Is Gen Y finding it easy to save?

The odds however, are stacked against Gen Y in some respect to savings practices. With the United States Department of Labor reporting an 8.8% unemployment rate, finding a job following graduation is a daunting task. Adding to the fears about sustainable income are the impending student loans that average about $23,000 for most students, according to the National Center for Educational Statistics. Even if a job is procured relatively quickly post-graduation, day-to-day expenses heaped on top of student loan payments can make saving for the future a near impossible task for most in the Y Generation.

According to Milwaukee financial consultant Graham Baxter, “the precarious job market and growing student debt does not deter most members of Gen Y from wanting to save. If anything, Gen Y has had a front row seat in terms of tangibly knowing the value of having money saved away.” With job prospects difficult to come by, “depleting a savings account or newly started 401K may be the only option while interviewing for potential positions and scraping by,” explains Baxter.

“Gen Y has first-hand experience with the financial instability and I believe that inspires most to build a 3-month cushion of their salary – just in case. The issue is not whether Gen Y has the will to save, but whether they have any discretionary income following the payment of their utilities and debts left to save,” furthered Baxter.

Tech Savvy Money Management—Online Banking Steps Up

Simultaneous to the growth financial struggles of Gen Y, the banks have accelerated their use of the newest online applications to attract the tech-savvy generation. PNC Senior Vice President and Area Manager, Paul Sfanos, describes the latest patented product of the PNC Bank Online Banking Services, “Virtual Wallet®, allows you to take a picture of the front and back of a paper check and send a picture message of the image to be directly deposited in your account – essentially eliminating the need for bank tellers and ATMs.” This new deposit capture function is a free feature offered to all PNC Bank customers.

Mobile applications are the new wave in online banking technology. For years, banks like JP Morgan Chase, PNC and Wells Fargo have offered services like account and transaction viewing, transferring of funds, ATM and branch locators. With new mobile technology these same banks now have mobile applications that can be downloaded for free on most smart phones and utilized for all of these services without extra fees. Beware however of messaging rates that will vary depending on the mobile provider.

Chase, PNC and Wells Fargo offer the option to perform standard banking transactions via text messages with the use of a 5-digit phone number and text code. For instance, Wells Fargo allows customers to text the code (ACT) and the customer will instantly receive an up-to-date report of the account’s recent activity.

Smartphone apps track and warn

Chase MobileSM has created its mobile application for iPhone® and AndriodTM. Wells Fargo’s mobile banking services can be downloaded for iPhone®, AndriodTM, Blackberry® and Palm devices. PNC Bank has its application available for iPhone®, AndriodTM, Blackberry® and Windows Mobile. All of these banks encourage mobile users that do not currently have a device of one of these brands to continually check back on their compatibility options as new devices are updated regularly.

In general, mobile applications provided by large banking institutions facilitate the banking process for their customers who are already heavy-users of mobile technology. According to Sfanos, “The applications are highly targeted for Gen Y and are intended to ease the process of money management and eventually to create a saving habit.”

In addition, to the basic functions of the banking transactions the online and mobile options for these banks allow customers to set budgets, wish lists for savings vehicles and alerts to notify how close one is to attaining a financial goal as well as how close one is to overdrafting.

“Mobile banking places the responsibility of money management literally in the hands of the consumer,” explains Baxter.

Gen Y is constantly on their phone for business or personal use and the alert systems available are so sophisticated and customizable, it should no longer matter that Gen Y on whole doesn’t know how to balance a checkbook. The accessibility of your money, the convenience of both online and mobile banking and the alert systems in place make it nearly impossible for someone to overdraft. The new tools help Gen Y budget and get on track financially.”

It appears that the implementation of mobile and online banking is a win-win situation for the banks and the Gen Y consumers. From the bank’s perspective, if a customer has an online account with bills automatically withdrawn on a monthly basis, and the customer is being responsible by checking the status of the account regularly through a mobile device, there will be little reason for that person to switch accounts on a whim. Meaning when that same consumer hopes to expand his or her banking services to include a home loan or a 401K, he or she will already have a comfort level maintaining the accounts already established at that bank.

The financial institution views the new technology as a means to keep a lifelong customer; while the customer simultaneously finds an efficient and effective way to manage money. The question that remains is whether or not the economy will allow for Gen Y to make use of its convenience and begin building nest eggs and 3-month salary cushions. That answer, unfortunately, will become clear only in time.

It’s important to ask yourself whether the store-issued credit card is worth opening. Standing in line you won’t have time to read the fine print prior to signing the credit card contract. Retailers know this and count on the lure of the initial discount to attract you. Often times, store employees are given incentives for each completed credit application submitted. They are concerned with their bottom line, not yours.

Recent statistics indicate the average American consumer has 5.6 cards in his or her wallet at any given time. That’s the average American. There are now so many private label credit cards, also known as store-issued credit cards, out there it is hard to keep track. Considering that the Mall of America has over 520 stores, that’s a lot of potential debt.

THE GOOD

There are advantages to store-issued credits cards. If you have don’t have a credit background, you can build one with a low limit store card. If you anticipate a large purchase, such as a new appliance, you may be able to take advantage of perks like six months interest free financing. Paying it off within the time span means you won’t get hit with interest charges and you’ll improve your credit score.

Store-issued credit cards can be co-branded. Backed by a larger well-known company, such as MasterCard or Visa, co-branded cards usually offer a lower APR and better terms. The Federal Trade Commission defines APR as the annual percentage rate, which is a measure of the cost of credit expressed as a yearly interest rate. It’s important to note that cards with high APR essentially erase any savings you may get through in-store discounts for using the retailer’s card.

