Seesaw

The following is a staff writer post from MikeS.  He is a married father of 2.  So, with the cat, he ranks number 5 in the house.  He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.

The stock market has always amused me.  One day the world is apparently caving in, the next day everything is rainbows and butterflies.  I keep track of my 401K balance relatively often, more so to keep an accurate net worth number, not to see my rate of return.  Market gyrations do not change my investment plan.  My asset allocation is based on my risk tolerance and daily or monthly fluctuations are not going to change it.  I thought I would give you a peak into how my 401K has done over a 12 month time frame at monthly intervals as well as how it did during the Brexit volatility.

Monthly Ups and Downs

I went back and looked at the last 12 monthly statements from my 401K.  I was only interested in the change in market value, not the ending balance.  The ending balance would have been impacted by my contributions, so I wanted to look at only what happened relative to the market.

To give context, my 401K balance at the beginning of the first month was $64,252.  The first month was September 2015 and it was not a good month for the market.  I had market returns of -$2,125.  My usual quip when I see numbers like this is “Guess I’m not retiring tomorrow”.  I guess the world was caving in that month.  Now, had I adjusted my investments or pulled completely out of the stock market, I would have missed out on the butterfly parade the following month.

October 2015 was a good month; I had market gains of $4,223.  November was basically unchanged at up $7.  That’s not a typo, my market gains were only $7.  The world was again falling apart in December and January with losses of -$1747 and -$3,931, respectively.

In February 2016, I guess everyone was shell-shocked from the previous 2 months as my return was down slightly at -$65.

The butterfly parade returned over the next 3 months as I had returns of $4,808, $1,063 and $926 for the March 2016 through May 2016 time frame.  June 2016 was uneventful with market losses of $59.

Happy days returned again for the last 2 months with gains of $3,084 and $336 for July and August.

My ending balance at the end of August was $88,859.  I kept steady in my investing and was able to enjoy the good months, while also purchasing more shares during the bad months.

That’s the beauty of dollar-cost-averaging.  Five of the twelve months had negative returns for a total loss of -$7,929.  The seven good months had returns totaling $14,449.

Brexit Volatility

I was quite curious to look back at the daily returns for my 401K during the market’s Brexit volatility.  The vote happened during the day on June 23rd and the general news coverage was that Britain would remain in the European Union.

As a result, my 401K was up for the day, $1,309.  Then after the results came in, the world was apparently ending.  The next two days saw market losses of -$3,739 and -$1,702.  The next four days all saw market gains $1502, $1,413, $1,078 and $262.  In told, from the day of the vote which was on Thursday to the end of the following week, my overall market gains were little changed at $124.

Had I panicked and pulled my money out of the stock funds during the two-day fall, I would have missed out on the rebound over the next four days.

Long-Term Thinking

Since I am investing for the long-term, I never react to isolated events.  Sometimes I wish I had a pile of money that I don’t know what to do with so I can buy on the large drops, but I’m not that financially stable yet.  I believe that in the long run, the market will produce positive returns.  If it doesn’t, I probably have bigger problems on my hands.

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Net Worth Summary

The following is a staff writer post from MikeS.  He is a married father of 2.  So, with the cat, he ranks number 5 in the house.  He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.

One of the tasks that I do with my finances is to track my net worth. It’s my scorecard on how I am doing financially.  I have only been diligently tracking the number since the end of 2008.  I am positive the number wasn’t pretty before that time, as I was not very good at managing my finances before then.  So, how did I do this year and what were the drivers of the overall change?  Let’s take a look.

Net Worth

My net worth increased 14.8% from the end of 2014 till the end of 2015. It was a roughly $19,000 increase year-over-year.  I will say that I am pleased with the number.  It’s going up and the markets did not contribute much of anything to the increase.  The increase was driven entirely by debt reduction and savings.  It is also a far cry from the roughly -$19,000 net worth I had when I started tracking.

401K

The biggest contributor to the net worth increase was my 401k. Despite having a negative return for the year, -2.3%, I was still able to grow the balance between my contributions and the company’s matching contributions.  The company has a flat 2% contribution and then matches dollar-for-dollar up to 6%.  I currently contribute 8%, so a total of 16% of my salary is going into my 401k.  The company’s contributions and the first 6% of my contributions go into a traditional 401k, while the remaining 2% of mine go into a Roth 401k.

