“Yes, Virginia, you can save more than a million dollars in your 401K!”  So says Jeremy Olshan in his article about 401k millionaires at Smart Money.

A Million Bucks-In Your 401k?Confirms this article at Smart Money. The author, Jeremy Olsham, interviewed several brokers who managed money for clients that had amassed more than 7 figures in their 401K.

Most experts feel 401k savings are a failure-that many in our country will be hurtin’ for certain at retirement….

Though the savings plan could use a few tweeks, the failure is OUR FAULT, yes us, the public rather than the plan’s.

Why do they fail?

Cause we don’t use ‘em.  I’ll leave it up to you to decide why, though I have strong opinions….

401K Success Stories

In this article, what were the consistent findings for those who saved the most in their 401k?

As usual, it’s not shocking,  no not surprising, and certainly not scintillating.

These retirement plan millionaires didn’t have inside information, they didn’t cheat the 99%ers, they didn’t walk all over the middle class.

Nope, they did what every self-respecting financial planner recommends you do to maximize your retirement account.

They participated.

• They put in as much as they could afford.
• They put money in every pay period, every month, every year for long periods of time.

Boring….but effective.  You can laugh at ‘em, but they are the ones having a comfortable retirement, while you spent your money on that new truck you couldn’t afford….

What didn’t they do?

• They didn’t use their 401k as an ATM….borrowing money for golf clubs, or braces.
• They didn’t try to time the market, stopping their contribution during down markets  (fear) and increasing at market tops (irrational exuberance).

Not rocket surgery as Yogi was known to say….

Included in the article cited above, is a discussion about how employees with modest incomes could be 401k millionaires, with the math and everything.  Where have you heard that before???? (hint: see the name of this blog….)

Breaking 401k rules

Some of those interviewed had broken a few standard rules.  The most common was having their 401k invested  100% in company stock.  {This precaution only applies to those of you working at a publicly traded company who allow company stock purchases in your account.}  My employees can’t buy company stock and most of my  nurse readers work at facilities with 403b plans.  They can’t buy company stock in their plan.

Experts advise that you not keep all your money in one stock-whether in a retirement plan or any account.  Failed companies such as Enron, Lehman, Worldcom and Bear Stearns come to mind.  If their employees only invested their 401k holdings  in company stock, their accounts went to zero overnight.  Damn depressing to think about-sorry you guys…

If you worked at Apple or Google and 20 years  ago you put all your retirement savings in those company stocks,  you are sitting on easy street right now.  20 years from now though, who knows whether even those tech titans will still be here.

In summary, the tried and true is confirmed once again.

If you want to have a large bucket of money in your retirement account at the end of your career, put money into it.  Every pay period, every month, every year, for years and years.

And you should learn what and where you are investing, but that’s for another post.  I’m sure you’re on the edge of your seat!

Reader Questions:

Do you think you will be a 401k millionaire?  Check out this post and survey at Retire by 40 on net worth at retirement  goals, and read the comments, very enlightening.

{photo credit: surburbandollar c.c.}

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Having extra money coming into the household can be amazingly rewarding to your psyche and your pocket book.

The cash flow coming from something besides your normal job income can be used in so many ways.

• Pay off debts-credit cards, car loan, school loans-only you know your needs.
• Develop that emergency fund.
• Fun money-vacation, eating out, or other self-rewarding extravagance you would otherwise not spend money on.
• Savings for your future-retirement or kid’s college fund.
• New home down payments.

Extra Income:

The potential uses for extra income are only limited by your total lack of imagination…

Just as the ways to earn an extra income are unlimited.

This is not the same as having a one time fund raiser….yard sale, getting rid of your books or selling extra stuff on eBay or Craigs list.  This is all about setting up a way to earn a steady stream of extra income.

This also is not as easy as the internet spammers would have you believe:

• “Make millions on Twitter by signing up tens of thousands of followers!”
  
• “A home computer based business that will bring in thousands of extra dollars in just 5 minutes a day!”

Put these ads in the same category as losing weight without dieting or exercising.  Your SCAM ALERT should be flashing big time!

How to get a new revenue stream?

