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.

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• 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

Here’s a review of Quicken Deluxe 2011, available in stores and download from Amazon.

The many flavors of Quicken.

I’ve been a fairly heavy user of Quicken for about 6 years now. I’ve only ever used the Deluxe version, though the product comes in many different flavors (Deluxe, Premier, Home & Business, Essentials and now there’s even a Rental Property Manager!). I’ve only ever used the Deluxe version and when I was researching the 2011 version I discovered that the majority of people who buy Quicken buy the Deluxe version anyway. Some 85+% of shoppers buy Quicken Deluxe. So, that made it easy to review since my product choice also happens to be the choice of most shoppers.

But if your situation is more specialized (i.e. you have rental property or a home business) then you may want to investigate the other flavors that Intuit has to offer.

As for the Deluxe version, here’s what it features:

• Money management and budgeting tools that enable you to track your spending and increase your savings.
• Save time categorizing your spending with auto-categorization.
• Download your financial data and manage all your accounts together in one place.
• Helps you stay on top of bills and create a budget.

2011 vs 2010.

What’s new.

One of the nicest features of Quicken since I’ve been using it has been the ability to download your account transactions online – right from the Quicken program itself. They call it “One-Click Update” and if your financial institutes allows for it (i.e. they’ve partnered with Quicken) then you get your transactions automatically downloaded to the correct account in Quicken – retirements accounts, bank accounts, credit card activity, auto loans and more.

This has at times been a draw back for me if my financial institution was small and not partnered with Intuit. With the 2011 version, Quicken Deluxe now automatically downloads transactions from over 12,000 banks, brokerages and other financial institutions–including PayPal.

The “guided setup” wizard has also been revamped, in an attempt to make learning to use the features of Quicken a bit easier too.

Intuit has also worked to increase the integration between Quicken and their other popular product: TurboTax Your financial information in Quicken can be imported into Turbo Tax, making tax time preparation a bit less painful. This ability has been around for a few years now, and I haven’t tried it myself yet. My taxes just haven’t been that complicated to begin with, though I think I may be giving it a try next year.

Perhaps due to pressure from online competitors, Intuit has made Quicken 2011 more “socialable” by integrating Quicken Live Community, an online forum for advice and interaction with other quicken users. This new community forum is integrated seamlessly into the program itself (you can view the online community from right inside Quicken).

Quicken 2011 does a better job of categorizing your spending automatically, and it’s much quicker for situations where you need to enter the category yourself. Often times, simply typing the first few letters of the category is enough to accurately select the proper category. This alone can be a major time saver.

They’ve done a nice job redesigning the cash flow feature, improving the graphing and making it easier to project your future savings or shortfalls.

The layout of the program has been redesigned in an attempt to make commonly used features easier to access. This will likely be helpful for most people, but may be annoying if your most commonly used features don’t match what “most people” commonly use.

They claim that transaction updates for account downloads are faster, though I didn’t see a noticeable difference. That could be dependent on your connection or your institution’s connection speed as well.

System requirements

Here are the system requirements to run Quicken Deluxe 2011:

Processor: 1 GHz
Operating System: Windows XP SP2+, Vista, Windows 7 (32- and 64-bit)
Memory: 1 GB
Hard Disk Space: Up to 450 MB free space; up to 1 GB if .NET not installed
Display: 1024×768 or higher resolution
CD-ROM Drive: Required
Internet: 56 Kbps (broadband recommended for online services)
Printer: Any printer compatible with Windows XP SP2 or later

Additional Software (included in Quicken installer): Microsoft .NET 2.0 or later;
Windows Installer 3.1;
Internet Explorer 6.0 or later

Why buy.

As I write this, you can buy Quicken Deluxe 2011at Amazon for $39.99 (33% off!)

Good personal finance software can help you create a budget and stick to it. It can help you set goals and meet them. After all, if you don’t know where your money is going and you wonder why there isn’t much left of your paycheck at the month’s end, how can you save for the future?

Beside the basics, good personal finance software can help you find extra savings or eliminate expenses you forgot you had. It can help you manage your money more effectively and help to pay off debt quicker or save for the big things like retirement or a new home or a new car.

Is Quicken Deluxe the best personal finance program out there? That depends on how you use it and what you’re using it for.

I honestly can’t tell you how it stacks up against online sites like Mint because quite frankly the idea of putting all of my personally identifiable financial information out on the web frightens me a little. But I know millions of people don’t have a problem with it. That’s your call.

Also, I’ve been using Quicken for years now, and I don’t particularly like the idea of re-entering my information and starting over with a new product.

Bottom line: Quicken Deluxe is a great program if you are looking for personal finance software that is not web-based, or you’re looking to replace Microsoft Money.

Why not to buy.

So those are the reasons you may want to buy Quicken Deluxe. Here are some of the downsides (or why you might not want to buy it).

Intuit has made the unfortunate choice to include advertisements in their product for their partners as well as other Intuit products. Advertising for your other products is nothing new, but the way in which Intuit does this in their Quicken products can become tiresome, at best. It is possible to ignore the banner-ad style product placement for Quicken Loans, Free Credit Reports and the like but it’s frustrating to have to do so in a retail product.

If you’re a Quicken 2010 or even a Quicken 2009 user you may not want to upgrade just yet. Many of the improvements are relatively minor and may not be worth the full price of the 2011 version.

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• REVIEW: Stock Investing For Dummies, by Paul Mladjenovic.

Quicken Deluxe 2011: Reviewed. Copyright © Simple Debt-Free Finance

Some astute readers will know that I typically only have good things to say about my Bank of America Upromise card.

Not anymore.

My wife and I have had this Upromise rewards card for about 6 years and make a habit of paying the credit card balance in full every month. The reward is a monthly contribution to our 529 college plan for our children. Basically, 1% of our monthly expenses get contributed to the fund. It’s not going to make or break the college fund, but every little bit helps.

As it is so easy to do with many habits, we let this one slip.

Over the Thanksgiving holiday we carried a balance for one month -one month, no late payments. We paid the balance in full for December.

Imagine my surprise when I received our credit card statement for the month of December – the month after we paid the balance in full, mind you – and saw a finance charge for $45!

I naturally assumed this was a billing mistake caused by the due date of the previous statement being on a holiday (New year’s day) and that one call to customer support would set things right.

Wrong.

It turns out I’m a victim of “Residual Interest”, which is a clever way for credit card companies to stick you with 2 interest payments when you carry a balance for a month even when pay your card balance “in full.”

I asked the very pleasant BofA support rep if this was a new change as I had never heard of or had to pay residual interest in the past. She assured me it’s common practice and part of my card agreement. ( I looked and could not find it.)

Fair enough.

I mean, it’s clearly legal for them to do, despite all the wonders of the Credit CARD Act of 2009, this is apparently one of the egregious acts not eliminated by the CARD Act. But It’s also perfectly legal for me to take my business elsewhere – and that’s what I’m doing.

So, goodbye Bank of America! I’ll be taking my purchasing habits to a new rewards card.

