In the 60′s and 70′s, giving grandchildren Savings Bonds was not a rare thing.  They are still available, though the format has changed.

A recent article in the Wall Street Journal discussed an option for those who want to give something more substantial than a toy, tie, or trinket.    A share of stock-with the stock certificate!

Kelly Greene, the author of the article reviewed several websites offering this service.

Stock Share Gifting Sites Online:

• Gifts of Stock- This site is simple and easy to navigate!  The tabs at the top of the page give the usual about “How it Works”, “Registry Benefits”, and “Stock Selection”.  They even have a “Registry Guide” for couples or grads to register-similar to registering at gift stores.
• One Share-This site is a little busier.  It lists different categories of potential recipients-such as Fathers, children, couples, and also has suggestions for each category.  I noticed Ruger or Harley certificate suggested for Dads.  A Coca-Cola stock certificate was suggested for the coke memorabilia collectors. A Martha Stewart Company certificate suggested for HER.  Sam Adams share certificate caught my attention!!! (caution-I like the beer, know nothing about the company!)  The certificate come pre-framed-so are more expensive than “Gifts of Stock” .
• Give a Share- This site is also easy to navigate.  It also comes with a framed share, but is less expensive than One Share-can’t comment on the quality of the frames on either site.  This site does a better job of price comparison of potential purchases.

I tried to do a cost comparison on a share of Microsoft, and it looks like the Gift of Stock site has the best price, because it doesn’t frame the stock certificate.  The Give a Share site seemed to be less expensive than One Share, but again, I can’t compare the framing quality.

The sites market these gifts as a “teachable moment,” especially for children.  The gift of the certificate can lead to a discussion about ownership of companies, and the way the stock market, and regular savings can build wealth.

All three sites will also register you with the companies Dividend Reinvestment Plan.  This is important because of the ease and low costs when investing through a companies Dividend Reinvestment Plan.

Dividend Reinvestment Plans:

What is a dividend reinvestment Plan, otherwise known as a DRIP?

DRIP’s are a way to buy additional shares directly from the company for zero or minimal cost per share. They allow the companies’ dividends (usually a quarterly payment to shareholders)  to be re-invested in company stocks automatically.

The advantage of this over buying from a brokerage, is there is no commission.

And most brokerages will only pay you the dividend in cash-not with additional shares.  You can also buy smaller quantities of shares.  Most DRIP plans will allow a small dollar amount, rather than the usual 100 share minimum that most brokerages require.

Let me give you an example on how DRIPs work:

Years ago, I served on a community board for Georgia Power.  They met with this voluntary board, of community leaders, asking questions about ways their company could be a better community partner.  We met several times over a couple of months time.  As a token of appreciation, they gave each person that participated a “share” of Southern Company Georgia Power’s parent company) stock-worth about 12 bucks at the time.

Original Stock Certificate

But they also registered us in their DRIP plan.  Since that time, I have added a couple of thousand dollars of purchases, usually in small sums.

Over that time, each dividend paid by that company has been added to my account, as additional shares. The share price has also risen to the low-mid thirties

So my account is now worth about $14,000-about 3 times the amount I have invested.  This with almost zero cost of investing.

You could, over time, build up a diversified portfolio, of high dividend stocks at a very low cost this way.

What are the cons of using this method of Gifting Single Stocks:

• You are buying single stocks, which can be a risky way to invest.  See this post about single stock investing.  If you are just giving a gift-this may not be important.
• You need the Social Security number of the recipient, or you can buy a gift certificate, and the recipient can then contact the site with that information.  Gift of Stocks, lets you notify the recipient of the gift, and allows the recipient to give the personal information.
• Relatively expensive:  If you are giving 1o graduates a gift, you may not want to spend $75-150 or more per person.  If you have one grandchild-Go for it!  Same for a wedding gift-if they are a close friend or relative, this amount may be in line with your spending plan.

Reader Questions:

What are your thoughts about giving single shares of stock, with the certificate?

