My Personal Finance Journey

Category Archives for Invest & Retire

LendingClub vs. Prosper – Which is the Better Option for P2P Lending and Investing?

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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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The following is a post by MPFJ Staff Writer, Jeff.  Jeff blogs about finances, health, and the environment over at Sustainable Life Blog.
Over the last few years, LendingClub and Prosper have gotten a lot of press.  Both are “Peer to Peer” (P2P) lenders, which basically means that one person is lending money to another person.  It’s like lending your coworker a dollar to go hit the vending machine in the break room, but on a much larger scale.

The Borrower

LendingClub and Prosper each have borrowers looking to borrow money for all sorts of different things: Wedding expenses, small business loans, home additions and new cars, but by far the most common reason that people turn to the sites is because they are looking to consolidate their credit card debt.  For the borrower, it’s something of a no-brainer – they can pay off their credit cards that they were paying 18%+ interest to, and get a loan with an interest rate dependent on their credit profile.  Some of these rates can be as low as 6-7%, and some can be as high as 12-14%.  Either way, the borrower generally comes out ahead.  The borrower is the first “peer” in the transaction.

The Lender/Investor

The second “peer” of course, is the lender.  Savings rates are abysmal right now, with even high quality accounts paying at, near, or slightly less than 1% interest.  P2P lending offers the chance at a far greater return than a traditional savings account (though with more risk).  A small fee is charged by LendingClub or Prosper to administer the loan and facilitate payments, but the rest of the interest charged to the borrower is yours.

The lender can choose the term that they would like to invest in (typically 36 months), and the company will send the borrowers payment to you every month.  You can choose to lend whatever amount that you like, though most investors lend in $25 increments so that they can further diversify their P2P portfolio.

Now that you know the basics of Peer to Peer lending, lets look at the two major players:

LendingClub

LendingClub is based out of San Francisco, CA.  Though you can use LendingClub in most states, it is not approved in all states (It’s approved in CA, CO, CT, DE, FL, GA, HI, ID, IL, KY, LA, ME, MN, MO, MS, MT, NH, NV, NY, RI, SC, SD, UT, VA, WA, WI, WV & WY).

If you’re not reading from one of those states, you’re unable to invest in the origination of LendingClub notes, but there is a secondary market that you may purchase the loans from called foliofn.  I personally have never used foliofn to trade any of my notes, but I have heard good things about the service, which is run by LendingClub.  

LendingClub has a prospectus on file with the SEC, and has people reviewing each borrower individually before they disperse money to them to make sure that they aren’t just going to take out a large loan and walk off with it.  Lending club also reviews each borrower’s loan and assigns a grade and a number to the loan.  The grades range from A-G and are accompanied by a number.  For instance, the top rated loans that will get the lowest interest rate are A1 grade, while the lowest grade loans that will get a higher interest rates are G5.

When viewing loans, you are able to see quite a bit of relevant information about the borrower: their credit score, where they live and work, estimated costs of living in their area, whether or not they have any previous bankruptcies and more.  In addition to the information provided, you can ask the borrowers questions, either pre-canned questions such as “what is the purpose of this loan” or a question that you write yourself, in order to gain more information about the borrower.

In addition to this, LendingClub also estimates your probable rate of return, adjusted for the risk of default for the loan grade that you selected.  Loans graded A have a lower default rate than loans graded G, so the chances of default will be lower, but so will your interest rate.  They use historical loan data for notes graded similarly to determine the possibility of default for all notes in the system.

My Personal Experience with LendingClub

I’ve been a member of LendingClub for about a year now, and things are going well.  
I initially invested $300, but about 2 months after that, I was liking what I saw and invested another $700, to bring my total investment in the service to $1,000.  I am getting an 11.77% interest rate, and have not had any charge offs or late payments to date.  I have had four notes get paid off early, but everything else is going well so far.  It’s generated a nice little passive income stream for me, to the tune of $36.75 per month.  When the payments come in, I wait until I have enough to invest in a new note and reinvest the proceeds.  
My cash is spread across 50 notes, all with a 3 year term.  Most of the notes that I picked initially were A and B grade, but lately I’ve been investing in a bit lower grade C & D notes to juice up the return a bit.  Once I counter balance everything, I’d like to get about 25% A grade, 35% B grade, 15% C grade, and 15 % D grade and 5% E grade notes.

Prosper

Prosper works essentially the same as LendingClub.  A person posts a loan out for something that they need cash for like credit card refinancing or a wedding, and they are graded by Prosper.

Once those are graded by prosper, the investor has a chance to purchase/invest in a note that comes with an interest rate set by prosper.  According to Prosper.com, they have a seasoned return rate of 9.28%, which is far better than you’ll get investing in a traditional savings account, but comes with a lot more risk as well.  

Like LendingClub, prosper has a prospectus on file with the SEC.  Prosper also isn’t available in all states.  Prosper is available to lenders from Alaska, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Louisiana, Maine, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New York, Oregon, Rhode Island, South Carolina, South Dakota, Utah, Virginia, West Virginia, Wisconsin and Wyoming.

While there were major problems at Prosper when the company first started that involved the default of lots of loans, things seem to have settled down and gotten a bit more normal.  It looks like there are far less defaults than there were when Prosper started.

One important thing to note about both LendingClub and Prosper.  The key to both of these services is diversity.  You’ll want to make sure that you diversify your funds across as many notes as possible to avoid 1 default causing a problem with your whole return.  This typically takes a rather large sum of cash to properly diversify across multiple notes.  However, it could be done with a sum as low as $1,000.

How about you all? Have you ever invested in P2P loans with either of these companies? If so, what type of return did you achieve? Was it worth any risk of default you were exposed to?

 Share your experiences by commenting below!

The Stock Market Hit an All-time High – Where Do We Go From Here?

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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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The following is a post by MPFJ staff writer, Kevin Mercadante, who is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

The Dow Jones Industrial Average is back to setting record highs. Good news? Sure!

But it also means that we are now in uncharted territory. There are no charts to look back at and say “this is how the market behaved the last time the Dow was this high…” This is a whole new dimension that requires a different way of looking at the market.

Just as with any other level of the Dow, or any other index, the market can either continue to rise, to float sideways for very long time, or to decline, even substantially. But what makes a record high unique – and a bigger question – is that the directions can carry greater weight.

The market can continue to ride the same euphoria that blasted the Dow past the 14,000 level, all the way up to 20,000 and even beyond. It can enter a period of confusion, not knowing where to go, because of the conflict between optimism and the unknown. Or you can get a sudden fear of heights, where millions of investors decide to lock in the profits and cash out, dropping the market several thousand points.

Where will it go? Who knows – but it’s best to have a strategy for any one of three scenarios.

If you anticipate that the market will continue moving higher

If you believe that the market will continue to go higher, the best strategy will be to continue doing what you’ve done so far, with only minimal modifications to be prepared for changing circumstances.

For example, if your portfolio has at least kept up with the general market, you may want to keep most of your money in the stocks and funds where already is. The same factors that have carried them this far will probably keep them growing.

But as market leadership tends to change as markets advance, this is also an excellent time to begin looking at other sectors and companies. While certain sectors may lead the market to new highs, leadership may shift over to sectors and companies that have not performed quite as well. This is because investors and investment managers will be looking for new opportunities as the market advances.

If you believe it will be range-bound

If you believe that the market will go sideways for a prolonged period time, perhaps as it consolidates for the next move up or down, you may also begin looking for a change in leadership among sectors and companies. In a range bound market, some sectors can fall as others begin rise. The stocks that brought market up to the top may not be the ones that will lead the way in the next surge.

Again you will want to look at sectors and companies that have strong fundamentals, but did not perform quite as well on the run up.

