Joe's Money

It’s odd.  Every financial adviser I’ve ever encountered swears up and down that their actively managed fund will out perform index funds hands down.  However, statistics show otherwise.  Statistics show that index funds out perform managed funds 80% of the time.  On top of that, of the 20% of managed funds that do out perform the index funds, how is one supposed to know which managed funds, or more importantly, WHEN the managed funds will be in that top 20%.

Lets take a quick look at the differences between actively managed funds and index funds.

Actively Managed Funds

The name is pretty obvious with actively managed funds.  It simply means that there is an individual or group of individuals that watch your funds.  They buy and sell based on their professional expertise.  Expenses are typically much higher than index funds because someone is actually “watching” your money.  Fees can be 1.5% or even higher.

Index Funds

Index funds are simple.  Index funds have literally a spread of all stocks on the market.  A little of this, a little of that.  Index funds do not have anyone watching your money.  As the market fluctuates as a whole, so do these funds.  They are bench marked against some of the biggest indexes like the DOW, S&P 500, Nasdaq, and many more.  Fees for these funds can be as low as .02%.

After reading the difference of the two types of funds, you’re probably thinking you’ve got to be kidding me!  I can let this run on auto-pilot and do better than the professionals?  The short answer is yes, or at least 80% of the time.  Remember that even though 20% do out perform the index funds, it is nearly impossible to tell which funds will, and even more difficult, when they will.  Heck, even if you do win, the margin of difference is usually so low the fees eat up the rest of superior gains.

In a nutshell, stick to index funds for the long term.  These funds are available in any style, conservative, moderate, aggressive, you name it.  Keep in mind, you will be investing for 20, 30, or more years.  Stick with your plan.

Ok, ok.  So this is probably the most worn out topic ever.  However, based on recent survey data, only about a third of the workforce that is offered a 401k, are enrolled and contributing to it.  This is a ridiculous statistic considering the average company match is 4%.  Think of it this way, if your boss asked you if you would like a 4% raise, would you take it?  I sure hope so.  If not close this web page, there is no hope for you.  All kidding aside, take a look at the numbers below to see how much FREE money you are missing.

The calculation is easy.  Take your earnings, before tax (Gross) and multiply it by the employer match.

Ex.  Current salary is $36,000 per year with a 5% employer match.

$36,000 * .05 (The employer 5% match) = $1800.  The total contribution is simply the employer match * 2.  The other half is what you need to contribute.  Hence the employer “match.”  So for this example, the total is $3600 per year total contribution.  Remember, this is FREE money.  All you have to do is contribute your portion first.

What investments does my 401k use?

Most 401k plans consist of mutual funds that target different objectives.  Most plans offer a little something for everyone.  Some funds are more conservative while others are much more aggressive.  The mutual funds offered are typically stock funds, bond funds, target funds, index funds, real estate funds, and more.

Stay tuned for more on how you can determine your risk tolerance and other factors on determining what funds you should invest in.

The sooner you realize that any credit card debt is too much the better off you will be.  Most folks have to learn this the hard way.  Once you have acknowledged that you need to rid yourself of credit cards, start with these steps to get rid of them for good.

I have 8 credit cards.  Where do I start?

I have found that paying off the lowest balance card first makes the most sense.  You may have heard of something called the “Debt snowball.”  This was mentioned in one of Dave Ramsey’s books.  The idea is simple.  Start with the lowest balance first.  Apply the most you can to that card while making only the minimums on all the others.  This helps in many ways.  First, it helps you realize you ARE making progress.  Once one card is paid off you can see for yourself that you have accomplished something.  The bill stops coming and its one less thing to worry about.

Once the first card is paid off, take the money you were using to pay the first card with in addition to the money you were using for the minimum payment on the next lowest balance card.  Do this until all cards are paid off.  You will be shocked at how fast this can get things rolling.

But wait!  Some of my cards have much higher interest rates on them.  While you raise a excellent concern, people need constant motivation to stick to the plan at hand.  Unless all of your cards have similar balances, stick to paying off the smallest balances first.  If your cards have similar balances, then it would of course make sense to pay off the higher interest rate credit cards first.

And last but not least, once you are done paying off all these balances, cut up the cards and never use them again.  You can no longer use the excuse they are for emergencies.  If you have setup an emergency fund, you won’t need them.  Plain and simple.  Don’t fall back into the debt trap once your out.

Well, it turns out no matter what income bracket you’re in, you probably still broke with negative net worth.

This book was a real eye opener for me.  It describes the perception and the reality of millionaires and how they got their millionaire status.  The truth is, the average millionaire is not driving a $100,000 sports car, or even a new car for that matter.  The folks driving the $100,0000 sports cars are usually just as worse off financially as the person making $8/hour if not worse.  They make more they spend more.  The doctors and lawyers may be book smart, but according to the author, they are decades behind on financial literacy.

Check it out, this is a good, inexpensive read!  Enjoy!

Link to purchase book – Used copies starting at only $.50

Everyone needs some time to get away from it all and relax sometimes.  Take a look at some of these tips and save big on your next vacation.

User Broker Travel Sites

Using vacation broker websites like Expedia, Orbitz, etc can save you tons.  I have the best luck with Expedia but I don’t travel too often.  Take a look at a few and see what you can find.  The idea for these sites is pretty simple, sell unsold seats and rooms for a discount.  Some money is better than no money.

With these broker sites, it is also easy to compare different travel times throughout the year.  If you are flexible on the days you leave and return, you can save a fortune.  I often go to Las Vegas and Sunday through Thursday seems to be the best bet most of the time.

Be sure to compare prices for extra days.  Last time we booked Vegas, we were only going to stay for 3 days.  Then we ran the price and realized it was literally the same price to stay for a fourth night.  They were running a promo for buy three nights, get the fourth free.  Even when that deal is not running, many times the extra night will only cost about $20.  Why not stay for the extra day?

Travel at Non Peak Times

Obviously, some destinations are more desirable at different times in the year.  However, if you are willing to go against the grain on this one, you can save a fortune.  I have literally seen half price vacations at non peak times.

Try to avoid Holidays and weekend, rates are almost always higher at those times.

Look for Discounts On Area Attractions

A quick google search can save you lots of money.  Before you take off for your destination, take a look at the areas attractions and activities.  Many times you can get discounts or deals when booking in advance.  Many attractions also post coupons on their websites or elsewhere online.  Again, a simple google search will help you find whats available.

Don’t Waste Money on Poor Attractions

The internet is your friend.  Looks for reviews of attractions you are thinking about.  Once you arrive at your destination, it can be much more difficult to find reviews on the attraction of choice.  Use this tip and stay away from the things that are not worth the price.