Jason and Sharon discuss the ballooning student loan situation in the U.S. and whether a college education is still as valuable as it once was. Sharon feels that it has to do with a standard, an expectation in our society, and students today can look at alternative ways of attending college to avoid the need for large student loans, such as scholarships or employers who assist with college expenses. The Thrive Time for Teens game deals with this issue, as well as educating youth about investing, real estate, and how to obtain good credit to open doors of opportunity.
A life-long education advocate, Sharon Lechter is the founder of Pay Your Family First, a financial education organization, and YOUTHpreneur, an innovative new way to spark the entrepreneurial spirit in our children. In 2009 Sharon was appointed to the National CPA Financial Literacy Commission as a national spokesperson on the topic of financial literacy. In 2008 Sharon was appointed to the first President’s Advisory Council on Financial Literacy. The Council served both President Bush and President Obama advising them on the need for financial literacy education.

Sharon is an entrepreneur, author, philanthropist, educator, international speaker, licensed CPA and mother. She has been a pioneer in developing new technologies, programs and products to bring education into children’s lives in ways that are innovative, challenging and fun, and remains committed to education – particularly financial literacy. In 1989 she joined forces with the inventor of the first electronic ‘talking book’ and helped him expand the electronic book industry to a multi-million dollar international market. Since 1992, she has dedicated her professional life and directed her entrepreneurial efforts in the creation and distribution of financial education books, games and other experiential learning products. In cooperation with the Women’s Presidents Organization, Sharon has held events across the country to teach young girls financial lessons through interactive games. In 2009 this event launched her new financial literacy board game THRIVE TIME for Teens, an innovative experiential and fun life and money reality game which has gained recognition with coveted awards including the GOLD Mom’s Choice Award, Creative Child Magazine’s 2010 Game of The Year, Dr. Toy’s Best Vacation Product and a five-star rating from WTS Toy Reviews. Recognized as an expert on the topics of financial education for children and entrepreneurship, Sharon has been featured in top national media outlets including CNN, Forbes.com, MSN Money and The Chicago Tribune. Sharon has authored Think and Grow Rich – Three Feet from Gold in cooperation with the Napoleon Hill Foundation and Greg Reid which was released in October 2009 and has ranked as a BusinessWeek and Wall Street Journal best-seller. Sharon’s most recent book project is Outwitting the Devil by Napoleon Hill-a manuscript hidden for over 70 years updated by Lechter for the modern reader. Future projects with the Foundation include Think and Grow Rich titles for Women and Children.

What some might be interested to learn is that Buffett didn’t create value investing. He actually learned it from a couple of men he considered to be giants in the investment arena beginning way back in 1934. Here’s their story.

Value investing is an investment paradigm derived from the ideas on investment that Ben Graham and David Dodd began teaching at Columbia Business School in 1928 and subsequently developed in their 1934 text Security Analysis. Although value investing has taken many forms since its inception, it generally involves buying securities whose shares appear underpriced by some form of fundamental analysis. As examples, such securities may be stock in public companies that trade at discounts to book value or tangible book value, have high dividend yields, have low price-to-earning multiples or have low price-to-book ratios.

High-profile proponents of value investing, including Berkshire Hathaway chairman Warren Buffett, argue that the essence of value investing is buying stocks at less than their intrinsic value. The discount of the market price to the intrinsic value is what Benjamin Graham called the “margin of safety”. Graham never recommended using future numbers, only past ones. For the last 25 years, Warren Buffett has taken the value investing concept even further with a focus on “finding an outstanding company at a sensible price” rather than generic companies at a bargain price.

Value investing has proven to be a successful investment strategy. There are several ways to evaluate its success. One way is to examine the performance of simple value strategies, such as buying low PE ratio stocks, low price-to-cash-flow ratio stocks, or low price-to-book ratio stocks. Numerous academics have published studies investigating the effects of buying value stocks. These studies have consistently found that value stocks outperform growth stocks and the market as a whole.

Benjamin Graham is regarded by many to be the father of value investing. Along with David Dodd, he wrote Security Analysis, first published in 1934. The most lasting contribution of this book to the field of security analysis was to emphasize the quantifiable aspects of security analysis (such as the evaluations of earnings and book value) while minimizing the importance of more qualitative factors such as the quality of a company’s management.

Graham’s most famous student, however, is Warren Buffett, who ran successful investing partnerships before closing them in 1969 to focus on running Berkshire Hathaway. Charlie Munger joined Buffett at Berkshire Hathaway in the 1970s and has since worked as Vice Chairman of the company. Buffett has credited Munger with encouraging him to focus on long-term sustainable growth rather than on simply the valuation of current cash flows or assets. Columbia Business School has played a significant role in shaping the principles of the Value Investor, with professors and students making their mark on history and on each other. Ben Graham’s book, The Intelligent Investor, was Warren Buffett’s bible and he referred to it as “the greatest book on investing ever written.” A young Warren Buffett studied under Prof. Ben Graham, took his course and worked for his small investment firm, Graham Newman, from 1954 to 1956. Twenty years after Ben Graham, Prof. Roger Murray arrived and taught value investing to a young student named Mario Gabelli. About a decade or so later, Prof. Bruce Greenwald arrived and produced his own protégés, including Mr. Paul Sonkin—just as Ben Graham had Mr. Buffett as a protégé, and Roger Murray had Mr. Gabelli.

Performance of value investors
Another way to examine the performance of value investing strategies is to examine the investing performance of well-known value investors. Simply examining the performance of the best known value investors would not be instructive, because investors do not become well known unless they are successful. This introduces a selection bias. A better way to investigate the performance of a group of value investors was suggested by Warren Buffett, in his May 17, 1984 speech that was published as The Superinvestors of Graham-and-Doddsville. In this speech, Buffett examined the performance of those investors who worked at Graham-Newman Corporation and were thus most influenced by Benjamin Graham. Buffett’s conclusion is identical to that of the academic research on simple value investing strategies—value investing is, on average, successful in the long run.

During about a 25-year period (1965–90), published research and articles in leading journals of the value ilk were few. Warren Buffett once commented, “You couldn’t advance in a finance department in this country unless you taught that the world was flat.

Value stocks do not always beat growth stocks, as demonstrated in the late 1990s. Moreover, when value stocks perform well, it may not mean that the market is inefficient, though it may imply that value stocks are simply riskier and thus require greater returns.

An issue with buying shares in a bear market is that despite appearing undervalued at one time, prices can still drop along with the market. Conversely, an issue with not buying shares in a bull market is that despite appearing overvalued at one time, prices can still rise along with the market.

Another issue is the method of calculating the “intrinsic value”. Some analysts believe that two investors can analyze the same information and reach different conclusions regarding the intrinsic value of the company, and that there is no systematic or standard way to value a stock. But there is no ambiguity in the calculated value in value investing as taught by Benjamin Graham. The stock selection procedures given by Benjamin Graham himself are very specific and are intended to avoid exactly this kind of subjectivity by focusing on documented and objective past numbers, instead of subjective and predicted future ones. The ambiguity arises only when investors use formulas not given by Graham or use subjective predicted numbers against Graham’s recommendations.

Which is not to say value investing has no critics…

Criticism
Value stocks do not always beat growth stocks, as demonstrated in the late 1990s. Moreover, when value stocks perform well, it may not mean that the market is inefficient, though it may imply that value stocks are simply riskier and thus require greater returns.

An issue with buying shares in a bear market is that despite appearing undervalued at one time, prices can still drop along with the market. Conversely, an issue with not buying shares in a bull market is that despite appearing overvalued at one time, prices can still rise along with the market.

Another issue is the method of calculating the “intrinsic value”. Some analysts believe that two investors can analyze the same information and reach different conclusions regarding the intrinsic value of the company, and that there is no systematic or standard way to value a stock. But there is no ambiguity in the calculated value in value investing as taught by Benjamin Graham. The stock selection procedures given by Benjamin Graham himself are very specific and are intended to avoid exactly this kind of subjectivity by focusing on documented and objective past numbers, instead of subjective and predicted future ones. The ambiguity arises only when investors use formulas not given by Graham or use subjective predicted numbers against Graham’s recommendations.

And now you know about value investing.

The Young Wealth Team

Flickr / 401k

We happen to think this idea raises a pretty good point, especially if we look back at how the Internet has developed. For a quick recap:

Web 1.0 (1994-2001) With big players like Netscape, Google, Amazon, eBay, and Yahoo, this first wave of Internet entrepreneurs led the business rush to the web.

Web 2.0 (2002-2009) In this era, we saw the rise of social media, inspired by Facebook, Twitter, MySpace, LinkedIn, and Groupon.

Web 3.0 (2010-present) Call this the mobile revolution, where a huge shift is underway, as we migrate away from desktop and laptop computing and towards mobile applications on smart phones and tablets.

While Google, Amazon, and eBay are Web 1.0 innovators who retain a solid market position in Web 3.0, there are others who fell by the wayside. Remember how big MySpace was just a few short years ago? Today it is shrinking from public consciousness at an absolutely amazing rate, retaining what minimal juice it has as primarily a way to promote original music, though other websites do it better.

What will ultimately comprise the group of big players in the mobile generation of Web 3.0? No one can say for sure yet, but it’s a good bet that we’re going to see some shooting stars across the horizon at some point, and even more likely that a few giants will be displaced in the process. Maybe it will be Facebook or Google. It’s a good bet that Mark Zuckerberg will be doing his darnedest to make sure that doesn’t happen, and we wouldn’t bet against him, but don’t be surprised if we’re reminiscing fondly about the Facebook Years by the time 2017 rolls around.

Could happen.

The Young Wealth Team

Flickr / stoneysteiner

Back in 1987, when the magazine first compiled the billionaires list, only 140 people made the cut. This year 1,226 people can claim a net worth of ten figures. See? From a sheer numbers perspective, becoming a billionaire is getting easier all the time, though with a world population of over seven billion, no one should make the mistake of thinking it’s easy.

For those who have set this particular financial goal, we’ve put together a three step guide to achieving it. Here goes.

1. Be born American: Sure, we’re a bit biased, but if you want to eventually reach the billionaires club, your odds are greatly increased if you happen be American. A full 451 (more than 1/3) of the names on the Forbes list call the United States home. Taking a look at the top ten, Bill Gates (Microsoft), Warren Buffett (Berkshire Hathaway), and Larry Ellison (Oracle) hail from America. After that, it’s all over the map: France, Spain, Brazil, Sweden, Hong Kong, Germany, Mexico. That last entry might be surprising to some. Carlos Slim Helu managed to sneak past the Microsoft ex-chairman into the top spot. Don’t feel too sorry for Bill, though. He’s still doing alright in second place with a net worth of $61 billion. Let’s review. Your first step to reaching billionaire status is to either be born in America or get here as quick as you can.

2. Choose your industry wisely: Sure, there are billionaires on the list who have gotten there selling such diverse products as yoga pants or energy drinks, but your best bet when it comes to choosing an industry is far and away investments. From here it gets interesting when you compare global billionaires versus American. In the rest of the world minus the U.S., fashion and retail occupy second place with real estate landing in third. It’s a different story in the United States. Over here fashion and retail dip to seventh and real estate checks holds the eighth spot. Of the 90 technology billionaires around the world, a full 57% of them come from America. The bottom line is this – if you’re rising through the ranks here, it could pay off handsomely to keep your nose in the tech sector. Mark Zuckerberg of Facebook did and it seems to be working out okay for him.

On a side note, while investments still hold the top slot among billionaires, MBA students seem to be moving away from finance, and who can blame them? Recent scandals and bailouts in this industry have shaken the faith of many of the best and brightest new business minds. A quote from Forbes.com:

“There’s definitely a movement among my MBA students – and among MBA students in general – a little away from finance, which has been somewhat compromised by the crisis and by Dodd-Frank,” says Steven Kaplan, a professor of entrepreneurship at the University of Chicago’s Booth School of Business. “We’re seeing big winners in technology. Finance isn’t going away, but I think finance probably peaked in 2007.”

3. Follow Your Passion: Such boring advice, right? Do you think people like Zuckerberg, Bill Gates, and Steve Jobs had incredible fortune as their driving goal? Probably not. These were productive, creative people who believed they were contributing something to society. To find and pursue something with this sense of purpose can yield extraordinary results. Once again, no guarantees, but even if you don’t quite reach a ten figure net worth, but are doing what you love, that’s worth something right?

In closing, remember when it used to be a big deal to be a millionaire? Now it seems everyone and their pet squirrel can make that claim. One thing’s for sure – it ain’t what it used to be. And with prospect of runaway inflation in the near future, who knows, becoming a billionaire in the future might be within everyone’s reach. The only problem is that we just might need that billion bucks to buy a loaf of bread down at the corner grocery store. It could happen. It’s actually called hyperinflation and might make billionaires of us all.

The Young Wealth Team

Flickr / Esparta

A real estate IRA is a special sort of self directed account, one specially designed to hold property investments. At Young Wealth, we’re of the firm belief that any sort of self directed account is preferable to one where someone else calls the shots, but being able to invest in real estate on a tax deferred basis is really in the wheelhouse of potential future profits.

Luckily, you don’t have to be a genius to open a self directed real estate IRA. In fact, it’s pretty simple. Follow the three steps below and you’ll be good to go.

1. Find an Administrator: The IRS is not going to let you be in complete control of all things related to your IRA, even if it’s self directed. Your first step is to find a financial services company that offers self directed IRAs. There’s a good chance your bank can do this for you. If not, check the Yellow Pages or go surfing (online, of course).

2. Fund Your Account: Once your account is open and ready for business, it’s time to put some money in there. Many people choose to roll over funds from their traditional IRA, but you can also simply make a contribution to the new account.

3. Invest: This is the fun part. Once your new real estate IRA is locked and loaded, it’s time to buy some real estate. Since the company administering the account is forbidden from offering investment advice, you might want to visit our affiliate JasonHartman.com and browse our free educational resources related to income property investing. The critical part about placing real estate into your IRA is that it cannot be for personal use! The IRS is quite strict on this topic, so don’t try any funny business.

The Young Wealth Show

Flickr / PrimeImageMedia.com

Where many people go wrong is using the presence or absence of state taxes as the ultimate litmus test for lower cost of living. By that standard, states like Texas and Florida, with zero taxes, would appear to be a no brainer. Unfortunately, the truth isn’t quite that simple. The reality is this. With some leeway granted for local ideology, all state governments run themselves fundamentally the same – except for California, apparently, which continually teeters on the brink of bankruptcy. The point is that all governments need money to operate. The traditional method of raising money is to institute a state income tax. If there is no state income tax, the money must be found through different means.

That’s just the simple truth. No state income tax means you can expect to pay more in your sales tax rate, property taxes, or for other fees attached to state services. For example, Florida has no state income tax but have you looked at the property tax rates lately? Or administrative fees? Here’s a concrete example. In Missouri, a state with a middle-of-the-pack rate of about 4.25%, it costs around $50 to license a car for the first time. Try to do the same thing in Florida and you’re liable to be scrounging sofa cushions for the $400 bill!