This may also be the time when you look to take profits. You may want to sell off some of your better performing assets, and move them into somewhat more conservative investments.

This is not a time to begin exiting the market, but you might want to consider investments that will provide you with a steady income, while enabling you to participate in the next move up. Growth and income type stocks and funds can be the perfect choice. You’ll earn income from dividends – which will also provide at least some price protection – and if the market does resume its rise, you’ll be in a position to take advantage of that.

This can also be an excellent time to look for value stocks, and funds that invest in them. There are stocks in companies that are fundamentally sound, but they didn’t do as well as the Nifty Fifty stocks that drove the market to a new record. Prices of these stocks can be relatively low compared to the better performing competitors. They will also represent of the best opportunities in a range bound market. As the market looks for new leadership, value stocks are a natural choice.

If you think the market will fall for a long time

If you think that the market has run its course, and may be ripe for a multi-year decline, then this is the time to put diversification into high gear.

You never want to leave the stock market completely, but this will be the time to begin reducing your positions. Because the market is in record territory, it will be the best time to sell and take profits. Even if the market rises another 2,000 or 3,000 points, you’ll still have made rich profits.

You can build positions in sectors and companies that are likely to do well in the current economic environment – value stocks and funds would be a perfect choice. Even in declining markets, capital is always going somewhere, and it’s usually when markets decline that investment managers start looking for bargains.

You’ll also want to begin moving money out of the market. This will not only be a matter of protecting your profits, but it will also free up cash so that you will be able to buy bargains later on after the market has fallen.

Any type of interest-bearing investments would be suitable for this purpose. It could be treasury bills, certificates of deposit or money market funds – any place where your principal will be protected, and you can earn some income while you were waiting out the market transition.

How about you all? Where do you think the market is headed now, and what do you think is the best way to react to the various possibilities?

 Share your experiences by commenting below!

    ***Photo courtesy of http://www.flickr.com/photos/83532250@N06/7651028854/sizes/s/in/photostream/

    Comparison of Popular Online Stock Brokers

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    Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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    The following is a post by MPFJ staff writer, Kevin Mercadante, who is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

    There is no shortage of online brokerage firms these days, and you can be blinded by all the options they offer. Most have low fees, and there are slight differences between each that make all the difference in the world (funny how that works sometimes, right?!), depending on what type of trader you are, and how larger your portfolio will be.

    Before you move your money into any of these accounts, it is important to check out the specials that they are offering – and they all seem to be offering them an ongoing basis. Most will at least reimburse you for exit fees paid to your current broker, but some firms also offer free- or lower cost-trades, either for a certain amount of time or a limited number of transactions.

    Special offers aside, here are the basics on some of the more popular online stock brokers.

    Scottrade

    Scottrade offers basic stock trading at $7, and reasonable transaction costs for most other trades. In addition to stocks, you can also trade options, mutual funds, exchange traded funds (ETF‘s), certificates of deposit, and foreign securities.

    You can also open a range of IRAs, including traditional, rollover, Roth, and SEP accounts. Scottrade is also offering banking services, including checking, savings, and money market accounts.

    The service offers real-time stock quotes, free research, and phone apps. The minimum to open and account is $500.

    Sharebuilder

    One of the advantages of Sharebuilder is that it has no minimum balance requirement, and that opens the service to the smallest of investors. Basic stock and ETF trades are $6.95, and mutual funds trades are $19.95. You can trade options at $6.95 plus 75 cents per contract.

    You can have both individual and joint investment accounts, and also education savings accounts (ESA’s), traditional and Roth IRAs, and rollover- and small business-401(k)’s.

    E*trade

    Probably the best known online brokerage service – due to its aggressive advertising campaigns – E*Trade offers two commission structures on stock and option trades. The standard fee is $9.99 per trade, but if you’re an active trader – meaning that you execute more than 150 trades per quarter – the transaction fee drops to $7.99 per trade.

    The company offers stocks, bonds, options, mutual funds, and ETF’s. You can hold an IRA with no fees and no minimum deposit requirements. The company also offers full service banking. There is a minimum deposit requirement of $500 to open a taxable account.

    E*Trade offers trading in more than 7,600 mutual funds, which includes 1,100 no-load/no transaction fee funds.

    The company’s Power E*Trade Account is available if you make at least ten trades per month, or 30 trades per quarter. This service provides advanced tools including advanced charts, and screening- and analytical-tools.

    TradeKing (Which Now Includes Zecco.com After the Merger)

    TradeKing offers one of the lowest transaction fees available for online brokers (the only one lower than this I know of is SogoTrade.com, which offers $3 trades). The basic fee of $4.95 applies to stocks, mutual funds, and options (plus $.65 per contract). There is no minimum amount to open up an account.

    The company also offers trades in stocks, ETF’s and more than 8,000 mutual funds. There is no annual maintenance fee, however, if you do not execute any trades within a 12 month period, and the balance in your account is less than $2,500, you will be charged a $50 inactivity fee.

    SmartMoney gave TradeKing it’s highest customer service rating in 2012, and when you combine that with some of the lowest transaction fees in the industry, it’s a tough combination to beat.

    TradeMONSTER

    TradeMONSTER offers transaction trading fees that are (at $7.50 per trade) about middle-of-the-road as far as online brokers go. The company offers both individual and joint investment accounts, as well as no-fee IRAs. You can also trade stocks, options, mutual funds, and ETF’s. There are no FOREX offerings, and futures can only be traded through a separate account.

    The company reportedly has excellent customer service, including research tools, portfolio analysis and reporting tools. On the negative side, they do require a minimum of $2,000 to open an account, and there are no extended trading hours, nor do they offer access to international exchanges.

    Bringing it all together

    The various account terms and fee structures can be confusing, so here’s a chart with a side-by-side comparison of each of the five brokers from above. Just be sure to do some deeper research into each company before making a decision. Some companies may offer even lower prices if you are a more active trader.

    How about you all? Have you used any of these brokers, and if so, how has your experience with them been?

     Share your experiences by commenting below!

      ***Photo courtesy of http://www.flickr.com/photos/perspective/186512551/sizes/s/in/photostream/

      Are You Blindly Saving for the Future? – Forgetting to Analyze the Withdrawal Process During Savings Accumulation

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      Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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      Since I finished my undergraduate degree in 2008, I have been pretty good at aggressively saving for retirement and the future in general. For the most part, I have been able to do this simply by keeping my expenses low, being fortunate enough to have escaped college with no consumer debt, and also integrating saving in to my everyday life as a hobby (I am a personal finance blogger, after all!).

      However, only recently, I realized that I had been doing something wrong all this time. While this mistake isn’t something as serious as say racking up $50,000 worth of credit card debt via overspending, it is still significant and something that needs to be addressed. And, from what I’ve been reading recently, it is one mistake that is made by many young and middle-aged people because of what society has deemed as the “normal” way to invest for the future.

      What was I doing wrong? Well, I realized that I have been so focused on saving (input) as much as possible and subsequently investing it with an appropriate strategy/asset allocation (execution), that I hadn’t stopped to consider what ramifications my inputs and execution would have on the withdrawals I will eventually take as a result of investing (output).

      Essentially, I have just been working under the assumption that if I save, save, save as much as possible and invest it appropriately, my future and retirement will take care of itself. After all, what more can someone do to prepare financially for the future except for save as much as possible? Nothing, right?

       Wrong! By making sure that we not only save as much as we can but also place the savings in to appropriately structured buckets, we can more adequately prepare for the variety of financial situations that life throws our way.

