Archive for April, 2011

First Look: Individual 401k

April 25th, 2011

You may have heard of this investment option by the names “Solo 401k” or “Self Employed 401k“, but I like the name Individual 401k, so that’s what I’m going to use to describe this great retirement option.

What Is An Individual 401k?

It’s a plan that enables small business owners (preferrably one with no employees) to contribute much more than a Roth IRA.  This plan allows you can contributed up to $49,000 a year, if you have enough profit!  How’s that for a contribution!!!

If you are self-employed you can contribute $16,500 + 25% of your compensation from your business…  up to $49,000.

If you have a very profitable business, this would definitely be an option to consider!

The tax benefits of an individual 401k are as follows.

  • Contributions to an Individual 401(k) plan are tax-deductible
  • Earnings grow tax-deferred. 
  • Contributions are not taxed until withdrawn.

The Individual 401k is most benefitial to small businesses that don’t have any employees.  Once an employee enters the picture the paperwork gets much more complex, since the plan must be offered to each employee.

I’m not in a position to take advantage of this great option.  But if you own a small put profitable business where you don’t have any employees, this plan may just be your thing!

Interested in opening up an individual 401k, check out at Charles Schwab’s Individual 401k offering.

-MR

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MR Cache 2011 April 24: Stock Market Craziness

April 24th, 2011

Weekly Thoughts:

The stock market when through a crazy drop and then another equally crazy rise.  When it dipped, I jumped into my stock, but I didn’t sell it yet although it rose to a new high.  Monday, I might change take that leap out of it since it’s coming out with its earnings on April 27th.

This post will be quick because of the holiday, and I need to sleep for tomorrow.

My Favorite Reads of the Week:

 

Favorites From Money Reasons this Week:

Carnivals and Mentions:

Closing Thoughts:

 Have a happy Easter weekend, for those that celebrate Easter…

-MR

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How To Get Through Dark Times In Life

April 23rd, 2011

We all have hard times growing up.  Sometimes life really is tough, especially if you’re just going through hard emotional times.

As a young man, my first long term girlfriend was trouble, and led me to some dangerous and illogical decisions and choices in my life.  Her problems ran deep, and I don’t want to relive them so I won’t go any deeper than what I said in the previous sentence. 

Once our relationship was totally broken, I was lucky to have family and friends to help me isolate from the pain of my girlfriend’s problems.  It was so bad that I even decided to change to a new college (I helped my girlfriend go to the original college as I was going to).

It took me years to get my girlfriend and her problems out of my head.  It was very complex situation and in the end I’m the one who left (which made me even feel worse).  I really cared deeply about her, but her issues pulled me mentally into dark and horrible places where I didn’t want to be.

So my point is that sometime you get into such dark moods and places and need help to find your way out.  Untested people (and the media) don’t understand what you are going through and the way that you can get kind of crazy when under such pressure.  I was lucky, I knew how destructive my path would have been had I stayed.  Actually it would have been destructive for the both of us.  Sometimes with people, much like certain chemicals, things don’t mix well and explode, no matter how much they care about each other.

So the point of this post is to describe how to get through these dark periods in your life.

  • Family and Friends help, but only if they understand and come from a similar background.  If they don’t have depth in such areas, they can hinder and hurt more than help.  So this option depends!
  • People that have similar backgrounds and can help in many ways.  Sometimes going outside of your circle of friends helps!  Support groups maybe be the answer, again it depends…
  • Music… knowing that even the best and most successful of us have problem that they had to overcome helps.  After a while, try to mix some uplifting and exciting music your listening too, so that you can improve your mood.  Nothing is worse than dwelling on your pain, which is kind of what I did.  It’s a time and life killer, if it it does on too long.
  • Fake it until you make it.  This line of thinking is if you fake being happy, eventually you will be happy.   This works, especially after you hit rock bottom and feel like there is no way out.  Why not give it a try.  You are your own emotional keeper, you control your thoughts, you can become whatever you want to become!

And now that my reasoning is layed out for you, I want to introduce a song from NIN that was my favorite song for few years during some of the most dark periods in my life.  I may have listened to it for too long, but it was cool and made me realize that everybody does though some rough patches:


Here is an uplifting song, that while a bit light, is still fun. I epecially like the lyrics “I’m in the race but I’ve already won, and getting there can be half the fun”.