Is this evil and rotten? Not really. It’s simply the reality of life in these United States. Governments need money to function. As to the question of whether or not the federal or any of the state governments should be functioning at the present overly intrusive level, that’s a different discussion for a different day. The point is you shouldn’t use the existence of an income alone to determine a state’s financial suitability. You need to do more research and get an accurate idea of what it actually costs to live there. For your planning purposes, the nine states without income tax are Texas, Florida, Alaska, Nevada, South Dakota, Washington, and Wyoming. New Hampshire and Tennessee only tax interest and dividends.

Do you ever plan on buying stuff? If so, you should pay attention to states with high sales tax rates and maybe think long and hard before moving there. The highest rates of around 7% are found in California, Mississippi, Indiana, New Jersey, Rhode Island, and Tennessee. But did you know there are presently five states which do not charge a sales tax? These are Alaska, Delaware, Montana, New Hampshire, and Oregon. Now we’re getting somewhere. Did you also notice the single state on the list with no income tax or sales tax? That’s right. Alaska! There’s no doubt in our minds that everyone would up and move to the “North to the Future” state – except it’s really cold and sometimes moose and grizzlies chase you through the streets. Still, if you don’t mind that, it could be an option. By the way, you can learn more than you ever wanted to know about the breakdown of taxes by state here.

But the cost of living doesn’t stop there.

Fuel Taxes
You’re not going to get out of paying federal fuel taxes but are you also aware that most states charge them as well? In addition to your fed donation, that gallon of gas you just dumped into your perpetually starving SUV was also loaded with state pilfering like sales taxes, gross receipt taxes, oil inspection fees, underground tank storage fees, environmental fees, and the ever popular just because we freakin’ wanted to fee. Okay, we made up the last one.

Cigarette Taxes
More and more states are beginning to realize that a great way to raise money is to ratchet up the rate and number of excise taxes imposed on tobacco products, especially cigarettes. Think about it. Nicotine addicts will pay ANYTHING to get their fix. Federal and state governments like to pretend like they’re raising cigarette taxes to get people to stop smoking. Nothing could be further from the truth. They’re actually banking on the fact that smokers will be smokers no matter how much it costs. This is a great way to increase revenue! A point in case is the state of New York, where a single pack of smokes now costs about $5.85, factoring in all federal and states taxes. There’s a very interesting article on this topic in USA Today here.

We’d keep on going but we’re too depressed and beginning to think that our wacky Uncle Ron Paul might be onto something with his constant clamor for returning the size and scope of government to constitutional levels.

Here, here!

The Young Wealth Team

Flickr / Ed Yourdon

Regardless, Iverson made the mistake of not answering the lawsuit and ended up having his wages garnished and Wells Fargo bank account taken over by the judge. No word on whether or not there was anything in the account to claim. Some would say this day of Iverson’s financial demise was foreshadowed back in high school when he was involved in a bowling alley brawl, then down through the many incidents of violence that followed his career.

Is it a coincidence that Iverson’s playing style was one of reckless abandon? Sort of like his spending style, which included supporting a “posse” of at least 50 friends and family who followed him everywhere and relied upon his salary to finance their lifestyles. As a poor child from the ghetto, Iverson was determined to stick with the friends he credited for getting him out of the so-called “life” of a gangbanger.

Consider this. If Iverson had put even half of his salary into a passive investment like a broad index-based mutual fund, he’d be looking at entirely different ending to the story. And that’s assuming he decided to blow $100 million. Sadly, this player’s plight is not a solitary one. The National Basketball Association (NBA) itself preaches to incoming rookies that 60% of all players are broke within five years of leaving the game. If that is truly the case, there is some seriously bad financial decision-making going on out there!

So don’t get too depressed over an investment gone bad or financial move that didn’t pan out. It could always be worse. You could be Allen Iverson.

The Young Wealth Team

Flickr / Keith Allison

Katie Kieffer is a national columnist and political commentator. Her multimedia website is KatieKieffer.com.  She writes a column for TownHall.com every Monday. Katie has a background in journalism, multimedia entrepreneurship, public speaking and commercial real estate. Due to her diverse experiences, Katie is a popular public speaker for college campuses and professional conferences across the country. Katie is a frequent guest on local and national radio shows to discuss her viewpoints on young professionals. Katie graduated Summa Cum Laude from the University of St. Thomas. As a college freshman, she wrote an opinion column for the St. Paul Pioneer Press. During her sophomore year of college, Katie founded, edited and published a nationally recognized student journal of thought and opinion called the St. Thomas Standard. Katie also developed a comprehensive website for the newspaper so that all of the articles were available online. Katie has over six years of experience in commercial real estate. Before launching into multimedia, Katie worked for NorthMarq Real Estate Services. She chaired a National NAIOP Young Professionals Forum of rising stars in commercial real estate and traveled across the country learning about different geographic business climates and development trends. Katie also chaired the NAIOP Minnesota Developing Leaders and was recognized as NAIOP’s Volunteer of the Year in 2007.

Katie is a LEED Accredited Professional through the U.S. Green Building Council (USGBC). Katie balances conservation and profitability considerations when discussing sustainability. Katie has traveled abroad and she currently researches the needs and challenges that young professionals face across the globe. Katie conducts interviews of both experienced and young professionals and showcases these on her website to inspire other young people to think innovatively, whether they work within a large corporation or are interested in starting their own ventures.

Stock
Stock is sometimes referred to as shares, securities or equity. Simply put, common stock is ownership in part of a company. For every stock you own in a company, you own a small piece of the office furniture, company cars, and even that lunch the boss paid for with the company credit card. More importantly, you are entitled to a portion of the company’s profits and any voting rights attached to the stock. With some companies, the profits are typically paid out in dividends. The more shares you own, the larger the portion of the company (and profits) you own.

Common stock is just that, “common”. The majority of stocks trading today are in this form. Common stock represents ownership in a company and a portion of profits (dividends). Investors also have voting rights (one vote per share) to elect the board members who oversee the major decisions made by management. In the long term, common stock, by means of capital growth, yield higher rewards than other forms of investment securities. This higher return comes at a cost, as common stock entails the most risk. Should a company go bankrupt and liquidate, the common shareholders will not receive money until the creditors, bondholders and preferred shareholders are paid.

How to Buy or Sell It
The most common method for buying stocks is to use a brokerage, either full service or discount. There is no minimum investment for most stocks (other than the price per share), but many brokerages require clients to have at least $500 to open an account. Dividend reinvestment plans (Drips) and direct investment plans (DIPs) are two ways individual companies allow shareholders to purchase stock directly from them for a minimal cost. DRIPs are also a great way to invest money at regular intervals.

Strengths
Common stock is very easy to buy and sell. Thanks in large part to the growth of the Internet, it is very easy to find reliable information on public companies, making analysis possible. There are over 11,000 public companies in North America to choose from.

Weaknesses
Your original investment is not guaranteed. There is always the risk that the stock you invest in will decline in value, and you may lose your entire principal. Your stock is only as good as the company in which you invest – a poor company means poor stock performance.

Three Main Uses
Capital Appreciation
Income
Liquidity

Mutual Funds
Are you someone who wants to invest (or already does), but doesn’t want to bother deciphering a company’s numbers and deciding whether or not the stock is a good buy? Or are you someone who finds the risk and volatility of the stock market stomach-turning? If this describes your personality, you are a prime candidate for mutual funds. A mutual fund is simply a large group of people who lump their money together and give it to a management company to invest it on their behalf. A mutual fund manager proceeds to buy a number of stocks from various markets and industries. Depending on the amount you invest, you own a part of the overall fund.

Strengths
No matter how much you invest, you get to own several companies. In other words, you get instant diversification. You can easily make monthly contributions. Your money is being managed by a professional manager. Because of his/her experience and knowledge, you should receive above average returns, at least in theory.

Weaknesses
The majority of mutual fund companies don’t come close to beating market averages like the S&P 500 and the DJIA. (Notice we said you will receive above average returns “in theory”. This will be discussed in detail in future pages.) Fund managers take a slice of the profits for their work. This slice varies, but it can be quite high. You pay management fees whether the fund actually makes you money or not.

Three Main Uses
Capital Appreciation
Provides Income
Tax-Deferred Savings

Real Estate
Usually, the first thing you look at when you purchase a home is the design and the layout. But if you look at the house as an investment, it could prove very lucrative years down the road. For the majority of us, buying a home will be the largest single investment we make in our lifetime. Real estate investing doesn’t just mean purchasing a house – it can include vacation homes, commercial properties, land (both developed and undeveloped), condominiums and many other possibilities.

When buying property for the purpose of investing, the most important factor to consider is the location. Unlike other investments, real estate is dramatically affected by the condition of the immediate area surrounding the property and other local factors. Several factors need to be considered when assessing the value of real estate. This includes the age and condition of the home, improvements that have been made, recent sales in the neighborhood, changes to zoning regulations, etc. You have to look at the potential income a house can produce and how it compares to other houses in the area.

How To Buy or Sell It
Real estate is almost exclusively bought through real estate agents or brokers. Their compensation usually is a percentage of the purchase price of the property. Real estate can also be purchased directly from the owner, without the assistance of a third party. If you find buying property too expensive, then consider investing in real estate investment trusts (REITs).

Strengths
Whether your objective is income or capital appreciation, real estate investing can help you achieve your goal. Mortgages allow you to borrow against the property up to three times the value. This can dramatically increase an investor’s leverage. Remember that you typically need a 5% down payment first.

Weaknesses
Selling property quickly can be difficult. There are significant holding costs, especially if you are not residing in the property. Examples include property taxes, insurance, maintenance, etc.

Three Main Uses
Provides Income
Capital Appreciation
Leverage

At Young Wealth, we strongly suggest that you focus your efforts on real estate investing. This is traditionally where American millionaires come from and there is no reason to think anything is set to change that. One thing we should also point out in regard to down payments. A few paragraphs back we referred to the fact that you will likely have to put 5% of the purchase price down as good faith in order to secure a loan.
The bad news is that was in the good old days about five years ago. With the crash of the housing market, powered by bank failures and massive foreclosures, few lending institutions will offer to write a mortgage on a property unless you are able to put down 20% to 25% in cash. This can be quite a chunk of change for the new investor but, on a positive note, there hasn’t been a buyer’s market like this in decades.

The Young Wealth Team

Flickr / ilovememphis

Some of the particular for the preceding article drawn from Investopedia.com

Dwindling Corporate Benefits
Not so long ago, college graduates targeted the corporate world. Pay and benefits were good, job security was high, and the incumbent stress and time away from home simply considered the price to be paid. Then a funny thing happened. We entered a global recession. Young and old workers alike found themselves laid off en masse while, at the same time, retirement benefits shrank, and stock options seemed more like a joke than something you would actually want. Take away the attraction of corporate employment (high pay and job security) and what are you left with? Umm…nothing? Newsflash to corporate headhunters: Nobody really likes office melodrama and 60 hour workweeks.

Rise of Organic Eating
At some point in the past few decades, Americans began to slowly realize that the chemical-laden junk food shoveled into their laps at their favorite drive-thru or tossed onto grocery shelves by Big Food was a first class ticket to an early grave. People began to look around and notice friends and relatives dropping like flies from an assortment of food-induced ailments: heart attack, stroke, high cholesterol, high blood pressure, obesity. Some of us began to care about what we put into our mouth. Voila! The rise and increasing popularity of organic farming.

The reality is that the demand for locally grown and organic food has seen a slow, steady rise, even during the recent economic downturn. Young people are starting to remove themselves from the rat race and put on work boots. With more than 60% of our nation’s farmers over 55 years of age, this is good news for food eaters everywhere. Do you want the entire food production and supply of the United States to be reliant on gigantic firms like Monsanto? The very idea makes us a little bit nervous.

Not only is the younger generation of workers showing a growing love of working with their hands, they also are taking to the idea of self-employment. Farming. It might be worth a second look.

The Young Wealth Team

Flickr / eamoncurry123

Wait a second. Low interest rates are a good thing, right? The truth is they’re great if you’re a borrower but terrible when you’re lending and the position of lender is exactly what you assume when you “invest” in typical savings assets like a certificate of deposit, money market fund, interest bearing savings account, treasury note, etc. What attracts investors to such choices is the guaranteed rate of return, because it makes us feel just a little more secure to have that “profit” locked in.

But with a reported annual inflation rate running around 4% (the actual percentage is probably MUCH higher – we estimate about 10%), and interest paid usually well below that number, falling for the savings account trap can actually cost you money. Inflation is simply a measure of how much value the dollar has lost over the course of the previous 12 months. And when the dollar loses value, you the consumer, lose spending power. It’s like getting a 4% pay reduction each and every year. Now you see why that percentage is the magic number when it comes to calculating whether or not your investments are really making you money. Here’s the simple math:

1. If you make MORE THAN 4% on an investment, it’s profitable for you
2. If you make LESS THAN 4% on an investment, it costs you money

Granted, making something on an investment, even when it’s less than 4%, is better than making nothing, which is exactly the case when you choose to keep cash assets stuffed inside your mattress. Hopefully, none of you are doing that. This concept can be a little muddy if you’re not used to thinking about rates of return in terms of inflation. Here’s a simple example of how it all works, and how an interest-bearing checking account or money market fund adds up to nothing more than you loaning the government money and receiving nothing for for it.

Step 1:
You deposit $1,000 in a money market fund that pays you 4% annually.

Step 2:
The bank, which acts as the middleman for the transaction, turns around and uses your deposit to purchase government debt such as treasury notes. When the notes come due, the government returns the money along with whatever interest rate applies at the time. For the purpose of this example and simplicity, let’s say 4%. The bank turns around and pays you that 4%. Of course, there are additional fees involved because the bank isn’t going to lose money but, for now, let’s ignore that.

Step 3:
Stepping back to look at the bigger picture. An unsophisticated investor counts his money at the end of the year and thinks that interest-bearing checking account is a pretty good deal. After all, he made 4% in an anemic economy. The reality, after taking into account the effect of inflation, is that he made nothing while giving the bank and federal government use of his money for a time.

If, after pondering this, you still think traditional avenues of savings are a good idea, you might need to re-read this blog post. The numbers don’t lie! You can’t win under this system in which interest rates are set and manipulated by the Federal Reserve. The end result is that, while you might think you’re increasing your portfolio at the rate of 4% each year, the compounding effect of inflation will see to it that, no matter what your account balance says, real world purchasing power is going to be much less than expected.

When you add in the reality that inflation is actually higher than 4%, the financial future of millions of young investors begins to look positively grim. You begin to see why we’re always harping about inflation and how it’s going to unravel the best laid plans of the younger generation. The sooner you acknowledge the reality of inflation and begin to take corrective steps with your portfolio investments, the sooner you have a chance to take advantage of the real investment opportunities that still exist in America today.

The Young Wealth Team

Flickr / FredoAlvarez

Third Reich
Adolph Hitler rode the coattails of the fervent German youth as they revolted against anything and everything that had come before. Considering the country had recently lost World War I AND suffered through a hideous economic period of hyperinflation, who could blame the younger generation for being a out of sorts when it came to trusting anyone over thirty? While the rest of the politicians went about business as usual, Hitler focused on tapping and turning all that youthful energy to his own cause. These “useful idiots” swept the man into power. Six million dead Jews later, his reign of terror mercifully came to an end.

But what does President Obama’s recession have to do with the price of idiocy in America? It goes something like this. Remember how the drive-by media “ohhed” and “ahhed” over the man’s ability to tap into younger voters, making huge inroads into that voting bloc via the Internet? Republic opponent, John McCain, was much less effective when it came to capturing young votes. Result: president who does not hold traditional American values in high regard.