      Society’s “Norm” for Investing for Retirement – The Good Ole’ 401k

      With the primary collapse of the traditional pension system of retirement income that one received after working for the same company for 30 years, the bulk of the emphasis society places on saving for retirement and the future these days is the traditional 401k.

      If you’re like me, you’ve no doubt been taught that if you don’t have any other debt to payoff, have an established emergency fund, and have an adequate amount of liquid cash on hand to meet your predicted short term needs, putting as much money as possible in to a 401k account is absolutely one of the best things that you can do to prepare for the future because you get tax-deferred growth and tax deductions in the current tax year.

      Sure, if you’re fairly young like I am and meet income constraints, it is common knowledge that it’s more advantageous to first make sure to fully fund a Roth IRA prior to fully funding a 401k (which I do each year). However, with the current annual contribution limit for IRA’s being $5,500, a Roth IRA alone will likely not be sufficient to fund an extremely comfortable retirement, even if you’ve started early like I did at age 21-22. You will want/need to save more.

      So, after exhausting the option of fully funding a Roth IRA, where did I (and I assume a lot of people) end up parking the bulk of their savings for retirement (with the exception of maybe a little bit of money here and there in taxable accounts)? 

       You guessed it – the 401k because of society’s emphasis on all of the tax advantages that you get in the present time. 

      Problems with “Blindly” Parking a Majority of Your Savings in IRA and 401k Retirement Accounts 

      While IRA’s and 401k retirement accounts are a very good way to save money (in my opinion), I have realized recently that they are slightly over-emphasized in the financial planning process.

      Sure – they definitely have an important place, but I’ve recently concluded that in order to fully optimize my finances, they cannot be the ONLY main buckets in which I place money saved for long term needs. In addition, I have realized that I should frequently review my financial needs to determine what ramifications are incurred during the withdrawal process if/when a need arises that I need to access my savings.

      There are two primary reasons/withdrawal considerations for why it is not a good idea to blindly “save as much as you can” in IRA and 401k accounts:

      • Loss of Access
        • While going through all of the minute details of treatment of withdrawals from retirement plans would likely take a post all by itself, it will suffice to say that savings parked in IRA’s and 401k’s are not very easily accessible. And, easy access to savings is without a doubt, a very powerful thing that I had been underestimating.
        • For example, let’s say that a fictional 22 year old man named Jim contributes $16,500 per year to his company’s 401k. On top of that, he fully funds a Roth IRA with around $5,000 per year. He continues to save vigilantly in this manner for 10 years, at which time, he decides he wants to purchase a condo to rent out as a real estate investment and needs to find some money for a down payment.
        • Since the purchase of rental real estate isn’t a “qualifying” purchase, any money being withdrawn from his 401k would be hit with a 10% penalty and any earnings from his Roth IRA would have this same penalty (his contributions to his Roth IRA can be withdrawn at any time tax and penalty free, an important thing to know!).
        • Essentially, the moral here is that you don’t want to be in a situation where you are surprised because have a lot of net worth, but none of it is liquid/accessible to execute on the endeavors that you want to.
      • The Effect of Taxes
        • Yet another pitfall that I realized I have experienced by blindly saving as much as I can in retirement accounts over the past few years is the effect of taxes on the withdrawal side.
        • Basically, the question here becomes when do you want to pay the income taxes on your savings – now or in the future?
        • With traditional IRA’s and 401k’s, even though you are not taxed in the current year for the money, you will definitely pay a good chunk of income tax on the withdrawals after the money has experienced years of compounding.
          • For example, do you want to pay income taxes on $1000 today or income tax on ~$45,000 after that $1000 has grown at 10% per year in the stock market for 40 years.
        • As I mentioned above, I definitely have realized and am utilizing the Roth IRA as a way to achieve tax free income in retirement (since the contributions are after-tax when they go in).
        • Essentially, I would rather pay the income tax now since I have a very low 20-30% overall tax rate as opposed to later in life when I have more savings compounded and income (and likely the government increases tax rates to deal with health care, Social Security, etc, but that is only speculation).
        • However, after maxing out my Roth IRA, the mistake I made was that I just sort of blindly assumed that there were no other tax-free options worth looking in to that would be better than a traditional 401k because the 401k is generally assumed to be a great thing!
        • Thus, for the past few years, I have been dumping as much as I could in to my employer’s or self-employed 401k accounts.

      If you’re like me, you have likely read these access and tax provisions/considerations many times before. 

      You know – it’s the stuff that’s in fine print on the account signup forms and/or lumped in to the category in our heads as “boring tax stuff that I don’t have to really need to pay attention to.” For me specifically, what I realized was that even though I was reading these details, they weren’t sticking because I just assumed that it wasn’t a big deal because it would “happen some distant time in the future,” and everything would magically work out since I used the popular 401k! In other words, I was reading the facts, but wasn’t making the connection about what it would be like to LIVE the considerations. This is a huge difference that you want to make sure to be on the right side of! 

      Conclusions

      As I mentioned above, the point of this post is not to say that IRA’s and 401k’s are evil or bad. They are actually quite good.

      However, the key thing to remember is that before you commit to putting any significant amount of money in to one of these buckets now, make sure you acutely understand not only the benefits (which society touts readily), but also the things you will lose in regards to 1) access and 2) taxes on withdrawals 10+ years down the road.

      After thinking about these considerations, you may conclude that you’re on track exactly like you need to be. If this is the case, then great! Just keep on saving as much as you can and diverting the funds to your retirement accounts. However, I imagine that most people (including myself) are somewhere in the middle in that we are on track pretty much, but still have some room to improve upon the positioning of our long term savings in buckets that are slightly more accessible (without penalty).

      How about you all? In thinking about your current asset distribution, do you feel that you are placing too much, too little, or an appropriate amount of savings in to retirement accounts vs. other vehicles? What would say the %’s are for your assets in retirement vs. non-retirement accounts?

      Would you prefer to pay taxes now or when you receive income during retirement?

       Share your experiences by commenting below!

        ***Photo courtesy of http://pixabay.com/get/1f6984b99b1d905f282e/1363046890/sign-41432.png

        Everything You Need To Know About Estate Taxes And Gift Taxes

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        Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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        The following is a post by MPFJ staff writer, Toi Williams, who is the professional personal finance blogger of Fine Tuned Finances. She has backgrounds in personal finance, sales, and real estate.

        There are many people that would like to give monetary gifts to the people that are important in their lives or transfer their estate to their heirs upon their death, but are unsure how these actions will be affected by taxes.

        The laws on estate and gift taxes are considered to be some of the most complicated in the Internal Revenue Code.  There are very specific rules and regulations that must be met for these assets to be transferred properly. 

        Here is what you need to know about the estate tax and the gift tax:

        What Is The Estate Tax?

        The estate tax is the tax paid on the transfer of assets from a deceased individual to their beneficiaries.  Also known as an inheritance tax, the tax is assessed on large accumulated fortunes and inherited wealth. If the total amount of the assets to be distributed to the deceased’s heirs is larger than the amount designated as tax exempt by the IRS, the tax amount is assessed against the portion that falls above the exemption limit.  The tax is calculated before the assets are distributed.  Any amount that is disbursed to a spouse or to charity is exempt from taxation.

        Estate Limits And Tax Rates

        Most relatively simple estates do not require the filing of an estate tax return.  The tax rate and estate limits have varied throughout the years, and the levels have recently been reset to new limits by federal law.  Currently, the first $5 million in value of an estate is exempt from taxation.  This individual estate tax exemption can be effectively doubled for couples that are proactive with their basic estate planning.  The estate value in excess of the exemption amount is taxed at a rate of 35%.

        How Are Estate Values Calculated? 

