt. It's of no use. If you're not moving at the speed you want, find someone or something to take you into a new reality with your financial freedom.

9. Say YES to:
* Working your plan at a pace that feels good for you (fast or slow, doesn't matter).
* Visualizing what it would feel like to have millions of $$$ (or whatever your dream is). Make it so real in your mind, that it makes you smile. :-)
* Making a decision right now to implement something you've been wanting to do. C'mon. Make it a stretch.
* Feeling peaceful right now, no matter what your current financial status is. Peace has nothing to do with financial security and wealth. It's a state of mind. If you get peaceful first, the wealth comes a lot faster and easier. I say this from experiencing both extremes myself and watching my clients.
* Knowing that you're up to this. Of course you are! Say it. "I am a money magnet!"Yeah!!!

Free Article brought to YOU by ArticlesOn.com,

Jeanna Gabellini is the Xtreme Abundance Coach. She'll give you all the tools you need to create financial wealth and prosperity with her personal coaching, tele-courses and audio products. Jeanna blends strategy, Laws of attraction and FUN to assist you in creating exactly what you want. Are you ready for Extreme Abundance? Go to www.MasterPeaceCoaching.com to get your free ezine or call 707-747-0447 for more info.

Where Should I Put My Savings? Different Types of Investment Accounts

By Emma Snow

Retirement Accounts

IRA stands for Individual Retirement Account. An IRA is meant for those who do not have access to employer sponsored retirement plans such as 401(k) plans or those who would like to contribute more than the maximum allowed by their employer plans. Why choose an IRA? Tax-deferred growth is the answer. With a standard savings account, you have to pay taxes on the interest or earnings that the account makes each year. An IRA, on the other hand, doesn't require you to pay taxes until the money is taken out in retirement, thus leaving more money in the account to grow each year. In many instances you can also deduct your IRA contributions on your taxes, giving you further tax savings. It seems like a small thing especially when the account balance is still small, but over time it makes a big difference. Investing $10,000 for 30 years in a regular savings account with a 28% tax bracket and a 6% average growth rate will give you $35,565 whereas that same amount put into a tax-deferred account will give you $57,435. Eventually, however, you do have to pay taxes on the earnings in your IRA, but you are still left with $44,153 after taxes are paid. Your net gain for tax-deferred growth is just over $8500.

Another individual plan is a Roth IRA. It is somewhat similar to a traditional IRA but the difference is that you cannot deduct the contributions and the earnings grow tax-free instead of tax-deferred. This type of plan is good for someone with a longer timeframe to invest or those whose tax bracket in retirement will be close to or higher than their current tax rate. Tax-free growth means that you don't have to pay taxes on any of the earnings in the account. If we start with $10,000 and invest it for 30 years at 6% growth like our example above, you would be left with $57,435. None of that money has to have taxes paid on it since the initial $10,000 already had taxes taken out and the earnings grew tax-free. Before you wonder why anyone would not automatically use a Roth IRA, consider the fact that the initial $10,000 investment wasn't tax deductible like it was for the traditional IRA above. With a 28% tax bracket, the Roth paid $2,800 on its initial $10,000 investment. If we look at the growth potential of $2,800 for 30 years in a tax-deferred account, it grows to $16,082. So, in this person's situation where their tax bracket is the same in retirement as it is while working with a 6% rate of growth, a Roth wouldn't be the best option. The Roth would only grow to $57,435 - $16,082 = $41,353 when all taxes are taken into consideration while the traditional IRA would grow to $44,153. There are several online calculators that can estimate which type of IRA would be to your advantage. Search under Roth vs. Traditional IRA for more information and calculators to determine the best account for you.

