Sound Mind Investing

I'm a big fan of the investment strategy used by the guys over at Sound Mind Investing. They do a great job and provide peace of mind. That's why I've got my Roth IRA with them.

They recently made available for free an article from their newsletter that I've read before and really love. It talks about why you shouldn't let current market behavior drive your decisions.

It's a very timely read. Check out the article by clicking here. It will be well worth your time.

Searching for a good CD rate. . .

I just had a CD come due. It was a 6 month CD paying 3.25%. It was good while it lasted. Now a 6 month CD at that same bank is paying a whopping 0.25%. I said thanks but no thanks.

So, wheres a good place to find CD rates? BankRate.com. I've talked about this web site many time in the past and it's worth you visiting the site from time to time.

In doing my CD search, BankRate is giving me 7 banks paying from 2% up to 2.25%. This is a much higher rate than the 0.25% I'm currently being offered.

So it looks like I'm going to open up an CD online at GMAC Bank paying 2.25% APY.

What's your highest interest earning rate right now and what bank is it with?

Save Now and earn an extra 3.25% on your savings

The state of Ohio has finally passed a savings incentive bill that been in the works for a number of years now.

The short version is this. When you take a qualified financial class, you become eligible for Ohio's Save Now savings rate at a participating bank. This savings rate is 3.25% above the banks normal interest rate. PNC bank, coming to Ohio soon in taking over National City Bank, is the first bank to participate in this program.

All the details are not out yet as the State has just passed this legislation. I'll post updates as I'm made aware of them. I'll be participating in this and will do everything in my power to make sure Financial Peace University qualifies for this program.

We the Savers. . .

ING Direct, one of the leading online banks has come up with a Declaration of Financial Independence. It's pretty cool. There are 10 "declarations" that you are making by signing it.

1. You will spend less than you earn.
2. You will build equity in your home.
3. You will take care of your money
4. You will defend your credit worthiness
5. You will ignore unsolicited credit card marketing
6. You will know the cost of your borrowing
7. You will invest for the long term
8. You will take care of the things you have
9. You will remember what matters
10. You will be heard

On the web site, the list above is explained. You can print it out. It's a cool reminder to have it in print.

As of this post, there have been 28,664 people who have signed the declaration. 28,665 with my signature.

Should you continue to invest in your retirement plan?

The very short answer without question is yes. Don't take my word for it. Click on this link, here what Dave Ramsey has to say about it and then you can download a free report from Davis Advisors titled "The Wisdom of Great Investors. Insights from Some of History's Greatest Investment Minds.

It's a great read. Stuff you will not hear about on the evening news. So, take a deep breath, download the report and become wise as it relates to your retirement savings. Enjoy.

Bonds in my retirement account

But first, what exactly is a bond? Great question.

A Bond is just and IOU from the issuer to the Bond holder. In other words, I "loan" my retirement dollars to a company and they pay me interest until the bond matures at which time I get my loan back. (oversimplified explanation)

Most "experts" would say a good rule of thumb is to allocate the same percentage as your age to bonds. So, I'm 42 and based on that, I should have somewhere between 40-45% of my retirement funds in a bond mutual fund. (I'm currently below that allocation percentage.)

Fidelity has a fantastic page on their website that explains exactly how bonds work. (click here). It's well worth a quick read.

Here are three recommendations on bonds.

1. They should be part of your retirement plan allocation.
2. Always buy a bond mutual fund never individual bonds (the same applies to stocks)
3. I like a good global bond fund.
   

Well, I did it. (Looked at my retirement account balances)

Each year, about this time after all my account statements have arrived in the mail, I pick a day to enter my various retirement account balances into a spreadsheet. I say various accounts because I have rollover accounts with 4 difference fund companies.

In this very hard economic time, I've talked with lots of folks who have told me that when their retirement fund papers come in the mail, they don't even open the envelope. They'd rather not know how bad it is. I can certainly understand where they are coming from although I do not agree with what they are doing.

After graphing my retirement account balances, I'm down 36% from a year ago. Ouch! But no need to panic. There was a need for me to "rebalance" how I'm allocating my current retirement withholding's. The only way I knew to do this was by looking at my statements.

I take comfort in this as I look at my declining retirement fund balances.

1. God is in control and I'm not.
2. I've got time on my side even at 42 years of age.
3. As I put money into the market now, I'm getting more shares for the same dollars.
4. The Bible tells us to save for the future and saving is a retirement fund is the best way I know how to do that.