        The estate value used for determining the amount of estate tax owed to the government is calculated using a very specific formula.  First, everything that the deceased owned or had certain interests in at the date of death is accounted for at fair market value.  This may be less or more than what was actually paid for the item when it was first obtained. The property included may consist of annuities, cash, insurance, securities, real estate, trusts, business interests, and other assets.  The calculated total of all of these items is considered to be the “Gross Estate” value.
        Once the Gross Estate value has been determined, deductions can be taken to lower the total value of the estate.  These deductions generally include mortgages, certain debts, property that passes to charities or the surviving spouse, and administration expenses for the estate.  After all eligible deductions are taken, the resulting figure is the “Taxable Estate” value.  This is the value used to calculate the amount of tax owed.

        What Is The Gift Tax?

        The gift tax is a tax on the transfer of property between one party to another party while expecting to receive nothing, or less than the value of the original property, in return. The transaction is considered to be a gift if property (including money), the use of property, or income from property is given without expecting to receive something of at least equal value.  Selling something at less than its full value or making an interest-free or reduced-interest loan could be considered to be a gift.  The tax applies whether the donor intends the transfer to be a gift or not.
        The gift tax imposes a tax on transfers of property during a person’s life, thereby preventing the avoidance of the estate tax should a person want to give away their estate to another party.  The person giving the gift is the one responsible for paying the tax, not the recipient. However, special arrangements can be made to allow the recipient to agree to pay the tax in place of the giver.  These types of arrangements are generally arranged by certified tax professionals in order to comply with IRS regulations.

        What Gifts Are Taxable? 

        Nearly any type of property or asset transfer can be considered a taxable gift.  However, there are some exceptions to the rule that allow you to give money or property without having to pay the tax.  Gifts that are generally excluded from taxation include tuition payments, the payment of medical expenses, and gifts to a charitable organization, a political organization, or a spouse.  There is also an annual exclusion limit and you will not have to pay taxes on gifts that fall under the limit.  The current exclusion limit is $14,000 per recipient for individuals and $28,000 per recipient for couples.

        How Do They Affect My Federal Taxes?

        Your federal income taxes are not ordinarily affected by making a gift of assets or property or by leaving your estate to your heirs.  Other than charitable contributions, you cannot deduct the value of the gifts that have been given from your taxable income.  A separate gift tax or estate tax return is filed with the IRS by the due date specified in the tax form instructions.  Gift tax forms must be filed by the end of the tax year while estate tax forms must be filed no later than nine months after the death of the deceased.
        If you are not sure whether the gift tax or the estate tax applies to your situation, I strongly recommend that you visit with a tax practitioner who has considerable experience in this field.  For most small transactions, the services of a professional may not be needed, but transactions that are large or complex should be discussed with an attorney or CPA before you make a decision on how to proceed.  Many of the people that make gifts as part of their financial or estate plans enlist the services of these professionals to ensure that they do not run afoul of tax laws.
        How about you all? Do you expect the gift tax or estate tax to affect your finances this year?  

        Share your experiences by commenting below!

          ***Photo courtesy of http://www.flickr.com/photos/davidreber/4471416713/

          I’m Not Saving for Retirement

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          Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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          The following post is by MPFJ staff writer Travis. Travis is a customer blogger for CareOne Debt Relief Services, and also appears weekly at Enemy of Debt.  Travis candidly shares his personal journey to pay off $109,000 of credit card debt and the tips he’s learned along the way. As a father and husband, he provides a unique perspective on balancing debt, finances, and family.

          If you would close your eyes, and envision retirement, what do you see?  Do does it include  starting each day sipping a Pina Colada on a beach?  Do you imagine world travel?  Do you imagine waking up every day, with the world at your feet, no commitments to fulfill, and nobody to answer to?
          With all due respect, No. Thank. You. If that’s retirement, it would bore me to death.
          People work throughout their adult years, stashing money into Roth IRAs, 401K, and other financial products so when they reach retirement age, enough funds have been saved to allow them to transition into blissful retirement for the remainder of their days.  Some even express a desire to be so smart with their money in hopes to amass enough wealth to make that transition early.
          I’ve come to the conclusion that I will never retire.  At least not in the traditional sense.

          I Love My Job

          If the only thing that gets you motivated enough to go to work is to save another dollar towards retirement,  then you’ve picked the wrong profession. I’m a software engineer, and I absolutely love it.  I love working with cutting edge technology, and I love solving difficult problems.   Merriam-Webster defines retirement as: “withdrawal from one’s position or occupation or from active working life.” 
          Why would I want to withdraw from something I love to do?

          My Brain Needs To Be Active

          The traditional description of retirement sounds to me a lot like a permanent vacation.  When I go on vacation, my brain shuts down, and goes into major comatose battery recharging mode.  After about 4 days, it powers back up and needs to do something.  I always say that my brain needs to “move.”  From that point on, I’m no longer on vacation, I’m simply putting in time until I get to go home and back to work.
          The traditional description of retirement sounds like a permanent vacation to me.   I would become restless,  and want to be doing something productive within a week at the most.

          Why I’m Still Saving

          Even though I don’t have any plans to ever retire, I am still utilizing retirement financial products to stash away money for later in life for the following reasons:
          ·           Medical Expenses:  As people age, they tend to have more medical expenses.  It’s imperative to be prepared for it.
          ·           Reduced Income:  Although my goal is to stay active and productive, chances are I will not be a software engineer forever.  At some point, I will most likely hang up my keyboard for something else that will likely pay less.
          ·           Freedom!:  This is the real reason I’m building my nest egg.   I want to build wealth not for the day I throw in the towel of being a productive member of society, but for freedom. I may plan to have a career for the rest of my life, but I also have other aspirations.  I would like to run marathons all over the world.  BBQ is a hobby and passion of mine, and I would love to learn more about it as well as visit places known for great BBQ.  My wife and I also love tropical places and would love to travel and enjoy vacations together.  Having money stashed away will make accomplishing those goals possible.

          What I’m Doing

          ·           Pension:  When I started my career, my employer had a pension plan.  Since that time, they have moved to a 401K based retirement plan.  However, I have a sizable amount of money in my pension account that will grow until I am eligible to collect from it.
          ·           401K:  For the first thirteen years of our marriage, even though we were racking up credit card debt, we were also taking advantage of matching funds by my employer.  When we enrolled in our debt management plan we had to stop contributing our own funds to our 401K.  The good news is my employer contributes a percentage of my salary regardless of whether I add any of my own money or not.  Therefore our 401K has continued to grow.
          ·           Future:  In 13 months, we will complete our debt management plan and we will have more funds available.  Some of those extra monthly funds will be allocated towards retirement.  We will certainly increase our 401K contribution to again take advantage of my employers matching funds, but we will likely look at diversifying by looking at other financial products such as Roth IRAs.
          Everybody has their own view of what they want to do with their life as they reach retirement age.  Personally, I want to continue being active, and earning paycheck.  But, that doesn’t mean that I shouldn’t be preparing for that time in my life.
          How about you, readers?  What do you want to do with your life as you enter your golden years?  Are you preparing for it adequately?

          Share your experiences by commenting below!

            ***Photo courtesy of of Ambro / FreeDigitalPhotos.net

            How is the US Economy Doing Compared to Other Parts of the World?

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            The following is a guest post. Enjoy! 

            The final quarter of 2012 painted a bleak picture for the US economy. But that was then, and the first quarter of 2013 is offering US citizens a different, more promising one, according to a recent report from the Fed.

            But, the question remains – how does this compare to how other parts of the world are doing?