In recent years, federal regulation has been enacted to assist credit card consumers. The Credit Card Act rids prepaid gift cards and certificates of hidden fees. The act also limits interest rate hikes during the first year of opening an account—though there are exceptions.

Store-issued credit cards operate in the same way as bank-issued cards if your card is lost or stolen. You must report it immediately and you should only be liable for up to $50 in charges.

The website creditcards.com offers a tool to compare store-issued credit cards and their varying interest rates. For example, popular work wear clothier Ann Taylor offers both a co-branded card, with MasterCard, and non-cobranded card. The non-cobranded card has a 24.99% APR. Compare that rate to the co-branded card’s lower APR of 17.99 to 24.99%. Rewards associated with the card include earning 5 points for every $1 spent at Ann Taylor or Ann Taylor LOFT stores, 1 point earning on purchases elsewhere with the MasterCard, a $20 gift card for every 2000 points earned, and 15% off at sign up.

The card offered by Banana Republic is nice because it can also be used at sister stores: Gap, Old Navy, Piperlime, and Athleta. It is also offered as co-branded and non-cobranded (Visa) cards. The non-cobranded card has a 22.99% APR, while the co-branded card APR ranges from 17.24 to 20.24%.

THE BAD

A creditcards.com report on 36 store-issued credit cards pointed out that half of the cards reviewed had higher APR’s in 2010. The site offers a weekly credit card rate report noting the average APR on credit cards. Store-issued credit cards tend to have high interest rates. Considering the national average for a bank-issued credit card is a little over 14% (at the time of writing this article), your best bet may be to stay with a lower interest card.

Did you know that any credit application or inquiry affects your credit score for approximately 12 months? Inquiries remain on your credit report for 24 months. So, if you think you are saving money by opening these accounts for a few purchases—think again—because it could affect a big ticket purchase like a car or home, and cost you thousands more in interest.

The Federal Reserve offers an online pamphlet titled “Understanding Your Credit Card Offer”. It thoroughly explains credit card terms you should be familiar with. At the very least you should know the APR for purchases and the penalty APR. The penalty APR is important because there may be a number of factors where it can be triggered, such as not paying your bill on time or going over your credit limit. In addition, you should know that it will affect your bottom line for some time, typically at least six months. The Federal Reserve also offers a handy tool to help you determine how long it will take to pay off your credit card. Go to www.federalreserve.gov/creditcardcalculator and add your total balance and APR and it will calculate it for you. In addition, the Federal Reserve offers a public service announcement on their website with helpful tips on how to use your card called “Getting The Most from Your Credit Card”. The tips include:

The bottom line when considering a store-issued credit card is to factor in whether the card is really necessary and ask yourself the following questions:

Doing so will save you future financial headaches.

4.5 pounds. That’s the amount of trash the average Pennsylvania resident generates each day, according to the state’s department of environmental protection. If you think that’s a lot, consider this: one third of that trash—1.5 pounds—is packaging.

Packaging plays an important role in our retail transactions: it displays the ingredients of our toothpaste, keeps our Oreos from getting stale, and protects our new DVDs from scratches. But too much packaging is still a frequent—and guilt-inducing—occurrence. Who hasn’t had the experience of opening the box of a new purchase only to discover a sea of Styrofoam?

Fortunately there are some simple ways to reduce your waste-size (no diets or exercise required!), and we’ve unwrapped the top three.

1. Say No to Plastic and Paper by Banning Non-Reusable Bags

Before they are thrown into the trash or discarded by the side of the road, the average single-use plastic bag is used to carry groceries or other purchases for only 12 minutes, according to the city of Santa Monica. In the state of California, 19 billion single-use plastic bags are used annually. That’s a big number—especially if you consider that less than 5 percent of those 19 billion bags are recycled.

The short lifespan of single-use plastic bags, which are often made from non-renewable resources, significantly contributes to increased greenhouse gas emissions. Even after the bags are discarded, they are far from harmless—they pose a threat to animals who often mistake the bags as food.

Following the lead of other cities in California such as Malibu and San Francisco, the city of Santa Monica is taking a stand against single-use bags. The Los Angeles Times reported that after March 9, 2011, supermarkets, convenience stores, liquor stores and pharmacies risk fines if they continue to hand out single-use plastic bags. These California cities are not alone in rethinking plastic bags—The Oregonian reports that Oregon may become the first state to ban the plastic checkout bags completely. Other countries, from Bangladesh to Rwanda, have already enacted similar bans.

So why not just switch to paper at the checkout? Paper bags have an adverse impact on the environment as well, according to the city of Santa Monica. Approximately 14 million trees are cut down annually to make paper bags, they require four times more energy to manufacture than plastic bags, and it takes nearly 10 times more energy to recycle paper than it does to recycle plastic.

The Bottom Line: You don’t have to wait for your city to take a stand against single-use bags. Make or purchase a reusable bag to carry around town. Not only is it an earth-friendly option, but it’s stylish as well (just make sure you wash or disinfect your reusable bag regularly—a journalist in Denver recently discovered the bags can be a breeding ground for bacteria). So the next time you are asked at the checkout if you prefer paper or plastic, you can proudly say, “Neither.”

2. BYOB: Bring Your Own (Water) Bottle

Americans love bottled water. “Every 27 hours Americans drink enough bottles of water to circle the equator with empty plastic containers,” according to the Environmental Working Group, a non-profit organization that advocates for health-protective policies.

