Invest in Your Debt

Where is the best place to invest your hard-earned money? It's a question that a lot of people spend a lot of time investigating. For many, however, the answer is right in front of them.

When looking at investments, many people disregard one of the best and easiest places to invest their money: their own debt.

Perhaps people simply don't think about it, or maybe they think it's not as glamorous as investing in stocks (most people will be more than a bit reluctant to let everyone at the party know they are getting double-digit returns investing in their own debt). But your credit card debt should be one of the first places you look when you have money you're looking to invest.

You can see why this is a superior investment opportunity by simply taking a look at five general investing questions that you should ask of every investment you make. When you ask them of investing in your debt, the answers are so incredibly favorable that you'll find it difficult to find a better place to invest your money.

What is the risk?
While almost all investing entails some form of risk, especially when you are referring to investments with double-digit returns, investing in your own debt is an exception to this rule. There is absolutely no risk involved when you put money toward your own debt. Once you pay money toward your debt, it disappears, and you save whatever interest you were paying on it.

What type of return can you expect?
Unlike most investments that can yield high returns, there is no guesswork when it comes to your investment return. You know exactly what the return on your investment will be -- whatever interest rate you are paying on your credit cards. For most people, that is a double-digit figure and can be as high as 30%.

What type of tax implications are there?
With most investments, you will be required to pay taxes on any gains you make. Most people are happy if the investment has some type of tax deduction associated with it. When you invest in your own debt, you are getting a return that is 100% tax free. There are no taxes of any kind to pay.

What type of fees are there?
Most of the time when you make an investment, there are fees associated with it that can reduce your overall return. When you invest in your debt, however, there are no fees to pay. The amount that you save is 100% yours.

How long until you receive your return?
Because many investments fluctuate quite a bit in the short term, you often need to consider an investment to be long term in order to achieve the expected return. This is not the case with your debt. The instant that you pay money toward it, you receive that percentage return.

With the huge advantages associated with paying off your credit card debt, there are few better places to put your money. If you are carrying credit card debt that has interest rates in double figures, paying down this debt should be a priority before considering most other investments.

Once you have finished paying off your credit card debt, you should look at all the other debts you have, such as student loans, your car loan and your mortgage, to see how these compare with other investments you are considering. By not bypassing your own debt when deciding where to place investment money, you may get much better returns than you ever imagined.

Ten Things Your Grandparents Know About Money (That You Don't)

The U.S. may not technically be in a recession. After all, the U.S. Commerce Department says the economy grew at a 0.6% pace in the first quarter.

But most people look at things more like legendary investor Warren Buffett, who defined a recession as when "people are doing less well than they were three months, six months or eight months earlier."

For most economists it is no longer whether there is going to be a recession, but what type of recession it is going to be: short recessions like the one from 1990 to 1991 and the one from March to November 2001, or something like the Great Depression.

No matter which it ends up being, one of the best places to look for sound advice is from those people who have survived the worst of economic times - namely your grandparents.

Here are 10 ideas you may want to take from them:

1. Frugality Is Not a Bad Word
There was a time when a person who was frugal was looked upon with esteem rather than someone without the means to buy more. Many people seem to equate frugality with "cheapness," but that couldn't be further from the truth. Being frugal is simply getting the most out of what you have and purchase, and not purchasing things that you really don't need.

While your grandparents learned frugality during the hard times, many of them continued to practice it even when times got better, which helped them build wealth. Learning to be frugal could help a lot of people who haven't learned to live within their means.

2. Use What You Have

In a consumer society, whatever problem you may have can always be solved by buying something else. If something breaks, go out and buy a new one. If something isn't exactly right, go buy something that is. In your grandparents' time, when something broke, they first took a look to see if it could be fixed.

If it couldn't be fixed, before it ended up in the trash can, they would consider whether it could still be useful for something else. There is no reason to go out and spend money on something new if you can get the same thing accomplished with the things that you already have.

3. Doing It Yourself Is the Way to Go
When it comes to fixing things, the first people that your grandparents looked at were themselves. Instead of calling someone to fix something that broke, they fixed it on their own most of the time.

In a society where we now hire people to do most basic repair and maintenance, it's important to remember that most repairs aren't nearly as difficult as they may appear and that you can do much of it on your own with a how-to book and patience.

4. Things Have More Than One Use
People tend to buy stuff with a specific purpose in mind and use it exclusively for that intended purpose. What your grandparents knew is that most things can have multiple uses throughout their useful life. That T-shirt can become a night shirt when the collar gets worn and can't be worn outside, and then a painting shirt when it starts to get holes and eventually rags when the holes get too big.

5. Debt Is to Be Avoided
In the age of credit cards, where spending what you don't have now is encouraged left and right, it's hard to believe there was a time when people actually believed that debt was to be avoided, but those are the words that your grandparents lived by. If they didn't have the money, then they would simply need to figure out a different plan on how to get what they needed. It might be borrowing it from a friend, saving up money or finding something that could be used instead. Going into debt to get it accomplished was not an option.