In addition to individual plans there are also employer-sponsored plans. SEP IRA, SIMPLE IRA and Keogh plans are in between Traditional Individual Retirement Accounts and the standard employer sponsored plans such as 401(k)'s. SEP's, SIMPLE's and Keogh's are for self employed individuals or small companies that need to put aside more money than a standard IRA allows but aren't large enough to warrant the expense of a 401(k) plan. Each plan allows both employee and employer contributions. Each has set maximums between $6,000 and $30,000, depending on the plan and the contributor, and each has tax incentives for both the employer and the employee. These plans are great for small businesses to be able to set aside money for themselves and their employees and not have to go through the time and expense of larger employer sponsored plans.

The last type of retirement plans are employer sponsored plans. When it comes to retirement, it seems everyone knows the term 401(k). This is because a 401(k) is the retirement plan of choice for medium and large companies. In 2006, the maximum contribution to a 401(k) is $15,000. If you are over fifty and your employer offers the 401(k) "catch-up" contribution, you can contribute up to $5,000 more, so $20,000 total. Your employer may also contribute to your 401(k) plan which generally doesn't decrease your contribution allowance. Originally, 401(k) plans were only offered to for-profit companies. Those who worked for non-profit companies such as charities, schools, universities and hospitals weren't able to contribute to 401(k) plans but were able to open 403(b) plans which allowed most of the same contribution limits as a 401(k). Government or public employees often used 457(b) plans for their contributions and for highly compensated employees there are 457(f) plans. This eventually changed to where 401(k) plans are now available to non-profit companies so more and more of the non-profit sector are opening 401(k) plans for their employees. Taxes on these types of plan can vary from one plan to another, so it is best to consult your plan director or talk with the investment company that manages your employers plan.

Education Savings Plans
Education plans have become available in the past decade allowing parents to better save for their children's education. Instead of trying to set money aside in taxable savings accounts, parents can now setup an education savings account that has various tax advantages depending upon the type of account used. Choosing an education savings account depends upon what your long-term goals are for the money. There are three basic types of education savings accounts, IRC section 529 plans, the Coverdell Education Savings Account (CESA) and the Uniform Gift to Minors Account (UGMA). Each plan is tailored a little differently when it comes to its tax advantages and who gets the money from each plan, but each has the same general purpose, to save for your children or grandchildren's future.

Medical Savings Accounts
There are three different types of accounts to help you save for healthcare costs, Flexible Spending Accounts (FSA), Health Reimbursement Arrangements (HRA) and Health Savings Accounts (HSA). The first of these, Flexible Spending Accounts are also called section 125 plans or "cafeteria plans." This plan allows participants to put pre-tax money into the account each year to cover health insurance deductibles, co-payments, dental care and other medical expenses. Cafeteria plan money cannot accumulate from year to year, however, so it needs to be used up in one year or it will be gone. The second type of medical savings account is a Health Reimbursement Arrangement. It is similar to an FSA but the employer contributes to the account instead of the employee.

The employer can make contributions contingent on an employee participating in designated health and wellness programs. In June 2002 it was updated to allow funds to rollover from year to year, but it cannot be rolled over from employer to employer so if you change employers, you loose the accrued benefit. The last and most recently created plan is a Health Savings Account. This plan enables employees with high-deductible health insurance plans to set aside and invest money to use to pay the deductibles or other healthcare costs in the future.

These plans are designed to put healthcare decisions more into the hands of the employees. These plans are also portable so they move with you when you change employers and they can be rolled over from year to year.

Other Accounts
For those who are just looking to invest, a brokerage account is the medium to use. Brokerage accounts are setup through investment companies to allow you to purchase securities such as stocks, bonds, mutual funds, money markets, options, etc. Generally the money sits in a "core" account such as a money market until you are ready to invest it in other securities. There are fees for purchasing many securities which vary depending on the company that the account is setup with. Brokerage accounts can also offer check writing, debit and ATM cards for easier access to money in the account. Since there are no tax-advantages of a brokerage account, money can be withdrawn at any time from the core account. These accounts are perfect for additional savings that you want to invest in the stock market.

