Be Financially Secure Before Investing

March 13th, 2009 — Investing

OK I’ve ranted quite a bit about getting out of mutual funds, and moving your 40(K) into cash.  Now that we’re seeing a little upturn in the market, are you missing the big change in the market?
 
I doubt it.  This blog is about saving cash – how to protect the money you have, save money when you can, and make money to keep building your wealth safely.  So, if safety and wealth is what you’re after, jumping back in to a recessionary market after just a couple up days is really risky. Let’s look at the big picture here:  
 
1.  Although we’ve been fueling the economy with our buying for the past 10-30 years, Americans right now don’t have any more money, that is, we’re not getting any raises, we’re losing our jobs, we’re spending too much on healthcare and very other expense, and
2.  We don’t know when we’ll have a lot of income in the future, it’s gonna take us years to pay off all our debt, (I don’t see anyone getting a 10%, 20% pay raise next year, do you?)  and
3.  We can’t get more credit even if we wanted to, and
3.  We SURE don’t want any more debt, because that’s what got us in this mess, and that’s OK anyway,
SO…
4.  How can you have “growth” stocks, or “value” stocks, when what makes them grow and be valuable is SALES?  Who’s going to buy, to increase the profits from to make the market move up again? 
 
So, when someone tells you to “buy a growth stock mutual fund”, you hopefully  will understand that there isn’t going to be much “growth” until Americans are making more money from their jobs.  Assuming they have one.  You might want to consider learning how to buy stocks for beginners.
 
The fact is, it has been consumer debt that has been driving both the US economy and the entire global economy for many years, and now we just can’t afford it any more. How could it be anything other than a long time before the market comes back?  You won’t find the answer to that on Carmen Wong, or
SquawkBox, or Mad Money.
 
Some things always will be needed, of course. For example: health care, which should get a big boost from the baby boomers’ aging and the stimulus; food; discount and warehouse stores like Wal-Mart or Target or Costco; some clothing maybe. Auto parts, but not autos. If you want to invest, you need to look around and think about what’s really needed, and what’s discretionary.  But you aren’t going to find many mutual funds that give you that kind of choice. 
 
There’s always the possibility that after we pay down our debt, and save some money, and have the cash for the big purchase we’ve been waiting for, then we might buy.  Want to venture a guess how long that might take, for people to want to start buying again?  When we see how nice it is though to have lots of money in our money market or mutual fund, and start seeing those four and five-digit numbers, it feels pretty good after years of not knowing how we were going to pay all our bills every month.  
 
Paying down debt is not always a good idea either.  For example, as I’ve said elsewhere here on the blog, if you spend all your extra cash paying down debt, but don’t have a decent sized emergency fund, what will you do for money if you lose your job?  In this environment, it’s probably a good idea to pay the minimums on your bills, and put as much extra money as yo can into a money market or high interest online savings account.  You won’t get a heck of a lot – maybe 2%- 3% – but it’s better than losing money for sure. You can put every extra dime into an emergency account, and then when things get better start using part of it to pay off your debt.
 
Some advisers like Dave Ramsey suggest getting a second or third (!) job to pay off debts.  (Just ignore Dave Ramsey investing advice, he always recommends something that today does not exist: a “good growth stock mutual fund” - see above!)  Not a bad idea to make more money. Your second job can fund your emergency savings just as easily.  If you have trouble working outside the home, due to children or other issues, there are plenty of ways to make money online, using your computer, real ways to bring in some extra cash, even doing something like eBay online selling.  For example, here are just a couple ideas I know of that are legitimate work at home business ideas, and can help bring in a little extra money, even if it’s only a couple hundred a month, that’s a car payment, or a grocery trip.  So, if you want to make some extra cash, try these:
 
ProjectPayDay – this is a real way to make money from home.
 
Today.com – easy enough to blog, and make some money, probably not get rich but extra cash can’t hurt!
 
BigCrumbs.com – you can save money when you buy, and if you get friends to sign up, you get even more savings.  My extended family loves this one!
 
I’ll post a lot more about ways to make extra money, but for now – consider where you want to be in six months, or a year.  Protect what you have now, by moving your money somewhere safe (unless you like taking a lot of risk).  Then, cut your spending, save the extra, and start adding to it.   Soon your emergency fund will look a lot healthier, and when the economy turns up, you’ll be ready to climb aboard.