SIMPLE IRA

Recently, I was asked what type of retirement plan if any I have available to me as an employee of NewPointe. I'm happy to say I have a SIMPLE IRA and I've been participating in it for years.

SIMPLE IRA stands for Savings Incentive Match Plans for Employees (SIMPLE) IRAs are fairly simple to administer, no-hassle IRA plans that offer a great benefit for employees in any "small business".

SIMPLE IRAs allow employees under age 55 to contribute up to $10,500 in 2008 of their annual income to the plan. Employers match this amount as part of the process. Employees are then vested and are eligible to receive this money upon reaching retirement age. Matching contributions by the business are tax deductible.

For the business owner, the only drawback of this type of retirement plan is that the employees doesn’t have to earn his or her vesting, but is vested once the account is opened. That means matching someone dollar for dollar up to 3% from the day they start participating in the plan. That's not that bad but it can hurt if the employee does not stick around very long.

So, now you know. NewPointe uses a SIMPLE IRA

Is this to much work for 4.5% interest?

I love searching the net and my local newspaper to insure that I'm getting one of the highest rates available for my emergency fund and savings. I'm currently with Emigrant Direct paying 3% and Amtrust Direct paying 2.75%. Both banks are paying much higher rates than any local banks in my area.

So today, while cruising BankRate.com, I came across an ad stating 4.5% on my checking account. Now, I don't typically leave my "savings" in my checking account but at 4.5% I needed to check this out. Addison Avenue Federal Credit Union is the bank paying 4.5%.

There are some hoops you need to jump through each month to get this rate. Here's the hoops:

1. Must use your Debit card for a minimum of 12 purchases a month. (This is how they pay you 4.5% as the fees they are charging the merchants for your debit card transactions cover your interest payments.)
   
2. Set-up direct deposit or one monthly recurring debit.
3. Sign up for electronic statements. No paper.
   

So, is it worth the hassle? I'd say . . . . No for a number of reason.

1. Are you really going to keep track of how many debit card transaction you do each month?
2. The 12 debit card transactions, is this in a calendar month or is it something different like the 15th to the 15th?
3. You're checking account is one of the worst places to keep your savings / excess cash. It will leave and get spent on some impulse purchase.
4. If you're not keeping a large balance in your checking account and I'm saying you shouldn't, then 4.5% on let's say $150 is your average monthly balance, your only talking about $6.75 a year. Skip a few sodas and you'll save that in a month.

Anyway, these are my thoughts on high interest rate checking accounts. Do you agree or not?

Perspective. . . . on the market

I'm a facts based guy. So when I look at something or make decisions, I want to see the data. If you look at the stock market through a very narrow time frame, you'll be scared silly. Here's what you need to think about to get some perspective.

1. 100% of the 10 year periods in the history of the stock market has made money.
   
2. 97% of the 5 year periods in the history of the stock market has made money.
3. Since 1970, 38 years, the market has gone down 10% or more 10 time. 9 of those 10 times it completely recovered everything it lost within 2 years. And the first year it came back after it bottomed it averaged a 33% rate of return.
4. When the current market bottoms and you miss the upswing, you will be mad as . . . . if you panicked and sold out.
5. So relax, take a deep breath and count your blessings in life.
   

4.35% 6 month CD

No joke and this is a great rate right now. I've used Amtrust Direct as one of my tow online savings accounts for years. They have lots of branches in the Cleveland Ohio area.

If you've got some savings laying around in low interest bearing accounts, you should consider this 6 month CD.

Is your Mutual Fund on the Lemon List?

How often do you look at the mutual funds you own? Don't forget the mutual funds that are in your companies retirement plan.

I came across a cool tool called the Mutual Fund Lemon List. Here's what this web site has to say about itself. This list has been around for 10 years now. Who knew?

The new "Mutual Fund Lemon List" shows you which mutual funds are costing investors money, plain and simple. Included are those funds that have underperformed their one-, three-, and five-year benchmarks.

How many funds are we talking about here? The total number of funds that made the Lemon List last quarter: 2,000+! The total assets in these funds: $1,000,000,000!

That's not a misprint. $1 trillion is currently languishing in these underperforming mutual funds. And I'd be willing to bet that you have at least some assets committed to these funds.

If you have a fund on this list. It's time to dump the fund.

Roll it over

One of our new hires here at NewPointe asked me a great question today. " What do I do with the money I have in my old employers 401K plan?"

I love this question. This is an opportunity for freedom / great choice. Let me state the best action to take is to roll your money out of your old employers plan. Never take the money out.

