Evaluating investment opportunities

Evaluating an investment

Evaluating investment opportunities (e.g. shares, property, bonds) is easier if you use a standard set of criteria to measure and compare them. While each investment must be evaluated in the context of your personal goals and objectives, in most cases the following characteristics may be considered:  

•  Return on investment (ROI)

•  Capital and income security

•  Risk

•  Transaction costs

•  Minimum investment amount

•  Liquidity

•  Ease of investment
  
• Taxation

Return on investment

Return on investment will usually be in the form of income (a payment you receive from your investment) or capital growth (where the value of your investment increases over time). Some investments, such as shares, may provide both.

Income

Investment income may include amounts such as interest on bank accounts, dividends from shares, rent from a property and distributions from a trust. As well as the amount of income you are likely to receive, you should consider the likely frequency and regularity of the income payments and the potential for any increases or bonuses. Does the investment pay distributions, weekly, fortnightly, monthly or yearly?

Income from investments is usually subject to income tax at your marginal tax rate.

Frequency of income payments

The frequency of income payments is a key factor in determining the yield for an investment.

Compare three investments of $100,000 each with a 6% interest rate: the first paying annual coupons, the second paying semi-annual coupons and the third paying quarterly coupons.

Even though you receive coupons totalling $6,000 over the year from each investment, when you take into account the timing of the coupon payments the yield can vary. This is because the sooner you receive your income payments the sooner you are able to reinvest that money.

This means that the yield for an investment paying 6% quarterly may be higher than the yield for one paying 6% annually.

Capital growth

Capital growth generally refers to the increase in the value of the amount of money you have invested.

Returns from capital growth can only be realised when you sell an investment for more than its purchase price.

The main benefit of capital growth is that it protects you against inflation. This occurs when the value of your investment grows at a rate faster than the general rise in the price of goods and services. By keeping your capital growth ahead of inflation you are able to prevent inflation from eroding the spending power of your savings.

Capital growth may occur through rising share and unit trust prices on the sharemarket, increased values in the property market and profit on fixed-interest securities if sold before maturity. In Australia, realised capital growth from investments is usually subject to capital gains tax.

Comparing risk and return

Setting realistic expectations is important when determining what level of return you might expect from your investment.

When evaluating the return on investments you may wish to compare their rate against the return on government bonds. This rate of return is often called the 'risk free rate'. An investment in government bonds is generally very secure as there is little chance that the lender (the government) would default and fail to repay the investment.

The risk free rate may be a good guide to use when considering whether the risk is commensurate with the reward of an investment.

You can generally find the government bond rate in the business section of the newspaper.

This article is based on the ASX Share Course. November 2008.

The science of getting rich - the will power

We continue in our journey to look at the timeless advice contained in the book "Science of Getting Rich" by Wallace D. Wattles.

This articles looks at the chapter regarding the will power. The bottom line about this article is simple: "what comes around goes around".

When you know what to think and do, then you must use your will to compel yourself to think

and do the right things. That is the legitimate use of the will in getting what you want — to use it in

holding yourself to the right course.

If you have a financial goal you have to use your will to remain focused. If you have such a strong will that you have no shadow of doubt that you are capable and that you will achieve your goals, this frame of mind will keep you motivated.

Let's face it, the journey to financial independence is very hard. My objective is to generate enough passive income to support myself and my family. By the very definition, passive income is income that once setup, will keep on generating income without your contribution, without you having to work on it.

Passive income is very difficult to get. People don't just give you money, they need to get value. We learned from Wattles that we need to give others more in use value than in cash that you receive from them, in other words, give people valuable and useful things that will positively affect their lives.

It is all very difficult and we will certainly face some failures on the way. Nevertheless your will can help you to stay motivated and on the path, don't quit it half way.

The science of getting rich - gratitude

We continue in our journey to look at the timeless advice contained in the book "Science of Getting Rich"  by Wallace D. Wattles.

This articles looks at the chapter regarding gratitude. The bottom line about this article is simple: "what comes around goes around".

Wattles mentions a law of gratitude. He says that it is absolutely necessary that you should observe this law if you are to get the results you seek. The law of gratitude is the natural principle that action and reaction are always equal and in opposite directions.

The moment you permit your mind to dwell with dissatisfaction upon things as they are, you

begin to lose ground. You fix attention upon the common, the ordinary, the poor and the

Mean. Eventually, you will take the form of these things and then you will transmit these forms, or mental images to your subconscious  and these things will come to you.

I think it is important that no matter where we are in our journey to financial independence we always remain grateful for what we have and for what we will achieve. This mindset helps us to remain motivated.

Dwelling in bad experiences and failures will discourage us. If you spend enough time on negative things you will stop focusing on the positive and your mind will move from a positive frame to a negative, which will in consequence affect your actions and you will begin to attract failures and negatives things towards you.

In some ways it is like the one bad apple that spoiled all of the good apples in the basket. Don't let negativism and lack of gratitude ruin your journey towards riches or whatever it is that you are trying to achieve.

Being grateful also helps you to keep things in perspective, to remember where you have come from, how much you have travelled and how much you still have to go.

The grateful mind is constantly fixed upon the best. Therefore it tends to become the best. It takes

the form or character of the best, and will receive the best.

A few strategies to make some extra money

It is always a good idea to make some extra money. It can help you to pay off a debt, save or just buy something that you want.

This article outlines a few ways to generate some extra money. Depending on your commitment and goals, some of these strategies can be turned into significant streams of income.

Making Money on EBay
Think about all the stuff you have around you, do you really need all of that? It is likely that something you don't need anymore may be useful to someone else. There are several stories on the internet about people who have made a few bucks, hundreds or thousands of dollars.