Have you ever been given one, or received one?  Do you think this is impersonal or inappropriate gift?

Let me and my readers know your thoughts!!!

Risk, risk/reward ratio-we  think we know what risk is.

We hear about risk all the time-sometimes in oblique ways-”That  BB gun will put someone’s eye out!!” as Ralphie heard over and over in A Christmas Story.

Don’t drive too fast, wear your seat belt, don’t swim on a full stomach, are all common comments.  And these days, more and more are concerned about the risk of the stock market!

Your Biggest Risk-May Be Income Related-Not Stock Market Related!

There is an interesting article in the WSJ about Thinking Smarter About Risk by Professor Moshe Milevsky. He suggests thinking about what would happen to your earnings or paycheck if the stock market crashed 25 or even 50%.

He gives a good explanation of the term-Beta.  Beta, in stock market parlance, is the risk of a stock-as compared to the market as  a whole-if the stock has twice the market risk-then it has a Beta of 2.

If it has the same risk as the market then the Beta is 1, and if the stock has no correlation to the stock market-then the Beta is zero!  He points out that our jobs also have a Beta-our future income may be correlated to the stock market, or completely uncorrelated.

Most nurses would see very little change in their earnings capacity-with a stock drop-so their Beta may be closer to zero.  Their earnings risk may be tied to the health care bill, but not really the financial markets.

(Maybe we should come up with a risk variable on how our incomes are tied to congress and new laws and regulations-Alpha and Omega risk ratio, perhaps!)

But most in the financial world-bankers, brokers, and brokerages, and thousands of their support staff would be devastated by another severe, prolonged market correction. Not just in their investments, but the job itself, and it’s lifetime of  income!

Dr Milevsky’s point is that our financial risk is many times much more correlated to our career earnings and income, rather than our investments.   And we need to adjust our thinking to account for that risk.

What does this personal financial risk mean to you and me?

• Keep an eye out for changes in the industry you are working  that may effect your future income.  If you are working in the insurance, medical device, or pharmaceutical industry-your risk of your companies’ financial health deteriorating may be increasing-so make adjustments in your savings-to be prepared for further layoffs or income shifts.
• If you are working for a hospital, whose profits are being squeezed by decreased reimbursements-realize much deserved raises may just be a dream so adjust your spending-or find other ways to increase your income-or both.
• If you are  at your pinnacle of pay-reached the glass ceiling-and are comfortable with that-you have savings built up-then you can take more risks with your investments-than someone just starting out.  Standard thinking is that as you get older, you decrease your risky investments-it may be time to consider increasing the risk slightly-as you can deal with the downside more.
• Insurance-life and long-term disability insurance helps to decrease your income risk-for you and your family.  So insure your human capital!
• Make sure your education investment risk-the huge amount of money and time required for your degree-is protected by a likely chance you can repay that investment.  (Don’t borrow tons of money-for a career with no possible chance of bringing in the income required to pay for the education!)

Financial Risk:

Think it over.  Do you have income or job risk, that you are not taking into account right now-if so, make adjustments.  Change your investments to something more conservative and liquid.

Think about what your steps would be if you lost your job or had a decrease in pay.

Don’t be caught  with your scrubs down around your knees.  Don’t spend  all your time worried about your investments-and not enough concern about your primary money factory:

YOU AND YOUR JOB!

Reader questions:  What are your thoughts about risk?  Do you think we balance our job risk and investment risks appropriately?

First, a disclosure.  I have held stock in Warren Buffett’s Berkshire Hathaway company for years.  One of the few smart financial moves I ever made.  You can find a pdf file of many years of his annual company reports here. They are always interesting reads.

Annual Meeting by Ethan Bloch

An article in MSM Money, recently dissected out statements in Mr Buffetts recent annual report. He publishes the annual report this time of year, to go over last year’s company results.

The article linked above, emphasizes  statements in the annual report, that will be particularly helpful to new investors in the stock market.