Roll your old 401K into a self directed IRA not your new employers plan. The biggest reason for this is freedom in choosing your investment funds. Your not limited to the choices in your new employers plan. Notice I said "funds" not individual stocks. We are talking your retirement nest egg here and individual stocks carry way, way to much risk.

When people come to me for investment advise, I recommend two funds for them to research. I like Vanguards life cycle funds and I love the Sound Mind Investing Fund. (Do your own research before purchasing any investment.)

The way to get started with rolling your old 401K money over is to first open a new "IRA Rollover" account with an broker (I prefer online brokers), or the mutual fund company directly.

Stay Encouraged - Investment are on sale

Well, the first 6 months of 2008 are in the books. Usually, the end of a quarter is an exciting time for me. I like to reallocate my investment choices inside my retirement plans. (What, you don't do this? You should, at a minimum of once a year.)

At first, I wasn't very excited at this quarter end. Most of my retirement account balances are less than what they were at 12/31/2007 and that's even after I've put money into my retirement accounts over the last 6 months.

While walking my dogs tonight, that's my thinking time, I remembered that since the value of my mutual funds is currently lower than it was 6 months ago, every time in put money into these funds, I get more shares for the same dollars invested. That's a good thing.

Here's an example. Let's say I have $200 a month coming out of my paycheck for my retirement plan.

5/1/08 per share value of my mutual fund: $10 @ $200 invested is 20 shares purchased.

6/1/08 per share value of my mutual fund: $7.50 @ @200 invested is 26.67 shares.

So, I got 6.67 more shares than I did a month ago with the same $200 invested. Cool.

Here's were perspective comes in. If I'm concentrating on the month-to-month value (from $10 a share down to $7.50) I'll get worried as the value of my investment when down. My focus is way to short. I need to be looking long term. 5, 10, 20 years from now. Long term, being able to purchase more shares now will have a greater payoff.

So, stay encouraged, keep investing. Steady plodding wins the race.

Great Rates for your savings dollars. 3.75% and up

I'm a big fan on online savings accounts. The interest rates far exceed what most local banks offer. Of late, even my two online banks rates are very low. Amtrustdirect is currently paying 2.5% and Emigrantdirect is paying 2.75%.

I'm pleased to let you know that the Free Methodist Foundation is paying 3.75% on their Flexible Certificate. Basically a flexible certificate is a savings account. You can get you money back in your hands within hours if you need it back that quick. The Foundations 1 year certificate is paying 4.25%. These are great rates in today environment.

One of the questions I get asked when I give the foundation props for their interest rate is, "Is it safe?". Yes. The foundation has been doing this for over 50 years and they have never defaulted on investment dollars.

So, put your money to work with the best interest rate available. Here's the foundations phone number if you've got questions for them. 800.325.8975

Start your day off right

How I start my day set's the tone for my entire day. I did a lot of reflecting this weekend and I realized the way I start my day is the most important thing I do all day.

So here's my list of morning rituals.

1. Tell God good morning and thank him for waking me up.
2. Take the dogs out (Ok, this one doesn't motivate me but it must be done.)
3. Say out lout 10 things I'm thankful for. (It's hard to start off on the wrong foot when your thankful first thing in the morning.
4. Touch my two kids while they are still sleeping.
5. Say this daily prayer before I leave the house.

Father God, It is a privilege to be your child. It's a gift of grace I don't fully comprehend. I thank you for your wondrous love for me, and I ask that you would help me lead a life that honors you. He me live according to the truth that my identity is based on who I am IN Christ. May I seee myself and others through your eyes. May I understand more clearly how much you love me & let that love empower & guide me. I pray in the name of Jesus Christ through whom you graciously demonstrated your amazin love for me.

How do you start your day?

Where's my stimulus check?

Have you received your IRS stimulus check yet? If not, don't worry. Here's the schedule from the IRS web site. (www.irs.gov)

Remember to pay yourself first and consider giving some of it away before you spend the rest.

People who use direct deposit also will be among the first to receive the payments starting April 28. Direct deposits will be made daily and completed by the date listed below:

DIRECT DEPOSIT

Last two SSN digits:	Payments will be transmitted no later than:
00 through 20	May 2
21 through 75	May 9
76 through 99	May 16

Paper checks will also go out based on Social Security number. For Social Security numbers ending in 00 through 09, the paper checks will be mailed starting May 9 and will continue through May 16. A similar process will be repeated in the following weeks.