Reducing Debts

Debt reduction was also a sizeable contributor to my net worth change. I only have two outstanding debts remaining.  The first is my mortgage, at 3.99%, and the second is a car loan at 1.99%.  I have not been paying any additional principal against the car loan, but I have been with the mortgage.  I refinanced the mortgage at the beginning of 2015 to eliminate the PMI I was paying.  Once the payments started on that, I began to pay an additional $215 a month towards the principal.  If I don’t change that payment pattern, I still will shave about 6 years off the length of the mortgage.

Savings

My savings and brokerage account did not contribute much at all to the net worth change. The brokerage account was up some and the savings account was down.  I wasn’t too surprised by the savings account decrease.  I had some money in there at the end of 2014 for large anticipated expenses in 2015.  The brokerage was up about $1,000 over the course of the year.  It was basically the amount I invested.  The dividends I earned cancelled out the market drop, so overall I just ended up with what I put in.

This Year

I largely expect a similar pattern in 2016.  Overall debt reduction should be just over $12,000 assuming I follow the same pattern as this year.  I don’t expect to have to deviate from that I and I don’t anticipate needing to take on any new debt.  The 401k savings will also remain the same.  The only variations will be from the incentive bonus, if any, and any salary changes.  I still contribute part of my bonus to my 401k and the company still provides a 6% match.  If I had to guess at a rough 401k increase for the year, I am hoping for about $16,500.  That would be absent of any market changes, just my and the company’s contribution.  Hopefully, I can see a rebound in the market performance of the 401k as I am in negative territory for the first two months.  I would be quite happy if the net worth change for 2016 was a positive 25,000 or more.  That would be a nearly 17% increase, I’ll take it.  How is your net worth doing?

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11 Ways to Completely Revamp Your Spread Betting

1.Don’t complicate things

Use a simple trading plan. Stick to markets you are familiar with and are comfortable trading in. Make sure you know almost everything there is to know about those markets from their trading hours, to the margin requirements and factors that influence their price.

2.Be up to speed with the latest news

If it is a stock, you should be aware of things like when the company is about to announce a trading update or even when it is about to go ex-dividend. For forex pairs and indices, you should always be up to speed with important macroeconomic data news.

3.Study the markets

If you watch and study a market for several days (or even months) you will gradually understand how it tends to move and how it trades. So whether you use fundamental or technical analysis, the longer you study a particular segment of the market, the more you can spot its idiosyncratic pattern. If you are looking at commodity markets, then make sure you’re literally an expert and can easily write a whole thesis paper on it.

4.Choose your trading hours wisely

Unless you are fully confident in your strategy, avoid trading during the first 30 minutes after a market opens. Most importantly, be on the lookout for the time the USA market opens (that is during the mid-afternoon in the UK). Trading during such periods of volatility requires extra monitoring and a simple mistake can do serious harm to your trading account.

5.Always use stop losses

A stop loss feature is designed to do exactly what you expect it to, it cuts your losses when the bet goes completely against your analysis leading to unacceptable losses. Wise traders know that stop losses are an integral part of the game.

6.Do not fight the trend

No matter the strategy you use, be very careful when trading against an obvious trend. For instance, it would be unwise to go short while the market is still in a basic upward trend. Brush up on your grasp of technical analysis to avoid common errors of judgment.

7.Don’t be overconfident

Most people make the mistake of thinking that they “know it all” and that they have unlocked the secret to success. At this time they start to trade without conducting enough research. Unknowingly they start taking on more risk – and this is when they get their fingers burned. If you want to revamp your spread betting, go steady with every trade. Keep a healthy margin and ensure that each bet you place has a decent risk-reward ratio.

8.Find the right spread betting company

Find a company that offers a range of different accounts tailored to different types of investors. Two things that really matter are :- Are they a reputable company? How long have they been in the market? CMC Markets for instance has been in operation for 22 years.

9.Use one strategy at a time

Whether you choose news trading, breakout trading, range trading, trend following or reversal trading; always keep in mind that these strategies should not be combined for the same trade. Normally, the logic for each strategy is different and mixing them up could lead to conflicts.

10.Read, read, read

The world’s best spread betting gurus read a lot. But is every book going to be great? Of course NO. Check out the books that are relevant to your trading strategy. If you are using technical analysis, well there are plenty of people who have done that as well and they have written lots of books on the subject. The same applies to other strategies as well.