• Working overtime or second job-the problem here is that it is using your same skill set.  One of the beauties of developing an alternative income stream is the cushion it can provide if your current job falters in some way.  Working overtime or having a traditional second job can be great for hitting a savings goal in a hurry, but is not truly a new income stream.
• Turning a hobby into a small business-this can be as simple as jewelery making or as complex as developing and marketing a product.  Jellies, designer breads, yogurt, or even organic produce are all being made and sold by entrepreneurs.
• Blogging and other internet related efforts are exploding in numbers.  Here you can earn money by selling ads or by developing skills others in your niche will pay for.  I have hired a blogger to help me with selling ads.  She has income stream from her own blog, as well as earning money by helping me earn money.
• Investing can be a source of secondary income.  Build up an account and use your skills to make the money grow.
• Real estate-buying rental property or renovating homes and selling.  This got a bad name during the bubble, but for those with capital there are bargains galore in the housing market for the careful buyer with fixer up skills.
• Multi-level marketing-for those with an outgoing sales personality, and the right product these can work.  Most however falter after they run out of in-laws and friends to sell to.

What are a few quick tips to make your new income stream work and to help you avoid crashing and burning?

• Start small-understand what you are doing and grow it slowly as you learn and EARN your way.
• Don’t quit your day job-we are talking income stream, not a new career.  Nothing wrong with changing careers if your new business takes off, but don’t mortgage your families future on  a whim.
• Research, research, research…there is so much information at your fingertips.  Use it.  Don’t make the same mistake others have made in that business.  Find a model or template that works.  Baking bread in your home sounds like a great idea, till the health department closes you down and fines you for not having a kitchen that meets commercial/sanitation specs.  Stories such as these abound, don’t be the  failure I write about next week-  “How not to start your home business!”
• Don’t borrow money unless you don’t need to borrow it.   Strategic business borrowing is a recognized technique to grow a business…This ain’t that time…. Having to pay loan payments is why many small entrepreneurial efforts are doomed to start with.
• Keep it fun….Who needs another J-O-B???  Any money making effort will have it’s ups and downs.  But focus on keeping your secondary income efforts fun.

Those of you earning extra income: What are your tips?  What worked? What was a dismal failure?

Carnivals This Week:

Hoo Yah-Editors Pick at Totally Money Blog Carnival at The Family CEO

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You would think after the recent financial crisis that the feds would want us to take better care of our money.

How are we supposed to make any headway getting out of debt with all this effort at getting us to spend?  When the fed talks about stimulating the economy.  That translates into: “Joe Public needs to get his credit card out and go shopping, damn it!”

A recent article in the WSJ focused on our country as a whole getting back to the basics, getting out of debt, and not spending so much on material goods.

Our not spending is considered by many at the treasury department to be a BAD thing…

And why is that a problem?  You would think signs of common sense debt reduction would lead to “Hallelujah!”, and a puppy dance with hands raised high?

How is your staying in debt a bad thing?

1.       You are paying off debt instead of buying new stuff.  Silly selfish bastard…. You aren’t very patriotic! You aren’t helping “the economy.”  (Forget the fact that you helped the economy so damn much for the last 10 years it will take you 20 to get  out of debt.)  All of those stimulus checks and tax rebates were for you to spend at Wal-Mart, not send to Capital One or to pay off Sallie Mae!

2.       When you don’t spend there are no sales taxes to collect.  The government gets no part of your money when you spend it paying off bills. Yes I know sales tax money goes into the state and local government coffers.  But the more money the state takes in the less they beg the feds for money….

3.       The feds are doing their best to keep interest rates low so we will be tempted to borrow money to buy stuff.  The whole goal of QE 2 is to keep mortgage and other rates low so we will buy more homes and stuff.  The reason this recession started was because too many bought more home than they can afford.  Right now though, the banks aren’t ready to cooperate.  They are actually reviewing your income and ability to repay the loan, weird-huh!

4.       If you are financially self-sufficient, you aren’t dependent on the government.  It is harder for them to buy your vote with pork projects if you can take care of yourself.  They need you in debt so they can “help” you.

5.       If you aren’t buying those items selected for support such as certain energy efficient appliances, or cars with tax rebates, those who pushed for those subsidies start to look like fools instead of saviors.

The above Journal article reports our household debt has dropped to 116% of our disposable income, down from a peak of 130%.  So we shouldn’t go to braggin yet, as we say here in the south.  A good debt ratio is less than 100%-of course zero makes an ideal target.

Savings Rate

We also actually have a positive savings rate over 5% (saving 5% of our income)-the most since the early 90’s.  Remember

the early 90s?  Pearl Jam, and the Beastie Boys anyone???

