Personal Finance

Safe Online Holiday Shopping

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Shopping online hasn’t really gotten any safer in the last few years. Most reputable online retailers use secure transfers to encrypt your credit card information when checking out. However, as an increasing number of high-profile corporate hackings have shown, just because your credit card number was safe when you entered it, doesn’t mean it stayed safe. The other issue with online retailers is knowing when the retailer themselves might not be safe. Sure, company’s like Amazon, Walmart, and Barnes & Noble aren’t out there to steal your credit card data, but there are a tons of little retailers you haven’t heard of, and they are the ones with hard to find items, unique gifts, and occasionally, deep discounts. Giving your financial information to them can be dicey. So, just how do you manage to have safe online holiday shopping this year? Limited Use Credit Card Numbers There are some tricks you can use to stay safe while shopping online. Many credit cards, or credit card companies, offer limited use numbers. These virtual numbers can usually be generated online. They link to your actual account, but the number you enter is a one-time use number, or limited to a certain amount. …

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Does Raising Interest Rates in December Matter?

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interest rates federal reserve

Usually, I caution people against paying too much attention to the Federal Reserve and when they set interest rates. For most investors, this is a distraction that doesn’t really impact, over a longer term, their investments as much as the media suggests it does. However, since the Federal Reserve has not raised interest rates in a very long time, there are those who don’t really remember what happens, and even those who weren’t adults, or investors, the last time the Fed actually raised interest rates, so let’s review a bit. How The Fed Raises Interest Rates The Federal Reserve actually sets interest rates in two way. First, the Fed sets a discount rate, which is the rate the Federal Reserve itself charges to banks for lending them money overnight. The second interest rate is the Federal Funds rate. This rate is the interest rate that federally insured banks charge either other for overnight loans. (Exactly why, banks need to borrow money in this way is a topic for another day.) As you can see, neither of these interest rates directly affects you as a banking customer or investor. However, these interest rates heavily influence other interest rates that do apply …

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Lower Investment Costs on ETFs

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There are many different ways to successfully invest for the long-term. One such strategy is indexing. The idea of index investing is that over time very few, or maybe even none, of the various mutual funds out there, nor any portfolio you make yourself, beats the returns of the index anyways, especially after expenses. Therefore, you may as well just invest in the indexes themselves. Of course, there is no way to directly invest in an index. To do so, you basically have two choices, index funds, or index-based Exchange Traded Funds, or ETFs. (Theoretically, with enough time and money, you could create your own portfolio to mimic an index, but this is often impractical.) When doing index investing, it is important to keep the expenses, or fees, of your investments as low as possible. After all, you aren’t paying for research or in-depth analysis, since the indexes already exist. Index Investing and Expenses Exchange Traded Funds, trade on the stock exchange, just like their name suggests. That means you buy them just like you do a stock, by putting in an order. For most investors, that purchase (and any subsequent sales) involves a commission, that’s part of your expenses. The …

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Who Needs a Financial Planner?

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financial planner helpful

Ask any financial advisor, and they’ll tell you that everyone (with money, at least) needs a financial planner or advisor. Ask any do it yourself financial planning type and they’ll tell you that no one need a financial advisor or planner. The answer, of course, is much more complicated than that. However, there are some people who are very likely to actually need a financial advisor. Big Money Quickly People who suddenly come into large amounts of money almost always benefit from a professional financial advisor. Unlike those who slowly grow into their fortunes, people who suddenly acquire wealth don’t have time to slowly build up experience with bigger finances. Consider someone who takes 5 years to grow into a $1 million net worth. That first year, they realize there are some tax things they need to consider. During the second year they find out other things, that maybe only really impact people with more than $500,000, and so on. But, when the money comes all at once, there is no time to build up that experience, and, unfortunately, many financial mistakes are irreversible. People who sell their company, or whose stock options finally come in, or otherwise come into a …

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World’s Easiest Retirement Plan

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easy retirement plan

So, you want to do some retirement planning, but it all looks very complicated. There are numerous ways to save for retirement, and there are a lot of different investment accounts, and so on. You may be wondering if you need a financial advisor or financial planner just to make heads or tails of everything. Don’t worry. Most of that stuff isn’t necessary. There are a few facts that will help you develop a rock solid retirement plan for free, in no time at all. Easy Retirement Planning Keep in mind that most of the complications that come from talking about things like financial planning or retirement planning come from the fact that there are actually a lot of different people and a lot of different financial situations. But, when it comes to building a retirement plan yourself, or with a professional, the reality is that 90 to 95 percent of people just need a basic retirement plan with no bells, whistles, or complex calculations. Fact #1: It is almost impossible to save too much money for retirement. The reality is that most people are very much under-saving for retirement. Fully funding a retirement at a lifestyle nearly equal to the …

