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September 9, 2010, at 6:00 am If you're new to BFS, please subscribe to my RSS feed. It shows me a vote of support and keeps me motivated to keep your attention. If you have any questions or comments for me, please contact me and I'll get back to you asap. Thanks for visiting! The following is a guest post by Barbara Friedberg, editor-in-chief of BarbaraFriedbergPersonalFinance as well as a portfolio manager and MBA professor. She has an MBA in finance and a BS in economics (& an MS in Counseling too). She is passionate about financial literacy and wants to share her knowledge and experience with others.
As I was talking with a fellow personal finance enthusiast yesterday, I realized once again – young people who learn investing basics have a leg up on their peers as well as an unbelievable opportunity for lifetime wealth. This opportunity far surpasses the investing opportunities of their parents, their grandparents, and their elders. In most instances, the elders trump the youth; make more money, have more experience, have better homes & cars, and frequently have less stress.
Then how can it be that the younger folks are in a better position to invest with greater chance of success than those with more years under their belts?
My former MBA professor, Dr. Pat C. frequently espoused the SECRET TO WEALTH: Time in the market.
What the heck does time in the market mean?
Someone offers you a choice:
- A penny on day 1 and doubles the amount every subsequent day for a month.
OR
- At the end of the month you may have $100,000.
Which would you choose?
If you chose option 2, you are like most people, $100,000.00 after one month, how could you go wrong? A penny doubled each day for a month couldn’t possibly compare. Guess what, on day 31, your original penny is now worth $10,737,418.24.
With option 1, on day 14, you have $81.92. By day 18, your money has grown to $1,310.72. After doubling 5 more days, on day 23, your penny is worth $41,943.04. By day 31, that penny has compounded to more than 10 MILLION DOLLARS!
As you grow your original investment, the money you make on top of that investment grows exponentially.
Check out this real life example. After all, no one is going to double your money every day, unfortunately.
Consider these historical long term returns for 2 popular types of investments (asset classes).
Stocks-9%
Bonds-5%
Let’s say you invested $200.00/month in stock funds and $100.00/month in bond funds for 40 years. And assume their future returns were 9%/yr for the stock funds and 5%/year for the bond funds. You would have a total of over $1,000,000.00 at the end of 40 years.
| |
Amount invested per month |
Average Return |
Total amount invested |
Ending value after 40 years |
| Stocks |
$200.00/month |
9% |
$96,000.00 |
$936,264.00 |
| Bonds |
$100.00/month |
5% |
$48,000.00 |
$152,617.00 |
Total-
66% STOCKS
34% BONDS |
$300.00/month |
Average combined return
7.64% |
$144,000.00 |
$1,088,881.00 |
Of course we all know that historical returns are no guarantee of future results. But consider this question; do you believe the United States and world economies will continue to grow in the future? If so, then contributing to stock (ownership in companies) and bond (loans to companies and governments) mutual funds when you are young and adding to them regularly will likely grow your wealth way beyond your expectations.
We don’t know if the return will be the same as in the past, but it is likely that it will beat out the historical 3% inflation rate.
PRACTICAL APPLICATION: I have no Money, How Can I Start?
With money, as with time, there is usually availability for the important things. You have time for stuff that matters. You have money for what is important. Make a commitment NOW to your future. Start with any amount and increase as time goes on. You won’t miss money taken out of your paycheck before you get your hands on it.
- If your employer offers a retirement plan, sign up. Start out contributing at least enough to get an employer match and more if you are really motivated.
- If you have no retirement account at work, shift money to a discount broker (ie Vanguard, Charles Schwab, or Fidelity) every month.
- Depending on how comfortable with your asset values going up and down (RISK TOLERANCE). You will choose investments weighted more toward stocks (riskier) or more toward bonds (less volatile). For more help on this topic check out my Lazy Investors Guide to Asset Allocation (see below).
- In your investment account, either at work or at a discount brokerage, choose 3 types of funds to start with: A broad based stock index fund which includes stocks from all over the USA of various sizes such as Vanguard Total Stock Market Index (VTSMX). Next choose a broadly diversified international stock index fund like Vanguard International Index Fund (VGTSX). Third, put a percent of your investing dollars in a total bond fund like Vanguard Total Bond Market Index (VBMFX).
- Keep adding to these funds every month in the percentages you are comfortable with. (Stocks, higher risk/higher return; Bonds lower risk/lower return).
You are done! Check your progress every 6 months or so. That’s it!
ACTION STEP:
Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.
Learn about investing by reading my- series MBA Course: Investing and Portfolio Management.
Class 1: Risk vs. Reward
Class 2: Bonds
Class 3: The Lazy Investors Guide to Asset Allocation
Class 4: Get Rich by being Passive
Take charge of your future!