All you need to do is take stock of what you have and sell anything that you don't need anymore.

Blogging

Blogging is a simple and quick way to start your own business. Over time, and with good and relevant content, you may build a loyal readership which may generate you some income through ads, affiliate marketing and other strategies.

It is also fun to be writing and exchanging ideas about a topic that you love.

EBooks

EBooks have the potential of generating significant income. Similarly to blogging, you can write an ebook on something that you are really interested, put it on the internet for sale and make some money.

Taking online surveys

Organisations all over the world need your opinion as a customer. They value your opinion so they can make various different decisions about the product, marketing and other aspects of their product management.

Your opinion is so important that they are willing to pay for it. You can find several online paid surveys. You can take a few each day and make some money from it.

Real estate investment

This strategy requires some start up cash in order to acquire an investment property. It is hard to get started, but once yo do you can make money from rental income and as your property value goes up you also make money.

Many people build a sizable property portfolio which generates passive income.

Invest in the stock market

Investing in the stock market is a common approach to generate income. As I have mentioned in previous posts, you need to learn before you start and you need to do a lot of research to ensure that you are investing in a good company.

You can also get stock market reports to help you to make your decisions. It is important to get the right advice, which can be of great help if you are a beginner investor.

I have recently blogged on the risks and benefits of investing in shares. For more information click here.

This short article is by no means exhaustive. The most important aspect of these strategies is to start. Do something about it , choose one strategy and get going, it may be the best decision you ever make.

The science of getting rich - how riches come to you

We continue in our journey to look at the timeless advice contained in the book "Science of Getting Rich"  by Wallace D. Wattles.

This articles looks at the chapter regarding how riches come to you. It is one of the most inspiring and insightful articles for anyone reading the book.

Wattles makes a very good point in this chapter: "...give to every person more than you take from him". This is simply the best advice anyone could give me.

It does not matter whether you run your own business, you work for someone else. When dealing with anyone, give more than you take. If you do that, your actions will return to you, many times over.

If you give to anyone more in use value than in cash value, then  you are adding to the lives of the people you are dealing with.

If you are engaged in a business transaction, make sure that whatever you are selling is worth more in use value than what you are getting. If you are a mechanic, ensure that your work is reliable and addresses the needs of your customers.

This principle applies to employees of an organisation as well. If you are working for someone else, make sure that you always go the extra mile. Don't just do what you are asked to do. Always do a little more, or do it a little better. Understand the reasons for your task and deliver more.

Employers, generally, are not seeking to exploit you. All they want is to get more in use value than what they give you in cash value. If you follow this principle, you can be sure that you will attract more cash to you. Either from your current employer or from someone else that is contact with you and knows that you always over deliver.

If you apply the principles in this article you will eventually expand your business, you will get the promotion that you want or the new job. People will know that when they deal with you they get more in use value than what they pay you in cash. They will always come back for more.

Debt consolidation

Debt consolidation means taking out one loan to pay off others. One of the main benefits of taking out a debt consolidation loan is sometimes lower interest rate and the convenience of paying off only one loan.

Debt consolidation is often advised when someone is paying credit card debt. More often than not, credit cards carry a much higher interest rate than even unsecured loans. in this case the total interest and the total cash flow paid towards the debt is lower, allowing the debt to be paid off sooner because it incurs less interest.

There is however one major pitfall with regards to debt consolidation to pay off credit card debt. The risk of taking out the debt consolidation loan and continue to incur credit card debt.

Nowadays it is very easy to get a credit card. More often than not, banks don't perform the appropriate checks to ensure that the person applying for the credit card can afford to pay it off.

I personally believe that it is the responsibility of each person applying for a loan or credit card to ensure that he/she can afford the repayments. The banks should perform the appropriate checks, nevertheless the individual is responsible for his own actions and in the end will be held accountable to pay off the debt.

The risks and benefits of investing in shares

The Risks of shares

Investors should be aware of risks with any type of investments. In order to receive a return for investing your money you need to accept a level of risk. Generally, the greater the risk the higher the return.

The following list is a summary of a few risks of investing in shares: 

• Risk of capital loss - Investors are able to redeem the value of their share investment by trading them on the share market. When a company is not doing well, it may be difficult to find a buyer to purchase the shares at the price you are asking. As a result, the sale price may be lower than the original purchase price. You incur a capital loss when the value of you share has gone down when comparing to the value of the same shares at the time of purchase.

•  Volatility risk - Share prices can rise and fall rapidly and investors must accept the fact that the value of their shares may fluctuate by as much as 50 per cent or more in a year. General market risk can relate to a particular sector, e.g. mining shares are usually more volatile than industrial shares such as bank shares. Specific risk can relate to the performance of an individual share.

• Timing risk - Because of market cycles, some shares have a higher degree of risk when the overall share market has risen sharply and is set for a reaction. The opposite may apply when the market has gone into a strong decline and then starts to recover after showing some signs of stabilising. Not all sectors of the market follow the same price cycles. Understanding business cycles and how different companies perform during the different phases of the business cycle can help to manage the effects of timing risk.

• The risk of poor quality advice - Are the investment recommendations made to you supported by a thoroughly argued case, or are they merely hearsay? The more reliable information you have, the better your decisions will be. Adopting a disciplined decision-making process will help you to minimise losses while you patiently build a portfolio.

The benefits of shares

• Shares for capital growth - Capital growth occurs when the value of your investment increases. Many people invest for capital growth to build their wealth and protect themselves against inflation.
  
  People invest in shares because they offer the possibility that their price will rise. Owning shares in a company with a rising share price is one way to achieve capital growth.
  
