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7 Types of Financial Companies

There are 7 basic types of firms that provide financial assistance, support, guidance, education, investments, and solutions/products.

There are Registered Investment Advisors (RIA), Broker Dealers (B/D), Insurance Companies, Robo Advisors, Accounting firms, Tech Companies, and Discount Broker Dealers.

First we have our Registered Investment Advisors. These are, as a general rule, partnerships or smaller corporations that manage the overall financial situation of clients, and in some cases institutional investors as well. They must be registered with the Securities and Exchange Commission (SEC) for each individual state that they have clients in.  An RIA Financial Advisor will conduct information gathering, Risk tolerance, and spend time getting to know your goals and needs. Most of the time they also educate a client as to what the implications are of making different financial decisions. One of my favorite things about an RIA, is that many of them will be full service. They’ll help with investments, real estate, insurance, estate planning, power of attorneys, wills, and more. They may outsource part of it, or bring in an expert to do estate planning, etc. But they keep you aware of the broad scope of protecting, growing, and sheltering your money. You may not have heard of any of these, but here are some RIA’s: Geneva Advisors, HighTower Advisors, Mill Creek Capital Advisors, Ferguson Wellman Capital Management, Swan Global Investments, and True North Advisors.

Broker/ Dealers are those companies that are like The Wolf of Wall Street. I mean, except that fact that they aren’t awful money laundering devils. They call people to sell them financial products, usually in the form of stocks or bonds. Investment advice is given, and they range from small boutique firms to large commercial companies and investment banks. The difference between an RIA and a Broker/Dealer is a B/D historically purchases their own securities (stocks and bonds and other products) and then sells them to the customer, whereas an RIA buys securities on the client’s behalf. The Broker of a B/D is buying and selling on behalf of clients, the Dealer side is when the company trades their own securities. Examples of Broker/Dealers include Raymond James, Wells Fargo, AXA, Waddell & Reed, Voya, and Edward Jones

Insurance Companies usually deal with just that… Insurance! Northwestern Mutual, Geico, Allstate, State Farm, Progressive, Farmers, Liberty Mutual, and New York Life are a few examples. Most of the ones that have huge TV ads. There isn’t much else to say. These companies are very important, and having specialized skills in specific insurances can be very beneficial in reducing premiums and having quicker turnaround times when claims are made. Some RIA’s and B/D’s will have specific individuals/teams in their group that specialize in either selling insurance, or working with insurance companies to get your insurance. One thing I like is how an RIA can work with many insurance companies, whereas an agent for a specific company only sells that Insurance. Some insurance agents will be licensed with several companies and can sell you policies from different companies depending on your needs.

The way of the future is Robo-Advisors. The basic concept here is that you can break down risk tolerance and needs into numbers, and computers can then spit out information about what you should do, or you can authorize a computer to auto-invest and rebalance and work out your investments for you based on your information you give it. Very smart people back these up and as a result of mass users for one program it can be cheaper to use a Robo. Remember though, that holes are usually left, and Robo’s can only do so much.

Tech companies are companies that leverage tech with finance. Lending Club is an example of that. You add money that is utilized in creating loans that then pay you back as the person pays back lending club. Robinhood is a financial app that has free stock trades. Stripe is a payment taking company. Some finance companies create platforms for making trades like TDAmeritrade or TradeKing, (though some may be better classified as Robo-Advisors, depending on how they are used). Some create plateforms for financial planning, like MoneyGuidePro, or SilverTree, that allow you to maintain and track financial data and policies for insurance and estate documents all in one location. One company local to Utah is TradeWarrior, which can auto rebalance any portfolio while taking specific needs and illiquid assets into account.

Accounting Firms are our next stop. These are a finance tracking type of company for businesses and self-employed individuals. They may provide book keeping for paying employees, create budgets and financial statements for companies, and also deal with tax-returns. I suppose they are for everyone in the sense of tax-returns, many individuals go to accounting-firms for taxes, though some companies will specifically only do taxes. Beyond the actual tax returns, accounting firms can help consult on risk management and tax implications of certain operations.

The last of the seven is Discount Broker/Dealers. These are just really really low-cost Broker/Dealers. Think Fidelity, and Vanguard. Vanguard is the most notorious of all of these, as the regularly create huge market changes. Some of their funds will have expense ratios of 8 Bips, which to be simple is nearly three times cheaper than most funds to invest in.

Which ones you’ll want to work with depend on your needs, interests, comfort, and knowledge surrounding the individual companies. Many people want to lump all companies in one category as ‘good’ or ‘bad’ or ‘lazy’ or ‘smart’, but the truth is, there are losers and winners all around. You just have to find someone who is trust worthy, and has a good track record of helping people achieve their goals.

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Auto Insurance: What’s Inside The Paperwork?

Your Auto Insurance has six main parts

Part A: Liability Coverage

Part B: Medical Payments Coverage

Part C: Uninsured Motorists Coverage

Part D: Coverage for Damage to Your Auto

Part E: Duties after an Accident or Loss

Part F: General Provisions

Woah, what? Let’s break it down.

Part A: Liability

This is how much the Insurer will pay out for any damage you as the insured become legally responsible for. Most of these have Split Limits, and Example of which would be 250/500/100

These three numbers show how much the insurance company pay for what damages.

The first number is bodily injury coverage per person maximum, the second is maximum amount coverage for bodily injuries per accident and the third is property damage.

For 250/500/100 that means $250,000 in coverage per person, up to $500,000 total per accident, and up to $100,000 in property damage; Remember that these are only for amounts you as the insured are liable for.