I for one am going to continue my efforts to thwart Big Brother by paying off my debts, and keeping my materialism to a minimum.  At least until I get my tax refund….

Comments: What say you?  Do you think the feds would rather we be spending money we don’t have rather than us busting our a… behinds getting out of debt?  What are you doing with your tax refund or extra money? Spending or Saving?

{photo credit: eliazar c.c.}

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When  Warren Buffett Speaks, does everybody listen?  That was the case a few years back, but to a lot of  so-called investment experts,  Buffett now  has as much significance as a prostitute at an Eunuch’s convention.

For you folks that are new to the business or investment world.  Warren Buffett, CEO of Berkshire Hathaway, is considered one of the most successful investors of all time.  And it would also make sense that he is also one of the world’s richest men.

It is hard to describe the company that’s now Berkshire Hathaway (stock symbols-BRKA & BRKB).  It’s part semi-mutual fund in that it owns a helluva lot of stock in other companies, but it also owns many huge companies out right.

Just last year it bought a railroad, Burlington Northern for $34 BILLION.  It also  owns utility companies,  candy, furniture, carpet and shoe manufacturers…

Having read Mr Buffett’s annual letter to shareholders today,  I wanted to share my thoughts.

Buffett and Gates at annual meeting

And yes a significant portion of my retirement money has been entrusted to Mr Buffett in shares of Berkshire stock so I do have skin in his game…

Criticism of Mr Buffett

The main criticisms of Mr Buffett and his company, Berkshire Hathaway  tossed about are as follows:

• Time has passed him by. “He doesn’t even invest in technology companies!”
• His company is too big.”All big mutual funds have died a slow death!”
• He is old.   “No-one can match his success, and who the hell is Todd Combs anyway?”

Mr Buffett just ignores the crows squawking in the field, and continues to play the investment game with his tools, his  rules, and, of course, his money (and mine!).

I found several corollaries to personal finance in Mr Buffett’s letter that I wanted to share with you.

• Share Price of Berkshire-Hathaway-He doesn’t care what the stock market thinks of his company day to day.  The share price, and any gain or loss of his stock value  from a market’s perspective is not mentioned in the letter.   He does emphasize book value, and gives his reasons for its use as a measure of his companies worth.
• Living within your means-(no explanation required!)
• Leverage (Borrowed Money)-He doesn’t believe in leverage-that would mean the use of borrowed money to make investments.
• Emergency Funds-He strongly believes in money invested in liquid assets put aside for the unknown.

Let’s analyze each of these points separately.

Stock value:

He believes the valuation of his company by the stock market will be accurate in the long haul, but not necessarily in the short term.

This shows up by the lagging stock price in the late 90′s when tech stocks were everyone’s darling, and Berkshire shares lagged the market.

He points out Berkshire’s valuation by the market eventually catches up to it’s true value-but sometimes in dog years….

Living within your means:

We all know what this means.  Mr Buffett lives it in ways that are unbelievable to most billionaires.

His office, home, and salary are all unassuming.  He expects the managers of the many companies owned and controlled by Berkshire to keep expenses low.

To Quote Mr Buffett in the shareholder letter, “Imperial corporate palaces induce imperious behavior.”  (Saddam, Mubarak,  and Qaddafi have taken this to a new level in government-all with similar outcomes!)

Use of leverage:

His cash holdings are an extraordinary 38 billion dollars.

Many brokerage firms allow their more stable customers to leverage their stock holdings. This means they can buy 50% more than they have cash in the account.  Hedge funds and other investments can be leveraged 10-100/1.

This is great when the value of the investment goes up, but can be devastating when the price drops.

Buffett’s refusal to use leverage limits his risk.

Emergency money:

He purposely keeps a minimum of 10, and currently 20 billion in readily available cash  for emergencies.  This has enabled his company to buy stocks, and whole businesses at distress sale prices.

This also keeps the company safe during  economic downturns and even natural disasters.

One of his insurance companies had a 5 billion dollar payoff during hurricane Katrina.  It was just a blip at Berkshire, well maybe more than a blip, but certainly not a danger to the company.

What if the company didn’t have the cash to pay that loss?  Ask the former employees of Shearson, Merrill Lynch, and Bear Stearns, just to name a few.   Those companies basically disappeared overnight from both lack of cash and the overuse of leverage.

Personal Emergency Funds:

Buffett also shares a letter from his grandfather to his grandfathers children extolling the virtues of having emergency money in a safe place and in cash!