I will list them here with commentary for my readers…..

• Stay liquid-this means make sure you have cash available.  You need the safety, security, and flexibility available when you have cash in the bank-will discuss the flexibility in the next comment.
• Buy when everyone else is selling-this is why you stay flexible with cash on hand-you want to take advantage of stock prices dropping when the heard is in panic mode-think March of last year!
• The same corollary holds true for the opposite-don’t buy when everyone else is buying (think tech stock bubble and housing bubble!!!!!).
• Value stocks over growth stocks-I have discussed the difference in other posts.  The hard part here is picking a stock that is undervalued, and not just cheap cause its a crappy stock!
• Understand what you own.  That is what we are here for.  In the information age, one,the idea that you would buy a stock without understanding why you should own it.-two, how much you should buy -and three, when you should sell it is crazy!
• Defense beats offense-Your want your companies to drop less than the market when things are tough.  That is another reason to buy value companies.

Now some argue that Buffett is aging, and investing in his company would be a mistake.  Well my feeling is, the Buffett -Way will continue for sometime, even if he is no longer leading.  He is smart and humble enough to have a line of succession in place if he were to be unable to continue.  So you couldn’t go wrong, with investing in his company.

Provided you are out of debt, have an emergency fund in place and are ready to begin building wealth.

Do I think you should become   A Millionaire Nurse ?  If YOU want to!

Here I have a blog, a website, a book, and speaking engagements…..

“What is Dr Dean talking about, if his blog isn’t to make nurses millionaires, then what is it?”

Well, I can’t make any of you millionaires.  What can I do?

• Give you permission to be Millionaires-convince you it is worthwhile to think it is possible.
• Teach you the tools to learn to manage your money.
• Teach you the basics of investing.
• Teach you the difference between “bad” debt and “neutral” debt- I don’t believe there is “good”debt.
• Teach you the differences between investing and gambling.
• Teach you to think on your own, and understand why you do something, not just because I, or anyone else says you should.
• Teach you to think and plan  before you spend.
• Teach you the importance of insurance, wills, retirement accounts, emergency funds, college funds, and personal savings.

How do you learn the skills and mindset of Millionaire Nurses?

• Be teachable.
• Want to learn-no they are not the same….
• Study, read, and absorb.
• Look deep into your sub-conscious and try to understand why you are unsuccessful with managing your money. This may sound like psycho-babble, but I strongly believe it is true-if you don’t think you are worthy, wealth will not happen.
• Be patient, Rome wasn’t built in a day-your personal finance Armageddon will not be repaired overnight.
• Be consistent-again similar to above, but not the same, that drip, drip, drip of good financial decisions, will soon result in a reservoir full of M-O-N-E-Y.  Just like a stroke victim at physical therapy-progress is slow, but steady…

I heard a million times in medical school and residency-You see one, do one, then  teach one.

Nursing 1959

I will show you the operation, but you have to pick up the scalpel, and perform YOUR own  wealth building procedure.  Then my hope will be, you will remember to teach others-( or at least tell them about this blog!)

Housekeeping:Remember to get email delivery of my posts-sign up at the email delivery option on the right-saves you time-which is money!!

Let’s say you have been working at hospital A for twenty years, and have built up a significant amount of money in your 401-K (or 403-B).   Now you have been offered a big promotion and raise to work for hospital B.

What do you do with your money?  Well, it depends on tons of factors, but lets work through a few of them.

• Your plan at your old company may require you to move your money-most don’t unless it’s less than $5,000.
• If you think the old plan is great, and the hospital is stable, you can leave it there-be sure to keep up with it, with change of address notifications, if you move.  You don’t want to lose touch with your money!!
• If you want to move the money, then you need to do a “Rollover”.

So what are your “rollover” choices:

• Have your money “transferred to your new employer.  Make sure you like the options in your new employers retirement accounts-if not keep reading.
• Rollover the money into a traditional  IRA-either with a brokerage, or a mutual fund company.
• Rollover the money into a Roth IRA.
• Let them send you a check for the money-go have a big party, buy a new car, new clothes and Jimmy Choo’s!