If you are on the policy, you are insured, plus your family, plus anyone you legally allow to use the vehicle. This is why it’s often beneficial to consider a temporary insurance policy on a vehicle for another to use it, so your insurance isn’t liable if they get in an accident.

Part B: Medical

Within 3 years of an accident, insurance companies promise to cover medical and funeral expenses caused by the accident. Surgery, Dental, X-Rays, etc, can be covered here. There are limits, some place a limit of $1000 per person, others could be $10,000. This coverage is specifically for the insured person being injured. This wouldn’t be like Coverage A, where the company is paying for your damages to others, this is for damage to you and your family.

This is regardless of fault, so even if you are found at fault, you will still get this coverage on your policy.

Part C: Uninsured/Underinsured Motorists Coverage

If you get hit by another vehicle, and it’s found to be their fault then you’re fine, right? What if they have no coverage. Remember that Coverage A only is your fault to others. The point of Uninsured Motorist Coverage is that if another person hits you without insurance, your insurance company will pay for your coverage. In some states, the percentage of drivers that are uninsured can be as high as 20! (Insurance Research Council, Recession Marked by Bump in Uninsured Motorists, News Release, April 21, 2011)

The maximum amount for these is frequently the same as your Part A coverage , but your policy can say differently.

Part D: Damages to your Auto

This is the part of your policy that says “Collision” and/or “Comprehensive” coverage.

Collision: This is when your car overturns on icy roads, or you find your car fender dented after a grocery trip. These are paid no matter who is at fault.

Comprehensive: Seperated from collision because some don’t want to pay for collision insurance, a comprehensive need is when there is a fire, theft, riot, or windstorm. Additionally this covers damages for riots, for a bird or animal breaking your car, flood and hail, or an earthquake damaging your vehicle.

Part E: Your Duties

This part in your insurance policy explains what you are required to do to obtain your coverages. There are some things you should do, like call an ambulance, the police, and get the other drivers information, but requirements from insurance companies may include: Not admitting fault, Notify your insurance company within a certain time limit, cooperating with their investigation, sending in legal paperwork in a timely manner, taking a physical exam, authorizing the insurer to obtain your medical records, and taking reasonable actions to protect your vehicle from further harm after the initial accident.

Basically, you need to cooperate with your insurance, or they aren’t required to cover your losses. That’s why a lot of online companies are harder to get coverage from, because they aren’t your personal advocate that you know or have met. It’s always nice to get auto insurance from someone you’re able to contact freely, and whom you honestly feel you can trust.

Part F: General Provisions

Provisions are details about your policy that include the ways you and your insurer can end your policy and also endorsements for your policy.

A policy has 4 ways of being ended.

  • Cancellation: simply return your policy and give a written notice that you’re done, the insurer can cancel a policy too within 60 days of giving it and giving you a 20 day notice. After 60 days they can cancel your policy if you haven’t paid, have had your license suspended or revoked, or you were deceitful in any way on your application.
  • Nonrenewal: at the end of your coverage period, the insurer can decide to not renew your policy.
  • Automatic: at the end of each insurance period, if the insurer renews, but you don’t accept the renewal, then your policy will automatically end.
  • State rules: many individual states have laws that change up the first 3, or extend time periods for renewals. It’s important to check your state laws for specific auto policy termination rules.

Endorsements are modifications to your policy. The most common being a motorcycle endorsement. Many companies adjust how much physical coverage they will have, or will have huge premiums they will only reduce when you remove or change certain coverages on a motorcycle.

To get your information simply call your auto insurer and request your coverage information. Tell them you want to see all the endorsements, riders, and Parts A-F of your insurance, and not just the fact sheet, though that can be simple and helpful too.

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The Worst Financial Mistake I’ve made + 2 Keys to Consider in Going to College

So, I’m Jacob Brad Johnson, I’m a ginger, I’m a Personal Financial Planner major at Utah Valley University(UVU), but was a Computer Science major at Brigham Young University (BYU) for 3 semesters before.

High School

After I graduated High School and I applied for many schools with my 3.86 GPA and 30 ACT score, I figured it’d be a cinch to get scholarships. I wanted to go to BYU, I wanted to study computers.

4 years later, I was wrong, and the worst financial mistake of my life was made.

“Congratulations Jacob on your submission to Utah Valley University,” the letter began. Later on it exclaimed these proud words, “The University would love to extend the Presidential Scholarship to you as you attend… This scholarship is renewable each year pending academic resilience each school year”

Presidential! I looked it up, screaming with delight at what I saw. This scholarship included full tuition, books, and partial housing reimbursement ($300 a month or something, as I recall for the housing portion).
2 days later I was reading another letter from BYU, my dream school. “You have been accepted to Brigham Young University, beginning Summer of 2012,” The words jumped out at me. YES! I’m IN!
I read the rest.
Reread it.
One last time to check for errors.
There was no scholarship, no anything. Oh. wait.
Nope, nothing. I received notification via email a few days later that I’d received a $300 book scholarship per semester for being a relative of some person who’d made a large scholarship fund for his descendants. That was good. ‘good’.

You Already Know What I Did

This is the moment where you all already know what happened. “Jacob, you’re such an idiot”, “What were you thinking!” “…” or other thoughts may have passed through your head.
Here’s the kicker, I had a 1/2 tuition scholarship to anywhere in the state because of the New Century Scholarship program, for graduating High School with an Associate Degree from a University. I’d have been PAID to go to UVU.

Mistake is made. BYU was attended. Computer Science studied. After a few years I didn’t like it. It wasn’t my cup of tea. Ended up transferring. Where to?

Back to Utah Valley University, studying Personal Financial Planning, sans scholarship.