  Capital growth is essential to investors as long as there is inflation. Inflation is a measure of the rise in the price of goods. The Reserve Bank of Australia (RBA) aims to keep inflation within a range of 2-3%. With no capital growth, your money will buy less in the future than it does now.

• Shares for dividend income - A dividend is the distribution of a company's net profit to shareholders. Dividend yields vary greatly from company to company. It is not compulsory for a company to pay a dividend.
  
  For Australian investors, dividends are often worth more than the cash payment they receive. This is because a company can also distribute franking credits for any company tax it has paid.
  
  Franked dividends carry imputation credits, which entitle shareholders to a tax offset or a reduction in the amount of tax to be paid. If your marginal rate of tax is lower than the company tax rate, the excess franking rebate can be used to reduce the tax payable on other sources of income.
  
  In addition to rising share prices, dividend re-investment plans (DRP) can multiply the capital growth effect of a share investment. DRP is an alternative to cash dividends, allowing shareholders to purchase new shares instead of receiving a cash dividend. These shares are often issued at a discount to the current market price and no brokerage is paid.

• Capital gains tax (CGT) - Shares enjoy good taxation benefits in comparison to most other investments. You realise a capital gain whenever you sell shares and the consideration received (sale price less related costs such as brokerage) is more than the cost base (purchase price plus related costs).
  
  If the shares were acquired on or after 20 September 1985, the capital gain must be included as assessable income in your tax return and is subject to CGT. CGT is payable at your marginal tax rate in the year in which you sell the shares.
  
  For shares acquired on or after 21 September 1999 and sold 12 months or more after the date of acquisition, capital gains may be discounted by 50%; meaning only half of the capital gains must be included in your assessable income.

• Financial control - Shares' flexibility and liquidity are key advantages. In particular, the ease and low cost involved in buying and selling relatively small amounts and the control that gives you; whether to free up some cash, re balance your portfolio or simply realise a profit.
  
  Many people appreciate how easy it is to invest in shares. There is no conveyancing cost, stamp duty or ongoing expenses. You can do everything over the internet if you wish, and brokerage fees are much lower than typical real estate agent fees. So you can start small, buying companies you know, and take the time to learn as you go.

 

Please note that this is an Australian website. Laws and regulations will differ in different countries. It is of vital importance that you check your tax laws before investing in shares.

This article is based on the ASX share course, version 3 2008, course 3. (http://www.asx.com.au).

Financial Independence Compilation

Welcome to the July 26, 2010 edition of financial independence.


This week, Your Financial Independence is highlighting three articles. "Why invest your money", "The science of getting rich - increasing your life" and "Managing your finances online".

Thank you to all weekly contributors who make this compilation possible.

Your Financial Independence articles

Why invest your money - This short article discusses two strategies for investing your money, capital growth or income.

Managing your finances online - There are many online resources to support you to manage your finances. This article discusses the potential dangers of using some of these websites.

The science of getting rich - increasing your life - This article talks about the right frame of mind. Start your journey by believing you can achieve your objective and continually think about your goals until they are realised.

Reader's sponsored articles

Silicon Valley Blogger presents Use Airline Credit Cards & Frequent Flyer Programs For Frugal Travel posted at The Digerati Life, saying, "Be wise about using credit cards. If you're a frequent flyer, then check out good airline cards."

Jessica Bosari presents Five Good Reasons to Dip Into Your Emergency Fund | billeater.com posted at Billeater, saying, "Guidelines for when you should use your emergency fund and when you should not."

7million7years presents An inch is not a mile - 7million7years posted at How to Make 7 Million in 7 Years™, saying, "Are you really SAVING when you buy that new TV at a discount, or are you just spending a little less?"

Tom Tessin presents 5 Ways to Build Credit History posted at FSC Blog, saying, "5 simple steps that you can take today when you're looking to build up your credit score."

Robert May presents Lethbridge Real Estate and Mortgage Info: Lethbridge Real Estate - Buy Rental Property NOW posted at Lethbridge Real Estate and Mortgage Info, saying, "Investing in Lethbridge real estate is a unique opportunity"

Jacob A. Irwin presents Home-Based Business Opportunities posted at My Money Blog - Personal Finance and Investing, saying, "A review at the different types of home-based business opportunities out there, and whether they are legitimate or not."

nissim ziv presents Can a Hobby Work For You? Turning a Hobby into a business posted at Job Interview Guide, saying, "Many have heard of great success stories from those who quit their day jobs to pursue active and lucrative hobbies from home.
Is this choice right for you?"

Lisa Kai Lee presents Finance | lisakailee posted at Does paying off your mortgage fast really pay off?, saying, "A new approach to online investing! Best of all, it is passive!"

Mike Piper presents HSA Contribution Limits: Health Savings Account Rules posted at The Oblivious Investor, saying, "A run-through of the rules for Health Savings Accounts, including eligibility requirements and current contribution limits."

Arjun Rudra presents An Introduction To Hedge Funds posted at Investing Thesis, saying, "Faced with the prospect of stricter regulation and a huge shift in investor sentiment post financial crisis, hedge funds have realized, in true Darwinian style, that sustainability is predicated upon their ability to adapt and evolve."

DepositAccounts presents Brokered CD: Higher Returns from Your Cash posted at Deposit Accounts.

BWL presents 24 Legitimate Home-Based Business Opportunities posted at Christian Personal Finance, saying, "These are 24 simple ideas of home-based businesses that you can start from home..."

MoneyNing presents Is Financial Compatibility Important When Choosing a Life Partner? posted at Money Ning, saying, "Did you and your spouse talk about financial compatibility before your marriage?"

