Because your money should work for you

For anyone using a Mac, Macheist is giving away free software on Christmas day at The Giving Tree.

You can pick up two free aps now, and four more on Christmas day. I hope the aps are good!

A few days ago I signed up to have Google migrate my Feedburner feed over to Google, but now it seems the old feeds are no longer updating, either through RSS or through email. I have decided to go back to the original Wordpress theme and stop using Feedburner/Google for the time being. So if you were one of my 10 subscribers, and you still want to receive my feed, you can re-subscribe with this link:

Free From Money RSS Feed

I am still trying to work out a way to enable an email list for those who want to go that way. In the meantime, if you previously used email, won’t you consider switching over to RSS? If you’re unsure checkout my previous post on tracking more information using RSS feeds.

Update:

I have started a new feed through Feedburner, which I will use for email.  So if you would like to continue receiving emails the option is now available.  I do highly recommend using RSS though for convience and to keep your email inbox clean.

The end of December is rapidly approaching, especially with Christmas coming up this weekend. Luckily though you have until April 15th of 2009 to contribute to an IRA or Roth IRA. Also remember that the limit has been increased to $5000, so if you can swing it that’s more money that you can save and grow tax free.   

They say you’re only young once. Most often that is said as a reason to spend money, but keep in mind that the sooner you start investing the longer the magic of compounding can work. You’re only young once.

If you want to read more about compound interest, check out my post on understanding compound interest.

I thought I should pass these tips along to anyone interested in taking holiday photos.

16 Digital Photography Tips for Christmas

Ever since the days when Thomas Malthus predicted that an economy’s population would starve once population growth exceeded food growth, demographics has played an important role in economics. So it makes sense for anyone interested in economics and investment to also try and understand demographics.

Most population projections predict that populations will rise to huge numbers, and that some 12 billion people will inhabit the earth. These projections are based on the fact that for the past 650 years the population has gone up. But according to Ben Wattenberg it is actually highly likely that the world population will grow to a much smaller number, after which the population will actually begin to decline. These projections are based on the total fertility rates of countries around the globe, most of which are far below the replacement level needed to sustain a population.

1. The Story of This Book

It takes 2.1 children per couple to sustain a population. Birthrates in developed economies have fallen below replacement rates, and even less developed countries have falling birthrates. Within the next few decades, populations in the developed countries will begin to fall, particularly the European countries. And thanks to the accuracy levels of population projections, you can be fairly certain that these trends will hold for a least another 20 years if things don’t change.

2. And Then There Were Many Fewer

Child or car. Cars are expensive, and babies are expensive. Thanks to modern materialism (good or bad), couples are now deciding between having more babies, or having more stuff. Out of 44 developed countries, 43 are below the replacement level. I think you know what many of them are choosing.

3. Less Developed, Less Fertility

Along with the developed countries, less developed countries have seen slowing fertility rates as well. The most drastic example is China, which saw a change from over 6 children per woman to 1.8 due to the one child policy implemented in 1979. You can chalk the slowdown in other countries up to the usual suspects of urbanization, increased education, better use of contraception, and an increasing number of women entering the work force.

4. America the Exceptional: The Baby Makers

The United States is unique because it has had huge population growth, yet it has still become the richest country in the world. Fuel is relatively cheap in the U.S., which makes suburban living a possibility. America has more single family detached housing than anywhere else in the world, which has no doubt had some impact on the number of children families can raise.

5. America the Exceptional: Immigrant Takers

Immigration is actually one of America’s competitive advantages; despite Total Fertility Rates being below the replacement level immigration has allowed the U.S. to grow larger. Unfortunately discrimination against foreigners goes back to the beginning of the country, but Wattenburg argues that immigrants are necessary for the U.S. to remain strong.

6. The Culture of Alarmism

The United Nations typically makes three population projections, including a high, medium, and low variants. There is a huge gap between the numbers, and groups with an agenda tend to use projections that suit there needs. Environmentalists, for example, tend to use the high numbers to stress the impact of population growth. Real estate agents often touted land as a good investment because a growing population will always need somewhere to live. Over time these numbers become ingrained in our heads, whether they are likely or not.

7. Why?

There are numerous reasons laid out in the book for why populations are growing. Education, contraception, urbanization, and money are the big ones. I’ll leave the rest for you to read about in the book.

8. The Graybe Boom

Better health care and new medicines are increasing life spans further and further. Coupled with falling fertility rates, this increase in ages is causing an overall increase in the population, which spells trouble for pension plans, social security, and medicare/medicaid. The author presents ideas for possible solutions, such as changing social security cost of living adjustments from a wage based index to a CPI based index. In the end it’s up to the politicians who run the programs who need to make the difficult choices, and so far no one is stepping up to the plate.

9. Business

As populations age some businesses will win and others will lose. For instance it’s probably not a good idea to invest in Baby Gap. The truth is that we don’t really know what happens when populations decline because it hasn’t happened before.