Now, Money mistakes are a super common occurence, and there are much bigger mistakes that one can make (I’m talking more than $40,000 decisions). When you make one of those, you’ll know.

Do These 2 Things Before You Choose Your University

1. Know your Major. 

If you haven’t determined your major, how will you know what school is best? BYU had a better computer science program. UVU has a better Financial Planning major. If you still aren’t sure, try going to a community college or other cheaper college. Why pay the price of the expensive colleges when you can get the undergrad cheap at your local community college? It sometimes may make sense to get your associates from a different school before going to the one you’ve chosen to attend for your bachelor’s or higher degree.

If you don’t know which major to choose, or are struggling between a few, Act on THIS article I wrote recently. Basically, its how to get the thoughts and who you are down on paper to make decisions easier and with more knowledge out loud.

2. Know your scholarships. What are the implications of attending your school of choice? How will you pay for it? UVU gave me scholarships, BYU didn’t. Do you have to take on debt, is the cost that significant.

Will your major pay for the cost of going to school?  You need to know How Much Your Degree Makes to consider how much debt you could take on if you don’t have the scholarships.

Here is what I mean: Determine how much income your major going to bring, and how much debt it’ll take. Can that justify the debt you would get from going to the more expensive school? Here are 8 majors that just don’t justify their cost.

What’s your biggest financial mistake you’ve made! Share your confession with me here or tweet it at me @FinancialGinger and I’ll make it into a post you’ll see featured on my twitter and Facebook.

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No More Resolutions: The 3 Keys of Achieving

Happy New Years Everyone!

Resolutions

I know now is the time of the year to be excited and happy about making a New Years Resolution.
“I’m gonna lose weight”
“I’m gonna start saving in my 401(k)”
“I’m going to read a book every month”
“I’m going to run every day even though its -1470 degrees outside”
And whatever other nonsense we tell ourselves once and then send into the magical air of wish-land *poof* to die a mysterious and definitely unnoticed death, because by mid-march you won’t even know your new years resolutions.

Real Goals

That’s because an unwritten goal is merely a wish. The goals that come to fruition are those that we record, monitor, and actively choose to achieve. We simply don’t take action on wishes. In Fact, According to Dr. Gail Matthews, the amount of success we have in reaching our goals nearly doubles when we create them properly.

The three  magic ingredients: Writing It Down, Commitment, and Accountability.

And even before you write it down, commit to it, or find accountability, you need to know what you want to accomplish! If you’re like most people you have the same 4 or 5 things that everyone wants, more money, more happiness, to do more fun stuff, to have less chaos, and to be more organized, but thinking why you want those, and what the purpose of accomplishing these goals when centered around your true character will make those goals that much easier to fully commit to.

VISION BOARDS – Not Resolutions

Might as well call this article Vision Boards Part 4. I’ve said it multiple times, especially in these articles get it from your head to paper,  how to write a vision statement, and utilizing a vision board, but it’s vital to learn about you. Write down whats most important to you, and then find ways to make those part of your daily actions. You’ll be happier. One way to learn more about you is through personality tests, such as the Color Code, or your HowToFascinate test.

How YOU Fascinate

HowToFascinate actually hooked me up with 100 Free copies of their basic HowToFascinate test for free! So, More than just finding your main definition and 3 or 4 characteristics, you can get some in-depth explanation of what it means to be like you are. Visit this URL and use the code “You-FinancialGinger”, until they are gone! http://bit.ly/2016YAF

Ingredient 1: Write It Down

Take some personality tests, and write that vision statement, then write down some of the goals you’re thinking of for new years. Do they even apply to what your personality tests say? Do they apply to who you are? It’s time to make the goals smart, specific, and personal. If it’s the same goal everyone else has, are you really doing it for you? Refine the list to look like you. Those you trust most can usually help to pin-point good goals.

For more science behind it, read this study about harvard students.
http://elitedaily.com/money/writing-down-your-goals/1068863/

“Harvard’s graduate students were asked if they have set clear, written goals for their futures, as well as if they have made specific plans to transform their fantasies into realities. The result of the study was only 3 percent of the students had written goals and plans to accomplish them…

After 10 years, the same group of students were interviewed again and the conclusion of the study was totally astonishing… The 3 percent who had written goals were earning, on average, 10 times as much as the other 97 percent of the class combined…

Think for a moment which group you belong to.”

(Bold, Italics, and Underlining added for emphasis)

Ingredient 2: Commitment

Commitment is a Vision Board. A super simple vision board I made was with blue painters type in a square right above my bed. I would draw or print pictures related to my goals with a word or 2 to explain it. I tape that picture inside the square and I’m now committed to achieving it.
Some of the goals came to fruition, I move them either to the trash, or to an accomplishment site on my wall, and some of them I end up not finishing or continuing either due to a change in priorities, information or ability.

Here’s my current vision board.

You can see I have goals to get a few more computer monitors to work better, to earn my Certified Financial Planner (CFP) designation, Publish 4 articles a month, start a podcast, have a date night every week, and make sure I take time for meditation and religious studies each day.

Those awkward ones on the right of my vision board. They are they rejects. One was a failed plan with a friend to create YouTube videos, another was the idea to do a super smash brothers tournament (I’m a pretty big nerd when it comes to that game), and the last one I removed because I ended up not getting this job with a tax firm I was shooting for.

The point is, those things change, and it’s good! Because you’re a human and you change. You’ve committed and worked toward the goal until you either a) accomplished it, b) changed your vision, or c) Lost the desire to finish it. I’m sure some goals we want aren’t being worked on, and we still certainly desire to accomplish them! Get them on the vision board. Commit to it.