All of the above are fine except the last one!  If you take the money and run, your old employer is required to send 20% of the money to the feds for taxes, as they consider this income, and if you are under 59 1/2 they also slap you with a 10% penalty (yes that money is gone) for being stupid!!!!

As to whether to choose a traditional IRA or Roth IRA depends.  The advantage of the Roth is that your money when you withdraw it, is tax free.  When you withdraw money from a traditional IRA, you pay taxes on the money at whatever rate applies-IF that is very little money, and your income is low, then the taxes may be low.

However, if you spend the next 40 years learning to act and then become a “Millionaire Nurse” then those taxes may be significant.  So, if you can afford to pay the taxes on the money now, then conversion to a Roth IRA, I think, is the best decision.   Now companies that manage Roth IRA’s, have calculators that you can play with to help with the decision.  And you can do both, have part put into a traditional and part a Roth.

But you still are having to “guess” at what you tax rate will be when you retire.  And I can only guarantee one thing-the odds of any of us “guessing” correctly is near zero!!!  So as I have said before, don’t have paralaysis by analysis, do your best due diligence and homework, then push the damn button!  EXECUTE!!! (sorry, but sometime you have to get people’s attention.)

Now to discuss all the implications of buying stocks, mutual funds, and deciding how to invest in your new IRA Rollover is worthy of a book, or at least several posts here-so we will deal with that in the future… I know, you can’t wait!!!

Now, as to how to actually arrange the transfer, you have to be proactive.  Call your benefits people at your old employer, and ask them what paper work you need to fill out to move your money.  Ask the people that you are moving the money to, what paperwork you will need to fill out, so they can accept the money,-without it disappearing in cyberspace…. So make sure both ends are covered.

If you aren’t sure if you have filled out the forms correctly ask for help-if you can’t get any one to help, then maybe you need your new financial company/brokerage folks to help, or even get an independent financial advisor to do so, and pay them their hourly rate for assistance.  Just keep bothering people on both sides  of the transaction till it gets done!!!

So let me know your questions or comments. There are plenty of exceptions to the above rules-special circumstances for withdrawal without taxes or penalties, such as disability, etc.  So, keep that in mind.

There will always be unusual exceptions.  Like the old saying in medicine-when you hear hoof beats, don’t expect to see zebras-but every now and then, a zebra will show up and bite you on your “donkey”….

If you have done a “rollover” let us know how hard or simple it was.  What was your experience?

I don’t deliver babies any more.  Do I miss it? Occasionally.  I miss the joy and interaction with those patients who you connect with.  I don’t miss the malpractice worries, the babies having babies, and families who don’t appreciate the responsibility involved in raising a child.

Sleeping all night is a wonderful thing-although a certain nurse woke me up at 2:30 this morning…..

Fortunately, I don’t have to miss the Ob nurses-because our Gyn wing connects to the Ob wing, and we share the same nurses.  They do a great job.

And to get around to the title of this post,  as we often do, the nurses and I were talking money when I made rounds this morning.  One of the night nurses was lamenting that her account balance in her 403-b seemed to never go up, although she increased her amount every year, and the hospital was matching part of it.

This phenomenon is very common in retirement accounts recently.  As everyone is aware, the stock market has taken a huge hit in the last few years.  And though the market has averaged 12% growth or so over the last 50 years, it has seen almost nothing in the past decade.  And has been down 30-50 % in some aggressive accounts last year alone.

However, since March the growth has been over 25% depending on which index you use.

What do you do when your  403-b balance is stagnant?

So the secret is to keep on keeping on.  No one knows when the market takes off, and it has been proven time and time again, that those people who try to time the market by going into and out of stocks, usually miss the biggest up days.

So even though watching your balance is like watching paint dry-don’t stop funding the account. You would just spend that money on something inconsequential, wouldn’t you?????

