To Invest or Not to Invest.....

Now I know it's been a while since we've talked. Sorry folks, I was having some technical issues. But the show can go on, I have returned.

On to the FUN stuff: investments. I'm sure that you've watched the news recently (please tell me you have), and you've seen that the U.S. economy is not in the best of conditions. You've heard statements such as, "Stocks are up", "The Markets are down", and "Bond yields are rising." At this point, your eyes glaze over, and you wonder to yourself, "What are they talking about?" After reading these upcoming posts, you will have a better understanding of what those terms mean, and you'll sound smart when you're having dinner with friends.

First up, stocks. What are stocks anyway? A stock is a type of security or financial instrument that represents ownership in a corporation. In simple terms, if you own stock in a particular company, you own a little piece of that company. You will also hear stock referred to as "shares". There are two types of stock: (a) common and (b) preferred. What's the difference? If you own common stock, you are able to vote in shareholder meetings and receive dividends. If you own preferred stock, you don't have voting rights, but you receive dividends before those who own common stock. 10-second lesson: Dividends are simply portions of the company's profits that it distributes to shareholders, usually on a per-share basis. So if you own 100 shares, and the company declares a $.50 per-share dividend, you'll be getting back $50 (excluding taxes). Also, if you are a preferred shareholder, you have priority if the company goes bankrupt. For the most part, when you hear people say, "Stocks are up", they are referring to common stock. A question you may be asking yourself is, "Why do companies issue stock?" The answer is simple: to raise capital (funds).

Next, bonds. You've probably heard the term "bonds" or "fixed income securities" thrown around by old people (or youthfully challenged folk). What does it all mean? I'll give you the Investopedia definition: A bond is "a debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities. Bonds are commonly referred to as fixed-income securities." In English, with bonds, you are basically lending your money to a company or the government for a certain amount of time.

Third term: mutual funds. A mutual fund is an investment company that essentially pools the money and resources of several investors/shareholders together and invests in a variety of securities (i.e. stocks, bonds) to achieve a specific objective over time. So when you invest in a mutual fund, you are actually buying shares of the mutual fund, not the individual stocks or other components of the fund. Mutual funds usually have what is known as a fund manager who is responsible for investing the pooled money into the different securities. What's so great about mutual funds is that they provide diversification to your portfolio. 10-second lesson: Your portfolio is your personal arragement/grouping of financial securities that you've purchased. Diversification is a strategy in which you combine/mix different types of investments in your portfolio in order to reduce risk (chance of loss). Since a mutual fund invests in different kinds of financial instruments, your chance of loss is lower than if you just invested in individual stocks alone.

I know that I've given you a lot to process in this one post, so let's take a break. In the next post, I'll give you an idea as to how you purchase and actually make money from the above instruments, as well as clarify any uncertain terms. If you have any questions, feel free to e-mail me at ISDiffer@gmail.com. In the meantime, you can check out the links on the right side of the page --------------------->

Money Talks (Savers)

So now that I have finished berating the spenders of the world, next on the chopping block: savers. Now don't get me wrong, saving is extremely important. If you happen to fall in the "saver" category, I tip my Yankees fitted cap to you. But the question then becomes: How are you saving your money? Is it stashed under your bed or in your top drawer? Or have you started to make your money work for you instead of the other way around?

Many African-Americans are experts at spending their money, but have no clue how to save it. They keep it their wallets (making it more accessible and easier to spend), under the bed (don't feel like bothering with banks), or have it in traditional checking and/or saving accounts, earning 0.20% APY. 10-second finance lesson: APY is the acronym for Annual Percentage Yield. It's the rate of return on your investment or deposit that takes into account the effect of compounding interest, which is the ability to earn more interest on top of interest already earned on that investment/deposit. Let's say you got smart and opened a high-yield savings account (discussed below) that offered 5.05% APY. If you deposit $100 at the beginning of the year and no more, at the end of year, your balance would be about $105. You're probably saying to yourself, "$5 in interest? That's it?" News Bulletin: When you spend money on clothes and other depreciating items, you earn $0 in interest. In fact, you earn what I like to call "negative interest". Basically, your money is worth less now than when you had it in your wallet, shoe, or bra. Why? The reasons are: a. you no longer have the $100, and b. you have forgone the interest (FREE MONEY) that you could have earned if you had invested the money. Puts things in perspective, doesn't it? Now back to our regularly scheduled program......If you really want to increase your wealth, you have to save AND invest in the right places.

One of these right places is a high-yield savings or money-market account (MMA). As the name suggests, this type of account offers a higher yield (rate of return on your deposit) as compared to other traditional savings accounts. You are able to fund your account directly from the checking account you already have, and you have the ability to write checks (limited number) against the account. For many high-yield savings accounts, the initial minimum deposit can be as low as $1. For some MMAs, the initial minimum deposit can be much higher, in the vicinity of $1000. But others, like those offered by Capital One, allow you to open an MMA with the minimum deposit of $1 as well.

