Low Risk Investments
The lowest risk investment class is those which are either federally insured or backed (meaning “guaranteed”) by the United States government.
Continue Reading Add comment July 14th, 2009
So Many Shoes Book
I have started to get some nice reviews on my book. I wanted to publicly thank the folks who have taken the time to read and review So Many Shoes, So Little Money – A Girl’s Guide to Finance.
Links to their reviews are below (please provide them with a lot of traffic):
http://selfhelpbooks.suite101.com/article.cfm/so_many_shoes_so_little_money_by_lisa_serwin
http://www.everythingfinanceblog.com/2009/07/so-many-shoes-so-little-money-girls.html
Thanks! For additional information you can also check out my website somanyshoes.net
2 comments July 9th, 2009
Seven Deadly Finance Sins
As told through shopping….
- Gluttony: Buying what you want, as much as you want, when you want it, regardless of whether you can afford it.
- Lust: Unrestrained, unbridled passion for any shopping item.
- Greed: Buying your tenth pair of black stilettos.
- Pride: Buying designer because you can’t been seen with anything less.
- Sloth: Not utilizing your eye and natural talent to find a bargain.
- Envy: Insatiable desire and coveting of your best friends Louis Vuitton Speedy Purse.
- Wrath: Your attitude towards the salesperson when they are out of your size and at yourself when your credit card bill arrives.
So, be a saint and not a sinner: Next time you hit the stores, try, just try, to exercise some shopping discretion.
Add comment July 8th, 2009
Why Shopping?
Why use fashion and shopping to explain money management? Because learning to manage your money does to have to be staid, boring or dry!
Continue Reading Add comment July 6th, 2009
Marry Rich
Some women believe that a sound financial plan is to marry well. I have written a post on this before – “you need a plan not a man” – but with all of the recent headlines about cheating husbands (John Edwards, Governor Sanford and Senator Ensign) and their suffering wives it bears repeating.
First of all marrying rich is never a given and rarely the solution. Second, there is no guarantee the relationship will work out. A lot of marriages end in divorce; it is a myth that you will always wind up with half of the assets. Third, having your own career means you are at no ones mercy. You answer only to yourself and are not dependent on anyone – a very empowering notion.
To paraphrase Maureen Dowd, if you give up your career to focus on your husbands/significant other/or at the request of a “special friend”, it is not his/her/their fault if things don’t work out and it turns out you sacrificed more for the relationship than they did. “Like an investor in a down market, you took a risk without a guarantee that it would pay off. If you make your significant other your career and you lose them, you lose your career too.”
http://www.nytimes.com/2009/07/01/opinion/01dowd.html?_r=1
Raising your joint children is no guarantee either. Mrs. Edwards, Mrs. Ensign and Mrs. Sanford all have children. Religion is not a savior – Governor Sanford considers himself a very religious man. Jobs can be lost – unemployment is currently 9.5%, and, in a worse case scenario your significant other could die.
The best thing you can do to take care of yourself (and your children) is to make and learn to manage your money.
Note on divorce rates:
Married adults now divorce two-and-a-half times as often as adults did 20 years ago and four times as often as they did 50 years ago… between 40% and 60% of new marriages will eventually end in divorce. The probability within… the first five years is 20%, and the probability of its ending within the first 10 years is 33%…
—Brian K. Williams, Stacy C. Sawyer, Carl M. Wahlstrom, Marriages, Families & Intimate Relationships, 2005 as quoted on Wikipedia
Add comment July 3rd, 2009
Risk Tolerance
Let’s continue the last post. Why is an understanding of your personal risk tolerance important? Because if you decide to invest your money in anything more complicated than a CD, you’ll need to know how much risk you can stomach without getting queasy. Your risk tolerance helps determine what kind of investments you will be most comfortable with and where you should focus your attention.
Risk tolerance is different for everyone. You need to choose the risk level which feels comfortable to you. Most of the investments we will cover in this book are not federally insured. This means that if you lose any money, it’s gone. Obviously, some people tolerate this knowledge better than others. How do you know how much risk level you can stand? This quiz will help.
- Which Sex and The City Character do you most identify with: (a) Samantha, (b) Carrie, (c) Miranda, or (d) Charlotte?
- Which is your very favorite pair of shoes: (a) Stilettos, (b) Stacked heels, (c) Wedges, or (d) Flats?
- You are in Vegas! and you are down 500 dollars. How much money would you be willing to risk to break even? (a) Whatever it takes, (b) 1,000 dollars, (c) 500 dollars, or (d) nothing – you are done for the night!
- When do you stop to fill up the gas tank in your car: (a) not until I have to, (b) when the light comes on, (c) when the tank is one-quarter full, or (d) when the tank is half full?
If you answered mostly (a) you have a fairly high risk tolerance, (b) you have a moderate risk tolerance, (c) you have mild risk tolerance and, (d) you have very little tolerance for risk.
Note:
Any woman who regularly wears high heels understands the saying “no pain, no gain”. We all endure pain and discomfort in the name of fashion—and great looking legs—but we also know that those had to have them high heels could cause blisters, calluses, corns, bunions, lower back pain, and ankle sprains. Women everywhere know flats are inherently more comfortable. We balance—pun intended—how much we want the higher heels against the possibility of any pain or discomfort. Going after higher returns on our money requires the same balancing act. You must consider the risks of placing your money in less secure and more volatile investments against the security of federally insured but possibly lower returns. If you decide that your risk tolerance is low, that is perfectly okay. Flats are always “in” for a reason!