And unfortunately, not all of those bottles end up in the recycling bin. The Natural Resources Defense Council estimates that only 13 percent of water bottles are recycled. Of the 30 billion water bottles Americans purchased in 2005, 26 billion of them wound up in landfills.

The Bottom Line: Plan ahead and bring a reusable water bottle from home. Over the course of the year, you will save more than a buck or two by swigging tap water—bottled water costs up to 1900 more times than tap water, according to the Environmental Working Group. Bringing your own mug for coffee and other beverages you buy on the go can save you money as well—many restaurants offer a discount.

3. Consider the Container

“Packaging now accounts for 64 million tons by weight or 33 percent of all our garbage,” according to Pennsylvania’s department of environmental protection. At least 28 countries have laws that encourage manufacturers to reduce packaging and recycle more of their packaging discards, according to the Environmental Protection Agency. But the U.S. is not one of them—there is currently no federal packaging mandate.

In an effort to appeal to increasingly environmentally-conscious consumers and reduce manufacturing and shipping costs, some companies are taking on the task themselves. Wal-Mart hopes to reduce the amount of packaging in its global supply chain by five percent by 2013. The company is also pledging to be packaging neutral by 2025, when it will recycle, reuse or even compost packaging material.

Other companies are reconsidering the design of their products. Procter & Gamble has started selling several products in more concentrated formulas, which save both energy and packaging. The company found that even simple redesigns of packaging can make a big impact. Total Effects, an anti-aging moisturizer sold under the Olay brand, “is introducing an improved pump design that is expected to save 800,000 pounds of plastic a year—equivalent to the weight of a Boeing 747,” according to the company’s website.

Companies such as Amazon are streamlining the amount of packaging required for shipping. The company’s Frustration-Free Packaging program works with manufacturers to box products for shipping straight off of assembly lines, reducing the need for an additional shipping box. The products, which come in recyclable packaging, are also easier to open. (Another downside of excess packaging? Trips to the emergency room. American Medical News reports that 6,000 people a year end up in emergency rooms for packaging-related injuries.)

But some attempts at greener packaging just don’t succeed. Last year Sun Chips introduced chips in a compostable bag that was said to decompose in 14 weeks. After consumers complained about the bag’s noisiness, the New York Times reported that the company stopped using the bag for all but one of its flavors. The company is trying again—its website announces a “quieter compostable bag” will be hitting stores soon.

The Bottom Line: While companies are working to be greener, consumers ultimately have the final choice about what sort of product (and packaging) to purchase. The next time you are at the store, take a look at the packaging on products in your cart. Is the packaging made from recycled materials? Can you recycle it? Can you purchase the same product with less packaging? If you buy products in concentrate, bulk or refillable containers, you can reduce packaging waste and save money. Items that are grown and produced locally typically require less packaging as well. But the easiest way to reduce your waste-size is to make sure that all of your discarded packaging ends up in the right place: the recycling bin.

The current state of the real estate market is a confusing one so you are definitely not alone. REAL ESTATE IS VERY LOCATION DEPENDENT. I can’t say that enough. When you read the USA Today article that states real estate prices have dropped dramatically, please take it with a grain of salt. It is always important to consider national trends but real estate prices/sales can drop 40% in a certain city and increase 10% in another. The best way to find out what your city’s current conditions would be to contact your local realtor for location specific trends and price changes.

POSITIVE TRENDS:
• Existing-home sales surged 10.1 percent in October from September and are 23.5 percent above the level in October 2008. Sales activity is at the highest pace since February 2007. So things are looking up.
• Another good sign is that inventory fell 3.7 percent in October from September. Low inventory means that there are fewer homes for sale on the market, which in turn causes more competition and higher sales prices.
• 30-year fixed-rate mortgages are near record breaking low levels. This is great for buyers because you can afford a much higher priced home on the same budget.
• The first-time homeowner government credit of $8000 was extended. The IRS defines a first-time homebuyer as someone who has not owned a principal residence during the three-year period prior to the purchase. It also was extended to owners who have lived in their previous home for five consecutive years out of the last eight ($6500). It applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. The credit is not taxed and is basically an additional $8000 add-on to your income tax returns. There are income restrictions on the credit so please check with your mortgage broker to make sure you qualify.

NEGATIVE TRENDS:
• The Mortgage Bankers Association reported that a record number of loans—1 in 7 are delinquent. Up from 1 in 10 a year ago. Our economy over the past 2 years has weighed heavily on homeowners who have lost income or jobs so many homeowners have not been able to keep up with loans.
• The national median existing-home price for all housing types was down 7.1 percent from October 2008. Distressed properties, which accounted for 30 percent of sales in October continue to downwardly distort the median price because they usually sell at a discount relative to traditional homes in the same area.

Again, take the national statistics that I stated above as general trends. Each city/state will have very different statistics. But the general national trends all point toward a leveling off if not upward trend in total number of sales. Once the foreclosures start to level off, decreased levels of distressed homes are sold, and inventories continue to hover at low levels, the prices of homes will start to increase again. The next 6-12 months will be a great time to buy. Especially as interest rates are continuing to stay at historically low levels. These conditions will not last forever and many mortgage brokers that I speak with warn that home interest rates will start to get much higher in the near future.

FORECLOSURE VS. SHORT SALE

Foreclosure is the legal proceeding in which a homeowner obtains a court ordered termination of their right to possess the home. A short sale is the sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan.

