Here is an example of how they discuss this asset in the  Lear Capital commercial:

This asset is up over 100% since 2008 and Morgan Stanly predicts it could rise another 30% for 2012!

Is your curiosity whetted?

If not, the ad department at Lear Capital does their best to do so.

This one asset is not a stock, and not a bond… Call Lear Capital to learn more about this one asset that has returned 18% per year for 11 years… Call Lear Capital to get a special report and video on this “special investment”

This “special asset” is of course gold. Lear Capital is a gold dealer and they’ve been aggressively pushing the precious metal for some time now. I have to say that they do a good job of piquing interest where other gold dealers usually resort to all out fear to sell gold. This Lear Capital commercial doesn’t avoid the fear angle altogether though. They have plenty of elements targeting uncertainty (and rightly so).

Tired of losing money in the bank? …Artificially low interest rates and high uncertainty have helped this one asset out perform all other investments. You can continue to live with market volatility or invest in a secure asset that’s kept its value.

This  Lear Capital commercial certainly does their best to make gold seem like the “One asset to rule them all.” Over the past 10 years, it has been, but there’s still that line about gold being a “secure asset that’s kept its value” that implies it won’t lose value.

If there’s a bubble in gold, then a lot of people are going to lose a lot of money. The question of course is whether gold is a bubble.

To answer that, you have to consider what has been driving the rise in gold prices, and whether those factors will continue.

What is driving the price of gold?

Gold is typically used as an inflation hedge, and there has certainly been a lot of concern over inflation in the past few years, but prior to the numerous rounds of government “stimulus” and quantitative easing, fear of inflation was not the reason for gold’s rise. Uncertainty was. The War on Terror and general threat of terrorism created great uncertainty in the early half of the 2000′s.

Since the financial crisis though, the fear and uncertainty have revolved around the so called debt bomb of massive public debt and devaluation of the dollar due to the many “stimulus” programs.

What does the future hold for gold – has anything changed?

As an investor in gold, I think you need to ask yourself whether these factors are likely to persist, increase or abate. Is the U.S. government likely to significantly reduce its spending and reign in the deficit? The increase in national debt of 50% in the last 4 years suggests this is not likely.

Another factor at play here is the U. S. dollar as the reserve currency. While this is true, the U. S. government will be able to “monetize” its debt – that is decrease the value of the dollar through inflation and pay the debt down with less valuable dollars.

But what if the dollar is no longer the currency of the world?

Interest rates on the debt would spike and the U. S. government would no longer be able to print its way out of its debt obligation. Think Greece, Spain, Portugal, Italy and all the other bankrupt nations in Europe.

Don’t think it can happen? Check out Is the yuan the new dollar? from MSN Money. China would love to supplant the U. S. currency with its own. If that happens, the price of gold would probably rise greatly.

Is buying gold the right move? I don’t know. I’m no expert, but there certainly seems to be enough reason to at least hold some gold.

Given the reasons outlined above, conventional wisdom would suggest that gold is a necessity to preserve your wealth. Then again, conventional wisdom is often wrong in the end.

Related Posts:

• Rosland Capital – U. S. Gold Eagle Coins in Your IRA.
• U.S. Debt Comparisons (infographic).
• How (and Why) I Added Gold to my IRA.
• To Buy or to Sell Gold?
• How to Survive (and Possibly Thrive during) Stagflation.

Lear Capital Commercial Pushes Mysterious Asset, but is it the One Asset to Rule Them All? Copyright © Simple Debt-Free Finance

Robert Kiyosaki, Financial IQ

I’ve been reading Rich Dad’s Increase Your Financial IQ: Get Smarter with Your Money, by Robert Kiyosaki and while I like the general gist of the book (especially the first half), Kiyosaki rubs me wrong way in several places. One of these is in his use of math to support his opinions on real estate.

Much of the second half of the book focuses on real estate as a means to grow wealth, but Kiyosaki does make an important distinction between speculating for growth or flipping a house, and buying property as an investment. In other words, Kiyosaki espouses buying real estate for the purpose of renting it out and creating a cash flow, not hoping for the market to rise and create capital gains. I’m not really interested in becoming a renter, but his approach makes a lot of sense to me, especially with the current economy, housing market and demographic changes.

The problem with Robert Kiyosaki’s math in Financial IQ

Where I have problems is when he gets into things like OPM (Other People’s Money). Here is one of his examples:

• He buys a rental property for $100,000 in cash.
• He is able to rent this property for an annual income of $10,000.
• He has made a 10% return on his investment.

So far, so good. He’s using very simple math and ignoring taxes, repairs, etc.. but that’s fine – he states that in the example. His problem is in his comparison to the same scenario but using OPM. Here’s his example using OPM (i.e. money from the bank – a mortgage):

• He buys a rental property for $100,000.
• He puts $50,000 down and the bank loans him the other $50,000 at 6% interest.
• He is able to rent this property for an annual income of $10,000.
• He has made a 20% return on his investment.

The problem is that he has not made a 20% return on his investment – unless he is a deadbeat and doesn’t pay his mortgage! While it is true that $10,000 in profit would be a 20% return on $50,000 invested he is ignoring the mortgage payment entirely!

Using the Mortgage loan payment calculator at BankRate.com, I plugged in a $50,000 mortgage over 30 years (I’m being generous in giving him a low monthly payment) at 6% (his figure in the book) I determined the monthly mortgage payment to be :

$299.78

This works out to be $3,597.36 annually, which makes his actually profit in the OPM example $6,402.64 not $10,000. That means his return on investment (ROI) in that example is 12.8% not 20%.

Granted, 12.8% is better than 10% but it’s a far cry from 20%!

This makes me wonder about the rest of his examples and stories. What if the mortgage were larger or the rent less? Someone reading this book may think it’s a slam dunk only to find that his property and mortgage alter the numbers to a point where he’s not profitable. Kiyosaki neglects to mention that part of the financial equation altogether.

Still, Robert Kiyosaki’s Financial IQ  book is quite motivating and offers much food for thought and for that alone it is worth the read in my opinion.

Related Posts:

• Want to Build Wealth, and be Secure? Focus on Learning Instead of Earning!
• How to Survive (and Possibly Thrive during) Stagflation.
• The Coming Economic Collapse – How You Can Thrive When Oil Costs $200 a Barrel
• REVIEW: Getting Started in Stocks by Alvin D Hall (the Professor of Wall Street).
• How to Invest in Real Estate Without Buying Property

Robert Kiyosaki Plays Loose With His Math in Financial I.Q. Copyright © Simple Debt-Free Finance

Photo by covilha

Gold is a well known hedge against inflation, uncertainty and a falling dollar. Since this pretty much sums up the environment we’ve been living in for the past decade, it’s easy to see why the value of gold has been on the rise. But that’s past performance and as we all know, past performance is no guarantee of future results. So is gold still a good investment?