I wish it didn’t have to end like this, but it’s your choice not mine and at the risk of sounding arrogant – you chose poorly.

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Goodbye Bank of America! Copyright © Simple Debt-Free Finance

The pitch.

The commercial is not the usual late-night infomercial types. In fact, you can watch one of their commercials here.. There are quite a number of fly-by-night operations just looking to sell you useless software, often for a subscription fee. This doesn’t appear to be one of those services. However, it also probably isn’t worth the money either. More on that later.

The claim of MyFasterPC is to remove unwanted spyware, malware and viruses and also de-clutter your PC by removing files that are no longer needed. They also offer some general maintenance and optimization features.

The program.

When you visit the website, you are prompted to “download now” to “get your free trial”. This sent a few yellow flags, if not red flags, up in my mind. “Free trial” usually means you’re going to get roped into some sort of subscription or at the very least a purchase after the trial expires.

After you download and install the trial application, you are greeted with this welcome message:

“Clean, optimize and speed up” my PC? Sounds great! Let’s go!

After clicking continue however, I was greeted with this seemingly friendly message to “help us find unwanted items”, but when I read further I saw it was a confirmation to send anonymous information to the website.

This is OK.

Many sites and products collect this kind of information, and as long as it truly is anonymous there is nothing wrong with it.

So what kind of information are they collecting?

According to the website, it’s the following:

• Installed applications
• Hard drive size
• Processor type
• Windows version
• Memory capacity
• Programs set to run at startup
• Browser add-ons
• Services

Having over a decade in the computer software industry working with the Windows operating system, I can tell you that every item in the list above is not only relevant but in some cases essential to optimizing and de-cluttering a Windows PC. However, it’s not essential that the information be collected – unless they are trying to improve future versions and they want to get an idea of what the majority of their customers have.

The result.

After selecting to Continue, the application ran for a few minutes then displayed this results window:

I should tell you that I ran this on a plain-Jane Windows XP test machine, with minimal programs installed. So why did it find so many issues if it was a clean installation?

Disk space.
Well, the short answer is that simply browsing an hour or so on the Internet can create enough temporary Internet files to account for the 182.48MB to clean entry, as would the download and install of the MyFasterPC.com application itself, since that was downloaded and run from the browser.

Optimizations.
Windows usually ships with the least common denominator of settings, meaning that certain settings are enabled or disabled simply because most PCs fit that configuration. This inevitably leads to a number of settings that could be turned on or off for any given Windows installation based on hardware and other factors that would result in better performance. Frankly, I’m surprised it only found 3 that could be optimized.

Registry issues.
Registry “issues” is a broad term. Many optimization programs count items that appear in a program’s “Recently Used” menu as unnecessary and hence are added to the “registry issues” bag. Other times it can be references to programs that no longer exist.

Disk defrag.
Lastly, disk defragmentation is almost always recommended by these kinds of programs, since most hard drive go without being defragged for ever. The problem with this is that Windows already has defrag software built into it.

This list of issues seemed reasonable, so I clicked “Repair Issues.” That’s when my suspicions were confirmed.

The upsell.

While the MyFasterPC trial software was able to repair a number of the issues, there were many more that required the upgrade.

This is pretty much what I expected when I set out on this test. I figured that it was either loosely disguised spyware masquerading as a repair and optimization program, or it would eventually lead to a heavy-handed upsell to the “full version.”

Just out of curiosity, I clicked the upgrade button and the program brought up the purchase page of their website. They seem to offer 3 options and the full version runs $29.95 (regularly $39.95).

Conclusion.

Cleaning and optimizing your PC is absolutely worth doing for most older machines, or machines that have had programs installed and uninstalled recently, but in my opinion MyFasterPC is not the answer. I don’t think there’s anything under-handed going on here, and MyFasterPC.com does not appear to be a scam. I’m just not sure it’s worth the money either. It seems to be a little light on delivering the goods for the price.

You can get similar programs for free (see below) or name-brand software that does more for about the same price – for example, Norton 360

Still, for some users who may not be computer savvy or want to be MyFasterPC may not be all that bad.

A cheaper alternative.

Being a father of 3 with a wife who is a stay at home mom, I’m always looking to cut costs where I can – and free is my kind of price point.

Here are 3 Free alternatives to MyFasterPC.com that don’t take a degree in computer science to use:

CCleaner . This handy tool essentially does what MyFasterPC does in terms of de-cluttering and optimizing, but also provides greater control. It too removes Windows temp files, temporary Internet files, browser cookies, and much much more. It also finds and repairs registry errors.

Avast! antivirus . Avast is an excellent -and free! – antivirus program that will keep your PC free of spyware, malware and viruses, which sill lead to less need to repair your PC.

Comodo Firewall. A firewall program is as essential as an antivirus these days. Comodo is an excellent alternative to the premium applications offered by the big name vendors.

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MyFasterPC Review (Why It’s Not Worth the Money). Copyright © Simple Debt-Free Finance

My wife and I have been saving up for a new television for a while. (We had a 27-inch CRT television, and flat panels have come down to a reasonable price. Even so, it’s a good chunk of change when you’re living on one income…) So imagine our excitement when we found a sweet deal through Fatwallet: A 42” 720p Panasonic plasma for $480 from Amazon.com. (Before you launch into educating me how hopelessly outdated 720p plasma is, remember: we’re going from a 27” heavy-as-hello CRT with a 4:3 aspect ratio, and nowhere near HD.)

Anyway, this was a great offer and we jumped on it. We made sure when we ordered a flat screen t.v. that it was being sold through Amazon and not a 3rd party.

Here’s the problem: We never got our tv!

Well, to be honest, that wasn’t the real problem here. The real problem is that Amazon.com didn’t care that we never received our television. This is a text book case of how not to handle a customer complaint…

In the beginning, life is good.

One day after we placed our order, we received an email stating that our t.v. would be shipped within the next 24-48 hours. After that, the email stated, we would be able to track our shipment and see when it would be delivered. Great. In fact, the whole first week seemed to go by without a hitch.

Then we saw that the shipping company had listed our t.v. as “out for delivery”. That was an exciting moment, until we saw that the date of that was 3 days previous.

What the hell had happened to our t.v.?

It shouldn’t take 3 days to find our house and unload the t.v. since the local distribution center was 30 miles away. So we called the shipping company and one thing led to another..

Amazon.com contracted with Ceva shipping, who in turn sub-contracted to a second, more regional shipper – Let’s call them “company B”. Apparently, Amazon never passed the contact information along to the shipper, so they couldn’t call to schedule a delivery.

At that point, shipping company B returned the t.v. to Ceva so they could return it to Amazon as “undeliverable”.

Now, I understand that mistakes happen and things don’t always go perfectly, but it took us another 3 days of repeat phone calls to the shipping companies to find out where the t.v. was. Ceva would say that they handed the delivery off to company B, company B in turn said they had handed it back to Ceva. Both companies felt it was not their problem as they had handed it off to the next party in the process. Bottom line: no one had any idea of where this television was, or when they’d be able to find out.