11.Stake sizing wisely

Avoid choosing large stakes because a loss would possibly be too big for your account to handle. On the other hand, avoid staking too small as the gains may not reflect the return expected for the level of capital. Ideally, you should keep your stake size between 0.02 and 0.06 percent of trading capital.

Final Word

Don’t let your emotions rule the day. Create a trading schedule and stick to it. There will always be other trades opening on other trading days. There’s no rush.

Remember, so much of spread betting is psychological, making self discipline a great virtue for an investor. But self-discipline alone may not be enough to get your profit margin growing. Brush up your strategy, learn new tactics, be open-minded and most importantly adopt a decent risk-reward ration in all your investments.

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What Married Couples Should Know About Life Insurance

A lot of married couples (especially millennials) don’t know the importance of life insurance—yet life insurance is even more important for married couples than it is for people who are single.

That’s why we asked our friends at Big Lou Life Insurance to provide a guide for our readers about on the basics of life insurance.

Every Pound Matters

One Inch and one pound can make a difference.  You may not know it, but if you tell your broker you weigh 150 pounds and you come in at 155lbs., your rate can change. With just a few pounds difference you may have been better off with another insurance company.

Your Health is Important

Blood Pressure, cholesterol, and other levels can have a big impact.  A few points on your blood pressure, cholesterol, or other blood profile levels can make the difference between rate classes. Each insurance company has different targets for each rate class.

Your Family History Can Impact Your Life Insurance Premium

Family history of cancer, heart disease, and other diseases can make or break your premium.   Some insurance companies don’t consider cancer history in your parents or siblings, while others do.  Most life insurance insurance companies look at your parent’s history of heart disease, but they attach different premiums depending on many factors.  If someone in your immediate family died before the age of 70, your broker or adviser needs to know and needs to be asking you follow up questions.

Diabetes and Chronic Diseases Complicate Things

If you have diabetes you will need to prove it’s under control and actively treated. Being in control of your blood sugar has a huge impact on premiums, and being honest about your sugar control will give your broker the best chance of getting you the best possible rate.  If you tell your broker your A1C is around 7.0%, but the lab results show 8.0%, your “quote” is going to change and you may find out another insurance company would have been better to apply with.  At a better A1C of 7.0% one insurance company has the best rate, but at 8.0% that company is no longer the best choice.

Does Your Husband or Wife Snore? That Could be a Problem

Snoring can really upset your life insurance pricing hopes.  Do you remember telling your doctor that you snore and wake up a lot at night?  Well, your doctor wrote it in your medical records along with a comment that maybe you have sleep apnea. Maybe? Insurance Companies evaluate risk and sleep apnea (where you stop breathing while sleeping) is a possible risk.  Something this simple can cause an insurance company to ask for tests to be done to rule out a risk.  You forgot about it, and didn’t tell your broker, but it pops up and can upset your premium expectations. Some insurance companies are more lenient on these types of issues than others.

Cancer, Heart Disease, and Other Illnesses

Your personal history of cancer, heart disease, and many other things are important and your broker needs to ask you the right questions.  In most cases you will need to provide your broker with recent lab results and or other testing before being able to get a realistic quote.  Without these, your broker or adviser can give a best case guess, but that is all it is. Just because your doctor told you are in great health doesn’t mean you are low risk when it comes to insurance. Heart disease, heart attacks, strokes, almost all cancer history, usually mean a higher than average premium compared to those who don’t have this history.  Again a “quote” from a broker without a lot of detailed information is nothing more than a guess. Want to learn more about heart conditions that impact life insurance? Read more on Big Lou’s blog.

Fight Your Instincts, Be Honest

You are going to want to withhold information from your broker or adviser.  In your day to day conversations with your friends you keep most health details private and your instinct will be the same with some broker on the phone. In the end, though, everything you keep to yourself will be found out by the life insurance company or underwriter which means either an uncomfortable conversation with your broker, or a higher premium, or both.

The more information your broker has up front the better off you will be.  You also need to consider the man hours and cost that your broker goes through to apply for coverage.  You can save a lot of time and effort for yourself and your broker by being honest. If you don’t feel comfortable opening up to your broker, you either haven’t spent enough time building trust with them, or you are working with the wrong broker.