I’m not going to pretend to know the answer to where gold is going in the future, but here are some things to consider. Quite frankly, they are no small part of why I was convinced to invest in gold in my IRA a few months back when the price dipped.

Budget busting entitlement programs.

Unfunded entitlement programs will force future income earners (you, your children and grandchildren) to keep less of their income after taxes, thereby shrinking available wealth.

U.S. funding for future promises lags by trillions:

“The government added $5.3 trillion in new financial obligations in 2010… that brings to a record $61.6 trillion the total of financial promises not paid for.”

The United States credit rating is in jeopardy.

Fitch may cut rating:

“Fitch said it would first place ratings on “watch negative” if lawmakers failed to enact an increase in the debt ceiling by August 2, when the Treasury will have run out of extraordinary measures to avoid a default.”

This could lead to the U. S. paying a higher interest rate on its debt, which means more tax revenue goes toward the interest payments of past over-spending, leaving less for current spending. The result, of course, is higher taxes, lower incomes and less wealth.

Inflation. Hyperinflation. Deflation.

Inflation and deflation have a big impact on the value of your wealth. After all, if you have $1,000 in the bank, but each dollar goes down in value (inflation) to .70 cents, then your $1,000 is now the same as $700 before inflation. Gold on the other hand, holds its value and can even rise in value during inflationary times which makes it the perfect place to store your wealth.

Some people think The Time to Prepare for Hyper-Inflation is BEFORE It EXPLODES , while others only see Hyperinflation Nonsense in Multiple Places

I happen to believe that an ounce of prevention can spare much pain and with gold trading in the $1,500 to $1,600 an ounce range it may seem like a costly ounce of prevention, but I’d still ratherbe prepared for stagflation or inflation or even deflation.

The trick isn’t so much in figuring out whether we’re going to experience inflation, hyperinflation, deflation or stagflation because any one of these situations will keep the demand for gold high, and keep the price high.

In the end, the one major risk to the price of gold is a sound fiscal policy in Washington D. C., a balanced budget and a robust economy.

I believe these factors are years away, and so is any big drop in the price of gold.

How to hold gold in an IRA or 401(k).

You basically have two choices when it comes to investing in gold in your IRA or 401(k):

1) Physical gold
2) Gold stock

I suppose you could add mining stocks and other precious metal related stocks, but that’s moving away from gold a bit too much, and I’m sure there are those who would say that even a gold index ETF is too far removed from gold. That’s a debate for another time..

Buying physical gold.

It’s possible to hold gold in IRAs (traditional and Roth), simplified employee pension (SEP) and simplified incentive match plans for employees (SIMPLE). Most IRA plans do not allow for this option though, so the first thing you’ll want to do is check with the custodian of your IRA and see if they allow holding physical gold in your account.

If your current IRA does not offer the option to buy gold coins and bullion, you’ll need to open a gold and silver IRA.

Why I chose paper.

My IRA does not offer gold coins and bullion, and I have chosen not to open a new gold and silver IRA. Instead, I invested in the PowerShares DB Precious Metals (DBP). Here’s why….

Fees

Gold and silver IRA’s have more fees than traditional IRA’s because of added regulatory overhead. The IRS stipulates that the gold must be stored at an approved depository. This depository is a separate entity from the IRA custodian, and the require a fee for storage.

The IRS also requires that Gold coins be 99.5% pure gold, and must be approved by the IRS and be legal tender to qualify.

This is all good, because you want some assurance you’re not dealing with some fly-by-night con-artist who’s going to sell you some gold plated junk.

But this does limit the field of qualified vendors. Here are some of the most popular qualified gold coin providers:

• American Gold Eagle
• Perth Mint Lunar series (from Australia)
• Kangaroo-Nuggets (from Australia)
• Canadian Gold Maple Leaf
• Austrian Philharmonics coins

The way this breaks down is that you end up paying for two services:

• The custodial service
• The depository service

The custodian (IRA administrator) usually charges a fixed annual fee or a percentage of the IRA’s value. The depository will also charge its own fee. Transaction fees may be applied to each contribution you make to your IRA.

Simplicity

I’m a big fan of keeping things as simple as possible, and to be honest I don’t really need another retirement account to keep track of.

I’m very happy with my Fidelity account. I can invest in Mutual funds with no transaction costs, and no load. I can invest in ETF’s like DBP for $7 a trade. It’s all good. I don’t need the hassle of another, specialized IRA for gold.

Liquidity and yield

Physical gold is great for holding value, and in times of uncertainty, appreciating in value. But gold pays no dividends. When times are stable or prosperous and relatively peaceful (think mid to late 1990′s) gold doesn’t do much. In fact, you’re lucky if you don’t lose value in that kind of environment.

Buying gold in a tax deferred account doesn’t get you the same tax advantage that holding interest generating assets does.

The big reason I chose paper is that it’s far more liquid than physical gold.

Gold bugs will tell you that the real deal is far better than paper, because if the excrement really hits the fan, your paper is worthless while physical gold still holds value.

I am of the opinion that in those kinds of scenarios, where the entire monetary system of the western world collapses, bullets will be the new currency, not a shiny metal with no real industrial use.

Why I chose PowerShares DB Precious Metals

I wanted an ETF or mutual fund because it would be easier (and quicker) to sell than physical gold if the price of gold starts to drop. I can also hold those shares in my existing IRA, which means less fees, and more flexibility.

In the end, I chose the PowerShares DB Precious metals ETF over the SPDR Gold Shares (GLD) ETF because I wanted more diversification. I was watching the price of silver rocket ever higher at a rate greater than gold, and wasn’t prepared to make a call on one or the other. I also wanted to get some exposure to other metals which are precious but have industrial uses, like platinum. So, DBP was a basket of indexes that track multiple precious metals, which should give a smoother ride than focuses purely on gold (or silver).

Related Posts:

• Rosland Capital – U. S. Gold Eagle Coins in Your IRA.
• To Buy or to Sell Gold?
• How to Survive (and Possibly Thrive during) Stagflation.
• Conversion to Roth IRA Still Possible for 2011.
• Are You on Track to Retire Comfortably?

How (and Why) I Added Gold to my IRA. Copyright © Simple Debt-Free Finance

When the FDIC tries to stabilize the economy, it inevitably leads to inflation. Inflation means a weakened dollar, and a great rise in gold prices. Middleton maintains that as long as investors worry about stocks, inflation, and the government’s response, gold will continue to rise, as investors look to the one commodity that guarantees security. This way of thinking is confirmed by gold’s record highs during the last few years.