This alone is unacceptable in the modern age of GPS and computer tracking, but it gets worse.

How to lose a customer.

When I called Amazon to get them involved, it was 6 days after our television was supposed to have been delivered. I calmly explained the situation and worked my way up the chain of command. I eventually landed with a very pleasant woman named Sarah, who was a “hardline support agent.”

Sarah seemed interested in helping me track down my television and even called her contact at Ceva at one point and then company B herself. When she took me off hold, she explained that they gave her the same story they gave me.

I told her that I was getting irritated by this and that it’s quickly becoming not worth my time to wait for Amazon to work things out with their shipping company – especially when I could just go to the local box store and pick up a comparable television that day!

Her response?

“I’m sorry sir. I understand your frustration, and it’s too bad that you had to experience this with your first big order from Amazon. This sort of thing hardly ever happens. You’re just unlucky.”

Really? “too bad” “just unlucky” She pretty much told me, “sucks to be you” (albeit in a pleasant voice). All of this was made worse by the fact that she couldn’t even tell me where my t.v. was.

So, I thanked her for her pleasant demeanor and told her to cancel the order and issue a refund.

An hour later, I was hooking up my new Samsung HD plasma screen t.v. that I got from a local box store for $20 more than the one I never received from Amazon. It was worth every penny of that extra $20.

It didn’t have to be like this.

For the life of me I just cannot understand why Amazon had nothing more to offer than, “gee we’re sorry.”

If Amazon had offered to upgrade my t.v. to the next size up, or overnight the same model I ordered to my house with a competent shipping company I would have been a happy customer. If they had even offered a token $75 gift card, it would have gone a long way toward making me feel like they cared about my business. Instead, they did the opposite – made me feel like I was just another number that they could live without.

One of the first lessons I learned when working with customer support was that a customer should always be left happy. If you can take a disgruntled customer and turn him into a satisfied customer you’ve done wonders for business. The reason for this is that most companies (apparently not Amazon) realize that a disgruntled customer is 7 times more likely to do what I have just done – share his unpleasant experience with everyone he knows. It’s a frustrating fact for businesses that most happy customers rarely tell their friends about a shopping experience that went well, while the irritated shopper will shout from the mountain top about the time things didn’t go right. It’s human nature. People like to grumble and complain. But why would a company choose to have negative things shared about them rather than the positive?

Why didn’t Amazon choose to have me tell people about how they made a mistake, but took care of me as a customer in the end?

Instead, they leave me compelled to say, “I won’t be shopping at Amazon.com again.”

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How Amazon.com Lost Me as a Customer. Copyright © Simple Debt-Free Finance

The interview is based around Dr. Stanley’s new book Stop Acting Rich: …And Start Living Like A Real Millionaire, and he discusses some more commonalities between the rich and how it sets them apart from the rest of the population.

Here are some of the interesting points Dr. Stanley raised in the interview.

1. The rich are very frugal.

Many of “the rich” had parents that were not only frugal, but well disciplined. This makes a lot of sense since discipline is required to succeed in anything at life, aside from simply getting lucky like winning the lottery.

2. Most millionaires today came from middle-class backgrounds.

They don’t come from affluent families, and they didn’t inherit their wealth. In fact, Dr. Stanley’s research shows that most came from comfortable, middle class families. They say they never felt embarrassed by their home or where they lived growing up. But they did have that uniquely American socioeconomic mobility that allows not only opportunity to become wealthy, but the siren call to hyper consume.

3. Resisting the call.

The nut of the interview, if not the book itself, is that the rich eschew conspicuous consumption. While they grew up in an environment that lends itself to consumption of luxury goods and “prestige products”, the rich simply didn’t partake. Instead, they simple live below their income.

4. Occupation matters.

What you do apparently matters more than simply determining your income. Many of today’s rich spend their time pursuing careers that have little to do with accumulating wealth. Contrary to populist screeds in much of the media today, the rich are not wall street bankers, investors or lawyers, but rather educators, engineers, business owners and retail store managers who “have a tendency to live below their means and to be quite efficient in transforming their income into wealth.”

5. Home is where you hang your hat, not an investment.

Most of the rich today don’t live in million dollar homes. In fact, there are 1,138,070 millionaire households who live in homes valued at less than $300,000, while only 403,211 who live in homes valued at $1 million or more.

6. Just who are “The top 1%”

The top 1% makes for a nice sound byte during political campaigns, but just who does that include? Stanley refers to the top 1% as “The glittering rich.” This demographic has an income of at least 7 figures and a net worth of 8 figures or more. They are extremely rich, and as Dr Stanley’s name for them suggests, they spend like it too.

Interestingly, even the “glittering rich” spend below their means. Of course, this might be because their means are so ridiculously large they have a hard time living outside those means. But, that doesn’t stop suddenly rich celebrities and lottery winners who blow through 7 figures in a matter of months, so I guess the moral is that if you earn it, you’re more likely to keep it.

7. Meet the income statement affluent.

Beside the glittering rich, Stanley profiles what he calls the “income statement affluent.” This demographic is made up of people with high incomes, but relatively low level net worth. They’re not as effective at transforming their income into wealth. This category includes a lot of physicians, attorneys and executives. The income statement affluent tend to be driven toward hyper consumption and the need to show off their high social status.

8. Meet the balance sheet affluent.

The balance sheet affluent have more modest incomes, but relatively large net worth. Stanley found that farmers are in large concentration in the balance sheet affluent. Other members of this group include educators, engineers, and small businesses owners. The balance sheet affluent are very effective at transforming their incomes into wealth – they accumulate assets while others accumulate liabilities.

9. Meet the aspirationals.

I couldn’t say it better myself, so here’s a direct quote from the interview regarding “aspirationals”:

“in sheer numbers, the largest consumer segment for pricey cars, vodkas and homes is not the millionaire population, it is the aspirationals. These are people who think they are acting rich via their adoption of prestige brands, but in most cases they are only acting like each other.”

They take their cues from Hollywood and the advertising industry. The problem is that most aspirationals know few, if any, really wealthy to emulate.”

10. How to become the frugal rich.

It should come as no surprise, certainly at this point, that the single biggest factor to becoming rich in America is to live below your means. Here is the minimal target savings rate for a typical family by age, According to Dr. Stanley:

• 30′s – 5% of their annual income
• 40′s – 10% of their annual income
• 50′s – 20% of their annual income

Sadly, most Americans are far below these figures. Probably because most are aspirationals?

Part of living below your means is owning a home you can afford. Beside the monetary reward to doing so, there’s a psychological benefit to owning an affordable home – “a highly significant correlation between satisfaction in life and living in a home and neighborhood which are easily affordable.”

Stanley’s rule of thumb for house price is that it should be less than 3 times your total household realized income, also never take a mortgage that’s more than 2 times your total household annual income.

Those would have seemed like laughable rules a few years ago, but they’re sounding much more sensible these days even if you aren’t trying to become a millionaire.

You can read the full interview with Thomas J. Stanley here.

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How To Be One Of The Frugal Rich. Copyright © Simple Debt-Free Finance

Accuquote review.