The standard savings account is probably what everyone is most familiar with. Offered by any bank, a savings account allows you to set money aside and receive a variable or fixed interest rate depending upon the account. Savings accounts are very liquid and can be withdrawn at any time, but they don't allow check writing capabilities. Most savings accounts nowadays do offer ATM cards. Certificates of Deposit or CD's are types of savings accounts that require money to be left in for a certain period of time in exchange for a slightly higher interest rate, these accounts are less liquid and there is generally a fee to take the money out before the predetermined period of time.

Whatever the reason or account used to set aside money, it is always a good thing. Savings in any form creates a more secure financial future and allows for problems or emergencies to be taken care of without having to obtain loans or dip into less liquid savings such as a home or other physical assets. Opening up any of the above types of accounts gets you started on the right track towards savings.

About the author:
Emma Snow is a writer who specializes in financial planning. She has worked in the financial industry for over eight years. Currently Emma works on a Finance and Investing site at http://www.finance-investing.com and Investing Partners http://www.investing-partners.com

Article Source: http://www.Free-Articles-Zone.com

The Magic of Compounding Part II

Submitted by Richy

The New Slant

Really understanding compounding will make all the difference in investing. I believe that Warren Buffett, the world's greatest investor, is hardwired to think geometrically. He is rich beyond dreamsbecause he totally gets the magic of compounding, and he executes on the concept.

I am going to get these numbers wrong because I'm doing them from memory but it doesn't matter. You'll get the concept. Buffett started a partnership way back when. He had a number of limited partners invest with him, and he took 20% of the gains. In the late 1960s he terminated the partnership with his famous letter, "When you no longer understand the way the game is played, it's time to leave the game." I'm paraphrasing, even though it's in quotes.

Buffet took about $100 million out of that first partnership for himself, so he was working with $100 million, keep that in mind. In 1974 when the bear market bottomed, it might have been early 1975, he started another rise...he took over Berkshire Hathaway. Buffet, since the 1970's, has been getting a compounded (remember that means exponential) growth rate of about 22 to 24%.

This is where I introduce you to the cousin of the Magic of Compounding, which is called the Rule of 72. With the Rule of 72 you can calculate how long it will take you to double your money at any given rate of return. OK? Let’s take an example. If you're earning 12% on your money and you want to know how long it will take to double it (we're compounding, remember?) divide 72 by 12, and your answer is 6.

It will take 6 years to double your money. Let’s do another one. If you're getting 6% on your money, divide 72 by 6 and you'll see that it will take 12 years to double. If you're getting 9%, it's 72 divided by 9, or 8 years to double up.

As for Warren Buffett, he's getting 22% on his money. This means you divide 72 by 22 and gee, in only 3.27 years, or every 3 years and 4 months, he doubles his money. Since he's been at it about 35 years with that $100 million he had to play with, he's doubled his original $100 million almost nine times.

You get that by taking 35 years and dividing by a double every 3 years and 4 months. It equals 10.70, or let's go with nine doubles to adjust for a rate of compounding that is varying. The key point is he's not making 9 times his money with the $100 million, that would be an arithmetic progression that would give him $900 million. He's making nine doubles, a geometric or compounded progression.

Let's see how that works.

Warren Buffet's Geometric Progression

Starting Dollar Amount: $100 million

Time Periods Involved: Nine 3 year and 4 month periods

Period Time Taken Compounded Gain
0 Starting Point $100,000,000
1 3 years, 4 months later $200,000,000
2 6 years, 8 months later $400,000,000
3 10 years later $800,000,000
4 13 years, 4 months later $1,600,000,000
5 16 years, 8 months later $3,200,000,000
6 20 years later $6,400,000,000
7 23 years, 4 months later $12,800,000,000
8 26 years, 8 months later $25,600,000,000
9 30 years later $51,200,000,000

I believe Buffet is worth about $47 billion. It doesn't matter, he is somewhere in his ninth double. This is the magic of compounding! Also, he never sells. This means his money is doubling every three years and four months with no tax consequences. He gets taxed only when he sells. Under normal conditions, the money compounds until he dies, then it's taxed at a capital gains rate in the far distant future. In Buffett’s case, he’s giving most of his wealth to the Gates’ foundation to benefit society.