Summary

I am going to stick with this old, behind the times, chicken-hearted investor with my money!

Reader Questions: What are your thoughts regarding Mr Buffett’s track record and plans?

Would you be a buyer or seller?

(photo credit-Ethan Bloch c.c.)

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When gas prices spike,

And 60 bucks

Won’t fill your tank,

Much less make your run

to town on the turnpike!

The initial reaction

Is how can I get traction?

My paycheck is gone

Even before

My last shift is done!

My Master-Card, it’s screaming

My checking-over-drawn,

The fees and penalties…

I’m sure I’m just dreaming!

So why oh why,

Is my initial reaction

To want  a new car

Like a Volt or a Prius

That look cool and hip,

( I promise, surely no bias.)

Dashboard?

It’s got: navigation, great mpg’s,

And you can even watch,

your  own MTV!

But do your math.

Make sure you remember

The total costs of owning

this new space-ship,

Include higher insurance,

and interest,

and depreciation too!

And don’t forget,

higher fees.

There are sales and tag taxes,

“Pay your gov’ment,  please!”

So keep your old heap,

maybe give it a hug.

It may not be shiny,

Bright, and certainly not new-

The old Lug!

But the note is paid,

And for that,

You should be happy-

And Dr Dean, too!

Readers:

Have you had a little niggle of wishful thinking about a new better mileage car with these higher gas prices?  Make sure you don’t succumb to that siren song!  If you need a sponsor to keep you in check when you have these urges, just let me know!

Questions, or comments, or just plain ole criticism? I can take it!

(photo credit: it’s our city)

Before the Compact Disc took over from cassette tapes, which took over from albums, and became known as a CD, the initials c.d. had another connotation.

The CD or Certificate of Deposit has to be the most boring thing in finance since the passbook savings account I had as a kid!

Passbook Savings

I was so proud of my little brown book, with it’s handwritten deposits and withdrawals….

I would pick up littered RC, Coke, and Mt Dew bottles, return them to the “corner store” as it was known, get 2 cents a bottle, and be RICH.

Old Soda Bottles

Part of that money, along with a little allowance money for yard chores ended up in my passbook savings account.

My brothers and I  rode our bikes collecting the bottles, then to the corner store-to rack up the big money- and then onto the city pool or movies without an adult in sight.  My how times have changed…but I digress.

The interest I was paid on those accounts by the current standards however is rock star status-5-6% interest.  Short term rates peaked at ~8.6% in the late 70′s.

Now even junk bonds-the most aggressive of bond investments can be found paying a similar rate.

And what would be the modern equivalent of a passbook account, a bank savings account pay now? About 1% or less.  So what is another alternative to savings, but is still conservative place for money you don’t want to put in bonds or the stock market?

What IS a CD?

Unlike savings accounts, which can be withdrawn at any time, a certificate of deposit, or CD, is basically a deposit for a fixed length of time.  It pays a fixed rate of interest at the end of that deposit time.  The maturity date.

CDs  were first introduced in the sixties.  Though they were initially ignored in that low interest rate environment.

But when the hyperinflation of the 70′s hit, CD’s became popular.  They allowed people to not get killed as much financially by inflation.  Think about it.  Your money in the bank is earning 4-5% in the 70s, but with inflation running at 10-12 % per year, you were losing your ass.

How?

Inflation and Your Money

Pretend you are living in the late 70′s.  Your hair is long, your bell-bottoms are stylin, your shoes are stacked, and that white belt is shining…

Stylin in the 70's!

Start with 100 bucks in the bank-@5% savings acct interest (the good ole days…)-in one year you would have 105 bucks.

However if you had a 10% inflation rate that year, your 105 bucks would only buy ~95 bucks of stuff…  Even though you had the money in a “safe-conservative” savings account….Bummer Dude…

So CD’s became popular, cause they gave depositors at least a slightly better chance of keeping up with inflation.

Like savings accounts, CD’s are priced so that banks can loan your money  to their  borrowing customers at a much higher rate of interest.  This is known as  “The Spread”.  “The Spread” is basically the banks  profit margin on savings deposits.

(Banks  also loan you part of their checking account deposits-an even better deal for them, as they aren’t paying interest on most of that money!)

And as one banker told me after a coupla scotch’s, “The Spread is the next best thing to printing money, or selling drugs-and it’s legal!!!”

