6 Ways to Improve Your Credit

One of the important keys to living a wealthy life is to have a healthy credit rating in the form of a good FICO score. But as important as your FICO score is to your financial life, it’s also confusing to understand how it’s calculated and how you can improve it.

So, to help us out, let’s begin with a few basics. According to Creditboards.com:
• Your FICO score can range from 300 to 850. And you have 3 different FICO scores from three different credit rating bureaus – Equifax, Experian and TransUnion.
• A score below 500 is bad, a score in the 600’s is OK, a score in the 700’s is good and a score above 720 is basically great.
• The following factors basically determine your FICO. The percentages are how influential each factor is in determining your score.
- Your Payment History: 35%
- The Amount You Owe: 30%
- The Length of Your Credit History: 15%
- The Types of Credit You Have: 10%
- The New Credit You’ve Applied For: 10%

OK, so now that we have an overview of what your FICO score is and how it’s determined, what can you do to improve it?

1. Pay your bills. On time.
With about 35% of your score based on your payment history, late payments can destroy your score, especially recent late payments. So, always send in at least your minimum amount due, on time. If you know your payment will be late, call your lender and explain why. They might accommodate you once. Read more

How Much Is A Dollar Worth? How About $53.70.

In the past year, we all experienced the dramatic fall of our Almighty Dollar. It’s been pounded by the British Pound (bad pun intended), smashed by the Euro, trounced by the Canadian Loonie.

Today, it’s the butt of jokes from New York to New Delhi.

But with all the trouble the dollar has been going through, it still must have some value. Right?

So, this got me thinking about the value of a dollar over time. Now, I’m not talking about the buying power of a dollar or the effect of inflation on the dollar. I’m just talking about a basic calculation of how much a dollar can grow over time.

To figure this out, I went to BankRate.com and used their Savings Calculator. I wanted to see how much a dollar can grow by earning 8% annually, compounded monthly, and 10% annually, compounded monthly. This range of 8% to 10% Annual Interest seems to be quite possible over the long haul when invested in solid mutual funds or blue chip stocks.

After running the numbers, I have to say that I was stunned by some of them. Check ‘em out.

The difference between 8% a year and 10% a year isn’t that much – until you get to 20, 30 and especially 40 years.

I mean, $53.70 after 40 years? That’s amazing.

So, the next time you’re putting down 4 bucks for that double mocha latte, take your time and really enjoy it. Because 40 years from now, you could’ve had an extra $200.

Is it Better to Rent or Buy? That is The Question.

Rent or Buy? Buy or Rent? What’s the smart thing for me to do?

I started thinking about this today because I just read a great article by David Leonhardt on NYTimes.com about this topic. And I’m sure that a lot of you are thinking about it too, considering that there are a lot of pros and cons on both sides. Especially now, in this crazy Real Estate market.

Now, I know that owning real estate is a cornerstone of building wealth. But, does that mean that whatever Real Estate I purchase will help me build wealth? I’ll need to do a lot more research to find the answer to this.

But back to the Rent or Buy question. Let me tell you about why I started thinking about it. I live in New York City where an average 1-bedroom apartment in a good neighborhood costs around $500,000. Yes, that’s 500 Grand! For a 1-bedroom! That’s crazy. But then, this is the greatest city in the world.

Let’s say I buy a condo for $500K. That means that I would have to put down at least 10% or $50,000. If I buy a co-op, I would have to put down 25%. For this calculation, we’ll stick with buying a condo.

So, now I’m left with a $450,000 mortgage. At 7% Annual Interest Rate over 15 Years, I’ll have a monthly mortgage payment of $4,044.73. This doesn’t include the Monthly Maintenance on the apartment (which varies greatly based on the condition of the building.) It also doesn’t include closing costs, mortgage points, insurance, attorney fees, etc. On the plus side, I would be building equity and would get tax benefits for owning a home.

Currently, I rent a 1-bedroom apartment for a lot less than half of the above monthly mortgage payment. Sure, I’m not building equity and I’m not getting any tax benefits, but I also have more than $25K extra at the end of the year than I would have if I had bought an apartment.

That’s my dilemma: Should I continue renting or should I buy a place? Read more

The Only Investments You Really Need?

When I see a magazine cover with a headline like “The Only 7 Investments You Need Now.”, I have to read it. At least for curiosity’s sake. And who knows? I might learn something about earning or growing my wealth.

So, when I saw that headline on the cover of this month’s Money magazine, I put down my $3.99, took it home and read it.

The important point that the article makes is that you don’t need to complicate your portfolio. Especially now, in a bear market that’s so unpredictable. That’s a good point.

But when it came to suggesting what investments you need now, the article suggests just 7 basic investment areas (i.e. Blue Chip U. S. Stock Fund, Small-Company Fund, etc.) and 1 fund in each area.