Caveat: This article is for information purposes only and may not be appropriate for your individual situation.
Question from Crystal:
What do you think? Do you do something similar to the above?
September 8, 2010, at 6:00 am
Okay, I can’t help myself. Would you consider this a great decoration for your personal space at work?
In case you can’t see the picture above, it is a framed bright pink poster that says “Drama Queen”.
I think it’s unprofessional, but I can’t put my finger on my exact reasoning behind that judgement. It just seems silly to be proud of being an overreactor. Oh, and I also hate pink…for some reason, that color annoys me…
What do you think? Is this as tacky as I think or am I just being weird? Have you seen similar oddities around your job?
September 7, 2010, at 6:00 am
I know a ton of you have probably already used Craigslist to sell random items you no longer use (if not, here are some tips for selling on Craigslist), but not as many people know how to sell a car on Craigslist.
My husband wanted a new car about two years ago and found his current Toyota Prius. We were going to trade in his Hyundai Sonata as part of the deal, but they would only offer $2000 for a car that was worth at least $4000. The idea of selling it myself was intimidating, but $2000 is one heck of a motivator. I quickly learned how to sell a car on Craigslist.
This is how to sell a car on Craigslist based on our own personal experience:
1. Look up the value of the vehicle.
I used Kelley Blue Book but many people prefer Edmunds. I saw that KBB thought the Sonata was worth $4300 in fair shape or $5500 in excellent condition, so I decided to aim for $4500 due to a few major dents and the fact that his car was in a major accident early in its life.
2. Find the title and gather the appropriate documentation.
We couldn’t easily sell a car on Craigslist without the title, so I made sure we had it in hand along with the other required documentation before we even listed the Sonata online. In Texas, we had to print out a Texas Certificate of Title (Form 130-U), a Bill of Sale, and found the Motor Vehicle Transfer Notification form online.
3. Clean the car.
The most important step of how to sell a car on Craigslist is pictures. You will need pretty pictures for the ad and you want prospective buyers to test drive the car in its best shape. Although having the car detailed for $50-$100 would definitely fit the bill, my husband simply took it through a very thorough car wash, vacuumed the inside as well as he could in 30 minutes, and then we wiped down all visible surfaces with pre-moistened wipes. Our total cost was about $15.
4. Take pictures for the ad.
As I said, the pictures are the most important part of selling a car online. We took a picture from the front, the back, the side view that had the dent, and one of the interior. Remember to always include the problem areas since full disclosure actually helps to sell a car on Craigslist. Also remember to take the digital pictures at low-medium resolution since Craigslist has a capacity limit.
5. Create the Craigslist post early Saturday morning or very late Friday night.
People do their major buying on the weekends and you are only supposed to list a new Craigslist post every 3 days, so Tuesdays and Fridays or Saturdays are the best days to target. Remember to include the year, make, model, and condition in the title of the ad. Also set the price at least 10% more than you are willing to take since everybody will want to haggle no matter what price you put.
Our post was titled “2003 Hyundai Sonata – Good Condition – One Non-Smoker Owner $5500″. We were willing to accept $4300, but past Craigslist experience had taught me to aim high and haggle to a fair price.
Our post included the year, make, and model again as well as the complete history of the car (including the accident) and the 4 pictures. I included my first name and cell phone number. I only gave the VIN to interested callers and emailers since I didn’t want absolutely everyone to be able to track our specific car to our address.
6. Make sure to schedule your prospective buyers.
We had 8 interested callers within 3 hours of posting the car for sale and scheduled the visits 1-2 hours apart.
7. Go on test drives.
Make sure to check for a driver’s license before letting someone test drive your car. Don’t get into the car if you have any bad feelings at all, but we only met really nice people. The second group actually bought the car, so we were able to call and cancel the other 6 appointments. We ended up getting $4800! I was so proud.
8. Sign over the title.
We signed over the title, filled out the Texas Title App together, and filled out the Bill of Sale. We used our scanner to copy everything and gave the originals to the buyers. I also reminded them that they only had 20 days to register the Sonata and we even kept the license plates (I found out later that we may not have needed to do that, but we wanted to be on the safe side). We filled out and submitted the Motor Vehicle Transfer Notification form online so we wouldn’t be held liable for any further problems.
9. Call your insurance company to cancel your policy on the sold car.
We called within 5 minutes of the sale and received a refund for the prorated amount we paid in advance for the Sonata’s coverage.
10. Deposit your cash.
That was the best part. 
I spent one Friday evening getting everything ready and one Saturday morning listing our car. Half a weekend of work for $4800 seemed really good to me! And now I know how to sell a car on Craigslist for the future as well!