For those unfamiliar with the concept of AccuQuote.com, it’s a one-stop shopping site for life insurance quotes. It allows you to search and compare offers from various insurers based on your own criteria.

Using the web site is really quite simple. For example, to get started, you simply go to the web site and click the “Get a Free Quote” button.

You then enter basic info like your first name, last name address, phone #, email, as well as your gender, DOB, height and weight.

Next, select the amount of coverage desired. (read: Life insurance: how much do I need?) and select type of insurance (read: Life insurance: what kind should I buy?). Then specify whether you’re looking to buy new coverage, additional coverage, or a replacement policy.

Next comes the most involved (and personal) part of the Accuquote process – your health history!

You’ll have to answer the following questions:

• Do you use nicotine?
• Do you take prescription medication regularly?
• Have you ever been diagnosed with diabetes, cardiovascular disease, cancer or depression?
• Have you had any major surgeries?
• Did any of your parents or siblings have cardiovascular disease or cancer, prior to age 60?

Then there are some questions that aim to gauge your lifestyle risk:

• Do you engage in any hazardous activities such as private piloting or scuba diving?
• In the past 10 years, have you had any DUI’s, or have you had more than 2 moving violations in the past 3 years?
• Have you ever been convicted of a felony?
• In the past 5 years, have you filed for bankruptcy?

It’s important to note that you would be asked these questions by any reputable insurance agent regardless of where you went to purchase life insurance, it’s not just Accuquote.

After the health history and lifestyle questions, you need to select your desired rate class: Preferred Plus, Preferred or Standard Rated.

The Accuquote site has plenty of easy to use references for how best to answer the questions, and how to decide the amount and type of insurance you need. These are interesting and helpful, but you should definitely do your own research before using the first value you see.

At the end of this section, all that’s left is submitting your information. After you click the submit button Accuquote reviews your application info. Next, you will be contacted by email with a list of 5 or so insurance providers detailing their rates, terms and conditions.

In the next couple of days I received a phone call (my preferred type of notification) during the time which I specified was best to reach me. The person on the other end was my AccuQuote agent. He discussed the options available to me and actually recommended the one I had independently chosen – and it was NOT the most expensive! It was the 3rd most expensive option, but the cheapest option with an AA+ rating (in fact it was cheaper than some A rated companies!)

The company rating was important to me because I wanted to be sure that if my wife and kids ever needed the insurance (i.e.: in the event of my untimely demise), they would receive payment in a timely and hassle-free manner.

After selecting the insurance company and policy I desired, it was time to prove that I was really as healthy as I said. This meant blood work. I was expecting to have to drive 20-30 minutes out of my way to the nearest hospital lab. I was wrong. AccuQuote employs local visiting nurses to drive to your home (or place of work if so desired) and do that vampire like voodoo that they do so well. So, a couple of CC’s (it felt like pints!) of blood later, I was on my way to work and verified preferred plus a couple of days later.

After all of that, they mailed out the application and once I signed it and returned it, I was fully insured in the event that I shuffled off this mortal coil. Provided, of course, that it was not by my own hand within 3 months of completing the process. Suicide, it seems, is only covered after the 3 month grace period. Who knew?

Related Posts:

• Minimalism vs. Simplicity – Are You Missing the Point?
• Alternatives To Pet Insurance (Tips For Doing Without Pet Insurance).
• Tips for buying the best pet insurance.
• Is Pet Insurance Worth The Cost?
• Save Money on Insurance – Skip These Insurance Policies You Don’t Need!

Buying Life Insurance Online With Accuqoute (Review). Copyright © Simple Debt-Free Finance

Swap what you can give or can do for what you need with swapaskill.com

Swapaskill serves as a hub to connect people from all over the world – some looking for something, and others looking to provide something. Need your house decorated, and like to get rid of that second car you no longer need? Not a problem. Submit a posting or peruse the search results and find a match.

You can swap items, or skills or both.

The intent behind the site is to form a community of people who pay it forward, and help one another out. To that end, there’s no profit involved but there is a rating system of 5 stars. Each participant gets to rate the other’s involvement with a value of 1 (bad) to 5 (excellent) stars. The result is an online visual reputation that’s intuitively simple to understand.

The web site is very easy to use. The search feature even provides tips to help you form your queries. There’s a portion of the page dedicated to the top 30 skills in demand as well as being offered. It’s laid out like tags on a blog, so the text is weighted based on the amount in demand or being offered – i.e. skills that are in really hot demand are bolder and bigger than less popular skills.

A lot of members are in the UK, but it’s really limited only by what you want and what you can give. Obviously, decorating someone’s house in the UK in exchange for a used car isn’t going to work if you live in the US, but if you’re a graphic designer who’s looking for a web site, or a blogger looking for a writer, those geographic boundaries melt away.

Related Posts:

• Minimalism vs. Simplicity – Are You Missing the Point?
• How To Stream Online Content To Your T.V..
• Where To Watch Online Content Streamed To Your Television.
• 7 Tips for Cutting Spending and Putting Cash Back in your Pocket. (video)
• Could You Erase $70,000 in Debt in 1 Year?

Have A Skill, Or Need Some Work Done? Check Out SwapASkill. Copyright © Simple Debt-Free Finance

Let’s face it, interest rates on savings accounts, CDs and checking accounts are near historic (if not historic) lows. With interest rates so low, it’s almost not worth the inconvenience of keeping your money in a bank instead of under the mattress. Almost.

There are a lot of great deals to be had on CDs and checking accounts, but the best have strings attached. For example, a high yielding CD is likely to be a 5-year maturity, in which case you run the risk of locking your money up at today’s low rates and missing the bandwagon should rates begin to rise before your CD matures. In the case of high yielding checking accounts, you often have to have direct deposit on the account, or make a certain number of purchases on your debit card per month to qualify for the high rate.

But with sites like Rate Brain, you can peruse hundreds of banks for the highest rates, and the terms that suit your situation. All results are available nationwide and federally insured by the FDIC.

There database is updated daily, so you can always get the latest rates.

You can subscribe to get email alerts on the 5 highest rates of the day, or on a specific bank or CD. There’s also a cool past rate graph option, so you can get a visual indication of the direction of the rates, and the speed at which they’re heading in that direction. This could be helpful in avoiding banks that lower rates too frequently.

The results page shows the bank name, type, and current rate as well as the trend – whether it’s above or below yesterday’s rate, and what that rate was. This is helpful to get a quick idea of whether the bank raises or lowers its rates in small or large increments.

The results link directly to the page describing the offer on the bank site, so there’s no run around to some affiliate site.

If you’re looking for a quick and easy way to check the latest rates, and keep aware of changes check them out. Hey, it’s free so why not?!

Related Posts:

• REVIEW: Stock Investing For Dummies, by Paul Mladjenovic.
• REVIEW – The Automatic Millionaire
• When a $50,000 Salary Can Feel Like Minimum Wage.
• How to Find the Best Place To Put Your Savings.
• 7 Tips for Cutting Spending and Putting Cash Back in your Pocket. (video)

Looking For The Best Rates On CDs, Checking And Savings Account? Copyright © Simple Debt-Free Finance

The promotion.