Teach your children to live a balanced life, and also help them master this concept and you will have very happy and very rich children. In stocks I show you how to make money at the bottom by buying depressed securities that are going to come right back, making you a fortune as they rocket off the bottom. In the future I will also show you how to make money with the Warren Buffet concept, or classical Graham and Dodd analysis. In the mean time, good luck with understanding the magic of compounding and good luck with Stocksatbottom.com.

Start thinking exponentially, Make Money Now

Richard Stoyeck’s background includes being a limited partner at Bear Stearns, Senior VP at Lehman Brothers, Kuhn Loeb, Arthur Andersen, and KPMG. Educated at Pace University, NYU, and Harvard University, today he runs Rockefeller Capital Partners and www.stocksatbottom.com

Source: http://www.articleavenue.com

The Magic of Compounding Part I

Submitted by Richy

Some of you know about this, some of you don't. Either way I'm going to give you the basics of compounding, plus a couple of new slants on the concept. I suggest you read The Magic of Compounding not just once, but several times. If you have children, print this write-up, and give it to them to read. If they master this concept they will become rich.

The Basics

Compounding describes how numbers, or money, can grow. Numbers can grow in an arithmetic progression, for example 2,4,6,8,10,12 or 3,6,9,12,15,18, where one unit is added on at each step in the progression and that action provides the growth, or, numbers can grow exponentially, 2,4,8,16,32,64. In an exponential progression the increase comes by doubling the number at each step in the progression. See the difference? This is compounding.

Now the really amazing part, the magic, comes when you see how fast compounding will make money grow. And guess what! That's right, I've got a little game to play with you, a little story to tell, which will illustrate this principle. This puzzle is as old as J.P. Morgan's moustache comb, so if you've already been schooled in compounding you have heard it before. But didn't I tell you to read this section several times? OK, then, solve the puzzle with us once more while I tell it for the first time to the children for whom "The Magic of Compounding" has just been printed out.

The Puzzle

I'm a wealthy and generous man, and I want to hire you to work for me for one month. Since I'm also flexible, I give you a choice: you can choose to be paid the entire month's salary up front on the first day of your employment, or, I will pay you 1 cent the first day. After that I'll double your pay every day for the rest of the month, but you won't get the money until the last day of the month. So on the first day you'll work 8 whole hours, and you'll have 1 cent coming to you. But on the second day you'll earn 2 cents. Hold on, it gets better. On the 3rd you'll have earned 4 cents, the day after that 8 cents and so on. Saturdays and Sundays are included just to give you a better chance. Oh, by the way, if you take your pay all at once on the first day I'll give you a million bucks ($1,000,000.00) cash. Seems like an easy choice, doesn't it?

Well, you decide for yourself. Now let's look at how much the fellows who picked the penny-a-day plan are going to have at month's end. Remember, on the one hand $1,000,000.00. On the other hand you get a penny the first day, two cents on the second day, 4 cents on the 3rd day, and 16 cents on the 5thday. If you keep working the numbers by the 15th day, you are up to $163.84. By the 18th day, you have cracked the $1,000 dollar mark coming in with $1310.72.

At this point you have to start thinking to yourself that it has taken 18 days, and I am only at $1300 and change. Was I better off taking the million dollars like the other day offered and taking a one million dollar lump sum payment? Maybe you were let’s see what happens. Keep in mind, we are continuing to double our money every day and we have 12 days to go.

On the 20th day, you are up to $5,242.88. Your numbers quickly move up from here on successive days:

Day 21 $10,485.76
Day 22 $20,971.52
Day 23 $41,943.04
Day 24 $83,886.08
Day 25 $167,772.16
Day 26 $335,544.32

By the way, did any of you ask me what month of the year we're in? Is it February with 28 days, or leap year with 29 days, or September with 30 days, or December with 31 days? You should realize that it's going to make a difference. Do you want the million dollars? Ask your kids again which they would choose?

