Fanelli's Personal Finance

Fanelli's Personal Finance Has Moved!

2006-12-10T16:58:00.000-05:00

I am still in the process on finalizing this move, so bear with me during the changeover. Please come visit me at The Journey to Success - My Finance and Accounting Blog! New and improved blog - will continue to concentrate on personal finance, however I will also be posting about current accounting issues, and the CPA exam! I am really looking forward to this change, as I hope you all are. Blogger just wasn't cutting it for me! If anyone has any advice to offer it would be greatly appreciated! Thank you.

-FPF-

Buying a New Laptop – Mac or PC?

2006-12-08T14:45:00.000-05:00

It seems that ever since the Apple ipod hit the retail store shelves, everyone is starting to consider Mac computers and laptops more frequently. I remember about 8 years ago I had a friend who purchased an iMac and I thought it was so weird. However, to his credit he was a big graphics junky, hence the reason for his purchase of the iMac. Now, I am at a point where I desperately need a new personal laptop. No more dealing with my 6 yr old Compaq PC, or having to use my employer-purchased laptop for personal usage. My wife and I will mainly use our personal laptop for email, Internet, word processing, and various photo projects (we currently use Adobe Photoshop).

For some reason I REALLY want a new Macbook. I am getting a little pushback from the ‘powers-that-be’ stating that we would have to buy all new software (ms office for Mac’s, Photoshop, etc) and the usually worry about file compatibility from PC’s to Mac’s.

The main reasons that I would like a Macbook are 1) the security of the Mac O/S seems to be much more secure than Windows XP or Vista, 2) to try something new, 3) I like the various software programs that can be purchased with a Macbook, i.e. iLife, iWork, etc. – however that adds cost to the puzzle.

I am essentially looking to spend between $1,000 and $1,300 for our new laptop purchase, and there aren’t any Windows based laptops that are really standing out to me at this time. Maybe a Sony Vaio? Maybe a Lenovo Thinkpad?

Does anyone have any experience with running Windows and the Mac O/S on a Macbook? I know this will cost more, however I am wondering how the usability is.

-FPF-

5 1/2 Month Break From Blogging!

2006-12-06T14:35:00.000-05:00

Hot of the press, Fanelli's Personal Finance is back in action! I took a 5 1/2 month hiatus from blogging, for a few reasons. 1) I got really busy at work, 2) I was planning a wedding, which takes of loads of time and loads of personal financial decisions (in which I should have been blogging about), 3) I lost focus of why I was blogging. #3 is the main reason that I want to focus on. I actually thought that I was going to start blogging to make some money on the side in advertising $'s. BAD IDEA! For all of you new bloggers out there, do not START blogging to make money. If the money does come - like sites such as Consumerism Commentary or All Financial Matters then GREAT, but the lesson of the day is.........blog about personal finance because you love talking about it and you cannot get enough of it. And that is what brings me to the present day. The wedding was absolutely wonderful, as was the honeymoon, and now it's back to reality. New items surrounding FPF consist of a new job coming 12/18, new education search - part time MBA or MS in Accounting upcoming in the near future, and back to studying for the CPA exam, which I got away from for the past 3 years. There is alot going on in the world of FPF, including a new Etrade account - love it - so let the blogging continue. Let's get back to basics and post once per week. Send me a comment - I'm ready to talk finances again!!

-FPF-

MSN Features PFBlog article!

2006-06-15T20:37:00.000-04:00

MSNBC.com - "Bloggers open up about money matters - Young online diarists reveal their financial facts, foibles to their virtual fans." This is just great! I love hearing about fellow pfbloggers in the news, I mean come on now, they are practically famous! To be featured on such a well-known site such as MSN is a great accomplishment. Bloggers mentioned were AllFinancialMatters, The Budgeting Babe, Boston Gal's Open Wallet, Make Love Not Debt, and of course our great friends at pfblogs.org!

I recommend that everyone reads the article. It is another feature that places pfbloggers on the map. Keep it up fellow bloggers!

Part 1 - Online Brokers - Which one is for me?

2006-06-14T18:08:00.000-04:00

Many people ask me “which online broker is best?” I always respond with, “well that depends on what you are looking for.” Readers do not like this answer, so I am going to try and break it down in a multi-part series here at Fanelli Finance.

Why do I say that it depends on what you are looking for? Each online broker is the same – they execute trades of various investment vehicles for individual investors. Each online broker is DIFFERENT. Each broker provides varying amounts of research, investment options, customer service availability, minimum account balances, interest on cash balances, no transaction fee mutual funds, commissions, and other various fees.

There are many online broker ratings out there on the web that break down various discount brokers, and I would recommend “googling online investment brokers” for further research.

Let’s start with some questions that you need to ask yourself before researching online brokers. 1) How much are you planning to invest, 2) How important is low commission fees, 3) How important is no load mutual funds with no or low transaction fees, 4) How important is stock research, 5) How important is an easy-to-use website, 6) How important is it to contact a customer service representative via phone, 7) How important is high interest rate on cash balances? This list of questions was utilized at Kiplinger’s Personal Finance web site.

Some individuals only care about low commission fees. For those of you out there check out Trade King ($4.95), Firstrade ($6.96), along with Scottrade ($7). Most other brokers have fees between $9 and $25 per trade, but will lower their fees if you make a certain amount of trades per year, or if you have above a certain amount ($) in your investment portfolio with them.

Commissions are one item, but most companies blatantly advertise these fees, and there are usually no hidden items behind them. However, there are some pesky fees that may arise for various items such as inactive accounts, annual IRA fees, and fees to close an account. Schwab’s online broker firm is one of the best for customer service and investment research, but charges $95 to close your account, $2.50 to send you an old statement, and $50 to obtain a stock certificate directly from Schwab. According to Kiplinger, Vanguard, OptionsXpress and Siebert are the best at minimizing these “nickel-and-dime fees.”

Here is Kiplinger’s Personal Finance Online Broker Ratings for a $50,000 account:
1)optionsXpress, 2) Muriel Siebert, 3) Wells Fargo, 4) Firstrade, 5) Fidelity, 6) Vanguard, 7) TradeKing, 8) Schwab, 9) E*Trade, 10) Scottrade, 11) TD Ameritrade.

Please look for future posts at Fanelli Finance for further breakdown of online brokers, and a more detailed description of each.

It's World Cup time, which means billions of $ in advertising

2006-06-09T16:06:00.000-04:00

I am a huge soccer fan. The FIFA World Cup is the most watched sporting event of all time, no matter what any American naysayers have to say about it (fyi - I am American and love soccer). I just got done watching Germany beat Costa Rica 4-2 in a goal scoring frenzied game, and am currently watching Ecuador v. Poland, while hard at work of course. The World Cup also means huge amounts of advertising dollars spent throughout the world. Adidas is one main global sponsor, and American companies like McDonald's and Anheuser-Busch spend hundreds of millions of dollars for World Cup sponsorship rights.

I saw a great World Cup spreadsheet at http://www.2006fifaworldcup.co.uk/downloads.php, in which you can input the scores of all games, and it will automatically calculate the standings! Pretty cool stuff. Go USA!

“I want a large tax refund”…..No you don’t……

2006-06-08T11:04:00.000-04:00

Here is a typical conversation between me and one of our employees at our company.

“YOU didn’t take enough money out in taxes out of my paycheck this year, and now I have to pay when I am filing my tax return.”

This statement makes me chuckle a bit, because it is very typical of an uninformed employee. I do like when someone asks this, because then I can give my dissertation on employee tax withholding and tax refunds in general. Another statement I get is, “I want to make sure that I get a large refund when I file my taxes, because I can use this money to pay for…..” This statement actually makes me want to vomit (sorry so graphic).

So, let’s address these two items. First, the employee is responsible for the amount of tax withholding from their paycheck. This is generated by that W-4 form that you fill out when you are hired, and most people don’t ever think about it or change it ever again. The more allowances you claim, the less is withheld. My goal is to “break-even” on my tax return, which I just about successfully did for 2005, having to pay approx. $100 to federal and state. Here is my rationale. If you get a large refund from your tax return at the end of a given year, which means you paid too much in taxes throughout the year. Therefore you essentially loaned the government your money for the entire year, and gained exactly 0% interest on that money. Just think, if you had that money throughout the year you could invest it and make money on the interest and/or appreciation in your investment.

As stated above, you, the employee, are responsible for this. Each individual should consult a tax professional (or review it yourself) to determine how much you should withhold from your paycheck in taxes each pay period. If this amount needs to be changed from your current amount, fill out another W-4 form, which can be attained from your employer or at www. Irs.gov and elect the appropriate amount of allowances, and even withhold an “additional amount” if needed. See what’s changed each year. Did you purchase a new home? Did you have large capital losses? Did you get a raise or earn less than you did the year prior? All of these items will change your taxable income.