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Use Accounts to Save and Budget

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I talk a lot about the psychology of money. The reality is that no matter how much something makes sense mathematically, it just may not work for most people because money isn’t just something we move around on a spreadsheet. One of the most common questions I see are in the form of “What should I do with $5,000,” or “How should I invest $3,000?” The answer is to put it in your savings unless you currently have enough money saved for your emergency fund and short-term goals, otherwise, put it in one of your investment accounts. People don’t like this answer. Why? Money psychology. Use More Accounts to Save One of the problems with money on a personal financial level is that it comes and goes so easily, often without really noticing or appreciating it. Consider a man (or woman) age 35. He earns $120,000 per year, has a mortgage, a car payment, some nice hobbies and he puts money away for his kid’s college and his own retirement. Honestly, that’s pretty great and he should be (and is) pretty happy. Financially speaking, this means that each month he earns $10,000. His company takes out $5,000 for taxes, insurance premiums, …

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Investor Types

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Often, when I write about stock market news, or other economic events, I conclude by reminding long-term investors that there is no need to overreact (or really react at all) to the current short-term events. It was brought to my attention that not everyone is a long-term investor. That’s not true, but what is true is that not everyone is solely a long-term investor. And, that being the case, perhaps it is worth me addressing other investing types and issues, here on Finance Gourmet. That sounds fair, but in order to do so, I think I need to start with the different types of investors. Different Types of Investors Long-Term Investors The most common type of investor is the long-term investor. Everyone with a 401k or an IRA falls into this category. The goal of this investor should be to construct a well diversified portfolio and then review and rebalance it regularly. The strength of this type of investor is that over time, this is a sound approach that has never failed. The weakness of this type of investor is forgetting the strength and reacting inappropriately to short-term events. This category could be broken into two sub-types, those who are only investing …

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Stock Market See-Saw

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Yesterday, I wrote about how the stock market plunge in China and the subsequent drop in the U.S. markets was not something anyone other than short-term investors should be worried about. Typically, I wouldn’t write another article about the stock market again right away, because I believe that most people would be better off watching the markets less, rather than more. But, I couldn’t resist today. Yesterday, there was an article that included the word “Bearmageddon” suggesting that a bear market of armageddon-like proportions was in the offing after the U.S. markets closed down six-days in a row. Other articles couldn’t stop pointing out thing like the biggest drop ever, or the longest-streak of down days since whenever, and so on. Today, the markets closed up. The stories today are about the “biggest gain in almost 4 years.” Talk about whiplash. The reality is that the U.S. stock market trades, in the long-term, based upon the fundamentals of the United States’ economy. While it is true that the issues in other countries, like China, can inform potential issues in the U.S. economy, it is important to remember that those issues must be American issues, not Chinese issues. The truth is …

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Bad News, Politics and Investing

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Here it comes… THE SKY IS FALLING! THE SKY IS FALLING! A presidential campaign is officially coming, and unofficially already in full swing. With it comes political ads, ads that make it sound certain that we are doomed, we will be doomed, or we must fix the doom. Are things really that bad? Is Washington really ruining the economy? The answer, as always, is no. Politics and Investing Do Not Mix The reality of America is that everyone, in both parties, wants the same thing: a stronger, better, bullet-proof economy. The only difference is in the ideas on how to get there. Even tougher to follow is that there is not definitive proof that ANY of the political ideas out there do what their followers think they will. Republicans think cutting taxes puts more money in the hands of businesses and consumers which boosts the economy. Democrats think government spending puts more money in the hands of business, while improving society, thereby improving the economy. Who is right? They both are. And, they are both wrong. The key to a strong economy isn’t really political at all. It is cyclical. Go back over the years and you can prove anything …

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PayPal Debit Card Worth It?

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paypal debit card

PayPal is a popular way to pay people online and also a useful resource for freelancers to get paid electronically. Funds can be transferred electronically from your PayPal account to your linked bank account at anytime. However, there can be a significant delay between when you initiate a PayPal transfer and when it shows up in your account. To help alleviate this issue, PayPal offers a debit card linked to your PayPal account. I recently got my own PayPal debit card and have had a chance to use it and see how all the little tricks work. Technically, I got a PayPal Business Debit Card, but I don’t see any differences from the regular one. Is a PayPal MasterCard Debit Card a Good Deal? PayPal is no different than any other for-profit company, they want to make money. They take a commission on certain types of payments and charge fees for things like receiving international currency in your PayPal account and for letting customers or clients pay you via credit card. The PayPal debit card is another way for PayPal to make money while giving you more ways to access the funds in your PayPal account, which the company hopes …

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