Personal Finance

What Did The New Obama Speech About His Budget Mean to You?

Posted by 2 March, 2009 (3) Comment

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I watched President Obama’s speech the other evening (last Tuesday to be exact) as many of you did. I was curious to see what changes were going to be made to the budget and I was interested in his targets for getting the economy going.

I’m not sure if you had this issue, but I always have a tough time watching speeches similar to this because it’s so obvious that all of the other politicians are there to brown nose.

Here are some of the items that I took away from the speech:

– 95% of all Americans will see tax cuts on April 1st in their paychecks.

– There is a website where you can see what is being done to put the US economy on the road to recovery, Recovery.gov. I took a quick look at this website and there’s not a whole lot of information posted yet. I hope that changes in the future. By looking at the website, it looks like it was perhaps rolled out to be available prior to his speech to Congress.

– 3.5 million jobs created through infrastructure improvements: roads, bridges, broadband, mass transit, etc.

He gave three examples of how he is going to kick start the economy:

1. New Lending Fund – Flow of credit is the lifeline of America and he aims to get that credit going through a new lending fund that will be able to loan to people for cars, college, and small businesses.

2. Housing Plan – This plan will help responsible lenders and mortgagees to lower interest rates and help keep people in their homes. I thought something like this had already been implemented. From what I’ve read of past plans, they have been ineffective. I wonder what they will do differently.

3. Bank Accountability – Put pressure on banks to lend to people. Also, there was a real emphasis on keeping the banks accountable for the money they receive from the taxpayers.

Obama said this a few times:

It’s not about helping banks, it’s about helping people.

Obama also seemed to hit on three major points – healthcare, energy, and education. In mentioning each of the three pursuits, Obama discussed items he’d like to target within each. The most notable pursuits being seeking a cure for cancer during our lifetime and by 2020, have the highest proportion of college graduates in the world.

All of this being said, what does all of this mean to you?

If you don’t live in the US or if you don’t care for the US, the speech probably didn’t do much for you. This blog never will be about politics so let’s put that aside. Regardless of your political affiliation, this speech was significant to you for a variety of reasons.

For one, if you are a taxpayer, this speech gave us an indication of what is being done with OUR money to help straighten out the economy. As I mentioned earlier, Recovery.org is to be the government’s vehicle for transparency to the taxpayers. It’s great that spending will be transparent, but we also need to begin looking at a way to begin paying down the debt. Currently, the U.S deficit is at close to $11 TRILLION, according to brillig.com. That comes to just over $35,600 for every man, woman, and child. That number is frightening once you start looking at the number of people in your family. For my wife and I, we would need to pay back ~$71,000. I’m not into scare tactics, but these are the facts and we need to live with it and figure out how to reverse this trend quickly.

The second reason why this speech was significant to you is that if you earn under $250,000 as a household, your taxes will not go up.

The third reason is that it appears there will be a renewed emphasis on education. It’s easy to make a claim that education is important. Let’s see if there is some follow through.

Perhaps the most significant moment for me was the story of Leonard Abess. Mr. Abess sold a stake he had in a bank last November. He took $60 million of the proceeds from that sale and gave it to the bank’s present and 72 former employees. Some of the long time employees received as much as $100,000.

Did you watch the speech? What did you think? What did it mean for you?

Photo by: Tony The Misfit

Outside Resources:

Miami Banker Gives $60 Million of His Own to Employees

Other Posts:

Are Real Estate Guru’s Worth the Money?
Book Review: The Art of The Start
Interview: Professional Blogger
Case Study: My Adventures in Forex Trading (Update: 2/16)
The TED Spread and What It Means to You

Categories : Personal Finance Tags :

The TED Spread and What It Means to You

Posted by 12 February, 2009 (4) Comment

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You may or may not follow the market. Personally, I try to stay out of the day to day activities partially for my sanity, but also because it doesn’t matter if I look at it or not because we aren’t selling anytime soon. While I try to stay away from all of the “hoopla” mentioned in the news, I do want to be educated so I know what I am doing and have a plan of action. One item that I had heard about previously in news articles, and in a podcast (Plant Money from NPR) I listen to while running, is the TED spread.

The TED spread is the difference between the three-month U.S. Treasury yield and the three-month Libor rate. The Libor rate is the rate at which banks charge each other on the London interbank exchange. NPR and The Big Money have in fact stated that we should be following the TED spread and not the Dow.

So, how do you know what number is good or bad for the Ted Spread?

CNN states that “A jump in the spread shows how panicky banks are, in that they are charging each other a bigger interest-rate premium than money lent to the U.S. government“. This basically means that banks are afraid to lend to one another out of fear that the firm borrowing the money will fail or the firm lending the money might need the money for it’s own crisis.

To give you an idea of what the TED Spread has looked like more recently and in the past, I found a nifty chart via Bloomberg.