Day 27 $671,088.64
Day 28 $1,342,177.28
Day 29 $2,684,354.56
Day 30 $5,368,254.56
Day 31 $10,737,418.24

If you work for me in September with 30 days you make over $5,000,000. In December it's over $10,000,000!

I have never met the child who didn't leap at the $1,000,000 on day one. This is because the human mind thinks arithmetically, not exponentially. You might say that we are hardwired to think in this linear fashion. The software in our brains compels us to think about progressions as being simple arithmetic ones. Luckily though, how we think about things, our prejudices, our attitudes, and our mindsets, can all be changed and worked with. We can update the software! We can consciously change the way we think about numbers, money and investing by absorbing new information, namely, that when you make your money compound you can get rich sooner rather than later.

Start thinking exponentially, Make Money Now

Richard Stoyeck’s background includes being a limited partner at Bear Stearns, Senior VP at Lehman Brothers, Kuhn Loeb, Arthur Andersen, and KPMG. Educated at Pace University, NYU, and Harvard University, today he runs Rockefeller Capital Partners and www.stocksatbottom.com

Continue to Part II

Source: http://www.articleavenue.com

Money Management For Couples

By Joseph Kenny

Foremost among the reasons that lead to marital discord are financial issues. Most couples are unable to or find it extremely difficult to broach the topic openly and honestly. Although the reasons may be different for each couple, being disorganized and unable to communicate are common.

In order to avoid serious consequences it is necessary to for couples to implement the art of budgeting and money management. Couples should avoid conflict over purchases made by each other and learn to respect each other’s opinions.

The initial step is to sit down and discuss the income and expenditure. If there is a lack of communication, which is the case most of the time, this discussion could end in a heated argument. It is important to decide on a strategy before hand, to prevent an ugly situation. For example, get up and drink a glass of water, take a few deep breaths and go for a short walk and then resume the dialogue or invite a friend to be a part of the discussion.

Make a list of all the bills that are pending and the amounts, highlighting the dates on which they need to be paid. Compare this with the joint income and in case of inadequate funds, try to find ways to reduce expenditure or increase income.

Document all facts and figures so that they are easily available to your partner. Make a separate file for documents and papers related to insurance payments, credit card statements, car installments, monthly mortgage, utility bills and expenses. Remove them from the file only when they are paid. Decide on a common place accessible to both, to keep checkbooks, receipts and all relevant financial information. If there have been withdrawals from the joint account, each partner should let the other know the reason.

Such discussions should be scheduled regularly. Financial planning should be an essential part of the discussions. Financial issues become stressful if not handled with care. Make a plan to ensure that both of you take turns to maintain checkbooks, file taxes and track investments. This will allow each partner to be aware of the financial details. Discuss and create a budget to suit both of you.

Try to visualize finances for the next five or ten years. Large amounts of money are required for buying a house or a new car. The different ways in which you could save for these purchases should be discussed openly.

When you set your goals, devise a strategy to achieve them. The plans would mainly comprise of eliminating debt and setting up a savings plan. One excellent way would be to save a certain percentage of the monthly income in a tax deferred account. You can also save and invest in securities and bonds.

Financial mismanagement is generally a key factor in wrecking a happy marriage. In order to keep finances on the right track, proper communication is essential. Regular discussions and mutual decisions on the family budget and savings are sure ways to maintain the harmony among couples.

