Saturday, February 12, 2011

How A Poor Financial Adviser Delays Your Retirement Plans

Who cares about the economy? Investing in the stock market seem to be the in thing in town for 2011.

When it comes to investments, you have to monitor your portfolio closely, especially if you are going it alone. Entrusting your wealth to a professional financial adviser sounds like a good idea as they will be doing all the research and analysis work for you.

Though an adviser provides value, you should still know what is happening. It’s the only way you know that the adviser is producing attractive returns at reasonable cost.

The following pitfalls of poor advisers could set your retirement plans back by many years. Pay heed and avoid where possible.

7 Bad Habits of A Lousy Adviser

1. Frequent portfolio changes.

Once you have the right asset allocation, it should work in good and bad markets with little changes except for periodic rebalancing. There should be no wholesale changes unless the adviser is more concerned about his own pocket.

2. Pressure to invest in new products.

Be wary of advisers who pressure you to buy new fancy products. Such products usually lack track record and have high hidden costs. Best to stick with proven managed products with suitable risk-reward instead of shooting for the next star mutual fund or stocks.

3. Aggressive trading.

Excessive trading comes at your expense. End of the day, remember you are paying for the high trading, product and account costs. Also, few professional managers trade well enough to beat a benchmark. Chasing returns with leverage is a faster way to delay your retirement if things go wrong.

The richest investor, Warren Buffett, is not "smart enough" to time the market. Hence, neither should your financial adviser who has to depend on commissions for a living.

4. No return calculations.

You can't tell if you are getting value if the real return you are getting is omitted or buried under complex language.

5. Frequent capital losses.

Obviously, this is not sustainable if your portfolio keeps shrinking under your adviser's charge. When you are constantly selling at a loss, your portfolio has the wrong or risky products and the asset allocation needs to be changed.

6. Too much contact.

Advisers call you rarely to socialize or help out with your house chores. They are mostly to generate commissions, like recommending hot stock or churning products. Such practice can reduce your returns by up to 80%.

7. No contact

This is definitely much safer than too much contact, but it is not a small sum to pay especially when your portfolio is huge. You will be better off relying on yourself by being a long-term value investor.

It is not too late to make changes and get your retirement plan back on track. To ensure that the relationship with your adviser stays healthy, ask for for return calculations.

Then compare with a relevant benchmark and see if your annual costs are too high. If the returns are much lower than the benchmark, and the adviser refuses to change his wayward management, do it yourself or get a new adviser.

Friday, December 24, 2010

Maximise Your Food Budget for the New Year

Merry Christmas Eve to all my friends and readers of Associate Money. Hope you guys enjoy the turkeys, chocolate puddings, gift exchange and a great holiday ahead.

As 2011 beckons, I am disappointed that the economy is not out of the doldrums, despite whatever benefits Ben Bernanke has been telling us about Quantitative Easing. The nascent recovery is not in the employment market and money is still in short order for most Americans.

Our family is still saving for a rainy day and the austerity mood will likely prevail in the new year.

I believe inflation will come up strongly in the next couple of years. Without salary hikes to catch up with inflation, is it possible to stretch our food budget and buy the same stuff for less money or rather lesser purchasing power?

I’ve found some great ways of stretching our groceries so that I can make the next shopping trip go a little bit further. Here are some useful food shopping tips to try:

1. Eat less.

Yes, I know this sounds really obvious. But it is true, we can afford to cut down on our portion sizes by around a third without feeling hungry. Already, Americans are struggling with obesity issues because we love to upsize our food.

Going for smaller portions save money and is more healthy. You shed extra pounds without signing up for gym or diet pills.

2. Avoid Junk food.

This is probably old advice. Nutritionists have been talking the ills of junk food for a long time, and I am not here to debate with the experts. Junk food (burgers, potato chips, cookies, etc) can be quite expensive and burst your food budget easily if you have a habit of snacking while you are working or watching television.

Avoiding junk food and snacks(processed food) will save you money.

3. Add extra ingredients to your meals.

This may sound contrary to our objective of maximizing the food budget. After all, adding extra ingredients cost money. But it is possible that with extra ingredients, your meals actually go further.

For example, if you add pasta and leftover food to soup, a snack can become a full meal with nutritional value for the family. Pasta is cheap and leftover meat and vegetables don't add to your shopping bill.

4. Dress up your leftovers.

There are always leftovers in our family. We don't go out of our way to portion the food for each member. And we also find it more economical to cook in bulk, ie. not only for a single meal.

I know some people have an aversion to leftovers thinking it is unhealthy. But that is a waste of money and not environmentally friendly.