Ted--Spread

If you look at the chart above, you’ll notice that the TED Spread typically stays at around 50 points or less, but since late 2007, it’s been a different story. In fact, it’s been more than double over it’s average for over the last year.

For more information on the TED Spread, there are several resources below. The article from Slate, “Now, Dow” and the Vinny Catalano Interview are great resources in understanding the TED Spread.

The current TED Spread trend seems to be going in the right direction. Do you think the economy is on it’s way back?

Photo by: Azrainman

External Resources:

What is the TED Spread?
TED Spread by Investopedia
The TED Spread Alliance by NPR Money
Vinny Catalano on NPR discussing the credit markets, Treasury yields, Libor and the TED Spread
Now, Dow?

Other Posts:

Interview: FairRepair.com
A Sure Fire Non-Money Maker!
What’s the Best Financial Decision You’ve Made?
10 Reasons Why I Want You to Be Financially Independent
529 or an IRA for College Savings

Categories : Personal Finance,Uncategorized Tags : ,

Case Study: My Adventures in Forex Trading

Posted by 15 January, 2009 (22) Comment

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Welcome to our Forex Case Study on Happiness Is Better.

To ensure you don’t miss anything, be sure to subscribe to our free full RSS Feed!

I am being coached by Forex expert, Mindy Yost. She has been Forex trading for over 8 years and full time for 6 years. I will be detailing my progress through a monthly report. I opened a demo account and am currently trading under her guidance through Skype (wow, Skype is really handy!). Skype is essentially an internet-based phone/text communication service (VOIP).

To start off our training, Mindy had me read through a handy website, Baby Pips. If you’ve never heard of Forex before, it stands for the foreign exchange (currency) market. Forex trading is the buying or selling of a currency “pair” and the one that I am learning about is the Euro paired with the US Dollar and is called the EUR/USD.  In the Forex world, there is a thing known as a pip. I had heard the term pip before, but I really didn’t understand what it meant. A pip is the increment by which a currency pair is measured for trading purposes. In the case of the EUR/USD, a pip is 1/100th of a cent and would be displayed as $0.0001. Baby Pips explains a pip as “if the EUR/USD moves from 1.2250 to 1.2251, that is ONE PIP. A pip is the last decimal place of a quotation. The Pip is how you measure your profit or loss.” The Pip VALUE however is a little different and is determined by the size of the trade you make. In Forex trading you cannot trade one EUR/USD at a time. Forex is traded in 100,000 units at a time in a standard account, and 10,000 at a time in a mini account.  I am using a mini account so the pip value when I trade one mini lot is $1.00 ($0.0001 X 10,000). So, when I am in a trade, I will earn or lose $1.00 for each pip the market moves. If I were to trade multiple mini lots at a time, the pip value would be determined by multiplying $1.00 times the number of mini lots I made the trade for. Basically, the more pips the market moves in the direction of my trade the better! If the market moves against my trade, that can be a bad thing. But, as Mindy says, the market can only do two things – go up or go down, so if you are willing to wait it out, your trade will probably be profitable sooner or later (if you have enough money in your account to cover the loss before the market goes your way).

So what makes Forex trading so attractive? One major advantage Forex trading has over traditional stocks is leverage. Leverage means that when you make a Forex trade, you essentially only put down a small deposit for the trade.  In most cases the Leverage Ratio is 200:1. So, when I do a one mini lot trade, instead of fronting $10,000 to make that trade, I only put up a $50 deposit to control the 10,000 units in the mini lot. Another new term to me is that of a “Margin Call”. In Forex trading, the Brokerage House will not let you lose more money that is in your account, so if your trade go so far negative, that you no longer have any more money to cover any additional loss on you trade, they will close your trade at the accrued loss.  This means that you will have lost a lot of money and is a bad thing, but, unlike some other venues, at least they will not call you up and ask for even MORE money! Leverage is always a double edged sword, and can work for you or against you. One thing that Mindy has stressed to me is the importance of properly funding your account. The best way to protect yourself in Forex is to “over fund” your account and put way more money in it that what you expect to trade with and then make small trades. Also, remember these things: 1) do not open an account with money you can’t afford to lose, 1) do not open an account with “a little” money as a test-the-waters type of trial, and 3) don’t trade Forex unless you have nerves of steel. You can properly fund your account yet trade in small quantities to minimize risk while you are getting your feet wet. However, if you do not properly fund your account, you run into the possibility of having the broker perform a margin call and lose your money. Another attractive feature of Forex is that it’s a large market that can’t be altered or controlled by a few people. To give you an idea of the enormity of Forex, about $4 trillion is exchanged daily compared to $25 billion exchanged on the New York Stock Exchange. There are also no commissions charged by the brokers and you can trade basically 24 hours a day, 7 days a week.

If you are interested in Forex trading, it is advisable that you read through School of Pipsology on Baby Pips and if you want to contact Mindy for mentoring, let me know (happinessisbetter@gmail.com) and I will give you her email address.