Ingredient 3: Accountability

Everyone hates having a personal trainer, or a gym buddy; let me tell you – IT WORKS. When you have an accountability partner, someone who you must report to, you get to work on it much more effectively than not. Why else do you show up to work at a specific time the boss sets? It’s because if you want to get paid, you have to work for that specific time and you report to someone to prove it.
If you want your goals to be the same, then get someone you report to.

I’m accountable to readers to publish an article every week, I have people who I’m setting up to interview on my podcast that hold me accountable. My mates Andrew and Matt are my gym accountable people (and they keep on texting me every Tuesday and Thursday when I don’t show up. I love you guys!). Without them, I wouldn’t have gone to the gym nearly as much as I have. In-fact, our trainer showed me through my fat levels and weight gain that since going to the gym I’ve put on at least 5 lbs of muscle in 3 months.

If you don’t have an accountability partner, get one.

If you need one, get me. Email me! I’ll be your accountability partner for a few weeks until you find another. Here’s my personal email: [email protected] Put Accountability in the title and I’ll help.

This year, lets not make resolutions that we wont remember by march. Instead: Make a vision, Write your dreams down, Commit by putting it on the vision board, and Get the Accountability partner.

-TheFinancialGinger

  1. http://www.dominican.edu/dominicannews/study-highlights-strategies-for-achieving-goals
  2. http://elitedaily.com/money/writing-down-your-goals/1068863/
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Concepts of Investments and Risk

Merry Christmas! Everyone!

I want to share a gift of knowledge with you. In relation to your Christmas futures. It is vital to learn how to invest in our future. Everyone has heard, as I’m guilty of saying as well, to save money for your future retirement. But the problem is, how do I invest it? How does it grow? What do I invest it in?

I would like to answer some of those questions here.

What’s the basics to investing?

First, knowing the Time Value of Money is valuable. The idea is, if you’re investing a certain amount of money every year for retirement, and you can assume it’s growing at an average rate, then how much money will you have to retire?

We utilize the Time Value of Money to calculate how much we need to save to reach our goals.

Vital to our tool belt is what Inflation is: The rate at which our currency is becoming less valuable. My Grandpa was telling me the other day about how at the store you could get a king-sized candy bar for a nickel. Nowadays the larger candybars are usually a dollar, or at a gas store a buck fifty. That’s inflation. If Inflation is growing faster than your money, then your investments aren’t doing to great.

What do people mean when they say an investment is riskier or safer?

Investment Risk, is the likelihood your investment will give a loss or less return than expected.

Many will say that a Bond is a “safer” investment than a Stock. An individual bond has a ‘guaranteed’ rate of return. This is because a Bond is debt, with required payments from the company who’s bond you own. A stock is in the market of that company, and will rise and fall as the companies valuations change.

If you’re only invested in one stock, you are in a risky investment. It isn’t necessarily true that bonds are safer. With some bonds, you have Inflation Risk, which is the risk that inflation will be greater than your return.

Safe investments are made when in conjunction with a Risk Tolerance, Financial Timeline of the investment, and proper diversification.

What is Risk Tolerance and Why Would It Affect My Investing?

 

This is an extremely generalized table of risk tolerance.

 

 

Younger Aggressive (1)

When we are younger we can subject ourselves to a greater risk with our long term investments, why? Because we’re young and if the stock market dips 30% in a year we can just wait till the market rebounds because you’re not retiring for 30 more years.

The basic concept of stocks and bonds for investing is to slowly overtime convert more of our investments from Stocks to Bonds and Cash to protect what has already grown. It’ll keep growing in a Bond, but at a slower and more predictable rate. This also helps to create a base level of guaranteed type income, (which can be supplemented with Pensions, Social Security, and Annuities also)

The ratio of Stocks to Bonds is called Allocation.

If Stocks are more jumpy, why invest in them at all?

The average return in the stock market since 1900 has been roughly 10.4%. Bonds have averaged somewhere between 5-6%. That is the basic reason why. Bonds, due to being debt instead of part of the companies growth are more guaranteed.

Why not 100% stocks then?

If someone is going to say “I’ll give you 99% chance of getting 5% more when I pay you back next year” you’re likely to love that when the contrasting option is “I’ll give you a 60% chance of being worth 10% more, and a 40% chance of being worth 10% less next year”. That’s the fundamental difference.Younger%2F Aggressive (2).png

When you’re closer to retirement, if too many of those coin flips become the negative ones you can see your retirement savings drown, and not recover for 5 -10 years. Well, when you’re retired and you need to spend the money this year. You start spending the money at that 10% drop or 20% drop.

Its good to have some in both, it gives you many baskets. If one basket drops, or has a bad year, overall lots of your eggs get safely there.

How Do You Step Into That Risk In The Stock Market?

Diversification is what allows investing in stocks to not be as risky, and can create reasonable believe that money will grow consistently over a long time period at a rate higher than most bonds.

The Market has a Beta of 1. This means that The market itself is 100% connected to itself. If a certain Stock has a beta of 2, then it’s expected to usually go up two dollars for every 1 dollar The Market goes up. If another stock has a beta of .3, then it’s expected to go up thirty cents per dollar the market goes up. This also is good because when the market goes down, it only goes down thirty cents per dollar.
Now, beta’s of stocks aren’t facts, but general trends that change over time. Having stocks in many different areas of The Market, allow for diversification.

If you want to get deeper into Allocation, Read some of Dr. Craig Israelsen’s work, the 7-twelve portfolio. It discusses 7 Asset Classes, and Twelve types of Stock’s and bond’s to be invested in. (That’s a lot of baskets to put your eggs in)

Where Do I start? Should I Buy Apple and Google Stock?

