If you have been keeping up with my finance blog, you know I love to budget! It gives you a sense of control when it comes to your money. I believe in doing a zero-based budget. This means your income will always equal your expenses. With this type of budgeting, you are telling your money where to go every month. I want to give you a recent example of how budgeting frees you instead of constricts you.
I have a line item on my budget for clothing. If you know me, you know I rarely use it. I am always wearing things out until I have to give it up. This month I had a coupon for DSW, and I was like I really do need some new shoes. Me being that cheap person that I am, I didn't want to buy any because I hate spending money! Then it dawned on me, Tiffany you budget for clothing every month, use it! So, I was able to buy new shoes, guilt-free. It didn't slow down my debt payoff or put me in the position to sacrifice something else. It was already in my budget! I wanted to tell...
A couple of weeks ago, I came outside to yet another flat tire. What the heck?! It seemed like every week a tire was going flat on my car. I knew when I bought the car I would have to get new tires (that was one aspect I used to negotiate the price down), but I didn't think it would be this soon. I made my seemingly weekly trip to the gas station to fill up again, and I was on my way. Of course, that wasn't the end of it...
After a few hours, I'm ready to leave my location and go to a lunch meeting with a friend. I get in my car to pull out, and I noticed my car wobbling and noise coming from the tire. I pull back in and get out to inspect. Low and behold, the tire is completely flat! So, now I'm stranded. Of course, I got rid of AAA a few years ago as I deemed it a waste of money for my situation. Now, I needed it! My brain started twirling trying to think of how I was going to get anywhere forget the...
Selling short aka short selling is when an investor thinks a stock will go down so they "short it". Essentially, the investor borrows shares of stock or another asset he or she doesn't own, sells it, pockets the money with the promise to replace the property someday, and hopes the asset declines in price so it can be repurchased at a lower cost, the differential becoming the profit. They make money on a dip!
Why It's Important
During the financial crisis of 2008, short sellers were making money in the market while everyone else was losing. A great movie that details what happened is "The Big Short". Be careful when short selling because if it's not done right, it could bankrupt you! Keep in mind that you are borrowing shares so if the stock goes up you will be in debt to the broker you borrowed from.
I am so excited! I was able to get my feet wet with podcasting by being featured on a fellow bloggers podcast. It was so fun to get interviewed and we had a really great conversation about timeshares and home-ownership. Take a listen:
For all episode notes and to subscribe, check out Danielle's site at https://podcast.thoughtcard.com/episode-4/
As a side note: We used the Longhorn Steakhouse gift card mentioned in the interview a few days ago for a date night. Yummm!!
Asset Allocation is an approach to managing your investments that involves setting parameters for different asset classes (bonds, real estate, cash, stocks, etc.) It involves setting a percentage of each kind to hold in order to reach your investment goals.
Why It's Important
Planning your asset allocations is a lot like budgeting. There are a multitude of different resources available to see what your target asset allocations should be based on your age, income, and retirement age when planning for retirement. Generally, the younger you are, more of your portfolio should be invested in stocks. As you get older you would start transitioning your portfolio to more bonds as they are a less volatile investment. This video may help you to develop a strategy for yourself.
REITs are Real Estate Investment Trusts. They allow you to invest in different types of real estate. REITs are available on the market for any real estate niche whether you want to invest in hotels, apartments, commercial buildings, etc.
Why It's Important
Most people think the only way to invest in real estate is to buy a house or rental property. REITs are traded on the stock exchange (just like stocks and bonds) to take advantage of the volume of people coming together to invest in bigger projects. They offer another form of diversification in your portfolio.
Be sure to invest in liquid REITs sold on the exchange and not illiquid REITs that are hard to get rid of!
An odd thing happened Friday, I went to the ATM to withdraw money, and I received the message that said, "Unauthorized Use." I thought maybe I put in the wrong pin, so I swiped and tried again. I received the same prompt! What could be going on?!
I took the next logical step and called the card company. They explained that my card had a block on it and they were sending me a new card because my information was compromised at a Sonic restaurant. Huh? In my head, I realize it has been a while since I've even been to a restaurant. On Saturday, I received another letter from another bank card saying that I was going to be reissued a new card. Wow! The situation was unusual because my friend had just told me earlier that week how her card was compromised at a Bojangles restaurant. What is going on with the fast food restaurants?! So, I wanted to make a post with some tips and what to look for so you won't become a victim.
Compound interest is interest added on to the principal on a deposit or loan so that the added interest also earns interest and so on and so forth.
Why It's Important
I think Albert Einstein said it best, "Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it." If you start with $1000 in the bank and it gains 10% a year, the breakdown would look like this:
Year 1: $1100
Year 2: $1210
Year 3: $1331
That's compound interest!
For the technical people it's formula is
|=||initial principal balance|
|=||number of times interest applied per time period|
|=||number of time periods elapsed|
Index funds are passively managed, meaning they track an established market index. One example is the S&P 500 which invests in 500 of the largest companies in a range of industries. Another example is the Dow Jones Industrial Average, "The Dow", which shows how 30 large, publicly traded companies have traded. Usually, reporters use The Dow to exclaim how good (or bad) the market is doing.
Why It's Important
Index Funds offer broad market exposure at a low cost. Because they are passively managed, their fees are lower than actively managed funds. When it comes to performance, index funds generally beat actively managed funds over the long-term.
I am always reading about finance (which is hardly news to anyone that knows me). I have found the ULTIMATE HOME-BUYING GUIDE. I am in love!
When I say this article breaks down the entire process, I am not over exaggerating. I admittedly wanted to write an article on my experience with the home-buying process, but I was not going to go this in depth. As a millennial, I navigated the process myself and learned quite a few "tough lessons" along the way. If I had found this article ahead of time, I would have been better equipped to go through the process. Here are my key takeaways from the article:
Understand the "Order of Operations"
I did not know how everything was supposed to go, but I did have an excellent real estate agent (Terri Burton) that walked me through and educated me as we progressed. I can not stress number 2 on the list enough! You have to have an excellent team behind you when making such a massive purchase. ...