Do You Buy Products from Companies You Invest In?

Many people who work for a publicly traded company like to invest some of their money in stock issued by their employer.  It is obviously not a good idea to invest everything you have in your company since you already rely on them for your paycheck too (just ask all the former Enron employees who lost their retirement nest egg).

But keeping a small percentage of your portfolio in company stock may be a wise investment choice, especially if you really believe in their long-term prospects.

But why stop only with the company you work for?  If you’re looking for other companies to invest in, why not take a look at the companies whose products and services you use on a day in and day out basis?  After all, you’re obviously familiar with their products and happy to use them. Odds are other people feel the same.

Of course, just because you use a product doesn’t guarantee the manufacturer is a good investment.  But it’s a good place to start if you are looking for companies to invest in and you’re not sure where to start your research.

Getting Started

To find companies that may be worth investing in, just pay attention throughout the day.  For example, let’s say it is a sunny Saturday morning and you’re going to take advantage of the nice weather to get some things done around your house.

You hop into your Ford car and drive off to Home Depot to pick up some supplies.  On the way home you stop at McDonalds for lunch and enjoy a Big Mac with a large Coke.  Finally, you swing by the Exxon station to get some gas before heading home.

Just like that you’ve found five companies (Ford, Home Depot, McDonalds, Coca Cola, and Exxon) to invest in.  Please note that I’m not a financial advisor and I’m not actually suggesting you invest in any of those companies, I’m just using them as an example.

Forming Your Investing Strategy

Once you come up with a list of potential companies to invest in you can dig down a little deeper and see if they fit your own personal criteria.  Read up on them and take a look at their history.

Also consider what kind of stocks you prefer to own.  Are you looking for high-flying tech stocks with tremendous growth potential?   Typically these types of stocks are extremely volatile and you may feel like you’re on a roller coaster as the price rises and falls.  They have the potential to make you rich very quickly, but they could just as easily crash and burn.

On the other hand, you have older and more stable stocks like Coke, Johnson & Johnson, and ADP.  These are examples of Dividend Artisocrats, a list of companies with a long history of not just paying out regular dividends to their shareholders but also increasing them year after year.  These companies are typically more mature and less volatile than the market as a whole.  And while they may not have the same explosive growth potential, the regular dividend payments offer a valuable stream of passive income.

What do you think about investing in individual stocks?  What kinds of companies do you prefer?

Frugal Ways to Spice Up a Room

Once you’ve been living in the same home for a number of years you can start to get bored.  Looking at the same furniture and décor year after year will have you yearning to switch things up. Unfortunately, any kind of remodeling or redecorating job will quickly get expensive and you certainly don’t want to spend an arm and a leg every couple of years.

But have no fear my frugal friend, there are plenty of ways to give an old room new life without breaking the bank.

Put a New Paintjob on Things

If you’re looking to get the most bang for your buck, consider repainting the room in a new color. For a minimal amount of money you can completely change the look and feel of a room.  We recently repainted our family room and now it feels like a completely different room.

Plan on spending about thirty dollars for a good can of paint (you can buy the cheaper stuff but remember you get what you pay for) and for an average room you’ll need two or three cans.  That’s about a hundred bucks for the paint.

If you don’t already have other painting supplies on hand from previous jobs you’ll need those in too.  Add the expense of some brushes, rollers, buckets, drop cloths, and other supplies to the cost of the paint and you’re looking at about $150.

Add Some Curtains

As a guy I never really gave much thought to curtains.  I’d be perfectly happy with the clean look of a bare window and venetian blinds.  But my wife couldn’t disagree more so she recently picked up some inexpensive window valances for our living room and I must say I do like the way it looks.  That little bit of a woman’s touch makes the room feel much more warm and friendly, and it only cost about $50 to do all four windows.

Throw Down a New Rug

Wall to wall carpeting is not cheap and can easily run you a thousand dollars for a good sized room.  Instead, consider an inexpensive throw rug.  We have hard wood floors in our living room but we wanted to mix things up a little, so we picked up an 8’ x 10’ rug at Costco for only $89.  It’s nothing fancy but it adds a pop of color and also lessens the noise of three little kids running through the house.

Finishing Touches

Check out garage sales for inexpensive knick knacks and artwork to add some flair to your room.  Swap out plain light switch and wall receptacle covers for something more fancy like a bright brass or brushed nickel. Add a border around the top edge of the wall near the ceiling.  Install a new light fixture.  Or just rearrange the furniture to create a while new flow.