The easiest way to check your withholding is by using the IRS Withholding Calculator, which gives you a step-by-step process through the calculation.

The Withholding Calculator can be found here.

A printable W-4 form can be found here.

I hope this helps, and if you have any comments, questions, or concerns, feel free to comment!

CNN Money Five Tips: Stocks are down, but rates are up = opportunity

2006-06-07T21:26:00.000-04:00

Gerry Willis, a CNNMoney.com contributing columnist has five personal finance tips for the current market environment. It involves being patient with your stocks and mutual funds, and getting your cash out of traditional savings accounts, and into high-yielding savings accounts, such as with online banks. Her five tips are as follows:
1.) Don’t be asleep at the wheel
2.) Hands off your 401k
3.) Protect your emergency fund
4.) Catch the CD fever
5.) Get into bonds

You can read this entire article here. If you are a buy-and-hold investor, like most of us, the key to investing during a down market is patience. Keep pouring money into the stock market even when the market is down, and remember, the only time you need to worry about the exact state of the market on a particular day is when you are about to retire. (Notice I am not talking to all of you day-traders out there)

Vonage

2006-06-06T11:22:00.000-04:00

With all of this talk about the Vonage “IPO-gone-bad”, I figured I would add fuel to the fire by sharing my Vonage experience as of late. At my company, we are opening up a new office in South Carolina, which will be smaller than the rest of our current offices. Due to ease of set-up, we are not going to place this new terminal on our current phone system. So, I had the bright idea of getting them a Vonage Business account, for a nice cost savings. I establishup the account for my company and purchase a Motorola VT 2442 router as my hardware. Well, a day goes by and I realize that I do not want the router, but I want a D-Link adapter, because I will be hooking it up to a VPN router. So, simple enough, I call to change hardware. Well, they already shipped my Motorola router, but a customer service representative put in my order for the D-Link adapter and just advised me to return the Motorola router when I receive it.

Well, a few days go by, and I receive to boxes. I open these boxes up, and look what I have here……2 Motorola routers. Wahoo! Nothing that I wanted. So, today I call Vonage to advise them of this situation and that I want to return both routers, and to purchase the D-Link adapter (again). I figured this would be a pretty easy task. Well, I thought wrong. The first customer service rep. insisted that I keep one Motorola router and he will send the D-Link, “when available.” Well, “when available” really meant that he had no idea what he was talking about so he asked if he could transfer me to someone “higher up”. I said ok. Next rep: looks up my account information, puts me on hold to contact her supervisor (3rd customer service employee involved) and lets me know that I have to speak with Account Management.” I said, “what for? If you don’t mind me asking.” Well, you see sir; you actually have to cancel your account now, due to the fact that we sent you these two routers. Since you want to actually purchase the D-Link adapter, you should cancel your account, and then open up a new account to purchase the D-Link adapter, and we will credit your current account of all charges, since you are still in the 14-day money back guarantee stage.

WOW! Am I overreacting?? I cannot believe some customer service departments. If upper management or sales heard this whole conversation, which by the way, I am still currently on hold waiting for “account management,” and my office phone states that I have been on with Vonage for 55 minutes, 52 seconds, and counting, they would flip their lids!

Someone, anyone, if you know of an IP-based phone service in the Spartanburg, SC area, please let me know.

Well, back to being on hold. It is amazing how much work you can do while being on hold with speaker phone…..

The Monday Void…..What to do now that Season Five of 24 is complete?

2006-06-05T13:23:00.000-04:00

My favorite TV show of all time is 24; a Fox based TV show as most of you know. I am not a big TV-watcher, so for me to be completely hooked to a TV show is pretty impressive. I am at the point where I cannot do anything on Monday nights from 9 to 10 pm, which would jeopardize my 24 watching. Well, Season Five is over now, so I have to wait until January 2007 before I will see a new episode of 24. What do you think is going to happen in Season Six? Before every single episode of Season Five, I would ask my fellow 24 fanatics, “When is the Chinese Government going to come into play again? They are not just going to let Jack go about his business after his actions in Season Four with the Chinese Consulate??” And of course, in typical “24 fashion”, with 2 minutes left in the entire season, the Chinese kidnap Jack, and leave the rest to our imagination, or at least until next January.

I am feeling a large void in my Monday night life without 24. However, tonight no void will be felt because the Carolina Hurricanes will be playing in Game 1 of the Stanley Cup Finals tonight, against the Edmonton Oilers. I have to admit, I am not a HUGE hockey fan, I never actually played ice hockey, but I do love to watch it in person, and on TV. Especially when the team from the town I live in (Raleigh, NC) is in the Stanley Cup Finals! So, 8:00 pm tonight, watch the puck drop as the ‘Canes take on the Oilers in search of Lord Stanley’s Cup.

I am going out on a line by saying Carolina is going to take the series in 6 games. You heard it here first folks.

The Ever-So-Precious Emergency Fund – Build It Now!

2006-06-03T12:39:00.000-04:00

This is probably the most talked about personal finance topic of them all, other than debt paydown. I am a huge believer of building an emergency fund. Most personal finance experts, including Dave Ramsey, say that you should have 3 – 6 months of expenses stashed away in an emergency fund, NOT to be used except for emergencies. From my perspective, this account should not be your traditional savings account. You should separate this emergency fund into its own account, not to be touched except for various emergencies such as, but not limited to, job loss, unexpected car maintenance, unexpected medical bills, or a leaky roof.

I am currently in the process of changing where I house my emergency fund, to Emigrant Direct, taking advantage of a 4.65% interest rate with no fees! These online savings accounts such as Emigrant Direct, ING, HSBC, etc. are a great place to house an emergency fund, because usually this account is not tied to an ATM card (more difficult to withdraw the money), and the money will work for you with the great interest rates that each company is currently providing.

I would recommend starting with an emergency fund of $1,500. Then I would pay off all high-interest debt, such as credit card debt. After all credit card debt is paid off, get aggressive and save up to 3 – 6 months of expenses, so any emergency will seem like a walk in the park! I wouldn’t start investing in stocks or mutual funds until this emergency account is fully-funded.

Bankrate.com has a great article on “22 ways to build an emergency fund.”

Bankrate.com also has an article on "Sizing up an emergency fund."

I Need Blogger Help: Archiving

2006-06-03T11:38:00.000-04:00

I hope some fellow pf bloggers read this post, because I am looking for some help on my archiving. As you can see, I use Blogger (pain in the #&%) for my blog creation, and I am wondering if there is an easy way to archive my posts by category, and not by month as it is now. I'm not sure if there is a universal way to do this, or if there is a specific way that I must do it within Blogger. I would LOVE to hear your comments! More finance talk to come soon....

Your Biggest Expense: The Home Mortgage Payment

2006-05-31T21:12:00.000-04:00

"Don't bite off too much house", says Liz Pulliam Weston, a writer for MSN Money. She states that buying a house that translates into a mortgage payment that may be too much for you to handle can "leave you with too little money for other goals: retirement, vacations, college funds for the kids. At worst, it can leave you vulnerable to foreclosure and bankruptcy." I'm sure this is part of the reason that personal savings rates are near all-time lows, which I wrote about during my first post on this blog which can be read here. A direct quote from that post: "The Commerce Department reported that for 2005, the savings rate fell into negative territory at minus 0.5 percent, meaning that Americans not only spent all of their after-tax income last year but had to dip into previous savings or increase borrowing. The savings rate has been negative for an entire year only twice before -- in 1932 and 1933 -- two years when the country was struggling to cope with the Great Depression, a time of massive business failures and job layoffs Contributions to IRA and 401(k) plans are counted toward the savings rate. So when the rate is negative it becomes very clear that a lot of people aren't participating in retirement plans."

Comparing a home purchase today with your parent's home purchase 30 years ago or so, may be different because of the following reasons, says Weston. 1)Inflation, 2) Two-income couples, 3)The lending industry, 4)Retirement.

Check out her article using the link at the beginning of this post. It is a must read for anyone, even individuals who aren't currently looking to purchase a home.

Beginning Investing 101 - Where to Start?