As a general rule, It’s extremely simple to get diversified by investing in a cheap ETF.

ETF stands for Electronically Traded Fund. These funds take an asset class such as Real Estate, Small Growth Company, or the entire S&P 500 series of 500 stocks and automatically invests a certain percentage of the fund into the different stocks that are available within their parameters. If you invest in their ETF, for a very small fee, they automatically keep the fund in par with the Market that it’s tracing.

When your money is in multiple types of ETF’s and perhaps a few stocks of companies you like, you have made a simple diversified portfolio. Some ETF’s even trace Bond’s, so you can get a healthy helping of bonds in their also. Any ETF that has Vanguard running it should be the cheapest type of ETF available. Vanguard is all about low cost investments.

How much growth should I expect in my savings?

It’s safe to expect growth, but how much growth? Most planners will not argue with me to say that though many will use numbers from 6%-8% that 6% is a reasonable expectation to have, if invested properly. This also depends on your risk. If you’re more heavily in bonds, you can expect it to be lower, if you’re more aggressive in stocks you can expect it to be a little bit higher.

What Questions do you have about investments that I haven’t answered? Send them to me at [email protected]  Or leave them in the comments below and I swear I’ll answer them!

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“Safe” Investments: What You Need To Know

The 8th Wonder of The World.

ae-quotes
Albert knows his stuff

Money is pretty cool right? And knowing that compound interest is the 8th wonder of the world, (Thanks Einstein for that gem) we usually turn to dropping our money in the bank.

Problem is, that money makes next to zero doll-air-oes. Back in the 90’s when interest rates with in the 12-14% it was safe to put money in a CD at 10% interest. Today, interest on a 3-year CD is puny, 1.4%. Interest rates are down 90%, which is good for inflation and other things, but makes me think, “What do I do to grow my money?

Numbers

First: let’s talk numbers. I conducted a survey and found that most people struggle with knowing where their money can grow, and what’s riskier or not.

Problem: “What tends to have the highest growth over periods of time as long as 18 years”

A. Checking Account
B. U.S. government savings bonds
C. Stocks
D. Savings Account

What is your answer?

I’m glad to say that not a single person put Checking Account. I’ll still explain that for a moment, a Checking account is what I classify as “Cash & Cash equivalents”. It’s liquid, it’s being used day-to-day, and mine currently has a return of .02%. This isn’t where money goes to grow, it’s where a money goes to be spent.

B. U.S. government savings bonds. These investments are usually given a pretty small interest rate, and are guaranteed by the government. I was actually quite shocked by just how many people thought that this was the best place to grow money! These are given a guaranteed return, but usually is equal or less than what inflation is.

D. Savings account. A few people thought this was a good place to grow money. Savings accounts are similar to Checking Accounts, in the fact that they have very poor growth rates, usually higher than Checking, but still very low. In my mind, they are basically a way to keep your money in 2 seperate locations so you don’t spend it all. I think there are better ways to organize money, but that’s just my thoughts.

C. The Stock Market. This is where money goes to grow. Naturally there are risks, but there are many ways to mitigate the risk. Diversification, Allocation, and having a good time horizon for investments helps. With an 18 year time frame, and being diversified across many stock types, this is where money will grow.

Lets look at the data

I looked into typical rates for Savings Accounts, Checking Accounts, Government Bonds, Corporate Bonds, and the Average Stock Market Yield. Here is what $1000 dollars looks like over a 20 year investment.

growthof1k
Chart by TheFinancialGinger – 2016
www.nerdwallet.com/rates/checking-account – Zion’s Bank Checking Account
www.nerdwallet.com/rates/savings-account -Zions Bank Savings Account
www.treasury.gov/resource-center/ – Government Bonds
finance.yahoo.com/bonds/composite_bond_rates – 20 year AA corporate bonds
http://www.moneychimp.com/features/market_cagr.htm – Stocks average from 1995-2015

Looking at this, some people are probably shocked. Know that Stocks have the risk of going down, they will go down and up. Greater Risk often yields greater upside potential.

Fine, I’ll put it in stocks. How do I do that?

If you have $5000 or $10,000 to invest, put it into the stock market. There are some great places to open an account online.

TDAmeritrade has a pleasant platform that is excellent for beginners and isn’t too expensive to use at $10 per trade.

OptionsHouse is an online broker that has $5 trades and has no minimum balance.

TradeKing is another online broker that has $5 trades and no minimum balance.

My absolute personal favorite is Vanguard. The reason for that is they are all about the idea of buy-n-hold with stocks, and stock-packages called Mutual Funds or ETF’s. The idea behind that is simply buying a preset group, then waiting and letting it grow over time.

If not, you can probably talk with your Bank, Credit Union, or find a good local individual company such as EdwardJones to get you started. Make sure that if you use a broker/dealer company that you know the cost associated with it.

In Summary

Checking accounts are where money goes to be spent. Savings accounts are for emergency funds and money to be used within 6-12 months. Bonds are where money grows safe but small, and the stock market is where money belongs for long-term growth.

So, open an investment account and invest! Don’t let $5000 extra dollars be left sitting for no reason in the bank.

 

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The Ultimate Cost Saver in College: 4 steps

My father during his last semester of college told my mom, “Wait… I don’t want to major in business. I want to be a chef”.

Needless to say, he didn’t go to chef school. Many of us spend years bouncing around in majors of college and end up with all this needless classwork.

This is the key to saving both Time and Money in college.