Leftovers can be dressed up to look like freshly made food if you are creative enough. The rice from yesterday meal can be transformed into fried rice by throwing in a few eggs for today's dinner. The chicken fillet can also be made into a pie for the weekend.

5. Use up everything.

There could be a use for everything. Hence, don't throw away any food, unless they have turned rotten. Many meals can also be bulked up by serving them with a bread roll and the remaining food can be placed in the freezer. Just defrost them as needed during the week.

After trying these tips, check to see how long is it before you make another trip to the grocery store and make purchases again. I am sure you can stretch your food budget and head to the store a lot less often.

Sunday, November 28, 2010

Top 5 Online StartUps For Cyber Monday Shopping

If you haven't had enough of Black Friday shopping or just wanted to avoid the crowds, you can scratch your retail itch by celebrating Cyber Monday!

Here are 5 top fashion online start-ups offering great Cyber Monday discounts.

1. Gilt
Each day at noon, Gilt offers its members a curated selection of merchandise, including apparel, accessories and lifestyle items across the women’s, men’s and children’s categories.

For Cyber Monday Gilt is offering free shipping on any purchase (from Gilt Women, Gilt Man, Gilt Home, and Gilt Kids) made on Monday, November 29 between 12 a.m. ET and 11:59 p.m. ET.

2. Rent the Runway
The site, like a “Netflix for dresses,” allows women to rent dresses from notable fashion designers.

3. Exclusively.In
A new e-commerce warehouse that sells Indian imported clothing, accessories and art like colorful dresses, saris and masala tees.

4. Of A Kind
The world’s first online Tumblr store, commissions designers to create limited-edition, exclusive “5, 10 or 50 of a kind” pieces.

5. StyleTrek
The site features an easy Facebook log-in and a crowdsourced e-commerce platform with the ability to “Like” products and share on Facebook, Twitter and via e-mail, which means StyleTrek designers receive real time consumer feedback at every stage of the design and production process.


Thursday, November 25, 2010

Black Friday Shopping, A Good Time To Save Money

I know a lot of people start their Christmas shopping on Black Friday. To be sure, there are some fantastic deals out there and it is easy to get carried away with all the store banners screaming "specials" and "bargains."

In order to save money, you should get to the stores early on Black Friday. Stores usually have their best sales in the early morning on Black Friday, so try to be out shopping before sunrise.

Make a list and stick to it, much like your grocery shopping. It's ok to deviate a little but not too much so that you are swiping your credit cards with abandon. If you don't have the discipline, just bring only cash to avoid credit card debts.

Doing your homework before hand helps too. Many stores entice you by advertising try to get you to enter by advertising a large sale when, in reality, the price is the same as weeks ago.

I have saved hundreds of dollars shopping on Black Friday compared to shopping near Christmas time but do watch out for your safety.

The savings may not be able to cover your injuries if you get trampled by the crowd while fighting for goodies. Here are some of the worst tramples on Black Friday.

Monday, November 15, 2010

Save Money By Clearing Up Clutter In the House

Clutter in the house, everyone has their struggles with it. With Thanksgiving and Christmas round the corner, the mess is going to get worse as people hit the stores and buy yet more stuff.

For us, we made a pact to remove clutter every couple of months. If not, it can be a nightmare... what with piles of papers in the kitchen and study room, worn out clothes in the wardrobe, magazines in the living room, old tools in the garage..

All these clutter isn't just an eyesore; it is expensive and continue to cost you money sitting in the house.

1. Buying Replacements

Say you are left with one half of your running shoes or earrings due to clutter. Thus, you have to spend money buying duplicates for stuff you own but just can’t find.

2. Damage to Good Stuff

When you have more stuff than space, storage becomes a problem. You end up stepping on stuff which become broken or stained. Some items just collect cobwebs or turn moldy due to moisture.

3. Missing deadlines

When your house is disorganized, you tend to forget about bills and end up paying overdue charges, extra bank fees, and tax penalties.

4. Renting Storage Space

Almost 10% of US families rent storage space for belongings that don’t fit in their homes. Some even bought bigger houses to accommodate their stuff. Well, such expenses and debts are unnecessary if you just manage clutter properly.

5. Health costs

Clutter can increase risk of falling and encourage growth of allergens like dust and mold. Treatments for those can get expensive. Clutter can also affect your mental health and the sign of neglect reflects badly on you.

6. Poor Efficiency

You can’t function at your optimum level if you’re disorganized. For example, time and energy are wasted looking for your car keys when you could be working, playing, relaxing or doing household tasks like preparing meals and paying bills.