2006-05-30T21:30:00.000-04:00

In response to a comment posted to my post regarding the keys to rolling over your 401k into an IRA, an anonymous reader asked a question which can be seen here. While pondering this thought-provoking question, I would have to say that there are many determining factors here. One is the fact that no % of appreciation on your assets is definite (obviously), so when investing you must have the mindset of being able to wait out any ups and downs in the market. This 10 or 20% appreciation may be negative at a point in time, so be prepared for this. First, I would assess your risk tolerance. Most younger investors have a higher risk tolerance than older (in age) investors, but once again this comes to personal preference. If you are looking for 15-20% returns, you must be able to go through the tough times when the market may be down 10%. After assessing your risk tolerance I would say that you should look for a broker to purchase your investments through, and also make sure you diversify. Yes the most overused buzz word of them all - diversification is very important when investing long-term.
How many times have you heard someone say, "Don't put all your eggs in one basket"? When it comes to investing, that's very good advice.
Successful investors know that diversifying their investments can help reduce the impact that a single, poorly performing investment can make on their overall portfolio, or mix of investments.
Diversification means having different kinds of investments, such as stocks, bonds, and mutual funds. It also means having a mix of investments in different sectors or industries. A well-diversified portfolio might include bonds, money market funds, and stocks of small, medium, and large companies in a variety of industries and countries. International stocks, for example, may rise at the same time domestic stocks are falling, softening the blow to your overall portfolio. Even if your risk tolerance is low, you can still consider diversifying into riskier investments as long as you keep the overall risk of your portfolio low.
The next item you will have to decide on is what broker to use. This can be a very tedious process without the appropriate background knowledge. The Motley Fool states the following “10 Ways to Size up a Broker.”
-Trading Commissions
-Other Fees
-Minimum Initial Deposit
-Customer Service
-Traditional Banking Services
-Research
-Mutual Funds
-Investment Product Selection
-Other Methods of Getting Your Trades Executed
-Other Freebies and Perks
See the entire description of the “10 Ways to Size up a Broker” here. When you are at this point, please let me know, and we will go through and research your online and traditional broker options through this blog. You heard it here, please visit Fanelli’s Personal Finance,” for all of your personal financial choices.

Check out these cool electronics

2006-05-26T15:52:00.000-04:00

Bestselling Electronics New electronic devices are always fun to buy, or at least dream about buying....

The Keys to Rolling Over Your 401k into an IRA

2006-05-26T12:35:00.000-04:00

The days of defined benefit plans and staying at one job for your entire career are over. The modern day worker has many more savings responsibilities than of past laborers. Most likely an individual will have to rollover a retirement account at least once in your lifetime. The time that this may occur is when you leave your current employer and take your 401k with you. You also may be eligible to rollover your current IRA into a Roth (see my post about Traditional vs. Roth IRA’s). This can be an easy process, as long as you know a few key elements.

Your company will be happy to simply send you a check for the amount of your vested 401k balance, but if they make the check out to you they are required to withhold 20% for taxes. To avoid the tax withholding, you must conduct a direct rollover (trustee to trustee or custodian to custodian) – simply stated, the check must be made out to the trustee or custodian of the IRA account you choose, and it may state “for the benefit of (Your Name Here). To arrange this transaction, you must notify your former employer that you would like to make a direct rollover and they will provide you a form to fill out detailing where the new account will be formed. Contemporaneously, you must decide where it is that you are going to open this newly formed Rollover IRA. There are many choices that you have regarding where to house this IRA, namely, at a bank, mutual fund company, insurance company, full service brokerage firm, or online brokerage firm. In my opinion, the most important aspects to look for are fees, commissions, number of investment options available, and customer service.

The rest of the research and decision-making is up to each individual investor. Here is a link to the “Motley Fool” which compares some online IRA Brokers, with a fee schedule. Here is a “Consumer Reports” table listing Banks, Brokerages, and Other IRA Sources, with fee schedules, min. balances, and investment choices. One company not detailed on either of these tables, but that I would recommend researching due to the impressive fee schedule and number of investment options is Scottrade.

I look forward to your comments…

BREAKING NEWS! Enron Executives Lay and Skilling found Guilty

2006-05-25T12:27:00.000-04:00

As time passes us by, history will tell that the Enron collapse was one of the biggest scandals EVER. We were able to live through it, and today, at 12 Noon EST the jury for the Enron trial, founded Kenneth Lay and Jeffrey Skilling guilty of fraud and conspiracy charges. See CNN Money article.

Please comment! ING, Emigrant, or HSBC? What would you recommend?

2006-05-25T11:50:00.000-04:00

I am looking to stash some cash away in an online savings account for my cash emergency fund. I have heard many good things about ING, Emigrant, and HSBC. I do not want to have to open a checking account in order to get this new online savings account. I would like to take advantage of some sort of referral bonus or sign-on bonus, if there are any out there. HELP! Do any of you have any suggestions? What is your opinion on which online savings account is best? Quickest transfers, best customer service, best website, quickest process to begin account....Let me know what you think - comment below.

Bill Gates on “The Big Idea with Donny Deutsch”: “I wish I wasn’t the richest man in the world.”

2006-05-25T08:02:00.000-04:00

CNBC aired an interview with Bill Gates on “The Big Idea” with Donny Deutsch last night, and I found it very intriguing. To me, Gates is the most interesting person in the world, along with being the richest man in the world (which is nice), however he stated that he wishes he wasn’t the richest man in the world because, "nothing comes good out of that.” I decided to look up some information on Bill Gates at Wikipedia and of course found some very interesting information.

• Forbes international rich list has ranked him as the world’s richest person for the last twelve straight years. In 1999, Gates’ wealth briefly surpassed $100 billion, making him the world’s first centribillionaire, but that has since decreased due to Microsoft’s stock price, along with the Bill & Melinda Gates Foundation giving billions away to charity.
• Gates donates about 52% of his total fortune.
• In 2005 he was named Person of the Year, along with his wife Melinda and Bono from U2.
• Bill Gates went to Lakeside School, Seattle's most exclusive preparatory school where tuition in 1967 was $5,000 (Harvard tuition that year was $1,760). Lakeside rented time on a DEC PDP-10, which Gates was able to use to pursue an interest in computers, a rare opportunity at the time. Gates was a member of the Boy Scouts of America and attained the rank of Life Scout. While in high school, he and Paul Allen founded Traf-O-Data, a company which sold traffic flow data systems to state governments. He also helped to create a payroll system in COBOL, for a company in Portland, Oregon.
• During his second year at Harvard, Gates (along with Paul Allen and Monte Davidoff) co-wrote Altair BASIC for the Altair 8800. Gates dropped out of Harvard during his third year to pursue a career in software development.
• He licensed a CP/M-compatible OS called QDOS ("Quick and Dirty Operating System") from Tim Paterson of Seattle Computer Products for $56,000, and IBM shipped it as PC-DOS.
• According to King County public records, as of 2006, the total assessed value of the property (land and house) is $125 million, and the annual property tax is just under $1 million. Also among Gates's private acquisitions are the Codex Leicester, a collection of writings by Leonardo da Vinci which Gates bought for $30.8 million at an auction in 1994, and a rare Gutenberg Bible.
• Time magazine named him one of the 100 people who most influenced the 20th century, as well as one of the 100 most influential people of 2004, 2005 and again in 2006. Gates and Oprah Winfrey are the only two people in the world to make all four lists. He was listed in the Sunday Times power list in 1999, named CEO of the year by Chief Executive Officers magazine in 1994, ranked number one in the "Top 50 Cyber Elite" by Time in 1998, ranked number two in the Upside Elite 100 in 1999 and was included in The Guardian as one of the "Top 100 influential people in media" in 2001. Gates has been number one on the "Forbes 400" list from 1993 through to 2006 and number one on Forbes list of "The World's Richest People" from 1995-2006. In 2004, he became a director of Berkshire Hathaway, the investment company headed by Warren Buffett, the second wealthiest person in the world according to Forbes and a long time friend of Gates.
• According to a 2004 Forbes magazine article, Gates gave away over $29 billion to charities from 2000 onwards.
• Bio:
Born: October 28, 1955 Seattle, Washington

Occupation:
Chairman and Chief Software Architect, Microsoft Corporation

Annual salary:
US$1 million

Net worth:
$50.0 billion USD (2006)

Spouse: Melinda Gates

Website: microsoft.com/billgates

Beginner Investors: Utilize Sharebuilder to Start Your Stock Portfolio

2006-05-24T10:54:00.000-04:00

ShareBuilder.com is the most popular dollar-cost averaging brokerage with nearly one million accounts. It is a great place for a gift account, building up a college savings plan or for the starter investor. As far as I am concerned, Sharebuilder is the perfect online brokerage company for the beginning investor with the desire to build a stock portfolio. I would recommend first building your cash emergency fund, then funding your company 401k, and furthermore funding an IRA – Traditional or Roth, depending on your own personal needs. Once you have this savings shell and you now desire some individual company stocks in your portfolio, choose Sharebuilder to take advantage of automatic investing, and dollar-cost averaging.