Get the Right Major the First Time

This is easier than it sounds. First, you need a vision. If you don’t have one, use this nifty little template. (Jokes, that’s a link to my article about writing a vision statement)

But seriously, the most important thing in deciding your major is knowing who you REALLY are. Who are you? What makes you tick? Figure that out.

Here’s the process:

  1. Lists about you
  2. Interviews
  3. Comparison Charts
  4. Have 1 “figure-it-out” semester

This is the process I used to break into my major quickly. The reason it’s so good in saving you money is because of the time you spend going to college. Sure, earning a couple scholarships for $400 or $500 a piece is great, but if you can go to school for 2 semesters less because you didn’t change a major, then you just saved 2 semesters of tuition which is average about $9-10,000 dollars.

Here is, The Ultimate Cost Saver in College.

Step 1: Lists

List out 20 majors you’re interested in.

List out 20 Jobs you could enjoy doing.

It’s important to get to a larger number, so you really consider things you actually enjoy. Everyone is able to find 3 or 4 things they like, but can you get 20? Narrow it down to a top 5. Maybe a trusted friend, or therapist, or coach, or school counselor could help you narrow the list down a bit.

My Step 1: I was deciding what I wanted to do with my life after finishing a 2 year service mission in New Zealand.  The starting list included skills with dancing (I was a 4th place Titleist in Youth-American-Smooth at BYU Nationals in Ballroom in 2013), a love for computers, good conversational skills (I hope), loving people, loving group interactions, breaking ideas into pieces, loving competition and other factors. It was easy to identify event planning, financial services, and global supply chain management as 3 possible majors, among others.

Step 2: Interviews

Find people in each industry that you know (or don’t!) and interview them. This is cake. Ask people on social media, google companies that work in that industry, it’s not too hard to find someone. Most respectable people will give you 15 minutes to interview them.

You need good questions: Here is a basic list:

What makes your job worth it?

How did you end up working in this industry?

How much do people get paid working in your industry?

How do you help people?

What are the best certifications or skills to learn success?

What personality types work well in this industry?

How do you get into the industry running fast?

Is this a 40 hour a week job? How much time do you need to invest to achieve excellence?

Interviewing  5 people in each industry will give you a good way to benchmark what they enjoy, pros and cons, income levels, what they hate, skills they utilize frequently, career path and progression, and other little details you want to know.

My Step 2: After calling up a few old friends, and posting on Facebook about wanting to talk to professionals in these areas (in separate posts on different days. Posting a list of things on Facebook gets zero responses. and you want more than zero), I was able to interview a few event planners, financial planners, and a few supply chain management experts. The leader of my service mission (over 200+ of us missionaries) was a supply chain expert for UPS during his working days, my old dance partners father is a financial planner, and a man from my church back home is a very successful event planner. This grew into more interviews. My Girlfriend sent me to the finance guy for her company at a local Edward Jones branch. My interviews grew and grew and I really learned the good, the bad, and the ugly of each industry.

Step 3: Compare

If you’ve read many of my articles, you’ve probably seen that I often say “Ask your friend, boss, etc to shorten down this list with you.” or “Ask your friend if that’s really you”.

Same here! Ask people what they think, and maybe make a weighted list or pros and cons for each, then weight how important that is to you. Then you can almost make a weighted average of how important it is.

My Step 3: I didn’t make a weighted list for this (Such a Hypocrite, ae?) but I’ve done this with many projects. Deciding where to spend money, choosing to live at home or live on my own during college, If I should paint my room blue on the top half or blue on the bottom half, and other ‘very important’ decisions, or less important decisions.

 Step 4: It’s okay to have a “Figure-it-out” semester

Maybe it’d be good to take one semester and take 1 or 2 classes in each major you’ve picked. It’s also a great time to talk to counselors and teachers and continue working on clarifying step 3 (compare) and spend more time on step 2 (interviews).

Realize that rushing through college isn’t fun. There are scholarships you can get while in school, there are lots of governmental aid that you can get, and there is college life. Do you really want to be out of school in the big world at 21? Consider studying abroad, finding side hustle opportunities, start a business, do something epic during school time. Summer is the opportunity to work at a hotel in Alaska, work on a fishing boat on the sea, working in hospitality in Australia, or building up certifications, skills, and hobbies that can contribute to your overall balance in life.

Remember,

Lists, Interviews, Comparison tables, and Take a semester to figure it out.

Jacob Johnson

The Financial Ginger

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4 Basic College Money Skills: How To Master Them

College always walks up and says: “Gimme money”. It’s the worst bully since Billy who always took your quarters during recess in 2nd grade!

Here are some amazing articles I’ve read about college kid money skills.
1) Getting Scholarships for school
2) avoiding Debt in College
3) how to deal with CC’s during College
4) how to start a savings account, and basics on opening an investing account

Basically, this is a really good reference and resource of some other writers work about the subjects. Feel free to comment extra resources you’ve found that are good too! I’ll make sure to update your research into this list also!

The Basics of College:

http://wellkeptwallet.com/2012/05/how-to-graduate-college-without-any-debt/

This article gives 5 basics: 1) Consider the Cost, 2) Work During School, 3) Apply for Scholarships, 4) Work for the University, 5) Be Radical – Try Crowdfunding! Thank you Deacon Hayes for this article!

https://wallethacks.com/money-tips-college-students/
Jim Wang gives one of the best and most concise run downs on 40 basic money tips in college.

Financial Advice To Start Your Military Career

I honor Doug, whom started the Military Guide. If you want to or do serve in the military, Doug knows the finances behind it.