Was Obama tapping into a whole herd of useful idiots back in 2008 and will he do so again in 2012 when he runs for election? Oh, almost certainly. The better question is will it work again? There’s a good chance. We at Young Wealth aren’t here to tell you which candidate to vote for when the time comes around, but do beg and plead that you not function as a useful idiot. Learn the issues. Know the candidates. Look at America and place our present state of existence in some sort of historical context.

Are you better off now than you were four years ago? If so, congratulations. There are a whole bunch of your fellow Americans who can’t make that claim. While we’re always in favor of hope and change, especially when compared to the opposite – hopelessness and stagnation – take a moment to consider what you’re actually getting in return for all those lofty, vague phrases.

A stronger America, or a diminishing superpower?

The Young Wealth Team

Flickr / Richard Elzey

To Kyle, a ‘red paperclip’ is more of a symbolic thing, an idea that you’re ready to launch. A new project about to happen. That spark of insight or inspiration. The most important thing about an idea is to do something with it. Today, Kyle lives in Montreal with his wife and does speaking engagement, photography, art projects, and “Who are These Guys?” to name a few of the projects he has embarked on.

At the age of 16, defiant and hardheaded, Eric decided to leave home and drop out of school, choosing to live on the streets of Detroit. By divine intervention at age 17, Eric met a pastor who saw him a young man with tremendous unrealized potential. As a result, their mentoring relationship was born which led Eric to complete his GED and to prepare for college. Determined not to be another statistic, Eric enrolled at Oakwood University where he began reading every thing he could get his hands on. Understanding the struggle of the streets, he realized what his purpose in life was to become, so he reached back to his fellow drug dealers and helped many of them get their GED’s, go to college and incorporate the strategies and self-improvement exercises he learned in order to assist them in developing their own life plans. In so doing, he provided them with a much-needed positive option to the life of crime and illiteracy they then led. While in college, Eric started Break The Cycle I Dare You, (BTC) a non profit youth development and special event organization that focuses on developing programs for youth who have made bad choices and most often have had family, social, and academic struggles along with the lack of a father figure in their lives. Today BTC has developed and produced many supportive community-based programs and conferences across the country. They provide youth and teachers alike with activities, self-improvement exercises and motivational strategies to help them reach their highest potential in life. Eric now serves as the Chairman of the Organization.

He obtained his Masters degree in 2005 and is currently pursuing his PhD in Education Administration at Michigan State University and serves as Senior Pastor of A Place of Change Ministries, Lansing Michigan. He also serves as a consultant at Michigan State where he has developed The Advantage Program, an undergraduate retention program targeting academically high-risk students of color. In addition to his work with the Advantage at Michigan State, he also serves as a consultant for several collegiate athletic programs across the country. In this role, he provides assistants to student-athletes having academic and social challenges as it relates to successfully transitioning from high-risk schools and communities to a collegiate environment. Eric’s representation of the merits of higher education, coupled with his knowledge of the pains of the street, inspires young people to break bad habits and reach for new levels of personal and spiritual achievement. Eric has lived a life of challenges and triumph but has found a way to break the cycle.

Here’s the point. The only way to get ahead – really get ahead – in love, life, or business is to take matters in your own hands. If you’re out of work, are you waiting around for Mr. Obama to wave a magic wand and suddenly decrease the jobless rate by a few percentage points? We certainly hope not because it’s obvious he’s in over his head in HIS job. But it doesn’t even matter which president or political party is in power.

Don’t make the terrible mistake of deriving your life’s progress from the aimless machinations of those in power. Need a job? Get out there every single day and beat the streets until you find one. Meanwhile, are you working to create your own business? Why not? Millionaires were made during the Great Depression and Great Recession by people who simply refused to participate in the “woe is me” mantra being chanted all around.

So what if there’s 10% unemployment? That means 9 out of 10 are employed. That’s 90%! We’d take those odds any day of the week and twice on Sunday. The point is that America was founded on a spirit of rugged individualism, which has been diluted by a wave of namby pamby whiners of late. Maybe your mortgage is upside down, you got laid off, your teenage daughter is pregnant, and your wife has cancer. Those are formidable obstacles and we wouldn’t wish such a nightmarish string of bad luck on anyone, but no matter what your story is, you have two options – deal with it or lay down and whine.

And though whining is always an option, it wastes your breath and accomplishes nothing. Why not ignore the doomsayers and recessionaires and simply live your life the best you can. After all, it’s the only one you’ve got. Make the best of it. Here’s the best tip we can think of for feeling better about the state of affairs in the world. Stop watching the evening news and cable television!

The Young Wealth Team

(Flickr / James Ellsworth)

Passionate
Unless you’re highly overmedicated, there is little chance that you’re truly passionate about all the things people claim to be. Some of us might have one passion. Maybe. Not three or four, and the odds that you feel that way about “teaching small businesses to harness the power of social media” is infinitesimal. Focused might be a legitimate word but passion is something else entirely.

Authority
Former British Prime Minister Margaret Thatcher used to say this: “Power is like being a lady; if you have to say you are, you aren’t.” What we’re saying is that if you feel compelled to plaster the word authority over everything you’re connected with, chances are you aren’t either. Social media authority. What’s that? Sounds like you spend too much time on Facebook.

Workaholic
To anyone who understands what the word actually means, “workaholic” has definite negative connotations. Sorry, it’s impossible to work 24/7. You’d be dead soon. Rather than devoting all that effort to impressing us with how hard you work, why not focus on the results that your efforts have created? Now that might be impressive. Keep in mind that employers don’t care how much your work, only that you accomplish something while you’re doing it.

Unique
We feel pretty safe in saying that every human being on this planet is unique. That’s part of the deal. Saying it is only restating the obvious and should be classified in the category of Worthless Resume Filler. Writers are urged to show not tell, and that makes good sense here to. You don’t prove uniqueness by saying you’re unique. Try showing why you’re different instead.

Why not pull out that resume’ that’s collecting dust and make sure you haven’t fallen prey to any of these common mistakes.

The Young Wealth Team

(Flickr / windygig)

Approach 1
Use put options as a trading strategy to generate profits.

Approach 2
Implement put option positions as a hedge against drastic market moves against your stock holdings.

Put Options Basics
Options that are traded on exchanges are a different beast than those issued as part of an employee compensation program. Normally the latter are good for years, plus you don’t have to pay anything to get them. The type of put option strategy we’re talking about is much shorter term in nature – they will likely expire in a few months – and you have to pay something to get them, just as if you were buying stock. A single put option contract allows you the right to buy 100 shares of the underlying stock at a certain price within a certain time frame. Terms like strike price, premium, expiration date, in the money, at the money, and out of the money are good to know.

Premium — The price of the option; the price the buyer pays and the seller receives. The premium can be broken down into two parts: The intrinsic value and the time value.

Strike Price — The price at which the put owner has the right to sell the underlying stock.

Expiration — The last date the option is a valid contract. Technically, options expire on the Saturday
following the third Friday of the month. But the last day to trade them is the third Friday of the expiration month. Many index options will expire one day earlier on Thursday. You can describe an option in one of three ways, depending on the relationship between its strike price and the value of the underlying stock …

In the money: When the strike price of a put option is higher than the price of the underlying instrument, the option is in the money.

At the money: When the strike price is essentially equal to the price of the underlying instrument, the put option is at the money. When expiration day arrives, options that are in the money have value and you can sell them at a price that’s very close to that in-the-money value. Before expiration, you also can capture any remaining time value in the options.

Out of the money: When the strike price of a put option is lower than the price of the underlying, then
the option is out of the money. When expiration day arrives, options that are out of the money expire
without value.

But why do investors like options, when they could just as easily buy the underlying stock? Here are 5 reasons: Let’s ask Mike Larson who explained it quite well in his report, The Great American Apocalypse of 2011 – 2012.

Advantage #1. Leverage. Even a modest move in an underlying stock can result in a significant change in the value of your options.

Advantage #2. Limited risk. With the simple purchase of options (as long as the options are not exercised), you can never lose a penny more than you invest plus commissions. That means you always know how much money you have at risk.

Advantage #3. Low cost. You can find options with excellent potential that cost as little as $50 or $100 per contract, although some options may cost $1,000 or more per contract.

Advantage #4. Listed on exchanges. Thousands of options are listed on regulated exchanges. You don’t need to venture into so-called over-the-counter options to generate substantial profits in the Great American Apocalypse of 2011-2012.

Advantage #5. An excellent vehicle for protective “hedges” against market declines. As we mentioned above, options can be used as a kind of insurance policy or hedge.
As you should know if you’ve been around the block a time or two, few things in this life come only with advantages and no disadvantages. Such is the case with a put option strategy. Here are four potential drawbacks listed by Larson.

Disadvantage #1. Options are wasting assets. That’s because when you buy an option, you are buying time. So if the market remains unchanged, the value of the option will naturally decline as time
goes by.

Disadvantage #2. Limited time. This follows from the first disadvantage. The expected market move has to take place — or at least get underway — before the option expires. Otherwise, the option can expire worthless and you will lose the entire amount you invested in that option. That’s why it’s important to buy an option with enough time for your trade to work out.

Disadvantage #3. Volatility. Investors who buy options and just forget about them often miss out on
opportunities to take large profits. Sometimes the option’s value will spike upward, and then, before
you know it, plunge back downward again.

Disadvantage #4. Occasional low liquidity. There are many options with plenty of liquidity. But there are also some that are not so liquid. In other words, the number that change hands in a given day (the volume) is low and the total amount held by investors (the open interest) is small. These options tend to have wider spreads, or differences between the bid and ask prices. That can result in you getting poor execution on your trades — paying more than you should to buy and getting less than you deserve when it’s time to sell.

Buying or selling a put option outright without owning the underlying stock is a pure speculation play, much the same as if you had simply bought the stock. EXCEPT the very nature of options means that leverage works in your favor, allowing you to control more value with less money. On the other hand, if you implement a put option strategy merely to hedge your stock positions, consider the premium you pay as the cost of insurance, because that’s basically what it is. Hopefully, the market never moves against your stock positions and the options expire worthless.

It makes sense for a new investor to spend a bit of time understanding the option market. There’s a good chance you’ll find yourself unavoidably drawn to it at some point in your investing career. Maybe you’ll give it a fling and move on to another type of investing that fits your personality better, or maybe you’ll fall in love with the whole ‘magnification of profits through leverage’ thing. Either way, DO NOT jump into option trading until you actually understand what is going on. From personal experience we know that you can get your head handed to you on a silver platter.

The Young Wealth Team

(Flickr / Doc Trader)

Young people just starting their working career tend to fall into three different categories.

1. Have a viral infection of “stuffitis” and max out every credit card they can get their hands on. Sorry, we can’t help these people in the short space available. Check out DaveRamsey.com.

2. Are busy hoarding every spare penny they’ve got for college tuition for a kid who’s not even born yet. Hey, at least they got the saving part down.

3. Earn a modest salary in an expensive urban area, and are barely able to cover rent and food.

The good news is that, if you make it a high enough priority, there is almost always space in your budget to steal $25 to $100 bucks a month to put into savings for eventual investment. And savings is critical for reasons other than simply investing. Are you lucky enough to be the one person on earth who never has a car repair expense, unplanned doctor visit, or any other type of financial emergency? If you’re like most of us, every once in a while a humdinger comes out of nowhere and turns your monthly budget into chaos.

That’s when a savings account is REALLY nice.

So, let’s get to it. Saving is just like exercising. Even a little bit helps. Skip a few soft drinks and you’ve got five extra dollars this week. To help you get started, here are six tips to save money on a modest salary.

1. Make it a priority!
2. Take your savings chunk out early in the month rather than waiting to see what’s left over.
3. Don’t shoot for the moon all at once. That sets you up for failure. Pick a manageable number and simply do it.
4. Open a separate account for your savings and LEAVE IT ALONE!
5. Decide what your first investment will be. Make it a specific, concrete goal.

Now get out there and start saving if you ever want to be able to afford The Donald’s hair stylist.

The Young Wealth Team

(Flickr / Gage Skidmore)

A few survived. Names like Amazon, eBay, and Google lived to become legitimate business models, and, in some cases, revolutionize industries, though their stock prices have never come close to those days of heady valuation. Still, they are solid investment options today. Others, too numerous to mention, crashed and burned and took millions of investors portfolios with them.

Does this mean you should avoid the tech stock surge completely? Of course not. There is a real chance to make money with these high-fliers but remember to use your common sense. Here’s a quick reminder list for the next time you are tempted to throw all your investing capital into the next tech IPO.

1. Stay diversified and conservative – Markets are always going to have booms and busts. The entire fate of your lifetime wealth does not rest on any single cycle, unless, of course, you decide to throw it all into a spectacular failure. Whatever your investing plan is, stick with it. Don’t oversize your trades or change any of your trading rules. You do have trading rules, right?

2. Be greedy when others are scared and scared when others are greedy – This advice comes from the great man himself, Berkshire Hathaway founder and chairman, Warren Buffett. This contrarian advice should have you buying market bottoms and selling market tops, a practice that should eliminate any danger of flame-out. Buffett also suggests you look for companies that return outstanding return on capital and produce substantial cash profits.

3. Take a look at real estate – Income producing properties, to be specific. Over the long haul, this form of investing outperforms all the tech stock boom and bust cycles you’ll ever see.

Now get out there and don’t load up on the next Egghead.

The Young Wealth Team

(Flickr / zzkt)

“We can no longer simply talk at this generation,” said Charles Schwab Foundation president Carrie Schwab-Pomerantz. “Social media isn’t just a place where young adults spend their time, but it’s also a place that allows for a two-way conversation.”

Strong words indeed for a company that has always chosen to talk AT its audience rather than engage in actual conversation. Schwab’s Twitter assault, which is not likely to set the world on fire all at once, is part of a larger effort by the company to access young investors on the own turf and try to educate them about money, investing, and finances.

At Young Wealth, we have to say we think any education at all aimed at young people and understanding finances is a step in the right direction, especially in light of the woeful job that most public school systems do in this area. Understanding how money works is the first step towards learning how to generate more of it through savvy investing. We’d love to see each and every one of our readers reach the land of financial independence and if it takes Charles Schwab strutting their stuff in the happenin’ world of social media – you go, Chuck.

Remember, though, that Schwab is a stock market company. We would like to suggest that you not get so caught up in the Schwabification of America that you forget that the proven best investment in history is real estate. Not just any old chunk of real estate but the kind that makes you a landlord, collecting passive income every month. We call it income property investing. It’s powerful stuff. The kind of stuff that could lead you to the land of financial independence if you let it.

The Young Wealth Team

(Flickr /  _DaniloRamos)

Here it is in nutshell. Instead of keeping all your content and applications on a hard drive installed on your local device, why not upload everything to the Internet, store it at a third party’s remote location, and access it via any of your devices any time you need it. Sounds brilliant, right? It is, though it might take a while for those of us who were raised tethered to our hard drive to give it up.

The downside is that cloud computing is only as reliable as your Internet connection. Let’s say you stored all your apps and files in the cloud and, for whatever reason, you couldn’t get online. Meltdown city. There’s a good chance you’d be ripping handfuls of hair out of your very own head and hurling them at the screen. And let’s not even think about the rumored electromagnetic pulse bomb that could immediately fry anything electronic across the country within seconds, including all your cloud data.