6. Save for Rainy Days
As many people are finding out, rainy days eventually come. Your grandparents were well aware of this and specifically put aside money for these rainy days. It's now what is commonly referred to as an emergency fund and something that comes in quite handy when your financial plans don't go exactly as you imagined they would.

7. Used Can Be Just as Good as New
This concept isn't completely foreign even to today's generation. The notion that buying a quality two- to three-year-old car has become basic mainstream financial advice when it comes to car ownership. Your grandparents knew that just because something happened to be pre-owned doesn't make it something to be dismissed as unworthy. They also know that this concept doesn't stop with cars and can be expanded to almost any other area where a second-hand market is available.

8. Functional Trumps Fashion:
When it comes to making purchases, your grandparents knew that it wasn't what the device looked like, but what it could do that mattered. It was much more important to buy something that did what needed to be done regardless of what it actually looked like. That Rolex may look great, but it doesn't tell time any better than a standard watch bought at the local discount store. Learning to buy for function rather than looks is a great way to save money.

9. Bargains Are to Be Sought-After
When it was time to purchase something, your grandparents didn't just go out an get it that day. They took the time to look for a bargain. That meant doing research and waiting until the price was right rather than pulling out a credit card and buying it even when they didn't have the money. Bargains take planning and time to find, but when they are found, you know you have gotten a great deal.

10. Homemade Cookies Are Delicious
In a society where everything is pre-made and sold for convenience, it may be hard to remember the last time you had a meal made from scratch. What your grandparents knew was that not only is it less expensive to cook this way, the resulting meal is also a lot more delicious. Think of it this way; would you ever consider trading in a plate of your grandmother's homemade cookies for any store bought brand?

While the way that your grandparents handled money may seem unsophisticated with all the financial tools that are available today, the basics of living below their means, saving for a rainy day, getting an education and investing in their future are values that a lot of people could financially benefit from today.

Six Awful Truths About Personal Finance !

With the weakening economy, people find they need to pay closer attention to their personal finances. As they begin to tackle their finances to get them in order, they usually come across some truths that they really don't want to accept. The main reason is that these truths mean that the each person must take more responsibility and make hard decisions that they would rather leave to others.

By understanding these inconvenient truths, you place yourself in a position to better deal with your money in a positive way. Here are a few of the most common of those awful truths.

1. You can't have everything you want.

Whine, complain and throw as many tantrums as you want, but the words of your parents when you were a kid still apply now that you're an adult. Even though every commercial you see will tell you that you can have everything you want, the hard truth is that you can't.

In order to stay out of debt, make sure your finances are healthy and reach your financial goals , you will need to make difficult choices about where it's best to spend your money. That means giving up some things you may want. If you don't, you'll end up with maxed-out credit cards and years of slavery to your debt.

It may not make you happy, but the sooner you realize this truth, the better off your finances will be so that you don't end up working while all your friends are retired. This will also help you prioritize your spending on what is really important to you.

2. Financial institutions are not your friends.
Banks, credit cards companies and even investment firms are there for only one purpose: to make money off of you. No matter how much they tell you that they have your best interests at heart, they are not your friends and they will charge you with any fee that they think they can get away with. It's common for banks to add "courtesy overdraft protection" to your banking accounts, which can cost you hundreds of dollars and fixed-rate credit cards are only fixed until the credit card issuer decides they want to change the interest rate.

You must always look out for your own interests and make sure that these financial companies are not trying to nickel and dime you., because they have no problem changing the rules in the middle of the game -- especially if they feel they are not getting enough of your money. So next time you listen to their pitches, remember that their primary purpose is their bottom line and not yours. Use their financial services if it is advantageous to you, but never become complacent or you will find a lot of your hard-earned money flowing to their pockets.

3. Nobody is going to teach you personal finance.
In a perfect world, parents or schools would make teaching personal finance knowledge as important as basic reading, writing and arithmetic. Unfortunately, for the vast majority of people, you are entirely on your own to learn personal finance basics. Your parents probably didn't teach you because they were clueless and learning themselves as you were growing up and the school system has done little to address the issue. That means you're going to have to make a concerted effort to actually learn how to get your personal finances in order yourself.

Go to the library and check-out one of the many excellent books (such as Smart and Simple Finances for Busy People by Jane Bryant Quinn, The Total Money Makeover by Dave Ramsey or The Wealthy Barber by David Chilton) that teach the basics about personal finance and begin reading. If you don't, you're going to learn by trial and error, which is going to hurt your finances a lot more than taking the initiative and learning how to take care of them right now. The longer you delay learning this truth, the worse off your finances will be.

4. You are your own worst enemy.
When it comes to personal finance, the state that you find yourself in can't be blamed on outside forces. If you're in terrible debt or your finances simply are not where you wan them to be , walk to the mirror and take a good, long, hard look. The person that's responsible for all the personal finance problems is staring right back at you.