If you a seller, you will want to do everything you can to sell your home through a short-sale process rather than through a foreclosure. Here are a few benefits for doing a short sale.
• You are in charge of the sale, not the bank. But you do need approval from the bank to proceed.
• You can be current on your payments and still sell through a short sale
• Your home sale will be handled like any other home sale
• After foreclosure, it can take 5-7 years before you can purchase another home. In some situations, you are able to purchase a home immediately after a short sale.
• Effects on your credit score after a short sale can be 50 to 130 points. Effects after a foreclosure can be 200-400 points.

If you are a buyer, there are also many differences between the two. Working with a short sale is very similar to working with any ordinary for-sale home. You might get a better “deal” because the owner has the ability to sell the home for less than they owe the bank, but that does not mean the bank will give it away. The short sale process is more straightforward than working with foreclosed properties.

Buying foreclosed properties can be a very complicated process. You are negotiating with a bank so it can sometimes take up to 3-4 months to even get an answer to your first offer. Closing timeframes can take many, many months. Cash is king. A cash buyer, or buyer paying mostly cash, will be a lot more attractive to the bank even if the offer is lower. Nothing is guaranteed in a foreclosure. So if the bank verbally accepts your offer and they receive a higher offer within the next few months, they can and will back out given they have legal rights to do so.

My suggestion when working with foreclosed properties is to always, always perform a very thorough inspection. Foreclosed properties are sold “As-Is” so the bank will not put any money into repairing or fixing them up. Many times these homes are left damaged by the owner or tenant who previously lived there. Also, many homes have been neglected for many months or years on end. I also highly recommend working closely with a real estate attorney who has experience with foreclosed properties so they can ensure that the bank is following through on their agreements.

When buying foreclosed properties, make sure you have the time and patience to go through the entire process. You should also expect that you will need to do some work to get the home back into living condition. There are many “deals” to be had in the foreclosure process but you must have patience and time.

TAX INCENTIVE FOR HOMEOWNERS
There are many tax incentives for homeowners and that is one of the big reasons you should consider purchasing a home if you have the resources. Please talk to a qualified tax attorney to find out the individual benefits that apply to you but here is an outline of what you can expect.

• Mortgage Interest—This is your biggest tax break. All the interest you pay throughout your loan is deductible. In the first years of owning a home, the majority of your loan payment will be paying off interest.
• Points—To lower your interest rate, some homeowners will pay money up front. The amount of points you pay is deductible. This is a little less common these days because interest rates are dramatically low.
• Taxes—Most homeowners will pay property taxes (included in the monthly loan payment) into an escrow account. This escrow account will be used to pay your property taxes for the year. These taxes will be an annual deduction as long as you own your home.
• When you sell—When you decide to move up to a bigger home, you will be able to avoid some taxes on the profit you make.

There are also many tax incentives that are offered on a city/local basis that you can apply for that will help once your taxes are due. One recent tax incentive that was put into place revolves around Eco-Friendly construction. If your home was built with a certain number and standard of ENERGY-STAR windows, doors, etc. you can apply for a tax break.

That wraps up my three-part series of explaining the entire home buying process. Although this can look like a long, complicated process from a distance, it can be greatly simplified by using the resources of qualified professionals within the real estate world. I hope this has helped provide an example of the process from beginning to end and gave you some good tips to follow along the way.

If you have any real estate questions and/or are interested in starting a search, please contact me through my website at www.CondoMeNow.com or by email James Weber at jweb@heliosrealty.com

HAPPY HOUSE HUNTING!

How much to save:
If you are wondering exactly how much a person should keep in a ‘liquid emergency’ reserve fund a good rule of thumb is to take your monthly take home and multiply that number by 3 to 6 times. I would say that having 6 times is excessive, but for some people this is most appropriate. So after analyzing your monthly expenses you realize that this is going to take quite a bit of time to build up, but if you continue to exercise financial restraint and steer clear of the newest line of Louis Vuitton handbags (or at least initially) it will become second nature to you. Don’t worry about how much is needed as long as you are making a substantial effort on a monthly basis to build up your reserves, it will happen soon enough.

Of course, you don’t want to stop paying on your other obligations so this is where the balance comes in. A well rounded financial plan functions just like a balanced diet. A few of each grouping will go a long way over time to your continued overall financial health.

Student Loan Payments
If you are saddled with a decent amount of student loans I find people asking, ‘which of the student loan repayment plans should I take out?’ I often explain that there are only a few ‘good’ types of debt and having student loans is one of them, and depending on your income the interest may be deductible. (Please consult your tax advisor as the deductibility depends on your current tax scenario) Now, I am not saying you should opt for the 30 year loan repayment plan, but lock in the repayment plan that gives you flexibility and a good set repayment schedule especially if the rate is FIXED and LOW. If you have a variable rate you are going to want to ATTACK these hardest, but don’t lock in a high required payment. It’s got to work with your monthly budget, and we will build a discipline of savings and debt reduction at the same time by using my monthly Income/Outflow Analysis, which I am linking for your use.

Categorizing your expenses
Here is how this works; add up your monthly take home pay and put that on the top left line, then work down the right hand side looking at your TRUE monthly expenses, so for example . . . say I go out with the guys on Thursday or Friday Nights (or sometimes both) and we do dinner and drinks, which we all know gets to be way too expensive to do on a regular basis, but these are TWO SEPARATE categories as if we go to dinner that’s DINING OUT, but then we leave and go to another place to meet up with our lady friends and have a few adult beverages that is another category for GENERAL ENTERTAINMENT. This becomes very confusing and also an accounting nightmare to track UNLESS . . . you keep all of your receipts. Keeping your receipts does two things, it allows you to know what you spent, and reminds you of how much you spent when you blew the budget while having a few tee many martoonies. Even the best of us have done this in one way or another and if we exhibit moderation with whatever it is we spend our monies on we will be able to keep our finances in order and there will be plenty of money.