CD’s today:

• Time till redemption-1 month to 10 years is available, though most are in the 6 month-5 year range.
• Interest paid-short term CD’s (<than 1 year)  interest paid at maturity-longer term, interest may be paid at 6 month interval and may be reinvested.
• FDIC insured-If sold by banks.  Brokerage sold CD’s may also be FDIC insured-always ask.
• Penalties-yes if you want your money back early, there is usually a penalty and interest cost!

Links of interest-(yes, that is a pun- insert guffaw!)

• Len Penzo’s 100 Words on Inflation-another in his series of “100 word attempts at self-flagellation writing!”
• FDIC’s CD Info
• Aggregator of CD rates-compare them!

For more information about advanced CD investing using a  laddered approach, check out these great blogger’s take:

• Ultimate CD Ladder by Consumerism Commentary
• Peak Personal Finance on CD Laddering
• Consumer Boomers take on Laddering CDs
• Beating Broke muses on the worthiness of bothering to ladder CDs

Reader Questions:

Do you have a question about CD’s or experience investing in them?  Let us know!

(photo credits by ben.seid c.c. and sassy by design c.c.)

I try not to be hypocritical here at the Millionaire Nurse Blog.  Sometimes I fail….  All of us have a little of the  “do what I say, not what I do” gene!

Investing In Single Company Stocks

Mutual Fund investing is more conservative  than single company stocks when it comes to investing in our retirement accounts.  But I confess, I do own a few single company stocks, and will continue to do so.

They represent less than 5% of my net worth, and I enjoy the process of selection and following them.  But studies show that it is difficult for the average investor to beat the market. And many experts recommend using index funds for the stock portion of your portfolio-and I have no problem with that!

A stock that has caught my eye this week is that of  the company epocrates-( EPOC on Nasdaq)  had an IPO.  {If you aren’t familiar with IPO’s, please read this popular post, The Purple Haze Condom Company Goes Public!}

epocrates

I have been a customer of epocrates software  since they first came out.  I had a Palm Pilot PDA-(already an antique) with one of their initial versions of the now famous prescription drug database.

Before epocrates, if I wanted to check on a drug dose, side affect, drug interaction I had to look it up in the PDR, a huge book with thousands of pages. And the drug interaction information was almost impossible to find.

PDR-Old School Drug Database

Now, with epocrates on my smart phone, it takes seconds to get a huge amount of data, well organized, about the medicine.  It even has information about disease diagnosis, and drug dosing calculators…

A Few epocrates Coporate Financial Highlights:

• The company has over 300,000 physician clients-some of which are like me and actually pay them for their software.  They do have a free app that suffices for many of their customers.
• The company has a marketing tunnel directly to many more of us health-care types.
• It is profitible
• The money raised in the IPO will be used to pay a dividend the company is obligated to pay on preferred stock holders, and for R&D.

I think the challenge for epocrates is finding a way to monetize the relationship they have with the medical community.  They are already doing so with ads directed at individual docs.

Getting the right ad in front of the right person is the whole secret to successful marketing.  If epocrates does this well, they should be successful.  They are also trying to grow their current business in a broader fashion by developing an Electronic Medical Record for small medical practices.

Here is link to their SEC filing prospectus, that will give you all the data you can obtain at this point to decide if this extremely speculative stock is for you.  I am still in my study and think mode myself…And remember, I am not a stock adviser, just a dumb guy with an opinion!

Investor Related Blogs and Websites

I want to highlight  a few fellow Yakezie personal finance writers who write frequently on investing and their latest investor related post .

Buy Like Buffett has a new series on beginning investing. I have been an admirer of Buffett, and a stockholder of Berkshire-Hathaway for many years.

Jacob at ERE has this poem that summarizes his investment strategy.  Wish I had written it!

Barbara Friedberg’s Personal Finance has ten steps before  investing.

Suba @WeatlhInfomatics compares Fidelity to Vanguard.  Both great companies in my mind!

Young and Thrifty give advice on finding a financial advisor, or is it adwisor….

Squirrlers has an interesting post on Stock Market returns by month.

Darwin’s Money gives up on Muni-Funds-I think with careful research there are still great buys in Muni-funds.

For another Buffett oriented investment post, check out Investor Junkies review.

General investing websites

Yahoo Finance

Morningstar-which you must join, but has a free service

CNN Money

Motley Fool is still around, but not quite as irreverent as in the old days!

Reader Questions:

Please let me know your favorite investing websites.  Where do you go for investing information before you pull the trigger on an investment?