Another "right place" is a Certificate of Deposit (CD). It earns higher rates of return like the high-yield savings and MMAs, but your money has to be deposited for a fixed amount of time. If you withdraw the money before the maturity date or end of the fixed term, you have to pay a substantial penalty. The fixed terms range from 1 month to 5 years. The minimum deposits can start at around $500 or $1000, but can be as high as $100,000.

Above I've provided just a few ideas as to where you can save your money, and actually receive more money than you deposited without lifting a finger. As I mentioned earlier on, interest is free money! Think about it: For those of you who have education loans, this scenario should make the picture a little clearer. Let's say that when you started college, you took out $10,000 in student loans with a certain interest rate (APY). When you graduate, the balance is $14,000+. You become frustrated with the idea of having to pay back the $10,000 in principal as well as the interest that has already accrued (and will continue to accrue) on the loan. Essentially, you are giving the lender FREE money on top of the $10K he loaned you. He didn't have to clean your house, scratch your back, or wash your car to get it. Simply put, the interest is the ever-increasing fee you pay for using the lender's money. Wouldn't you rather be on the receiving end of that kind of deal? When you put your money in a high-yield account or CD, the bank pays you interest (FREE MONEY) in exchange for allowing them to use (borrow) your deposited funds when they provide loans and mortgages to other consumers/businesses. Now that it's put that way, it seems to make more sense to save some money than spend it all, doesn't it?

For my friends who are interested in bigger numbers or have more money to invest, stay tuned because we are going to get into some savings/investment products that can earn you bigger returns, but aren't FDIC-insured. 5-second finance lesson: FDIC stands for Federal Deposit Insurance Corporation, which is an independent agency of the U.S. Federal government. Most banks within the United States are memebers of the FDIC, which means your deposits with the banks are insured/guaranteed by the Federal government up to the first $100,000. For example, let's suppose you have a savings account with FDIC-Insured NoWheresVille Bank. The balance in that account is $50,000. If the bank happens to go bankrupt (that wording seems a little redundant), the Federal Government will make sure that you get your $50,000 back. So even though NoWheresVille Bank becomes non-existent, you don't lose any of your $50,000. In the next post, I'll begin to talk about investment products such as stocks, mutual funds, etc. that don't have deposit insurance, which means there is the possibility that you could lose money (Enron, anyone?). But if you make smart investments, even though there is always the possibility to lose, you can reduce your risk AND make a decent profit. If you're interested, stick around!


***Thinking about opening a high-yield savings account, MMA, or CD? Check out the money links on the right side of the page.***

Money Talks (Spenders): Continued

For those of you who decided that you were too special to do yesterday's exercise, I'll give you the example of a good friend of mine. We'll call her Kristy for now. She made $37,100 last year after taxes and bills (rent, food, cable, etc), and as of January 4, her checking account balance was $340. Now the question I asked was "Where did the money go?" The answer was simple: Kristy likes to spend money as if it was going out of style. Her rationale is, as she explained, money is only paper. It's made to be spent. Sounds like someone you know, right? Well, the truth is, if Kristy got fired today (which is a distinct possibility in this economy), she could not afford to stay in her apartment for a month or pay her car insurance. Now my purpose is not to scold you or put you on a time-out for spending your money foolishly. Hey, you earned it. You can waste it all you want ;-) I'm just here to provide food for thought.

Even though money is paper, it's the paper that makes the world go 'round. So frivolously spending your money isn't really beneficial to YOU because if you don't have any money, your part of the world stops. The bills aren't paid, there's no food, no clothes, you get the point. No one is saying that shopping is bad, or you should live like a hermit on just bread and water. But the key to having more than enough money for that rainy day is to live below your means. Not above, not dangerously on the edge, but BELOW your means. What do I mean by that? I mean that you should only make purchases (outside of the necessities) that you can comfortably afford and won't cause you to scrape by, barely surviving from paycheck to paycheck. You shouldn't be sacrificing meals, living arrangements, or childcare in order to spend money on clothes, jewelry, or other things that depreciate (decrease) in value once they leave the store.

For you spenders that have come to favor the layaway path to flyness....Just as an FYI, the only things that you should be paying for in installments are:

1) student loans (education is a good investment)

2) a house (usually appreciate in value, and over time, equity in the house increases)

3) a car (reasonably priced, you shouldn't be driving a $70,000 vehicle with a $40,000/year salary)

4) furniture sets (not just an expensive couch) - quality, long-lasting furniture is usually more expensive than the stuff you find at Ikea.