Jane Bakerson presents Belize condos: A market snapshot posted at Real estate data for Panama, Costa Rica, Nicaragua and Belize, saying, "There is no Multiple Listing Service for property for sale in Belize so it can be hard to get hold of reliable data. This article provides a market snapshot of the Belize condo market to help overseas property investors make better decisions."

Huddson presents Internet Marketing: Making Money Online posted at Marketing Online Can Be Enjoyable & Profitable.

Matt T. Henterly presents What I Learned From My Small Business Failures posted at The SimpleChecking Blog, saying, "Learn from one individual's small business failures; so you won't have go through them yourself."

Michael Pruser presents What is a Social Security Statement posted at The Dough Roller, saying, "Understanding that Green Social Security statement you get in the mail every year"

Roshawn Watson presents Will The Dow Really Drop By 90%? posted at Watson Inc, saying, "We've been having a nice little stock rally lately. As of yesterday, the Dow stands at 10322. Still, the shocking warning of market analyst Robert Prechter is still being discussed all over the net. He predicted that the Dow will drop precipitously to below 1000 within the next six months. Do you believe him?"

That concludes this edition. Submit your blog article to the next edition of financial independence using our
carnival submission form.

Past posts and future hosts can be found on our blog carnival index page.

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Why invest your money

Investing and finances independence means something different to everybody: being able to retire at 50, setting up your own business, paying the mortgage, writing a novel or traveling the world. To achieve your goals consider how much you will need, and then think about how you can invest your money to help you achieve these goals.


There are a few different strategies to invest your money, this article will look at 2, investing for capital growth or investing for an income.

Investing for capital growth

Capital growth occurs when the value of your investment increases. Most people invest for capital growth to build their wealth over time and protect themselves against inflation.

Investing for income

People can seek an income stream from their investments in order to supplement their primary source of income. Many retired people live off the income from their investments (e.g. dividends from shares and rent from property). Fixed interest products such as bonds and hybrids offer a potentially regular income stream.

There are some investment strategies that will give you capital growth and regular income. An example is properties. In the long term property values generally go up in value. If you are investing in properties and you have tenants you will also have rental income. Properties therefore have the potential to give you income and capital growth.

Before investing, think about your short and long term objectives and devise a strategy to support you in achieving your objectives.

Managing your finances online

There are many ways to manage your finances online. There are websites that you can use to track your finances via the internet. You enter your details and some of these sites download your financial transactions and create charts and reports for you.

The principle is right, you need a way to keep track of your expenses. But I prefer to do that in my local machine instead of on a hosted environment where my detailed financial information is maintained by someone that I don't even know.

At the end of the day, these websites are maintained by people, all you need is one dishonest employee with access to the database and he/she can steal your identity and, potentially, your money.

These websites have very strict rules and they assure you that they are always doing all that they can to keep your data safe, nevertheless all you need is one person and the damage is done.


I support the internet and all the wonderful things that we can do with it, nevertheless, I don't think that it is safe enough to be giving out detailed personal and financial information to perfect strangers on the internet. After all, would you give out your bank account numbers, and how to get to them, to a stranger on the streets? So why would you do it to a stranger on the internet?

The science of getting rich - increasing life

We continue in out journey to look at the timeless advice contained in the book "Science of Getting Rich" by Wallace D. Wattles.

The book offers practical advice that if followed it will lead you to riches with mathematical certainty.

The first article of this series ( enter the URL here) talks about the right frame of mind. Start your journey by believing you can achieve your objective and continually think about your goals until they are realised.

The second advice on the book is with regards to increasing life. Wallace says that the desire for riches comes from a natural occurrence that we have to expand, in other words, to increase life.

The book uses the example of a seed that when dropped into the ground it springs into action and produces hundreds more seeds. He says that life, by living, multiplies itself. It is forever becoming more.

All human beings of all aspects of life and society naturally desire to continue to live. By seeking food, shelter and company we all seek to continually live and expand our lives.

Similarly, the desires for riches is the desire from within you to expand your life. It comes from possibility, or potential from within you to express yourself more and to achieve more.

If we all seek to expand our lives, our areas of interest, influence and earn and multiple riches our society will be in a much better position.

If we have more we can help more. It is like a snow ball effect, the more you have, the more you can help others in different ways. Your desire for riches is life within you seeking for fulfilment.

Wallace also discusses the topic of competition. He is completely against competition because in order for you to get rich, you don't need to have what others have. You have the capacity from within you, and life seeking fullness, will continually produce wealth via different ways.

Let me clarify this by using an example. There are seven notes in the western musical scale. With those seven notes, countless amount of music have been produced and countless will still be produced. Musicians don't need to copy each others' compositions. If you go to a music shop you have literally thousands of music that all come from the combination of those 7 notes.

The same apply to your journey for riches, you don't need to copy what others have done, you can always come with something new, which may be similar to what others have done in some cases, nevertheless it is new.

You don't need to compete or take what belongs to others. There are countless million of dollars yet to be produces. The wealth is unlimited, you don't need competition, you can generate wealth yourself.

"Don't look at the visible supply of wealth. Look always in the limitless riches in the formless substance and KNOW that they are coming to you as fast and as soon as you can receive them. Nobody can prevent you from having what is yours."

