Getting Specific with Savings Goals for the Year Ahead

We’ve talked before about the idea of setting goals so you can save what you want to save (and ideally more besides). But there is a big difference between setting goals and setting specific goals that are packed with detail. The difference is mainly that detail makes it easier to be held accountable to those goals.

Take a look at these two examples:

#1:  “I want to save as much as possible during the coming year.”

#2:  “I want to save $5,000 within the next 12 months. I will do this by cutting back on spending and finding better deals for utilities and other outgoings. I must save at least $416.66 a month to achieve this goal.”

If you had to pick one of these two examples, which one would you pick to get you up and running and headed towards your goal this year? Most people would automatically go for the second example when presented with both of them. And yet if they were left to their own devices they might end up going along with the first one without even thinking about it.

The trick to remember is to include as much detail as possible in your savings goals. It doesn’t matter why you are saving – there doesn’t even have to be a reason beyond wanting to create a cushion to protect you in case of financial woes. The more information you can add to your goal, the more personal it becomes. This in turn makes it easier to keep your goal close at heart so you stand a much better chance of achieving it.

You’ll also notice the second goal gets a lot more specific in terms of timing. Not only does it specify the amount of money you want to save, it also divides it up. This means you know exactly how much you need to save each month in order to hit the target at the end. If you fall short, you know you need to up the ante over the rest of the year. If you end up saving more than the allocated target amount in January (for example) you should still aim to save the monthly amount from February onwards. The additional sum can act as a cushion in case you fall short for some reason later in the year.

Getting into the specifics of things doesn’t just apply to monetary goals. You can use this technique in all kinds of situations. However it certainly works well if you would like to finish this year with more cash than when you started. It doesn’t matter whether you want to put the money in a standard savings account, stocks and shares or anything in between. Setting a proper goal to begin with is the aim here, and you might be surprised how much you can achieve when you spend time working out the details. Try it now and see just how much easier it can be to save this year.

The Good, The Bad and The Ugly of Mortgages for Rental Properties

If you are looking into a mortgage for a rental property, you likely already have one on your year-round home. This rental property might serve to bring you more income. During the summer months, you might retreat there with the family and rent it out for the other seasons. Whatever your motivation is, you should know some important information about mortgages for rental properties.


Getting Approved

Before you can take another step in this process, you obviously have to get approved for the rental property. This might be a little bit more difficult than you think, but it can be done. Remember, once you are approved, you are going to have two mortgages in your name. Essentially, you must be able to afford both of them, a mortgage calculator is really useful for finding out what you can afford. Showing that you have a large deposit to make on this rental property can be extremely helpful for the situation.


Counting The Rental Income

Some people assume that they will be able to count all of their rental income while they are going through the approval process. This is generally not true. Usually, you are able to count only a certain amount of the rental income toward your income. Furthermore, you need to actually know that you are going to have renters. Even if the bank does approve you for the loan, you have to consider whether or not you can afford it if you go through a time when no one is renting the property.


The Length of Time

When you purchased your first home, you may have been in your late 20s or early 30s. At that time, you didn’t mind having a mortgage that would last for another 30 years. However, now, things have changed. You may be getting close to the end of your first mortgage. You should really think about how long you want to be paying this mortgage for. Take your retirement into consideration as well when making this decision. A rental property can be a wonderful place to retire to, but you want to be sure you are able to pay for it then.


Other Elements to Consider

If you are really thinking about taking out a mortgage for a rental property, you should definitely speak with someone who has experience in that area. Failure to do so could mean you don’t know all of the ins and outs. For example, let’s say that the house is in need of major repairs. No one is going to want to rent out a property like that, so you need to be sure that everything is taken care of. This might require you to take out a loan to get the improvements finished, so you have to be sure you can get qualified for that loan amount as well.


Plenty of benefits exist to taking out another mortgage so that you can have a rental property. You’ll have somewhere to go and an opportunity to make extra income. However, you need to consider the full picture before taking this major step.

Is it Possible to Save TOO Much?