Most of my posts are beginning level info on retirement and the stock market, but today I wanted to discuss a few advanced theories.  If you are a beginner, don’t go out and throw money away, cause Dr Dean said…. I didn’t!

One of the most predictable things about the stock market is its unpredictability.

The big firms in NYC spend millions  on salaries of hotshot Ivy League graduates, and invest billions in super-computers to help  make wise investment decisions and big money.

But study after study shows that most investment firms recommend buying when they should be selling and vice-versa.

Why is that?  Just human nature.

When the going is good, it’s human nature for everyone to want to jump into the party.  Everyone wants to dance with the dream.

Then when a crack in the dam is visible, everyone checks out at the same time, similar to hospital administrators on Friday afternoon.

Don’t get in the way of the herd….When everyone sells, there are no buyers-so the market drops like a kid in an ice bath’s fever.

You may say, “well Dr Dean, if the market drops because everyone is selling, wouldn’t buying at that point be like putting your finger on the IV site of  someone with DIC,  who is bleeding out from every orifice.”

And I would say “Great thinking grasshopper.”

Contrarian Thinking

Contrarian thinking is not to be confused with being a dufus.

Contrarian thinking would be, after the selling has ended, when everyone thinks the sector in question is dead forever,  is the time to start building a position.

This article by Greg Zuckerman in the Wall Street Journal points out several end of year suggestions of money experts trying to avoid the usual trend of  “buying when you should be selling.”

Let’s look at their suggestions one by one:

1.     Buy small cap stocks: now stocks of smaller companies have done well this year, (small cap 600 index is up 20%) and playing the don’t do what the crowd does may say: “Don’t buy smaller company stocks.”  Buuuut, keep in mind the crowds aren’t piling into small cap stocks, and the amount of investable cash on the sidelines right now is at a record.  So if you have no small cap exposure I would say it is time to add.

2.     Buy technology: Technology shares are up 7%. That certainly is less than the market as a whole.  And if we are going to get out of the current doldrums, I think technology will have to lead the way.  I don’t think it will be housing or health care.

3.     Sell gold: I wrote that gold probably had peaked a couple of months ago, when I was tempted to begin buying it again myself as it seemed to want to go up forever.  I am concerned that the Feds’ actions will result in hyper-inflation in the next couple of years-but don’t think that is a worry in the immediate future.  I think gold is a going down or sideways for some time…

4.     Sell emerging markets: I have been adding to our emerging market position in my retirement portfolio the last couple of years, which has been a good strategy.  If you have no exposure to this area, I think it may be something to add gradually.  But would be waiting on a drop in this sector to add a significant portion to your portfolio.

What are a few other areas a contrarian might be interested:

1.     Banking sector:  This group has been given up for dead by many experts.  But with cheap money, and continued high unemployment, I think low fed-funds rates and higher lending rates and standards is as close to a money printing machine for banks as is legal.

2.     Energy stocks: I think energy prices are going to outpace the inflation rate for the foreseeable future-and the BP fiasco has prevented our country from moving forward with home-grown oil.  The alternative fuels push seems to be dying a slow death as prices remain too high to be competitive.  And even Al Gore’s folks are scaling back!!

Stock sectors to watch:

I don’t think the fall in health-care and housing is quite done, but they would be on my radar in 2011.

Begin to study the sector and pick out the stronger companies or the mutual funds/ETF’s that will lead the pack.

Remember, when you see the “You Have to Buy Health-care Stocks” on the cover of the investment magazines-you have already missed the boat.   At that point it is like going to your nurse practitioner for birth control after you have missed three periods….

Disclaimer:

These are the opinions of an Gyn Doc stupid enough to be writing a personal finance blog for nurses, so keep that in mind.  Please do not begin investing until you have paid off the sports car you bought when you graduated from nursing school, and have those student loans down to below 100 grand….

Seriously, this article is just for those who are ready to begin investing in your future, and have professional assistance.  You should have a plan when you invest, and have a trusted mentor to assist you.  That and losing your ass a few times even when you do things right is the best teacher.

And finally, these decisions should be part of re-balancing your portfolio-and if you don’t know what that means-you need to keep studying….

Reader Questions:

What are your thoughts about investing these sectors?

Do you have a favorite, or a story of your disasters while following the herd?  Share it with us here.

Julie RN, Staff Writer

You’ve made that exciting leap towards being debt-free in order to boost your retirement savings   on your way to become a “millionaire nurse” or just a millionaire if you are not a nurse….  Congratulations!  “Credit cards are paid off…I’m debt-free! Now it’s just my mortgage and car loan!”  Whoa! Not so fast…car loan = debt!