Some of the readers may look at this short article and say that there is no real advice towards becoming rich or financially independent. It is not true, the advice is to KNOW that you can get the riches you want and you don't need to copy the way that others have done. Life within you wants to increase. By focussing your mind on doing something and being able to achieve your objective, by learning and seeking to expand your life for your own benefit and the benefit of others around you, you will achieve the riches you need, it will come to you as you continue on your path towards financial independence.
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Financial Independence Compilation

Welcome to the July 19, 2010 edition of financial independence. This week, Your Financial Independence is highlighting one article regarding the timeless book The Science of Getting Rich by Wallace D. Wattles. Please do take time to review the article and to post your comments. Thank you to all weekly contributors who make this compilation possible. Your Financial Independence articles

The Science of Getting Rich is a timeless book with sound advice regarding build wealth. Your Financial Independence will be publishing a series of articles regarding the principles presented in the book. The first principle focuses on having the right mindset to support your path towards financial independence. Read more...

Reader's sponsored articles

Silicon Valley Blogger presents How To Invest Online Using The Peter Lynch Strategy posted at The Digerati Life, saying, "Thanks!"

Leave Debt Behind.com presents A Money Coach Can Fix Your Finances posted at Leave Debt Behind.

Matt T. Henterly presents Ten Things You Don't Need to Start a Business posted at The SimpleChecking Blog, saying, "The "experts" aren't always right. If you are thinking about starting a business, here are 10 things you DON'T need."

How to Project How Much do I need to retire | eHow.com posted at FaithAllen, saying, "Financial independence is very important and projecting how much you need for retirement is part of being financial independent."

Susan Howe presents The 11 Wackiest Celebrity Body Part Insurance Policies posted at Welcome to the Insure.com Insurance Blog: Life Insurance, Health Insurance and Car Insurance news and opinions, saying, "Celebrities are known to insure their body parts. Read about the 11 wackiest celebrity body part insurance policies."

Jena Ellis presents 20 Most Common Jobs for College Students posted at Online Certificate Programs.

Christien presents How to Get a Free Credit Report without a Credit Card Needed posted at Credit Cards Truthiness.

Brenda D. Chapman presents 8 Most Expensive State Construction Projects posted at Construction Management Schools.

BWL presents The Best Pre-Paid Credit Cards & Who Should Use Them posted at Christian Personal Finance, saying, "This article examines the pros and cons of using prepaid credit cards and who might benefit from them..."

SWE presents How To Sell Something on Ebay posted at Sell With Ebay, saying, "Selling on Ebay is a great way to make some extra cash and these are some tips to get you started..."

Super Saver presents Protecting Near Term Fund Needs posted at My Wealth Builder.

Gal Josefsberg presents Do Frugality and Dieting Work? posted at Equally Happy, saying, "Frugality has a bad reputation in some circles as a pointless pursuit of a few more cents at the expense of joy and happiness. I think this is a misconception. To me, frugality is less about chasing one more dollar and more about finding ways to improve life that also happen to save a bit of money."

Alexander presents What are Dividend Aristocrats? posted at Dividend Stocks, saying, "Dividend Aristocrats are dividend stocks listed in the S&P that have increased their dividend for 25 years or more. They make great investments."

Moneyedup presents Ipad Financial Apps posted at MoneyedUP, saying, "5 financial apps that will help you manage your finances from anywhere."

Ramsay presents Guaranteed Ways To Keep Your Phone Bill Down posted at Need Money Tips, saying, "Save money on your cell phone bill by reducing unnecessary expenses from your monthly bill."

How to Properly Manage 401k Retirement Plans | eHow.com posted at FaithAllen, saying, "Being independent on your own finances is very important for anyone at any age. 401K retirement plans are cornerstone to finanical independence."

Dan presents Actively Managed ETF Wins in Both Up and Down Markets posted at ETF Base, saying, "A review of an actively managed ETF that beats the S&P500 in both up and down markets. Beating the street is rare but this ETF has the demonstrated history making it worth a look."

Michael Pruser presents What is a Good Credit Score? posted at The Dough Roller, saying, "A look at the difference in credit scores and how it can affect your finances over the course of a lifetime."

Justin Lavine presents Don't Buy What You Can't Afford | TheFinanceFeed posted at TheFinanceFeed.

Contact presents Is Discover the Rodney Dangerfield of Credit Card Issuers? posted at NerdWallet Blog - Credit Card Watch, saying, "Discover has a reputation for not being widely accepted. And while the bad reputation is not without merit, it’s quickly fading from truth into perception. Even since 2007, when Discover was the butt of jokes on Futurama and Family Guy, things have improved substantially."

That concludes this edition. Submit your blog article to the next edition of financial independence using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

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The science of getting rich - the first principle

"To do things in the way you want to do them, you will have to acquire the ability to think the way

you want to think. This is the first step toward getting rich."

The statement above is the first principle of getting rich in the unforgettable book "The science of getting rich" Wallace D. Wattles in 1910. The preface on the book says that the book is a practical guide for people who want to follow a scientific way to achieve prosperity. It claims that there is a science for attracting wealth and that if you things in a certain was as so attract wealth you will certainly get rich.

Some people may interpret the advice on the book as abstract and therefore have difficulties following them.

Each of the principles have a sound theory linked to them and, although the book was written a long time ago, are in alignment with modern theories on financial management.

We all know that one of the barriers towards becoming financially independent is starting with the wrong mindset. Having the right frame of mind is the beginning of success. That's what the first advice is all about. If you want to achieve anything in life, and this includes financial independence, you have to think positive thoughts that encourage you towards achieving your goal.

It is actually very simple. If you want to become financially independent, start by thinking that it is possible an that one day you will achieve it.

Think about what motivates you, it maybe spending more time with your family, acquiring a waterfront property, paying off debt or whatever it might be. This thoughts should motivate you to start or to continue on your journey.

Whenever you can, think about the goals you have, develop a positive mindset about your journey and renew your mind every day. There will be ups and downs in your journey, the secret is to stay the course and remain motivated.