Every day that you pay a bill online using your Electric Orange checking account, you’ll be entered in a sweepstakes to win $1,000. That’s a daily sweepstakes, but they also offer a $10,000 grand prize! You can enter up to 10 times per day, and obviously the more bills you pay, the more chances you get to win.

Visit ingdirect.com/billpaysweeps to see the Official Rules and to learn more.

Electric Orange accounts.

If you are already an ING Direct customer, starting an Electric Orange account is a piece of cake – you can even use one of these referrals to get an extra $25!

If you’re not a current ING direct customer, what are you waiting for?! They’ve got some of the best rates and the easiest to use web page I’ve seen for an online bank.

Related Posts:

• Capital One to buy ING Online.. So Long ING?
• HSBC Direct Increased its Rate!
• ING Direct Orange Savings Referral Links.

Pay your bills using Electric Orange Bill Pay and you could win $1,000 Copyright © Simple Debt-Free Finance

Cost of transfer: FREE
Time to transfer:

To ING DIRECT Accounts: Instant
To External Accounts: 3 business days

Of course, you have to have an Electric Orange account to use this feature, but the recipient does not.

“How to Send a Person2Person Payment:

1. Enter the recipient’s name, amount and select a send date.
2. If the recipient is not in your address book, you can add them by entering their Email Address, Account Number and Routing Number (for non-ING DIRECT accounts only).
3. Verify the information, and click ‘Send’.

Additional Info:

• The amount will be deducted from your account on the Send Date.

• P2P Payments to other ING DIRECT accounts are available immediately upon payment pickup.

• P2P Payments to accounts at other banks take 2 bank business days after payment pickup due to transfer time”

As you can see from above, you do need the account number of your recipient’s bank account and the routing code of his bank to send the money.

Related Posts:

• Capital One to buy ING Online.. So Long ING?
• ING Direct Electric Orange Checking referrals.
• 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.

Person2Person Payment at ING Direct Copyright © Simple Debt-Free Finance

Electric Orange is the online checking account version of it’s popular Orange Savings account. Just like Orange savings, Electric Orange (EO) has one of the easiest to use web sites in the banking business, offers competitive rates and offers $25 free when you sign up with a referral. Electric Orange accounts are like siblings to Orange Savings accounts, so money transfers are instantaneous between the two. You can pay bills direct from your EO account too, free of charge.

Here are the details:

Electric Orange Checking Rates

Benefits:

• Your FDIC-insured Deposits Earn Interest (see above)
• Free MasterCard® Debit Card for all purchases
• Free Online Bill Pay
• Free access at over 35,000 ATMs through the Allpoint™ network
• Free postage – they mail your paper checks for you
• P2P Payments – Show friends how cool you are.  Securely email them money. It’s Fast and free.

EO accounts also offer overdraft protection, here’s how that works:

When you sign up for an EO account, you select the amount of over draft protection you’d like. That amount becomes a line of credit that gets used in the event of an over draft on the account. You pay interest every day your account remains over its limit, but if you’re like most people and only experience a shortfall in between a bill payment posting and your pay check being deposited, paying interest for a day or two is going to be a lot cheaper than the $25-35 flat fee most brick and mortar banks charge.

Check out the web site for more details or if you’re ready to open an account, you can use one of these referrals below and get a $25 bonus if you open the account with an initial deposit of at least $250 – that’s a 10% return on your money!

Electric Orange Checking referral
Electric Orange Checking referral
Electric Orange Checking referral
Electric Orange Checking referral
Electric Orange Checking referral

Related Posts:

• How to Find the Best Place To Put Your Savings.
• Capital One to buy ING Online.. So Long ING?
• How to Waste Your Money in 15 Easy Steps.
• Why Do You Bank Online?
• Person2Person Payment at ING Direct

ING Direct Electric Orange Checking referrals. Copyright © Simple Debt-Free Finance

This handy site lets you search by zip code and filter banks on a range of features:

• Interest on balances

• Overdraft Protection

• Online Bill Pay Service

• 24-hour automated telephone banking

• Email Alerts for balances, transfers, payments or deposits

• Mobile banking services

• Download activity to Quicken or MS Money

• Unlimited check-writing

• Debit Card Reward Program

• Non-Bank ATM Fee Rebate

• Free additional linked deposit account(s) (i.e., savings, money market, checking)

• Free or discounted check-printing services

After ranking the available features, you are asked to answer a few questions about your average monthly balance, credits and debits to factor into the fees you would likely incur under the various banks.

Once that’s done you get a very nice list of banks that fit your criteria, and a summary page of the fees, features and perks of each.

If you’re looking for a new bank, give them a try. It could take hours off your comparison shopping.

Related Posts:

• 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.
• HSBC is Closing its Local Branch. Should I be Concerned?
• Capital One to buy ING Online.. So Long ING?

Find a Better Bank with FindABetterBank.com Copyright © Simple Debt-Free Finance

What’s The Cost has financial calculators for:

• Determining the true cost of a loan (monthly cost, and total + interest)
• Determining the true cost of a mortgage (monthly cost, and total + interest)
• Find out the effect of a rate change (increase or decrease)
• Determining how much you’ll have in savings with a given plan (monthly contribution, yearly increase, interest rate, length of time, etc..)
• Determining how long it will take to pay off your credit card debt.
• How much you’ll make by Stoozing (making free money from 0% credit cards)
• How much your smoking habit costs you.
• How much your drinking habit costs you.
• Interest:
  • Effective annual interest rate – This is the interest rate taking compound interest into account.
  • Annual interest rate compounded monthly – This is the nominal interest rate, from which the effective rate is calculated when compounded monthly.
  • Annual interest rate compounded daily – This is the nominal interest rate, from which the effective rate is calculated when compounded daily.

There’s also a bunch of other info on getting out of debt, snowballing and some fun stuff too. Check them out.

Related Posts:

• Pssst… The Joneses Don’t Care About You!
• Debt is Really a Good Thing?!
• Living on a Single Income: 7 Years and Counting.
• Minimalism vs. Simplicity – Are You Missing the Point?
• How To Stream Online Content To Your T.V..

Calculate true cost of debt with What’s the cost! Copyright © Simple Debt-Free Finance

• No account minimums.

• Low cost.

• No inactivity fees.

• Member of FINRA/SIPC (like FDIC for investment companies)

I basically wanted something to buy and hold stock whenever I had the extra cash to do so… i.e. not an automated venture.

Not only did I visit each website and scour their available online info, I went trolling through forums and news groups to see what other people were saying. Eventually I had narrowed my selection down to 2 choices: ShareBuilder and FOLIOfn. I didn’t want to back a losing horse, so when I started seeing a lot of chatter about FOLIOfn being on financially unsound footing, I decided to go with ShareBuilder.

In the end, FOLIOfn did not fold, and I could have gone with them but that’s hindsight.