While I would have like the song above, it came after the dark times in my life, below is a song that worked for me, especially when I was in the martial arts. it got me pumping and I would perform better as I would play this in my head but at a faster rate of play.


Here’s one more song that I liked (and my first exposure to rap). It was a great song and luckily, I didn’t see the video until much later…

I’m not sure why this article came out of me, but it’s Saturday (which is my anything goes day) so I thought I’d share.

-MR

My Take on the Five Worst Pieces of Financial Advice

April 22nd, 2011

While reading FreeMoneyFinance.com a few days back, He included a MSN Money online article called: five worst pieces of financial advice.  It was so interesting that I thought I’d give my personal take on those 5 points.

My take on the 5 worst pieces of financial advice

1. Pay off your debt before saving for retirement.

This approach is too risky.  While paying off both my house and car early, I also continued to put at least 10% of my salary into my employer’s 401k plan and I also put away money each month into a 529 plan for my kids.

For the last 5 years before my house was paid off, I bump up my saving percentage by an entire 1% each year.  Then once my house was totally paid off, I did bump up my 401k yearly contribution to the maximum.

2. Don’t borrow for an education.

With a combination of having money from working as a teen, a decent investment portfolio created when I was very young with help from an uncle, working jobs through college, and going to a relatively cheap university, I was able to avoid going into debt to pay for college.  I had to live very frugally, but it was a great financial accomplishment.

I guess in this area it depends on the overall potential return from the degree.  Had I going into medicine, I would have borrowed to get the degree, but if I got a degree in the “history the french painters”, or something without an immediate financial gain, I wouldn’t have borrowed to get my degree.

3. Pay off your mortgage as fast as you can.

This is complex, and for me it was more than a simple math problem.  I think I’m in a better position today by paying off my house early.

But even I didn’t pay off my house as fast as I could.  I still put money aside for my employer’s 401k, a 529 plan, and was still able to save a little bit still for investments in my regular brokerage account.

Today more than ever, I wouldn’t pay off my house as quickly.  While I might pay an extra $50 or $100, the interest rates are so low, and there are so many great opportunities now!

4. Buy a home as an investment.

I agree!  A home is not an investment, it’s a place for stability to raise kid and have your own personal fort of solitude (at least when the rest of the family is away).

That said, it’s still wise to treat it as a financial asset!  To have good finances with everything else in life, then go out and by a million dollar home on a middle-income salary wouldn’t be a huge financial mistake!

5. Make an emergency fund your financial priority.

I don’t have an emergency fund in the truest sense of the meaning, but I do have financial assets that serves as a financial buffer if a hardship was to ever hit me.  So even thought I don’t flat-out declare that I have one, I guess I kind of have a stealth emergency fund.

So while I don’t totally agree with the MSN Money article, for the most part, I do.

What is your take on the MSN Money’s 5 worst financial advice points?

-MR

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Treat Money With Respect Even When It’s Small Change!

April 21st, 2011
Change

Change

All to often, I see many of my friends and work peers see change on the ground or wherever and ignore it like it’s something disgusting!  I’ll

When I see silver-colored coins on the ground (yeah, I’m too good for pennies), I pick them up.  And then if I’m near a restroom, I go in and wash them and obviously my hands too.  If I’m not near a bathroom, I try to use purell or some other kind of cleanser to cleanup.

So why do I bother?

I’ll be honest, it’s mostly for my kids…  But even if I didn’t have kids, I would still pick up the silver-colored coins (and pennies too if I’m bending over to pick up the silver-colored coins).

I save the coins for my kids because they still get excited (although not as much as they use to), when they get any type of money.

So why save money if you don’t have kids?

  • Crazy, “Anything Goes” wild spending money!
  • To save for vacation trips.
  • Speculative investments (it may take a few years to get enough to invest, unless you go for penny stocks, in which case you are gambling with losing odds).
  • Emergency fund?
  • House and car repair fund.
  • Yearly Christmas or other special occasion fancy restaurant meal.

After saving the money for a period of time, basically use the money for anything that is fun.  Why save money for a something mundane!  If you make it fun money, then it’s doing the extra work of picking it up and saving it after you purchase something using cash.

When to Pick Up Money

When to Pick Up Money

So the question is…  Do you save or pickup change?

-MR

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