With few exceptions, you have only yourself to blame. So accept what you have done, take responsibility for your previous actions and take the steps needed to make the changes to get your personal finances back into order. These steps include figuring out how to create a budget that works with your current income and identifying where you need to cut spending and ways that you can save more.

Trying to blame others for your situation will only mean that you will not take the needed steps to actually improve your finances and it only prolong the debt you find yourself with.

5. You need to stop watching TV.
Ask anyone you know whether television influences what they buy and almost all of them will answer "no." This is why advertisers spend billions of dollars and laugh all the way to the bank. If you can't recognize that you are being influenced, then you can't take the steps to stop the influence.

Watching TV can cost you $1 million during your lifetime and you don't even realize it. You need to take steps to learn how to limit the amount of influence advertisers have on you and your family. One effective way to do this is to spend less time in front of the TV by setting a specific number of hours you can watch each week, so that you watch only the shows that you want to watch and you are not sitting there simply because you are being lazy.

By understanding exactly what is important to you and what your financial goals are, you will also limit the impact of advertisers. If you don't, you're at the mercy of the advertisers, which will result in a much lighter wallet.

6. Personal finance is easy.
Even though you want to blame your current money situation on the difficulty of personal finances -- whether it's reducing credit card debt, finding money to put away for retirement or even creating a budget to make ends meet -- this excuse won't fly.

You already know what you need to be successful in personal finances. All you need to do to get your personal finances in order is spend less than you make. It's a concept that even a child can comprehend. Unfortunately, knowing and implementing it are two separate issues.

Much like people wanting to lose weight know that that they need to consume less calories than they use, actually doing it is a lot harder than merely realizing it. Yes, implementing the knowledge is more difficult than simply having it and will require some effort on your part, but that's not an excuse to claim that it's too difficult because the reality is that it is not.

While the above information about personal finance may be inconvenient, realizing these six truths and acting on them will go a long way to get your personal finances on the right track.

10 (More) Reasons You're Not Rich !

Many people assume they aren't rich because they don't earn enough money. If I only earned a little more, I could save and invest better, they say. The problem with that theory is they were probably making exactly the same argument before their last several raises.
Becoming a millionaire has less to do with how much you make, it's how you treat money in your daily life.

The list of reasons you may not be rich doesn't end at 10. Caring what your neighbors think, not being patient, having bad habits, not having goals, not being prepared, trying to make a quick buck, relying on others to handle your money, investing in things you don't understand, being financially afraid and ignoring your finances.

Here are 10 more possible reasons you aren't rich:
You care what your car looks like: A car is a means of transportation to get from one place to another, but many people don't view it that way. Instead, they consider it a reflection of themselves and spend money every two years or so to impress others instead of driving the car for its entire useful life and investing the money saved.

You feel entitlement: If you believe you deserve to live a certain lifestyle, have certain things and spend a certain amount before you have earned to live that way, you will have to borrow money. That large chunk of debt will keep you from building wealth.

You lack diversification: There is a reason one of the oldest pieces of financial advice is to not keep all your eggs in a single basket. Having a diversified investment portfolio makes it much less likely that wealth will suddenly disappear.

You started too late: The magic of compound interest works best over long periods of time. If you find you're always saying there will be time to save and invest in a couple more years, you'll wake up one day to find retirement is just around the corner and there is still nothing in your retirement account.

You don't do what you enjoy: While your job doesn't necessarily need to be your dream job, you need to enjoy it. If you choose a job you don't like just for the money, you'll likely spend all that extra cash trying to relieve the stress of doing work you hate.

You don't like to learn: You may have assumed that once you graduated from college, there was no need to study or learn. That attitude might be enough to get you your first job or keep you employed, but it will never make you rich. A willingness to learn to improve your career and finances are essential if you want to eventually become wealthy.

You buy things you don't use: Take a look around your house, in the closets, basement, attic and garage and see if there are a lot of things you haven't used in the past year. If there are, chances are that all those things you purchased were wasted money that could have been used to increase your net worth.

You don't understand value: You buy things for any number of reasons besides the value that the purchase brings to you. This is not limited to those who feel the need to buy the most expensive items, but can also apply to those who always purchase the cheapest goods. Rarely are either the best value, and it's only when you learn to purchase good value that you have money left over to invest for your future.

Your house is too big: When you buy a house that is bigger than you can afford or need, you end up spending extra money on longer debt payments, increased taxes, higher upkeep and more things to fill it. Some people will try to argue that the increased value of the house makes it a good investment, but the truth is that unless you are willing to downgrade your living standards, which most people are not, it will never be a liquid asset or money that you can ever use and enjoy.

You fail to take advantage of opportunities: There has probably been more than one occasion where you heard about someone who has made it big and thought to yourself, "I could have thought of that." There are plenty of opportunities if you have the will and determination to keep your eyes open.