ShareBuilder offers 3 plans to choose from

Here’s a quick breakdown of features associated with each plan:

BASIC:

• No Account Minimums
• Automatic Investment Plan
• Real-time Trades
• Mutual Funds
• Express Funding
• Investment Guidance
• Options Trading
• Margin Borrowing
• Research Tools
• Gain & Loss Tracking

Standard:

• BASIC PLUS:
• Included Automatic Investments
• Discounted Margin Rates
• Stock Grades

Advantage:

• Standard PLUS:
• Stock Reports
• Strategy Reports
• IPO Priority Notification

Well, since the basic fit my main criteria, I chose that and haven’t looked back since. The best part is that it doesn’t cost me a dime unless I buy or sell a stock! Which brings me to the next important feature – Price!

How Much Does It Cost?

Basic:

• $4 to buy
• $9.95 to sell Market, Limit and Stop Orders
• Phone trades: $29.95

Standard: ($12/month – 1st month free)

• 6 free buys per month
• $2 to buy after the 1st 6.
• $9.95 to sell Market, Limit and Stop Orders
• Phone trades: $29.95

Advantage: ($20/month)

• 20 free buys per month
• $1 each thereafter
• $9.95 to sell Market, Limit and Stop Orders
• Phone trades: $29.95

All levels offer Margin Borrowing, with the Standard package giving a 0.25% discount and the Advantage a 0.5% discount in the margin rate. All levels also include PortfolioBuilder. PortfolioBuilder is a general guide to take the user through risk tolerance and gets them to focus on what they’re investing for. I haven’t used this feature much, since I’ve educated myself prior to joining on most of what it provides.

Since I joined ShareBuilder, they have been acquired by ING. This actually makes me very happy since I believe ING is a very stable company, and have also been a member of their Orange Savings and Electronic Checking accounts for years. Since ING owns ShareBuilder, transfers to or from ING accounts are free AND instantaneous! No waiting 3 days for the transfer to be completed.

There’s also no cost to reinvestment dividends – you can create your own DRiPS!

If you’re interested in joining ShareBuilder, you can get $25 free when you open an account using one of the promo codes below:

ing sharebuilder promotion code

ing sharebuilder promotion code

ing sharebuilder promotion code

ing sharebuilder promotion code

ing sharebuilder promotion code

NOTE: If they have stopped working, please let me know so I can get some fresh ones!

These promotional codes are similar to the ING direct savings account referral codes

Related Posts:

• How to Survive (and Possibly Thrive during) Stagflation.
• 2009, year in review.
• 5 Reasons To Avoid Index Funds?
• Jim Cramer’s Tips for Detecting Sector Rotation Stock Bottoms
• Jim Cramer’s Tips for Detecting Individual Stock Bottoms.

Get $25 Free When You Open an ING ShareBuilder Account! Copyright © Simple Debt-Free Finance

The whole idea behind Book Swim is that it is an online book rental club that advertises itself as Netflix® for books. The idea is simple. You create an account, request a book or two and they arrive in the mail within a couple of days for you to read at your leisure and you never have to pay late fees.

The frugal side of me thinks, “Hello… ever heard of a Library?” but alas, my library doesn’t often have new releases I want. I am content to wait until I can get the books I want through inter-library exchange, but I’m the first to admit that while I enjoy reading, I am not the kind who needs a new book every 3 days. I’m happy to get lost on the Internet for the time it takes to get a new book. My frugal side is just stronger than my book loving side.

They offer 4 plans:

Light Reader

This level costs $19.98 per month and lets you have up to 3 books at any given time for as long as you’d like.

Casual Reader

The casual reader costs $24.97 and lets you have 5 book out at a time.

Avid Reader

This level allows 7 books at a time and costs $29.96 per month.

Devout Reader

The big daddy level gets you 11 books out at any time for $39.94 per month.

YIKES!

Sorry. That was my frugal self again. But seriously, even the cheapest level is $20 a month!? I’d be hard pressed to be able to rationalize this one. And what’s with those odd dollar amounts: $19.98, $24.97, $29.96 and $39.94 ?? It must be some kind of code, but I digress…

Still, I know there are people out there for whom reading is like breathing, and so it may be a viable service in the end. I suppose much of the benefit rests in how poor your local library system is and just how addicted to reading you truly are. If you can’t get anything newer than a Gutenberg bible or it’s all encyclopedia’s from the Eisenhower years, this is probably the service for you. I’ll stick to my local library though.

Just for kicks, I checked their BBB (Better Business Bureau) info for complaints.  They have a rating of A- with 2 complaints, both marked resolved. It doesn’t look like they’re a scam or shady business venture, you just need to decide if they’re worth the price.

If you’re interested in trying them out, head on over to the BookSwim website.

Related Posts:

• Want to Build Wealth, and be Secure? Focus on Learning Instead of Earning!
• Robert Kiyosaki Plays Loose With His Math in Financial I.Q.
• MyFasterPC Review (Why It’s Not Worth the Money).
• Buying Life Insurance Online With Accuqoute (Review).
• ING Direct Electric Orange Checking referrals.

Book Swim: A Bad Idea or Library Resource for the 21st Century? Copyright © Simple Debt-Free Finance

Personal Finance cards from Nuru: a distinctive gift.

I received my Nuru Personal Finance cards from the giveaway at MoneyNing a few weeks ago (Thanks again David!)

I actually got the cards within 3 days of winning the giveaway. I’ve just been so busy, I haven’t been able to blog about until now.. Yeah, I know, the giveaway was forever ago, but I think these cards would make a great stocking stuffer and I’m hoping this is still a timely post

The personal finance cards are an excellent primer on the basics, and totally portable. That’s the advantage of these cards over a book! They fit quite comfortably in the pocket of my jeans or jacket, and they’ve given me something to look at when I’m stuck in traffic and get tired of staring at all the lifeless faces stuck with me.

The cards cover:

• Essential Vocabulary

• Personal Planning

• Investing

• Loans

• Financial Vehicles for Retirement Planning

• Credit

• Insurance

The topics are laid out so that they build upon the previous topics, and have a nifty notation for cross referencing various topics on other cards.

They have a clip-ring to hold them together, so you’re not constantly dealing with a shuffled deck!

The company that makes them is Nuru (Knowledge for Real Life). They’ve got a bunch of other topics too like Fitness, First Aid, Automobiles Maintenance and more. Each deck sells for $7.50 – $10.00 and makes a unique stocking stuffer. Check them out Here

I think they would make an excellent gift for anyone who interested in learning more about personal finance, but isn’t going to sit down with a 200+ page book on the topic. In fact, these cards might just get such a person interested enough to eventually delve into a book.

They can also serve as a helpful reminder of the basics for someone who may have forgotten or just lost sight of the building blocks of proper personal finance.

Thanks again to MoneyNing and Nuru for the giveaway!

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Nuru Cards – a great stocking stuffer! Copyright © Simple Debt-Free Finance

I recently received a sample issue of the Bottom Line Personal magazine. The tag line states: “Bottom Line makes you Healthier, Wealthier, Wiser… Happier too.”