Savings first!
Remember the idea is to look at savings FIRST, not from what’s left over. So, after we added up all of the expenses we then subtract these from our monthly income and guess what we get our ‘total discretionary monthly income.’ Hopefully this amount is positive and if not . . . THIS IS THE REASON YOU HAVE CREDIT CARD DEBT! If negative, take some time and review the starred areas. These are the areas that you are overdoing it in, and the funny thing is you knew it before you even completed this form. I have heard that thousands of times in working with my clients and this seems to be the common thought here. So here is a bit of advice for those who have these out of control areas . . . figure out an amount each month that you feel allows you to both satisfy your needs in this area, but is not overindulgent and then make one envelope for each of the areas and label it. At the beginning of each month put the amount you have allowed yourself in these areas (again that doesn’t blow the budget) and when it’s gone . . . THAT’S IT! No more spending in this area. Try this technique and in about three months you will find yourself weaned down to a livable pace on spending here.

Now for those of us that have a big positive each month, do the following: go to the bank and open up a savings account. Have the bank take 75%-80% of this amount monthly and put it into this account. For example if my take home is $3,600.00 per month and my total expenses are $2,600.00 my discretionary income is $1,000.00. I will go to the bank, setup a savings account and have them transfer $800.00 per month from my checking over to my savings until I have accumulated roughly $10,800.00 (monthly take home X 3) in savings that I have not touched. Now, if I have credit card debts, or high rate student loans it is completely acceptable to keep going until this amount reaches $21,600.00, but once it hits this amount we are going to hit the ‘purge’ valve and cut a check each 6 months for $10,800.00 to the highest interest card or student loan holder and say goodbye to high interest loans.

I have successfully used this discipline effectively with many clients over the years. By coupling this with a disciplined systematic investment plan you can accumulate FIRST GENERATION wealth. Stay tuned and in my next series we will discuss building a solid financial foundation and how asset allocation works to your advantage.

Kenneth J. Wolfe, CRPS®
Financial Advisor
Raymond James Financial Services, Inc
Member FINRA/SIPC
500 Elm Grove Rd. Suite 108
Elm Grove, WI 53122
262-782-5900 X012

So should you?

What are the advantages and disadvantages of online trading? How does one go about getting an account? How does one chose what to buy and sell . . . and when to buy and sell? When is it appropriate to manage your own investment portfolio and when is it best to leave it to the professionals?

This is the first of a series of articles on Investing Online 101. Here’s what you need to know before your first share is bought.

Advantages of Online Trading:

Flexibility: Online trading is nearly instantaneous, providing you the freedom to trade at your leisure from anywhere, anytime. No need to make a call, travel to your broker’s office, or even get dressed. This flexibility means you have the freedom of watching the market and making quick trades if needed. You don’t have to wait on anyone other than yourself.

Expenses: For the most part, transaction costs are usually lower for online trades than traditional brokerage firms. E-Trade offers trades starting at $6.99, Scottrade at $7, and TD Ameritrade at $10. One reason for this is because overhead is obviously lower for online firms. Another reason for this however, leads us to one of the disadvantages of online trading which is no advice.

Disadvantages of Online Trading:

No Advice: Buyer beware! Unlike traditional brokerage firms that may offer investment advice specifically for your situation, you won’t find that online. Therefore, it might pay for inexperienced investors to meet with an investment advisor while still new to the game. You also won’t have guidance as to what price you should buy and sell with an online firm.

Expenses: While these can be an advantage because of low cost, many investors become “trading happy” and begin to make excessive daily trades which can not only lead to higher transaction costs, but possibly lower returns as well.

First Thing’s First:

While anyone can open an online trading account, it is much more difficult to understand the full implications of managing your own portfolio. So before you click away to day trading, become familiar with online investment research and screening tools. Some popular investment education sites include www.investingonline.org, www.fool.com, www.investopedia.com, www.kiplinger.com, and www.finance.yahoo.com. These websites can serve as a resource of how to buy and sell online as well as provide current market and economic updates and individual stock information. Become familiar with these tools before opening an online investment account.

Practice before you Play:

While it might sound frustrating, if you are a beginning investor I highly suggest you practice before you play. Take a few days or weeks (whatever you feel comfortable with) and make pretend stock selections and transactions. Keep a spreadsheet of fantasy stocks you buy and sell and at what price. Include transaction costs to make the illustration as accurate as possible. You can even use Monopoly money as you practice. The idea here is to begin to understand your investment style: what you are comfortable with you and what you aren’t. At the end of your fantasy training ask yourself honestly if you would feel comfortable managing your own portfolio of money.In the next article we will discuss stock selection. How do you know when a stock pick is a good one? We will also discuss step by step instructions on placing an online trade. Until then, do your homework and the money will follow!

Do you love finding and downloading new apps for your cell? Then you’ll have a blast trying out these free online sites too!

Picture Perfect!
Fans of the picture share site flickr, will enjoy checking out taggalaxy.de. It’s an impressive site even if you don’t use flickr. Key in a tag (something specific like Audrey Hepburn or a major sort topic such as music) and your galaxy of photos will appear—continue to define the categories until you get it just right. Once your pictures stick, rotate the photosphere and you’ll discover that this site is visually out-of-sight!