            As a comparison, on the other side of the world in the United Arab Emirates (UAE), Dubai (another economic hotspot due to oil influence) is also seeing good things happen in its economy. After the burst in the housing bubble, its financial and housing markets have gradually started to regroup and enjoy the refreshing taste of recovery.
            Let’s look at some recent events in more detail to see how the US is doing compared to other parts of the globe:

            Full house – Housing Market Status

            Encouraged by lower interest rates, US homebuyers are house hunting again. According to US Department of Commerce figures, sales of new homes increased by 15.6% in 2012, the largest percentage they’ve seen in almost 20 years. But fasten your seatbelts some more: they’re expected to increase even more during 2013.
            House prices had also risen by 6% by the end of 2012. All of this activity on the US housing market reflects greater consumer confidence (as well as buying more houses, Americans are buying more cars), which is gradually returning and allowing the housing market to start feeling itself again.
            Dubai, in the UAE, is likewise enjoying a housing market recovery. Prices are returning to those of 2008, the year the bubble burst after years of property speculation. As prices rise, we’re more like to see more people apply for home loans in the UAE.

            Faith restored in the Stock Markets

            Now is a good time to be a borrower in the US. The Fed is sticking to its policy of investing in mortgage and Treasury bonds, keeping the cost of borrowing down for longer.
            Ten out of twelve districts reported moderate growth to the Fed. However, banking isn’t the only sector recovering from the economic storm. The stock markets are fighting back too. The Dow Jones has more than just recovered all of its losses since the Great Recession: it’s smashed its closing record of 14,235.77, up 125.95 points on its record of 14,164.53, set in October 2007. Now all eyes have turned to the Standard and Poor’s Index, which is just 24 points away from its 2007 record close at 1,565.15.
            At the same time, investor confidence has also grown in Dubai. Stocks on the Dubai exchange hit a record high recently, with gains of 16%. There’s particular confidence in property stocks.

            On the job

            Job markets bring us good news as well. Factories and service companies have grown at the fastest they have done in at least a year. US businesses reported adding 215,000 jobs in January 2013 and 198,000 jobs in February, helping unemployment to drop slightly from 7.9% in January to 7.8% in February.
            And as the Dubai economy continues its recovery, companies there are expected to hire more people, both in Dubai and other parts of the UAE. However, once bitten, twice shy, and they’re likely to do this with more caution.

            Conclusions

            The statistics show that both economies are beginning to recover from the fallout of the financial crisis, particularly the US. More people are finding jobs and consumer and investor confidence is growing back.  This is all amid concern about US government spending cuts and higher income taxes, but so far those fears have proved unfounded. Economic good times really do lie ahead.

            How about you all? What’s your feeling on the strength of the US and global economy at the present time and where it’s heading in the near future?

             Share your experiences by commenting below!

            Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.

            • Very interesting guest post here! Thanks for sharing!
            • Since I mostly watch Netflix movies, I don’t often watch news reports on the US/global economy, so it was interesting for me to hear some of the recent statistics about the housing market and unemployment rates.
            • Regarding the comparison between the US and the UAE specifically and how both economies seem to be going upwards right now, it really highlights how globalized the US economy has become. In fact, it’s hard to find a company that does not have some sort of monetary foothold that it depends on another part of the world for, whether it’s manufacturing or customer base.

            ***Photo courtesy of http://upload.wikimedia.org/wikipedia/commons/d/d7/Philippine-stock-market-board.jpg

            How Do You Analyze Individual Stocks?

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            If you’ve been reading MPFJ for a while, you’ve probably heard me mention before that I am not a big advocate of people investing large amounts of their own money in active management, either through the buying and selling of individual stocks yourself, following the advice of a newsletter, with the help of a “professional” investment advisor, or through an actively managed mutual fund.

            Why do I shy away from large investments in individual stocks? Simple. Because the track record of individuals (even professionals) selecting individual stocks does not show proof positive that it is worth the cost involved. In fact, 70% of the stock professionals fail to beat out the market, so why would I think I can do this consistently?

            Having said that, I do, however, think that analyzing individual stocks for investing using smaller amounts of play money is a fascinating exercise, and it’s something that I would like to believe in. I just haven’t seen proof that it can be done consistently in an efficient manner, but maybe someone will prove me wrong one day and cause me to switch from my current approach of passive investing using index mutual funds and ETFs.

            Anyhow, recently, I received an email from a blog reader asking about how I analyze individual stocks and also what my thoughts were on the specific stock, MGT Capital Investments, Inc. (AMEX symbol: MGT). Since other readers may also be curious of what approach I take to analyze a stock for potential investment (or not – using play money only of course!), I figured this would be a good topic for a blog post and to also answer the reader’s question at the same time.

            Step 1 – 30,000 Foot Elevation View of the Company and Long-Term Price Performance

            To get a very high level overview of the company, I first turn to Google Finance and look up the ticker symbol.

            On Google Finance, I specifically am looking at 3 things – 1) the long term price history, 2) the financials, and 3) the company overview/description. I like to use Google Finance for this purpose because all of these items are displayed on a single page, making it very easy to navigate.

            Shown below are these three items for the stock that the reader wanted me to take a look at, MGT. From these screens, I can conclude the following things for this specific stock:

            • Because of the low stock price per share, low institutional ownership, low market cap, and horrible looking financials, this stock is an extremely speculative play, with a very high level of risk involved. 
            • The company seems a little mysterious, as I’m not really sure from reading their description what it is that they do. It states that they have only 9 employees and that they are a holding company that makes investments in order to obtain value-added intellectual property (patent aggregator). So, essentially, it is basically a group of several people investing share-and-bond holder money in to other or new companies/patents to operate.
            • The company has been around for a while now, over ten years. It appears that their stock price started off higher during the euphoric times of 2000-2001, but was not able to recover until just recently. 
              • Because of this, I’d want to look specifically at what caused the decrease in the stock price in 2002 (if it was related or unrelated to the general stock market bubble), what caused the flat-line from 2002-2011, and what recent event has sparked renewed interest in this company (is it legitimate/sustainable, or just speculation?). 
            MGT Long Term Stock Price History
            MGT Financials
            MGT Company Overview/Description

            Step 2 – See How the Stock Fits Within Phil Town’s Rule # 1 Investing Analysis System 

            As I mentioned previously in my 6 month test run of Phil Town’s Rule # 1 investing system (which showed that its usage did not deliver a market beating return due to the trading commissions involved), I do not believe that Phil’s system is the “magic formula” for beating the market. However, Phil’s approach does involve some very prudent technical and fundamental analysis which I feel can give me a deeper understanding of how the company would function as a potential investment. 


            Listed below is how the stock, MGT stacks up against Phil’s investing criteria:
            • Phil Town Criteria # 1 – Only invest in companies that you would be proud to own, trade for > $1 per share, and have > 500,000 average daily trading volume. The type of companies you should invest in should be at the intersection of what you love to do, what you are good at doing, and what you can earn money doing.
              • MGT is trading for >$1 per share, but only has a daily trading volume of 20,000 shares, which means that it is not very liquid.
              • Since MGT holds companies that are involved in the medical field, I would be interested in owning the stock. However, I also found out in this investigation that they are planning to cut out the medical side of their business soon….. 
            • Phil Town Criteria # 2 – Identify if the company has a “moat” – What he explains we are looking for here is >10% annual growth rate over 10 years for the following things: 1) Return on investment capital, 2) sales revenue, 3) EPS growth, 4) Equity per share, and 5) free cash flow growth. We also make sure that the company has enough current free cash flow to be able to pay back it’s long term debt in 3 years or less.
              • A great place to get all of this 10 year historical data in one place is Stock2Own.com. If you type in the ticker symbol of the stock you’d like to analyze in the box at the top, it will then automatically calculate all of these five financial ratios for you. These can be accessed by clicking the Growth Rates option on the left sidebar. 
              • For MGT, unfortunately, the financial calculations above do not look very good because of all of the negative values it is carrying, and as such, are definitely NOT in line with Phil Town’s criteria. Return on investment capital, EPS growth, Equity per share, and free cash flow growth are all either deeply negative or zero. Furthermore, the company has negative free cash flow, but at the same time, they have no long term debt. 
              • At 23% annual growth over the past 9 years, sales revenue does fit the criteria.