Some cons to
ShareBuilder.com are an investor is limited to stocks and ETF’s through Sharebuilder, and has limited equity research compare to its competitors, for a site aimed at beginner investors.

Interesting fact: Sharebuilder has a special section devoted to understanding and investing in ETF’s. 40% of the top ten most-bought stocks by its users are ETF’s.

ShareBuilder.com offers three different purchasing plans based on steady long-term monthly investin: Basic ($4 per investment, $16 market order), Standard ($12 per month fee, six free auto-investments per month, $2 for each additional and $15 per market order) and Advantage ($20 per month, 20 free auto-investments and $1 for each additional and $12 per market order). I would try to avoid the Basic plan unless you are only investing in one or two stocks: you don’t get the gain/loss tracker with the Basic plan.

3 great finance articles from the week – Topic: Investing

2006-05-18T08:29:00.000-04:00

The Motley Fool is a site that I like to read for free financial advice and research. This week the Fool had three interesting articles relating to investing, that I thought were worth linking to in this post.

• The Easy Way to Better Returns
by Tim Hanson
Screen Boy Hanson's recent home-buying experience forced him to sell many of his small-cap holdings -- which, looking back, may have saved him from a boatload of volatility. Small-cap investors need more than a steely stomach, though, and Tim offers up five Foolish tips all investors should post on their fridge.
• Total Returns Are Better Returns
by David Meier
Investing luminary John Neff guided his mutual fund to market-beating returns over the course of several years. What's his secret, you wonder? Well, you're in luck -- Neff freely discusses the things he looked for in prospective investments, and David Meier applies those criteria to a few of today's bargains.
• Keeping the Faith at Berkshire
by Nathan Parmelee
Warren Buffett is probably the greatest investor on earth. But what will happen to Berkshire Hathaway when the Oracle moves on? Fresh off his trip to the Berkshire shareholders meeting, Nathan Parmelee explores the line of succession.

When should I lock into a mortgage rate? When should I float?

2006-05-17T13:18:00.000-04:00

My fiancé and I will be closing on our first home purchase in about a month or two, in Raleigh, NC. This is another huge undertaking in the personal financial arena, one in which most people really know nothing about, unless they are in the business. Well, we are not in the business of mortgage lending, so we had to educate ourselves in the various topics that go into a home purchase.

As most individuals know, your monthly mortgage payment depends on your interest rate. This interest rate that becomes applied to your mortgage is stated on the day that you close on your purchase of your new home. That is, unless. you ‘lock-in” to a rate prior to closing, which can usually happen anytime after your application, but at least 5 days prior to your scheduled closing.

I was reading an article that related to this topic recently on the site of “National Education Association Member Benefits” (not sure how I stumbled upon there) and the site gave some suggestions on when you should “lock” and when you should “float.”

When should you lock?
• Your loan pricing is protected from changes in financial market conditions
• Your final rate will reflect the pricing that was available at the time you locked in for loans with your specific transaction characteristics (points paid, loan-to-value, etc.) and your credit profile.
• You can select a specific length of time, usually 30 or 60 days – but sometimes as long as a year.
• You can lock anytime you locate a property, or start your refinancing process, up until five business days before the closing.
• Returning to a float status after you’ve locked typically involves an additional fee.

When should you float?
• You can take advantage of falling rates before you close on your loan. Lower rates mean lower monthly payments.
• You are not tied to a specific rate.
• You can switch from floating your rate to locking it in anytime after applying and at least five business days before closing.

So, in conclusion I think that we are going to take advantage of a 120 day lock which gives us a little time cushion, and also this particular one allows for one free change of status from “lock” to “float” in case rates do go down in between now and the closing date (which I doubt will happen). This requires a non-refundable, but fully applicable 1% deposit at the time of lock. Non-refundable if you decide not to buy the house or not to use the particular lender involved, and fully applicable in regards to the fact that this amount gets applied to your down payment at the time of closing. This is really a no-lose situation. Any suggestions out there for a first-time home-buyer?

pfblogs.org posting statistics update

2006-05-16T21:25:00.000-04:00

I've always wondered when the best time to post on my blog was to generate the most traffic from pfblogs. "John" from The Financial Ladder stated that he has had the best results when posting around noon during the weekdays. Obviously the image on this page is only a snapshot of one particular day, May 16 2006, but he seems to be correct. The most page views on pfblogs.org come between the hours of 11 am and 2 pm. Apparently many financial bloggers like to read during their lunchtime! I will continue to follow this topic to see if I can find any other information and to solidify this hypothesis. It also seems as though (not seen in this image) that page views decrease on Sundays. Happy Blogging.

MS Word 2007 to Feature Built-In Blogging!

2006-05-13T12:40:00.000-04:00

Word is a great tool for writing stuff, right? Blogging is all about communicating with words (and pictures, too). So, why not use Word to write your blog posts?

I was reading Slashdot this morning and noticed a post from Joe Friend, a leading Program Manager at Microsoft, which detailed one new feature for MS Word 2007 of blog post authoring. And yes, Word actually generates the html behind your post, so you can manipulate as you would like if need-be.

There have been many instances, especially since I am not by any means an intermediate or advanced in html, that I wanted to use many of the tools that MS Word provides, but something like Blogger does not, and a rookie blogger like me would not know how to write the html from scratch for these various tools.

This application software is however in a very much ‘beta’ state, but you can view a preview on the Microsoft web site.

I highly recommend that you check out this post to see some of the new features coming with MS Word 2007 directly relating to blogging.

Here is also a link to the "Top 10 reasons to upgrade to Word 2007".

What is the best time to post – specifically for pfblogs.org?

2006-05-12T20:11:00.000-04:00

Pfblogs.org is without a doubt one of my favorite websites to visit on a consistent basis. It can be difficult to choose which Personal Finance Blogs to read on a specific day, but with the Ad-Free Personal Finance Blogs Aggregator, you have them all right at your fingertips. I was wondering if anyone has done a study regarding when the best time to post is, to benefit from the most readership through pfblogs.org. Does anyone know this? I would love to know if you do. Here are few quotes from fellow pf bloggers regarding pfblogs.org

“[Pfblogs.org is] fairly new, but their site is already one of the best sites I’ve seen.” — Jack's Cash

"pfblogs.org - When you can’t choose just one personal finance blog, choose them all—without ads." – Consumerism Commentary

"First off, let me just say that I LOVE pfblogs.org." – Done Dirt Cheap

"Like reading investing and personal finance blogs like this one? I'd encourage everyone to take a look at the outstanding personal finance blog aggregator -- pfblogs.org." – Stock Ferret

Satellite radio is awesome, but are they good stock picks?

2006-05-10T18:34:00.000-04:00

I have been a subscriber to Sirius satellite radio since November 2004. I absolutely love it, especially for long car rides, and namely my commute to work three of the five days per week, which totals 150 miles per day. Do I have to have satellite radio? No. But I really want it. That is a quote you will here from approximately 10.5 million Americans, the amount of subscribers between Sirius and its rival, XM radio. The radio is relatively inexpensive at $13/mo. and approx. $50 - $200 for hardware, but anything is expensive compared to FREE (regular radio). Anyways, I love it, and won't get rid of it unless the companies ever go out of business.

Now, on the other hand, how about purchasing XM or Sirius stock? I thought it would have been a great idea last year, but held off because of each company's debt structure. HUGE expenses on both sides, due to primarily crazy spending on programming deals. One that pops into mind is Sirius paying Howard Stern $500 mil. over 5 years! Wow. Well, XM stock is down 33% this year, and Sirius is down 31%. So, not so sure on the stock purchase just yet, but who knows, maybe the technical analysis will trigger a purchase.

See an article here published in the News & Observer - Raleigh, NC newspaper.

New Financial Technology - Paying via Text Message

2006-05-02T13:35:00.000-04:00

New options for cell phone users are now allowing money transfers and purchases to be made via text-messaging technology. EBay’s PayPal unit recently introduced “PayPal Mobile” that allows consumers to send payments to others, purchase items from select retailers, or donate money to specified charities by typing a text message into a cell phone.

I think this is a great idea moving forward in the technology-laced world that we live in. Others however, do not have the same belief. I asked an individual that I work with if she would consider using this feature. She stated “No way! How are you supposed to trust the fact that it works? What if someone gets a hold of my bank account information through this text messaging system?” I then asked, “Do you conduct any of your banking online ma’am?” She replied, “Are you kidding me? With all of those online predators out there, there’s no tellin’ who could have access to your banking information if you submit it online.”

