Investment Opportunity

Money Lending


One of the most interesting sites I found last year was Prosper who facilitates person to person lending or P2P for short. Lending on prosper is a great way to get your savings to work for you. There are many different kinds of loan requests to choose from. I found it so interesting that you can “be the bank” and review peoples credit history to make informed decisions on whom to lend your hard earned money to. Another great reason I like prosper is the fact that I can earn a much higher interest rate than any fixed income security and with less risk than any other non-insured investments. They have a new system called a portfolio plan that makes it easy to start a diversified P2P lending portfolio.


Borrowing
Borrowing money on prosper can also save you money in interest charges when compared to bank or credit card rates. With current credit conditions deteriorating it is becoming more difficult to qualify for loans from institutions if you can get a loan at all. P2P lending helps Borrowers find lenders who are not constrained by these limiting factors. By joining a group on prosper you can get an even better rate because the group will stand behind you and give lenders confidence that you will repay the loan. If you are currently looking for a loan consider a loan at prosper.

Prosper

Prosper, which is based here in San Francisco, is like the ebay of person to person lending with people bidding the lowest interest they will take on their money loaned out. They really are helping us regular people “cut out the middle man” with regards to dealing with banks. They held a lenders lunch meeting, which I attended, at their old headquarters early last year shortly after launching the site to the public. It was impressive that the CEO Chris Larsen, who used to run E-loan, was on hand running the meeting and answering questions. In fact, when the company found loopholes early on they covered the losses for the early lenders to make it right! They have by far the most comprehensive P2P lending site out there at this time and it is only getting better.

My Experience

I personally have many loans, average over 13% return, and have had a low percentage of defaults. Making transfers into and out of prosper electronically is very easy although there are wait periods for certain transactions for safety purposes. While I wouldn’t suggest lending all of your savings in prosper I would suggest you take a serious look at opening an account and giving it a try. With the CD rates declining, and the uncertainty in the financial markets, you can help keep your money working for you with the tools on prosper. There is a book written about it called How to lend money to friends you never met. If you have any questions regarding P2P lending please email me.

Monday Mantra - It's not how much you make

Monday Mantra

“It’s not how much you make, but, how much you keep”

The biggest factor in how much of your income you keep is centered on how much in taxes you have to pay. My research has shown me that one of the ways the rich get richer is through reducing taxes as much as possible. Imagine how much more wealthy you would be if you were able to keep some or most of that money that goes to state and federal income taxes each check.

One way to lower your taxable income is to take advantage of a traditional IRA account. Although the money you contribute to the account is after tax; the amount is deductible on your tax return at the end of the year. The account also will allow you to invest and collect tax deferred gains on those investments! Check with your accountant or tax professional to see if you can take advantage of this.

Another way to lower your taxable income is through a company sponsored 401k plan. If your employer has a 401k or profit sharing type of savings plan it behooves you to take full advantage of this pre-tax savings plan. I personally contribute the max that my company matches and I suggest you do the same. Check with your tax professional to see how you can lower your taxes by contributing to this kind of plan.

Also look into flex pay accounts if your employer offers this benefit. It allows you to set aside pre-tax dollars for use on health related expenses such as prescriptions, glasses, contacts, OTC medicine, and co-pays for doctor visits. It takes a little bit of time to calculate how much to set aside and also to request reimbursement but will save you money with less income tax taken.

Most, if not all, of the wealthy people in the United States also start, own, operate, or control some sort of business that helps them to have more control over how much of their money goes to Uncle Sam. It’s not as hard as you might think to start and run your own business. As a matter of fact you probably have numerous hobbies or interests outside of your work that can become a successful business. Once again I must suggest that you consult with your accountant or tax professional to see how starting a business can help you financially. A good book I read to get you started is

Lower Your Taxes


Don’t have a tax professional or accountant? Don’t know where to start or have further questions about any of these topics? Email me and I can help. AJSinvest@gmail.com

Monday Mantra - Rule No.1

Monday Mantra – Rule No. 1

This Monday mantra comes from The Tao of Warren Buffett , a book which I received as a gift and have read over and over.


Rule No. 1

“Rule No. 1: Never lose money. Rule No. 2: Never forget rule No.1” – Warren Buffett

What Does it Mean?

The secret to building wealth: Compound returns. And the more you have to start with, the more it will compound. So taking too many risks with your wealth when you're young might not be the best strategy. While we are young and careless we sometimes take risks with our money that are downright stupid. Gambling Is A Fools Game. Gambling on the latest and hottest stock every time is a risky proposition with long term consequences. To chase investments that offer a high rate of return you must also know that it comes with a high rate of risk. Bill Gates once quipped “Warren’s and my betting has always been confined to $1 bets” when talking about them playing poker together. If two billionaires take risk management this seriously, both you and I should be doing the same thing.