Get The Scholarship

Jocelyn from TheScholarshipSystem shared her site, and I highly recommend it. The Best article she has, which is a freebie if you join her email list, is “The 3-Steps I Used To Write Reusable Scholarship Essays QUICKLY and That Won Me Over $125k”
http://thescholarshipsystem.com/ – her article The 10 basic steps to getting scholarships
http://thescholarshipsystem.com/ – 5 things to update on your FAFSA (Right NOW!)

 

KristinaEllis.com hosts Kristina’s books about how she paid for college “Confessions of a Scholarship Winner” and “How To Graduate Debt Free”. I met Kristina in person and FinCon16 in San Diego and would recommend her books to anyone who is serious about getting scholarships in college.

I can’t rant enough about Brynn Conroy and the wonderful FemmeFrugality site. These tools are great to understanding the mindset of applying for scholarships.

http://femmefrugality.com/how-to-write-a-successful-scholarship-essay/

http://femmefrugality.com/playing-the-odds-on-scholarship-opportunities/

http://femmefrugality.com/why-a-scholarship-resume-is-an-important-part-of-your-college-arsenal/

Hear the Ginger

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Avoid The Debt

Robert Farrington, a friend of mine, gave me some articles he wrote about avoiding debt and investing during college. This article is about 6 people in different situations, and how they avoided student loan debt. http://thecollegeinvestor.com/15182/6-college-graduates-share-avoided-student-loan-debt/

Jason Butler gives you the run-down on TextBooks and cutting costs here. http://thebutlerjournal.com/2013/08/09/saving-money-on-college-textbooks/

And how about the cost of an apartment? LaTisha Styles from StylesTV shares how to deal with an apartment here, https://www.youtube.com/watch?v=7UEn_k0DNb8

Credit Cards in College

http://investingdollarsandcents.com/1/post/2015/09/12-things-to-consider-if-you-want-to-start-investing.html

This article is technically about investing, but I really like that it gives you a good mindset about how to think about debt, and weigh the options in investing, saving, or paying off debt.

Where to Start Saving/Investing

The College Student’s Guide to Investing

There is no where safer to start than a website DEDICATED to college investing.

http://www.invest-safely.com/personal-finance-goals.html

The writer for Invest Safely is on point, every time. These 8 points are sure to get anyone started on the right track investing and saving.

How to Win the Stock Market Game [4 Rules]

If you want basics on how to invest in stocks, this is the place to start. It shows statistics and gives basic explanations for types of stocks, mutual funds, and other places to start with your money.

http://www.moneysmartguides.com/become-stock-market-millionaire

This is a very good basic guide explaining how to split your investing money, how to fund an account, and ways to keep your money safe. It talks about Bonds and Stocks, and good general rules for picking investments, and ways to diversify in multiple types of securities.

How to Fund a Brokerage Account and Start Investing Online

Lastly, this is a beautiful article that gives explicit details on HOW to open an account, and basic processes for utilizing it (as well as other useful information).


What are your resources you’ve liked in these areas? What do you use for credit cards? What are your beliefs? Share them with me in the comments, and I’ll be sure to put a few quotes on Instagram.

Jacob Johnson

The Financial Ginger

 

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Homeownership: Still the American Dream?

Is Home Ownership Still the American Dream?

Home ownership is at the lowest level in decades in the United States[i], and many industry pundits lay the blame squarely on millennials.  But is that fair?  Or even true?  Let’s examine this.

How did home ownership become equated with the American Dream?

The term “American Dream” was first coined by James Truslow Adams, an American writer, in his book The Epic of America published in 1931.  At the time, America was caught in the grip of the Great Depression.  Millions of families had lost their homes and found themselves homeless and starving.  The American Dream describes an ethos that folks desperately wanted to believe at the time that hard, honest work would result in financial security, the ultimate symbol of which was owning one’s own home.

We have found, however, that not all folks who work hard ever achieve financial security, or for that matter own their own home.  As faith in the traditional ethos fades, fewer Americans own homes, and the trend toward not owning is still growing.

Will it come back?

Traditionally families bought their first homes in their late 20s or early 30s, so we are looking to millennials to begin buying homes; but they are not – at least not in the numbers necessary to stabilize homeownership rates.  While many pundits posit that the reason is that millennials only want to rent in urban areas, Uber to work and walk to a coffee shop, there is really something else at work here.

Millennials are getting married and starting families later in life than their parents did, so they have less reason to buy a home early.[ii]  Add to this a decline in the belief that real e state is always a good investment, since many millennials watched their parents struggle to keep their homes during the Great Recession, or lose them altogether.  Moreover, because of low starting salaries, massive student debt[iii] and the lack of dual incomes, they have less ability to pay for a home early in life.

If we recall Econ 101 in college, we remember that the demand curve in the supply-and-demand model is driven by two factors: the desire of consumers for the widget and the ability to pay for the widget.  Homes are no different than any other commodity that way.  With less desire than their parents to own a home for multiple reasons, and less financial ability to jump into the market, it isn’t surprising that millennials aren’t buying at the same rate as previous generations.

But is this a wise move on their part?  If you can’t buy a home, then of course the decision is made for you.  But if you can buy a home, should you?

While watching their parents lose everything in a severe recession understandably made folks question the traditional wisdom (that homeownership is always a good investment), new regulations and lending safeguards make the financial crisis very unlikely to happen again, at least to the same scale.

Some folks have noted that it is much more expensive to own a home than to rent, and that it true – at first.  But tax deductions make up some of that difference for most folks.