Actually, you shouldn’t worry about an EMP bomb too much. If it ever happens, lost data will be the least of your problems. But Apple has figured out the way to lure the younger generation into the cloud is to focus on music, and that’s what iCloud is all about. Imagine storing all your music and video with iCloud and being able to access them all instantly across all your devices. Want to hear the latest Celtic musical punk rant by the Dropkick Murphys? Doesn’t matter whether you’re on your iPhone, iPad, or Macbook. If it’s in the cloud, it’s always at your fingertips. And get this – no syncing required!

You’ve done it again, Mr. Jobs. While the competition was floundering around trying to figure out what to do, you knew how to take the technology and make it cool. Now Amazon’s not far behind. Stand back and let the era of cloud computing begin in earnest.

And one more thing from your friends at Young Wealth. It might not be a bad idea to invest in Apple.

The Young Wealth Team

(Flickr / kevindooley)

A Chicago native, at the age of 18, Walsh has amassed great wealth as well as created a personal brand that surpasses most seasoned marketing experts.  As CEO of iSocial Academy, Walsh has created what he calls “iHit17” which is a “17-minute Social Media Hit List”, that allows you to build and easily maintain your personal brand and Social Media network. Austin started his career by developing local bands MySpace pages in the Chicago area, bringing in 200 to 1200 attendants—all without spending a dime and using social media outlets like Facebook, Twitter and YouTube.  After many successful events, Austin’s father’s colleagues took notice and asked him to do the same for them—create a Facebook page that not only increases their followers but also brings in revenue.  The great thing about his concept is that your followers are people who actually want to receive information from you—unlike a mailing list.

So what does a business plan look like? It’s simply a printed document, the more professional looking the better, that is broken down into standard sections where you describe various aspects of how the business will operate. Some experts tell you to include more information and others claim you need less, but the following eight section breakdown is the one suggested by the Small Business Association.

1. Executive Summary: The executive summary, sometimes called the Mission Statement, is the big picture view of your business. This is where you talk about the company’s reason for existing. In other words, how will the world benefit from your business being there? A good example of a mission statement on steroids can be found in the movie, Jerry Maguire, where a sports agent played by Tom Cruise famously flips out and decides to tell the truth about where he sees his profession as having gone astray, and lays out a road back to respectability in mission statement form.

2. Company Vision: This section is where you lay out the ultimate vision for your company. Where is it now and how big do you want it to be? Will it be limited to a single store serving a local area or do you have aspirations for it to grow into national or international proportions? If so, you better have a step-by-step plan for getting there. This is where you expand on your grand vision and do your best to get potential investors excited about the possibilities. Subsections of this topic would include a history of the company and any other principal players that might be involved, such as investors or partners.

3. Definition of the Market: To complete a business plan requires that you have some idea of the scope of the market, target audience, and amount of competition already there. You should have already done some research, or at least a fair bit of thinking, to be able to define and describe exactly who you are trying to sell your product to. High earning middle-aged men with flat feet? Left-handed young adults? Very few companies can simply say “everyone” is their target audience because it simply isn’t true. Wal-Mart might get away with such a declaration without being laughed off the stage but there’s a good chance you should narrow your sights considerably.

4. Products and Services: This is where you describe exactly what it is you do or what you’re selling. Maybe you want to sell hot dogs but it’s not that simple. How do you distinguish yourself from the other weiner-slingers already in business? Is your dog bigger, tastier, cheaper, more fortified with essential vitamins and minerals? There’s got to be something different about yours, that makes it superior, or what’s the point in even trying to open a business? If you have nothing different to offer, there’s little chance you’ll make significant inroads into the market if there are already other established players. Don’t forget to include your pricing model.

5. Organization and Management: Depending upon the scope of your vision, especially if you’re going to be a one man company in the beginning, this might be a very short section. On the other hand, if you do have more than one person involved and would like to provide an organizational chart that delineates the power flow and departmental responsibilities, please do so here. Also include what business type you are planning, whether it be a sole proprietor, LLC, or corporation. If you do have managers or partners, describe the role they will play in the business and what they are in charge of. If you need to obtain any special licenses or permits, mention that here, as well as how and when in the process you will get them.

6. Marketing / Sales Strategy: You have your product. You’ve defined the market. Now how are you going to connect the dots and put them together? Explain your sales and marketing strategy, especially in regard to the Four P’s of pricing, promotion, products, and placement. In simple terms, how will you reach your market with news of your company’s product or service? Building it and hoping they will come might have worked for Kevin Costner in Field of Dreams but please don’t rely on it for creating awareness of your new endeavor. What are your plans to get the ball rolling toward the land of profitability? Are you going to advertise on radio, television, on the Internet, or in print? Wait for word-of-mouth to kick in? Send a sales team out into the world? Your investors want to know up front how you’re going to make sales.

7. Finances: You better not blow through this section with a flip remark, “We’ll make money pretty soon.” For a new business, you need an estimate of start-up costs, as well as a projected balance sheet, income statement, and cash flow statement extending one year into the future. For an existing business, you’ll need to provide records of at least three years worth of balance and income statements and a year’s worth of cash flow evidence. For your own good, make these estimates as close to accurate as you can get. If you’re trying to get a business loan, you should include the most recent year’s tax return for the business, as well as a personal financial statement for yourself and any other principals involved.

8. Title Page: Last but not least don’t forget to include a title page, lest the very people you’re trying to woo find themselves eager to throw fistfuls of money in your direction but can’t figure out where to send it. Include your company name, street address, phone number, email address, and website address.

After a stringent round robin of editing by at least two or three other people, you can print out this business plan, put on a freshly pressed suit, shave, and head out to convince those people who need convincing to give you money. Or, if the business plan is merely for your own purposes, the process of putting it together should have given you a heads up if you have massive holes in your thinking. Be glad that you found out now rather than three months into the process.

If you’re interested in more information about how to put together a business plan, visit the Small Business Administration’s website here.

The Young Wealth Team

Flickr / Yodal Anecdotal

* List courtesy of IncomeDiary.com (Click here to see the whole list)

1. Mark Zuckerberg, 25 yrs old (Facebook)
Why They Matter: Mark is at the top of our list for two HUGE reasons, he is the world’s youngest billionaire and he runs the world’s largest social networking website which is actually the second most visited site in the whole world, not bad for 25 years, is it?

2. Matt Mullenweg, 25 yrs old (WordPress)
Why They Matter: Matthew Mullenweg is the founder of WordPress, the software that runs this blog and millions of others out there. Without Matthew, you probably wouldn’t be at this website right now because I wouldn’t be as fond of blogging without his genius, easy to use blogging software. He has been offered over $250,000,000 for his company which he turned down.

3. Pete Cashmore, 24 yrs old (Mashable)
Why They Matter: Pete Cashmore makes our list because he runs on of the world’s top blogs which is about all that is new on the web. With over 1,600,000 Twitter followers and 300,000 RSS readers, you know this guy is running something big!

4 and 5. Aaron Levie and Dylan Smith, 23 yrs and 22 yrs old (Box)
Why They Matter: Box.net founded in 2005 was originally launched as a college project to share and store any type of file, and make it accessible from anywhere in the world with an internet connection. The company nearly has 2 million users on the service, and netted a $6 million in venture capital.

6. David Karp, 22 yrs old (Tumblr)
Why They Matter: Tumblr is a blogging platform that anyone can use. The service was built with customization and ease of use in mind. Karp invested money into the company from his previous job as a software consultant at a parenting website. Tumblr raised $5.25 million in funding from various investors, including 2 lead investors with the popular social network Twitter.

Now get out there and replicate the success of these young entrepreneurs.

The Young Wealth Team

Flickr / DonkeyHotey

Self-Directed IRA – In case no one ever told you, it’s perfectly legal (and smart) to invest in real estate through a self-directed IRA. The tax benefits are truly amazing, but make sure you familiarize yourself with the complex rules first. Do it wrong and you could get hit with a huge tax bill. The main thing to keep in mind is that the property cannot be for residence or vacation use. It has to be an investment property.

* Read this Kiplinger’s Article on the subject

Partner with other Buyers – There are experienced real estate investors out there who solicit funding from the public for large apartment building buys. This is a great way to let an expert do your property screening for you, though take care to understand exactly what sort of deal you’re getting into and what returns are expected. It wouldn’t hurt to have your own expert look over the deal. We suggest you avoid the “great deals” associated with a “war zone” neighborhood.

Make friends with the local REIA – Most areas have a local chapter of the Real Estate Investor’s Association. Attend the meetings. It’s a great way to meet like-minded investors and maybe even get a heads up on new property deals or meet potential partners.

Wholesale – This refers to the strategy of locating motivated sellers who have not listed their property on the MLS yet. A great way to learn the business from the ground floor up, wholesalers commonly make $5k to $10k per deal by acting as a bird dog for cash buyers.

These are just a few ideas for the young investor looking to break into real estate. The overall point to keep in mind is that you will be much better served in the long run to focus on developing your property portfolio than messing around with Wall Street squirreliness.

The Young Wealth Team

Flickr / Jon Garfunkel

Now you’re paying attention! At least for a little while. Even if you plan to earn your first million by wining the next edition of Survivor, you’re going to need top notch money management skills to make it last a while because a million bucks ain’t much when you take the long view. Think of it like this. One million dollars divided over the course of a 40 year working career works out to $25,000 a year, an amount that won’t have you eating caviar at the Fontainebleau in Miami Beach.

Knowing how to manage your money for growth is critical to long term success and the kind of wealth you’ve REALLY been dreaming about. Let’s steer this towards investing and say you have that million dollars in your pocket after outwitting, outplaying, and outlasting 17 other castaways. You take the money from your pocket and open a trading account. You’ve been studying a bit and have a good idea how to make a killing as a Wall Street daytrader.

Here’s something you might have overlooked. No trader is right 100% of the time. Only the market itself is never wrong because it does whatever it darn well likes and no one can do a thing about it. Do you have a clue as to how much of your cool million you should risk on a single trade? How about in total open positions? If you say 50 percent, you might as well turn make a reservation on skid row right now because that’s where you’re headed. Different experts have different ideas but the ballpark you should be thinking is NEVER risk more than 1 percent of your account on a single trade or put more than 5 percent of trading capital at risk at any one time.

That’s what money management is about and that’s what will keep you alive to trade another day.

The Young Wealth Show

Flickr / danielmoyle

Are colleges in their current format, as brick and mortar edifices of learning, becoming about as useful as the square wheel? Here’s what’s been happening in the real world. There was one part of the American economy that actually saw prices increase in the wake of the recent recession – college tuition. While stock market and real estate prices tumbled left and right, Americans ran for the shelter of higher education, hoping to arm themselves with the proper tools to land a job upon graduation.

It turns out that education at ANY price might not be all it’s cracked up to be. Private, four-year colleges have averaged a 5.6 percent tuition increase each year over the last six, and the government has been more than willing to allow students to pile up mountains of loans to keep pace. Now these poor souls who greatly overpaid for their education are graduating to find there still are no jobs to be found. It’s enough to make one think that the current business model of higher education is unsustainable. We have an education bubble in the United States!

Why can’t colleges go to the Amazon model? With high speed Internet a functional reality in almost all of America, is there any real reason to continue the charade that it’s necessary to relocate to a different physical location and sit in a room with thirty other sweaty young adults to be bored out of their mind by a droning professor? Actually there is no reason to continue this arrangement and the smart schools are already figuring it out. With most states forced to cut college funding as they grapple with serious budget issues, the schools themselves have no better solution than to raise rates while prices are falling all around, or maybe encourage campus police to write a few million extra parking violations.

There comes a point when you have to say, “This isn’t working. Let’s try something else.” We agree. It IS time to try something else.

The Young Wealth Team

Flickr / cooljinny

Think about it like this. Notice how some presidents, not to imply anything in particular about the current White House occupant, don’t seem to have even a grade school grasp of how to run a country? Well think of each state’s governor as a mini-president. Some are good. Some are not. Some states have a history creating a better economy for workers. Why not go there? Is there really a good reason to stay where you are if unemployment is high and salary is low?

Just in case you get a wild urge to go where the local economy looks better, here are some ideas to ponder. The following conclusions were based upon research that considered unemployment rate, average income, state income tax rate, and cost of living to arrive at what is called an Adjusted Average Income.

5 Best States to Earn a Living

1. Illinois
2. Washington
3. Texas
4. Virginia
5. Delaware

And then there’s the 5 Worst States to Earn a Living

1. Hawaii
2. Maine
3. Montana
4. California
5. Vermont

Sure Hawaii is a tropical paradise but the average income isn’t so good and the cost of living out of this world. Conversely, Illinois might not be high on most people’s bucket list of places to live but, after you consider the numbers – reasonably high wages, low state income taxes, moderate cost of living – it starts to make more sense. Young Wealth is not here to suggest you drop it all and run halfway across the country based on a blog’s advice, but is there really a good reason to not consider another state to live in?

The Young Wealth Team

Flickr / woody1778a

Which begs the question, what will it look like when the sliver disappears? How exactly does a country defaulting on its debt affect the man in the street? Unfortunately, there’s a good chance we’re about to find out. First we should point out there there is one teensy tiny factor in our favor which might prevent a Weimar-esque sprint into hyperinflation, and that’s that we still hold the world’s reserve currency, though it’s anyone’s bet how long that will be the case.

Let’s check on a recent quote by Bill Gross, Chief Investment Officer of PIMCO, the world’s largest bond fund. Gross is personally responsible for $1.2 trillion worth of assets and had this to say: “I am confident that this country will default on it’s debt.”

Not much wiggle room there. He IS confident we WILL default. Gross has been busy getting PIMCO out of treasury bonds and thinks that unless Social Security and Medicare aren’t reformed substantially, and quickly, the default is a done deal. Gross went on to say the default was already underway to some extent. Here’s how he explained it. “Not in conventional ways,” he said, “but by picking the pockets of savers.” He says the government will pick your pocket through “inflation, currency devaluation, and low to negative real interest rates.”

That’s is why it’s dangerous to be a saver right now. Low interest interest rates paid on treasury bonds and bank certificates of deposit end up actually costing you money by the time inflation is figured in. If Gross is taking his money out of assets backed by the “faith and credit” of the United States government, where is he putting it?

Mortgage-backed bonds! At least there’s a real asset somewhere on the other side of all that paper.

The Young Wealth Team

Flickr / abraham.williams

The bad news for owners is that their NBA teams lost an average 2.6 percent in value during the recent recession, making basketball a below average investment. In the past year, the value has shrunk by 1 percent. Okay, so maybe we’ve finally found an investment opportunity that actually makes the stock market look good and real estate investing positively lucrative. But back to basketball. The truth is that these billionaire owners often get into the business for reasons other than profit. While some teams are incredibly profitable over the long haul, an underlying passion for the sport is probably more of a contributing factor.

And how those fortunes can change in an instant. Let’s look at the Miami Heat, whose off-season acquisition of LeBron James and Chris Bosh (to go with superstar Dwayne Wade) sent that franchise to the largest value increase in the league’s 64 year history, with a 17 percent surge, while the team James left, the Cleveland Cavaliers, saw their value drop by 26 percent.

