Posts tagged 'Personal finance'
You thought you knew all about bonds – friendships, relationships, marriage, the hot one who actually did call the next day. So all this economic talk about rates and payments has you flummoxed.
In financial terms a bond is a loan to a company or to a government. When you buy a bond, you agree to loan your money to the company or government in exchange for interest payments they make to you and the return of your money at a later set date. You receive your interest rate payments in the form of checks, sent out within a set time frame. You receive the full amount of your original loan back when the loan matures. The interest rate you receive depends on how strong the company is. The stronger the company, the less risky the loan and therefore the less interest you receive. (Conversely, the weaker the company, the riskier the loan and the more interest you receive.)
Just as you have a credit score, so do companies and governments. Like you, the better their score, the lower interest rate they have to pay. Where are bonds traded? Just as there is a stock market, so is there a bond market. (See January 12 Stocks posting). However, unlike stocks, some bonds don’t have to be traded in the market. When bonds are not sold on the bond market the transaction is called Over the Counter (OTC).
Turns out, financial bonds are so much easier to comprehend than the real ones.
January 26th, 2009
In his inaugural speech, Obama quoted the Bible: “the time has come to set aside childish things.” The question is does that include an obsession with shoes? He asked the nation to grow up and cited our “badly weakened economy” as a consequence of not just “greed and irresponsibility on the part of some but also our collective failure to make hard choices…”
So yes, sadly, it applies to shoes – or at least our obsession with them. A poll of 1,057 women by the Consumer Reports National Research Center for shopping magazine, ShopSmart, found that U.S. women on average own 19 pairs of shoes, although they only wear four pairs regularly; 15 percent have over 30 pairs.
Carrie: [In shoe store with Miranda]: Where did all my money go?
Miranda: At four hundred dollars a pop, how many of these do you own? Fifty?
Carrie: Come on…
Miranda: One hundred?
Carrie: Would that be so wrong?
Miranda: Four hundred dollars times one hundred, there’s your down payment.
Carrie: That’s only four thousand dollars.
Miranda: No, that’s forty thousand dollars!
Carrie: I spent forty thousand dollars on shoes and I have no place to live? I will literally be the old woman who lived in her shoe.
Carrie, with her disregard for her spending habits – tossing off hundreds of dollars for things she doesn’t need and will, in all likelihood, never wear – might be incredibly chic but is a very bad financial role model.
Managing your money, taking control of your finances and living within your means requires hard choices. However, if you put off or don’t make the hard choices, they become impossible.
January 22nd, 2009
One of the worst of the recent horrible headlines is the $50 billion dollar swindle perpetrated by Bernie Madoff. If you have not been following the saga, you should. It provides a valuable lesson about why understanding money and taking control of your finances is so important.
In a nutshell, Mr. Madoff paid early investors with money from later ones. He did this for so long, and on such a large scale, he convinced folks that whether the stock market was rising or falling they could invest with him and receive the same return – earn money on their money – without any risk.
Through understanding money, you understand the risks involved with investing. A higher return on investment almost always comes with a higher risk of losing your money. Most of us already know there is no such thing as a free lunch – or a free dinner. The same is true of investing: If something sounds too good to be true, it probably is.
January 9th, 2009
Today, Obama spoke about the current economic crises. He pointed out that “this crisis did not happen solely by some accident of history or normal turn of the business cycle … we arrived at this point due to an era of profound irresponsibility that stretched from corporate boardrooms to the halls of power in Washington, DC. … Banks made loans without concern for whether borrowers could repay them, and some borrowers took advantage of cheap credit to take on debt they couldn’t afford. The result has been a devastating loss of trust and confidence in our economy, our financial markets, and our government.” He’s right.
The recent economic headlines have been enough to make anyone nauseous. Money-savvy people are scared and financial novices are terrified. One of the most important promises you can make to yourself this year is to learn about money and personal money management. I realize learning about the economy can seem intimidating, math feels boring, and managing your own finances daunting – but if you can shop, you can manage your money.
Shopping actually requires you know more math than money management. For example to spend, you need addition and subtraction. To budget, you need addition, subtraction, and multiplication. To over-spend, you need addition, subtraction, multiplication and division. To shop, you need addition, subtraction and multiplication. Percents and decimals also help – especially if there is a sale! Notice that algebra is not listed; geometry is nowhere is sight (although one way to save money is to angle around the outer perimeters of the shoe department); trigonometry – forget it; calculus – don’t need it.
So make a commitment to yourself and learn about money. You’ll feel even better than you do when your skinny jeans fit.
January 8th, 2009
With all the screaming headlines about the collapse of the economy as we know it, it’s a good time to pause, stop and reflect on how the headlines affect you; and, more importantly, your love of shopping. What’s a Fashionista to do? Yes, “Recessionista” is the new haute word and yes, these days $1,000 + handbags do seem excessive and even a tag vulgar but sometimes a girl wants what a girl wants.
What to do? Go back to the basics. When you shop plan, focus and splurge only on investment pieces. Go lower scale for trendy items.
Now that I have your attention, I have a confession. This blog will be as much about finance as it is fashion. Planning, focus and investing are also ways to manage your money. But I promise not to put you to sleep! Watch – I’ll jolt you awake faster than a double espresso with three words: Shopping, shopping, shopping.
“Shopping isn’t finance,” you say. Yes. It is. Here’s how: shopping takes money and money is finance. Understanding money allows you to shop (and meet your insatiable need for that Louis Vuitton bag). Understanding money is about understanding some basic financial concepts. So, if you check in with me you will gain an understanding of basic personal finance and ultimately better shopping.
If you have so many shoes, but so little money, then this blog is for you.
October 24th, 2008
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