As you can see, there are many ways to give a room a completely new look without spending a fortune.  Do you have any frugal tips for redecorating?

Comparing Credit Card Offers

Not a day goes by where I don’t receive at least one solicitation for a new credit card.  If your mailbox is as full of these credit card offers as mine, you’ll want to know how to compare the various offers to determine which offers you the best deal.

No two credit card offers are the same so let’s take a close look at some of the key factors that distinguish one credit card from another.

APR

The Annual Percentage Rate determines how much interest you will pay on any balance you keep on the card.  The higher the APR, the more you pay.  The interest rate can vary wildly depending on the type of card as well as your credit history and score.  Keep in mind that a low rate today can turn into a much higher rate if you miss a payment or two.

Introductory APR

Many cards offer an introductory interest rate where the rate you are charged is much lower than normal (often as low as zero) for a period of time.  A great introductory rate can save you a lot of money in finances charges, but you need to be prepared for the rate to increase when that initial period is over.

Rewards Structure

Does the credit card come with a rewards program?  How many points is each dollar you spend worth?  How many points do you need to accumulate to earn a reward?  What kind of rewards are available?  Can you use the points anywhere or only at a specific place?  Do points expire?   These are all questions you should ask when comparing credit card rewards programs.

Fees

Some credit cards charge an annual fee while others don’t.  The annual fee alone can cost you around $75 to $100 per year.  If the card has a rewards program you have to keep in mind that any annual fee will eat into the rewards earned by your purchases.

Balance transfer fees will typically run you around three percent of the amount transferred so you have to factor that into your decision to transfer a balance to the card.  Cash advance fees are charged when you use your card to take out cash.  There are also fees charged when you make a late payment or go over your limit.

Summary

There are so many different credit cards out there that you can surely find one that is right for you.  Of course, you also have to think about your own spending habits and how you plan to use the card.  If you already have large balances on other cards and you’re looking to save some money on finance charges you’ll want to pay close attention to balance transfer options and introductory interest rates.

On the other hand, if you always pay your balance off as soon as you get the bill, the interest rate doesn’t really matter.  Instead, you’d be looking for a good rewards credit card that lets you earn points which you can redeem for cash or other rewards.

The Real Reason You Haven’t Gotten a Promotion at Work

The other day I met up with my buddy Moe for lunch and we talked a lot about work.  He’s been feeling very frustrated at his job lately and he really needed to vent and let off some steam.

Moe has been stuck in the same position for three years and he hasn’t even gotten a sniff of a promotion.  He feels unappreciated and taken for granted and it is starting to affect his motivation.  While he’s always been a solid worker, he admits that he’s starting to wonder why he even bothers trying so hard.

Moe is a good friend and I’ve known him a long time, so I had no problem asking him a point blank question that put him on the spot.

“What makes you so sure you actually deserve a promotion?”

His response was pretty much what I expected.  He’s been in the same role for several years, has more seniority than most of his co-workers, he’s always been reliable and punctual, rarely calls out sick, and his immediate manager loves him.

As someone who has received promotions at work and also been responsible for recommending others for promotions, I had to be brutally honest with Moe.

I told him that all the qualities he listed make him a great employee and it’s no wonder his boss loves him.  He’s reliable and does a good job and that’s something every manager values.

But being in your job for a long time and knowing how to do it well isn’t enough to get promoted.  Promotions aren’t about seniority (well I guess at some companies they could be), they’re about recognizing someone who is going above and beyond his current duties and demonstrating creativity, innovation, and a desire to advance.

You might think that being the worker who processes the most amount of work will get you promoted, but all that proves is that you’re a good worker bee.  If you’re looking to move up the corporate ladder you should focus some energy on solving problems or improving a process that will make everyone more productive.

Talk to your boss and ask him what some of his biggest challenges and frustrations are.  Can you think of a way to remove some of his headaches and make his job easier?  Odds are he’ll be very grateful if you can!

Take a closer look at some of the processes and procedures your team follows.  Can you think of something that everyone hates doing or that everyone agrees makes no sense?  Most companies start out with logical procedures but over time things become more complicated and what once made perfect sense now seems completely absurd.

Improving a process to make it more efficient will definitely get you noticed, especially if the improvement can be quantified like “My idea cut mailing expenses by 20 percent.”