It’ll be at least a month or two before I start trading with real money, but in the mean time I’ll be showing you the results of my demo account.

Here is our first report on how we are doing with our demo account.

ACCOUNT SUMMARY
Beginning Balance 15,000.00
Comm Trading Commission 0
Rollover Rollover Fee 19.6
PnL Profit/Loss of Trade 466.2
Depos Deposit 0
Withd Withdrawal 0
Option Options Payout 0
Comm Options Commission 0
AdminFee Administrative fee 0
MngFee Management Fee 0
PerfFee Performance Fee 0
Void Deposit Rollback 0
ASPComm ASP Commission 0
MargInterest Interest on Usable Margin 0
Ending Balance 15,485.80
Floating P/L -1,955.80
Equity 13,530.00
Necessary Margin 300
Usable Margin 13,230.00

We’ve profited $466.20 because we are trading in a mini account and we are only trading one unit (we are cautious and HIGHLY suggested by Mindy) at a time. If you look at the Floating P/L, you will notice we are -$1955.80 in the hole. As previously stated, we have not lost that money because we have not re-exchanged the currency pair. Mindy has told us that the market always goes up and goes down, and as long as you are willing and able to hold onto the trade, we will more than likely not lose money.

Stay Tuned!

Do you trade in Forex? How do you like it?

Photo by: Zack Attack

Other Posts:

Interview: 2 Million Dollars Made in Network Marketing – It’s All About Leadership!
6 Reasons Why I Joined Toastmasters
Goals for 2009
Goals from 2008 – How Did I Do?
Interview: Do You Have What It Takes to Own a Franchise?

Categories : Alternative Income,Entrepreneur,Personal Finance Tags : , ,

A Sure Fire Non-Money Maker!

Posted by 29 December, 2008 (2) Comment

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A few weeks ago, the 4 week T-bill auction reported a yield of 0.000% (that is NOT a type-O). A T-bill stands for a treasury bill. A Treasure Bill is a short-term debt obligation backed by the U.S. government with a maturity date of less than a year. T-bills are sold in $1000 denominations.

It seems odd that people would be willing to accept no return after buying a T-bill, but that is in fact what is happening. When people need a place to put their cash, there is nothing safer than a government security.

Where are you putting your money? We have a lot of our money in money market accounts right now, primarily ING Direct.

Photo by Kevin Dooley

External Resources:

Investopedia – T-Bill
Recent Bill Auction Results
Safety outweighs negative yield for some T-bill investors
Treasury Bills: Rate Tracking, Discussion, and FAQs

Other Posts:

Interview: Do You Have What It Takes to Own a Franchise?
The 3 Myths of Happiness
17 Ways to Save the Planet
The Biggest Bailout Ever
Is Happiness Viral?

Categories : Personal Finance Tags :

5 Ways to Soften the Financial Impact of the Holidays

Posted by 20 November, 2008 (1) Comment

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The holidays are a fun time. This is the time of year that we make our trips to go visit friends and family and catch up on the past year. This is also a time of year that people tend to spend quite a bit on gifts. Let’s take a look at a few ways you can soften the impact to your pocket book.

  1. Draw names – In the situation of large family gatherings, instead of buying gifts for all of your family members, draw names. When you draw names, you are only responsible for buying a present for the person drawn as opposed to buying presents for the entire family. This will limit the number of presents bought by everyone and save everybody a good bit of coin.
  2. Make gifts – This most likely will not appeal to the modern day American, but hear me out. Do you think a gift card that I spent absolutely no time or thought would be more appreciated than a hand written letter? In the letter, you could express how much you appreciate what they’ve done for you. J.D. at Get Rich Slowly also has a great list of gifts you can make yourself.
  3. Escrow – My wife and I really don’t get each other gifts for Christmas. It seems like other family members pretty much take care of that. Having said that, we do spend some money on other family members and Angel Tree kids. To soften the financial blow, we basically escrow the money in an ING account. Since this February, we’ve been putting back $20 per week into our account. I just looked and we have $673.08! Perhaps this is a little more of a little less than what you typically spend. If so, just alter the weekly amount deposited into your ING account. I’m sure there are many other options for banks, but we’ve found ING to be really easy to use.
  4. Take Advantage of Circuit City Store Closings – Circuit City is closing 155 stores nationwide. There can be great deals found at many store closing sales. If you have an electronics need, it may be worth your time to take a look and see if you can score a great deal.
  5. Don’t Give Gifts at All – Why not show your generosity by spending time at a homeless shelter serving meals or visiting a retirement home to spend time with people who may not get many visitors. You could get the whole family in on the activity. While it may be hard for some to believe, you can get much more long term satisfaction out of community service than spending your money on more material things.
    Photo by Kris Decurtis

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Additional Posts:

Life is Like an Etch-A-Sketch
Frugalicious?
Three Essentials for a Banana Free Living
Interview: Live Work Dream.com

Categories : Frugality,Personal Finance Tags : ,