We are constantly reading about how important it is to save money – for our children, for our homes and needs and for our future. But can this worthy habit become too much for some people to cope with? Are there times when saving money can become a hindrance rather than a help?

It shouldn’t come as a surprise to learn this is indeed the case. A lot depends on your own habits and whether you are naturally a spender or a saver. However it is possible for some people to go too far and save to extremes, leaving little if anything to actually enjoy as they live their lives.

Saving for tomorrow

It is admirable and indeed necessary to set up good savings habits so you have some money in the bank for the future. This could be for a vacation, your child’s university days or perhaps for your retirement. There are a million and one worthy reasons why you can and should save money.

However there are also plenty of reasons why you should guard against saving to extremes. Let’s look at a hypothetical situation that describes the difference between normal saving and extreme saving. The latter may involve you wanting to save every single cent instead of actually enjoying any of it. For example, you might be tempted to treat yourself to a coffee and a donut while you’re out one morning, but you decide to save that cash instead. If you do this in every situation you’re in, you could end up spending nothing and becoming overtly thrifty. There is nothing wrong with being thrifty but if you never spend anything you won’t enjoy your life either.

Goals are important

The above example shows you just how important it is to set goals for saving a certain amount of money in a certain period of time. This not only ensures you have a better chance of saving the amount you want, it also ensures you have a little left over to enjoy as you move through life. It’s all about getting the right balance and if you can’t manage that you could move into becoming an extreme saver.

Of course some people love looking for bargains and saving as much money as they can. This is an admirable way to live but you do have to be careful you don’t move into the situation described above. If this should occur you will end up finding you save to the detriment of all else – instead of enjoying your life a little as well.

This should give you something to think about if you are trying to focus on saving without going over the top. Striking the right balance can be tricky. While many would say erring on the side of caution is better, it is possible to overdo it, as we have seen above. Think about this when you are saving and investing money, so you can see whether you are striking the right balance or not.

Knowledge is Power: How Much Financial Knowledge Do You Have?

If you want to solve a financial problem in your life, you need to seek out the right knowledge to achieve that aim. Oftentimes this is where people go wrong when they are faced with the challenge of choosing the right savings plan or investing in the right stocks. Indeed this applies to any financial situation you might find yourself in during your life.

The typical approach to a financial issue is this: people go on the knowledge they already have in order to find a solution. For example, they may know of two types of savings vehicles they can use to save for the future. So they base their decision on those two vehicles and never think to see what else is out there.

Broadening your horizons

In truth, it is easier to solve any financial problem if you have more information to use to help you make your choice. This means taking the time to find that information instead of assuming you know everything there is to know already.

Your first task whenever you have a problem of this type is to find as much information as you can. Don’t make a kneejerk decision based on too little information or data. Let’s say for example you have $5,000 to invest for the future. Maybe you’ve been given a bonus or come into a lump sum for some reason. You might immediately think of investing it in shares or putting it in a basic savings account. However, if you take the time to find out what else you could do with it, you’ll realize you can generate lots of other possibilities.

This is why knowledge is power – it’s not just something people say. However it is up to you to decide how much power you want to have over your finances and your financial future. In truth the sooner you start educating yourself and amassing this knowledge, the sooner you will be able to improve your financial future.

Starting today

It can be all too easy to look back on your life and see decisions you made that you don’t approve of now. You can see mistakes very easily indeed when you have 20/20 vision – commonly called hindsight in this situation.

However, you should be aware you can choose today to change things. Whatever you may have done financially in the past, you can change things today and head in a new direction. This is possible when you amass fresh knowledge and use it to enhance your financial position.

Don’t make the mistake of thinking you have to have lots of money for this to work either. It doesn’t matter how financially well off you are, and in fact, you can use newfound knowledge to help you cement a more positive financial position in the future.

So remember the phrase ‘knowledge is power’ and consider how much (or how little) financial power you currently have. If you don’t have much, you know what to do about it.

How Complex Should Your Portfolio Be?