Leading analysts are recommending gold investment as the obvious choice, as it continues to hit record highs. However, in the long run, gold is a volatile asset that has low returns. Some are of the opinion that the stock market and the economy are on their way back. If this is the case, gold will drop very far, very fast.

The high gold prices do not only influence stock market investors, they can also be taken advantage of by your everyday consumer. Many are learning, sometimes the hard way, that it is essential to put away some money every month for a rainy day. The money may be stored in a CD, low risk investment, or even under the mattress. Some say that now is a great time to invest in gold. As the prices rise, investors who merely wish to have their money secure may even see the values rise. Those of this school of thought say that gold is the answer to a secure investment that has room for growth.

Others say that now is a bad time to buy, when prices are high, and investors should instead sell gold at a high profit. Inflation and the state of the economy has opened up a whole new market of those willing to buy gold, whether online, to a jeweler, or to private investors. It is advisable, however, to learn a little bit about the industry before getting cash for gold, because it is easy for scammers to rip off an unknowing client.

Although gold is the primary precious metal that is being traded, all precious metals follow the trends of gold, albeit on a smaller scale. Therefore, it’s a great time to sell platinum, a very precious metal, which is worth even more than gold. Silver, bronze, copper, and other metals are also very valuable now. Just ask any silver store. The prices have skyrocketed.

There are many opinions of what the best actions to take are right now, in regards to gold. If inflation continues to rise, gold will prove a secure asset that is a smart investment. However, if inflation is tame and smart fiscal policy strengthen the dollar, then the price of gold will plummet, possibly for a long time. Time will tell which way we go.

Related Posts:

• How (and Why) I Added Gold to my IRA.
• Lear Capital Commercial Pushes Mysterious Asset, but is it the One Asset to Rule Them All?
• Five Common Debt Solutions.
• 11 Things to Consider When Choosing an Online Bank.
• How to Get Your Tax Refund Now!

To Buy or to Sell Gold? Copyright © Simple Debt-Free Finance

“The open palm of desire
Wants everything
It wants everything
It wants soil as soft as summer
And the strength to push like spring”

-P. Simon, Further to Fly

Spring is here (FINALLY)!

It’s been a long, cold, lonely winter here in the northeast, but the buds are present and the tulips are pushing through. That means it’s spring cleaning time – time to get our (financial) houses in order!

Here’s how I’m cleaning out the financial cobwebs in my life this spring, and using that desire to push like spring into a summer realignment of my retirement planning.

Consolidating bank accounts

Life’s been a bit crazy for me these past 7 years. Here’s what happened to me that had an effect on my finances:

• I moved to a town 2 hours away and changed jobs
• I became a homeowner for the first time
• I had a child
• I had another child
• I moved to another new town (20 minutes away) and bought a new house, to make room for an expanding family
• I had another child (that makes 3!)
• I changed jobs again

That’s pretty much it, but I think that’s enough.

All of the above changes have left me in a situation of having abandoned bank accounts strewn to the four winds. As of just last week, I had 5 bank accounts at four different banks! That’s not counting any high yield, online savings accounts at ING and HSBC either. That’s just local banks and credit unions.

Remarkably, most had little money in them and no fees associated with keeping them open, even though they were dormant. When I cleaned out the two accounts at one bank that had been dormant for more than 2 years, I had just under $50 between the two of them. I probably did them a favor by saving them the money to mail me bank statements every month stating that nothing had changed from the previous month!

Of course, all of these accounts make my book keeping a hassle too. I had piles of useless papers to be keep, or discarded securely and so many accounts in Quicken that my eyes glazed over every time I started to reconcile my banking activity. Not the thing you want to happen when maintaining your finances.

In fact, I made a sort of informal pledge to myself at the beginning of the year to simplify and streamline my financial life as much as possible. It’s already paying off. I no longer feel overwhelmed by the number of accounts and financial detritus cluttering my Quicken records. As a result, I am up to date on my banking for the first time in over a year! Go, Me!

Refinancing

Another effect of all this moving around over the past 7 years is that while I got a decent interest rate on my mortgage in 2008, rates had gone even lower since then.

Rates got so low that I initiated a refinance back in January with a local credit union, which meant yet another bank account (see above), but it was worth it.

It took about two months of processing, but I went from 6% to 4.5% – saving over $200 a month!

I was initially reluctant to refinance, but the rates just became stupid low, and it’s a bi-weekly payment schedule with no pre-payment penalties so it just made sense. Besides, it wasn’t a cash-out refinance, so I wasn’t setting the clock back on owning the home free-and-clear.

Looking ahead

“…And the strength to push like spring”

Rollover to an IRA

That covers what I’ve done so far this year, but the final result of that list of financial changes is due to the job changing: I have a dormant 401(k) plan.

I’ve written about this before. The simple problem is that for the first time in my professional life, I work at a company that offers a terrible 401(k) plan and no company match. I love the job, and it’s in a very secure sector, so it was still the right move to make. But while all this dust was settling on the new job and baby activity, I had put my retirement contributions on hold until I figured out what I wanted to do with it all.

Well, I finally figured it out, and now I need to implement it. No more dawdling, dammit!

In the next few weeks, I will be rolling over my 401(k) to a simple IRA and start implementing my rollover plan detailed here.

Next steps.

After that, I figure it’s a good time to create a new budget to account for the savings from the refinance and the new contributions to my IRA as well as the hidden costs of living in this new house with another child. But more on that another day.

Related Posts:

• How to Save for Retirement When Your 401(k) Plan Sucks.
• Are You on Track to Retire Comfortably?
• 11 Things to Consider When Choosing an Online Bank.
• New Debit Card Fees Got You Angry? Switch to a Local Bank.
• How to Find the Best Place To Put Your Savings.

Spring Cleaning My Finances and Looking Ahead. Copyright © Simple Debt-Free Finance

Stagflation, 70′s style.

Most people who are familiar with the term stagflation will no doubt think of the 1970′s when they hear the word. The 1970′s in America was defined by stagflation, and oil shocks.

There is a common belief among many that stagflation in the 1970′s was caused by oil shocks – rapid spikes in oil price, caused by the OPEC nations, and as this article points out:

In desperation, President Jimmy Carter (1977-1981) tried to combat economic weakness and unemployment by increasing government spending, and he established voluntary wage and price guidelines to control inflation. Both were largely unsuccessful.

Others argue that the very reason those efforts were unsuccessful was because they were in fact the cause of much of the problem. Lutz Kilian points out that 1970′s stagflation was caused by poor monetary policy. Oil shocks didn’t help the situation any, but neither did they cause it.