Check out fotoflexer.com and picnik.com if you enjoy editing pictures—lots of tools and gadgets are available to recolor and retouch, add text, doodle, morph and distort. You’ll feel like a pro as you access your photos from facebook, picasa, photobucket, smugmug, flickr, etc. Don’t miss the fun effect that picnik provides under the create tab—“panography-ish”—once you try it, you’ll love it!

Cover Girl! (or guy or pet . . .)
Magmypic.com is your home for fake magazine covers designed by you! The possibilities are awesome and it’ll make a great gift—just frame it up!

Digital Creations
Ladies, start your creative engines! We’re highlighting some great sites to spark your imagination and fire-up your inspiration!

Smilebox.com is a great site for designing quality e-cards, slideshows, photo albums and digital scrapbooking. Personalizing is super easy just as the smilebox tagline “sharing life’s moments in minutes” suggests. Bookmark this site because you’ll visit often!

Microsoft offers Photo Story 3 a totally fun program that’s downloadable and free. Just as Microsoft promises, Photo Story does make “show-n-tell cool again”! Add a touch of reality to your picture stories with soundtracks and your own voice as you narrate the action. We’ll need a few road signs to keep you on track—specifically, the Yield sign and the yellow caution light—as you could spend hours at this site!

That little twitter birdie has been super busy designing tweetphoto.com and twi.tt—flock to these sites and you’ll see why twitter is the go-to site for celebs, the president, and you!

We’ve been humming along at a comfortable pace but now we’re kicking it into overdrive as we rev up to the ultra-cool sites!

Time to produce and direct your very own video . . . click on over to the mega-hit site animoto.com and you’ll discover how easy it is to create a digital blockbuster that’s sure to be number one with your best buds! This site provides easy-to-follow instructions along with a sharing feature in the video toolbox that allows you to email the link or post to your favorite social media site. You’ll say, “that’s a wrap” before you know it! Keep in mind though, the bigger the production, the longer the finalizing process.

Another cool site is voki.com. What’s a voki? You enter the world of voki when you create an avatar, your online personality. A voki can be contemporary, futuristic, historical, realistic or cartoony depending on your preference. Lots of selections in appearance, backgrounds, and accessories—you can even record your own voice—voki creations can become addicting, it’s that much fun!

One final site that’s got hundreds of reasons to love it is wordle.net. Come up with your list of words, scramble, and print! A few suggestions to make your wordle perfect: use a tilde between words rather than a space if you want those words to remain together in a line; and, whichever word you want to be the biggest, key that word three times in a row. Check out the bizMe wordle–

The thing to remember when investing is that this is a very complicated ballgame. To try and pick the right fund, stock, or even area of the market at any given time is an art that is yet to be perfected. Many experts can offer statistics that suggest the timing is right for specific companies or specific areas of the financial markets, but we live in a world when nothing is guaranteed. This fact alone is the reason that the first lesson anyone should take when investing is: diversify, diversify, and then diversify. This lesson dates back to an age-old adage my Grandfather taught me when I told him I was going to be a professional hockey player, “That’s great, but don’t put all your eggs in one basket.”  Needless to say, my Grandfather’s advice was dead on.

Diversification, by definition, means “the condition of being varied.” Restaurants diversify their menus because not all people like the same foods, clothes manufacturers diversify their clothing styles because not every style looks good on every person, and investors should diversify their investment portfolio because not all areas of the market will be in favor at all times. For the purpose of investing, the definition of diversification is to spread one’s risk among different securities in different areas of the economy. We do this to limit the impact that a downturn in one industry may have on our overall investment portfolio.

To better understand diversification from the investment perspective, we need to understand the different types of investments that exist today. Currently, there are three main investment options that investors have access to; stocks, bonds, and cash.

Stocks refer to shares of ownership in a company.

Bonds are loans a person issues to the government or a company with the promise of being paid back with interest. Bonds are traditionally less volatile than stocks and viewed as a more conservative investment option.

Cash, the safest of all investment options, is a liquid investment that holds its invested value.

Investors can use these three types of investments to diversify at different levels. The first level finds diversification by owning more than one stock, the second level by owning stocks in more than one asset class, and the third level by owning more than one investment option (i.e. investing some money in stocks, some money in bonds and some in cash). We will touch on each. 

This level of diversification allows us to allocate our risk among companies that are different in scale, trade, and geographical location. In doing this we can mitigate many of the risks that come from investing. As mentioned previously, when we invest we are giving companies money in hopes that they are able to put our money into projects that produce revenues for the organization and investment returns for us. However, when we invest this money we are given no guarantee that we will see any investment returns. By spreading our money around to companies that are located in different areas of the globe and work in different areas, we provide security should one industry or region fall under intense scrutiny. For example, market factors may cause small technology companies to fall out of favor.That being the case, we would want to make sure that our portfolio consisted of companies outside of the technology industry. Again, to offset the losses we experienced from owning stock in small tech firms. The same holds true for companies outside of the United States. To protect our portfolio from significant losses when the U.S. economy goes through a downturn we can soften our losses by owning stock in companies that operate outside of the U.S. Most well diversified portfolios now include international stock in them.

As the stock market goes through a cycle and has a few bad years, bonds tend to remain stable, softening the blow we may have felt with a portfolio consisting of only stock. However, while bonds carry less risk than stocks and create greater stability for our investment portfolio, it is important to remember that in exchange for a safer portfolio, we are giving up some of our potential for larger gains.

However, don’t forget that the most important thing for each investor to do is to determine what his or her investment goal is. After we have decided how much risk we are comfortable taking and what our overall investment goals are, we can research the mutual funds offered and determine which funds —  investment objectives meet our investment goals.