Now does that mean that the market will go gang-busters the next 10 years?  I wish I knew. If I did I probably wouldn’t be treating bladder infections in the middle of the night!!!!!

But I do know that putting away small amounts of money over your working career is the only way to significant wealth for most people.  Having the results of  stock market and interest rate growth work on your money will result in a healthier retirement account than:

• No retirement savings
• Depending on Social Security
• Depending on your kids to support you in your old age

The secret here is to continue to put as much as you can afford in your retirement account each year, and try to increase that amount- until you are saving 15% of your income in some sort of retirement vehicle.  (I will discuss the options such as Roth IRA’s in another post.)

Of course, to be able to do this, you must have your spending under control, and your debts knocked out-I know, easier said than done.

So let us hear your retirement account questions-and if you need “Emergency Money Resuscitation” then hit the link, don’t delay, hit the link.  If you don’t know what the link is, then hit the comment button, and ask, and I will post on how to hit a link in a blog…. If you do hit the link, you can sign up for my free e-book, and also receive my mini-course on personal finance delivered straight to your email box.  Free, you can’t beat free!

My job, here at the Millionaire Nurse , is to teach, cajole, berate, preach, and guide you to make better choices with your hard-earned dollars so you can learn to build your own personal wealth.  As yesterday’s post suggest’s, I also want you to learn to give, but that is another story.

What you and I fight every day, is  the huge number of choices we have to spend our money. Intersect those choices with the commercial entity that has become known as “the holidays” and we are all in trouble.

• When we have a perfectly good cell phone, why do we covet a new one?
• When our car runs great, why do we drool over the newest Mustang, Prius, or the Mini-Cooper?
• When our jeans have no holes or only designer holes, why do we have to have a new pair?
• What is it about the latest pocketbook, pocket knife, or pair of shoes that drives us into a spending frenzy?

The experts in brain function/psychology have tried to explain the chemical changes that occur in our brain that makes us feel better briefly when we buy the latest bauble, smoke that last cig., eat that chocolate, or have that third, fourth or fifth drink, but this isn’t a science blog.

So how do we combat these very real feelings of lust for stuff?

1. Planning-write down your list of needs, strike through them if they are just wants-get your partner or friend to challenge you.
2. Keep a spending limit.   Yes this means a Christmas list with dollar values by each name and don’t you dare spend more than you wrote down.  During the non-holiday season, do the same.
3. Challenge your family to give time and not money to each others favorite charity.
4. Pray for the strength to overcome your urges.   John 2:16 comes to mind:  “For all that is in the world—the desires of the flesh and the desires of the eyes and pride in possessions—is not from the Father but is from the world.”

The essence of building wealth occurs when you get rid of all the bells , whistles and hype  is controlling spending and increasing income.  So do your part this holiday season.  Even if you cut your spending by 5%, you are making progress.

Let us know your thoughts on what works to help you get past those spending mantras that repeat endlessly through your mind this time of year.

If you want tips on saving money-Check out my free ebook at The Millionaire Nurse-in addition to the free e book, I will send you a mini-course on personal finance and info on credit card management and banking-free of course.

Free Money Finance has a great blog post today about givers.  The premise is that those who give are happier, and as a result tend to become wealthier.  The post is based on an article written by an economist at BYU studying the act of giving.

I placed my chapter on giving at the end of my book.  After reading these discussions, maybe I should have put that chapter at the beginning. There are a lot of stories out there about those whose giving continued even during times when it would be easy to say “maybe next month”.

One of the nurses in my practice was just discussing the other day-how, in her experience, every time she thought there was no way she could make that tithe check not bounce-the money just seemed to always be there.  God works in mysterious ways, but He does work.

So let us all remember, don’t wait until you are successful to give.  Even those of us who have little money can give a little of our time to help others.  Ring the Salvation Army bell, be a big brother or big sister.  Help out at a soup kitchen, or go by the nursing home and visit the elderly as another nurse friend of mine does.