About the Author:
Joe Kenny writes for CardGuide.co.uk, offering UK credit cards, visit them today to compare credit cards.Visit today: http://www.cardguide.co.uk/

Ways to Help You Invest

By Emma Snow

Direct Deposit
Of all the tools to help you save, direct deposit has been around the longest. Direct deposit is when your employer deposits your paycheck directly to your checking, savings, retirement or brokerage accounts. Many times an employer can deposit your check to more than one account. If this is the case, to help you with your savings, you could split your check up by how it will be used. Spending money could go into your checking account, investment money into your brokerage account, retirement into an IRA or 401(k) and a percentage into a savings account. This way you don't have to actually move the money into savings, investments or retirement yourself, it is done for you automatically at the beginning of the month. Setting up direct deposit is usually just a matter of completing a form at your workplace. For many people, money that goes directly into savings is forgotten and therefore less easily spent.

Automatic Investments
When direct deposit isn't an option or you just want another choice, automatic investments is a good way to help you save. With this, your paycheck goes into one account and then you setup times during the month when money is taken from this main account and put into other accounts such as IRA's, investment accounts and/or savings accounts. This is something you schedule in advance and takes place on a monthly basis. This way, you don't have to remind yourself to do it. This is very similar to direct deposit but where your bank or financial institution is doing the work for you instead of your employer. This could also be used if your direct deposit limits you to one account or only allows you to split up your check by percentages. If this is the case, you can direct deposit your paycheck into the account where you have setup automatic investments and then have dollar amounts go into different savings accounts. This is helpful for depositing into accounts like IRA's where you can only invest a certain dollar amount each year and you don't want to go over your limit.

Tax Return Money
When tax season comes, consider saving your tax returns instead of spending them. This is an especially good idea for those who have a difficult time saving on their own. You can deposit your tax return directly into a savings account and start yourself a little nest egg. If you worry about your ability to keep it in that savings account, consider putting a lot of it into an account where you cannot get it out easily, such as an IRA, a CD or an investment with redemption fees when you take it out too quickly.If you don't have any issues with keeping your savings intact, instead of determining where your tax return money should go, you should instead determine why it is not coming to you in the first place. The IRS website has a calculator that will estimate your federal taxes and tell you what exemptions are appropriate so you can break even on your taxes each year. Doing this will give you more money each paycheck which enables you to start saving immediately instead of waiting for tax time. This also allows you to earn interest on that money for a longer period of time.

Investment/Savings Credit Cards
Credit cards that actually help you save money? For people who use a credit card for convenience and rewards and not for the ability to carry a balance, this is a great opportunity. Recently, a few cards have come to the market that offer investment or savings points when you make purchases. Fidelity Investments, Motley Fool and American Express are some of the first companies to offer these types of Credit Cards. The way they work is for every dollar in purchases, you earn points to put toward investments or savings that you choose. Once there are enough points to reach a threshold (determined by the card), the points are redeemed as cash and deposited to an investment account, retirement account or savings account that you have designated ahead of time.

Workplace Savings Plans
Many employers now offer workplace savings plans. These come in many shapes and forms, not just 401(k)'s but 403(b)'s, 457 plans, Roth 401(k) plans, etc. To contribute to a workplace savings plan, money has to come from your paycheck since they are employer sponsored plans. Your employer asks you to indicate what percentage of your paycheck should be deposited to your retirement savings account. Once this is done, that percentage will come out of your paycheck each time and go directly into your retirement account. It is difficult and sometimes impossible to retrieve money from your retirement account while working for that employer so this is a great savings tool for those who have a hard time setting aside money. Workplace savings also is good as it lowers your overall tax burden for the year, giving you even more savings.

Automatic Increases
The last way to help increase your savings is to use an automatic increase program on your workplace savings plan. Not all employers offer this; contact your human resources or benefits department to see if it is an option. These programs facilitate saving for retirement by automatically increasing your retirement savings each year. You generally choose what percent you want to increase the savings by as well as the date. When the chosen date comes, a larger percentage of your paycheck starts going into your workplace savings account. You can have it take effect right after annual salary increases each year making it less noticeable in your take-home pay.