If you start with a positive frame of mind, renew it every morning and remain positive throughout your journey you have more chances of achieving your objectives.

I encourage each of you to download and read the book, it is a free download: www.scienceofgettingrich.net/sogr.pdf

Financial Independence Compilation

Welcome to the July 11, 2010 edition of financial independence. This week, Your Financial Independence is highlighting 2 recent posts. Please do take the time to review them and post your feedback. Thank you to all contributors. Your financial independence articles Some good advice on money matters. This article offers a few important advices to help you on your financial journey. Managing your cash flow to pay off debt. Debt is one of the biggest problems in our modern society. Young generations are growing up accustomed to debt, as if it is a normal part of life. Bad debt can affect individuals and families to the point of bankruptcy. This article offers a few advices on how to manage your cash flow to pay off bad debt. Weekly compilation Valery Zelixon presents Logistics is key for international business success posted at Supply Chain Notebook, saying, "great overview from a purchasing pro about selecting overseas suppliers." Valery Zelixon presents Supplier selection process part 1 - - how to select global supplier for your business posted at Supply Chain Notebook, saying, "great overview from a purchasing pro about selecting overseas suppliers." Silicon Valley Blogger presents Want To Day Trade? Try Paper Trading First posted at The Digerati Life, saying, "Lots of new investors jump into stock trading without enough experience and training. They lose their shirts in the process. But before you try this out, why not do virtual trading with play money and find out if this is right for you? You may find that you aren't cut out to trade and can save yourself a bundle!" Ryan @ MFN presents Improve Your Credit Score Quickly posted at The Military Wallet, saying, "These tips will show you how your credit score is determined and give you methods for improving your credit score quickly." Tim Chen presents 5 Reasons To Avoid Amex Blue Cash posted at NerdWallet Blog - Credit Card Watch, saying, "The Amex Blue Cash is a card that everyone loves to love, with it's enticing promise of 5% cash back. But there is a catch! So make sure you understand the fine print before you sign on the dotted line." Hussein Sumar presents Three Reasons Why You Should Sell a Dividend Stock posted at Dividend Stocks, saying, "If investors buy high yielding dividend stocks in an effort to generate income in the form of streams of dividend payments, but the company one day decides to reduce or cut its dividend altogether, then for those investors, there will be no point of holding that stock. This will put selling pressure on the stock and downward price movement. Here's an example of a dividend cut by General Electric." Corinne Reidy presents 52 Habits of Highly Effective Teachers posted at OnlineUniversities.com. MoneySecretRecipe presents Your 2 Top Options For Success If You Want To Make Money Online posted at MoneySecretRecipe. Jessica Bosari presents A look at the Big Four…Where Can You Get the Cheapest Cell Phone Plan? | billeater.com posted at Billeater, saying, "Who has the cheapest cell phone plan?" OmarAdams presents 12 Must-Have iPhone Apps for Serious Bargain Shoppers posted at Online Accounting Degree, saying, "These apps also allow you to save your time while getting the best price, so now you do not have to trade in your time to save cash. Get great deals on a tight schedule with the following iPhone apps for bargain shoppers." MoneySecretRecipe presents Do something that you have passion ... money and success will follow .. posted at MoneySecretRecipe. Carlos Sera presents A Competitive Tale; Financial Tales posted at Financial Tales, saying, "In every new client relationship the conversation always turns to how will the advisor be compensated? Periodically I am asked why I or others don’t charge clients based on the profits that we generate. When they ask me this question I always ask them to choose between two colors. I ask them which is their favorite black or red. When they look at me quizzically" CreditShout presents Beware of Joint Credit Card Accounts posted at CreditShout. Joel Ohman presents How to Find Cheap Car Insurance posted at Car Insurance Comparison, saying, "You don't have to be a Scrooge but there are still some quick tips to finding cheap car insurance!" Sam presents New !! Your IRA Retirement Savings Plan. Details for Tax-Free Savings posted at Surfer Sam and Friends, saying, "Thanks for including my article. Here's an excerpt... Almost anyone can set up an IRA and start saving for retirement. Retirement can be the best time of your life if you have enough money to enjoy it. Plan ahead. Avoid coming up short when you retire. 1. What is an Individual Retirement Account, IRA? 2. How Much Money Will You Need to Retire? 3. Three Steps to Set Up Your IRA Retirement Plan 4. There are Three Types of Individual Retirement Accounts, IRAs 5. How Much Can You Contribute to an IRA Retirement Plan? 6. How Much of My IRA Contribution Can I Deduct? 7. Making Withdrawals from Your Regular IRA Retirement Plan 8. How to Avoid the Penalty for Early Withdrawal From an IRA Retirement Plan 9. The Regular IRA Retirement Plan Has an Penalty for Under-Withdrawing 10. Use an IRA Retirement Account for Estate Planning" DepositAccounts presents 10 Mistakes People Make with Their Bank Accounts posted at Deposit Accounts. Patty Pedersen presents Sector Funds: Best, Worst, and Mid-Year 2010 Stock Market Outlook posted at AlphaProfit MoneyMatters - Investing Blog, saying, "As we cross the year's midpoint, investor's are focused on flat or worsening employment situation in the U. S., strained fiscal situation in Europe, and slowing growth in emerging markets. Yet, some sectors have been able to provide gains even in this crummy market. This article provides insights on whether momentum plays from the first half can continue to be top performers in the second or whether it is time for laggards to take charge." OmarAdams presents Broke Billionaires: 12 High-Profile Modern Tales of Riches to Rags posted at Online Accounting Degree, saying, "You might assume that being a billionaire equates to an easy life of no money problems, but for many high-profile people, this is certainly not the case. It is tough for most people to lose a job or a home worth thousands, but imagine losing millions or even billions of dollars in the blink of an eye." Roshawn Watson presents The Phony Rich posted at Watson Inc, saying, "The exotic cars, the homes, the private planes, chauffeurs, the celebrity hot spots, and nightly $300-plus per person dinners, etc. all encompass our vision of wealth. If this lifestyle is your aspiration, then there is a secret that you should know" BWL presents How To Avoid Taking Out Student Loans posted at Christian Personal Finance, saying, "Graduating debt-free is possible, but you’re going to have to rethink everything in order to make that happen..." Linda@NHE presents How To Find A Natural Health Insurance Plan posted at Natural Health Ezine, saying, "Find the best health insurance plan that will suit your needs for natural and alternative treatments." Arjun Rudra presents Correlation of mortgage rates with real housing prices: How increasing inflation could affect housing prices posted at Investing Thesis. The Dough Roller presents How To Get Your Private Pilot’s License (And How Much It Costs) posted at The Dough Roller, saying, "Flying high can cost you a pretty penny." MoneySecretRecipe presents How to Avoid Mistakes Made by 95% of NEWBIES INTERNET MARKETERS posted at MoneySecretRecipe. BIFS presents Maintaining Motivation on a Big Financial Goal «Budgeting In the Fun Stuff posted at Budgeting In the Fun Stuff, saying, "Great post about ways to keep your eyes on the prize." Dividist presents Investors Love Divided Government - Perception is Reality posted at Divided We Stand United We Fall, saying, "No studies unequivocally show a statistically significant correlation between longer term market direction and Republican, Democratic, or divided governments. But in the short term it is less important whether there really is a correlation so much as whether investors believe there is a correlation. Most investors believe the stock market will benefit from Republicans taking control of either the House or Senate in the fall. With that expectation, a rising market could very well be a self-fulfilling prophecy." Alexander presents Dividend Income Strategy posted at Dividend Stocks, saying, "When you invest in dividend-paying stocks or mutual funds, you will receive periodic dividend income." Claudia Gonella presents Is now a good time to buy Panama Apartments? posted at Real estate investing in Panama, Costa Rica, Nicaragua and Belize. MoneySecretRecipe presents Top 4 Ways For Stay-At-Home-Mom Who Want To Make Money Online posted at MoneySecretRecipe. That concludes this edition. Submit your blog article to the next edition of financial independence using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