Besides credit card debt, car loans are the the next largest item of expense we tackle…but it doesn’t have to be.  “how is that possible?”  OK, let’s look at the situation a little closer…

Let’s put our Car buying thoughts on the Psych Docs couch, and probe a little:

1.  STATUS - the evil one, our biggest downfall!  We all fall victim to this at one time or another.  We pull into the parking lot at work and see that gorgeous Acura SUV nurse Susie drives.  “Wow! What I would give to have that car (or similar luxury car or maybe a sports car)!  This old Chevy is embarrassing!”   Peer pressure – it’s not just for teenagers!

New Car (photo by Uggboy

Nurses make pretty good money. There’s no reason why we can’t afford a $400-500 car payment.  Besides, we deserve to look as good as money-bags Susie-what’s she got that I ain’t got..

Remember…our goal is money in the bank, not image! Your self-worth should NEVER be tied up in your CAR

2. MONTHLY PAYMENTS - “It’s a good financial decision to trade cars every 2 years if I can keep my same monthly payment. I always have a new vehicle and warranty.”

Now tell me how that’s financially sound when you always have payments? You’re never out of debt! Why do you want never-ending monthly payments?  How can you fund your retirement account and become a “millionaire nurse” when you’re paying $400-500/month forever for that new car?

3. VALUE - A new car loses  20% of its value the moment you leave the dealership, another 20% each year until after the 4th year when depreciation slows. When you trade for a new vehicle every couple of years you are trading during the highest depreciation period.

4. NEW vs. USED - I love the smell of a new car!  But is smell worth that 20% loss in value the moment I drive away with it? No! Let someone else take that 20% loss.

Dealerships are loaded with great used, low mileage vehicles and the immediate depreciation has already been taken. Find that 1-2 year-old low-mileage car that someone else took the 20-40% loss on. I’ll never buy another brand new vehicle. Status isn’t worth taking that financial loss!

5. LEASING – Don’t even think about it!

“I can’t swing $600/month for that new Lexus but a $300/month lease is too good to pass up…brand new luxury car, no down payment or sales tax..yeah, man!! Money-bags Susie won’t have anything on me!”

Leasing is one of the worst financial decisions for most individuals. You will always have monthly payments and if you drive more than the mileage allowed (usually 12,000-15,000 per year) you will pay dearly at the end of your lease. You will pay the difference between allowed mileage and actual mileage plus there are always hidden fees. Insurance costs are higher as well.

When you buy a car, it is yours free and clear.    With leasing, you make those monthly payments and have nothing to show for it at the end of the contract term.  If you opt to purchase your leased car when the contract ends, you will pay the difference in mileage (if any) plus  the remaining value of the vehicle.  Total costs will be much higher than buying a car from the beginning.

What is YOUR OBJECTIVE?  Look wealthy, or be wealthy?

Our object is to BECOME millionaire nurses, not LOOK like one!

I live in an area where driving luxury vehicles are the norm…high-end BMW, Porsche, Mercedes, even an occasional  Lamborghini or Ferrari.  I envy these people for a moment until I consider what their true financial status may be.

Statistics show that most millionaires drive conservative cars, usually American made, average age around 4 years, and never buy new.  This is because they are into making money, not boosting their image.  They don’t worry about keeping up with nurse Susie, or anyone else!

It doesn’t have to be a luxury car to be a bad financial decision.  Buying ANY new vehicle is a poor choice.

You may be in a situation where you can afford to buy that luxury car and pay cash.  Boy, do I envy you! But I don’t know a single nurse personally who makes enough money to buy new vehicles and be able to adequately fund their retirement fund.

Buy only what you can afford, get it paid off and DRIVE IT UNTIL THE WHEELS FALL OFF!  (seriously, until your repairs are more costly than the value of your car)

FORGET ABOUT IMAGE! Put the money you’ve saved in your retirement account, watch your investments grow. Then YOU’LL be the envy when nurse Susie asks how you retired a millionaire on a nurse’s salary : )

Reader Questions:

What’s your new car jones? Do you have a problem, not driving a new car and making payments?  Is it your birthright to die with a car payment?

Article by Julie RN Staff writer for The Millionaire Nurse Blog

For information about Julie, check this link.

Julie RN- Staff Writer!