The lesson to be learned here is that, if you want to earn real estate type returns for your professional basketball investment, hire LeBron James then stand back and watch season tickets sell out. In case you’re interested, here are the values of the top five NBA teams.

1. New York Knicks – $655 million
2. Los Angeles Lakers – $643 million
3. Chicago Bulls – $511 million
4. Boston Celtics – $452 million
5. Houston Rockets – $443 million

But don’t feel sorry for these owners and the recent paltry rate of return. Most of them are just doing this for fun. They make their REAL money in completely unrelated industries. And these basketball numbers seem positively anemic when compared to that other American sport, football, where 19 of the 30 teams are valued at over $1 billion, with the Dallas Cowboys leading the way at $1.6 billion.

The Young Wealth Team

Flickr / RMTip21

Sean is a wunderkind – with the strength and determination to succeed at whatever he does. A young entrepreneur, he was raised in rural poverty and has lifted himself to wealth in the millions through his service, import, and real estate portfolios. The intensity, commitment, and preparation that Sean demonstrates provide practical starting points for anyone who wishes to become wealthy. Though still in his late 30’s, Sean has become successful in business many times over, with accomplishments such as SBA’s Young Entrepreneur of the Year, and the San Francisco Bay Area’s Most Successful Under-40 Recognition. He has sufficient self-awareness and analytical abilities to clearly describe the principles and practices that have contributed to his success, so that others can follow where he has led.

The truth is that decisions our politicians have made in recent years would have been unthinkable 50 or 100 years ago. At some point along the way, in our hubris, we decided that we could ignore the laws of economics and never have to pay the price. Blame presidents, congresses, Federal Reserve chairmen if you like. It wasn’t one person who set us on this path but rather a succession of extremely poor decision-makers.

We’re fighting a war in Afghanistan, a nation called the “Graveyard of Empires.” Nobody ever wins in Afghanistan! The British tried. The Russians tried. Now we’re mired there, wondering around in those vicious mountains where all our fancy technology seems to not work quite as well as advertised. While we’re at it, let’s let government employees set their own wages and benefits, but first we’ll get rid of that irksome gold standard so we can create money out of thin air to finance our wild spending sprees. Everyone deserves a house with a mortgage they can’t afford, a handful of expensive prescriptions paid for by someone else, and a willing communist nation to foot the bill for our largesse (thank you, China).

The problem is that nation-building and spending without limit never works. Remember back when the original colonists got a bee in their bonnet over “Taxation without Representation?” They threw off their oppressor and wrote down some pretty good ideas about how to run a successful republic. They called it the Declaration of Independence and the Constitution of the United States. We were recently reading those documents. Seems like they have some pretty good ideas in them. We should try it some time. Again.

The Young Wealth Team

Flickr / The US Army

Overall, last quarter’s billionaire sentiment was to get into the financial sector and out of technology, which is a bit of a buzzkill for all the young traders out there itching to earn their bones by being the next prescient wunderkind to get out in front of the next great tech wreck.

Financials? Boring! Sorry to have to break the bad news to you but billionaires were literally flocking to financial companies like Bank of America, Wells Fargo, and Citigroup. Both Warren Buffet’s Berkshire Hathaway group and John Paulson’s hedge fund hit these stocks in a big way. Meanwhile, currency billionaire, George Soros, decided to up his stake in Delta Airlines to 14.7 million shares, which works out to about $157 million.

While we would not be so silly as to suggest you mindlessly model your portfolio after anyone, you could do worse than to at least follow what the Big Boys are doing with their money, and try to understand why. It’s a pretty safe to assume they aren’t randomly dumping huge piles of cash on certain stocks just because they like the sound of the name. With Buffett, it is always and forevermore about fundamentals. You can bet he sees great fundamentals with the financials (probably that they are artificially undervalued in the aftermath of the foreclosure mess), which can be a great reason to buy.

In general, the billionaires are staying away from technology companies, though some can’t help buying shares of Apple. The overall feeling is that the sector is overvalued and ripe for a bubble which will eventually pop.

The Young Wealth Team

Flickr / TEDizen

Todd Babbitt grew up in the Washington, D.C. area, in an average middle-class family. He attained the majority of his wealth through real estate, and a smaller portion from the stock market. Nothing he did was complicated or beyond the understanding of an average person. Today, Todd lives the good life in Naples, Florida, with his wife and daughter. He continues to build his net worth through various investments.

Employment is one of the fundamental factors of economic growth that represent the most frequently used yardstick for measuring recoveries. In discussion of employment, there are two distinctly different categories of unemployment that must be understood. The first is the ‘narrow’ definition that compares the people who are unemployed and looking for work against the total labor force who is employed or looking. The alternative or ‘broad’ definition includes discouraged workers who have stopped looking for work and incorporates the number of people who are working part time, but would like to be employed full time.

Some strange nuances can influence the reported unemployment rate that must be comprehended. When large groups of people stop looking for work, it can result in a net loss of jobs that rolls through as a lower rate of unemployment because the number of people who stopped looking exceeds the number of people who lost their job. Given the statistical machinations that are inherent within reported rates of unemployment, it is critical to understand the factors that will need to be present in a return of unemployment to historically healthy levels between 4% and 6%.

One of the most important factors to consider is the dynamics of “Job Gains” and “Job Losses.” The reported numbers are frequently the ‘net’ of all gains and losses in a given month or quarter. Focusing on the net number has the unfortunate effect of blinding many people to the ‘churn’ of jobs within the economy. Each US fiscal quarter results in the ‘destruction’ of somewhere between seven and nine million jobs that is offset by the ‘creation’ of seven to nine million jobs. The net change at the margin is what influences the reported rate of unemployment.

The current economic situation has resulted in the net loss of many jobs with many more people dropping down from full-time to part-time employment. Facilitating a return to healthy rates of employment will require many consecutive months of net job growth to absorb the currently unemployed work force. In the 2010 forecast book, we forecasted a narrow unemployment rate of 9.2% by the end of the year, and a broad rate of 16.1% by the end of the year. As of November, narrow unemployment stands at 9.6% with broad unemployment at 17.1%. Our 2010 model assumed an anemic economic recovery, but predicted a faster return to net job growth than actually occurred. The principal reason for this is because of uncertainty that surrounded the health care legislation that was pushed through Congress during 2010. As employers grappled with the expected impacts of these new laws, they held off on hiring new employees until their view of the future business landscape became more clear.

As we move into 2011, we are anticipating continued economic sluggishness that offers dim prospects for major net changes in employment. Over the past few quarters, economic growth has barely held pace with the entry of new workers into the labor force. This has resulted in narrow unemployment persistently holding above 9% with broad unemployment staying above 16%. In order for a major reduction in unemployment to occur, the economy will need to expand faster than the rate at which new entrants come into the work force. Since the economic fundamentals are not currently oriented toward the accomplishment of these goals in 2011, we anticipate that unemployment will continue to be relatively high throughout the year.

Our models predict that we will exit 2011 with narrow unemployment of 9.3% and broad unemployment of 16.8%. On the surface, this reduction in unemployment appears very anemic, but it is reflective of the fact that employment is a lagging indicator of economic recovery. During uncertain times, businesses become very cautious in hiring new employees. This generally results in new hiring only when it can be justified by tangible revenue generation. The wild card in growing employment is the impact of small business and entrepreneurial ventures. Job growth at the margin frequently stems from small business. Current uncertainty over the future of health care legislation, government policy, and taxation has suppressed growth and expansion for many small business entities. We do not currently believe that the regulatory environment will stabilize quickly enough to generate a tangible impact in 2011. However, if the mid-term elections and subsequent strengthening of the Republican Party in congress suppresses the tide of government intervention, there is the potential for an economic recovery to begin unfolding before 2011 concludes.

The Young Wealth Team

Flickr / smemon87

Austin experienced a moderate value contraction after the financial collapse, but is now regressing back toward its long-term trend of modest single digit appreciation. The economic fundamentals of Austin continue to be strong as it moves into 2011. Currently, approximately 37% of listings in Austin are from foreclosures.

With many companies seeking to move out of hostile business environments and into areas that are more friendly to commerce. With a highly educated population, a strong technology industry, and a low rate of taxation Austin is a nexus for business and commerce in the upcoming decade. Market values in Austin are somewhat higher than cities such as Dallas and Houston, which has resulted in lower rates of cash flow than is frequently experienced in those markets. In contrast, Austin centers much more around the University of Texas, with its associated restaurants and culture scene. Income property in Austin operates much closer to breakeven than other markets in Texas, but values have historically grown at a faster rate, resulting in a higher expected return from leveraged appreciation.

Investors are expected to realize attractive rates of return from Austin by generating leveraged appreciation and positive cash flow from rental revenue. As a historically linear market, Austin has not experienced the same value swings as many other areas, but is expected to produce consistent returns for investors. Austin strikes a balance between cash flow and expected appreciation by generating rent revenues that are frequently sufficient to pay for normal expenses associated with operating income properties. This gives investors considerable leeway in waiting for future appreciation, since they are not required to absorb significant negative cash flows. On balance, Austin represents the kind of market that many investors tend to prefer because of its attractiveness as a place to work and live, along with its balance ROI profile.

The Young Wealth Team

Flickr / StuSeeger

Oil prices have been going through a period of very significant volatility over the last few years. In the months preceding the financial crisis, global demand for energy was perceived to be on a permanent upward trajectory. This drove a large degree of speculation on oil prices by investment fund managers. The resultant run-up in oil prices1 generated large profits for established oil companies, which drew a high degree of political pressure from the government.

As the financial collapse unfolded, it initiated a string of forced selling by investment funds to unwind their financial positions in oil contracts. This drove market prices down to levels similar to the year 2000. After oil prices bottomed, they have regressed toward their longer-term trajectory. As we moved into 2010, another major factor effecting energy policy emerged. This factor was a drilling ban in the Gulf of Mexico following the oil spill by British Petroleum. This drilling ban served to inflate market prices for oil and tilted the balance of production to Mexico, South America, Russia, and the Middle East. In the 2010 forecast book, we forecasted an oil price of $82.70 by the end of the year. In the month of November, the price for a barrel of light sweet crude oil reached $81.3, landing within 1.8% of our forecast for the year.

We used the same model to produce our 2011 price forecasts as in 2010. The price estimate per barrel of crude oil in 2011 is $105.27, reflecting continued monetary expansion by the Federal Reserve and a global price equilibrium of growing demand juxtaposed against a limited supply of proven crude oil reserves that can be harvested at a relatively low cost. If market prices continue to escalate, it will generate opportunities for opening up new wells for production that are not currently in use due to acquisition costs that exceed the market price. This phenomenon may help to constrain price growth in the future, as new supply comes on line to accommodate some of the increase in demand.

The Young Wealth Team

Flickr / L Gnome

One of the primary monetary news items to note as 2010 draws to a close is the announcement of more ‘quantitative easing’ by the Federal Reserve1. In plain terms, this means that the Fed will purchase treasuries on the open market. This will have the effect of artificially increasing demand for treasuries, which will push down the rate of interest. It is also expected to have the effect of pushing more money out into the economy with the hopes that it will stimulate consumer demand. Unfortunately, many fear that it will also stimulate inflation.

One of the most powerful tools that the Federal Reserve has in its arsenal is the rate it charges member banks for loaned funds. (Also known as the “Fed Funds” rate) In the aftermath of the 2008 financial crisis, the Fed Funds rate lowered to just a few basis points. (Effectively Zero) The effect of this move was to immediately flood the balance sheets of banks with liquidity. This also created a vast sea of un-loaned reserves on the balance sheets of banks.

In a normal lending environment, capital at the bank is lent out at a 10 to 1 ratio so that the bank can earn interest on the loaned funds. In the current environment, banks can borrow money from the Fed at near-zero interest rates, and many are earning profits by churning borrowed funds into treasuries to profit from the yield spread between the treasuries and the rates charged by the Federal Reserve. The fundamental problem is that the nearly $1 Trillion in un-loaned reserves can literally be turned into new loans overnight. This could potentially mean the addition of up to $10 trillion in new money at any given time.

In practice, a flood of loans like this is quite unlikely. Analyzing the rates of change for key monetary aggregates reveals that the M1 and M2 measurements have grown much more slowly than the Monetary Base2, even when accounting for the massive increase following the 2008 financial crisis. The way that this expansion of money has been held out of broad circulation is by government sponsored treasury arbitrage from artificially low interest rates from the Federal Reserve. As we move into 2011, the principal monetary question facing investors is that of whether the Fed will decide to increase its Fed Funds rate, shifting incentives for banks to stop arbitraging treasuries and resume making loans. When this ultimately happens, it will create broad and rapid price escalations. Our models indicate that the current administration will use all of the tools in its disposal to delay this phenomenon in an attempt to create the appearance of economic recovery in advance of the 2012 election cycle.

The Young Wealth Team

Flickr / DonkeyHotey

Atlanta represents an investment gem in the southeastern United States. It has spectacular economics from a development and employment perspective that make it a tremendous opportunity for income property investors. With a wide diversity of employers, many universities, and a vibrant cultural presence in the city, Atlanta has attracted a tremendous amount of in-migration from young professionals seeking employment opportunities. Since many of these young professionals choose to rent, the Atlanta market has very healthy rents relative to values. Currently, approximately 31% of listings in Atlanta are from foreclosures.

Atlanta’s experience during the real estate bubble and financial crisis has been somewhat unique. Prices in Atlanta started from a much lower baseline than many other major markets. The prices escalated to a peak in advance of the financial crisis and have subsequently fallen back to the same levels that they were 10 years ago. Most of the other markets that experienced an inflation and deflation of prices like this are bubble markets that typically exhibit high prices relative to rents. In contrast to this, Atlanta represents more of a linear market with attractive rates of return available from cash flows that result from rent revenues. This is one of the primary reasons for Atlanta’s strength as an income property investing market.

The favorable business and economic environment in Atlanta make it one of the more likely places for an economic recovery to emerge. Our models estimate a return to modest rates of appreciation in 2011, which combines with attractive rates of cash flow to produce a tremendous opportunity for astute investors. By investing in Atlanta, it places you in an advantageous situation where you can afford to wait out market volatility and sell when it is optimal for your long-term strategy.

The Young Wealth Team

Flickr / blairsmith66

One of the important ratios to keep in mind when examining the equity markets is the gold price relative to the major stock market indexes. This provides a valuable insight into the extent to which market values reflect a real shift of sentiment toward equity value, versus the extent to which the value has lost value, driving increases in nominal valuations to simply retain purchasing power. Over the last 35 years, the relative price of Gold1 and the S&P 5002 has oscillated up and down very significantly. In the aftermath of 2008 and the financial crisis, this ratio has regressed toward a value of 1.0, which indicates equal valuation for the S&P 500 index and an ounce of gold. In the latter half of 2010, the S&P 500 vs. Gold ratio dropped below 1.0 as Gold prices were pushed up by speculators seeking to hedge against expected future inflation. Our analysis indicates that this trend is likely to continue through 2011 as monetary expansion inflates both asset classes.

The principal driver of past expansions and contractions of this ratio are changes in consumer sentiment toward business and expectations about price inflation. During the late 1970’s and early 1980’s there was a general souring of investor sentiment toward the prospects for business expansion, combined with high levels of price inflation. This drove the ratio downward quite sharply. As the economic expansion of the 1980’s and 1990’s continued, sentiment shifted toward the stock market as a way to generate wealth. This was reflected in the S&P 500 carrying a valuation over five times the price for an ounce of gold in the late 1990’s.