She obviously comes from a different generation than I do. I am not saying that you shouldn’t worry about conducting your banking online, or paying bills via text message, but to me it is no different than paying via written check. The way I see it is if someone did somehow make an unauthorized transaction using my bank account because they hacked this information online, my bank is going to be in more trouble than I am. Also, I feel confident with the security technology within big-name banks, that this will not occur, and if it does that they will be able to tell that it was an unauthorized transaction and that I will not be liable.

Another new service is starting to be offered by credit card companies and cell phone makers to create so-called mobile wallets. This service allows users to store credit card information on cell phones that can be waved over special terminals at the checkout counter to make purchases at various retail establishments.

According to the Wall Street Journal, the text messaging system and the mobile wallet will most likely not compete with each other.

Here is a ‘real-life’ example from the Wall Street Journal, of the text payment service being put into action. “Cooper Marcus, a 33 year old Berkeley, Ca., resident, recently used TextPayMe’s service when he wanted to split a $40 restaurant bill with his fiancée and collect $88 from a friend who owed him money for a wireless router. “I always have my phone with me but I don’t have cash,” says Mr. Marcus, who is chief executive of a parking management company.”

WSJ Online Free for 10 days!

2006-05-01T07:09:00.000-04:00

Wall Street Journal Online is celebrating its 10 year anniversary by giving all access to WSJ Online FREE for 10 days! Click on the link to take advantage of this great offer.

Funds that adjust as the years go by

2006-04-27T13:18:00.000-04:00

I am interested in the fairly new “Target Retirement Funds” to place within an IRA. Has anyone had any experience with investing in these funds? I read an article from BusinessWeek Online from back in July 2004 that described some aspects of these funds. These funds are different from mutual funds in the fact that they rebalance themselves – “going from heavy commitments in stocks to greater allocation in bonds” – as the shareholders move toward retirement. These funds are commonly called “lifecycle” or “target maturity” funds, so you chose a maturity date that is close to your expected retirement date. For instance, a 35 yr. old may choose a fund with a target maturity date of 2040 (an example being the Fidelity Freedom 2040 – FFFFX). It seems that each Fund Company has slight differences in how aggressive they are, along with the varying expense ratios. It seems as though this would be a good choice for an individual who does not want to review their asset allocation on a consistent basis, although you probably always should. Here is a link to a different article about Target Retirement Funds from MSN Money.

FORTUNE Top 100 MBA Employers

2006-04-25T16:01:00.000-04:00

FORTUNE has come out with their "Top 100 MBA Employers" for 2006. I really want to get my MBA, but I am currently weighing it's true worth to me. Will I gain an immeasurable amount of knowledge upon graduating with my MBA - probably. Will it make me wealthier - probably not. I am sure you can increase your salary significantly with an MBA, but in my position I think the debt it would cause might outweigh the increase in income. The list of Top MBA Employers is filled with intellectual companies such as McKinsey & CO., Microsoft, The Boston Consulting Group, and Dell. #2 on the list is Google - which I would would be interested to find out where they were on the list a couple years ago, or even last year. It seems as though Google is in everybody's mind, whether it is for their stock price, their user-friendly online tools, or for a place of employment. You can view the entire listing of "Top 100 MBA Employers for 2006" here.

First stab at selling on ebay - will it be a success?

2006-04-24T14:44:00.000-04:00

I have always wanted to test the waters, selling something on ebay.com, but never got around to it. Yesterday, Sunday 4/23/06, I submitted my first item to sell on ebay.com. I am looking to sell my old (less than 12 months old) cell phone. I was given a Blackberry (Nextel 7100i) from the company that I work for, so my personal cell phone was really no use to me anymore. The phone I am selling is a Motorola v710. The link to the phone on ebay.com may be found here, for anyone interested. You can find a write-up of the phone here. Either make a bid on it, or give me some feedback on selling items on ebay if you would like!

4 strategies that beat 'buy and hold'

2006-04-22T14:11:00.000-04:00

I read a very interesting article lately by Timothy Middleton of MSN's Moneycentral, named '4 strategies that beat 'buy and hold'. Since, for the most part, Moneycentral is a guide for the average individual investor, I thought this was a very interesting idea to promote. You don't see too many sites promoting market timing to the average individual investor. Middleton states that he has been receiving emails from many average individual investors stating that they are not making any money on their investments these days. To quote Middleton, "Here's one possible reason: You're using out-of-date investment approaches. You were brainwashed in the 1990's to "buy and hold" a "thoroughly diversified portfolio". That is so 20th century. If you actually did that from the market's peak in March 2000 through the end of last year, you eked out annual gains of 3.9%. No wonder you're unhappy."

This is interesting, because most all financial advisors tell you to buy and hold, and you will be better off in the long-term. But will you really be better off? I am not sure where I stand on this, because it would be much easier to simply buy and hold a group of historically well-performing investments, but you may miss out on some good investment opportunities on the way if you don't hedge with your risk profile.

The 4 strategies that beat buy and hold come from Michael E. Kitces, director of financial planning for Pinnacle Advisory Group in Columbia, Md. 1) Buy a few stocks rather than a bunch; only the best will do, 2) Shun weak industries, 3) Use alternative investments, like commodites, 4) Violate the biggest taboo of all, and start market timing.

Kitces states his reason for this idea as markets tend to move in very broad trends, meaning that when markets consistently are on the move up and achieve significant excess, when they retrieve back, they usually don't regress to the mean, they regress to their lows. This is well-known as a secular bear market, a period in which stock prives contract from their peak as much as 65-75%.

In the rest of his article he details how to implement the 4 strategies into your investment portfolio. What does everyone think about Kitces and Middleton's idea for the new-age market?

2006 MLB Team Payrolls

2006-04-18T07:37:00.000-04:00

I am a huge baseball fan, always have been. My favorite team is the NY Mets, and even though it is quite early in the season, I am very pumped about them getting off to a 10-2 start this season. One thing that is tough to look past about the MLB is the disparity between top and bottom of team payrolls. Now, granted money does not buy championships, because if it did the NY Yankees would win the World Series crown each and every year. But, it does help immensely when you can pay 10 different players on your team over $10 mil. for one year (Yankees this year - click here to see the Top 100 paid players for 2006). Fox Sports ran a story detailing the 2006 MLB Team Payrolls, which can be seen below. Look at the difference between top and bottom. The NY Yankees have a $198 mil. payroll for 2006, and the Marlins have a $15 mil. payroll! $15 mil for your whole team!!! Give me a break Florida! There are 12 MLB players who will INDIVIDUALLY make more than $12 this year. I do not blame the Yankees, I blame Florida. The ownership of this team is making a joke out of their franchise. The Marlins should be sold off to a management team with some passion (and money) for the game. I do, however, believe something needs to be done about the disparity from top to bottom in the MLB regarding team payrolls. Here is the detail for your enjoyment.

Where do your income tax dollars go?

2006-04-13T09:27:00.000-04:00

I am not going to make it a point of setting my own agenda and swaying you to my governmental views, but I thought this was a very interesting link. Click here to find out where your tax dollars go. I was a bit surprised to see this analysis. For all of you anti-war gurus out there, you better sit down before clicking the link. Click here for more information on how these numbers were achieved. Feel free to give me a shout!

Preparing for the World Cup

2006-04-13T07:36:00.000-04:00

Another great reason why I am so glad to be living in Raleigh, NC occurred this week. I am a HUGE soccer fan, I played all my life through college. Yesterday, Tuesday April 11 the U.S. Men's National Team squared off against Jamaica in an exhibition game in Cary, NC (right outside of Raleigh). Needless to say, I went to the game and had a blast. Here is a synopsis:

U.S. Men Draw, 1-1, with Jamaica in Last Match Before World Cup Roster Is Announced on May 2.

• Ben Olsen Scores Equalizer After Jamaica Takes Lead in the Fourth Minute
• Landon Donovan Becomes All-Time U.S. Assist Leader in with 23 in Seven-Year Career
• Tony Meola Becomes Just the Ninth U.S. MNT Player to Earn His 100th Cap
• U.S. Manager Bruce Arena Will Announce 2006 FIFA World Cup Roster Live at 6 p.m. ET on ESPN’s SportsCenter and ussoccer.com on Tuesday, May 2.

Here are some pictures from the game. Hope you enjoy!

The fuel debacle - Ethanol to save the future?

2006-04-05T20:45:00.000-04:00

I've been reading some articles in the news lately about ethanol (a form of alcohol derived from sugar or grains such as corn) being used as a source of fuel for Americans. Interesting fact, the Model T that was first produced in 1908 would run on either ethanol or gas. At the time (and also now) gas was cheaper and became the primary fuel source. Henry Ford's vision of ethanol usage is however becoming more of a reality according to many sources.