John R. Ryan is the Regional Marketing Director of John Hancock Retirement Plan Services

Disclaimer: Before investing one should consult a registered financial advisor to obtain further information about investments and financial products.

The Walk-through ~ Is it the perfect place for you?

Depending on where you are searching and how close the properties are to each other, I recommend scheduling your viewings in two hour increments.

Obviously this will vary per situation but when you start seeing numerous properties in one session, they will all start blending together by the end of your day. Bring a pen and paper if your realtor doesn’t provide you listing sheets. Take notes on each property relating to the condition of the property, size of bedrooms, condition of flooring, and if anything stood out so you can remember the condo/home. By the end of your showings you will be glad that you took these notes. Take a few minutes to go over your notes when you get done and if possible, transfer these notes to the website you and your realtor are sharing so he/she can view them down the line.

I always tell my clients that this is the “weeding out” phase. It will be very unlikely that you will make a final decision after only seeing the property once, so the initial phase of looking at properties is to eliminate the ones that will definitely not work for you. This process is going to be a very emotional process so every good realtor will point out certain things that you might over-look. I am always looking at characteristics from a re-sale standpoint because your first home purchase will likely not be your last. How much light does the condo get? Are the room sizes too small? What type of condition is the building in (if it is a condo)?

Every situation is different but one of the things you will want to ask yourself when starting your search is whether you will want to do any repairs down the line. Some people want to move into a “fixer-upper” and others will want a move-in ready home. If you are looking to make repairs try to evaluate how much time and money you will need to invest to make the home livable.

The amount of homes that you end up looking at will vary from market to market but the average client I work with will view around 20-30 homes before we start setting up second showings.

Second Showings ~ Checking out your maybe’s

Once you weed out the “No’s” I start scheduling second showings. This is where you will want to start paying attention to the small things. I would suggest viewing it at a different time during the day than you originally did. Especially if you saw the home/condo during the evening because you will want to see what type of lighting you will receive during the daytime.

Condo Considerations

A more important issue you will encounter when purchasing a condo in a mid/high rise is the health of the condo building itself. Most realtors will do this research for you but you will want to know how much money the condo association has in its reserve fund. It will be important to find out when the major structural elements have last been replaced. Major structural elements include the roof, tuck pointing, windows, and mechanicals. When buildings take on these major projects, the tenants of the building will pay for them if the building doesn’t have sufficient reserve funds to pay upfront. I have seen these projects cost owners thousands of dollars down the line.

After you narrow down your search to one property, you and your realtor will sit down to discuss the market value of the home. The most important thing when determining market value is the price of the most recent sale(s). In a perfect world, the best comparable property would be a condo in the same tier (same layout and dimensions), with the same exact finishes, one floor higher or lower that sold yesterday. Because this will be uncommon, your realtor will do their best to find the most similar properties in the same location, which have closed within the past few months. Although current, active listings can help, they are not a true representation of market value because they could be priced incorrectly (high or low). Your realtor will sit you down and will explain the differences between each property and the one you are interested in. After noting the differences and assigning a value to each difference, your realtor will suggest a market value for you to consider when negotiating.

Bidding and Negotiating on your first home

The next step will be submitting your first offer and negotiating the important points within the contract. Everything is negotiable so if you can’t get the exact price you were aiming for, maybe you can get a closing date that works best for you or a possible seller credit that will help you pay for closing costs. It is a give and take process from both sides so some things more important to you might not be for the seller. Before calling it a day and giving up on the negotiations, make sure you discuss each point to see if something can be mutually beneficial.

Most cities/towns/states will have a standard contract that most offers are submitted on. A few important sections within most real estate contracts are earnest money, mortgage contingency, closing date, attorney approval period and inspection period. Your realtor will explain these in more detail but here is a quick explanation of each.

The Vocab you need to know!

• Earnest money can be described as a good faith deposit. It is offered to the seller as a monetary promise that you are doing everything in your ability to close on their home. Earnest money can vary from $1000-10% of the purchase price. If you do not uphold the contractual end of your agreement, you are liable to lose this earnest money.
• The mortgage contingency is a provision that says that if the prospective buyer can’t get a mortgage within a fixed period of time, he/she can call the deal off. A lot of the time the mortgage contingency will have a provision that the seller can find the buyer a mortgage on their own (within certain mortgage interest rates and terms) if the buyer says they cannot find one.
• The closing date will be the perfect world scenario for you. I suggest picking a date at least 30-45 days after you submit the initial offer. This will give your mortgage broker the necessary time to secure the loan for you. The closing date can vary greatly depending on your situation and that of the seller. There are monetary penalties for both the seller and buyer if this closing date is not met.
• The attorney approval period is usually 7-10 business days from when the offer is accepted. This will give both attorneys time to discuss legal matters. It also allows the attorney to cancel the contract or request it be altered. During this period, either party may void the contract without penalty in most cases. You will want to conduct your home inspection during this timeframe as well. If a large/expensive issue comes up during the inspection, you will want the ability to get out of this contract penalty free if you cannot agree on a monetary solution. It is very IMPORTANT to choose a “real estate” attorney in most states. The real estate laws are very complicated and you do not want to leave it in the hands of an attorney who is not familiar with real estate law. If you do not know a real estate attorney, have your realtor refer one.
• The inspection period is also a very important one and is usually 7-10 business days. I recommend that all my clients hire a licensed home inspector. This is more important in older buildings but I recommend it even if the property is brand new. There are so many things that can go unnoticed without hiring a licensed inspector. They will inspect the appliances, electrical outlets, mechanicals (HVAC and water heaters), roof, common elements, etc. A good inspector will also teach you how and when to perform routine maintenance and give you a bunch of useful hints/tips on how to keep your home running efficiently. I suggest taking notes during the inspection.