As the above posts discusses, it may not just make you feel richer, and happier;  you may truly be better at building your own wealth if you learn to give sooner, rather than later.

Please let us know your stories on giving-how it makes you feel and whether you feel happier as a result.

Far be it from me to pick a fight with an attorney, as an Ob-Gyn I am genetically afraid of lawyers….

But, so far, the comments on her post have been all congratulatory in nature, and as she is a self-confessed recovering spend-thrift, I think I would lose points in the personal finance blogosphere, yes maybe even a little bit hypocritical, to let her get completely away with buying a new car.

So for all The Millionaire Nurse wannabe’s here is my list of reasons why buying used is better, when buying transportation:

1. Depreciation-when driving the new car off the lot, the value of your new purchase drops by 20-45%, making this a depreciating asset-it usually doesn’t pay to borrow money for something that drops that quickly in value.
2. Hidden Costs- Besides the monthly payment, and interest there are other costs involved in buying new vs used.  These include higher insurance costs-see this article in the Wall Street Journal about insurance costs.  Taxes-the taxes on buying your tags in most states is directly related to the cost of the vehicle, and new cars just cost more, therefore a higher yearly tag tax.
3. The savings she suggests from buying a more fuel-efficient vehicle are real, but most studies show at today’s gas prices, it will take 5-7 years to make up the difference in price that the new car costs.
4. Having a large amount of your net worth tied up in a vehicle, is usually not a wise move, financially, although that is probably not an issue here, but is for many people whose car is the second largest asset after their home.

So, before anyone points out my personal hypocrisy, in the spirit of true confession, I will admit that I own, (or the banks own) several investment lots on the Gulf coast, that I purchased at the height of the real-estate boom, that have now dropped significantly in value, and though I am paying them off as quickly as possible, I do admit that I made a big mistake in not purchasing them with cash or not at all.

The Frugal Lawyer also makes me a little jealous when she describes the personal pleasure she gets from driving her “new green machine” (my words not hers).  When I climb in my 10-year-old paid for truck that gets 16 miles to the gallon, I am thinking about what I am going to do that day-not how I am saving the planet.  But maybe that is because I am over 50, and  male, so I just don’t get that emotional attachment she has with her new vehicle, with my truck.  So far the truck doesn’t seem to mind my emotional detachment, but maybe I am just not listening…

So, do I want Danielle to feel guilty every day she gets in her new car?  No, just like I am trying to quit beating myself up for trying to be a real-estate baron.  We just need to continue to learn more about our relationship with our money, and try hard to be a good example in the future to those we are trying to help on their path to financial freedom.  Which is, I think, both of our goals in blogging about personal finance.

Saving money daily, just means being aware of your long and short-term goals, and when confronted with spending choices, take a minute and be sure the choice fits your plans.

Just to give you a few examples in my life today:  I had to go to the hospital to see a patient ready for discharge.  No emergency, just a routine visit.   I got on my bicycle, rode the three miles to the hospital-saving money on gas as well as getting my exercise for the day.

Another example-I needed (wanted) different music for my aerobic exercise.  I received a Sansa Mp3 player for Christmas last year-nothing fancy.  It had been awhile since I loaded anything different on it.  I looked on the net for free downloads of exercise music and found the site: Podrunner.  This site has free downloads, that contain a brief commercial message that allows you to choose between different speeds of aerobic exercise.  The downloads are free.  They also have a pay version, and newsletter that you can sign up for.

This download was perfect for me to use while exercising on the 20-year-old cross-country ski machine I have at home, or the elliptical trainer I use at the local YMCA.

These are just two examples of ways you can save money daily, while not feeling as if you are being a skin-flint.

Let me and others know how you save money on a daily basis.  And for a free e-book, filled with money-saving tips, go to my website, www.themillionairenurse.com and sign up.  We will send you a free e-book along with a mini-course on personal finance.

Also please send a link to our site to your fellow nurses and nursing students, so they can join our journey.