Add comment June 29th, 2009
Return on Investment
I am thrilled to announce I will be on the radio discussing my new book. Please check my website (www.somanyshoes.net) for updated dates and times.
In the meantime, let’s discuss investing. Why should you think about investing your money? Why not just put it into a checking or savings account and let it sit there? Because investments offer a way for you to increase the money you invest by paying you a return.
One way to describe how fast your money is growing (or the increase in the value of your money), is through a concept called return on investment (ROI), a measurement of how efficiently your money is working for you. It is usually expressed as a percentage. It is an important concept to understand because ROI tells you how much your money will grow. Here is the formula for calculating your return on your investment: The gain from the investment minus the cost of the investment, divided by the cost of the investment
Note that while it is a math formula, it only uses subtraction and division. Let’s look at two examples.
Example one: you put 1,000 dollars into your savings account at the beginning of a year. The bank paid you interest on your money. Let’s assume you left the 1,000 dollars in there for the entire year and, at the end of the year, you check your savings account balance and see that you have 1,020 dollars. What was your return on investment? Your return on investment was 2%:
1,020 dollars minus 1,000 dollars equals twenty dollars.
Twenty dollars divided by 1,000 dollars equals 2%.
Example two: let’s assume you put 2,500 dollars into your savings account at the beginning of a year. You leave the 2,500 dollars in there for the entire year and, at the end of the year, you check your savings account balance and see that you now have 2,600 dollars. What was your return on investment? Your return on investment was 4%:
600 dollars minus 2,500 dollars equals 100 dollars.
One hundred dollars divided by 2,500 dollars equals 4%.
As you can see, in both cases you earned money, but the amount of money you earned was small. Your money earned money, but it could have earned more than it did. You work hard for your money and your money can work harder for you.
In a checking or savings account, your return on investment comes solely from the interest the bank pays you which are typically, fairly low amounts. However, in addition to checking and savings accounts, banks offer other kinds of accounts which pay higher interest.
One type of investment account that banks offer is called a certificate of deposit (CD for short). A CD is a special type of savings account and is a great place for a beginning investor to start investing their money. A CD differs from both a savings account and checking accounts because your money goes into a CD for a specific, fixed period of time (often three months, six months, or one to five years). During the period of time that you sign up for, you really don’t have access to your money. (In a regular checking or savings account, you can withdraw your money at any time you need to.) In a CD, if you pull your money out early, there’s a penalty fee. However, in return for leaving your money in the bank for so long, the bank pays you a higher interest rate than they pay on a checking or savings account. Once the period of time that you selected ends, you get back all of your money plus the interest your money earned for you. Then you can decide if you want to re-invest your money in another CD, selecting perhaps a different time period, or put it back into your checking or savings account.
Why is a CD a great place for a beginning investor to start? Because a CD pays a higher rate of interest than a checking or savings account and so you receive a higher rate of return (ROI) on your money. But because you can’t take your money out early without incurring penalties, you learn whether you have the tolerance to keep money tied up for some period of time. A CD is a way to check if you will miss having access to your money, without the risk of losing any of it. A CD is federally insured against losses, and allows you to begin to understand your personal risk tolerance.
More about personal risk tolerance and other kinds in investments in posts to follow.
Add comment June 24th, 2009
Amazon.com
I am thrilled to announce my new book: So Many Shoes, So Little Money – A Girl’s Guide to Finance is now available on Amazon.com!
I use the language of fashion and shopping to convey money management fundamentals: The basic questions of how to budget, when to use credit cards, how to know which fashions to buy, what to do when you’re in debt and more ― it’s all covered. Each chapter draws parallels with fashion while delivering the primary message: If you want to be stylish, you must take care of your money―and the sooner the better. Managing your money truly is the new black.
Thank you!
Add comment June 16th, 2009
Finance Questions
Which have not been uttered…
Can you embroider “My 401K lost 30%” on this pillow? Are you sure I can’t pay more? Does my bank account make me look fat? Do you think my credit card company has my back? Is my CPA single? Taxes anyone? Do you think his checking account is what killed him? How great is my bank card photo? Can you make my paycheck smaller?
Add comment June 8th, 2009
Fashionista’s Finance Dictionary
With apologies to the urban dictionary…
Annual Percentage Rates (APR)
Fees charged by credit card companies when you do not pay your bill in full.
The credit card company charged me major bucks last month when I didn’t pay my bill in full – damm you Jimmy Choo!
Budget
An itemized plan of what you earn, what you spend, and what you can spend.
The new Gucci bag I am coveting is not in my budget – I might have to rent it!
Debt
Spending more than you can afford on anything (un-stylish)
Girl #1 – “Fantastic new jeans – tres chic! Were they expensive?”
Girl #2 -“Very. They put me in debt but I had to have them.”
Girl#1 – “That is so not stylish.”
Compound Interest
Where you pay (or receive) interest on your interest.
I owe so much interest on my credit card bill it’s as if my shoes bought their own shoes.
Time Value of Money
All things being equal it is better to receive money sooner than later.
A true Fashionista measures time in seasons and hates to wait.
Professional Help
Experts who can help you manage your money: Accountants, Attorney, Financial Planner, Investment Adviser, Insurance Broker, Realtor, Stock Broker
I’ve hired a professional, after all it’s a fine line between super stylish and fashion train wreck.
Add comment June 5th, 2009