Some people seem to think their investment portfolio isn’t doing the job unless and until it becomes highly complex in nature. But how true or helpful is this? Can you really say your investment portfolio is better for being more complex?

Too complex is as dangerous with regard to investments as being too simplistic. Striking the right balance can be tricky and it can sometimes feel as if you’re trying to get a pendulum to stop at the exact right point for you. Let’s look at the pros and cons of being simplistic or complex with regard to your investments.

The pros and cons of staying simple

The main advantage of keeping things simple is you will be able to gain a better understanding of where your investments are and what they are earning. The more you have the more complex it becomes and the more likely it is you will miss a trick somewhere.

Of course, keeping things simple can backfire on you too. This is because you can end up with too few investments that don’t really serve your needs as well as they should. However different people have different requirements so you have to think about whether a simple investment plan would suit you, or whether you want something more involved.

The pros and cons of being more complex

Here the main advantage is you can put money into a wider range of investments. However the downside is clear – there is a higher chance of investing in something you don’t fully understand. You may also find it harder to keep track of your investments, so you won’t find it as easy to see when they are no longer working as well for you.

What is the bottom line?

The bottom line is you should be able to understand your portfolio. If you can’t understand it you’ll end up with no idea of whether it is performing well for you or not. You cannot make a confident decision about an investment if you cannot understand it properly.

Some people rely on advisers to give them the information they need to build a portfolio. Yet while advisers can be useful to an extent, there is a tendency to rely on them a little too much. This is why you need to make sure you can understand your own investments instead of taking the easy route and trusting someone else’s explanation and signing on the dotted line. This is never a good way to approach things and it should not be your main method for choosing investments. Do your own homework and make sure you understand every investment you sink money into, whether it is one investment or ten.

There is no clear answer to the question of complexity. Yet it is fair to say being either too simplistic or too complex makes it more likely you will run into problems in some way. Consider your own investment plan and ask yourself whether it veers into either extreme.

Are You Investing in YOU?

Whenever you hear someone talking about investments, you probably immediately think of the different types of investments they (or you) should make. But it can pay dividends to think along different lines too. This is particularly true when you start thinking about your own needs.

This is where we get to the idea of investing in you. If you were to read any definitive guide on investing, you’d notice that while some of the advice applied to you, not all of it would. The same would apply to other people. In reality no two people will ever have exactly the same requirements for their finances. Once you figure in their situation, their job, their future plans and so on, you’ll see how true this is.

So what do we mean by investing in you?

You have to figure out what you want from life in terms of your finances. If you do this you can work out how to gain the best possible results – not to mention amassing the largest sum of money to invest in your future. This is where we’re starting to get to the root of what it means to invest in you.

The idea here is to invest in your skills so you become better able to choose the right investments, and better able to free up more cash to put into them. The first way to do this is simply to educate yourself on how to invest your money for the best. If you have little knowledge of how to invest money, you could improve your knowledge by going online or buying books that will tell you more about the different investments available. The more you know about them, the less likely it is you’ll invest in the wrong ones or make any financial mistakes.

The other way of investing in you is to further your career so you are capable of earning more money. The investment here could be in a course or further qualification of some kind, so you are able to increase your worth to gain a better job.

As you can see, both of these methods invest in you as a person in different ways. Yet they both have one end goal in common – the ability to achieve the results you want by improving your own knowledge and ability to generate money to invest.

Decide where your investments need to be made

Of course you may already know a great deal about investments of all kinds, or at least of the kinds that interest you. However this is only the first step. You now need to ensure you generate enough money with your skills to be able to create those investments.

Conversely you may have the cash available to make investments but you may not have the knowledge required to help you place that money in the best way for your needs. This is why it makes sense to decide where best to invest in YOU, so you get the results you want.

How to Use the ADX Stock Indicator

The ADX indicator can be a useful tool when it comes to gauging whether a particular trend is worth following in terms of investments. The indicator was created back in 1978, and the letters stand for the Average Directional Movement Index.