10. The Environment

Population growth has a huge impact on the environment, both through consumption of resources and pollution. Pollution levels have also been historically linked to affluence, a relationship which is explored by the book.

11. Geopolitics

Nations with larger populations are typically viewed as being stronger. Large populations lead to large militaries, and on top of that having a large military is expensive. If the population of the United States declines and another country becomes the world’s dominant force, how will that shape the global landscape?

12. Is There an Immigration Solution?

The less developed countries have too many people, while the developed countries have too many. Doesn’t it make sense to bring workers from poorer areas to countries where they have better opportunities? Ben Wattenberg argues that developed countries need to be more aggressive with immigration laws to bring in more people, both skilled and unskilled.

Increasing immigration also has secondary benefit. Migrant workers tend to send money home to their families, bypassing any corrupt government officials or organizations. So by allowing immigration we can not only better allocate skills but also wealth.

13. Numbers Matter

The final chapter reiterates the premise that past population projections are being adjusted down by the United Nations based on new fertility rates, and that less developed countries have more of a chance than ever to move ahead economically.

Recommendation:

If you are interested in macro economics, politics, or investing then Fewer is a must read. A country’s population and demographics have a huge impact on its dynamics. Even if the projections in this book turn out to not be right, it’s worth understanding the implications of a decrease in the population.   

For someone simply interested in general personal finance though I don’t think it would be as useful, other than to provide background on a very important issue in this country. Social security will eventually affect us all, and population declines will likely have an effect on financial and real estate markets. If you have time to read and can find it in a library, Fewer might still be worth checking out.

MSN Money has a list of 8 things your financial planner won’t tell you.

#1 stands out to me since it basically means a financial planner doesn’t have much of an advantage over someone who is savvy about their own money. At least with a lawyer or a doctor you know that they went through years of schooling to get where they are. A financial planner, not so much.

#4 is also interesting, since an inexperienced financial planner (see #1) probably has no basic educational training to draw ideas from. The broader the knowledge of the person doing your finances the better off you should be.

Overall these reinforce the idea that most people should take control of their own finances. Another benefit to managing your own finances is that you can likely start small when you have limited funds, and as your money grows your knowledge will grow. No one cares about your finances as much as you do. Devote some free time each week to studying investments and personal financial management and you will have as much knowledge as most financial planners.

With financial markets the way they are hoping for capital gains is like a hail mary at the end of the game. In times like these getting solid dividends is the most sound way to move your portfolio forward. If you’re nervous about investing in the stock market, but don’t want to have your money sitting in cash, here are three places to get started. The following are three ideas for getting a yield above a standard money market fund, all with various amounts of risk.

First up is the Vanguard Short-Term Bond ETF (BSV). It is currently yielding 2.7%, lower than most CDs but also more liquid. On the other hand a savings account at ING Direct is paying 2.75%, is fully liquid, and has no minimum investment. While the fund does pose some risk, it also has the potential for capital gains as well. I began investing in this through my brokerage account since we didn’t have enough money to invest in a high-yield money market fund, which typically have minimum requirements of $50k or higher.

The second idea is the iShares Investment Grade Corporate Bond ETF (LQD). The yield is quite a bit higher at 6.16%, but there is also more risk, coming as both credit risk and investment risk. Credit risk is the risk that the some bonds don’t pay, causing a drop in the yield. Investment risk comes from the volatility of the fund. As you can see the fund is down about 11% this year, which would have wiped out the yield altogether. The key to this fund is the investment grade rating. In a turbulent market such as the one we’re in it’s extremely risky to buy non-investment grade bonds, aka junk bonds or high-yield.

Last up is the iShares S&P Preferred Stock Index (PFF). This is the riskiest of the three ideas here, but it is also yielding a hefty 11.52%. Take a look at the top holdings and you will see why this is down. Owning this fund is going to give you a lot of exposure to the financial sector, so if you’re scared of them this probably isn’t the place to be. But if the market turns around this fund will give you some exposure on the upside, while giving you a decent yield while you’re waiting. For those who don’t know preferred stock from livestock (sorry I had to throw that in there), I recommend reading up on preferred stock at wikipedia before investing.

As always I encourage you to do your own research as your risk tolerance may be different than my own.

disclaimer: at the time of this writing I own shares in BSV and LQD

Sounds confusing . . .

Over at the Blueprint for Financial Prosperity they have a great post up on Building Your Financial Network Map. I think this is a great idea for anyone to do to gain a better understanding of how their finances play out.

After doing this exercise you will have a better idea of where your money comes from, how it fits with your accounts, and how that money outflows into various bills and obligations. Hopefully you have plenty of assets that you are building up, and not too many outflows like credit cards and car payments.

I saw this very nice graphic at Mint.com. It’s pretty cool for both information and as an interesting flow chart.

By the way, Mint.com is a pretty cool site to check out.

source:

http://blog.mint.com/blog/wp-content/uploads/2008/11/visualguidecrisis2.jpg