Looking in the Mirror

If you’re looking for a promotion and haven’t been able to get one, it’s time to ask yourself if you’re really doing everything you can to reach your goal.  If not, schedule a 1 on 1 with your manager and let him know that you’re looking to take on more responsibility and be considered for a promotion.  Most bosses will be excited by your initiative and offer you plenty of suggestions on what you need to do to reach the next level.

Spend or Save: Learning How To Spend Money

For the past two years, my husband and I have survived on a threadbare budget. We’ve said no to dinners out, to new clothes, to unnecessary trips across town. Whenever faced with the decision to spend or save, we always opted to put money away for a rainy day – we were convinced a deluge of biblical proportions was looming just over the horizon.

But as the years passed, no such deluge came. Instead of being flooded by rain, we found ourselves flooded by money. All the scrimping and saving we had done over the intervening years had allowed us to do all the things financial experts say you’re supposed to do: building up a six-month emergency fund (check), maxing out our 401(k) contributions (check), saving or investing at least 10 percent of our pre-tax income (check).

We were rife with money… but we weren’t having any fun with it. So six months ago, I loosened the purse strings. I made it rain money in my house. Booyah.

Going Overboard

The first few weeks after I stopped acting like Ebeneezer Scrooge, my husband and I went a hog wild. We spent $75 at a nice restaurant, not to celebrate a birthday or anniversary, but just because. I bought myself a new pair of jeans for the first time since getting pregnant with our oldest child… nearly four years prior. My husband purchased new tools, without a plan as to how he’d use them.

At the end of the first month of our new-found financial freedom, we reevaluated things. Although we’d still paid all our bills, maxed out our IRA contributions, and hadn’t dipped into our emergency fund, we’d failed to make extra payments on our existing debts (specifically, our car loan and my student loans). When we’d loosed the purse strings, the plan was to have fun with money. But by overspending, we’d gone back to where we were years prior, when money was tight: we were so worried about how much we had – or rather, didn’t have – that we weren’t having any fun anyway.

We had to rein it in.

Finding Balance

In month number two, we employed the allowance method. I gave my husband and I $50 each to do whatever we wanted. I expected him to spend it all on tools he wouldn’t (and didn’t know how to) use; he expected me to spend it all on shoes.

But we surprised each other.

Instead of blowing his $50 on a new power sander, my husband split his allowance into five allotments of $10 each:

  • He used $10 to go out to breakfast with his coworkers before work one morning
  • He used another $10 to enter a fantasy football bracket with some friends
  • He spent $10 for new insoles for his tennis shoes
  • He paid $10 to take our daughter to the children’s museum one rainy afternoon
  • He used the last $10 to go out for drinks to celebrate his friend’s 40th birthday

Likewise, I also broke my $50 down into smaller amounts:

  • I spent a total of $16 on four separate occasions to buy myself Starbucks before heading to the grocery store to shop
  • I bought a cool new color of toe nail polish for $5 instead of paying $25 for a pedicure
  • I used $10 to go out to lunch with my girlfriends
  • I paid $7 to buy a six-pack of my favorite adult beverage to share with my husband while watching football one weekend
  • I used $5 to participate in a Zumba-a-thon for charity at the YMCA

Faced with the decision to spend or save, I pocketed the remaining $7 to use the next month. I could also contribute to a CD. Check CD Rates here.

What We Learned

Without consulting the other, my husband and I both learned that $50 could go a long way. We employed many of the same budgeting strategies that had helped us build up our nest egg in the first place when it came to spending our monthly allowance money. It’s easy to learn how to save money – you simply reduce or eliminate your expenses and save as much as you can. I’d argue it’s harder to learn how to spend money, or, perhaps better said, to spend money wisely.

Several months have passed since we started the allowance system. Over that time, we’ve figured out what our “fun” financial priorities really are. To me, a $4 latte from Starbucks is priceless; it helps me relax during what can otherwise be a rather frenzied trip to the grocery store. To my husband, the $10 he spends every month to have breakfast with his coworkers before one of his dreaded weekend shifts puts him in a better frame of mind heading into work. I’ve never regretted the money I’ve spent on charity-related expenses, and I know my husband has never doubted the value of the money he spends on our children.

Reader, what are your financial priorities? What lessons have you learned when it comes to spending money?

How I Painlessly Cut My Expenses by $200 a Month

How many times have you heard someone say that they want to start saving and investing for their future, but they just don’t have any money left over after paying their bills each month?  Maybe you’re the one saying that and using it as an excuse.