Further, rent goes up, while mortgage payments do not – at least if you have a fixed-rate mortgage.  Property taxes and insurance go up over time, but usually at a much slower pace than rent, and they are only a small part of your monthly housing cost.  And with homeownership, eventually your mortgage is paid off and your payment disappear. *

Finally, there is the principle of leverage.  When you home appreciates, you are not only making money on the money you have invested in your home, but on the money your lender invested as well.  This simple principle will double or triple your return on investment.  You cannot leverage your savings accounts, and most folks can’t leverage their investment accounts, either.

Mortgaged real estate is the only real leveraged investment available to the average Joe.  The sooner you buy the sooner your monthly payments begin paying down your mortgage rather than paying someone else’s, and the sooner you eventually pay off your mortgage.

Still, owning a home is really not for everyone.

  • If you have to stretch to the very limit to buy a home, it may not be wise, because the first emergency could bury you financially.
  • It costs about 10% of the purchase price of a home to get in and out, in real estate commissions, title fees, etc. If you don’t plan to stay at least three years (or more, depending on the appreciation rate in your area) it may not be wise.
  • If you are likely to move for any reason within the next three years you should probably not buy a home. (Although I have clients who buy a home in their destination area a few years before they move.)
  • If you love to travel and want to spend your money there, the responsibilities of home ownership may not be for you.

However, if you want the stability of knowing you can never be forced to move, want the satisfaction of creating your own home exactly the way you want it, and want to build wealth over time with the greatest certainty, consider re-thinking your negative thoughts about the American Dream.

Casey Fleming, Author The Loan Guide: How to Get the Best Possible Mortgage (On Amazon)

Mortgage Advisor, C2 FINANCIAL CORPORATION

My Blog: www.loanguide.com

Facebook: C2 Financial Corp.

Facebook: The Loan Guide Book

Follow me on Twitter for interest rate updates: @TheLoanGuide

[email protected] NMLS 344375 / BRE 00889527

[i] Tuttle, B (2015 July 28) U.S. Homeownership Level Drops to its Lowest Level Since 1967, retrieved from http://time.com/money/3975212/homeownership-rate-record-low/

[ii] Davidson, J. (2014, November 12) What Everyone Gets Wrong About Millennials and Home Buying, retrieved from http://time.com/money/3551773/millennials-home-buying-marriage/

[iii] Notte, J. (2014 December 11) Why Millennials Aren’t Rushing to Buy Homes, retrieved from http://www.cbsnews.com/news/how-will-millennials-buy-homes-if-they-dont-know-their-credit-scores/

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Get The Job. 3 Sure-Fire Ways to Impress (Before You Ask For The Job)

Before you can make smart financial decisions, you need to have money. Why not explain how to get the job?

My Friend, Larry, asked me the other day if I knew anything about resumes. I told him SURE! Let me get you a good template and some other fun things. I helped him and reviewed his resume. He got a job interview. He got the job. Here are 3 tips to getting that job.

Three Things: Resume, Elevator Speech, Good Knowledge

Resume

First, you need your resume to look desirable. A Good Resume has the following information
1) Your contact information
2) Your Purpose Statement
3) A Skills/Qualifications list
4) Your Work Experience
5) Your Education Experience

They need to each be relevant and overall your Resume should never ever ever ever eeevveeerr be longer than 1 page. This is why.

“When I hired at JCPennys and Home Depot, I’d receive hundreds of applications for a single job opening. Anything over 1 page I threw away.” -Dana Johnson, Store Manager

Employers have no time for your lack of brevity and concision. Heck, If this was more than 800 words long, you probably wouldn’t read this article! You probably thought “It’s 3 things to get hired. I can do three things”. Click-Bait at its finest. (You can join my click-bait mailing list here. #ShamelessAdvertising)

Elevator Speech

The elevator speech: “Hello, My name is Jacob Johnson and I’m a student of Personal Financial Planning at Utah Valley University. I get excited about connecting people to their finances. I study tax planning, insurance risk, and retirement planning so that I can help others to see their big financial picture. As a Counselor and President at the Money Management Resource Center, a free services for students, I help individuals and couples with student loans, debt management, budgeting, and general financial questions.

Would you stop by our office in the Woodbury Business building to see how we can help you feel more at peace with your finances?”

The good elevator speech has 3 important factors:

The Introduction– Which is why I’m here
“I get excited about connecting people to their finances. I study tax planning, insurance risk, and retirement planning so that I can help others to see their big financial picture.”
The Explanation– What you’re doing about your dream
“As a Counselor and President at the Money Management Resource Center, a free services for students, I help individuals and couples with student loans, debt management, budgeting, and general financial questions.”
The Invitation– Tell them what you want them to do (Often times, this is in the form of a question or request)
“Would you stop by our office in the Woodbury Business building to see how we can help you feel more at peace with your finances”

Now your invitation could be different: it could be a request for an interview, requirements about the internship, or consideration to hire you or give you an internship.

Research Them

Last, you need to know the company! You should know some history about them, where they started, their mission statement, and maybe a little bit about where you want to be in their company.

I’d recommend also getting some good questions to ask. How do you get business, How do people climb the ladder, What are the requirements to move up, How frequently do you hire… Just make sure that you’re asking good questions that demonstrate your excitement and knowledge about working in that industry. This will make it easy and natural to talk to them regardless of path; email, phone call, in person, etc.

“You sound a thousand times more intelligent when you have prepared intelligent and meaningful (but not overly complicated) questions… when I was assistant manager…I got to sit in and help interview people. And let me tell you, you seem significantly more prepared, intelligent and eager for the job when you prepare a few questions.” – Flia

What are some of your best moves to make sure you get the job? Share it below!

Join the Facebook group to tag along with the community!

-Jacob Johnson
The Financial Ginger

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The Financial BlabberMouth