Get on the Same Page with Your Spouse

Will you or your spouse have enough money to provide for yourself and your family if you died tomorrow? Will you be able to pay off the mortgage, pay for college tuition, etc? If not you should have a straightforward conversion with your husband or wife and get on the same page about life insurance.

About the Author

Big Lou Insurance has 30 years of experience as one of the leading life insurance providers in the United States. Big Lou specializing in helping married couples get hard to place life insurance.

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Wanna Be a Forex Trader?

Looking for ways to earn money and want to be your own boss? Forex trading might be a good choice for you! This hobby (or even full-time job if you wish) might bring you some serious cash if you play your cards right. In case you‘re not familiar with what forex is, it includes trading foreign exchange on the market. Why is forex trading so popular? It can be a great source of income, without putting much effort into it. Of course, you’ll need to learn some essentials of trading first and adopt basic forex strategies if you want to make a real progress. Later, as you earn more experience, trading will become a piece of cake.

Here are several things to have in mind if you want to become a successful forex trader.

  1. The first step – learn forex terminology

Words such as ask price, bid price, leverage, spread, quote currency, base currency and others are a must-have in your vocabulary if you’re serious about forex trading. There are numerous online resources that can help you get started and learn the basic terminology of forex and adopt the language of the trade. It’s needless to say that without this knowledge, successful trade would have been impossible. So, go on, take your tablets into hands and start learning from the scratch.

  1. Looking for trustworthy trading tips

Instead being impatient and diving head first, make sure that you do some more reading – preparation and gathering valuable resources will literally pay off in this case. Now that you have acquired knowledge about basic forex terminology, you can continue to learning about basic principles of trade. This includes reading articles about available online trading methods and learning forex rules, watching educational videos, finding blogs of renowned experts who often share their trading tips and tricks with their readers.

  1. Deciding on currency

The first important decision to make is which currencies you’ll buy and sell. This depends on several factors: economy, trading position, unemployment rate or political situation in the country. When analyzing these factors, you can rely on experts’ opinion. If they predict that the economy in a certain country will weaken, it would be best to sell their currency and purchase the one from the country with a better economic situation at the moment. The currency pairs with the greatest liquidity are US dollar/Yen, British Pound/US dollar, Euro/US dollar and Swiss Franc/US dollar.

  1. Finding your own strategy

When you decide on currency, before investing any actual money, it would be best to plan your strategy in advance. Since you’re a beginner, it might be hard to decide on this right away. However, you might start trading by using strategies that are simple and reliable. Here’s the tricky part: not all strategies suit all currencies and trader profile – there’s no strategy that works best in all possible cases. Most new traders went through the process of “trial and error” but this is the best way to learn which strategy suits you.

  1. Choose a broker and open an account

The forex market is a rich one. This might be a bit frightening for a beginner trader as you simply can’t decide on which forex broker to choose. Here are several tips that might be helpful. Brokers earn their profits through spreads and commissions – lower the spreads, the better for you. Make sure that your broker is registered (all relevant information about registration and regulations should be visible on their website). Most brokers will provide at least two types of accounts to choose from. Give an advantage to brokers who offer varying deposit requirements.

  1. Try different platforms

Forex brokers will offer you different trading platforms. These platforms have features which aim is to help you to raise your trading activities at the highest level possible. The list of features includes real-time charts, tools for technical analysis, various forex-related news and data of importance for traders. Before you choose a broker, it would be best to check their choice of platforms. Don’t commit and pay for their service before trialing available solutions – they should suit you and the strategy you chose. Make sure that the platform is intuitive for new users, and that is enables easy entry and exit.

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Our Life Insurance Plan

Chris Huntley just launched a huge life insurance movement called the Whole Life Insurance Rebellion.  Whole Life is generally pushed as an investment, but it is not a really good one…

As I have mentioned before, Mr. BFS and I purchased a 10 year term life insurance policy for each of us after we decided to both go self-employed.  The reasoning was that we’d save enough in 10 years to be self-insured by the end of the policies.  Or in the unlikely event that we decided to have a child, we would want to revisit the policies anyway.