With headlines touting such things as the “Millionaire’s secret to retiring richer faster”, my scam alarm was ringing loudly.

Secret # 1. How to Make More Money Than 90% of Investors – Even if You’re Lousy at Picking Stocks.

They give some silly example of an investor who lost 80% of his nest egg in the tech bubble bust of 2000. He then turned his remaining $33,000 into $7 million over the next 15 months.

Wow! Sounds great. How’d he do it?

By eliminating his loses, of course. We’d all be millionaires if we never lost money in the stock market, right?

Their example goes on to state that:

If you invest $5,000, and lose 20%, you’re down to $4,000 ($1,000 is 20% of $5,000).

Fair enough.

But for you to recover that loss you need to earn a 25$ return ($1,000 is 25% of $4,000).

OK, I’m with them so far.

The more you lose, the harder it is to get back. Recovery from a 50% loss requires a 100% gain, and recovery from a 75% loss requires a 300% gain.

Then how the hell did the investor profiled in the tech bubble example get back his 80% loss just from avoiding further losses?

The answer is he didn’t, it’s a load of bunk.

But the underlying methodology is sound: limit your losses in the stock market by using stop-loss orders.

Secret # 2. Make Your Grandchild a TAX-FREE Millionaire!

The claim:

“If your teenage child or grandchild is gainfully employed, he can contribute up to $4,000 a year to a Roth IRA. If the child puts $4,000 a year away between the ages of 16 and 21 and the Roth IRA earns 10% per year, the child will have $2,045,042 at the age of 65.”

Sounds great on the surface. But what’s the catch?

Inflation.

After those 49 years piling up in the Roth IRA, that $2,045,042 would be worth only $1,391,185 in today’s dollars, assuming a relatively benign 3% inflation rate. That and it took 49 years to get there, so while the headline makes it seem like it’s getting rich quick, it’s anything but.

Does this make it a scam, or mean it’s not worth doing? No, of course not. It’s the point of an IRA or 401(k) in the first place. It’s also the basis of David Bach’s Automatic Millionaire. Just don’t confuse automatic with instant.

Secret # 3. How to Pay Off Your 30-Year Mortgage in Just 23 Years.

No secret here – it’s called a Biweekly mortgage payment.  The only catch is to make sure your lender doesn’t charge a fee for the program or any pre-payment penalties.

Secret #4. Lower Your Tax Bracket.

The claim:

In one easy step, lower your rate to as low as 15%!

This one is so vague I can’t be sure what the “secret” is they’re selling. It could be creating your own business as some form of tax shelter. Maybe it’s legal, maybe it’s not. There are legal ways of doing this. For example, you could invest in tax-free municipal bonds or max out your pre-tax retirement accounts to lower your taxable income.

Secret #5. How to Boost Your Tax Refund.

The claim:

You can boost your tax refund even if you take the standard deduction!

Yeah, I can over-pay the government every pay period by claiming 0 dependants. Whoopdy-do! No thanks, I’d rather owe the government $10 at the end of the year. Then I know I’m keeping most of my money.

So are these really scams?

I think scam is probably too harsh a word. I haven’t actually seen a full issue, but this “free copy” mailer certainly makes it seem like they are trying to make a buck (or take a few of yours) selling information that’s relatively easy to find on the Internet or through other sources. In short, there’s nothing secret about any of it.

Still, it just looks “scammy.” It feels like something targeting gullible retirees. In fact, looking at reader testimonial page shows 6 people – all over the age of 60.

Bottom line on the Bottom Line Magazine: Read some personal finance magazines or blogs and save your money.

Related Posts:

• Beware ezsver rw and the proflowers scam!
• 6 Tips for Spotting an Investment Scam.
• The Coming Economic Collapse – How You Can Thrive When Oil Costs $200 a Barrel
• Want to Build Wealth, and be Secure? Focus on Learning Instead of Earning!
• Robert Kiyosaki Plays Loose With His Math in Financial I.Q.

Bottom Line Secrets Magazine, a Scam? Copyright © Simple Debt-Free Finance

Bills iQ is a set of multiple choice questions that are broken down into different sections. The sections include: Credit, Debt, Budget, Wealth, and Life Plan. They essentially start you thinking about taking stock of where your overall financial health is now, and lead you through to setting goals and planning various aspects of your life.

They score you as you go through each section and provide an overall “Bills IQ” on a scale of 0 to 100%. The great thing is not the score, but the overall report it gives you at the end. For each question you answer, it provides a response to your answer as well as any tips or hints for improving that various aspect of your financial health.

For instance, a question about the most important factor in determining your credit score will include steps you can take to improve your credit score.

Bills IQ is provided by Bills.com, which offers financial information and services like Debt consolidation, in case you’ve found yourself with too much debt to dig out from under by yourself.

I found myself $16,020 in debt one night and seriously contemplated such services. Of course, it didn’t happen over night – that was just when I realized what had happened. Debt accumulation typically happens in a slow bleed sort of way. Many relatively small purchases that snowball into 5 figure debt before you know what happened. That was my financial tipping point. That was when I finally woke up and decided to take control over my money, for I had unwittingly let money gain control over me.

For a while, I considered pursuing debt consolidation avenues. I thought about taking out a HELOC (Home Equity Line of Credit) or a personal loan to consolidate my credit card debt. In the end, I received a 0% interest offer from one of my credit cards and opted for that instead. It worked well because I stopped accumulating more debt, and I paid off the balance before the interest reset.

Not everyone can be so lucky and 0% offers are harder to come by since the credit crunch has caused the banking industry to slow down their lending.

If you’re lucky enough to have home equity, but unlucky enough to have found yourself in debt despair as I was, then a HELOC might be useful. You can often consolidate credit debt, which can run as high as 27%, into a second mortgage as low as 6% and the interest is tax deductible.

What ever path you take, just be sure you resolve yourself to doing what it takes to pay down your debt. Also, become financially literate and change your behavior to avoid finding yourself in the same place in the future. That’s what I did and I have absolutely loved sleeping well at night ever since.

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What’s your Financial IQ? Copyright © Simple Debt-Free Finance

What I like most about this book is that the author doesn’t try to “sell” stock investing to the reader, but covers the basics like the difference between investing (including stocks, money markets, CDs) and speculating.

At first glance, this book seems very similar to Getting Started in Stocks by Alvin D Hall, but this book is not nearly as nuts and bolts about investing as is Hall’s book.

Mladjenovic covers basic terminology and concepts like: appreciation (capital gain), risk vs. reward, and the concept of yield. He also briefly covers the various Stock Exchanges: NYSE, NASDAQ, AMEX.

But the heart of this book is Mladjenovic’s key success factors.

Key Success Factors:

• Analyze yourself.
• Know where to get information.
• Understand why you’re investing: Seeking appreciation (capital gains) or income (dividends).
• Do your research.
• Understand how the world affects your investments.
• Understand and identify “megatrends”.

Analyze Yourself.