Most people are familiar with trends and how they can influence our need to buy something. If a particular fashion look is trendy, more people are liable to buy it. But every trend is only likely to last for a particular time. This means those fashionable slacks you have may not be so trendy next year, so you’d likely ditch them before then.

Spotting trends

The same thing applies in terms of the ADX stock indicator. It allows you to see whether a trend is weak or strong, and you can thus gauge whether to buy or sell your investments – in the forex market for example – as a result.

Generally speaking if you see an ADX value that drops below about 20, you can consider that to be a weak trend. The lower it goes the weaker it will be. Conversely if it should go above 40 it will be an indicator of a strong trend.

Which indicator is the most important one to be aware of?

In truth, both ends of the scale are worth looking at. You don’t want to invest in things that have weak trends because they aren’t likely to go anywhere or get you any particularly good results. Of course you can keep an eye on them in case things change, but generally speaking you should ignore them for now.

The interesting ADX indicators are those that start climbing. Some say anything above 25 is worth looking at, so you can see that an indicator measuring 40 is well worth a closer look.

Should you abandon all other methods of choosing stocks?

No – using the ADX stock indicator should form just one part of your overall strategy to find stocks that are worth investing in. If you use the ADX indicator for just one thing, it should be to find the magic number 25 and to see whether the trend is going up or down from there.

This will help you spot the strong trends and avoid the weak ones. A value of 25 that starts going up will be well worth taking a closer look at, for example. If you use this indicator along with a number of other tools, you can narrow down your investment options. Hopefully you will arrive at a far better result than you would have had before.

The ADX stock indicator takes a little getting used to if you have never used it before. As with any other stock picking method, it makes sense to have a few dry runs and to ‘invest’ in chosen stocks in a virtual sense first to gauge your success rate. You can then work out whether you want to go ahead and use it more often.

How the Commodities Market is Standardized

Most people have heard of the commodities market. But there is a big difference between knowing about it and understanding how it works. Commodities are so called raw products. These could be food items, types of energy or different precious metals to name just a few.

The issue of standardization and how it works

Unlike other types of trading platforms, the commodities market requires all traded items to be standardized. This prevents substandard items being traded for the same price as superior items. Each item traded has a specific set of instructions and details applied to it, so the commodity falls into a specific grouping. Many different aspects of a particular commodity can be gauged, but among the most common are the quality of the item and where it comes from.

The amount of the said commodity will also have an effect, with rare commodities reaching higher prices typically because they are more sought after than commonly occurring ones.

Would the commodities markets work if standardization didn’t exist?

It is fairly reasonable to say they would fall into disarray. In fact trust in certain commodities may be eroded because the potential buyers wouldn’t know exactly what they were buying.

Let’s look at an example using one commodity in particular – wheat. If you wanted to trade in this commodity at present, you would be assured of several things. You would know the commodity is reliable, available and of a certain quality, otherwise it would not be listed on the commodities exchange. This gives you the confidence you need to consider it as a potential investment.

Now let’s think about what would happen if standardization did not exist. In this situation you may think twice about such an investment. After all, with no standard parameters in place, how do you know whether the wheat is of high quality or poor quality? Furthermore do you know where it is based or how much of it there is?

All of these parameters – a staple part of the standardization process – give the buyer confidence in what is being offered. Without them buyers would probably shy away from investing in these commodities – and that could spell disaster for the market as a whole.

Needless to say, the very nature of raw commodities means they are not necessarily all the same. To this end, the standardization of the process makes it easier to regulate the marketplace so buyers find it easier to tell which items they want to invest in. Whether it is wheat involved, or something else entirely such as a raw metal, it is important to ensure everything on the market is of approvable and identifiable quality. Without this structure in place, the market simply would not work.

So the next time you consider getting involved in the commodities market, be aware of the existence of standardization. It is one of the best indications there is of the quality of whatever you happen to be interested in investing in.

What are the Best Oil Mutual Funds?

Some people who want to invest in mutual funds are quite happy to invest in balanced funds that take in all manner of different companies. But others want to invest in specific funds with a theme, such as oil mutual funds for example. Oil mutual funds tend to be quite popular because their returns are generally rather good when compared to other funds.