Some good advice on money matters

The following list is a compilation of various financial advices I have come across over a period of time. Some of these have been of great importance to help me to get on the path towards financial independence.

No matter how much you earn always save a little bit

There is no excuse for not saving money. No matter how much you earn you should always strive to save a little bit. I am not talking about a set amount or percentage. Depending on your circumstances the amount you save may change periodically.

Nevertheless always save a little, no matter how little.

If you have bad debt such as credit card debt, then strive to always pay a little more each month. As you do that you are saving on interest that would be charged to your account.

Know the difference between needs and wants

This advice goes towards wise spending, especially when you are working towards achieving a certain goal.

You have to be able to differentiate what you need from what you want. It is actually simple. In summary, you need food, clothes and shelter. Those will cover the basics. Take a step back and think, do you really need that expensive coat, or shoe or watch. Most people have those basics and if you really think hard you have all you need and probably quite a lot of what you want.

Have fun too

I decided to position this advice right after the one regarding your needs and wants. It is important to have fun too. Don't give yourself too much pressure if everything is going well, don't relax too much either.

I like to enjoy things that don't cost a lot such as spending time with m family on the beach, or going for a walk, or simply playing with the kids, renting a movie and having a night in, etc...

There are many ways of having fun that won't cost a lot, or that won't cost anything.Don't live pressured, remember to relax, it is vital to you and your family.

When you buy something, ensure that you buy a quality item

When you buy something ensure that you buy the best item that you can. Buying items that are not of good quality will probably mean that you will have to purchase it again in a short period of time, there fore spending more money that you would otherwise.

Don't pay interest purchasing depreciating assets

Most of us will need to buy many things that loose value. The couch, the car, electrical appliances, clothes, shoes and others. When buying those items ensure that you don't pay interest for the purchase.

Don't borrow money to buy a car and don't buy anything on your credit card that you cannot pay before interest kicks in.

I usually say that when you purchase things on credit card or borrow to buy depreciating assets such as cars, they are taking your money while you sleep.

They do, think about it, the interest is charged to your account usually during night calculation done in the bank computers, so you actually loose money while you sleep.

Buy real assets

This advice is the very opposite of the previous one, when you buy something buy an asset.

An real definition of asset is something that puts money in your pocket. Your personal car does not do that. Following are some real assets that put money in your pocket: dividend paying shares, positive real estate investments, a business that generates money, some say that even your education is a real asset because you can use it to earn more money, etc...

The idea is simple, do you need what your are buying? Is the item you are buying a real asset?

Avoid using your home equity to pay your credit card debt

I see many professional financial advisers saying that your should use your home equity to pay off your credit card. I don't think that this advice should be always followed.

I believe that it is more important to pay the credit card debt though other means rather than your equity. If you effectively manage your finances and eventually pay off the debt you are better of many ways.

• Learning how to manage your finances - if you find other ways of paying the debt, you are actually managing your finances in a wise manner which can go a long way once you finish paying the debt.
  

• Taking money from your home equity can be a short term solution if you continue spending on the credit card.

• The money you borrow from your home equity is at first cheaper than the credit card but in the long term you will continually pay interest to the bank, so in reality it is also costing you a lot.