Well I’m here to tell you that you can easily find money to invest if you take a good look at your expenses and trim the unnecessary fat.  I’m going to use myself as an example and show you how I cut my expenses by over $200 per month without cutting anything that really mattered to me.

Shopping Around for Cheaper Home Insurance – Monthly Savings $61

I wrote a full article about this on my own blog, but I’ll give you the short story here.  I consolidated my insurance policies under one carrier and managed to cut my annual bill by $734.  If it’s been awhile since you’ve comparison shopped you may want to get some new insurance quoates and see if you can save yourself some money.

Trimming My Own Hair – Monthly Savings $14

I like my hair really short so I usually just get it buzzed every month or so.  When it gets a bit long I spike the front, but otherwise it’s about as low maintenance as you can get.  But buzzing is so easy and takes only a couple of minutes.  For $25 I bought myself a hair trimming kit and I just buzz it right in my own house (my wife helps since I can’t see the back of my head).  Now I get to trim it even more often since it doesn’t cost me anything, and the trimmer set paid for itself after just two uses.

Eliminate the Cable Movie Package – Monthly Savings $18

My wife and I love to watch movies and when we first signed up the cable company gave us all the movie channels for free for one year.  That year expired a few months back but we kept the movie package thinking it was still worth it.  Well, between work, kids, and other activities we realized we on’t have time to watch as many movies as we thought.  It’s cheaper for us to just rent something through redbox or onDemand rather than paying for the extra movie package.

Car Pool to Work – Monthly Savings $112

I’ll admit I’ve never been a big fan of carpooling.  I don’t like being tied down and I prefer the freedom of being able to come and go as I please.  If I want to leave work a little early, I don’t want to be stuck waiting for someone else to be ready.

That said, getting to and from work has gotten expensive.  Since we moved last year, my roundtrip commute is now 85 miles every day.  Add up the cost of gas and tolls and I figure it costs me about $14 a day to drive back and forth from the office.  I already work from home every Friday, but now I’ve started carpooling with a coworker Monday through Thursday.  We take turns each week so I figure I’ll save $14 eight times a month, and that doesn’t include the wear and tear on my car.

What about you?  What expenses could you cut without feeling any pain?

Types of Mortgage Loans

So you’re in the market for a new home and shopping around for a mortgage.  It’s unlikely you’re going to be paying cash for your new home so you’re going to be in the market for a mortgage.  But how do you know what type of mortgage loan best suits your needs?

Let’s familiarize ourselves with the different types of mortgage loans so you can make the most informed decision possible.

Fixed Rate Mortgage

The standard “vanilla” home loan, a fixed rate mortgage comes with an interest rate that does not change over the course of the loan.  It’s easy to budget for this type of loan because the monthly payments for principal and interest do not change (though your payment amount could change if your property taxes or homeowner’s insurance increase).

Fixed rate mortgages generally run for 30 years, though most lenders often different options.  If you can afford it, a fifteen year mortgage will save you a ton of interest, plus it will be paid off in half the time.  On the other end of the spectrum, if money is tight you can reduce your monthly payment (though you’ll pay more over the life of the loan) by choosing an extended loan period of 40 or even 50 years.

Adjustable Rate Mortgage (ARM)

As the name suggests, an adjustable rate mortgage is one in which the interest rate is not fixed. While the initial rate is generally lower than that of a fixed rate mortgage (which is why many people choose this option), the lender has the right to periodically adjust the rate, usually once a year.

The rate may go up or down so you need to be prepared to see your monthly payment increase.  That could be a problem if your budget is already stretched thin, so it’s a good idea to leave enough wiggle room to allow for increases to your mortgage payment.

Hybrid ARMs

Take a fixed rate mortgage and combine it with an adjustable rate mortgage and you have yourself a hybrid ARM.  The rate remains fixed for a certain amount of time and then it becomes adjustable.  For example a 5/1 ARM will have a fixed interest rate for the first five years and then it adjust once a year after that.

Balloon Mortgage

With this type of home loan your monthly payment will remain low for an initial period of around five to seven years.  When that initial period of time elapses the remaining balance comes due.  The borrower must either pay back the entire balance remaining or refinance the loan.

Interest Only Mortgage

With this type of mortgage you pay only the interest on the loan for a specific period of time (usually the first few years).  This allows you to keep your monthly payment very small at the beginning of the loan, but when the initial period is over your payment will skyrocket as you start paying back both principal and interest.