Determine how much you own and how much you owe. This is where the concept of assets vs. liabilities is brought into the discussion. Using these two categories, he encourages the reader to create and assess his personal balance sheet. This exercise not only provides an eye-opening window to the reader’s financial state, but it provides a basic skill that will be used later when analyzing individual companies when looking for stock to buy.

The focus of this step is to determine and understand your Net Worth. Later sections of the book focus on growing your Net Worth.

Know Where to Get Information.

Here, the author stresses the importance of using multiple sources for information and advice. He lists some key online resources, such as U.S. Securities and Exchange Commission (SEC) in general, and EDGAR (the Electronic Data Gathering, Analysis, and Retrieval system) in particular. He covers different kinds of brokers and how to decide the right one for you, but he also discusses how to check the SEC, National Association of Securities Dealers (NASD) and the Securities Investor Protection Corporation (SIPC) to ensure that your broker does not have any black marks on his record. Incidentally, the NASD is currently known as Financial Industry Regulatory Authority (FINRA).

Understand Why You’re Investing.

Know your purpose!

If you want income, invest in dividend paying stock. If you want appreciation (growth) invest in growth (typically non-dividend paying stocks) stocks.

Stocks are a tool, a means to an end. To simply state that you are investing to “get rich” is not a plan. This part of the book covers short term, mid-term and long term goals. The author provides sound examples of when to invest in each type.

In one example, he recounts the story of one man who’s investment “advisor” put his child’s college fund money into Internet stocks circa 1999. Who know’s if this is true, but it is a prime example of why the latest investment fad is not a good place to stash your long term funds. Similarly, don’t have your emergency fund in stocks, but DO invest in stocks for long term like retirement (if your retirement is more than 5 – 10 years away).

This flows nicely into the topic of investing style: conservative vs. aggressive.

Conservative looks for a proven record, large cap stocks with market leadership and perceived clout. Conservative investors are looking for long term, consistent growth, but not a roller coaster ride of growth stocks.

Aggressive investors look for “jack rabbit” stocks with great potential and capital gains possibilities (no dividends). Such stocks tend to be innovative (i.e. new technology or service) and generally small cap.

Do Your Research.

This section is devoted not so much to where to get your research, but what kinds of things to look at when gathering your research. For example, the author discusses comparing a prospective stock to its respective index to see how well it performs against its peers. Most people have at least heard of the Dow Jones Industrial Average (DJIA), but Mladjenovic covers many other indices than just the DJIA. He also recommends visiting www.djindexes.com to analyze each index so that you can understand how they are weighted, and what exactly they track.

A quick visit to the site indicates that there are many indexes, and some are quite exotic like the Dow Jones DIFC Arabia Titans 50 Index. When investing in index funds, it’s best to stick with broad based indexes like the Wilshire 5000 and S&P 500 or sector indexes.

Mladjenovic outlines the following relevant questions when analyzing a company:

• Is the company making more net income than it did last year?
• Are the sales increasing?
• Do you understand the company’s industry?

He suggests that if you’re looking to invest in growth stocks, you should only invest in such stocks IF the company is profitable, AND if you understand where they derive their income AND from where it generates sales. This is good advice, but I’m not sure it pertains only to growth stocks.

Other factors in determine potentially successful stocks:

• Industry buying. Are mutual funds buying the stock you’re looking at?
• Analyst attention. This can offer positive reinforcement IF it backs the research you’ve done independently
• Influential Newsletter. See above.
• Consumer publications. If consumer reports rates a product of your company as good, that’s a positive influential factor.
• Management team. The company should have a management team with a strong history of success.
• Growth of earnings.
• Growth of equity.
• Insider buying. If management is buying, they probably know something good about the company.

Mladjenovic does a good job of covering the basics of risk in growth stocks as well as possible Enron like companies. He uses Enron quite a bit as an example of how the numbers alone are not always enough if the company’s management is corrupt. In my opinion, this is another reason why individual investors should stick primarily to index and mutual fund investing, unless they are really going to take the time to baby sit their individual stocks. However, if investors do decide to take on individual stocks, Mladjenovic does a good job of outlining the application of stop loss orders to limit the downside. Again, he uses Enron as an example here.

Just to round out the section, he discusses IPOs and why they are rarely worth the risk, and covers DRP’s and dividends. He details how to determine when a dividend is “safe” and gives a good overview of the benefits and drawbacks to high yield stocks, and provides safer alternatives (bonds, treasuries, CDs, etc..).

He only touches on covered calls and options, but mostly refers to “Stock options for Dummy’s.” This is probably 1 third up sell, and 2 thirds good sense since these topics are not essential to becoming a solid investor.

Mladjenovic also stresses the importance of paper investing to improve your knowledge and risk tolerance.

Understand how the world affects your stock.

Mladjenovic spends a bit of time discussing various types of economic indicators: coincident indicators, lagging and leading economic indicators (LEI) and how to determine their effect on your investments.

He discusses causes and effects of interest rates, provides a good overview of larger economic indicators and ties it all together with what they mean and how they factor into a stock’s performance.

There is a good overview of how a bull market works (spawning from the bottom of a bear market) and how to avoid being gored by the horns of a mature bull market. He provides strategies for investing in a bear market as well as a bull market.

He also offers many useful links and resources for further study:

www.financialsense.com

www.freemarketnews.com

www.prnewswire.com

www.hoovers.com

Understand and identify “megatrends”.

A megatrend (as defined by Mladjenovic) is a trend that has reaching impact on the population and hence economy and stock market.

Some megatrends are:

• The advent of Internet
• The aging of the U.S. population
• Rising energy prices
• The overheated housing market
• The hot international and emerging market stocks

He spends quite a bit of time talking about another big megatrend: Debt.

I think he gets a bit preachy about debt, energy prices and derivatives though. These are serious topics and carry sway over the economy and the stock market, but at times the tone seems a bit too “sky is falling” to me. That being said, his discussion of the risk that the enormous debt the U.S. government AND citizens have accumulated is pretty scary stuff and should not be looked at too lightly. In the end, I’m probably being a bit too picky here.

Mladjenovic recommends the following to take advantage of megatrends – look for companies with:

• A strong brand (examples include Coke and Microsoft)
• High barriers to entry (example: UPS and FED Ex)
• Focus on research and development (example: Pfizer and Merck)

He wraps things up with a discussion of megatrends for the current decade and past decades: US large cap of the 90′s, Japanese stocks of the 80s, commodities, energy and natural resources of the 70s and 2000s.

Examples of future megatrends are debt, derivatives, aging of the boomers, and emergence of China and India.

Mladjenovic also does a great job of illustrating how the main stream media often amplifies trends just when they are ending, thus acting as a contrarian indicator!

Conclusion.

Stock Investing For Dummies gets at the roots of investing, rather than providing a how to guide. But how you go about investing is as important as what you invest in.

It is for this reason that I believe it makes a great companion read to Getting Started in Stocks by Alvin D Hall, Both books are a good place to start but I think that neither provides enough information on its own for the beginning investor.

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REVIEW: Stock Investing For Dummies, by Paul Mladjenovic. Copyright © Simple Debt-Free Finance