If saving money isn't one of your stronger qualities, these savings programs can help. Savings is the best way to avoid financial ruin. Having money set aside for an emergency, job loss, car and home repairs, or any unexpected expenses prevents you from having to take loans to cover these problems. In addition to liquid savings, retirement savings and college savings are long-term goals that often get overlooked or procrastinated. Taking advantage of one or several options from above is the first step in creating a healthy financial future for you and your family.

About the author:
Emma Snow is a writer who specializes in financial planning. She has worked in the financial industry for over eight years. Currently Emma works on a Finance and Investing site at http://www.finance-investing.com and Investing Partners http://www.investing-partners.com

Creating A Budget

By Joseph Kenny

Many people do not consider the importance of a budget. They indulge in spending according to their earning and do not leave room for emergencies. This usually ends up in the incurring of debts and sometimes, personal bankruptcy. A budget helps to counter these consequences.

The essential calculations in a budget are income and expenditure. The purpose of a budget is to ensure that the expenses do not exceed the income and also provide for savings for the future.

A budget needs to be documented in the form of a chart or table. This needs to be easily comprehensible and provide a quick summing up of the relevant details. The chart needs to effectively reflect the different heads of expenditure. Suggested heads are housing and utilities, entertainment, health and beauty, transportation, communication and household. These can be further subdivided as follows:

Housing and utilities
- Mortgage payment or rent
- Insurance
- Taxes and electricity
- Natural gas
- Water and garbage pick up

Entertainment
- Cable television or satellite service
- Internet access
- Dining out
- Bars clubs
- Sporting events, parties, lessons and recitals

Health and Beauty
- Hair-cuts, perms etc.
- Make-up
- Medical, dental, vision, weight loss, diet products
- Nutritional supplements

Transportation
- Car payments, insurance
- Gas
- Routine maintenance, repairs
- Air travel
- Rental cars, public transportation

Communication
- Telephone
- Cellular phone
- Voice mail

Household
– Groceries
- Cleaning supplies
- Laundry, dry cleaning
- Home improvement Projects, towels, linens

Others
- Credit card payments
- Other loan payments
- Child care, items for baby/elderly
- Allowances for children, book clubs, magazines, music, etc., fast food
- Investments, vacation, spending money, donations to church or charity
- Gifts (Christmas, birthdays, anniversary, etc.)
- Emergency fund
- Cigarettes.

If you have any other expenses that are not covered, you could add them to the list.

Next, try to reflect all expenses on a monthly calculation. For example, if you pay yearly taxes, calculate the monthly expense by dividing the yearly amount by twelve. Having done this, add up all the figures to arrive at the total monthly expense figure. Then subtract this amount from your take home salary amount. If you find the remainder in negative, you need to look for expenses where you ought to cut down. For example, if your take home salary is $1000 and your expenses total to $1150, you would need to trim down $150 each month, from the expenses.

If you need to cut down on your expenses, you would be the best judge to decide where to make the changes. However, it would be prudent to cut back on the extra subscription channels of the television. If you are smoker, cut down on smoking instead. Take home cooked lunch to office instead of eating fast food. Economize on power consumption by avoiding unnecessary use of the air conditioner and heating and make less use of the phone.

Creating a budget is absolutely necessary to manage your finances and is not dependent on the size of your income. It helps to prevent overspending and personal bankruptcy, allowing you keep track of your income and expenditure.

About the Author:
Joe Kenny writes for SelectLoans.co.uk, a bad credit loans comparison site, visit us today for information on all loan topics including secured loans and links to leading UK providers.Our Site: http://www.selectloans.co.uk/

Personal Budget Planning Tips

By Sarah Freeland

Your personal money management is the key to your financial success; your method of reaching your goals and dreams. No one likes the term budgeting, but without it, you won’t know if you are getting the most from your income. Everyone wants to pay all their bills on time. Successful debt and asset management is a source of pride and of good credit. All of us want good credit whether we use it or not. Unless you have unlimited funds to spend however you wish, you will need a personal budget to pay off debts. Budgeting your money can be a difficult process.

