MoneyNing - Part 394

Take Comfort, Even a Stock Market Crash Is Not the End of the World

by David@MoneyNing.com · 11 comments

light at the end of the tunnel
Several days ago, I asked readers to share their wisdom with those that couldn’t sleep at night because of the turbulent stock market. Today, I want to share with you two that particular stood out.

From Debt Reduction:
I was a stock broker in 1987. On black Monday the market was down what 27%. The next day, my smart clients were buying like crazy. I had my best day ever. They knew it was going to go back up. So will this eventually.

From Marci:
I don’t feel like I’ve lost anything yet, as I haven’t pulled anything out yet. It will come back sooner or later. I can retire in 6 months or in 6 years – no hurry on my part as long as I am getting this free company health insurance with a 33 hr week 🙂
It’s only money. The worst that could happen is that I lose it all. I’ll still be ok. My house is paid for, I am debt free, and I need under $400/month to survive on a bare bones budget, if I stay healthy.
With that kind of debt free peace of mind, I don’t worry and I don’t stress. I am more concerned with spending quality time with my grandkids and enjoying whatever time I have teaching them the skills they will need to survive financially in this world.
PS – since this has started, I have bought more stocks and upped my 401K contributions. My way of hopefully coming out ahead later on.

Like everyone else, I saw my stock portfolio take a dive this past year. It was disheartening at the beginning, but I’ve since change my view on this because I know that the values will come back up. I know that if I keep investing, I will come out ahead.

I have:

No debt
Enough Income to take care of my expenses
A solid emergency fund
A lovely family

For those that are really worried about the stock market, step back and think about all the so called “standard advices” we’ve spoke about on this blog. It’s times like these that having that emergency fund, low debt, and being able to live frugality come in handy. Those things might not be the most efficient ways of increasing our wealth, but they allow us to sleep at night when times are tough.

Take comfort in knowing that it’s never too late. Start that emergency fund, see where you can spend less money and remember to stay positive.

Not Caring About the Wild Stock Market Swings

by David@MoneyNing.com · 21 comments

We witnessed a very crazy day for the stock market yesterday. The DOW plunged 800 points only to come roaring back to close down 370 points. It was breathtaking for many of us because we were glued to our TV (and computer screen) as the stock market kept on going down but for some of us, it didn’t really matter because our focus was on other things.

Yesterday, I was extremely busy at work. I was so busy that I didn’t have time to check on Yahoo Finance nor did I have time to talk to my coworkers about the stock market. When I finally sat down and looked at how the market was doing, I saw the headline (DOW plunged 800 points and closed at 370) on the homepage. My net worth probably plunged just like any other 350 point down days, but it didn’t matter as much to me.

I wasn’t emotionally upset this time because I wasn’t “living” the roller coaster. As a result, it hurt my wallet but didn’t hurt my feelings. I felt much better and saved myself from much of the emotions of a down day just by focusing on other parts of my life. I wasn’t thinking about the stock market nor was I worrying about the Cisco (CSCO) shares that I owned.

I was living my life and not being controlled by the stocks I own. I felt good. In this type of market, maybe you should try it too.

How did you spend your day yesterday? Did you even know that the stock market plunged? Can you sleep at night these days? If you aren’t worried at all, reply and show some encouragement to those that couldn’t.

Another Way I Use Credit Cards to My Advantage

by David@MoneyNing.com · 9 comments

Recently, I started to make bigger purchases around the middle of the month because I found that I can save more money this way. Most of you are probably a little puzzled by what I just said so let me explain this a little further.

Credit cards have a statement date where they will calculate how much you owe with the due date usually a couple of weeks later. A few weeks ago, I finally realized that if I buy something after the statement date, I won’t really have to pay for it until 50+ days (almost two months) later. Let me give you an example to illustrate.

As you can see on the screen capture, my last statement date is September 10. If I bought something on September 11, the charge would be on my October 10th statement and I wouldn’t have to pay for it until the end of October.

So Why Is This Useful

The obvious is the extra interest that I gain from doing this. The dollar amount is not that much, but I’m quite happy getting what would seem like free money.
Furthermore, not allowing myself to buy something until the middle of the month is actually a great way to stop splurging. One of my biggest money leak is impulse buying. When I want something, I seem to flip on my “passion switch” because I would be thinking about it constantly. I would convince myself how much I “need” it and then I would finally convince myself to buy it, only to let it sit on my desk collecting dust after a few weeks (sometimes a few days). Now that I’m not allowing myself to buy anything expensive until the middle of the month, I give myself time to think about my purchase and I end up not buying most of the items that I want.

Oh I wish I found this trick long ago. I hope that you too will benefit by spending less and keeping more.

Are You Worried About Your Job?

by David@MoneyNing.com · 9 comments

Never mind the stock market, never mind the oil prices and never mind whether the government buying mortgages is a bailout for Wall Street or a rescue of Main Street. At the end of the day, the most important contributing factor to our individual ability to live comfortably is having our job.