Mortgage

Mortgage News

Are you considering refinance or home purchase? Now is a good time, if you have good credit and sufficient equity or down payment. The average 30yr. fixed rate on conforming loans is below 6%! If you currently have an adjustable rate mortgage you really need to consider locking in a low rate now while you still can. The mortgage mess appears that is will continue to get worse and banks will keep tightening their lending standards making it harder to refinance. Please email me if you would like more information on mortgage options. AJSinvest@Gmail.com

Savings

Saving Basics


This, as most will agree, is step one in building wealth. We’ve all heard it before at sometime or another “It takes money to make money” While not being 100% true in all situations, I believe that this is a good indication of a persons seriousness to invest. After all if you can’t manage to save, no matter how small, how can you manage to invest no matter how small? Almost all of the books I have read about wealth building all begin with some sort of saving. Paying yourself first is a popular method of saving in most of the wealth books out there today. In the book The Richest Man in Babylon it is put best “A part of all I earn is mine to keep” this revolves around a basic savings concept of saving 10% of all monies that you take in as this should be yours to keep. Whether in the form of income from work or income from investments this simple rule should be followed. For most of us this is the hardest step in building wealth.

Saving More

Personally I have used other ways to build savings over the years on top of the 10% method. For instance a popular one for a lot of people the piggy bank approach which involves hoarding all of the spare change from your pocket or purse at the end of each day. I even throw in all of the change I find on the street, in the car, or even in the couch! It’s incredible how much money can be saved just in coins over a couple of month’s time. Even to this day I deposit $100 in the bank every couple of months just in rolled coins alone! Another method, I have been using personally, is also saving every $1 bill that is in my pocket at the end of the day. When I reach $100 the same applies, it gets deposited in the bank just like the rolled coins. Aside from these I also contribute to my companies’ 401k plan up to the limit they match and also contribute to a Roth IRA.

Invest

No matter what ways you decide on saving be sure to put those savings to work. In the classic book Rich Dad Poor Dad the author gives good definition to properly investing in assets and defines what assets are. Investing in assests with your savings puts your money to work for you! Some of these include cd’s, bonds, stocks, and lending. I will cover some ways to get this money to work for you in many upcoming investment ideas.

Ideas

If you have different savings ideas please feel free to leave a comment on how you save your wealth.

Investment Idea

Investment Opportunity - Gold

The past two days have cumulated in the price of gold dropping below $800 per ounce after setting the all time high closing price less than a week ago. Many investors have very wisely cashed in some profits after gold’s big run from $670 an ounce in late August. This may be opportunity for buying on the way down as the downward pressure may continue in the near future. In the long term, however, gold should march higher on its quest towards $1000 dollars an ounce which should be attainable if the weakness of the US dollar continues. Of course really long term $1000 is the tip of the iceberg to me. If you missed out on the last big run in gold the past two months now may be the time to begin the buying process to get on board for the next run.

Dollar Weakness

The dollar index has been at an all time low; recently hitting the lowest point ever recorded since they started tracking the dollar index in 1973! This is alarming to say the least. The dollar index has recovered in the past few weeks from this all time low, but, will remain under pressure as the fed eyes another rate cut that would weaken the dollar even more. The fed appears that they are going to “sacrifice” the dollar in a last ditch effort to save the mortgage industry and in turn the housing market. A natural “safe haven” for currency weakness is gold. For more on this check out a book I have read and recommend you read Gold The once and Future Money.

Buying Gold

There are many different ways to get involved with the “gold rush” and here are the most popular. There are gold ETF’s symbols: GLD (one share represents 1/10th of an ounce of gold) and IAU. Gold mining company stocks whose profits increase with a higher spot price symbols: NEM, PDG, ABX, and AU just to name a few. You can also buy the real thing in the form of bullion coins or even bars from bullion dealers or most coin shops. As with any type of investment diversification is the best way to go.









Real World Money Management’s editorial goal is to provide a forum for personal finance and investment ideas. My blogs and other features should not be construed as investment advice. An investor's best course of action must be based on individual circumstances.

The Monday Mantra - "A penny saved is a penny earned"

I’m sure you have heard this famous quote from Benjamin Franklin at some point in your life. "A penny saved is a penny earned" means that little by little you will save money by not spending your money. This is a good foundation to begin with when you are trying to build wealth. Not spending money has the same result as earning money, so to save a penny is the same as earning a penny. The saying compares saving money to earning money one penny at a time. Remember this saying when you are tempted to spend your hard earned money on material things that will only provide temporary satisfaction at the sacrifice of wealth that can provide a lifetime of satisfaction.

Penny Fact
Do you ever pick up a penny you see on the street? How about a nickel? A dime? Did you know that a penny minted before 1982 is currently worth .02 in copper alone? This may sound insignificant, but, think about it this way $100 of pre-1982 pennies is worth $200, $1000 worth $2000, and so on.

Welcome to the Real World of Money Management

So, you've decided to manage your money and you're probably thinking "How do I get started?"
This is the question I had many years ago. To my surprise I realized that neither my parents nor school had taught me much about how to save nor how to invest what I save. My parents told me to save, but, didn't show me how nor what to do with what I saved. School taught me how to become a median income employee but not what to do with that median income. This is what began my odyssey, that continues to this day, of learning and putting to use saving and investing techniques.

The forthcoming posts of insight and advice that I currently use, am researching, or have helped me in the past, can help shed light on the real world of money management. Posts will cover savings plans, investing strategies, new financial developments, book reviews, "guru" reviews, and many other money management topics.