In order to create a household budget, you must include all your monthly and yearly bills. You must also include your spending money, savings goals, and retirement funding. It doesn’t matter how much money you make; it’s how you spend it. A personal or household budget will help you make payments on time, provided you follow the plan.

When you don’t follow a debt management program, your debt may overtake your income and then you are forced to make late payments on bills or no payments at all because you don’t have the money. You can’t just spend money and hope you have enough for your bills. You must spend within a budget.

You can prepare a budget by using budgeting software on your computer. The program will ask you the same questions that a personal finance advisor asks during a financial planning interview. The questions concern your expenses, your spending habits, and retirement goals. They may include tips on debt consolidation and reasonable cash flow. Or you can choose a financial planner to help you with your personal finance concerns.

For more on debt management and credit repair visit the resource center at DebtControlExperts.com. If you are in the market for a home equity loan, auto loan or mortgage, visit FundingMarketplace.com for financing options.

Controlling your Cash Flow

By adam10x

Are you looking for a way to gain control of your personal finances and implement a budget that will get you back on the road to financial success? Great! And remember there is no better time to start than now. Like anything in life, before you can become financially stable you must understand the fundamentals of personal finance. Gaining control of your personal finances does not have to be hard, in fact some even find the road back to financial stability both challenging and satisfying. Don’t forget, where there is a will there is a way. You can do it!

One of the basic, yet important concepts behind the success of a financially wealthy individual is his/her basic understanding of a cash flow. The term merely refers to the flow of incoming and outgoing cash. An inflow refers to any money considered income, whereas an outflow refers to anything recognized as an expense. Perhaps a simple example can best illustrate this basic concept.

Identifying Inflows and Outflows of Cash
Example: Sara, an extremely mature 13 year old, has just washed the dishes for her father, Dee, who has promised to pay her $10 for her services for a week. Having fulfilled her duty and received her payment, Sara quickly hops on her bike and rides to the local grocery story, where she purchases some chocolate milk, a donut, and a pack of gum, all for $5 dollars. Sara hands the clerk $5 dollars and leaves the store happily with her loot.

In this example what is the cash flow? Remember our definition of the term. There exists a flow of money when cash comes in, or is received, as well as when cash goes out, or is spent. Thus, in this scenario the cash flow can be broken down into two streams, namely Sara’s income and her expenses. Her income amounted to $10, representing a cash inflow and her expenses incurred totaled $5, representing her cash outflow.

Plan of Action
The reason this is so important is gaining control of one’s financial wellbeing typically revolves around handling inflows and outflows of money appropriately. It is easy to see how trouble can arise quickly if one is consistently spending more money then is made. When expenses exceed income, debt is incurred. The simple yet vital key to financial stability is no secret at all. Spend less than you make.

This method proves to be a success time after time, even when prior debts exist. By spending less than is made, a positive cash flow is created which can in turn be applied against existing debts. Slowly but surely, these small payments on existing debts will eliminate the debt and amount to huge savings. One can then take advantage of living debt free by allocating to savings the payments previously applied to the existing debt. Again, slowly but surely, those savings will begin to add up to quite a nice little nest egg for retirement.

Conclusion
The principles to financial stability are extremely simple and basic, but nonetheless true. Realizing a positive cash flow requires great dedication and commitment as well as strict adherence to a personal budget which minimizes expenses and maximizes savings. Becoming financially wealthy does not happen overnight. Rather it requires time and persistence, even a minute by minute plan of action to realize such wealth and make those millions you have always dreamed of.

The sooner positive financial habits are formed, like saving money, maintaining a positive cash flow, or investing wisely, the sooner those habits will become a part of who you are and lead you down the road to financial success.

Adam Smith an internet marketer specializing in affiliate program management for 10Xmarketing.com. More information on controlling your cash flow is available at OneMinuteMillionaire.com.