Today, I want to ask you: “Are you worried about your job?”

I’m not saying that the oil prices or the passing of the bailout bill isn’t important, but there is no question that our job is more critical to us than either of those. These days, I see so many people focused on how the DOW is doing or trying to find the newest update on the rescue bill instead of concentrating on their jobs, but their attention is clearly in the wrong place.

No matter how bad the stock market is doing or how weak the economy is, you will do fine if you have the same job as long as you didn’t over leverage yourself.

There is a huge opportunity for you to shine because you can really stand out as someone who is optimistic and energetic while everyone is worried and stressed out. Start showing everyone why you deserve to move up in your company and get a raise.

At the very least, promise me that you won’t worry too much and end up getting fired for lack of performance okay?

Details of the $700 Billion Bailout Plan

by David@MoneyNing.com · 8 comments

Update: Congress did not pass the bailout.. More details to follow.

The $700 billion bailout plan designed to buy toxic mortgage securities has been finalized by the lawmakers and the bush administration over the weekend. Now that the only hurdle remains a vote on congress, it seems to likely pass.

Here are some of the details that I found about the bailout plan.

$250 billion will be used to immediately buy troubled mortgage securities
An additional $100 billion is available if the president approves its use
$350 billion is set aside and can be used to buy even more troubled mortgage assets if congress approves it.
Companies that take advantage of this bailout plan has to give the government a stake of the company (via stocks) so US taxpayers can potentially profit from future growth of these companies
Top executives earning over $500,000 at companies that sell the assets to the government will have tax restrictions and executive leaving those companies would only have a limited compensation package.
Republicans wanted a way for companies to buy insurance on the troubled assets instead of selling the assets to the government. This is included in the bailout plan.
Democrats wanted the plan to allow judges the power to change loan terms to help mortgage owners in trouble and also the government to use some of the profits it makes on the purchase to help people facing defaults. This DID NOT make it on the plan.
The government will only buy investments originated on or before March 18, 2008.
If the government is losing money on the purchases of the assets in 5 years, the president needs to submit a plan to get some of the losses from the companies that sold the asset.

I’m sure more news will follow after congress votes today. Stay tuned.

We End Up Paying More When Better Options are Available

by David@MoneyNing.com · 6 comments

I remember when we were looking at a house about 18 months ago, the real estate agent would show us a house that is $500k, then one at $550k and another at $600k. On the seller’s perspective, this is called up-sell (which I’ve covered before here).

This time around, let’s talk about the consumer’s (our) perspective.

Choices Are Not Always Good

Example #1 – It’s All About Safety
As part of my wife’s new job, she was given three options for health coverage:

Cigna Network Open Access w/ Dental – $55.47
Kaiser HMO w/ Dental – $59.97
Cigna Network POS Open Access w/ Dental – $62.08

It’s easy to pick the more expensive choice. “Oh it’s only $7 more and it allows us to be covered for out of network doctors.” In the effort to be as safe as possible, we will probably choose the more expensive option. But would we be fine if we were only given the least expensive choice? Probably.

Example #2 – Evil Technological Advances
Our router broke a few days ago and while I was looking for a new one, I noticed that they have this cool thing now called 802.11n (for nontechnical readers, think of faster, better and cooler). Although it’s twice as much money, I instantly wanted it. I still have no idea whether I will buy those new versions or not but would I be just as happy if I never knew they existed and bought the old ones? Yes.

Example #3 – It’s Only Three Bucks
Recently, I noticed that they opened a new coffee shop along the route that I take to work. When I wanted coffee in the morning before, I would tell myself that Starbucks wasn’t on the way to work. Nowadays…. well… maybe I will just get that coffee tomorrow. It’s only $3 bucks and it’s not a big deal right?

The coffees are priced perfectly too. $2.20 for a small, $2.60 for a medium and $3.00 for a large. Only $0.40 more and you get twice the coffee so give me a large.

We Just Want The Better Choices

When we are presented with choices, we will naturally pick the the more expensive one. We tend to focus on the cost difference (often small) and try to convince ourselves that the incremental cost is worth the extras. It’s only a few bucks here and there but they add up you know.

Do You Have a Better Idea?

If saving money is one of your priorities, focus on what you are comfortable getting instead of the the cost difference of each choice. For every purchase from now on, focus on the minimal you are comfortable with and pick that choice.

A Simple Example – Picture Perfect
Never mind that the Sony flat screen TV looks clearer than the Vizio when comparing them side by side. Focus on whether you would be happy with the Vizio flat screen in the living room. If the answer is yes, why are you complaining that you didn’t take the Sony home?

See what I am getting at? Focus on what’s really important, and you will save more money. Focus on the benefits, and be prepared to pay for it.

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