After the technology bubble burst, and market sentiment for equities eroded, the S&P 500 index began a regression back toward the price for an ounce of gold. This regression has stabilized in the last few quarters as the price of gold pulled even with and eventually surpassed the S&P 500. As 2011 unfolds, we are not expecting to see economic or political conditions that are favorable for business expansion, meaning that price increases for both assets will most likely come from inflation pushing up the nominal values, but resulting in little change for the real value. If the economy slips back into recession from monetary tightening or the cumulative impact of additional government taxes and regulations, we expect to see the S&P 500 price move significantly below the price for gold. Conversely, we anticipate that the S&P 500 will resume a growth trajectory relative to gold when the economic and political conditions become more favorable for expansion. At present, these conditions are not likely to transpire in 2011, and may take until 2012 or longer.

The Young Wealth Team

Flickr / covilha

One of the significant problems faced by the government is the increasing difficulty in auctioning off treasury securities. The reason for this is investor fears over inflation and the relative low interest rate offered on the debt. These fears are amplified by the massive budget deficits being run by the Federal Government that must be financed with consistently increasing levels of borrowing. The strategy currently employed by the government is to use the Federal Reserve to purchase treasuries.

By adding treasury securities to the Federal Reserve balance sheet, the Fed is increasing the amount of banking reserves in the system that are available to be loaned out. Thus, every dollar in monetary expansion by the Fed can be turned into ten dollars by the banks through issuing loans under the 10% reserve requirement. Currently, this has not happened because of the near-zero interest rates being charged for loans from the Federal Reserve. Instead of loaning out these additional reserves, banks are using the funds to purchase treasuries and generate a profit on the interest rate spread. When the tide of new money creation eventually crashes in, it will result in a sudden upward surge in prices that will influence demand for treasury yields.

In the 2010 forecast book, we anticipated that rates would exit 2011 at 6.7% for a 10-year government bond. This estimate was based on the assumption that current levels of monetary expansion could not be continued indefinitely without adverse effect. As of November 2010, the 10-year treasury rate stood at 2.5%, supported by heavy purchases on the part of banks who are investing funds borrowed from the Federal Reserve at near-zero rates. Because of these factors, we believe that the 10-year treasury rate will finish 2011 at 5.75%. Our models have been adjusted to factor-in the spillover effects of quantitative easing pushing up yields demanded by investors in response to escalating consumer prices.

With current mortgage rates at historic lows, it is likely that the housing recovery will stall in the second half of the year as the interest rate increases erode affordability. For homeowners and investors that have capitalized on the current low interest rates, there is a significant probability that future inflation rates will be considerably higher than the current treasury and mortgage rates.

The Young Wealth Team

Flickr / RambergMediaImages

By now, most people have heard about the second round of “Quantitative Easing” being conducted by the Federal Reserve. In short, this means that the Fed will be purchasing treasury bills with freshly printed money to inject more cash into the monetary system. To date, most of this additional liquidity has been limited to banks who have opted to hold the capital instead of loan it out. The reason for this is because the banks can borrow from the Fed at extremely low overnight interest rates and use the capital to purchase treasuries with a yield rate that exceeds their cost of borrowing.

However, this round of monetary expansion is likely to ripple out into the economy much more quickly than the last one. In practice, it means that prices are likely to adjust with more money out in the system and the same amount of goods and services being produced. This is expected to create a nominal increase in prices. The items that will experience this price increase first will be those that are bought with cash and have a high transaction velocity. Treasuries, Stocks, Food, Energy, and Commodities are the first places where nominal price increases are likely to show up.

As time goes by, the nominal price inflation is expected to work its way throughout the economy. This is the intended purpose of quantitative easing, and one of its principal dangers. Actions by the Federal Reserve are being taken to stabilize nominal prices. If further weakness is seen in the price for things like real estate, there is a possibility that the Federal Reserve will take even more action to keep nominal prices stable. The problem comes when the nominal price of things like homes are held stable, but the price of things like food, energy, and other things that are considered ‘necessity’ items of life increase in value.

The likely output of such a scenario will be ‘real’ value decreases that are hidden behind ‘nominal’ price stability or even increases. When analyzing decisions for your personal and investing behavior, it is critically important to understand the importance of these monetary effects. There are many ‘doom and gloom’ proclamations floating around that anticipate a second recessionary dip for the economy. Our assessment of the situation is that the Federal Reserve will continue with its expansionary monetary policy for the express purpose of avoiding value contractions that would initiate a secondary recession.

The likely outcome of these decisions will be an extremely slow economic recovery as activity stops and starts in reaction to price signals. Increases in nominal prices will temporarily spur activity, but increases in key costs will subsequently dampen that additional activity. This see-saw action is likely to continue throughout the process of quantitative easing and for a considerable time afterward.

Practically speaking, this means that investors must be ready for considerable uncertainty over the next couple years. It also means that nominal price gains must be measured against the real purchasing power of the dollars that they are denominated in. Astute investors should seek opportunities to fix their cost of capital at today’s low rates and invest in assets that will have their nominal value carried upward by inflation.

Financial independence is closer than you think. Buy your Early Bird ticket to the Meet the Masters of Income Property Investing educational event before February 14 to qualify for a steep discount on tickets.

The Young Wealth Team

Flickr / DonkeyHotey

By focusing on investment in deals that produce reasonable cash flow, investors can achieve favorable rates of return from leveraged value appreciation and cash flow in the Phoenix area. Currently, approximately 54% of listings in Phoenix are foreclosures1.

Phoenix is a unique market, since it has been historically linear but was escalated to very high levels of valuation during the recent real estate bubble. We expect to see a return to historical levels of value appreciation that are a combination of modest fundamental growth and a regression upward from an artificial bottom that resulted from foreclosures after the financial crisis. To long-term investors, a steady growth rate with attractive cash flow represents a much more attractive opportunity than a cyclical market that depends on steep value appreciation and quick re-selling of properties to compensate for negative cash flow from rents.

As we move into 2011, there are two significant forces acting on the Phoenix market. The first is a regression to replacement cost after market values reach their fundamental bottom. The second is an expected increase in interest rates from historic lows that will suppress cash flow relative to prior levels. Our analysis concludes that now is the optimal time to pursue income property deals due to the intersection of historically low interest rates and market values that have been suppressed to their year 2000 levels.

The Young Wealth Team

One of the complexities implicit within consumer prices is the duality that exists between commodity products that naturally inflate with increases in the supply of money from the Federal Reserve and technology products that naturally deflate in price as new innovations displace current products with higher quality and lower prices. When we published the 2010 inflation predictions, our models assumed that the quantitative easing being undertaken by the Federal Reserve would ripple through the economy and drive up consumer prices. Our 2010 forecasted rate of inflation was 3.9% for core inflation and 7.2% for all items. The reported inflation through the month of October is 0.8% for core inflation and 1.1% for all items. It is quite apparent that the experienced inflation through October is quite lower than our prediction. The reason for this is that our prediction was based on an assumption that a dramatic increase in bank reserves after the financial collapse of 2008 would eventually spill out into the broader economy. However, the Federal Reserve successfully kept these reserves out of circulation by lowering the “Fed Funds” rate for bank borrowing from the Federal Reserve down to nearly zero. This made it more profitable for banks to borrow from the Fed and use those borrowed funds to purchase Treasury notes than to loan their reserves out. This technique has resulted in steadily printing more money to fund the bank arbitrage of Treasuries, but has also been able to keep the excess reserves from inflating the supply of money in the marketplace.

As 2011 unfolds, we expect to see commodities inflated by the “quantitative easing” on the part of the Federal Reserve. This is expected to result in an inflation rate of 2.4% for all items excluding food and energy and a 6.6% rate of inflation for all items in the index. These predictions are based on the assumption that techniques used by the Fed to constrain monetary inflation will see their effectiveness diminish in 2011. The spillover effect from quantitative easing are already being felt in prices for food and energy. We view this as an indicator that recent increases in the money supply are finding their way into the broad economy and influencing prices. In the event that large amounts of new money are unleashed into circulation over a short period of time, there is a considerable risk of price spikes. However, it is extremely difficult to know exactly when such an event will occur, because of the existence of large excess reserves that have been sitting on bank balance sheets for an extended period of time.

The future of consumer prices will be largely dependent on the extent to which government policy accommodates or constrains new innovation that will deflate prices for technology and manufactured goods when the currently deployed capital becomes obsolete. Our current view is that the divided legislature resulting from gains by the Republican Party in mid-cycle elections will moderate government activity and hold the potential for stabilizing the economy as it moves out beyond 2011.

The Young Wealth Team

Flickr / pdinnen

The most significant factor that impacts prices is the supply of money relative to economic output. While it is true that the prices of individual items relative to one another will fluctuate in the marketplace, the only thing that can drive the price of everything up at once or everything down at once is an increase or decrease in the supply of money chasing after goods or services. It is important to note that “money” can take the form of currency, bank deposits, or lines of credit.

Bearing the cause of inflation in mind, it is also important to understand how the government measures inflation. The most commonly cited measurement of inflation is the consumer price index.1 This index is expressed as a bundle of consumer goods, and is intended to represent the likely purchasing behavior for an urban household. (Over time, the household size assumption for CPI has been decreasing, meaning that when the consumer bundle is expressed in a per-person instead of per-household basis, the increase is faster than expressed in CPI) The index value derives from comparing the consumer bundle price to the bundle price in the base year(s).

As time goes by, the items in the government consumer bundle are changed to reflect shifts in purchasing behavior. In addition to this, quality changes are imputed into the index so that an item that costs the same, but has greater quality shows up as having a lower cost in the consumer bundle. There are many other adjustments made to CPI, but in aggregate, they make objective pricing comparisons from one time period to another difficult since there are many subjective adjustments that have gone into computation of the index.

As a way of level-setting the value of CPI, we have constructed a comparison of the relative values2 for the S&P 500 stock market index, the consumer price index, the consumer product bundle3, and the consumer product bundle normalized for per-person instead of per-household from 1929 through 2009. Analysis of the trending shows provides some very interesting insights for investors.

The first is that over time, the CPI and CPI bundle diverge very significantly. Presumably, this is due to price adjustments for quality improvements of CPI component items. However, it also shows that the nominal increase in price of items over time is likely to be larger than what is expressed in the CPI. Another interesting insight is the fact that the adjusted bundle tracks very closely with the consumer bundle until the 1960’s. This is the point when divorce rates began to increase and the average household size started shrinking. When the consumer bundle is spread across a smaller household size, it results in a higher cost per person than is expressed in the ‘per household’ assumption of the index.

Further analysis of the data trending shows that the S&P 500 significantly under-performed the CPI through the mid 1950’s, and basically held flat with CPI during the mid to late 1970’s. It wasn’t until the bull market of the 1980’s that the S&P 500 value really began to separate from CPI.4 After the financial crisis of 2008 drove down market values, the normalized value for the S&P 500 and the normalized value of the adjusted consumer bundle stood relatively close to one another.

This analysis provides a unique insight. Depending on how one defines inflation (CPI, Consumer Bundle, Adjusted Bundle), the long-term returns from the S&P 500 index become relegated mostly to dividends. For stock market investors who were caught in the value growth explosion of the technology and financial bubbles, it is important to understand that the rates of growth experience during those time periods are unlikely to be repeated anytime soon.

However, all investors must come to understand that nominal gains and real gains are very different things. The government assesses tax liabilities based on nominal gains, but as investors, we principally care about the ‘real’ rate of return generated by our investments. This means that we must seek investment vehicles that will produce ‘real’ rates of return in excess of future inflation.

Our preferred strategy for accomplishing this goal is with income properties. By purchasing an income-producing asset with fixed-rate financing, it allows investors to benefit from nominal value inflation since their cost of financing is fixed. Furthermore, by outsourcing the payment of mortgage interest to tenants who are paying rent, it allows income property owners the luxury of holding through value disruptions so that nominal price inflation helps them to create real wealth.

The Young Wealth Show

Flickr / MoneyBlogNews

One thing that we know will occur because of this move is that prices will be temporarily strengthened as the inventory of foreclosures is artificially constrained. During this time, people will be held out of the rental pool while they are living in a house (without paying rent) until the foreclosure process rolls through. The impetus behind this is quite clear, since the politicians in charge of government policy are attempting to curry favor with their constituents by helping people to stay in the houses that they cannot afford.

Over time, this decision will play out and the market will regress back to equilibrium. In many markets, this will take the form of short-term price stabilization or increase, followed by softening of the market prices as the foreclosure inventory that had been held off the market comes back on. In conjunction with this, there will be people moving out of the ‘owner’ population and into the renter pool. This will strengthen rents as the population of renter’s increases faster than the supply of rental properties. This will remain true even if investors purchase some of the foreclosed properties because the displaced owners will become renters, but less than 100% of the foreclosed properties will be purchased for investment.
In some markets with low land values, the wave of foreclosures has pushed market prices below the cost of construction. Fundamentally, this means that buyers have ‘built-in’ equity since the low prices have ground new construction to a halt and future demand increases will push market prices up toward replacement cost before new construction begins. This Regression to Replacement Cost is expected to be an upward force on future market values in some areas. Conversely, in markets such as California and New York with high land costs, there is considerable room for price compression since the values exceed replacement cost by a very large margin. It is not likely that land value in these markets will compress to zero, but whenever land value makes up a high percentage of your total market value, there is more downside risk exposure.

In the end, the only situation that can create a fundamental market recovery in real estate is if there is an increase in the number of people who can pay their bills. With national unemployment in excess of 9% with a broad unemployment rate exceeding 16%, there is considerable slack in the labor markets that will stand in the way of a fundamental recovery. It is likely that real estate will lag the overall market recovery, as there need to be more people who are employed and paying their bills before there can be a sustainable increase in the number of people purchasing homes. For astute investors, there continued to be tremendous opportunities available to purchase properties in healthy economic areas for prices below the cost of construction.

Breaking Down Return on Investment by Market
It is most decidedly true that “all real estate is local” and that the commonly referenced “national real estate market” does not exist. One of the unique features offered in this forecast book is a detailed prediction for each major investment market that outlines the key ROI components. These components are the base value appreciation, leveraged appreciation, and cash flow from rental income.

Value appreciation represents the simple increase in property values for a market area. Leveraged appreciation represents the extent to which you realize additional return on investment because of the mortgage loan that allows you to purchase much more property than would have been possible with cash alone. Leverage opportunities vary, based on markets. Cash flow represents the rent revenues you receive from tenants, less expenses for the property. These factors combine to generate the total return on investment for properties in a given area.

Another Form of ROI is “Return on Inflation™”
Jason Hartman created the term “return on inflation,” which is a distinct advantage of investment real estate in that it offers the opportunity to generate a return on inflation. Broad price inflation results from increases in the money supply by the Federal Reserve. This ends up generating more dollars chasing after the same amount of goods and services, which inevitably precipitates an increase in prices. By borrowing money to purchase your property with a fixed-rate mortgage, it allows investors the opportunity to realize significant benefits when inflation rolls through the economy.