Many borrowers who took out interest only loans found themselves in trouble when the real estate market crashed.  They had planned to refinance or flip the house before the interest only period ended, but when housing prices tumbled they ended up underwater on their mortgage and unable to get out.

Financial Mistakes: How to avoid the pitfalls and get back on track

According to Aviva research, the average British family has over £10,000 of debt before mortgages. Here, we look at the most common reasons why debt mounts up and ways to overcome it.

 

1.      Spending more than you earn

This is the main reason people get into debt. A few overspends here and there soon add up. Track your spending throughout the month and curb it if you can see your overdraft approaching. Starting a month in the black rather than the red feels so much more comfortable.

 

2.      Not working to a budget

Using a budget to define how much you spend is a simple solution to avoiding any overspends. Those who do not use a budget invariably fall into debt. It may seem boring, but once you have set it up, keeping to a budget is easy and spotting a bargain can even be fun.

 

3.      Not saving

We never know what life holds for us so saving for a contingency fund is very important. In this economic environment, redundancies are all too common and pensions are not always guaranteed to suffice, so saving can help to safeguard our financial future. Find a high interest savings account, or a tax-free ISA, to make your money work as hard as it can for you.

 

How to get back on track?

 

These three financial mistakes will only lead you into debt, so taking stock of your financial situation now rather than later is critical. The good news is that there are always ways to improve your finances.

 

1)      Reverse bad habits

The obvious advice is to reverse the habits from the list above.

  • Make sure you spend less than you earn each month.
  • Keep a budget for monthly bills, household objects, food shopping, socialising, holidays etc. This will ensure you spend within your means.
  • Start saving whatever you can, even if it’s every £2 coin you get or the change you receive each time you go shopping. You won’t notice its immediate absence and you’ll be surprised at what you have built up.

 

2)      Sell unwanted belongings to make more money

The easiest way to earn a bit of additional money is to use what you have. You no doubt have many old belongings that you no longer want or need – but someone somewhere will want them. Why not have a clear out and earn yourself some extra cash at the same time as decluttering your home?

 

Remember, time is money as they say, so don’t delay. Start your financial planning today.

5 Things That Do Not Affect Your Credit Score

Your credit score affects many parts of your life, from the interest rate you pay on your mortgage to your ability to get a job or rent an apartment.  But there is an awful lot of confusion over which factors influence your credit score and which do not.

Did you know that the five factors listed below have absolutely no affect at all on your score?

Your Savings

Most people think that having a big chunk of money saved up will give their credit score a boost but that just isn’t the case.  Having a healthy emergency fund and savings account is certainly a smart financial move, but your credit score is meant to judge the likelihood of repaying your debts on time, not your ability to save. A million dollars in the bank won’t help your score if you miss a few credit card payments.

Your Income

No matter how high or low your salary is, it has absolutely no impact on your credit score.  Someone with a very low salary could have a higher credit score than someone earning much more.  Of course a lower salary could make it more difficult for you to pay your bills on time, and that would definitely have an impact on your credit score.  But don’t expect a new promotion and raise to have any effect on your FICO score.

Your Age

There can be a correlation between your age and your credit score but that does not mean that one actually causes the other.  While your age is not a factor in your credit score calculation, it can have an indirect effect on your score.  An older person will generally have a longer credit history and would have had more time to recover from any financial missteps they made when they were younger.  But being young does not automatically doom you to a low score.

Your Employment Status

If you are in the market for a loan, potential lenders will definitely look at your employment history when considering your application.  They will want to see that you’re responsible and have a stable job so you can pay them back.  However, your employment status does not affect your credit score.  In fact, you can be unemployed and still have a good credit score as long as you continue making payments on time.  Obviously your credit score will suffer if your lack of unemployment keeps you from paying your bills.

Your Marital Status

If you have a lousy credit score and you think you can give it a quick boost by marrying someone more credit-savvy than yourself, think again.  There is no such thing as a shared credit score for married couples.  You each keep your own individual credit file and getting married won’t wash away any money mistakes from your past.  Of course, if you take out a loan with your spouse, payment history will then be recorded on both of your credit reports.  Keep making those payments on time and you’ll both reap the benefits of a higher score.

Mike Collins is a freelance writer and blogger who specializes in personal finance topics. He’s also a husband and father of three children who keep him very busy.  You can read more about his quest to achieve financial freedom for his family at WealthyTurtle.com

It's Not Personal Finance… It's Personal Freedom