An additive to gas, methyl tertiary butyl ether (MTBE) supposedly may cause cancer, and Congress will not offer refiners protection from legal liabilities that may arise from MTBE usage, therefore sometime this year, refiners will be dropping this additive and replacing it with ethanol. In regards to short-term effects, this may not decrease gas prices, it may even increase them but only slightly. However, looking into this from a long-term perspective, could this be a blessing in disguise? Americans are becoming fed up with dependence on oil from the Middle East and high gasoline prices, so maybe an increase in supply of ethanol (and increase in usage) could actually drive prices down in the long-term, or at least make them less volatile.

Here are some quick political facts regarding this topic:

The Energy Policy Act of 2005 requires gasoline producers to nearly double the use of renewable fuels (chiefly ethanol) by 2012. Mandated use will rise to 7.5 billion gallons by 2012, from 4 billion gallons in 2006. This is still a very small portion to overall gasoline use however, although many experts believe that the government will increase the requirements each year going forth. This bill offers some sort of tax incentives for service stations to sell E85, a blend that can contain as much as 85% ethanol, for use in so-called "flex cars" that run on ethanol.

President Bush has offered his endorsement to this idea, along with pledging money to fund research on new production methods.

Ethanol also has bipartisan support on the local governmental level - 45 states have enacted policies to stimulate ethanol production and consumption.

Here is another way to look at this topic. All of these factors stated above has pushed the price of ethanol above $2/gal., and producers of ethanol can make this stuff for about $1/gal. DING DING DING - Can you say "stock purchase"? As you know I am getting married this October so I don't have a ton of money to throw at individual stocks, but if I did, I would look into some ethanol producers as LONG-TERM stock picks. Here's a little research for you: Ethanol's large producers -"Archer Daniels Midland" ticker = ADM (however price needs to lower a bit before I would purchase), "Pacific Ethanol" ticker = PEIX.

This is a very interesting topic for the future of America. We really cannot rely on the Middle East forever, especially if the current turmoils continue into the future. Unless you are one of those individuals who thinks the whole Middle East is moving towards Democracy! (sorry Pres.....)

Blackberry Blog Post

2006-03-30T14:59:00.000-05:00

This is my first attempt at a blog post from my new toy, the blackberry. So please bear with me during my rookie-like attempt. I am currently traveling from nj to nc back home from a business trip. This week was quite busy for the management of my company. We moved our NJ office from Edison to S Plainfield which entailed a 16 hour work day yesterday. The key component being the phone system and the computer network. If either of these items do not successfully go live instantly, then we lose valuable revenue!

Switching topics, my company purchased a blackberry 7100i for me, with service provided by Nextel. I am a novice crackbery user, but I can truly see why people become so addicted to these devices! Between making a phone call, to surfing the internet, to text messaging, to email,calendar,to do lists, the list goes on and on for available features at your disposal! It is a lifesaver when I am out of town on business, because I can read all of my emails instantly when I receive them. The speed of the blackberry server has been very impressive. I will receive an email on my crackberry instantaneously as it comes through my company email server.

Well, that is enough ranting for today. Back to making the trip back home to NC!

Wedding Costs - AHHHHHHHHHHHHHHHHH!

2006-03-24T16:26:00.000-05:00

According to a Cost of Wedding Internet site, the average cost of an American wedding is $26,800.

If you are wondering why I am blogging about this, it is because I am getting married in October 2006. I cannot believe all of the planning and $$ COSTS $$ that go into a wedding. I mean, don't get me wrong, it will all be worth it in the end, but a strict budget is definitely needed when getting married. My fiance' and I use www.theknot.com, which by the way is a great site for couples preparing to be married. It has everything you need to plan a wedding including an editable guest list, and budget (I'll be honest - the budget is the only thing I look at).

We are getting married back in our hometown of Endicott, NY. On average, couples will spend $23,048.00 for their wedding in Endicott. This does not include cost for a honeymoon, engagement ring, bridal consultant or wedding planner. Add that in and cost could reach $30,559.00. Below is a cost breakdown by wedding category. The items listed below the category are included in the cost.

Category Average Cost:

Wedding Attire $1,583.00
-Bride Accessories
-Groom Accessories
-Groom Tux
-Groom Suit
-Hair
-Makeup
-Headpiece
-Wedding Veil
-Wedding Dress

Wedding Ceremony $2,010.00
-Marriage License
-Ceremony Accessories
-Ceremony Location
-Ceremony Site Decorations
-Officiate
-Rehearsal Dinner

Wedding Favors & Gifts $950.00
-Attendant Gifts
-Parent Gifts
-Wedding Favors

Wedding Flowers $977.00
-Boutonnieres
-Bride Bouquet
-Bridesmaid Bouquets
-Flower Girl Flowers
-Wedding Flowers
-Corsages

Wedding Jewelry $1,496.00
-His Ring
-Her Ring

Wedding Music $793.00
-Reception Band
-Disc Jockey
-Musician

Wedding Photography & Video $2,286.00
-Photographer
-Videographer

Wedding Reception $11,775.00
-Bride & Groom Hotel
-Beverages
-Decorations
-Food Service
-Venue
-Rentals
-Wedding Cake
-Bartender
-Centerpieces

Wedding Stationery $696.00
-Wedding Invitations & Reply Cards
-Stationery
-Save The Date Cards
-Bridal Shower Invitations

Wedding Transportation $484.00
-Limo Service
-Car Rental

Wedding Other $7,511.00
-Engagement Ring
-Honeymoon
-Bridal Consultant
-Wedding Planner

Pretty crazy isn't it?! And this is only the AVERAGE, so apparently there are many weddings that are costing more than this. We have a pretty specific budget for ours - hopefully we will stick to it!

Wish us luck!

The IRA Dilemma: Traditional vs. IRA

2006-03-20T20:27:00.000-05:00

First things first – I would always advise an individual to maximize their company 401k contribution, at least up to the company match (if your company provides one) as a primary retirement investment vehicle. The reasoning behind this is simple. It’easy – an automatic deduction from your paycheck on a weekly basis (or whatever frequency you are paid on) – and your company match is FREE MONEY!

After maximizing a 401k contribution, I would advise investment in an IRA for retirement purposes. Now note, I am solely speaking of investing for retirement, so liquidity is not taken into consideration.

Deciding whether to open a Roth IRA or Traditional IRA is a major decision with potentially large financial consequences. Both forms of the IRA are great ways to save for retirement, although each offers different advantages.

Traditional IRA Profile
• Tax deductible contributions (will deduct from income before AGI, depending on income level)
• Withdraws begin at age 59 1/2 and are mandatory by 70 1/2.
• Taxes are paid on earnings when withdrawn from the IRA
• Funds can be used to purchase a variety of investments (stocks, bonds, certificates of deposits, etc.)
• Available to everyone; no income restrictions
• All funds withdrawn (including principal contributions) before 59 1/2 are subject to a 10% penalty (subject to exception).

Roth IRA Profile
• Contributions are not tax deductible
• No Mandatory Distribution Age
• All earnings and principal are 100% tax free if rules and regulations are followed
• Funds can be used to purchase a variety of investments (stocks, bonds, certificates of deposits, etc.)
• Available only to single-filers making up to $95,000 or married couples making a combined maximum of $150,000 annually.
• Principal contributions can be withdrawn any time without penalty (subject to some minimal conditions).

Tax Deferred vs. Tax Free
The biggest difference between the Traditional and Roth IRA is the way the U.S. Government treats the taxes. If you earn $50,000 a year and put $2,000 in a traditional IRA, you will be able to deduct the contribution from your income taxes (meaning you will only have to pay tax on $48,000 in income to the IRS). At 59 1/2, you may begin withdrawing funds but will be forced to pay taxes on all of the capital gains, interest, dividends, etc., that were earned over the past years.
On the other hand, if you put the same $2,000 in a Roth IRA, you would not receive the income tax deduction. If you needed the money in the account, you could withdraw the principal at any time (although you will pay penalties if you withdraw any of the earnings your money has made). When you reached retirement age, you would be able to withdraw all of the money 100% tax free. The Roth IRA is going to make more sense in most situations. Unfortunately, not everyone qualifies for a Roth. A personal filing their taxes as single can not make over $95,000. Married couples are better off, with a maximum income of $150,000 yearly.