The way that this phenomenon unfolds is when the increased flow of dollars throughout the economy increases the nominal value of the property. The real value relative to other assets may remain unchanged, but the fixed-rate mortgage that was used to acquire the property will have its payments remain flat while the value goes up. In this case, the investor realizes all of the increases in value while paying exactly the same amount to the bank each month. We refer to this effect as “Inflation Induced Debt Destruction.” The impact of inflation reduces the real value of mortgage debt.

In addition to this, rents are likely to be pushed up by inflationary pressures as well. This will result in larger cash flows that increase profitability for investors. The driver of this increased profitability is also the fact that interest payments remain fixed and revenues grow faster than expenses. Thus, investors can generate real returns from inflation through the prudent use of leverage. This is the fundamental strategy behind our ROI predictions.

The Young Wealth Team

Flickr / Xurble

In practical terms, prices in Orlando have declined to less than half of what they were at the peak. This has resulted in a tremendous improvement in the ratio between cash flows and the price of investment properties. However, the extensive inventory of foreclosures is still being worked through by the banks, and is expected to suppress future value appreciation. The current situation is a case where values in Orlando grew so rapidly that they no longer justified income property investment, but have now adjusted down so that they are back in line with the underlying economic fundamentals. The city economy is very heavily intertwined with the entertainment industry, so it is likely that a full recovery will lag the overall economic recovery.

The combination of these market dynamics create an environment that is friendly to investors because of cash flows that have strengthened significantly, and values that have the potential to rebound from a precipitous decline as the inventory of foreclosures are dissipated. With multiple foreclosures currently available, investors may have the opportunity to purchase properties near or below the cost of construction. This can create ‘natural’ price appreciation as market values regress toward replacement value. This effect will only happen when net in-migration resumes and new construction begins again. However, for people who took action at the right time, it can be a tremendous opportunity for gain that is hiding behind a shroud of current economic difficulty. These factors make the Orlando area worthy of consideration.

The Young Wealth Team

Why should young entrepreneurs care about IPO’s? Not so much as to whether or not you should invest in them, though that could certainly be part of the equation. The real factor to take into consideration is that where there are IPO’s, there are ideas and innovation. That’s where the action is, and where there is money to be made. Not that you can’t still become filthy, fabulously wealthy in the United States. There is always that possibility, especially if you happen to be a billionaire heiress with a penchant for bad behavior, or an American teenager in Orange County.

But if you do want to cash in on the sense of vigor and vitality in the Chinese market, there is a way for young entrepreneurs to profit without going directly to Chinese traded markets. ETF’s are one option, as are American Depositary Receipts, which lets you invest in companies like Suntech Power and JA Solar Holdings through the American stock market. Mind you, we’re not suggesting you run out and sink everything you own into these particular companies. Keep in mind that some will make it and some won’t. Remember those late 1990′s heady dot come days when everyone and their grandmother was going public with an IPO? A very few had sensible business plans and lived to become legitimate companies – Amazon and eBay are two.

The real point of this is to encourage young investors to broaden their horizons. Extend your vision beyond the shores of America because opportunity can be found in places you never thought of looking. One thing is certain, the tsunami we know as the Chinese market is not going anywhere any time soon.

The Young Wealth Team

Flickr / marcus.tan.yi.wei

Too many young entrepreneurs find themselves stymied by what they perceive as a lack of focus on any particular business direction. Stop making it so hard! You can figure this out if you’ll stop trying to invent a new wheel and content yourself with selling them. It’s true that some people have made amazing amounts of money by bringing something truly original to the market. Bill Gates and his Windows operating system is a good example. But many, MANY more people have made a heck of a lot of money simply selling something what’s already on the market. Did Ray Croc invent the hamburger? Of course not but, under the auspices of his chain franchise, McDonald’s, he certainly re-invented how to sell about a billion of them.

Keep in mind that you don’t have to limit your thinking to what you perceive to be a profitable idea. Think of some of the wacky concepts people have turned into businesses over the years and, hopefully, you’ll realize that you shouldn’t limit your imagination at this early stage of the game. So, let’s get down to the lists.

What are your ten favorite things to do? Be honest. Don’t pretend like you’re great with numbers when you’re not. Your parent’s dream of raising a solid tax accountant professional might be your dream – but it might not. Write down ten things you love to do, then ask yourself what you like about each one. This should be a voyage of discovery, because not many people take the time to actually complete an exercise like this Once that’s complete, it’s time to crank out list number two – your ten greatest strengths. Now cross pollinate the lists to see what similarities you might find.

At that point, you should be a whole lot closer to nailing down the business idea than you were before.

The Young Wealth Team

Flickr / Florian

But what can you, as a wet behind the ears investor, learn from this grandfatherly figure who has managed to climb to #3 (Carlos Slim Helo and Bill Gates being #1 and #2 respectively) on the most recent list of the world’s richest men? Quite a lot, if you’re willing to pay attention. Warren Buffet has always eschewed complex mathematical models when it comes to picking stock, and usually is something of a contrarian (which simply means he tends to ignore popular opinion and go his own way). For example, when Goldman Sachs was getting the stuffing kicked out of it during the 2008 recession, and the stock price had slipped to $115, Buffet was all in, investing $5 billion dollars. With a recent closing price of $165, the old man did okay and added several million more dollars to his pile.

What does a simple investing philosophy mean when it comes to picking stocks the Buffet way? He prefers businesses with models easily understood by anyone. Companies like Target, Coca-Cola, Apple, and Wal-mart are good examples. Each has a simple mission: to sell as much of their product to as many people that will buy it. Nothing fancy. Nothing complex. Just solid examples of filling a need in the consumer market.

After simplicity? Buy and hold, baby, buy and hold. And keep in mind that Mr. Buffett didn’t make his first million dollars right out of the gate. He worked at various jobs in the financial industry, learning the ropes, forming partnerships until, finally, at the age of 32 he could legitimately say he had joined the millionaire club. At age 60 he officially became a billionaire in 1990, and his net worth has continued to grow ever since.

Don’t make the mistake of thinking you can become like Buffett overnight. Patience is part of the process. Set a few interim goals, but keep your eyes on the road and hands on the wheel.

The Young Wealth Team

Flickr / Aaron Friedman

Such is the case with what passes for financial journalism in the world today. If you don’t know anything about investing, you naturally read/listen to the financial media for advice. The problem is they either don’t know anything about it either, or are lying to you. The end result of consuming the “wisdom” of the print, cable television, and Internet “gurus” is that you still don’t know anything about investing.

But the problem with the entire premise of this article is why should you listen to us either? Aren’t we part of financial journalism? Good point. We do, indeed, consider Young Wealth to be a critical component of a young investor’s education. One crucial difference is that we are a non-profit organization trying to make up the financial literacy deficit you acquired in school. We’re not selling a product and the only benefit we get is when you learn to discern fact from fantasy, then go out and make the world a better place for us all by working the free market system for all the wealth you can earn.

There are so many ways the traditional financial media misleads you, but here are a few, in particular, to watch out for.

1. Corporate broker recommendations made via direction from on high, and possibly totally unsuitable for your purposes.

2. Recommending an “all in” in approach no matter where the market is rather than a dollar cost average or buy when it’s low strategy.

3. Churning your account with pointless buying and selling of stocks simply to create transaction commissions for the brokerage.

So, what’s the easy way to separate the kernels of good information from the ignorant or misleading? Sorry, there isn’t one. Becoming a savvy investor takes applied research over time from a variety of sources. One general bit of advice we would like to suggest – if you want to truly build wealth, investigate income property investing. It beats the pants off stock market returns, and you maintain direct control of your investments.

The Young Wealth Team

Flickr / tkksummers

Most young people rent first because that’s all they can do. Buying is not an option yet, and it’s not even because they have bad credit, but because they haven’t had time to establish much credit history at all yet. Don’t feel bad about it. That’s the way the world works. You build a good credit rating as time passes by paying your bills on time, not exceeding your credit card balance, and keeping a debt to income ratio of about 16%.

But back to the point of the article. How does one both rent and buy at the same time? Using a type of investing called income property, you can gain the benefits that go beyond what renting or buying a house can do for you individually. Let’s consider a nice little duplex. Nothing fancy, but clean, neat, and in a decent neighborhood. Run the numbers, considering what your mortgage payment would be if you decided to buy it, and how much you could earn in rent from a tenant by renting out one side. If the numbers work, you live in one side and rent out the other. Often the rent paid by your tenant will completely cover the amount of the monthly mortgage payment and, even if it doesn’t pay it all, should make a good-sized dent.

The end result is you either get free rent (if income from the other side covers your payment), or greatly reduced rent yourself if it doesn’t cover everything. Either way, it’s a heck of a deal for you, especially when you consider you’re going to own the asset (the duplex) at the end of the mortgage, even though the bank put up all but about 20% of the purchase price and your tenant’s money was actually what paid it off.

Even better might be to rent both sides out, a move that could leave you with positive cash flow above and beyond the loan payment. And you can repeat this process again and again and again with different properties? Are you beginning to see the possibilities?

The Young Wealth Team

Flickr / NNECAPA

Construction: Unemployment in this industry is at 17% right now. With the foreclosure crisis still unreeling, a resumption of building new houses on any sort of broad scale is not likely to happen in the near future.

Realty: See our comments on construction. The bottom line is the realty industry has lost 200,000 jobs since 2006.

Automotive: Detroit has lost 300,000 jobs in recent years but that isn’t all the damage. Periphery jobs lost are estimated at three for every one auto construction that goes away. We’re looking at almost a million people out of work due to the financial mess the industry brought upon itself. Thanks unions!

Pharmaceuticals: The big drug inventions of the 1990′s and 2000′s are running into the fact that their patents are expiring, which means everybody else can horn in on the action. With companies merging and downsizing, only the next “it” drug will turn this train around.

Postal Workers: Already considering dropping Saturday delivery, the USPS can’t seem to do the job of moving parcels as well as private firms like FedEx and UPS. With actual letters being replaced by email, what’s left for the boys and girls in blue to do except take shots at one another?

Federal Government: Believe it or not, Mr. Obama has frozen the pay of federal employees for two years, and more than 240,000 federal jobs have been slashed since 2007, so don’t pin your hopes for a swanky retirement on a government paycheck.

Other areas without a rosy future include education, the military, public safety, and banks. Charles Darwin taught us about evolution, and it seems that some of the former stalwart employers of this economy are disappearing like the dodo bird. Don’t be the last one in line.

The Young Wealth Team

Flickr / Aranami

Here are a few particular financial mistakes to watch for.

1. Don’t neglect an emergency fund. Yes, the boring old emergency fund that can save your financial rear end when things like medical expenses, car repairs, or broken windows appear in your life. Though the timing and extent of emergencies never reveal themselves in advance, one constant is that they will happen. We recommend you first establish a $1,000 “baby” fund, while working on building a full three month reserve. Using this to deal with contingencies is always better than using high interest credit.

2. Beware the slow leak. Do you use your debit card for the daily soft drink, Starbucks, or bottled water? These nicks and cuts to your balance can surprise you at the end of the month, leaving you paying close to $30 for that latte, once overdraft fees are figured in. Set yourself a drink budget and pull out the cash. When it’s gone, it’s gone.

3. The non-existent budget. It surprises us to discover that some people have absolutely no budget at all for – for anything – and are still surprised when they run out of money halfway through the month.

4. Credit disaster. Paying only the minimum on your credit card each month is a financial black hole. The high interest charges end up costing you much more than the actual purchase price of whatever you used plastic to pay for. A credit card should only be used for actual emergencies, and the balance paid off, in full, each month. If you’re in a bad way and can’t do that, pay as much as possible until the debt is gone.

If you recognize yourself committing any or all of these financial mistakes, we have a bit of direct advice for you – stop. The good (and bad) news is that it’s as simple as changing your habits.

The Young Wealth Team

Flickr / UggBoy UggGirl

At Young Wealth, we hope all our readers have the chance, at some point in their lives, to display colossal ignorance regarding investment capital totaling more than $1 million, because that means you’ve been doing something right along the way.

And we’re not here to bash the stock market without cause, merely to point out that any resemblance between today’s stock market and the one your father and grandfather invested in, is nothing more than thin window dressing. Financial times have changed and taken your Wall Street darlings with them. We happen to not believe that the idea of waiting around for an eventual correction is sound strategy any more.

We also see a parasitic connection between the rise of the ’round-the-clock news cycle on television, radio, and the Internet, and the seemingly random price twitches the stock market has adopted as “business as usual.” An oil well in the Gulf of Mexico explodes and stocks go bouncing like Silly Putty. A tsunami hits Indonesia and stock charts look like the Tasmanian Devil’s EKG. A snail breaks wind in Kwajalein and investors take to buying and selling like frenzied clowns on crack cocaine.

This is not investing. Today’s stock market runs on worldwide static generated by business channels desperate to bump viewership at the top of the hour. Plus they need something dramatic to build tension during the interminable five minute news break that separates broker commercials. If you’re a millionnaire, more power to you; we salute what you’ve accomplished. Our fervent hope is that you learn how to stop playing with your money in stocks and learn how to actually invest it in income property.

The Young Wealth Team

Flickr / Donkey hotey

Think of it this way. A roommate is an immediate way to halve your housing costs, but the decision should be undertaken only after considering all the angles.

The Good
Obviously, only having to shoulder half the financial burden of rent and utilities is a major benefit that makes it seem like you received an immediate pay raise. Choose carefully, and you can find a cheerful soul to pass time with on a rainy weekend afternoon, and who will help keep the common areas clean. If you’re really lucky, they might even have a large screen, high definition television to put in the living room.

The Bad
Choose poorly, and your life could become hell on earth. In the worst case, your new roommate is chronically late with rent payments, or can only muster a portion of what they owe. Toss in a tendency for all night rave parties, clogging the bathroom plumbing with unmentionables, and loud sex in the kitchen at 3 a.m. But it doesn’t even have to be that traumatic. The disconnect could be as simple as a personality conflict that keeps you on edge any time you’re in the room together.

The Ugly
Worst case scenario, your new roommate is using your apartment to sell drugs or mastermind his new prostitution business. Make sure that you spell out in exact detail, before they move in, what can and can’t be done on the premises, how long the rental agreement will run for – it wouldn’t be bad to have a contingency plan (like an emergency fund) in the event you have to kick them out, which you can do if necessary.

The Young Wealth Team

Flickr / ghindo

Here’s what you do to keep your brain from imploding and palms from breaking into a cold sweat.

1. Determine if it’s a bear or bull market. Bull market conditions mean that, overall, prices are generally trending higher, while a bear market suggests lowering price conditions. Many times you can apply a layman’s eyeball to a chart and determine what the current conditions are. A simple way to confirm is to apply a 200 Moving Average to your time frame and check the price. If the line is up and price the same, you’ve got a bull. Line moving down and price below indicates a bear.

2. Ranging market. We’re not going to lie to you. Often the stock market falls into what is called a range, where it wanders back and forth over a relatively narrow price span. It’s tougher for the average trader to make money under range conditions. Some choose to sit out the range completely and wait for a trend to appear. If you do trade the range, consider taking smaller positions and cut your profits and losses sooner. Trading a range badly can kill your account, though your broker will be happy at the extra commissions.