According to Money magazine, not me, this is all you need right now, along with the funds that they highlight for each selection. (Full disclosure: I don’t own any of the funds in this article.)
1. A Blue-Chip U.S. Stock Fund, like Fidelity Spartan 500 Index (FSMKX)
2. A Blue-Chip Foreign Stock Fund, like Vanguard Total International Stock Index (VGTSX)
3. A Small-Company Fund, like T. Rowe Price True Horizons (PRNHX)
4. A Value Fund, like Vanguard Value Index (VIVAX)
5. A High-Quality Bond Fund, like Vanguard Total Bond Market Index (VBMFX)
6. An Inflation-Protected Bond Fund, like Vanguard Inflation-Protected Securities Fund (VIPSX)
7. A Money-Market Fund, like Fidelity Cash Reserves (FDRXX)

To me, this article doesn’t go far enough. It doesn’t talk about asset allocation or portfolio construction. And it only gives us 1 fund in each area, with a very heavy emphasis on Vanguard Funds. So, it seems like just another old-time generic investment guide. One from Column A, one from Column B and so on.

But don’t take my word for it. Check it out yourself. And let us know what you think.

Is Your “Money Story” Keeping You Broke?

During my life, I’ve done almost everything to figure out what’s going on with me and money. I’ve taken dozens of money/self-growth seminars. I’ve read a ton of books. I’ve taken a bunch of university financial classes. And I’ve gotten a heck of a lot of advice from rich friends.

And after all of this, I’ve come to believe that the reason I have a rough relationship with money is because of my “Money Story”.

What’s a “Money Story”?

Well, it’s a story that we subconsciously tell ourselves – over and over – about money. It’s not something we verbally say. But it’s something that we believe on a subconscious level. And that makes it extremely powerful.

Mine is: “My family never had money. So, I’ll never have money.” Read more

The Bear Stearns Interns Reading List. Did the Top Guys read these, too?

I was just looking thru some old files (this one is from Sept. 12, 2007) that I saved on my computer and came across this - the Reading List for the new Interns at Bear Stearns. Yes, that Bear Stearns. The one that the Fed recently delivered to JPMorgan Chase in the biggest shotgun marriage/merger/discount purchase in the history of the financial industry.

It seems that those Ivy League MBAs who were “lucky” enough to snag internships at Bear Stearns were given a little reading to do, to prepare them for the rigors of working at what used to be one of Wall Street’s most prestigious firms.

So, without further ado, here’s the Bear Stearns Reading List for Interns: Read more

Free Coffee? Sure, if you own stock in Starbucks.

In a market like this, where stocks seem to be getting slammed every day, there is a bright spot to owning certain stocks.

You see, some stockholders get extra perks, even if they own just as 1 share of stock.

For instance, if you own stock in Berkshire Hathaway, you get discounts from some of the companies that Berkshire owns - like GEICO insurance. Plus, they get invited to its famous annual meeting where they can take in the wisdom of Warren Buffett.

Investors who own at least 100 shares of Royal Caribbean stock get great savings on the company’s cruises.

And if you’re a Starbucks stockholder? Well, you get a gift card that’s just enough to cover the cost of one of their coffees. Hey, it ain’t much. But it’s better than nothing.

Check it some more stockholder perks in this Motley Fool article. And tell us if you get any perks from the stocks that you own.

How to save $1 Million if you’re 25, 35, 45 or 55.

If you’re 25 years-old, how much do you have to save per month to have $1 Million when you retire? What about if you’re 35? Or 45? Or 55?

Well, if you’d like to know the answers to the above questions, check out this cool piece on Kiplingers.com.

The calulations assume that you’ll put these monthly savings in a retirement account that gets at least an 8% return. That’s a pretty fair assumption.

But the big question is: How much do you have to save per month?

Well, the answer is $671.

But I won’t tell you what age that starts at. For that, you’ll have to check out the article.

Saving $451 a month can make you a Millionaire?

There’s an interesting article on today’s Kiplingers.com that talks about how little you need to save and invest every month to reach $1 Million.

According to the piece, you just need to save $451 a month. And it actually shows you have to save money on a bunch of things - like your income taxes and your food bill. Even your health care!

It assumes that you’ll put the money into a retirement account that averages a return of at least 8% a year over the next 35 years.

It makes sense. But I guess I’ll have to cut out my Dunkin’ Donuts coffee. That’s 2 bucks a day for a total of $60 a month.

What do you save per month for retirement? Or do you save anything per month? Let us know.

Leveraged ETFs: Triple the Returns. Triple the Risk?

Just read an article on today’s MarketWatch.com by John Spence about an investment product I’ve never heard of before – Leveraged ETFs.

These are ETFs that attempt to triple the returns of their particular segment of the stock market. So, if the S&P 500 index rose 2%, the Leveraged ETF that tracks it would shoot up 6%.

The investment company that came up with these funds is Direxion Funds. And their new supercharged ETFs would track U.S. benchmarks like the S&P 500, the Dow Industrial and the NASDAQ 100.

As good as triple returns sounds, remember that on the flip side, these supercharged ETFs could also triple their losses. As they say in investing, the more risk, the more return. But are these too risky?

Well, each of us have to decide that for ourselves. We all have different circumstances, needs and levels of risk comfort. But I think these ETFs are at least something to look into.

Check out the article and let us know what you’re thinking.

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