Is there any way to avoid the 10% early withdrawal penalty on my IRA?
Yes! There are ways to avoid paying early withdrawal fees.
1. Permanent disability of IRA owner
Money can be withdrawn without penalty in the event the IRA holder becomes permanently disabled.
2. Death of IRA owner
It's small consolation, but if you kick-the-bucket before you're 59 1/2 years old, your estate won't be hit with the 10% early withdrawal fee.
3. Withdrawals are used to pay non-reimbursed medical expenses
In the event of serious illness or injury that requires prolonged or expensive medical treatment, Uncle Sam will waive the early withdrawal fee on the condition that the expenses are in excess of 7.5% of your adjusted gross income.
4. Withdrawals used to help pay for first-time home purchase
Despite a lifetime limit of $10,000, this exemption can make it much easier for an IRA owner to buy a house.
5. Higher education costs
College can be expensive. Thankfully, certain higher education costs for you, your spouse, children or grandchildren can be withdrawn penalty-free. You may still owe federal income tax, however. For more information, read the Internal Revenue Service article, Notice 97-60 Using IRA Withdrawals To Pay Higher Education Expenses.
6. Money is used to pay back taxes to the IRS after a levy has been placed against the IRA
This is not the kind of exemption for which you want to qualify, but it may save you money if you find yourself in an uncomfortable position with the IRS.
7. Withdrawals used to pay medical insurance premiums
Out of a job? The rest of the world may be topsy-turvy, but rest assured, you won't be penalized for using retirement money to pay your medical insurance as long as you have been on unemployment for longer than twelve weeks.
8. Made on or after the day the IRA owner turns 59 1/2
Once you have reached the qualifying age of 59 1/2, you can make penalty-free regular withdrawals upon which to live.

Where can I open an IRA?
IRA's of both types can be opened through a bank or brokerage house. If you are interested in holding stocks or bonds in your IRA, it may be wiser to open an account with your broker. It should require no more than a few minutes' visit to the local branch office, or a trip to their website.

How much money do I need to open an IRA?
Minimum opening fees differ by institution, but are dramatically less than other types of investment accounts.

How much can I contribute to my IRA each year?
IRA Contribution Limits
YEAR AGE 49 & Below AGE 50 & ABOVE
2002-2004 $3,000 $3,500
2005 $4,000 $4,500
2006-2007 $4,000 $5,000
2008 $5,000 $6,000

Click here IRA Calculator
to see how much your IRA account could appreciate to!

Why I moved to Raleigh, NC

2006-03-17T17:00:00.000-05:00

This is a picture of my townhouse that I am building in an area of Raleigh, NC called "Brier Creek." This will be my first home purchase (with my fiance' Katie) and we are very excited to soon be new homeowners!

I know I talk so highly upon the geographic region of Raleigh, NC to all of my friends and family, so I wanted to back it up with some facts and figures. You can post your comments here on what you think about your particular region of habitation if you would like. I am sure we would all like to hear about some various points on the globe.

#3 Hot Cities for Entrepreneurs (Raleigh-Durham) - Entrepreneur Magazine, September, 2005

#1 High Tech Region (Research Triangle Region) - "Projections 2006 - Daring to Compete: A Region-to-Region Reality Check", Silicon Valley Leadership Group

#12 Top 40 Real Estate Markets in the U.S. (Raleigh-Durham) - Expansion Management magazine, August 2005

#8 Most Unwired City - Intel Survey, June 2005

# 2 Best Place (Raleigh-Durham) for Business & Careers -- Forbes, May 5, 2005

#1 Best Place to Work (U.S. Environmental Protection Agency, RTP) # 4 (NIEHS) and # 1 Academic Institution (UNC-Chapel Hill) for Postdocs -- "Best Places to Work for Postdocs: 2005", The Scientist, February 14, 2005

#5 Best Business Climate (North Carolina) - Site Selection, November 2004

# 1 Preferred State (North Carolina) for Location and Expansion - Plants Sites and Parks, October 2004

# 2 Healthiest Place (Raleigh-Durham-Chapel Hill) - Outlook, Sept/Oct. 2004

#5 Most Entrepreneurial City in the United States (Raleigh) - Visa's New Innovation Index, October 2004

# 3 U.S. Metro Area (Raleigh-Durham-Chapel Hill) for Biotech and Life Sciences – Milken Institute, June 2004

#2 Best Place for Business -- Forbes, May 24,2004

#1 Next Boomtown -- Business 2.0

# 1 Best Place (Raleigh-Durham-Chapel Hill) to Live -- MSN House & Home's America's Places to Live 2003

# 1 Best Place (Raleigh-Durham-Chapel Hill) to Live and Work -- Employment Review, June 2003

# 4 Up and Coming State (North Carolina) in the World of Biotechnology -- Ernst & Young, Outlook, May/June 2003

# 3 Best Place (Raleigh-Durham-Chapel Hill) For Business And Careers -- Forbes, May 9, 2003

# 4 Picture Perfect Metro (Raleigh-Durham-Chapel Hill) -- Plants, Sites & Parks, March 2003

# 4 Top Biotechnology States (North Carolina) -- Plants, Sites & Parks, March 2003

# 1 Best Cities (Raleigh-Durham-Chapel Hill) for Education -- Forbes (Places Rated Almanac, Millennium Edition), February 14, 2003

# 1 State (North Carolina) Business Climate -- Site Selection, November 2002

# 1 Best Cities (Raleigh-Durham-Chapel Hill) for Education -- Forbes (Places Rated Almanac, Millennium Edition), February 14, 2003

# 1 Healthiest Place (Raleigh-Durham-Chapel Hill) to Live - Outlook, July/August 2002

Sounds like a great place to be doesn't it?!

8 Virtues of great mutual funds - Part II

2006-03-10T15:46:00.000-05:00

(As stated by Kiplinger's Mutual Funds) "Management Excellence." Outstanding records don't happen by accident. They are the work of talented men, women and sometimes teams. Favor funds with good records whose managers have been at the helm five or even ten years. Or follow an established manager from a large fund firm who launches his or her own organization, so you get a proven manager even if the fund is new.

Most great managers have well-defined investment philosophies, are committed to their jobs and exhibit an infectious enthusiasm. Plus, they don't let their funds fall apart. Once someone becomes synonymous with success, such as Bill Miller of Legg Mason Value Trust, Bill Nygren of Oakmark, Chris Davis of Selected American Shares or Will Danoff of Fidelity Contrafund, he or she occupies the same exalted perch as a renowned chef. Everyone wants to enjoy what they offer - but they're constantly on the spot. If their establishment goes downhill, so does their reputation. So although all managers stumble from time to time, the best ones work harder to recover.

8 Virtues of great mutual funds - Part I

2006-03-08T20:39:00.000-05:00

Part I of Kiplinger's "8 Virtues of great mutual funds" deals with "Lusty Performance." This is job one: Making money for you. Our favorite funds have total returns (the gain in value of a fund's investments plus reinvested interest and dividends) that are better than average for their category during most calendar years and over numerous periods, such as three, five and ten years. We're not thrilled when a fund's multiyear return is inflated by one fat year - a problem with the gold and tech funds. We're also unimpressed when a fund boasts of matching an index. Great funds beat comparable indexes.

We do like funds that limit the damage when the market falls but deliver big in good times. Take Marsico Growth, which invests in large, expanding companies. In 2001 and 2002, when its segment of the stock market was performing terribly, Marsico Growth lost much less than most of its rivals and Standard & Poor's 500-stock index. Since the stock market started to recover, Marisco has outgained the S&P 500 and the large-growth fund category, just as it did during the 1990's bull market.

Please look for future posts for the other 7 virtues of great mutual funds, as stated by "Kiplinger".

Technical Analysis of the Financial Markets

2006-02-28T16:12:00.000-05:00

The philosophy of technical analysis of the financial markets is the study of market action, primarily through the use of charts, for the purpose of forecasting future price trends. Market action refers to the three main sources available to someone analyzing a market trend, which are price, volume and open interest. One must not worry about ‘open interest’ unless they are trading in futures and options.

The three main ideas behind the technical approach to analyzing market action is 1) market action discounts everything, 2) prices move in trends, 3) history repeats itself. The opponent to a believer of ‘technical analysis’ is one who believes in ‘fundamental analysis.’ (Although many analysts use a combination of the technical and fundamental approach) Analyzing an investment using a fundamental approach focuses on more of a balance sheet and income statement approach, industry trends, and the specific economic factors of supply and demand that cause prices to move higher, lower, or stay the same.

Technical analysis is a very interesting philosophy. If you believe in this approach you essentially believe that one can analyze a stock’s future movement, simply by analyzing its chart. This concept may seem a bit odd, but I can tell you that it is amazing how well it does actually work! You can test this theory by simply taking a historical chart, analyzing the chart, and determine where you would’ve bought and sold, without looking at the future of the chart, and then determine how your theory works. Obviously you will have to study technical analysis for awhile before you put your ideas into implementation.

A good book to read for learning technical analysis is “Technical Analysis of the Financial Markets” by John J. Murphy. I own it and I am amazed at how Murphy breaks down such a complex topic into small, specific areas, easily read and understood by the reader.