The Whole Life Option

We did look into a whole life insurance plan, but the premiums were 7 times higher.  It seemed to be like investing in a single company with A LOT of money with the hope of around 4% returns over 40+ years.  In 40+ years, I would hope any children we had would be taking care of themselves and I could make better returns with our Roth IRA’s or our SEP IRA.  Higher premiums, no diversification, and worse investments returns than I was already getting with retirement accounts – NOPE.

Our Current Plan

Our current term life insurance policies cost us $32 total per month.  It’s $14 for me and $16 for Mr. BFS.  The policies are for $250,000 each in case of accidental death.  It seems to only cover $37,500 each if we die from natural causes.  Even though I didn’t exactly realize this little point before, this sort of coverage suits us right now since $37,500 would cover our funeral costs and $250,000 would cover the funeral and could even pay off our current mortgage.  Or one of us could live off of $250,000 (or what’s left after the government takes its cut) for at least 4 years even if we completely stopped working.

Contemplating Our Options

As we get a little older, I realize that we may need to look into our options.  If we decide to have a kid, we’ll need to raise our coverage.  I’d want to make sure the surviving spouse has enough to live on with our kid for 2 years without working AND have at least a little to cover some of the larger kid expenses that will pop up like braces, a used car when they learn to drive, and even a little help with college.

If decide to stay kid-free, we still only have 5 years left of this plan.  We’re probably not going to be so well off to be self-insured as I thought, although we do keep healthy savings just in case.  I think another 10-20 year policy for each of us could do the trick though.

What do you think?  Term life or whole life?

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Just a Feeling

The following is a staff writer post from MikeS.  He is a married father of 2.  So, with the cat, he ranks number 5 in the house.  He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.

It has occurred to me that I seem to be managing my money less in terms of hard numbers and more in terms of how I feel. Granted, I still have set budget amounts for my normal monthly spending items, but savings is where things have shifted.  It is possible that with the recent stock market volatility that I have grown hesitant to add more to my Vanguard account or it is because I just don’t like the way my Capital One savings account looks.  Either way, I have decided to make a change.

50/50

My savings are not in a bad position, but I just don’t feel comfortable with the level that it’s at right now. There have been some recent hits to savings that have been easily absorbed, but have reduced the overall level in the account.

Some things like pre-buying my oil for the winter are known and expected, but others like an unexpected vet bill were not.  Since I divide my savings up into multiple categories, there always seem to some that have a positive balance and some that have a negative balance.  I have been feeling recently that there appear to be more with a negative balance, than positive.

As it turns out, it is exactly 50/50, half are positive and half are negative.  This is making me uneasy.

Attack Plan

My plan of attack is two-fold.

My first step will be to redirect my monthly savings number from Vanguard, back to my Capital One savings.  I am sure I could earn a better return in the market, even if it’s just from dividends, but I am not looking for returns right now.  So, that’s $85 a month I can plow back into savings.  I am also going to adjust some of the category savings amounts.  With gas prices staying low for the foreseeable future, I am readjusting what I set aside for that every month.  At the gas price peak back in 2013, I would set aside $325 a month for gas.  I have since adjusted that down to $175.  The most recent adjustment was from $200 down to $175.  The extra $25 will be added into the $85 to beef up all savings categories.  I will start with my general savings (emergency fund) and the eventually add to all the categories that are running a deficit.

The second prong of my attack will hopefully be with my annual bonus.  I should be learning soon about the amount of the bonus.  My plan is to use that to strictly augment my savings.  There are no large expenses coming this year that require funds to be set aside.  The only two things that will be allocated from the bonus are the Disney trip in a couple of years and some money for some small trips this year.

The catch is I do not know the amount of the annual bonus.  I will find out soon, so right now I am just guessing.  I already know, no matter what, the take-home is significantly less than the actual bonus.  In my case, the number is actually about 46% less.  Between the taxes and my 401k contributions, the bonus amount is substantially reduced by the time it ends up in my checking account.  Knowing this however, I can more effectively plan out what I might do with various bonus amounts.  At about that same time, I will find out if there will be a salary increase.  That is another area that could help shore up the savings categories.  Again, not knowing the value makes planning slightly more difficult.

Just a Little Higher

It does feel good to know that I am not in dire straits, that I do have at a minimum about 4 months of expenses completely covered.  I just want that number to be a bit higher.  So, it is just a matter of readjusting my cash flow to the areas of concern.  How is your cash flow doing?  Making any changes?

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