Increasing government spending, lax monetary policy and rising oil prices… sound familiar?

Stagflation, 21st century style.

Despite Ben Bernenke’s claims to the contrary, real inflation has risen quite sharply over the past year. Gasoline prices alone have risen over 10%, food prices aren’t far behind.

Up until now, Bernenke and company have focused only on “core inflation” which excludes “volatile” areas of spending like food and gas. The problem is that while these expenses are volatile and prone to high degrees of fluctuation, they also happen to be things that people need to buy.

It’s one thing to exclude volatile spikes in situations like 2007-2008, when fuel prices spiked, but then receded. However, when real inflation takes hold, the core inflation numbers become misleading at best, and insulting to the general public at worst. As I write this, inflation by some counts is closer to 10% than the official 2.6%.

Everybody knows they’re paying more for food and fuel, so Bernenke only loses credibility with the general populace when he comes out with statements about inflation being “mild” or “tame.”

The Federal Reserve’s liquidity policy is spurring inflation and even leading some states to seek alternative currency.

John Boland, financial adviser at Maple Capital Management sees inflation as high as 6% by the end of 2011 – and that’s the “official number”, not counting food and gas prices!

Some have sounded the alarm over hyperinflation, but personal incomes are flat , at best and declining at worst. This coupled with high unemployment seems to suggest either depression or stagflation.

It looks to me like we have a little of both: depression in the things we want, inflation in the things we need. Things like cell phones, televisions and computers are getting cheaper while food, gas and clothing are getting more expensive.

So, the stage looks set for a potential encore presentation of 70′s style stagflation. How do you survive stagflation and can you possibly thrive during such a time?

Thriving through stagflation

Looking back at the 1970′s makes it pretty clear that very, very few people got rich after accounting for inflation. In fact, it was considered a victory just to keep pace with inflation and not lose “too much” of your wealth.

The average American was much worse off by the time stagflation ended in the early 1980′s.

Here are some of the ways people were able to maintain their savings, if not prosper at least a little.

Investing

Bonds

Seeking Alpha sums up investing in bonds during stagflation like so:

“During the last stagflation, bonds were called “certificates of confiscation” by many professionals in fixed income. It paid to have your fixed income assets as short as possible.”

Because inflation results in each dollar being worth less than previously and a bond is an agreement to pay back a debt today in tomorrow’s dollars, the bond holder is paid back in dollars worth less than he lent. In effect, having his wealth confiscated.

Treasuries are pretty much in the same boat as traditional bonds here, although you can now buy TIPS (Treasury Inflation-Protected Securities). TIPS didn’t exist in the 1970′s, and they were created as a means to protect the value of your savings from inflation. You can learn more about TIPS and buy TIPS at TreasuryDirect.com. Of course, TIPS are indexed to the official government inflation rate and as we’ve seen above, that’s much lower than the real rate. So your savings are still likely to lose value if held in TIPS.

If you have an investment account, you can also buy shares of the iShares Barclays TIPS Bond (TIP) ETF.

If you do hold bonds, keep your domestic bond duration to maturity short. You may also want to diversify into foreign currency bonds.

Some short-term bond ETFs you could use are the Vanguard Short-Term Bond ETF (BSV) and the iShares Barclays 1-3 Year Credit Bond (CSJ). Similarly, there are a number of International bond fund ETFs to choose from as well.

Stocks

When it comes to picking stocks for inflationary or stagflationary times, pricing power is all important. Pricing power simply refers to a company’s ability to raise prices to maintain profit, and not lose sales in the process.

These are the kinds of companies that produce things people need, or are most reluctant to give up. Think: utilities, energy, healthcare and consumer staples.

Commodities

Gold, silver, oil precious metals and agriculture all tend to rise with inflation.

Most commodities have already risen due to anticipated spikes in inflation with excess government spending and have continued to rise with inflation. Precious metals, for example, are probably not likely to be a money maker this late in the game, but they may be one of the few wealth preserving investments this time around.

Other commodities, like oil and agriculture are less of a pure inflation hedge and probably make sense as long term holdings even without high inflation.

You can buy gold coins, and coffee futures on there own, but you can also invest in broad indexes of these and more through ETFs. This provides added diversification, and will let you capture most of the gains with a bit less risk.

To be clear, ETFs that focus on one type of holding are not really diversified. For example, the ETF GLD is focused solely on gold, while DBP is a broader index in the precious metals category. DBP will reward you for gold rising as well as silver and copper, and punish you less if silver takes a tumble but gold and copper remain stable.

There are also a number of good mutual funds for investing in sector stocks, bonds and commodities. I recommend anyone who is interested in those take a look at the fund on Morningstar and find a highly rated (4 or 5 star) fund.

Housing

Traditionally, housing is a go-to place for protecting your money and riding out inflationary waves. Unfortunately, the bursting of the housing bubble has made it difficult to ride that wave this time around. It’s likely to take along time before housing prices begin to rise enough to alleviate inflation, much less keep up with it.

Real estate will likely be sitting this round of inflation out, so people should buy a house only if it makes sense for them to do so – i.e.: it fits their lifestyle and long term goals – not as an investment.

Cash is king

Cash is king when interest rates rise. This will likely be the case toward the end of this inflation cycle, as it was at the end of the last bought of stagflation. In the late 1970′s – 1982, money market accounts were fairly new and proved to be one of the few safe havens.

The problem is that the Fed has kept rates so low, that your savings will actually lose value in a money market now. Eventually though, even the Fed will have to recognize inflation has risen too far too fast and will be forced to do something about it. What they do is raise rates. Quite possibly, very quickly and quite high. This is bad news for people with variable rate debt (mortgages and credit cards) but great news for people with cash on hand to stash in a money market account.

The trick of course is to make it to these final stages with enough money left to preserve in a money market account.

What if I’m wrong?

Whenever I play fortune teller and try to predict the future, I always ask myself: What if I’m wrong?

I’m no expert, but I do know enough to know I don’t know it all and that puts me ahead of many so called experts. So, here’s what you should do if I’m wrong about my views and opinions on stagflation over the next few years:

DIVERSIFY.

That’s what I plan on doing with my money.

Life is full of “what-if”‘s, the only way to get through those moments is to plan for as many possibilities as we can. I still have much of my portfolio in more traditional growth stocks and bonds. I’m not “all in” on gold. I’m simply leaning more toward the types of investments outline in this article so that in the event that these predictions come true, at least in part, I will be in a position to be less negatively impacted.

As I said, I’m no expert and you should speak with a financial planner before making any big decisions. Gold looks great and oil seems like a no brainer, but their prices have been bid up in anticipation of inflation and you may get caught buying high at this point.