However, if you have to make monthly payments on a coat, a pair of jeans, or a pair of sneakers, that means you can't afford them. For those of you spenders who have babies or young children, if you are sacrificing formula, baby food, or daycare in order to get the IPhone, that means you can't afford it.

Many of us look at the lifestyles of people like Jay-Z, Diddy, Beyonce, Paris Hilton, and believe that if we spend our entire paycheck on what they wear and use (in terms of phones and other gadgets), we are just as "fabulous" as they are. The rest of us spend our money on expensive brand-name clothes and other items just so we can say we've got stuff, more stuff than the person next to us. That old idea of keeping up with, or these days, running past the Joneses. But if you have to save all of your nickels and dimes in order to purchase one item, you probably aren’t as fly as you think you are. No offense, but individuals with real wealth don’t have to try that hard. They’ve already got their investments, savings, and stash accounts set up, their homes and cars are paid off, they’ve retired their parents, so the rest of the cash can be spent without a second glance. But those of us who have just a little something can’t wait to turn our money over to other people. Then we complain that African-Americans can’t have anything in the U.S. because the White man has everything. News Flash: If you keep taking water from a well, and the water isn't replenished, THE WELL WILL DRY UP. Plain English: If you continue to give someone else your money and are keeping nothing for yourself, soon that person will have all your money. And, as I said earlier, your part of the world stops.

Bottom line, spenders: No one is saying you can’t spend, but spend wisely. If you continue the trend of spending to impress other people, belittle (put down) other people, or just because you can because you think you’re ballin’ out of control’, sooner or later you’ll find yourself drowning in debt with only your last season Prada and Gucci shoes to show for it.

Keep reading because I have some tips and advice for the savers that you spenders may be able to find useful as well.

Next up: Money Talks (Savers)

Money Talks (Spenders)

See? I told you the finance posts were coming. You just had to be a little patient. But before we get into your pocket, here's a quick political update: In a surprising turn of events, Hilary Clinton won the New Hampshire primary for the Democrats. As mentioned in the previous post, Barack Obama was on track to win New Hampshire with a substantial lead. However, the turnaround came when the former first lady got all choked up and glass-eyed in a New Hampshire diner after a supporter asked her a question. (For further information on Hil's theatrics, check out: http://www.cnn.com/2008/POLITICS/01/07/clinton.emotional/index.html?iref=newssearch#cnnSTCText) For the Republican readers, John McCain won in New Hampshire, with Mitt Romney in 2nd place, and Iowa winner Mike Huckabee coming in last place. All eyes now turn to the primaries in two key states, Nevada and S. Carolina.

The other topic that has dominated the media and will continue to do so over the coming months (especially as the elections get closer and Bush prepares to leave office) is the U.S. economy. Whenever we watch the news or read the newspaper, there is always a colorful arrangement of articles and commentaries about the flailing U.S. economy. The housing slump, the struggling credit market, imminent inflation, and the list of financial woes goes on and on. However, before I tackle what's going on in the overall economy, let's talk about YOU and YOUR money. I'm not going to warm you up to it, we're going to just jump right in. Why? The reason is simple: You need a little shocker to get your dollars and cents in order.

Today, I'm going to talk to the spenders. Yep, those of you who HAVE to be the flyest thing since Blackberries and Sidekicks. We're going to do a simple exercise. My dad used to do it with me when I got my first job (and actually still does). Grab a pen/pencil and a sheet of paper. It's not going to take long, I promise. To start, I want you to ask yourself a very simple question: How much money do I have right now? Let's keep it basic, so include just your checking account (no savings or investment accounts because they earn interest/returns). I want to use your best judgment and common sense here. If your checking balance is slightly inflated because of the Christmas money you received from Grandma Louise or sweet Aunt Patty, deduct the total amount of the gifts so that it's only YOUR hard-earned cash we're working with. DO NOT include credit cards. Why? Because IT ISN'T YOUR MONEY!! When you get the amount, write it at the top of the page. Now for you spenders with a steady job (if you dont have one, you shouldn't be able to spend anyway), I want you to take the average amount of your NET paycheck (meaning after taxes and bills) for 2007 and multiply it by 52 (if you got paid every week), 26 (if every other week), or 24 (if semi-monthly). Once you have the number, write it underneath the first amount. Then subtract the second number from the first. Yes, it's probably a negative number. The reason is that's all the money you DON'T have! I want you to circle that number. If for some of you that number is relatively small, congrats. For the rest of you, if you look at that number and all of a sudden, you feel uncomfortable, we've got some work to do. Tomorrow I'll have an example that will help you change the way you think about spending all that money.