            Even though MGT does not meet the criteria set forth in the Phil Town method, this is not very surprising because as I mentioned above, it is expected to be a more speculative play, not a rock solid, long term investment.


            Because of this, we must also examine the actual financial figures over the past ten years in a more manual style. Shown below is a handy graphic from the Raw Financial Data section of the Stock2Own site for MGT for the years 2002-2011 (displayed left to right in chronological order on the chart):

            As you can clearly see in the chart below, many of the numbers are negative, which is definitely a bad thing. However, if you examine the TRENDS closely from left to right, it can be seen that the company seems to be heading in the right direction in the regard that EPS, sales, free cash flow, cash from operating activities, and gross profit are all experiencing positive changes, even though the numbers themselves are in fact negative. This is a good sign for a speculative play. 

            Ten Year Financial Data Trends for MGT for 2002-2011, displayed left to right in chronological order

            • Phil Town Criteria # 3 – Calculate the appropriate sticker price, or what the stock should be selling at given it’s current EPS and EPS growth rate. We then calculate the Margin of Safety price (MOS) to make sure that we buy the stock at a significant enough (50%) discount to shield ourselves from mistakes and be able to achieve higher returns.
              • Fortunately, the tool listed above, Stock2Own.com also has a handy feature that automatically calculates the sticker price (Value Price) and Margin of Safety (MOS) price.
              • To view this in Stock2Own, simply click the Value Price option in the left sidebar. 
              • Unfortunately, for MGT, since their EPS is negative, a MOS/Value Price cannot be calculated, so we don’t have this gauging point to base our decisions off of. 
            • Phil Town Criteria # 4 – Use technical analysis tools to make sure you are either buying or selling at the right time. Phil recommends using three technical tools to make sure of this – 1) 8-17-9 MACD indicator, 2) 14K, 5D Slow Stochastic Oscillator, and the 3) 10-day moving average. Phil recommends that you only buy when all 3 of the tech. indicators say “buy.”
              • To generate these three graphs for a stock analysis, I again use Google Finance. To set it up, you simply click, “Technicals,” at the bottom of any Google Finance stock price history window, and fill out the fields as shown in the below screenshot:
              • Once you’ve set up the indicators, view the 3 month history graphs for the stock you’re analyzing. Three months seems to be a good time period in order to clearly see whether the technical indicators are saying “buy” or “sell.”
              • For analyzing MGT, we’ll go through the technical indicators one by one. First, the 10 day simple moving average, as shown below (red line), compared to the actual stock price (blue line). With the simple moving average, a “buy” signal is indicated by when the stock price line crosses above the moving average. In the case of MGT, the stock price is currently below the moving average, indicating that we do not want to buy right now.




              • MGT’s 14K, 5D Slow Stochastic Oscillator is shown below. With stochastic, the K line (blue) is the “buy” line, and the D line (red) is the “sell” line. With this technical indicator, a “buy” signal is indicated by when the buy/K line crosses above the sell/D. In the case of MGT, the K line is currently below the D line, indicating that we do not want to buy right now.
              • MGT’s 8-17-9 MACD indicator is shown below. With this technical indicator, a “buy” signal is indicated by when the MACD line crosses above the EMA line. In the case of MGT, the MACD appears to have decreased and is now crossing the EMA, indicating that we do not want to buy right now (this is actually a sell signal if we already owned the stock).


            Step 3 – Qualitative Research on the company, the management (CEO especially), current news, and that no insider selling is happening

            As the title above suggests, the next step I take to analyze a company is to perform some qualitative research about what they do and how they do it. This is also a good time to research any questions that have popped up from the more quantitative investigations discussed above. 
            Listed below is how I tackle this step, using the stock, MGT, as an example:
            • Management Analysis (done through Google Finance and Reuters.com) – The current CEO of MGT, Robert Ladd, joined the company in 2010 as a director and became CEO in early 2012. This occurred almost exactly the same time at which the stock price for the company increased from almost $0 to $4 per share. There was also a stock split at this same time. At a high level, this appears that the market took the news of a new CEO as good and that Mr. Ladd was assessed as a good leader. Ladd also has a long history of investment analysis, which is important in his role as head of a holding company where he is making investments as his primary business. I also found another article stating that Mr. Ladd is “responsible for rejuvenating the company.”
            • Insider Trading (done through company website or MSN Money)  – In looking at the recent transactions of company insiders, there have only been stock purchases over the last year or so, which is a good thing. It is also encouraging to note that the management only have reported income that they pay themselves of $200 per year or so, so it appears that their salary is heavily weighted in stock options/stock performance. That’s also a good thing. 
            • Additional Clarity About What the Company Does/Its Current Position (find the “news” columns on Reuters, Yahoo/Google Finance, etc after you bring up the chart for a specific stock) – On the MGT company website, I found a presentation from late 2012 that stated that they “have a cash rich balance sheet.” However, in looking at their balance sheet from that time, I really didn’t understand how they could make that claim. 
              • It wasn’t until I read up on the developments at MGT within the past 3 months or so that I was able to obtain a complete picture of the company. Because none of these events are yet reflected in their SEC filings/reported financial figures, it makes judging the decision to buy or not more difficult and involving more guesswork.
              • First, I found out that they obtained about $6MM in additional financing in late 2012 from equity offerings. This will definitely help free up some cash flow and pay off short term debts.
              • Second (and more importantly), I found out that MGT is selling off its medical holdings because it did not fit and wasn’t profitable for them. They have decided only to focus on their gaming patent development for now. The fact that the company is focusing on its core competencies and will obtain a large amount of cash to improve its balance sheet from the sale is definitely a good sign to me. The general “buzz” in the community is that this stock is set to “take off” this year because of these recent events. 
            • Lastly, as I mentioned in my high level review, MGT’s stock price started off higher during the euphoric times of 2000-2001, but was not able to recover until just recently. Because of this, I said that I wanted to look specifically at what caused the decrease in the stock price in 2002 (if it was related or unrelated to the general stock market bubble), what caused the flat-line from 2002-2011, and what recent event has sparked renewed interest in this company (is it legitimate/sustainable, or just speculation?). Unfortunately, I couldn’t find information about what caused the decrease in 2002. However, I found a press release stating that the increase in 2012 was not for some shady insider event, so that is a good sign! 

            Step 4 – Review and Decision to Buy or Not

            Having now completed all of the analysis, it’s now time to bring it all together, summarize the findings, and make a decision for if I would buy a specific stock using play money or not. 

            Using our example of MGT, here are my conclusions:
            • Seems like an understandable and good business model (now that I have performed a little more analysis).
            • Since the long-term financials are not very good and/or negative, the investment involves a lot of risk. However, although the financials are negative, the recent trends definitely point upwards for MGT.
            • In addition, there is nothing but good current news on the horizon for MGT, including a lot of positive effects not currently reflected in their SEC filings. They also have a strong CEO and no negative insider trading. 
            • All 3 of the technical indicators dictate that NOW is not a good time to buy shares of MGT. 
            • Because of that, my final conclusion for this play is to keep monitoring the technical indicators and news for MGT, and I will place a small amount of play money in this stock when the technical indicators all give me the green light, either in my account at Sogotrade.com or TradeKing.