I just think you should be aware of the specter of stagflation as being just as possible as rampant inflation or the “gold bubble” bursting.

Related Posts:

• Inflation Winners And Losers.
• Minimalism vs. Simplicity – Are You Missing the Point?
• Robert Kiyosaki Plays Loose With His Math in Financial I.Q.
• How (and Why) I Added Gold to my IRA.
• CD Rate Roundup for March. (video)

How to Survive (and Possibly Thrive during) Stagflation. Copyright © Simple Debt-Free Finance

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Since interest rates are still near an all-time low, yields on most CD’s are pathetic. Couple that with the specter of rising inflation and it’s a tough road for CD investors and anyone living on a fixed income. It’s not surprising then that Mr. McBride recommends finding the highest yielding CDs.

The problem is that even the highest yielding CDs are unlikely to keep pace with a rapid spike in inflation. Still, if you’re looking for the safety and security of CDs, stick to the shortest terms so you can be ready to renew at higher rates when interest rates begin to rise.

Related Posts:

• How to Survive (and Possibly Thrive during) Stagflation.
• Don’t Sabotage Your Retirement (Like Kris)!
• When Saving Money Can Cost You.
• Give yourself a Check Up Of Your Financial Health!
• Inflation Winners And Losers.

CD Rate Roundup for March. (video) Copyright © Simple Debt-Free Finance

Regular readers know that I’ve been a steady contributor to my 401(k) at every job I’ve had since I started work professionally about 12 years ago.

Consistent contributions (even through employer match cut-backs and the recent Great Recession) an good plans have allowed me to watch my savings cross the 6-figure mark at the end of last year. But I realize now how lucky I have been to have had such good options in my 401(k) plans to date.

I realize this because I’ve hit a problem with my current plan, and I bet I’m not alone.

The problem

The problem is this: The investment options in my current employer 401k plan stink.

The plan is administered through a well known insurance company with a catchy jingle and fees that top the range of what is considered average for the funds.

I’m a big believer in low fees. Research has shown that most portfolios have a greater chance of outperforming their peers and the benchmarks averages when they invest in lower cost mutual funds or ETFs. It’s just common sense that when all other things are equal, the fund that charges less with leave you with more money in the end.

Of course, some funds out perform their peers and have higher fees. That’s OK too, but the key is that you’re getting a demonstrated track record of out performance for that extra cost.

My problem is that few of the funds in my 401(k) out perform their peers, but still have higher fees.

So, I have a few options and if you’re in the same situation, you do too!

Retirement plan options

The 3 basic retirement plans available to me in my career are:

• Traditional IRA
• Roth IRA
• Employer’s (lousy) 401(k) plan

Each one has benefits and drawbacks, but the Traditional IRA and Roth IRA are slightly different beasts given that the Roth contributions are after tax, while the tradition are pre tax.

I don’t want to roll over my 401(k) to a Roth, because I don’t want to pay the taxes on the conversion. I’m considering opening up a Roth in addition to pre-tax retirement plans in the future, but the Roth is not being considered by me at this time.

That leaves the Traditional IRA and the crappy 401(k).

Rolling over my 401(k) to a traditional IRA seemed liked a no brainer – I would be able to invest in a wider range of funds, stocks and bonds – but then I realized this startling discrepancy:

The contribution limit for a traditional IRA is only $5,000!

By contrast, the limit on a company sponsored 401(k) plan is a whopping $16,500!

With all the talk of financial reform in Washington D.C. over the past two years, and all the discussion about ending the 401(k) plan in favor of another social security style plan, I wish Congress would just make the contribution limit of the IRA as large as the 401(k)!

The total solution

Well, this left me with the choice of saving less in my IRA but paying less fees, or paying higher fees and potentially saving more by using my 401(k).

After much pondering, and poking around the Internet (to no avail), my solution is this…

I will rollover my old 401(k) to a new IRA. I will make the maximum contributions per year ($5,000) to that plan and any remainder I will contribute to the least offensive options in my 401(k).

For example, I’m used to contributing about $7,000 a year to retirement. I will be splitting up that amount like so:

• $5,000 to funds in my IRA
• $2,000 to funds in my 401(k)

I call this the “total solution” because it reminds me to consider the total holding in these two accounts as my portfolio – I have 1 unified portfolio instead of 2 portfolios.

The trick is determining which holding to keep in my 401(k) considering that an future increase in contributions will need to go into those funds. I’m tempted to hold my bond allocations in my 401(k). That way I will automatically increase my bond exposure over time as my contributions increase and I get closer to retirement age.

It’s not an ideal solution by far, but it’s the best I could come up with and I couldn’t find a better one. If you have any suggestions, I would gladly welcome them!

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• Are You on Track to Retire Comfortably?
• Conversion to Roth IRA Still Possible for 2011.
• Generation Y slacking on Savings?
• Spring Cleaning My Finances and Looking Ahead.
• Don’t Sabotage Your Retirement (Like Kris)!

How to Save for Retirement When Your 401(k) Plan Sucks. Copyright © Simple Debt-Free Finance

While 2010 is already wrapped up, there are still financial considerations you need to make about the previous year in the near future when it comes to Roth IRAs. In 2010, the conversion rules have changed regarding converted Traditional IRA accounts and Roth IRAs. The government made it effective in 2010 that account holders could spread the income tax payments owed on the conversion over the following two years – 2011 and 2012.

This rule change would allow you to keep half of the income tax amount you owe still in the account, earning compound interest until the tax deadline for the following year. It is currently too late to take advantage of that tax incentive if you have not already made the conversion. But there is still good news for those wanting to convert to a Roth IRA in 2011.

Making the Change

In the past, there were strict limitations on who could make the conversion from a Traditional IRA account to a Roth IRA based on income. For now those laws have changed and are beneficial to anyone. Since you can still convert tax deductible investments as permitted by the government, making the switch in 2011 is a good investment strategy.

To make the conversion, you will have to pay the taxes you will owe later now but once the funds are converted, you will not have to pay income taxes on the amount you save ever again. For those who can afford to pay the income tax due out of there own funds rather than their investment funds, the conversion will be that much more beneficial.

When You Shouldn’t Switch

There are certain circumstances that may not prove to be beneficial to convert to a Roth IRA. First, if you know for sure that the rate of your income taxes will be lower in your retirement years than where they stand today, making the conversion does not really benefit you financially.

Secondly, if you don’t have the cash necessary to pay the income taxes you will owe from making the conversion, it is not wise to use your investment funds as a payment source as you will be required to pay a penalty on those funds as well as the tax.