Before closing on this topic, if you are in financial difficulties and need to get rid of the credit card debt, then consider using your home equity to do so. This may help you to avoid a disaster. But remember, your mortgage repayments will go up and you need to have the cash flow to be able to afford the higher payments.

Financial Independence Compilation

Welcome to the July 4, 2010 edition of financial independence.

Debra Jacobson presents How To Be Frugal: Saving on Child Entertainment posted at All Things Frugal, saying, "Children's entertainment does not have to be expensive."

ComplexSearch presents 4 Ways to Cultivate Alternative Income posted at Deals & Tips, saying, "Thanks for Consideration"

Saurabh presents Use Bad Credit Payday Loans To Improve Your Credit Score « Best Payday Loan posted at Best Payday Loan, saying, "The billion dollar payday loan industry is growing leaps and bounds. Astonishingly, very few new ventures in this field have met with failures." Ryan @ CML presents How to Make a Zero Based Budget posted at Cash Money Life, saying, "How to create a budget that you can use to streamline your finances and better control your money." Ryan @ MFN presents Solve a Finance Problem With 3 Steps posted at The Military Wallet, saying, "These three steps can help you solve financial problems when it's tough to make ends meet." MoneySecretRecipe presents How To Join A Free Proven Mentoring Program If You Are Totally New Internet Marketer Want To Make Money Online posted at MoneySecretRecipe. Paul Emran presents Forex Trading and Mistakes Beginners Make posted at Free Daily Forex Signals, saying, "Forex trading makes money but only when you know what to do. There are a few common mistakes that novice traders make. To make money, first they have to learn to avoid those mistakes." Jerry Rogers presents Everything You Need to Start Your Own Coworking Group posted at OnlineUniversities.com. MoneySecretRecipe presents What is the fastest and the easiest way to make money online ? posted at MoneySecretRecipe. MoneySecretRecipe presents 3 Must Follow Success Keys For Anyone Who Want To Make Money Online Quickly posted at MoneySecretRecipe. Wenchypoo presents D-I-Y Economic Reform--Starving the Evil Piggies posted at Wisdom From Wenchypoo's Mental Wastebasket. Kai S. presents Make Residual Income posted at Internet Business Tactics, saying, "You don't have to be a millionaire or even have a ton of money to be financially independent if you can create the right income: Residual Income." aiwendel presents Make money online with paypal posted at TubeBlogger, saying, "Sharing my secrets on how to make money online, if you have a paypal account." David de Souza presents Inland Revenue Increase Tax Free Allowance posted at UK Tax Blog, saying, "The tax free allowance has recently been increased. Find out what it means and how it will affect you." Arjun Rudra presents 5 Canadian Portfolio Managers You Should Follow : Investing Thesis posted at Investing Thesis. AEDINSY presents This Could Change Your Small Business Forever! posted at Small Business Advice | Small Business Tips and Articles | Small Business Success Stories, saying, "NY Times bestselling author Christine Comaford is CEO of Mighty Ventures, a business accelerator which helps businesses to massively increase sales, product offerings, and company value. She has helped 152 entrepreneurs (and counting!) to become millionaires. In fact, she is about to close a $105,000,000 cash buyout for one of her clients! Christine is best known for providing proven strategies plus unleashing an army of powerful people and resources to help her clients grow their businesses at massive speed." BWL presents A Few Different Ways of Investing Money posted at Christian Personal Finance, saying, "If you've got your emergency fund in place and debt paid off, it is time to get started investing. These are a few ways you can go about it..." Roshawn Watson presents Why Is Debt Really Decreasing? posted at Watson Inc, saying, "In the first quarter of 2008, our debt to disposable income peaked at a staggering 131%. This means for every dollar we earned, we spent $1.31. As of March, our debt as a share of our annual income is presently 122%. If you think this change indicates that we have collectively been so scarred by the "Great Recession" that we are now behaving fiscally responsible, think again. There is a surprising and sad reason why our debt has gone down. Hint, it has nothing to do with frugality." MoneyNing presents Three Frugal Recipes Everyone Can Enjoy posted at Money Ning, saying, "You can really save so much money with food by being just a little bit frugal. Here are a few recipes that you can start with." George Estremera presents Legit Online Jobs – Does It Really Work? posted at georges_log. ComplexSearch presents TIPS and I-Bonds: Two Relatively Simple (and Low Risk) Ways to Beat Inflation posted at Deals & Tips, saying, "An article about how inflation erodes your purchasing power, and two simple, risk-free ways to protect against it." Everything Finance presents 10 mantras to keep your parents happy in abroad tour posted at Invest In India. Silicon Valley Blogger presents What Is Options Trading? An Analogy posted at The Digerati Life, saying, "Thanks!" MoneySecretRecipe presents The Proven MUST Follow Guidance to Start Your Internet Business posted at MoneySecretRecipe. Estate Yard presents The Basics of Real Estate Negotiation posted at Estate Yard .com. Kevin Poulis presents CreditorWeb.com – Compare Credit Card Offers posted at SiteTally.com. Roshawn Watson presents Why Is Debt Really Decreasing? posted at Watson Inc, saying, "In the first quarter of 2008, our debt to disposable income peaked at a staggering 131%. This means for every dollar we earned, we spent $1.31. As of March, our debt as a share of our annual income is presently 122%. If you think this change indicates that we have collectively been so scarred by the "Great Recession" that we are now behaving fiscally responsible, think again. There is a surprising and sad reason why our debt has gone down. Hint, it has nothing to do with frugality." That concludes this edition. Submit your blog article to the next edition of financial independence using our carnival submission form.

Past posts and future hosts can be found on our blog carnival index page.