            How about you all? What is your approach to analyzing individual stocks for potential investment? How much of your money do you allocate to individual stocks vs. mutual funds?

             Share your experiences by commenting below!

            ***Photo courtesy of http://farm3.staticflickr.com/2339/1563208173_867ddc9717_z.jpg?zz=1

            Most Common Loan Problems and How to Avoid Them

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            Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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            The following is a guest post. Enjoy!

            There are some situations in life where taking out a loan is a sensible solution to a short-term problem or need. In the modern day, there is no stigma attached to having a loan, and the majority of people purchase their properties by loaning money from a bank as a mortgage. However, there are lots of other situations in which people might choose to take out a less substantial loan.
             
            Whatever your reasons for taking out a loan are, there are some common problems that you should make yourself aware of before entering into any kind of agreement:


             

            Loan Problem # 1 – Unrealistic Repayments

            The most common problem that can arise is that you agree to repayment amounts that you cannot afford. You must always factor in your income and other financial outgoings and commitments when you look into how much you can afford to pay back each month.
             
            The precise length of term agreed for your repayment will affect how big the monthly amounts are, although having the loan for longer will cost more in interest payments.


             

            Loan Problem # 2 – Choosing the wrong amount

            It can be tempting when taking out a loan to actually borrow more than you need, which ends up costing you money in the long run. Also, if you are using the loan to finance something like home improvements, it is usually best practice to overestimate what you might need, as there can often be unforeseen costs which push the final bill higher.


             

            Loan Problem # 3 – Getting into bad habits

            Having too many loans at one time or a continuous series of loans, one after another, can cause difficulties when it comes to repayments. This could also point to a more fundamental problem in your personal financial arrangements.
             
            Although the historically low interest rates that currently exist mean that there are plenty of cheap loans on the market, you should still treat a loan as an exception rather than a standard financial tool that you regularly use to get by.


             

            Loan Problem # 4 – Choosing the wrong lender

            The old term ‘loan shark’ sadly still exists, so it is always important to make sure that any money you borrow is from a reputable lender who is fully compliant with all financial regulations. Obviously, all licensed banks and credit unions will be safe to do business with and have legal obligations, ensuring that they only lend money to people who are able to pay it back without getting into further financial difficulties.

            How about you all? What are some common problems either you have personally made or that you have seen others readily making?

            Share your experiences by commenting below!

            ***Photo courtesy of http://pixabay.com/static/uploads/photo/2012/04/01/19/12/sign-24108_640.png?i

            Carnival of Retirement – February 18th, 2013 Edition

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            Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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            Welcome to the February 18th, 2013 edition of the Carnival of Retirement. If you want to submit a post for next week’s edition, please use the submission form. Next week’s edition will be hosted by Greg at Club Thrifty (one of the staff writers at this site actually!).
            Retirement is a long-term game. There are so many things you need to do to prepare for retirement, and it’s not just saving and investing. Of course, having a great retirement portfolio is best, but to get there, we need to live within our means and build wealth along the way. 

             This edition includes many retirement articles along with posts that will help us get there.  Enjoy these great posts from around the Internet!

            Top 5 Editor’s Picks

            1. Roger Wohlner @ The Chicago Financial Planner writes 4 Signs of a Lousy 401(k) Plan – It is important that you make the most of any workplace retirement plan available to you. New required disclosures about the costs of the plan and the underlying investments were introduced in 2012 and are a good start. However, 401(k) plans are still a mystery to many of the workers who participate in them and sadly to many of the employers sponsoring these plans. Here are 4 signs that your 401(k) plan might be lousy.

            2. FMF @ Free Money Finance writes Real Estate 101: Summary – Throughout the Real Estate 101 Series my goal has been to introduce prospective and beginning investors to the world of real estate investing. Specifically I have tried to answer some basic questions, dispel some myths and misconceptions, and give actionable advice that can be used to move towards becoming a successful investor. As I finish the series I hope that the information provided here has mostly met that goal.

            3. Jason @ Work Save Live writes Best Online Tax Preparation Software – H&R Block, TurboTax, TaxACT, FreeTaxUSA – To take the guesswork out of which online tax software is right for you, we’ve taken a tremendous amount of time to examine the best – and most popular – online tax preparation companies to determine which has the best software for your particular tax situation. See the differences between TurboTax, H&R Block, TaxACT, and FreeTaxUSA.

             4. Paul Vachon @ The Frugal Toad writes Winter Storm Nemo and the Importance of an Emergency Fund – What does the massive Winter Storm Nemo have to do with the need to have an emergency fund? In short, everything. Nemo is symbolic of any un-foreseen event that may disrupt one’s income or cause a financial hardship. From a simple power outage to a long-term illness, being prepared to handle an emergency can mean the difference between peace of mind and having your family’s world turned upside down.

             5. Emily @ Evolving Personal Finance writes Should You Count Your Employer’s Contribution into Your Retirement Savings Percentage? – If you get an employer match to your 401(k), do you count it toward your target savings percentage or ignore it? I have a new suggestion for how to account for it.

            And listed below are the best of the rest!

            Marvin @ Brick By Brick Investing writes Selling Options — How To Start Your Own Casino – A brief description detailing the benefits of selling options.

            James Petzke @ This Is Common Cents writes Financial Superpowers: The Automagic Climate Controlled Super Suit – If you want to retire earlier, considering adapting to different temperatures to save money on heating and cooling.

            Michael Kitces @ Nerd’s Eye View writes Safe Withdrawal Rates In Today’s Low Yield Environment – Walking On The Edge Of A Cliff? – What’s a safe spending amount in retirement, given today’s low-yield environment? Is the 4% rule still safe, or does it need to be trimmed given today’s market conditions?

            Mary Rhodes @ Fine Tune Finances writes Are you Saving Money Just to Save? Or are You saving With Purpose? – Human nature dictates much time and money is wasted when we don’t have a goal. This also applies to our financial life, in short your goal your reason for saving, or purpose. If you are saving money just to build up a bank balance you are not likely to be successful at it.

            Jen @ Master the Art of Saving writes Preparing To Buy A House: The Score – Buying your first home can be an exciting and stressful experience all in one. When we bought our first house, I really didn’t know what to expect. Maybe I should have done a little bit of research ahead of time, but what’s done is done.

            SFB @ Simple Finance Blog writes 4 Money Management Tips For College Graduates – You have just graduated from college, and you are about to join the working class. Here are 4 Money Management Tips to set you up on the right path.

            harry campbell @ Your Personal Finance Pro writes My First Default With Lending Club – With today’s pitiful interest rates, it’s hard to sit there and invest your money in CD’s that are returning 1 or 2 percent. So if you’ve been searching for alternative investments you may already know about Lending Club. But if you’re new to the peer to peer lending scene, you can read my first review of Lending Club here.

            Crystal @ Budgeting in the Fun Stuff writes Why I Use a Credit Card (And How To Leverage Yours) – If you can’t be disciplined enough to pay off your balance in full every month, then you probably shouldn’t have a credit card. But it works for me.

            Passive Income Earner @ The Passive Income Earner writes Pay Your Mortgage or Invest It – Do you pay your mortgage down first or do you invest? Which one gets you ahead further?

            MMD @ My Money Design writes Believing In Yourself After Finding Out That You Suck – Despite what other people think of you, believing in yourself will have to come from your own hunger and ambition. Only you know what you’re capable of accomplishing.

            Wayne @ Young Family Finance writes Money and Relationships: Some Advice to Keep in Mind – Talking about money with your spouse can be difficult, but it doesn’t have to be. There are many successful strategies to broach the topic.