Retirement Power

The most beneficial aspect of converting from a Traditional IRA account to a Roth IRA in 2011 is the investment power you are using towards your retirement years. Retiring with tax-free funds available later in life is a strategic move anyone can accomplish. For those who do not qualify for a Roth IRA account because of the income limitations, consider opening a Traditional IRA account and converting to a Roth IRA in the future.

Choosing your investments wisely for an easier, more comfortable retirement is part of your overall good financial health. If you have not taking the steps to plan for a financially healthy retirement, it is never too late to start investing, though it is always best to being when you are young. Not all financial strategies meet the needs of every future retiree but it is worth your time and money to explore what works for you. The Roth IRA account definitely has many advantages and it may be the ideal starting point for your retirement investment planning.

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• How to Save for Retirement When Your 401(k) Plan Sucks.
• How To Start Saving For Retirement At 40.
• Rosland Capital – U. S. Gold Eagle Coins in Your IRA.
• Are You on Track to Retire Comfortably?

Conversion to Roth IRA Still Possible for 2011. Copyright © Simple Debt-Free Finance

One of the basic concepts of investing is the idea of active funds and passive funds.

I’ve just come across this post about active vs passive funds by Craig Ford at Christian PF.com that does a good job of breaking down the differences between active vs passive funds and which is better.

As I say, even if your interest and involvement in retirement planning doesn’t go beyond your company 401k plan you should at least know the general idea beyond these funds, so check it out!

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• Are You on Track to Retire Comfortably?

Investing For Beginners – Active Vs Passive Funds. Copyright © Simple Debt-Free Finance

Suze Orman Investment Advice.

• Investing before you’re ready.

“Better to do nothing than do something you don’t understand”

That’s a great quote, and very applicable to investing.

(On a side note, poor Matt Lauer asks whether people invested in subprime mortgages just weren’t ready – as if the independent investor was buying subprime shares in his 401(k)!)

• Using a financial advisor who only “sees” one person in a couple. There’s a great local car commercial I keep seeing where the car salesman keeps asking the man questions while the woman is answering. The salesman plows on as though she weren’t even there, and eventual she fades away. Very powerful. It’s like that with investing but more so because a couple’s financial situation is far more reaching than a car purchase.

• Being afraid to invest when the stock market is going down.

“Be greedy when other’s are fearful.” – Warren Buffet.

• Being an all-or-nothing investor. Don’t focus on buying one thing, or following one asset type. I wonder how many are doing that with gold and other commodities. Remember tech stocks in 1999?

• Buying a loaded mutual fund vs. a no-load mutual fund. Knowing the difference between load and no load funds can save you a hefty chunk of change over the years.

Suze Orman Investment Advice - Don't Make These Mistakes

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• Conversion to Roth IRA Still Possible for 2011.
• How To Start Saving For Retirement At 40.

Suze Orman Investment Advice – Don’t Make These Mistakes! (VIDEO) Copyright © Simple Debt-Free Finance

Cashing out before the certificate matures can be costly. The article states that the average penalty for CDs of 1-year or less is 3 months of interest. The rate can be as high as 6-months on CDs of 1-4 year maturity. Some banks will even hit you for 20-25% of the total interest you would have earned for a 5-year CD.

I’ve long known that you forfeit a percentage of the interest if you cash out a CD before it matures, but there’s a key point I never knew. It’s in the last part of the paragraph above: “…the total interest you would have earned.”

Yes, that’s right – the penalty is a percentage of what you would have earned if you left the CD to maturity. This could lead the bank to take some of your principal if you haven’t earned enough interest to cover the penalty before you cash out the CD.

That sounds pretty bad, but I don’t think it is. Let me explain…

For the sake of example, let’s suppose you buy a 5-year CD worth $10,000. 1 Year later, you realize you need that money (maybe there is some medical bill or some other unexpected expense that you can cover with your emergency fund).

• If the CD was left until maturity, you would earn $1,611.84.

• By the time you redeem the certificate however, you’ve only earned $303.39.

• Using the above stated average penalty of 20% of the total ($1,611.84), your penalty would be $322.368.

But that would leave you with $9981.02 or a loss of only $18.81 (roughly 0.18%). And that’s if you redeemed it after only 12 months. You wouldn’t lose any principal if you held it for at least 2 years.

Even if the rate was 5%, you only be out about $55 after a year.

Don’t get me wrong, I never want to lose principal and I’m not comfortable throwing away money even if it’s less than 1%, but I wouldn’t lose sleep over it either.

Even if you bought a $100,000 5-year CD at 5% interest you’d only give up $600!

Bottom line – do the math, know the risk but don’t fret about the small stuff. I’ve wasted more money on a morning coffee through the years.

(all calculations were done using BankRate’s Certificate of Deposit Calculator.)

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• Protect Yourself and Keep Your Car Out of the Repair Shop in the Winter.

CD Penalty For Early Withdrawal Can Be Costly! (Really?) Copyright © Simple Debt-Free Finance

That’s the premise of this article and I have to say I agree!

It’s just common sense, really. Without a periodic check of your finances, you have no way to know if you’re on track or not until it’s too late.

So what should your financial check up include?

Net Worth.

Put simply, you should own more assets than liabilities. an asset is something that either generates income or could be sold relatively easily for cash. A liability is something that is either worth less than you owe on it, or that takes money out of your pocket. Work for assets and avoid liabilities.

Rates and Ratios.

Check your debt to income ratio (D/I) and savings rate. You want a small D/I ratio, and a large savings rate.

Spending vs. Income.

DON’T SPEND MORE THAN YOU EARN. I’m sorry to yell like that, but it’s one of those concepts that is so simple to understand that people gloss over it and forget it altogether.

Life changes.

Be sure to adjust your finances any time your life changes. For example, if you have a new baby, make sure your life insurance is in place and adequate. If you lose your job or take a pay cut, adjust your spending accordingly.

Insurance.

Make sure your life insurance, car insurance, homeowners insurance, etc are up to date and are adequate to cover the item insured.

Estate planning.

This is often something that needs updating when your life changes. For example, you buy a home or have a child.

Portfolio asset allocation.

You should readjust your 401(k) or IRA asset allocation at least once a year, and possible more if there’s a large shift in the market. A good example of this is the recent market plunge of 2008. Many retirement accounts ended 2008 not just down, but out of balance. It’s important to rebalance or you can end up holding too much in stocks or bonds when the tables turn again.

If you want the in-depth discussion of each of these topics, you can read the article here .