If you are interested in this particular area, it is wise to do a spot of research to see what kinds of oil funds are out there to invest in. Obviously there are many of them and while we have provided a list of some of them below, this should not be treated as an exhaustive list. Indeed you should make your own decisions and look into each one carefully before investing. The same applies for looking at other oil mutual funds in case you prefer those you find elsewhere.

Vanguard Energy

If you want an average return of around 14% or more each year, this could be the ideal place to look. This is one oil fund that has weathered the storm of the recession rather well, even when other funds were struggling. This alone could give you serious reason to consider Vanguard.

Fidelity Select Energy Services

The idea with this fund is to get capital growth. If this is on the cards for you, explore it in more detail. It is a typical example of how an oil mutual fund has gone from strength to strength thanks to the increasing prices given to oil.

Invesco Energy

This is another oil mutual fund that has been progressing well. It didn’t do as well in 2011 as it has this year, but having said that it still outperformed many basic savings accounts, so you have to consider what to expect. It could be a good possibility for the year ahead.

ProFunds UltraSector Oil and Gas Investor

It may have a long title but the name of the game is to achieve a steady growth over time. And this particular mutual fund has managed to do just that, providing more than 9% in returns over the past decade.

Are you going to pick one or more mutual funds to invest in?

Of course the main idea is to spread your risk as much as possible. Thus you may wish to invest in more than one oil mutual fund if this is the area that concerns you. Consider how much you have to invest and what you expect to gain from that investment. This should help you work out whether you want to invest in more than one mutual fund and whether you want all of them to be involved in the oil industry.

Clearly many people pick oil mutual funds simply because they have the potential to deliver a reasonably reliable improvement each year. But regardless of your reasons to invest in them, the suggestions above should help you choose your ideal fund.

A Comparison Between Lending Club and Prosper: Peer to Peer Lending

If you’ve been reading our blog in recent weeks you’ll know we’ve covered peer to peer lending and two services in particular: Lending Club and Prosper. This week we’re going to focus in on comparing the two, to enable you to get a better understanding of how they fare against each other.

What amount of loans has been met so far?

At the time of writing, Lending Club had filled $960,287,975 in loans since it had first got underway. Prosper has managed under half of this at $411,000,000. Prosper opened its doors in 2006, while Lending Club began life a year later.

Are the loans rated to provide different rates of interest at each club?

Yes – you’ll notice different grades of returns at each service, going from A upwards. This enables you to gauge what degree of risk you are happy with and to balance your investments in each case too, so you can spread the risk.

What is the maximum amount you can borrow if you are looking for a loan?

Prosper will lend a maximum of $25,000, with a minimum of $2,000 in place. Lending Club will lend up to $35,000 and there is no obvious minimum given.

Are you guaranteed acceptance for your loan?

No – Prosper indicates it will accept creditworthy borrowers, whereas Lending Club specifies that it approves less than 10% of the people who make a loan application.

How do you invest? Is the process similar for each one?

Yes – you invest in notes. Each note with each company is represents a $25 investment. You can choose how many notes you want to invest, although a larger amount is more likely to give you a good rate of interest, because you can spread your risk across more than just a handful of investments.

Do you get a good degree of control over your investments?

Yes you do, because in each case you can decide whether you want safer A graded investments or riskier higher graded investments. Most people balance out the risk and thus improve their chances of getting better returns while spreading the risk.

How do you decide which peer to peer lending organization to go to?

There is no simple answer to this. One person might prefer Lending Club while another might be happy with Prosper. The best course of action is to go through all the options and to read the information on each website. Compare what each organization is giving you (either as a borrower or an investor) and see which one seems best for your needs.

One thing is clear though: both Prosper and Lending Club have established themselves as leading players in the peer to peer lending market. If you like the idea of this new model of investing and borrowing, it might prove worthwhile to look into it further. Plenty of people have already had experience of peer to peer lending from one side or another: you could be next.