After the inspection has been performed to both party’s likings and both attorneys’ sign off on the attorney approval period, your work is almost done. It will now be in the hands of the mortgage broker to gather the necessary documents, set up the home appraisal and secure the mortgage before the closing date. In today’s mortgage environment, be prepared to supply any and all documents to your mortgage broker. It may seem annoying and time consuming but in lieu of the high amount of mortgage fraud over the past few years, banks want to do everything they can to ensure they are loaning money to someone who can make payments on this home/condo. The quicker you can provide these documents, the smoother and quicker your loan commitment will come.

Assuming your mortgage broker is on top of everything and the loan commitment has come in before your closing date, all you will need to do is show up at the closing location and be ready to give your signature hand a good workout. In most states, your attorney will walk you through each document and tell you the importance, or lack of importance, of each one. This is another reason you will want to hire a good real estate attorney.

Once you have signed the necessary documents and the funds have been transferred to the respective banking accounts, you will be handed the keys to your home. This might seem overwhelming and a lot of work, but good realtors will make this entire process painless for you. If you surround yourself with the best professionals available (realtor, mortgage broker and attorney), the process will be an enjoyable one you will remember forever. Good luck with the move in!

In the final part of the series I will discuss the current state of the market, foreclosures, short-sales, and tax incentives to owning a home. If you have any real estate questions and/or are interested in starting a search, please contact me through my website at www.CondoMeNow.com or by email at jweb@heliosrealty.com.

This is the first part in a three-part series walking you through the entire home/condo buying process. Along the way, I will provide some tips and suggestions that you can follow to ensure a successful transaction and a very happy home purchase. Buying a home is the most important and most expensive purchase most people will make in their lives so going into the process blind is a mistake you will not want to make.

one:

The absolute first thing I recommend 100% of my clients to do is speak with a trusted mortgage broker. If you don’t know of one, ask your friends, family, and colleagues. Anyone you know that has purchased a house in the past few years should be able to recommend one for you. Because of the recent mortgage fraud running through the U.S., make sure that your contact had a positive experience with them. My clients usually speak with at least two mortgage professionals. The mortgage interest rate that is quoted is always important but it will most likely change by the time you find your condo. You should definitely consider the quoted interest rate but choose the broker you feel most comfortable with because interest rates will not fluctuate greatly from broker to broker.

The mortgage broker will ask you questions about your current job, run your credit history, and ask you how much money you are willing to put down as a down payment at closing. All of these things will have a significant impact on the mortgage rate you qualify for. It is very important to speak with a broker early on in the home buying process because if your credit score can be improved or if you know you need to save a little more money before buying, it can positively affect your interest rate and the purchase price of the home/condo you can afford.

two:

Once you have narrowed down a purchase price with your mortgage broker the next step will be finding a location. If you have been living in the city for years and know where you want to buy, choosing a safe location is easy. But if you are new to a city or exploring neighborhoods in your current city there are a few things I suggest to my young professional females to make sure the neighborhood is safe.

• Drive or walk around your neighborhood at different times throughout the morning, day, and evening.
• Test out the public transportation, if it exists. See what the best and fastest routes are to work, grocery stores, and your favorite restaurants.
• Spend a weekend day in that neighborhood so you can test out some local food, entertainment, etc.

three:

When you have narrowed down your price range and location preference, your next step will be to choose a respected realtor to help you find your dream home. I highly recommend asking friends and family for referrals. If someone had a bad experience with an agent, they will never recommend them. Your realtor will most likely set up a time to meet and discuss your complete situation, likes/dislikes, needs, and wants. Along with price range and location, be prepared to answer questions about how long you plan on owning the condo, if you have any preferences of construction (new, vintage, fixer-upper), number of bedrooms/bathrooms, and if you need parking.

Refrain from narrowing down your search too much unless you absolutely need a particular trait in a home. If you can’t go without a washer/dryer in your unit or hardwood floors, tell your realtor. If you think you can either add them at a later date or go without, I would suggest not limiting your search. You would hate to miss a great home because the washer/dryer hasn’t been installed or hardwood floors haven’t been added. You can do all of these improvements at a later date. I would rather have a client see a home without that trait and then rule it out, than never see it at all. All of these questions will help your realtor narrow down your options so that they can find the right home for you.

After the realtor feels they have a good idea of what you are looking for, they will set you up an automated MLS (Multiple Listing Service) home search. All of your parameters (price range, bedroom, bathroom, unit features that are a must, location preference) are entered into a database that runs a few times a week. You will be able to view pictures of the homes, read the description of the properties, make notes, mark your interest level and ask questions from within that database. The realtor will be able to read your comments and answer all your questions from the back end of the system. This search will run from this time until you move into your home. Any new properties to hit the market or any properties that fall into your parameters will be sent to you by email.

This is a great way for you to keep track of all the properties on the market, make notes on the ones you have seen, and eliminate ones you do not like once you have seen them. It is the best way to keep you and your realtor on the same track regarding the condos that might work for you.

I hope that gets you started and in the next part of the series I will discuss finally hitting the pavement with your realtor, negotiating the offer, inspection, attorney approval period and closing. In the final part of the series I will discuss the current state of the market, foreclosures, short-sales, and tax incentives to owning a home.