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• 7 Tips for Cutting Spending and Putting Cash Back in your Pocket. (video)

Give yourself a Check Up Of Your Financial Health! Copyright © Simple Debt-Free Finance

Here’s the question:

I have a couple thousand dollars saved up, but it’s just sitting in a bank account right now not earning very much. I see a lot of sites like yours recommending ING high yield savings, but that yield is only 1.15%. I’m wondering what will give me the best return on my savings for both the long and short term?

-John.

Well, there is no single answer. There’s nothing that will give you the most return both short and long term. If there was, all other investments would be rendered useless. In fact, return is based on risk, and since not all places to put your money carry the same risk, not all places offer the same reward.

In general, the highest return for the long term is stocks, followed by bonds, followed by CDs and bank savings accounts. But I think John is asking the wrong question, or maybe he’s just skipping ahead. What John really needs to ask himself is: How much risk can I take?

Anyone can find a chart or set of data to show that one savings vehicle or investment class beats another over some given period of time. But what does that really tell you?

For example, stocks lost value over the last 5 years while gold almost tripled. But that doesn’t mean you should put your savings in gold alone. Gold did almost nothing for the 20 between 1981-2001.

The best place to put your savings is determined by the amount of risk you can take, and that is largely dependent upon when you need the money.

If you’re saving for retirement and that’s 20 years or more away, then a mix of stocks and bonds is probably best since they provide the greatest average growth over that time period and can usually out pace inflation. But stocks are risky, as we’ve seen during the 2008-2009 crash. Cash and gold were about the only things that didn’t lose value.

But you wouldn’t want to keep your retirement savings in cash because over 20 years, you’d likely lose money to inflation and end up with less real value than you could have.

But that’s savings, not growth.

If you’re saving money for retirement or college and that event is 15 years or more away, stocks and bonds are the way to go because you need your money to grow over that time, and savings accounts won’t get the job done.

If you’re saving for a down payment on a house, or a new car then you’re better off with a high yield savings account or CDs. You’re giving up growth and accepting a lower return because you’re saving your money for a specific near term goal.

In the long run, growth is more important than preservation of capital (savings). But when your goals switch from long to short term then preservation is key.

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• Don’t Sabotage Your Retirement (Like Kris)!
• Give yourself a Check Up Of Your Financial Health!
• Net Worth: How do you stack up?

What Is The Best Place For My Savings To Grow? Copyright © Simple Debt-Free Finance

As the history books close on 2009, I thought it might be nice to take a look back on the topics that were hot on Simple Debt-Free Finance over the past year.

401(k) Plans.

2009 saw a lot of talk about the future of the 401(k). It seems only natural, given that it is one of the major means of saving for retirement for many American workers who had just seen those savings drop like a stone in the 2008 stock market crash. A lot of the talk was centered around ways to “fix” the 401(k) when it isn’t broken. This bothered me enough to blog about it in that post as well as Fixing What Isn’t Broken and Why 401K Retirement Plans Really Don’t Work And How To Fix Them

Many workers, like myself, saw their company contributions to 401(k) plans cut or “temporarily” suspended. My response to that was to give my 401(k) some TLC, a move which paid off when my balance returned to pre-crash levels in the 3rd quarter of 2009.

Bank Failures.

Another hot topic of the beginning of the year was bank failures. So many failures naturally led many to wonder what the FDIC insurance limits cover.

Investing.

2008 was a big year for gold, and 2009 was even bigger. Such a bullish environment for gold led Rosland Capital to offer Gold Eagle coins for IRA accounts.

The 2008 crash created an historic opportunity for investors to “buy low”, but it also offered many reminders of what not to do. To that end, I shared Jim Cramer’s 10 commandments of stock trading.

Since the crash created a great opportunity for new investors to get into stocks at levels unseen in a decade, I put together a list of 10 investment tips for beginners:

1 Follow The Rules
2 Be Aware Of Taxes
3 Don’t Confuse Investing With Trading
4 Tune Out The Media
5 Don’t Tune Out Too Much
6 Pay Attention To Risk
7 Don’t Avoid Reality
8 Don’t Fall For Hot Stock Tips
9 Don’t Try To Time The Market
10 Try Before You Buy

In other news, some investing sites seemed to want to attack index fund investing in all the wrong ways. I had to respond to their criticism of index fund investing.

Credit Cards.

Kiplinger was nice enough to provide a 1st phase of credit card consumer protection rules went into effect.

I had a couple of posts about 0% balance transfer offers, mostly because 0% balance transfer offers were coming to an end at the same time my wife received a 0.99% balance transfer offer.

Since it seemed to be a hot topic, for me anyway, I decided to share 6 things you should know about 0% APR credit card offers.

And all this at a time when Bank of America began imposing fees for paying off your balance… idiots!

Government Bailouts.

2009 is likely to be remembered best for the bailout craze that gripped the auto sector, bank sector, heck – the entire nation!

credit card consumers got a bailout, the NASDAQ released a “government relief index” for tracking bailed out companies and cash for clunkers gave charities some competition

Debt.

What would a debt blog be without posts about, well, debt?

The year started out with discussions about toxic debt and ended with the mortgage debt relief program going until 2012.

In between was some discussion of whether debt settlement is a good idea, and why debt consolidation is (sometimes) a scam. When it’s not a scam, debt settlement and loan consolidation just doesn’t work, and you’re much better off taking a DIY approach to debt consolidation.

And just to round out the debt consolidation talk, I shared how it affects your credit score.

I asked, “Why are you in debt?”, but not too many people answered, so I got the top 10 causes for debt from BankRate.com.

Related Posts:

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• Using Secured Credit Cards To Rebuild Credit.
• Avoid These 5 Credit Card Rookie Mistakes!

2009, year in review. Copyright © Simple Debt-Free Finance

But for most people, a 529 saving account is pretty straightforward. Most experts recommend you select an age-based fund that gradually shifts from a more aggressive stock heavy portfolio to a more conservative bond or cash heavy portfolio as high school graduation nears. It’s also common advice to go with your in-state plan, as most states offer a tax deduction for the amount of money contributed to the plan.

But common sense, and conventional wisdom are not always absolute.

For example, the state tax deduction for contributions only makes sense if you live in a state that collects income tax. If you’re lucky enough to live in a state that has no income tax (like Florida or New Hampshire), then you’re not really benefiting from that part of the plan.

There’s more wrong with conventional advice when it comes to 529 plans.

Many 529 plans offer age-based options that are similar to target-date options found in many 401(k) plans. But age-based options carry the same risk as target-date funds that hi-lighted by the After Hours Investing blog post Beware Target-Date Funds! . Namely, age-based funds carry non-uniform risk.

SmrtMoney examined performance of 529 plans during the 2008 market crash, and they found some problems.