Attempting to teach my readers technical analysis in this blog posting would be impossible. I will however, include some technical analysis rationale in future postings in my site.

An excerpt from Murphy’s book:
On moving averages as oscillators….
“One way to construct an oscillator is to compare the difference between two moving averages. The use of two moving averages in the double crossover method, therefore, takes on greater significance and becomes an even more useful technique. We’ll see how this is done in Chapter 10. One method compares two exponentially smoothed averages. That method is called Moving Average Convergence/Divergence (MACD). It is used partially as an oscillator.”

Investment Appreciation vs. Student Loan Interest Expense

2006-02-23T13:51:00.000-05:00

A reader sent me an email yesterday with the following question: Dear Mr. Fanelli, I am a graduate student and I take out student loans with relatively low interest rates (let’s say 5%). I have just received $15,000. I could use this money to pay for tuition, thus reducing my loan burden, but it seems that it would be a better idea to invest that money and hope for a return greater than my interest rate. However, I value liquidity and would want to have this money available after I graduate in May 2007. What would you recommend? In particular, could you suggest a short-term (6 – 12 months) investment vehicle?

Fanelli States: Let’s start with the various investment vehicles that you have to choose from.
Name Avg. Yield (all %’s are approximate)
Money Market Account 3%
CD (6mo, 12mo) 4%, 4.3%
Treasury Bond 4.5%
T-Bill 4.5%
Mutual Fund ?
Stocks ?

I placed a question mark in the average yield section of mutual funds and stocks, because there it would be naive to give an actual %. Yields for mutual funds and stocks revolve around market timing if you are trading in the-short term, or a fundamental or technical analysis behind each individual fund or stock. You can however look up average returns on specific funds or stocks at many various sites. Check out http://finance.yahoo.com/ to research specific funds and stocks.

Top Annual Returns for Mutual Funds (as of 2/22/06):
(It would be nice to find these BEFORE they climax!)
Top Performers - 1 Year
Fund Name Symbol Return
ProFunds UltraJapan Inv UJPIX 90.57%
ProFunds UltraJapan Svc UJPSX 88.75%
ING Russia A LETRX 70.94%
Fidelity Advisor Korea I FKRIX 69.09%
Fidelity Advisor Korea A FAKAX 68.79%
Fidelity Advisor Korea T FAKTX 68.33%
Fidelity Advisor Korea B FAKBX 67.42%
Fidelity Advisor Korea C FAKCX 67.41%
Gartmore Global Natural Resources I GGNIX 65.95%
Gartmore Global Natural Resources IS GGNSX 65.72%

If you really wanted to achieve a greater return than what your student loan APR is, you would have to time the market. “Market Timing” is essentially buying a stock or fund low, and selling it at a higher price, resulting in a profit. Sounds simple?! It is actually not simple at all, hence the need for professional Investment Brokers. I personally do not believe in buying mutual funds or stocks for a short-term investment.

So, to actually answer the aforementioned question, I would not invest the money at all, and also decide against taking out another student loan. This question stems more from a cash flow point of view. If you are really looking to live like you have $15k extra in the bank by going on some vacations, eating at nice restaurants, and buying that new 60” plasma TV that you have always wanted, then the student loan looks nice to pay the current tuition due. But knowing that this reader is financially savvy, I know he/she will live the same lifestyle as they did pre-$15k. Since there is no science to leveraging an investment in this $15k to know for a ‘fact’ that you are going to make more than your future student loan interest expense, I would advise that this person uses their direct deposit at their employer and socks this money away in a savings or money market account, and to pay the tuition due for the upcoming semesters with this hard-earned cash. Remember readers, we do not want to increase our debt burden if we don’t have to. We should all set a long term goal of being “debt free except for the house”.

If you are looking to invest your money with a short-term (less than one year) goal in mind, I would recommend seeking out your local professional Investment Advisor. This is if you are not content with the return on a savings account, money market account, CD, etc. Market timing is a very difficult task to accomplish in the short term, especially when, remember, you have to calculate the ‘costs’ (to the broker) of purchasing and selling your shares.

In conclusion, I would recommend purchasing a CD (look for the best rates on the web before you buy) if you needed a 6-12 month investment vehicle, and you didn’t want to chance ‘market timing’, by opening up your own Sharebuilder account (I have an account with them) to invest in mutual funds and stock at a very low ‘broker cost.’ My ACTUAL recommendation is to use the $15k to pay down current tuition, instead of taking out another student loan. In the near term, your cash flow may not be as positive as you would like, but you will be much better off in the future when you do not have an extra $15k (+ interest expense) to pay off when you graduate from college.

I hope this helps. Please feel free to comment and/or email me your questions/comments/concerns about this article.

~Buon Pomeriggio

My First Post - The Road to Personal Financial Success

2006-02-21T21:23:00.000-05:00

The purpose of life is to make money. Ok, ok, so the real purpose in life should be the 'pursuit of happiness', but let's be honest for one moment. When you have a large nest egg, it is much easier to show that 'happiness.' So, in conclusion we will say that the purpose of life is the pursuit of happiness, however the purpose of my Blog is to make money.

"Fanelli's Personal Finance" will be a Blog relating to various avenues that relate to that demon we all think about day-in and day-out --- $$. Every once in awhile I will get off track and make a posting of other topics that interest me, such as exercise, baseball, soccer, politics, or my new favorite toy - the "Blackberry."

My goal of this site is to keep myself on track with all of the aspirations that I have in my own little money-making world, along with learning from others experiences. So, after a long introduction, let's talk finances.

The personal savings rate that the Commerce Department's Bureau of Economic Analysis issues with much fanfare each month is arrived at by subtracting everything we spend money on -- from mortgage payments to a night on the town -- from our disposable income which, in government lingo, is personal income minus taxes and other fees to government agencies. The little pile of nickels and dimes that's left over -- the stuff you didn't spend -- is what you have to save.
The Commerce Department reported that for 2005, the savings rate fell into negative territory at minus 0.5 percent, meaning that Americans not only spent all of their after-tax income last year but had to dip into previous savings or increase borrowing.
The savings rate has been negative for an entire year only twice before -- in 1932 and 1933 -- two years when the country was struggling to cope with the Great Depression, a time of massive business failures and job layoffs Contributions to IRA and 401(k) plans are counted toward the savings rate. So when the rate is negative it becomes very clear that a lot of people aren't participating in retirement plans.

UH OH! This is not a one-time thing that happend during one specific month, this is a statistic from the entire year of 2005, this is now the norm in America. Hence, the reason why I decided to write a Blog about personal finances. This web page will tackle many areas of what one would deem 'personal finance,' each very specifically in its own posting. Controlling your finances is based on two simple tasks. 1) Make money, 2) Spend money. Seems simple, right? Wrong. Personal budgeting is a must in ones life. For instance, how many of you that are reading this posting right now, actually have a written budget for a specific time period - and you stick to it? I would bet not too many of you. I personally have a formula-driven budget in a MS Excel spreadsheet that I use (I will have a specific posting detailing this spreadsheet in the future of "Fanelli's Personal Finance"), and without it, I probably wouldn't have a dime in the bank. I am going to quote a very knowledgeable financial guru (Dave Ramsey), by stating "live on less than you make." This is another aspect that sounds simple, right? Well, in the age of 'materialism', credit cards have taken over hard working wallets all over the country. But think about it. All you have to do to save money and live a better life in the future, is to 'live on less than you make' right now.

A very knowledgeable man once told me, "Mike, every time you earn a paycheck, put 10% away into some sort of savings vehicle." Great advice from my Grandfather, Dominick Gioffre'. Just think if you put 10% of every dollar that you earned into a savings account, mutual fund, or a more risky stock portfolio, and compound that interest over the life of your working career. Cha-ching! The dollars would rack up, without you even having to touch them.

In future postings, I will focus on various investment tactics. I will shed more light on your company 401k, the famous Roth IRA, mutual funds, and stocks. I hope that after reading my postings on a continuous basis you will gain a bit of knowledge and also, not be afraid to conduct your own financial makeover, starting from scratch and building that nest egg you always dreamed of. Also, by reading my postings, I hope that you will save and invest without the help of a paid financial advisor. You can do this! Investing is a very scary thing without any knowledge, but in the modern day there are various web sites out there where you can build your own cash, mutual fund, and stock portfolio all by yourself sitting at your home computer. Personally, I like www.sharebuilder.com, especially for beginner and intermediate investors.

Well, that is it for today. I wanted to make my first post an introduction of what to look forward to on "Fanelli's Personal Finance" Blog. I hope my introduction sparked an interest to view my future postings.

~Arrivederci~