If you’re one of those people who likes to live the high life, you probably don’t realize how much your spending will end up costing you in the long run. Unless of course you have a trust fund and don’t need to worry about money, there’s a good chance you’re spending more money than you ought to, and thus not saving enough for retirement.
While its difficult to curb your spending, you can still make a difference. What you try to do is cut down on certain expenses without making a signficant lifestyle change. You don’t drop the expense, you modify it so it costs less. Maybe use a cheaper brand or a less expensive service. And you invest the difference.
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- Starting saving early. If it doesn’t hurt you’re not saving enough!
- Never spend more than you earn.
- Max out all your retirement plans every year.
- Get and stay married to a sensible person.
- Buy your home.
- Plan far ahead for your retirement, and then stick to the program.
- Make a plan with a reliable financial adviser. Don’t be afraid to ask for advice.
- Make savings and financial stability more important than looking cool.
- Adopt a straightforward investment philosophy that takes advantage of the historical benefits of investing in common stocks but balances it with bonds in a judicious mix.
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In a previous post, I mentioned how the sub-prime lending collapse might throw the US into a recession.
The entire sector of mortgage lending stocks have been slammed across the board. Some of them have gone under as their credit lines have dried up and they have been asked to repurchase loan portfolios with high deliquencies.
Some of the companies may have been unfairly punished. TheStreet.com just published an article, Subprimal Fears Signal a Time to Buy where they mention that one such company is American Home Mortgage (ticker symblol: AHM). At current stock prices, it yields a 16%+ yield! (As of writing the article it was 18%+).
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Real estate is one of my favorite investments and is great for the purpose of creating wealth. It’s highly leveraged and the government gives you several tax deductions to own it. And if done properly it can catapult you to wealth. What’s not to like?
It all started when I attended a real estate bootcamp in the late 1990s. (By the way, I hate bootcamps that charge you $5,000 or more, but that’s a topic for another post. In short they’re not worth it).
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As mentioned in earlier posts on compound interest and paying yourself first, saving small amounts regularly over an extended period of time is a sure shot way of becoming a millionaire. But you can do more to achieve that goal quicker. The best way to create wealth and become a millionaire is by learning what millionaires do and copying them. So once you know how millionaires acquired their wealth, how they live, and how their families function, all you have to do is replicate that system and now you’re living like a millionaire!
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Posted in Investing, Canroys on Mar 19th, 2007 9 Comments »
Canadian Royalty Trusts, also called Canroys, are a subset of a class of investments called Canadian Income Trusts. Royalty Trusts invest in oil and gas resources. But Income Trusts can invest in businesses, real estate and utilities.
In terms of taxation, they get similar treatment as US REITs. They have to distribute most of the profits out to the shareholders (only they’re now called unit holders) and the dividends aren’t taxed at the corporate level. This means that there usually more dividends to pass through to the unit holders. And at the unit holders level, there’s a flat 15% tax.
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Jim Rogers, successful hedge fund manager, investor and author of incredibly interesting books is so certain that real estate prices are going to drop in certain “bubble” markets that he’s putting his $15 million Manhattan home for sale. Its not that he needs the money, but he’s probably a value investor. And like many value investors, he can’t bear not taking advantage of selling obviously over-inflated assets. Warren Buffett, probably the most famous value investor on earth, also believed that his Laguna Hills house was over-priced and sold it a while ago.
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Posted in Saving on Mar 15th, 2007 6 Comments »
March 14th is Albert Einstein’s birthday! And in case you’re ever on “Who Wants To Be A Millionaire”, he was born in 1879. Apart from his general theory of relativity he’s also allegedly famous for claiming that Compound Interest was one of the greatest mathematical discoveries of all time. He’s also credited with the rule of 72.
The Rule of 72
The Rule of 72 lets you calculate compound interest returns in your head and helps you quickly determine how good a potential investment is likely to be.
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Posted in Investing on Mar 13th, 2007 1 Comment »
The trading for New Century Financial (NEW) was halted today as the company is on the verge of bankrupcy. Its lost about 75% of its market cap in the past 1 week.
Thats kind of funny because Bear Sterns upgraded the stock 2 weeks ago to a buy. The sad part is that some of their investors must have believed them and bought the stock at $15. When it dropped to $7 they may have doubled down, thinking they’ll break even when it jumps up a bit. However, its currently trading at $1.66 so any chance of breaking even for those who bought at $15 is gone.
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With global liquidity at an all time high, stocks and other assets aren’t trading at multiples of profit or revenue, but rather as a function of how much money is chasing that asset class. With investors borrowing insane amounts of money via the carry trade and Chinese “investors” borrowing money from pawn shops at 36%/year to invest in the stock market, there seems to be flight from safety and a frenzy to invest in just about anything thats hot.
This reminds me of the good old days in 1999. When hairdressers and car salesmen used to give us stock tips! This scares me and it should scare you too!
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