            Evan @ My Journey to Millions writes Maybe There Is Yield Out There! Bank Bonuses Offered by Kasasa – I couldn’t ignore a recent article from CNBC on the topic titled, “4% Interest, Without Fees: Too Good to be Checking.” The article highlights a new type of checking account that works with local banks and credit unions.

            Corey @ 20s Finances writes Five Ways to Achieve Your Financial Goals – Very rarely do I meet someone who doesn’t care about achieving financial success. Simply put, everyone wants to have more money than they know what to do with. Who doesn’t right? That’s why so many people waste their money on lottery tickets. Yet, as we all know, very few achieve this goal. But, it isn’t for a lack of trying.

            Peter @ Bible Money Matters writes Scottrade Review: Top Rated Brokerage for Customer Service, Low Fees and Commissions – When I’ve been searching for which brokerage company to use, one of the companies that kept coming up with positive reviews from others I know was Scottrade. No only do the have low costs when it comes to fees and commissions, they also have great customer service, a wide range of research and tools available to all users, and an easy to use interface on the web and mobile. So let’s do a Scottrade review.

            Alice @ Hurricanes, Panties & Dollars writes Shopaholics are like Superheros – I ended up spending around 9 hours shopping (with an official shopaholic) by my side. When I finally got home, I was freakin’ exhausted; not to mention broke as…

            Lazy Man @ Lazy Man and Money writes Your 401(k) Is Costing You $155,000!?!? – No one really knows how much the 401(k) investing fees are going to cost you and everyone is different. However, even conservative estimates from Wall Street sources in that article pin it at $20,000.

            Bryan @ BryanMaltier.com writes How I Plan To Generate Passive Income This Year – This article is a guest post from MyMoneyDesign.com and is focused on detailing his plans this year to generate additional passive income. In it, MMD discusses his 4 main opportunities – to continue building up his blog, build a niche site, write an E-Book, and invest in dividend stocks.

            Matt @ Living in Financial Excellence writes The Wow Factor: Getting the Most Bang for Your Buck – When you think about making a purchase, have you ever thought about rating it on a scale of 1 to 10, with 1 barely moving the needle and 10 being a big, exciting WOW?

            Amanda L Grossman @ Frugal Confessions writes My Frugal Resume: Contributing to Our Household’s Finances in More Ways than Earning – It’s no secret that I enjoy funneling as much of our income as possible into our savings accounts.

            Ted Jenkin @ Your Smart Money Moves writes How To Read Your Investment Statements – You have a college degree from a good four year school. Perhaps you went on to get an MBA from a fantastic post graduate program.

            Kyle @ The Penny Hoarder writes 5 Mortgage Saving Ideas – When it comes to cutting your budget, you probably start with incidental expenses like eating out or having digital cable. But it’s also important to pay attention to what kind of money you can save even on the necessities, like your housing payment.

            Miss T. @ Prairie Eco Thrifter writes 5 Investment Strategies for the Wary Beginner – You might be surprised that you can get started in investing fairly easily, and that it doesn’t have to be all that complicated. Here are some ideas that the wary beginner can use to get started:

            Suba @ Broke Professionals writes How to Watch Your Expenses Like a Hawk – You’ve heard it before, saving money – like losing weight – is as simple as watching your inputs and outputs.

            Joe @ Midlife Finance writes Money Secrets – Have a bad money secret in your life? Confessing feels great…but what are you doing to make it better? (Feel free to comment anonymously — we’re all friends here.)

            Little House @ Little House in the Valley writes Recognizing Financial Patterns – The other day I had a moment of clarity; I was speaking to someone as interested about personal finance as myself, and realized I keep repeating a bad pattern. Until that moment, I hadn’t been able to see the pattern or even acknowledge that I had a repeating financial pattern.

            Roger the Amateur Financier @ The Amateur Financier writes Money and Child Raising: Preschool, Yay or Nay? – If you’ve been reading the past several weeks of these Monday posts here at The Amateur Financier, you’ve noticed that I’ve been covering some of the choices

            A Blinkin @ Funancials writes 99 Problems: Are You a Sort-Of Good Saver? – You may remember me (and other bloggers) mentioning the $999.99 giveaway. Believe it or not, the dollar amount is not completely random. There is a purpose for it.

            Grayson @ Debt Roundup writes The First Step to Recovery is to Admit You Don’t Have a Budget – When you have any problem, the first step to recovering is to admit the problem. The same goes with money. The first step to getting your finances in order is to admit that you don’t have a budget.

            NoTrustFund @ Where’s My Trust Fund writes Financial Wisdom From A Nonagenarian – Words of wisdom from a lady who has been around the block a few times.

            Tony @ We Only Do This Once writes We Are All Experts – Many people have spent a ton of life energy in a quest to discover their passion. And for many of them, once they found it, that was enough. Finding the thing that lights them up inside satisfies the quest. But some people want more than that—they want to live their passion.

            CAPI @ Creating a Passive Income writes Playing the Inheritance Game for Passive Income – When it comes to inheriting money, there is no other way to do less, or in some cases, more work for what will be considered a passive income. For those who are blessed to be part of a family that has a fortune to pass on, then your entire job in life becomes maintaining your place to inherit the goods.

            BARBARA FRIEDBERG @ Barbara Friedberg Personal Finance writes HOW TO MEASURE RISK & PROTECT AGAINST IT – Measure investment performance, investment risk, & protect against investment risk.

            Jules Wilson @ Faithful With a Few writes Why You Need to Diversify Your Income Sources – Diversifying your income is the best way to protect your financial future in this economy. Learn why you should and how best to diversify your income sources!

            MR @ Money Reasons writes 2013 Late To The Stock Market Strategy – I’m going to share my Late to the Stock Market Strategy that I’m hoping will make 2013 a block buster year for me!

            Jon @ Novel Investor writes IRA Contribution Deadline Almost Here – There is one important thing you need to do before you file your taxes. Don’t miss the IRA contribution deadline for the 2012 tax year.

            John S @ Frugal Rules writes 4 Reasons Why Having an Investment Plan Will Save Your Butt – Investing in the stock market can be difficult for many, especially if they have no plan in place. An investment plan can help guide your investing decisions so you’re working smarter and not harder, which will in turn help your long term investing approach.

            Darwin @ Darwin’s Money writes These Mutual Funds Actually Beat The Index. And “The Market” – Mutual funds rarely beat their index, but in this niche, managers returned over 20% in 2012 while besting their index as well – is it worth switching back from ETFs to mutual funds?

            Don @ MoneySmartGuides writes 3 Secrets to Retiring Well – I read an article recently in Money Magazine regarding retirement. The author pointed out three secrets to retire well. They include: Embrace Change: As life happens, sometimes our plans need to change and we have to rethink retirement.

            Ashley @ Money Talks Coaching writes Video: Reaching Your Goals – Hey there! I have another video for you today. Today I’m reviewing a great tool I’ve been using that will help you reach your goals.

            Daniel @ Sweating the Big Stuff writes What Was Your First Passion Project? – My first passion project was my blog that I worked on for 40 hours a week while bored at my day job. What was yours?

            Maria @ The Money Principle writes My Father’s only investment – My Dad made only one investment in his life: my education.

            Glen Craig @ Free From Broke writes Signs You Have a Bad 401(k) Plan and What to Do About It – A 401(k) plan is generally a good thing to have at work. But not all plans are created equal. You may have a bad 401(k). See how to spot a bad 401(k).

            Jason Hull @ Hull Financial Planning writes The Value of Mortgage Shopping – Most people would rather spend a weekend shopping for a car than spend the same amount of time shopping for a mortgage. Here’s why they should reconsider.

              ***Photo courtesy of http://farm7.staticflickr.com/6007/5962693743_7e2e9eb152.jpg

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