Archive for the ‘Wealth building’ Category

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Cars and Success: Do They Have a Correlation?

Thursday, October 28th, 2010

Cars and Car Buying-For Successful People

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.

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Posted in personal finance, Wealth building | 7 Comments »

Stock Buying 101:For Nurses and Non-Nurses Too!

Wednesday, October 20th, 2010

Buying Stock….Protocol for Success

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!

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Posted in Investing, Personal Finance 101, Wealth building | 5 Comments »

Gold-Is it Time To Buy? Or Time To Sell?

Monday, August 23rd, 2010

Gold Investing

Gold, is it the best investment since Wal-Mart or McDonalds debuted- many years ago, and since made many investors wealthy?

Columbian Gold Figurine-photo by Casver CC

Or is gold, truly fool’s gold, only worthy of a Gold Bug’s time and study?

In this WSJ Blog article, James Altucher, writes about gold’s two century-long lack of investment growth- a miserly 1%-even counting it’s go-go growth the last few years.

What do I say to those who brag about Gold tripling in value over the past 5 years or so.  I say,”So what!”

Internet stocks hit the stratosphere in the late 1990′s.  Housing was growing 15-25 % in some parts of the country a few short years ago. And my personal favorite- beach property in Florida-where your’s truly has lost a bundle.At their heyday all three seemed to be no-brainer investments.

That is the nature of bubbles.  And my personal best barometer, is “When Dr Dean start’s to think about an investment, it is probably at it’s bubble-licious peak!

Internet Stock Bubble

Think about it.  When the internet  investment bubble was near it’s high, I saw a nurse anesthetist- who didn’t know  a P/E ratio from a vial of Narcan-poring over the Wall Street Journal.    With her  broker holding breathlessly on the other end of the phone, waiting,  for her latest pick.  She no longer reads the WSJ….

Housing Bubble

Another acquaintance in another part of the country, has had several foreclosures, on his flipping flops in the housing market.

Beach Property Bubble

And finally, there is yours truly, who is still holding beach property, at 25% of its former bargain price,(so I thought!)  Just when I thought the market might be turning, BP had to turn loose a couple billion gallons of oil on my beloved Gulf Coast!  Saying it’s like throwing gas on the fire (sale) would just be too easy!!!

Calling Market Tops

Years ago, there was a saying on Wall Street-called the Business Week Sign-if an area of investing was featured in Business Week-it was probably at it’s top!

That is just one more sign of the herd mentality.  It is emotionally more satisfying to follow others, than to make a decision all our own, based on facts as we can determine them.

So based on the “Dr Dean’s Investing Forecast” I have been more and more tempted to buy gold recently-probably a sure sign it is close to its top-buyer beware…..

Or. is this recognition of my failings,  a sign that I am becoming more mature-Nahhhhhh!

What say you, Gold Bug, or Gold Bear?  Or do you care??????

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Posted in Wealth building | 10 Comments »

Making Money From Nothing: Can YOU Do it?

Friday, July 30th, 2010

Money for Nothing

Myths, Mystics, and Magicians conjure up visions of the supernatural.  The idea that something worth having can be created out of thin air, without blood, sweat, or tears is an idea that has enthralled kids and kids at heart for centuries.

The billion dollar success of the “Harry Potter” series with the emphasis on magic wands, flue dust, invisibility cloaks, and spells is just a recent reminder of our fascination with making something from nothing.

Magic-Wand-by-terwilliger911

But Shakespeare, had his witches, as King Arthur had his Merlin.  The goose that laid the Golden Egg, and spinning hair into gold, also come quickly to mind.

The modern day equivalent can be found in those that want to turn a quick buck, without doing their due diligence.

This might include:

  • Lottery tickets
  • Single stock investing
  • Texas Hold-em
  • Flipping homes
  • Resort real-estate

Brett Arends, in his column in the Wall Street Journal, recently wrote a story on the Ten Stock Market Myths That Just Won’t Die.

I will summarize a few of those  stock market myths here, with my commentary-(apologies to Mr Arends)

  1. This is a good time to invest in the market-I am guilty of this one.  My thinking is, that when everyone is bearish is a good time to be bullish.  I do think this is true, but that doesn’t mean it will be true today!  It also may take a year for everyone to figure out the sky is not falling-so you have to have a strong stomach and deep pockets.
  2. Stocks on average make you 10% a year- this may have been true over the past 100+ years-but we have had zero growth over the last decade.  Does that mean we are going to double in the next couple of years- I wouldn’t hold my breath.  I think those who base their retirement earnings on that number, may be disappointed if they are going to retire in the next 20 years.
  3. Our economists are forecasting…….-Economists opinions, are equal to weather people in my mind.  They may be able to predict the next 24 hours-beyond that is a guess.
  4. This is a stock pickers market- I hear this one every day,  on the business channel, while I eat my homemade p.b.&J gourmet lunch.  Studies show the average mutual fund under performs the market-so where is that damn stock picker when you need him.

For the rest of the list-check out Brett’s article-it’s good for a laugh-before you cry.

So what are we to do, if we want to increase our wealth, and don’t want to play the lottery with our savings.

Dr Dean’s wealth building  secrets:

(I am not going to make you slash your palm, and mix your blood with mine-like Clint on “Outlaw Josey Wales”…..)   But let’s just keep these between me and you.   shhhhh….

  • Start early-compound interest is your friend.
  • Live well below your means and save like hell!
  • Work your ass off! Now this doesn’t mean slaving away for 50 years in a minimum wage job.  It means working strategically, to increase your value in this economy.  That may mean additional schooling, OJT, multiple streams of income.  Most millionaires made their money consistently working, adding value-for their company, their employer’s company, or themselves, not by someone giving it to them.
  • Use your time wisely- I am writing this during a time when a patient canceled her appointment.  Make sure you have things to do during your down-time that are constructive.  Turn off the television, phone, and other distractions.
  • Diversify-and this doesn’t mean invest in 5 different categories of stocks-as Cramer does during a segment on Mad Money!.  It means investing in 5 or more categories-stocks, bonds, commodities ( Precious metals, energy, grains, industrial metals like copper), real-estate, and yourself.  You don’t have to do this all at once-gradually spread out your resources as you build them.

I promise there is not an original thought in the list above. (You are saying no-duhh as my kids were fond of muttering!) The secrets to success are not secrets at all.  They cannot be conjured up with a Magic Wand, even a special one found at Diagon Alley!

Secrets to Success

Like most things in life, the secrets to success should be called the “obvious path to success”.  The difference between those who succeed and those who don’t is frequently the difference between those who make the hard choices and sacrifices.

Now I don’t judge success by bank accounts, and monetary success.   Balancing your life between your family, friends, job, and spirituality-can make you rich in many ways-but if you want money for retirement, or to allow freedom of choice-then develop a plan and go make it work.

Reader Questions:

Do you know any magic ways to make money?  And will you share them?

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Posted in goal setting, Retirement savings, Wealth building | 5 Comments »

Give a Gift That Can Keep on Giving-Stock Shares!

Friday, June 18th, 2010

Giving A Stock Certificate!

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. Make sure the price is 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!!!

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Posted in Wealth building | 4 Comments »

Financial Risk: Do You Really Understand It?

Tuesday, June 15th, 2010

Risk

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?

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Posted in Retirement savings, Wealth building | 2 Comments »

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