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Get cash now to put away

March 1st, 2009 — Cash, Debt, Earn Money, Savings, Sell Stuff

As of today, job losses continue to climb despite estimates, mortgage delinquencies are skyrocketing, home prices and home sales continue to drop.

Even with Obama’s new plan, which might work, things don’t look so good.  Having cash set aside would be a really good thing right now.  But so many of us don’t have any cash at all, because we’ve been spending every dime and then some, till now.

It’s not too late to get on the right track though.  Here are some really, really basic ideas to get some cash, right now, to put into a savings account.  But be sure to take the savings and put it into a savings account – don’t just spend on something else.  And for God’s sake don’t invest it in anything!  You need a cushion, NOW.  Nothing shocking here – just basic reminders to DO IT NOW.  (We’ll keep adding ideas in future posts.)

Things to skip or adjust:

- Discretionary spending: Starbucks, or Dunkin for that matter, smokes, buying lunch at work, going out to dinner, vacations (do something cheaper close to home), going shopping for fun, buying junk food at the grocery store (have you see the prices jump lately?), trips to the movie theater, buying the newest cell phone, upgrading your car lease, spending too much on cable channels you don’t watch, traffic tickets, the weekly mani/pedi, home decor, fast food for dinner, clothing you don’t need, magazine subscriptions, appliances that could be fixed instead of replaced, you get the picture. Stop yourself, one day at a time. What did you NOT buy today?  Put that cash into the bank.

- Paying extra on your debt.  Yes don’t pay extra right now.  You’ll pay it down eventually! But for now, pay the minimum, and put the rest into your savings.  What if you get laid off? Would you rather have that money in your pocket, or Bank of America’s?  Will it cost you a little extra in interest? Yes. Will you have cash on hand, in the bank,  if you lose your job? Yes.

- Getting into more debt.  Just. Don’t. Do. It.  It’s how we got into this mess, it’s NOT how to get out. 

Where to find or earn more money:

- An extra job. Picking up an extra amount of cash and putting it all away is a good idea, unless you’ll have to spend $$ on child care, travel or other job-related expenses.  Check Craig’s List for local and part time jobs from home.

- Sell it on eBay and craigs list, or throw a garage sale.  Millions more listings are showing up, but there are buyers out there looking for deals too.  So get rid of that stuff NOW.

- Make a little money online.  I don’t mean scams, but if you have something you’re passionate about, you can set up a blog, for free, learn to attract readers who are just as passionate, offer excellent value and products and ideas, and earn a little extra cash.  Here’s a reasonably priced product that can help you set up a blog to earn money. Will you get rich? not likely.  Will you have a little extra to put away?  You can easily do that.

Where to put your extra cash:

- Your mattress.  Hey, some people feel better having bills within reach.

- High interest savings accounts, like ING or HSBC.  You can earn upwards of 3%, but you’ll need to open a checking account with them too to get cash through a debit card. Research rates here.

- Your local community bank. Their interest rates aren’t great, but by and large they are more stable than the big national banks.  Find out your bank’s rating at Bankrate’s Safe & Sound ratings page.

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It’s a good idea to focus on making cash

September 27th, 2008 — Cash, Earn Money, Savings, Sell Stuff

A typical flea market shop, in Germany

Image via Wikipedia

Time to start that side business if you haven’t already. A CASH side business is the best idea.  By spending a couple hours a week and putting some cash in your pocket, you might have a little bit more protection tan if you just keep relying on the credit card and spending every dime you earn every paycheck.  Look for more on the cash economy here are Saving Cash Tips.

Here are a few ideas to get you started:

- Sell your stuff on Craig’s List – cash only
- Set up a table at local flea market, swap meet
- Fix up used cars and resell them
- Sell services: piano lessons, computer spyware cleanup, home or office organizing, house cleaning, day care

You can also start thinking in terms of barter and trade. For example, post on Craig’s List has a barter section, but you can also post under for sale.  (We’ll be posting links to other good places to sell and market your stuff in future posts.)

Anything you can do to bring in cash, or make extra money, is going to be a good idea right now.  I’m recommending that if you’re selling using PayPal or some other service that credits a bank account, that you pull the cash as soon as you can, and hold onto it to invest in something else.

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