And The Winner Is....(Part II)

Here we are, Part II. By now, you should know that Illinois Senator Barack Obama has won the Iowa caucuses for the Democrats, beating out Hilary Clinton and John Edwards for the top slot. He is also on track to win the January 8th New Hampshire primary, leading with 39% support, according to a recent research poll. For those of you who are Republicans, former Arkansas governor Mike Huckabee won the Iowa caucuses for the Republican Party, but is now trailing behind in third place for the New Hampshire primary with only 14% support,according to the poll.

Now back to this issue of voting (yep, it's important enough for two posts).....Besides the lovely reasons that were presented in Part I, many African-Americans explain that they don't vote because none of the candidates represent their interests. The funny thing is, they only know about the one or two candidates that are all over the T.V., kissing babies and helping elderly people with their groceries. They have no clue about the others who aren't all over the T.V. screen, but are doing just as much and are probably more likely to represent their interests. It may take a little more effort to find out about these candidates (yes, actual research), but if you want change, you have to be willing to work for it. The candidates who aren't doing the Pepsi commercials are the ones who need your support the most. Bottom line: If the most visible candidates don't seem to be proposing the type of change you believe in, find one who is. Should it turn out that no such candidate is running, vote for the one is most closely aligned with your beliefs. If we are all "so-called" tired of the way this country and our cities are run (Woe is me, I'm Black), we should be more than willing to do whatever we can to make a difference, even if the difference seems small at first. I know this sounds cliche but it's true: "If you aren't part of the solution, you're part of the problem." By sitting back and waiting for things to change, you DEFINITELY aren't solving anything. For further info on voter information and registration, current elected officials, candidates, and more, please see the voting links on the right side of the page.

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And The Winner Is.....(Part I)

Now that 2008 has begun, the upcoming elections will take the driver's seat in the media. The reason is that long before the November elections, the various states will hold their caucuses / primaries. Simply put, states hold caucuses / primaries in order to select their preferred candidate for the elected office (presidential, congressional, etc). In fact, the first caucus for the 2008 Presidential election is being held in Iowa tonight.

In the case of many African-Americans (not ALL), voting and elections seem to be non-issues. However, there are reasons given. Below I have a few of my personal favorites:

5. I don't vote because my vote doesn't count. (Now if 10 million of you say the same thing......)
4. I don't vote because the outcome of the elections don't affect me. (You live in the U.S., don't you?)
3. I don't vote because I don't know anything about the candidates. (.......)
2. I don't vote because I'm not registered. (http://www.register-vote.com/)
AND THE ALL -TIME FAVORITE.....

1. I don't vote because that's how people get chosen for Jury Duty. (WOW!)

I could go on and on about slavery, the 3/5ths compromise, and the fact that so many of our foreparents fought and died up until and through the 1960s to get equal voting and civil rights for African-Americans. So everytime we neglect our duty at the polls, we are spitting in their faces. I could rant and rave that in so many other countries (ex. Iraq, Pakistan, and Kenya more recently) free, fair, and orderly elections are not common practice. But instead, I'll just leave it at this: Voting is one of the easiest ways to affect change in our communities. I'm not just talking about voting once every 4 years in the presidential election, and then expecting all the woes of your neighborhood to be taken care of. News Flash: The person who is elected to the office of President has to look out for the interests of the 300+ million people that live in this country. So don't expect for the President to be especially sensitive to YOUR needs. However, if you take the time to vote for candidates (who share your values and ideologies) at the municipal and state level, you will be able to affect change much closer to home. When you vote for your senators and congressmen, you are able to affect the legislation that is passed, not only for your particular state, but for the nation as a whole. Your vote helps to get the right persons in office to create the necessary changes in education, healthcare, public assistance, and other issues that directly and/or indirectly affect YOU. Check back in for "And The Winner Is.... (Part II)".

Happy New Year!

Ahhh….New Year’s Resolutions. They’ve become almost as American as apple pie and fear of terrorism. But are they really useful? We’ve all made them (myself included) and by April or May (if that long), those resolutions have long been forgotten. One question that I have always had is: “Why do we wait until January 1 to make changes in our lives?” If you got something in your life that’s screwed up or needs improvement, why not make the change right away? If you want to lose 30 lbs, why wait until January? Chances are, if you wait until January, you may end up needing to lose more than 30 lbs. anyway. If that guy/girl in your life is irking your last nerve, why wait until he/she stresses you to the point of drinking on New Year’s? Save yourself the grief, and get rid of him/her ASAP.

On the other hand, there are those few who find it helpful to make those resolutions for January, and they actually follow them through to the end of the year. If you happen to be one of those few, kudos! You’ve achieved something that many of us never could. Another note: Should one of those resolutions be getting your finances in order, please stay tuned for upcoming posts. There will be small tips and tidbits of information that just may help to get you on the right path of achieving your goal.