Nurses and Doctors love protocols! Nurses get more autonomy. Doctors get fewer phone calls! (I see that smile, Dr. Dean!) – It’s a win-win situation!

When it comes to buying stock, how do you find the right stock at the right price? Decrease your risk of loss? Know when to buy and when to sell?

Wall Street lingo is a course within itself – P/E ratios, ROE, EPS, IPOs!   And charts…wow! For most of us, it’s like being an OB nurse trying to interpret EKGs!

Not The Right Direction For YOUR Stocks (by yotut)

Buying stock is not for the faint at heart! If you can’t handle the looping corkscrew roller coaster then single stocks aren’t for you!  By all means, stay with mutual funds, bonds, and safer investments.  But for those who enjoy the challenge, there are basic guidelines to follow when doing research to improve potential profits.

Selecting stocks:

• Keep your eyes open for that new fad.  If you had jumped on the Crocs craze or Apple when the I Phone emerged and cashed in on your profits, you would be well on your way to wealth!

• Buy what you know. Cosmetics, cleaners, toilet tissue (there’s something we all know about!), lingerie, medications, coffee, and ice cream – the list is endless! If you know the product, chances are you have a feel for its potential success. For example, don’t buy agricultural stocks if you know nothing about the industry.

• Look for companies paying dividends. It’s an added bonus! yeah!!

Basics of Stock Buying

We’ll start with a condensed protocol with more detailed focus on each category in the coming weeks

STOCK-BUYING PROTOCOL:

Always start small and stay diversified!!  Never put all your eggs in one basket!

Do your homework! MSN Money and Investors.com (IBD) are excellent sites for research:

□ Beware of cheap stocks < $5 – there’s a reason why they’re cheap

□ Earnings per Share – up 25% from last 2-3 quarters and increasing over last 2-3 years

□ Sales – increasing at least 25% from last quarter

□ Return on Equity - 17% or higher

□ Company is in top 5 of industry group – buy leaders, not laggards!

□ Low margin of debt – only invest in financially strong companies

□ Near its 52-week high in price per share – good indicator of an upward move

□ Mutual Funds are grabbing up shares – institutional buying = increased demand

Learn to read charts – determining proper buying points are critical in optimizing profit potential and decreasing losses.  Charts take time to learn but IBD has an excellent tutorial for beginners. We’ll discuss basic chart patterns in future blogs.

DON’T BE GREEDY -  let me stress that again…DON’T BE GREEDY!

Don’t try to pick the top – you will never out-smart the market! SOME profit is better than zero.  I’m still crying over Cisco Systems – I was getting rich quickly and wanted just one more split. “Cisco is too hot! There’s no way it’ll drop below $70/share! It will come back, split again, I’ll take my profits, and be one rich happy girl!”  I rode that baby all the way down to $25! GREED = STUPID MISTAKE!

Keep your emotions out of the market! don’t be married to your stock just because it’s something you like.  Remember…it’s about making money…not falling in love!

I have a friend who told me this story.

A patient who had gone through 3 in-vitro 1st trimester miscarriages, finally went to term.  She came into OB with early labor.

During her assessment, the new nurse on the floor couldn’t find heart-tones on the baby.  The nurse just fell apart, couldn’t do her job.

It is easy to get emotionally attached to patients-but you can’t help them if you are in as bad a shape as they are.

You have to have a professional sense of detachment-not that you don’t care, on the contrary.  You care enough to put your feelings aside, knowing someone has to provide emotional support, and not need it themselves.

Emotions and YOUR Stocks

When you are investing in stocks you have to have the same professionalism.

Look at each stock  with clinical detachment-and make difficult decisions.

If you can’t do that, then you have no business investing in single stocks.

If your stock fails to rise, cut your losses at 7-10% below purchase price – NO EXCEPTIONS! Minimal loss is better than total loss!

Investing in stocks is much different from mutual funds, where you leave the research to the pros. It’s comparable to differences between med-surg and critical care!  Stocks require critical thinking and research (and nerves of steel!)   If you enjoy the challenge, minimize your exposure to risks, and remain frugal, then stocks can play a part in your investment strategy on your way to becoming a Millionaire Nurse!

Questions? Do You Have Questions? What stocks have you been buying lately-how have you done in the market?

Post by Julie RN Staff writer for The Millionaire Nurse Blog!

Message from Dr Dean

To learn more about Julie, just click on her name for a link to her bio. We are excited to add her to our team!