Some age-based plans targeting high school seniors lost 30% while others gained 4%. How can this be? Aren’t age-based funds supposed to gradually adjust assets over time specifically to avoid such risk?

Well, just like target-date funds, the fund managers of some 529 plans got greedy. Some plans had 50% or more of their assets in stocks! This is way too much risk for a high school senior who will need that money in a year or less. According to Cleveland based financial advisor Scott Snow, an age-based fund for high school seniors should have no more than 20% in stocks.

This should serve as a reminder to all who investing for college in a 529 plan: know where your money is. If your account holds age-based funds, check on the underlying holdings and make sure the risk is in line with the time till graduation.

Related Posts:

• Why Now May Be The Time To Switch 529 College Saving Accounts.
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• More Parents Are Becoming 529 Dropouts.
• Best State 529 Plans.
• 529 plan comparisons – free search!

What To Watch For In Your 529 College Saving Accounts. Copyright © Simple Debt-Free Finance

Returns for Average, best and worst 529 plans for 2008.

To make matters even worse, a recent report by Morningstar found that the average 529 college savings account lost 22.4% in 2008.

If there is a silver lining in all of this, it may be that a recent change to the tax code allows parents to adjust their 529 asset allocations twice in 2009.

Normally, 529 account holders can only change their allocations once per calendar year. This would mean that anyone who was playing games with weighting or trying to time the market – say, keeping heavy stock allocations in an attempt to play catch-up – would get stuck holding the bag, can instead re-adjust their allocations to a more balanced approach before the year’s end.

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• 529 plan comparisons – free search!
• Minimalism vs. Simplicity – Are You Missing the Point?
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• Tax Time: Kiplinger’s “Do It Yourself Pay Raise” (Video).

Why Now May Be The Time To Switch 529 College Saving Accounts. Copyright © Simple Debt-Free Finance

Here’s a sample of the 529 plan comparisons details provided (from New York, my state):

Summary:

The team of Upromise Investments and The Vanguard Group took over management of this 529 savings program from TIAA-CREF in late 2003. It now features age-based and static portfolio options utilizing Vanguard mutual funds, and accounts can be linked to the Upromise Rewards Service.

Program Details:

• Summary: The team of Upromise Investments and The Vanguard Group took over management of this 529 savings program from TIAA-CREF in late 2003. It now features age-based and static portfolio options utilizing Vanguard mutual funds, and accounts can be linked to the Upromise Rewards Service.
• Program type: Savings
• Program manager: Upromise Investments, Inc. and The Vanguard Group
• State residency requirements: None
• Maximum contributions: Accepts contributions until all account balances in New York’s 529 plans for the same beneficiary reach $235,000.
• Minimum contributions: $25, or $15 per pay period via payroll deduction
• Age-based investment options: The Age-Based Option offers a choice among three different risk levels (Aggressive, Moderate, or Conservative) each containing five portfolios of underlying mutual funds. Contributions are placed into the portfolio corresponding to the selected risk level and beneficiary?s age, and later reassigned to more conservative portfolios as the beneficiary approaches college age.
• Static investment options: Select among four multi-fund portfolios (Growth, Moderate Growth, Conservative Growth, and Income), nine individual index-fund portfolios, and the Vanguard Short-Term Reserves Account.
• Underlying investments: Vanguard mutual funds
• Enrollment or application fee: None
• Account maintenance fee: None
• Program management fees: 0.55% manager fee; fee includes underlying fund expenses.
• Expenses of the underlying investments: Not applicable, included in the program management fee.
• Total asset-based expense ratio: 0.55%
• Program match on contributions: None
• State tax deduction or credit for contributions: Contributions to any of New York’s 529 plans of up to $5,000 per year for an individual taxpayer, and $10,000 per year for married taxpayers filing jointly, are deductible in computing New York taxable income. Only contributions made by the account owner, or if filing jointly, by the account owner’s spouse, are deductible. Contribution deadline is December 31 postmark.
• Telephone: 1-877-697-2837

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• How to Survive (and Possibly Thrive during) Stagflation.
• Don’t Sabotage Your Retirement (Like Kris)!
• Conversion to Roth IRA Still Possible for 2011.
• How To Start Saving For Retirement At 40.

529 plan comparisons – free search! Copyright © Simple Debt-Free Finance

1. Know where to look.

Start without even leaving your home. Check out websites like RealtyTrac.com or ForeclosurePoint.com. These sites allow you to find listings of houses in foreclosure.

2. Know who to buy from.

In short, a bank. Buying a foreclosed home at auction requires you to pay cash, and you don’t even get the luxury of inspecting the property first. Contrast this with a bank owned foreclosure, where any liens have been cleared and you do get to inspect the property first, and you’ll see which is the better option.

3. Hire a contractor.

Foreclosed homes were either owned by people who didn’t care about tending to the property, or people who did not leave on their own terms. This often leads to vandalization and disrepair. Bringing a contractor to inspect the property before you buy, eliminates the possibility that you will underestimate the cost of repairs.

4. Aim low.

There’s a glut of foreclosed homes on the market the likes of which are rarely seen. This means banks are more likely to accept a lower price, just to be rid of the house. Start 20% below the market value, and be prepared to haggle.

5. Be patient.

While the glut of foreclosures means you can score a big discount on the price, it also means the bank has a lot of homes to process. This means it will likely take some time to finish the deal. Be ready to wait.

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• Mortgage Debt Relief in Effect Until 2012.
• Tips to Avoid Foreclosure Scams!

What you need to know about buying a foreclosed home. Copyright © Simple Debt-Free Finance

Then I got an email from Investopedia titled: “Forex Training“.

Hmmm… I thought, this might give me a clue. But then again, maybe not. When I followed the link, this is what I got:

“What Does Forex Training Mean?
A form of instruction or mentorship that provides information on forex trading tactics, methods and successful practices. Forex training acts as a guide for the retail forex trader, providing insight into successful strategies, signals and systems as well as other general information on Forex trading.”

Wow! That seems more like a definition of training as it applies to Forex trading, but what is Forex Trading?

So, I did a little more digging, and eventually found this:

“What Does Forex – FX Mean?
The market in which currencies are traded. The forex market is the largest, most liquid market in the world with an average traded value that exceeds $1.9 trillion per day and includes all of the currencies in the world.”

It all makes sense to me now. It’s a bet on whether a given currency’s value will rise or fall. This is what George Soros made his billions in. I just don’t understand how it can be such a common term, and yet so narrow in its understanding. I guess if you don’t know what Forex means, you don’t need to know?

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• How (and Why) I Added Gold to my IRA.

What Does Forex Mean Anyway? Copyright © Simple Debt-Free Finance