Did you already know how to sell a car on Craigslist? How did it work out for you?
September 5, 2010, at 6:00 am
BFS is a member of the Yakezie Alexa Ranking Challenge! My ranking last week was 66,162 and is now 63,123!
The original goal was to be in the top 200,000 by July 4, 2010 and you helped me blow that out of the water in 2 months…a whole month early! Then we were shooting for 100,000 by July 4th and we hit that goal too!!! After that we started a new goal of 75,000 by the end of August, and I thought there was no way, but we hit that out of the park by August 15!!!
Now we are shooting for 50,000 by Halloween! I know it’s a little insane, but let’s try it out anyway! Obviously we’ll be slowing down, but we seem to be doing great!
As always, I would like to sincerely thank all of my readers and the members of the Yakezie Challenge. Obviously, this would have been impossible without all of you. Thank you all so much! I repeat those words every week, but please understand that I mean it every time.
In case you didn’t know, Alexa traffic rankings are determined by the numbers of hits a site gets by people with the Alexa toolbar. If you want to be part of this ranking community, you can download the Alexa toolbar here.
If you are a Yakezie member and don’t see yourself on my member list, please send me an email or leave a comment here to be added. I copied the list originally in early March and updated it in mid-June. Please let me know if you are still missing. Thanks!
September 4, 2010, at 6:00 am
My Favorite Posts this Week
Carnivals that Included BFS
Thanks for putting tons of work into these carnivals! I know how long these things take!
Blogs that Featured a BFS Guest Post
Thanks so much for having me over for the day!
Fellow bloggers, if you would like a guest post from BFS, please shoot me an email. I usually have a couple of weeks of posts ready in advance so I could probably help out.
Guest Posts on BFS
Thanks for the day off! I appreciate all of my guest posters for giving BFS readers quality content and allowing me to have a little breather from my 7 day a week schedule.
If you would like to guest post on BFS as a fellow blogger, please send me an email with your idea or post and I’d love to have you over for the day! If you are a business, please email me for more details. Thanks!
Other Info
Feel free to email me if you have any suggestions. I’d love to add a few more blogs to my regular reading list or at least give a shout-out for great posts or contests.
As always, thanks to all the bloggers that teach me something new every day. Thanks to all my commenters for making this blog the community I want it to be. Thanks to all my lurkers too. I hope everybody is enjoying this as much as me!
September 3, 2010, at 6:00 am
Ramsay from Moneyed Up contacted me about his $500 Giveaway* going on until December 1st to promote the new blog and asked if I’d review it on BFS. I couldn’t come up with more than “hey, look, a big giveaway!”, so I turned it down at first, but he then asked what would I do if I won.
I’ll be honest, I do daydream about winning millions in the lottery (that I haven’t bought tickets for lately…hmmm…), but I never really put thought into smaller amounts that I actually have a shot for – like this giveaway or even the pots at the local Bingo hall. What would I do with $500?
My first thought would be to do what we normally do with extra money – 50% to savings or the mortgage, 25% to the vacation account, and 12.5% to each of our fun money accounts. Yes, that sounds good to me. But, what if I had to come up with something else?
Here’s what I daydreamed about last Tuesday:
- I could visit a blogging friend or one of the blogger meet up groups that pop up in different states. I could use the $500 for airfare and a rental car for a long weekend.
- I could buy 500 Mega Millions or Texas Lotto tickets and hope for the best.
- I could play 25 computers of Bingo. That’s 1650 cards per game…I’d probably make some money off of that, lol.
- I could put it towards our annual vacation – $500 would cover 1/4 of our normal costs or we could really go wild when we want fruity drinks.
- I could buy a second laptop for our house since one of our current two is dying a really slow death and annoying the crud out of me. This idea sounded like the winner since the laptop situation is bugging me a little on a regular basis.
What would you do with $500?
*In the interest of full disclosure, the link above is a referral link. That means I will get an additional entry into the $500 giveaway if you sign up for the giveaway using that link. So click away – I want that laptop after all. 
September 2, 2010, at 6:12 pm
I had no idea that my first fixes to Subscribe by Email didn’t take more than 3 months ago. I would like to thank Jay for bringing it to my attention that this feature was still oh-so-broken. Thank you!
Subscribe by Email should now be up and running for anybody who does appreciate emailed Feedburner subscriptions instead of checking in every day. Thank you all for being a part of the BFS community that I am enjoying so much!
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DISCLAIMER I am not a professional or a financial advisor. BFS posts are informational opinions only. Please make your own financial decisions based on personal research or see a financial advisor.
Also, there are paid links on this site. There is no obligation on your part to purchase any products advertised on this website.
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