PAPER CHECK

Last two SSN digits:	Payments will be mailed no later than:
00 through 09	May 16
10 through 18	May 23
19 through 25	May 30
26 through 38	June 6
39 through 51	June 13
52 through 63	June 20
64 through 75	June 27
76 through 87	July 4
88 through 99	July 11

People who file a return after April 15 will receive their economic stimulus payment, but probably later than the schedule shows. A return must be filed by October 15 in order to receive a stimulus payment this year.

If you still have questions after reading this schedule, you can call 1-800-829-1040.

Roth IRA Basics

I've talked about Roth IRA's in lots of posts. In doing so, I've made some assumptions that everyone knows what a Roth IRA is. We'll, we all know what happens when we assume.

So, here's the 411 on a Roth.

1. Where did the name "ROTH" come from? The Roth IRA was born on January 1, 1998 as a result of the Taxpayer Relief Act of 1997. It's named after the late Senator William V. Roth, Jr.
   
   
2. What's the big deal with a "ROTH" vrs a regular IRA? The chief advantage of the Roth IRA is the ability to have investment earnings completely escape taxation. This is a really big deal.
   
   
3. When can I contribute to my Roth? Annual IRA contributions can be made between January 1 of that year and April 15 of the following year. Because of the extra three and a half months, if you send in a contribution to your IRA custodian between January and April, be sure to indicate the year of the contribution so the appropriate information gets sent to the IRS. Remember, contributions to a Roth IRA are never deductible from a taxpayer's income (unlike a traditional IRA).
   
   
4. How much can I contribute in 2008? $5,000 if under age 50. $6,000 if 50 and older.
   
   
5. Can I take money out of my Roth without penalty? *Contributions can be withdrawn tax-free and penalty-free at any time. *There is 5-year clock 'A'. Clock 'A' starts on the first day of the first tax year in which any Roth IRA is opened and funded. *Earnings can be withdrawn tax-free and penalty-free after Clock 'A' hits 5 years and a qualifying event (such as turning 59.5, disability, etc.) occurs.
   
   
6. Are there income limits for eligibility? (Can I make too much money to contribute?) Yes. You need to look at your Modified Adjusted Gross Income. This is the last amount on the first page of your tax return. If this amount is greater than:
   
   *Single filers: Up to $101,000 (to qualify for a full contribution); $101,000-$116,000 (to be eligible for a partial contribution)
   *Joint filers: Up to $159,000 (to qualify for a full contribution); $159,000-$169,000 (to be eligible for a partial contribution)

I'm a firm believer that no matter what type of retirement plan your employer offers, you will greatly benefit from having a ROTH IRA.

What type of retirement plan is right for me?

This post is in response to a recent comment I received form relientk008.

The question posed to me was, "as a teacher, should I consider other forms of retirement savings in addition to State Teachers Retirement?" Now if your not a teacher this post is still for you because everyone should save for retirement both through their employer and on their own using a Roth IRA.

Ah, but I'm getting ahead of myself. Before you start thinking about saving for retirement, You must establish an Emergency Fund. Start with $1,000 in savings. Next, you need to pay off all you consumer debt. Attack it! Kill it. When it's zero, now it's time to start saving for retirement.

Here's what I do.

1. I contribute 3% into NewPointe's retirement plan. Why 3%? Because the church matchs 100% up to that amount. I've just made a 100% return on my investment. That's way cool.
2. Next, I fund my Roth IRA as much as possible. The limit for 2008 is $5,000 / $6,000 if you are 50 or older. If your married, then double these amounts. (Hands down, the outside of company matching funds, the Roth IRA is the greatest retirement vehicle ever.) Why? Because 100% of the growth, and that's where the wealth comes from is TAX FREE when you take it out at retirement age.

Where do I have my Roth? Sound Mind Investing Fund.

relientk008, I hope you and everyone found this post helpful.

10% on my Savings

Currently I have my checking account with JPMorgan Chase. Why? Because some time ago, they gave me $25 to open a checking account and with direct deposit, the checking account was free and so is their bill pay. I do like their bill pay. It works well.

I do not have my savings account with Chase. I have use two internet only banks for that. One is Emigrant Direct (They are paying 4.3%) and the other bank is Amtrust Direct (They are paying 5.11% on new accounts) These are both great rates.

I'm about to open a third savings account. This one at Chase. In todays mail, the sent me an offer. If I open up a saving account with $500, they will give me $25. The only catch is I have to leave $500 in the account for 6 months. Well, $25 on $500 is 5%. That is if I leave the money there for one year. Leaving in there for just 6 months turns that $25 into 10% return on my $500.

After the 6 months is up, I'll most likely roll the funds back to Emigrant or Amtrust. I love putting money to work.