7. Tying Up Your Cash

Stuff can tie up our earnings in rarely used sports equipment, video games, gadgets and clothes. Selling the unused stuff frees up cash and your energy.

With so much disadvantages of clutter, no wonder people struggle to save money. But eliminating clutter takes time. You will feel strange in an empty house if all your stuff are dumped overnight. And you may end up throwing things which you really need.

Here are some solutions to put your space on a diet:

* Consider a household agreement to buy nothing new for one year. This should reduce incoming stuff to a trickle.

* To deal with existing stuff, go through one area at a time, instead of tackling the entire house. Choose a room, a closet, a desk, or even just a kitchen drawer. A good rule of thumb: Get rid of anything you don’t use or love.

* Throw clutter in bags, put them in the attic. As you need something, take it from the bag. After 6 months, donate the bags.

* Try to spend 15 minutes a day decluttering. This requires discipline and we are forcing ourselves to do it too.

It’s hard to grow or thrive when hemmed in by clutter. Try out the above tips and see if your house becomes neater and your cashflow improves..

Saturday, October 9, 2010

How To Avoid Celebrities Debt Follies?

The key to financial freedom is not to earn lots of money, else money machines like celebrities will never face bankruptcy. It is about controlling expenses!

In the latest example of celebrity excess, singer Toni Braxton has filed for bankruptcy and owes between $10 to $50 million. Her list of debtors includes AT&T, the Four Seasons, and Tiffany.

So why do celebrities fall on hard times financially? This is because of their unpredictable income expensive lifestyles, and enormous pressure from family and friends who want their money. We can avoid their spendthrift ways.

1. Control spending.

Celebrities love to spend money especially during their new-found financial success. They think their high earnings will continue, but in reality their careers are short. They actually need to spend modestly to make their money last.

2. Make a plan.

Make a plan and follow through when it comes to finances. You have to be prepared for the worst-case scenario, such as disability or sudden loss of income.

Plan a rough estimate of your career, income and lifespan. Next, live off that amount and the rest should be saved.

3. Learn to manage an unpredictable income.

While it's OK to splurge a little when a big chunk of income comes in, it's important to remember that you still have to pay 40% of it on income taxes.

And because income might go down in the future, setting money aside for rainy days is essential. This advice applies to anyone who sees their income dip and dive, including people who work in sales, freelance, or consulting fields.

4. Pay off debt as soon as you can.

Celebrities should avoid mortgages and buy homes that they can afford to pay for with cash, since they often don't know when their next paycheck is coming.

5. Surround yourself with people you trust.

Celebrities and noncelebrities alike need to make sure they trust the people who work for them, including personal finance advisers.

The worst thing is to leave your finances and bank accounts in the hands of a rogue adviser who charges exorbitant fees or misappropriate your money. You should read your own monthly statements and regularly check up on savings and retirement accounts.

6. Save for retirement.

During good times, people should put at least 8% of their income toward retirement accounts. That's in addition to maintaining an emergency fund of six to nine months' worth of expenses.

7. Just say no.

Don't ask for money from friends or distant relatives. Having a financial adviser can help to monitor your spending habits.

If you have lots of money but became a bankrupt, don't worry as following the tips above will help you to come back into solvency.

Thursday, September 30, 2010

Poverty To Riches Is Easy

One of the least understood aspect of financial planning is that almost everyone can be well off just by following simple principles of money management.

I am not talking about attaining Warren Buffett's wealth. Most people are likely to be in this situation of starting from poverty, get a good education, good career and end up financially sound. It is doable, a little bit of luck but more of being disciplined.

You must be willing to spend less than what you earn over a long period of time. It explains how a person earning more than $30,000 a year can retire comfortably while another guy earning $1 million a year can retire broke.

That's really good news for all of us because cutting expenses/living below your means is much easier and more controllable than trying to increase your income.

However, once you generate excess cash by living below your means, you need to invest that surplus wisely to maximize its growth.

You don't have to be an accountant or receive an inheritance from your rich daddy.
All you need is the willingness to begin and learn. A commitment and perseverance to regular, small investments, like $50 or $100 a month, can be the start of a million-dollar retirement account.

The earlier you start, the easier it will be and the more money you'll actually accumulate. But if you're like me and put off investing until later in life, you still have the ability to achieve your goals. The idea is to start, but start now.

Time is best friend in compounding your wealth, ie. to multiply your savings over and over again to turn the little savings into a massive portfolio.

So the path to prosperity is quite simple:

1. Spend less than you earn.

2. Invest your surplus to make your money grow.

3. Repeat steps 1 and 2 for many, many years.

Isn't the path from poverty to riches easy?