3. Check the dollar. In the current economic environment, when so much of the stock market movement is a reaction to macro world events rather than intrinsic company value, it’s often true that when the stock market is weak, the dollar is strong and vice versa. For example, if you think the market is bullish but the dollar is also showing strong, step back and take another look before opening a big position.

Unfortunately, much of what you learn in college related to stock investing is based on a market that doesn’t exist any more. As we said, so much of today’s movement is based on speculation and knee-jerk static reaction to political events halfway around the world. If you’re looking for a safer long term investment play, check into income property investing.

The Young Wealth Team

Flickr / ericskiff

Such was the case with Frank Corbin at http://jasonhartmanfoundation.org/articles/young-wealth-show/. When Frank was very young, he had a “hunger”, as he put it, to become wealthy. After moving from Ghana to New York City, he watched his mother constantly struggle to pay the bills. Frank was determined not to get into this same situation. Frank was determined to become wealthy and eliminate money as an issue in his life. As a teenager, Frank worked many different jobs. After graduating from high school, he attended DeVry Institue in Toronto – which loaded him up with student loans and other debts.

In addition to his studies at DeVry, Frank also purchased every real estate course and real estate investment book he could get his hands on. As a result, Frank became convinced that purchasing and holding real estate was the easiest and quickest way to become wealthy.

At the age of 21, Frank purchased his first property – a $241,000 home in Toronto which he picked up for no money down, received $20,000 at closing and the property ended up providing him with $900 per month of positive cash flow. One year later, Frank had attained 4 more properties and was financially free.

After 15 years of buying properties, Frank became bored. He needed a new challenge. Frank saw people struggling financially. He couldn’t understand why people weren’t doing what he was able to do so easily. So he went about creating a course, the Remic Wealth Institute, which teaches his methods for finding and investing in real estate. While putting together the courses within Remic Wealth Institute, Frank identified another need people had that he new he could satisfy – obtaining credit despite having a poor credit history. “The 8 Strategies to Highly Effective Credit” was thus born.

1. Links get retweeted. According to social media scientist (who even knew there was such as thing), Dan Zarella, the best way to get a retweet is to include a quality link. Zarella claims 60% of retweets contain a link, while only about 19% of non-retweets do. The easy way to boost your retweeting? Include links. And remember you should be sending out quality links. Conversational or entertainment value tweets are okay every once in a while but, to build influence, find links that matter.

2. Stop overtweeting. Like overeating, overtweeting makes you fat and lazy and people stop listening. As a tool of influence, you shouldn’t sit the entire day with fingers poised over the keyboard, waiting to regurgitate the next stray thought that enters your mind. Save that for Facebook. Too much tweeting will actually cause some people to tune out. Try the following. Get a list of 10 to 20 possible tweets as part of your morning routine. Kill the weaker ones until you have 3 to 5 strong ideas. Spread them out as tweets during the hours of 8:30 am to 10:00 am because this is when people pay the most attention. 3 to 5 ideas. No more. Got it?

3. News digest versus self promotion. Too many people make the mistake of linking only to their own products and/or websites. That will only get you so far. You’ll come to be viewed as a much more valuable resource if you only do that a third of the time or less. Use the majority of tweets to help people cull the junk from the gems. Once they realize you almost always give good links, they won’t mind the infrequent promo and might even be more inclined to pay attention.

Let’s sum it up. Don’t tweet too much. When you do, make it mostly links. Don’t obsess on yourself. Now get out there and build a Twitter account that matters.

The Young Wealth Team

Flickr / waltercolor

The problem is that failure has gotten a bad rap and needs to be re-framed or redefined. Let’s make failure the goal rather than an inadvertent result. What does failure mean? In essence, it shows we challenged ourselves, pushed beyond the boundaries of the comfortable and safe, and aspired to go where we hadn’t gone before. Failure means you put yourself in a situation where the opportunity to grow and achieve was ripe. The fact that you didn’t accomplish the desired goal right then and right there is irrelevant.

Failure isn’t a bad thing for successful entrepreneurs; it’s merely one stage of the journey. More important is how you reacted to it. Did you take a step back, think about what went wrong and plunge forward again or did you get mad and quit? A temporary failure is just that – temporary.

Here are a few great failures in history you might have heard about.

Bill Gates – dropped out of Harvard to tinker with computers. He ended up creating a company you might have heard about. Microsoft.

Michael Jordan – this eventual greatest basketball player in history was removed from his high school team due to “lack of skill.”

Walt Disney – this man’s first cartoon production company went bankrupt and he suffered ridicule at the hands of the local press for his lack of ideas.

Marilyn Monroe – this legendary sex symbol was dropped from her contract at 20th Century Fox after one year. They claimed she was unattractive and couldn’t act. Like the Energizer Bunny, she kept going and going and going…

This sampling of various highly successful people have one thing in common and it’s something successful entrepreneurs could learn from. They failed utterly at one point in their life. If this is what failure gets you, where can we sign up?

The Young Wealth Team

Flickr / locationscout

Here are a few you might want to pay attention to.

1. Mark Suster (MSuster on Twitter): Suster is an acknowledged expert in the early stage development of a tech company. He’s also good at selling them and making lots of moolah in the process. Suster’s Twitter account holds links to all his blogs and he even includes interesting responses.

2. Richard Branson (RichardBranson): Quirky? Yes. Brilliantly driven? Yes. Branson is the head of the Virgin group (airlines, music, etc) and a heavy Twitter user. Plus he likes to interact with followers, which is a bonus for those looking to learn a thing or three.

3. Cindy Ratzlaff (BrandYou): Ratzlaff specializes in building personal brands and Twitter is her tool of choice. Her incisive marketing tips and buzz building strategies constantly circulate among her 18,000 followers.

Another guy you might want to track is Fred Wilson (FredWilson). This leading Twitter investor is very well connected and an excellent conduit to keeping up with what is going on in business. As might be expected, Wilson tweets all day, every day. Got a favorite business guru? Find them Twitter or Facebook and get busy learning from the best.

The Young Wealth Team

Flickr / waltercolor

Location
If you want to live in the hippest neighborhood, you’re going to pay a steep price for the privilege; there’s no way around that. Plus if the area is densely populated, it’s liable to cost extra for a parking space (Hello, New York City). Or you can lower your rent dramatically by finding new digs a few minutes away. The amenities will still be there, albeit a short drive and you’ll have extra cash in your pocket to actually enjoy them.

What does “nice” mean?
If nice heretofore had to include granite countertops and stainless steel appliances, maybe it’s time to rework the definition to mean no insect infestations or bad neighbors. Presto, you have more money for essentials like food, gas, and deodorant. The truth is that your income might not be quite ready for that dream apartment but your ability to overlook drawbacks like shabby carpet could get you into an otherwise nice place at a good price. Throw down some area rugs and you’re good to go.

Roommates
A roommate (or 2 or 3) doesn’t have to be the definition of Hell on earth and imagine the cost savings if you only had to pay a quarter or third of the cost of living in some fancy digs. Finding sane roommates can be something of a crap shoot but if you really really really want the nice place – get busy screening. Your personal budget will thank you.

The Young Wealth Team

Flickr / Ben Cumming

• Enrolled in school less than part time or not in school at all
• Currently making loan payments or within the “grace” period
• Have a good repayment history, which typically means not be in default
• Hold a balance of at least $5,000 to $7,000 in loans

Now that we have the particulars out of the way, let’s take a look at a handful of reasons that you could benefit from a decision to consolidate your student loans.

1. A single larger payment rather than a handful of small ones can simply your life.

2. In many cases, a consolidation extends the the term of your loan, which can reduce your monthly payment if you’re having financial difficulties. Keep in mind an extension means you will incur interest and pay more in total over the life of your loans.

3. You may be able to receive a lower interest rate through a refinance if your credit has improved since you took the loans out.

4. Borrowers often have various loans at different interest rates, some variable. A consolidation can pool everything under one fixed rate so there will be no future interest rate hike surprises.

5. If you are a valuable customer, your lender may extend certain other benefits such as interest rate discounts for setting up automatic payment or paying your bill on time.

It’s not all wine and roses when it comes to consolidation. There are some factors you should be aware of which could work to your detriment. As mentioned, you may pay more in total interest as well as having a larger total loan repayment. Obviously, consolidating for a longer term means you will be paying for a longer period of time. Most Federal loans are issued for an initial ten year period but can be extended with some consolidation for up to 30 years.

One final note, be wary of lenders offering to drastically reduce your interest rate. The student loan consolidation industry is rife with scams so it behooves one to perform their due diligence before signing on the bottom line.

The Young Wealth Team

Flickr / RambergMedialmages

If Social Security had a Facebook account, it would soon be permanently changing its status to “historical footnote.” Here are a few reasons we believe this.

1. Retirement Age: Remember when the age to begin collecting benefits was 65? Now they’ve raised it to 67 and talk is that it will be going to 69 soon. The powers that be realized that one way to stop the arterial bleeding in the program is to get the age at which people begin to collect benefits up to a level that exceeds the average lifespan. At that point, there’s a chance it just might become solvent, and the only ones who get their fingers in the pie will be the cripples and the geezers. Brilliant? Absolutely.

2. Cost of Living: Back in the mists of pre-history, as in two years ago, the federal government used to implement a cost-of-living-adjustment (COLA), which was a percentage – based upon the annual inflation rate – that a retiree’s monthly Social Security check was bumped up. The fed sent up a trial balloon in 2010 and offered no COLA. Since there was no outright rebellion by recipients, they’re repeating the process for 2011. You can clearly expect that the amount of a check will never go up again. Factoring in inflation over forty years of your working life, by the time you’re ready to collect, if you live long enough, your monthly benefit amount might just be enough to buy a loaf of bread.

Point number two illustrates the crux of the matter why you mustn’t make the mistake of counting on Social Security for your retirement. Inflation destroys the value of almost all assets, properly leveraged income property investments being the exception, and it will make your benefit check essentially worthless. Looks to us like young American workers better learn how to invest and learn it well, because it’s the only shot they have at a comfortable retirement.

The Young Wealth Team

Flickr / Alex E. Proimos

Make no mistake, you would have to be either desperate or desperately stupid to ever cross their threshold, for the entire industry is nothing more than loansharking, plain and simple, and loansharking is illegal – except when it isn’t. All we can guess is that this industry has a mob of highly paid lobbyists, because interest rates on one of these short term loans can easily climb north of 100%. Let’s see a bank do that and try to stay in business.

Here’s how a payday loan works, and remember, this is one of the worst financial decisions you’ll ever make!

Your payday is still a week away but you’re short of cash and not about to stoop to the indignity of spending your last ten bucks on a loaf of bread, peanut butter, and gas to get to work and back for the next few days. Nope, you’ve got a drinking date with guys this weekend and need more cash, so you waltz down to your local payday loan company – don’t worry, you can’t miss them – and ask to set up a payday loan. Normally the amount runs the gamut from $50 to $1000 but it’s much harder to qualify for the higher amount. After being approved for a certain loan amount, you write a postdated check for the loan plus the fees. You walk out of the store with money in hand and they cash your check when the date on the check rolls around.

A payday loan is a way for people with no financial alternatives to stay afloat for a short period of time without asking for handouts but it is a very risky habit to develop, plus you pay a seriously high rate of interest. A typical $100 loan might run for eight days and cost you $18 in fees and interest, which works out to an 821% interest rate!

You would be better served to cut off your hand and eat it than patronize these vultures.

The Young Wealth Team

Flickr / Lip Kee

Firsts the scoop on what Americorps and the Peace Corps are. Both are federally funded programs that connect willing participants with non-profits, public agencies, faith-based, or community-based organizations performing a range of work from basic healthcare to business development in both domestic and foreign locations.

While certainly commendable to participate in such an endeavor, our one caution is that the stipend offered is sometimes not enough to cover living expenses. To get an idea of what we’re talking about, your monthly allotment will range from $900 to $1,900 (generally). This might be fine and dandy in the Kentucky Appalachians but might barely cover your rent in New York City. Unless you have benevolent parents willing to make up the difference, think carefully about how you’ll pay the bills while you’re there.

Let’s look at the programs themselves.

Americorps is a domestic program offering terms of service of one year – sometimes shorter. The stipend is $800 to $1100. If plan to attend grad school and complete your service, expect a $4,725 education award (similar to Pell Grant) and partial cancellation of Federal Perkins loans (only for VISTA volunteers). VISTA (Volunteers In Service To America) also find themselves on the inside track to Federal jobs.

The Peace Corps is a similar program but specializes in overseas locations. The term of service is 27 months, after which you receive a $6,000 cash award and partial cancellation of Federal Perkins loans for each year of service. If your long range plans include securing a Federal job, the Peace Corps also gives you the inside track to finding one.

Is volunteer service a good choice in your case? Only you can decide that but think long and hard about what’s important to you. If your primary life motivator is a healthy weekly or monthly paycheck, maybe you should pass on this, but if helping others makes your heart sing, go for it!

The Young Wealth Team

Flickr / Tommy and Georgie

Like Underdog, we’re here to save the day. The following list includes the major classes of investments and a little about each one; just enough to be dangerous, probably, but we’re going to tell you anyway. The primary type of investment is called ownership investment and it goes like this.

1. Stocks: A stock certificate is literally a piece of paper that declares you own a portion of a company. Even though most investors rarely have need to actually hold the certificate they own, they could call the company and have it sent out if they wanted. Partial ownership of the company entitles you to certain rights, such as the ability to sell it if the price goes up or you think it’s going down hard. A successful company will cause other investors to want a piece of the action, driving share price up on the open market. You can sell your shares at any time or hang onto them and reap dividend payments.

2. Business: Starting or buying into a business is also considered an ownership investment. This is normally a harder method to realize profit in but, when you do, the rewards could be extraordinary. Think Bill Gates for example. One of the main difficulties in investing in a business is that requires more than just money. You also need a great idea that people will pay for and someone willing to put lots of time and effort into the undertaking.

3. Real Estate: Often called history’s best investment, to invest in property is to invest in one of people’s basic needs, namely shelter. Everyone (almost) wants to have it or must have it for protection from the elements, therefore we like to call it a Universal Need. The profit potential for this type of investing is enormous but it sometimes receives a bad reputation when people who don’t really understand the proper way to invest get involved. With real estate, you can profit from both appreciation of the value of the asset and through cash flow when you rent it out.

This discussion has been an abbreviated thumbnail sketch about a particular class of investments. There are many others, of course, and we’ll get around to mentioning them eventually but these are the biggies. You could also invest in gold, foreign currency, a da Vinci painting, or a pair of Kobe Bryant’s basketball shoes, though we can’t say we’re awfully excited about the prospect of that last one unless it comes with odor eaters.

The Young Wealth Team

Flickr / Myrone

The Young Wealth staff makes no claims that staying under the same roof with the parents won’t mean giving up some independence – there’s a good chance it will. The obvious upside to the arrangement is it should reduce your overall living expenses. If it turns out that staying at home for a year or two after graduation is somehow just as expensive as going out on your own, don’t waste another second thinking about it However, even if they require you to toss a few bucks into the common kitty, it likely won’t be as expensive as coughing up first and last month’s rent plus a security deposit to move into your own place.

Depending on where in the world you live, it takes a chunk of several thousand dollars to even get move into an apartment or rental house. Monthly expenses such as utilities, phone, cable television, and internet service come at their own high cost and sometimes require individual deposits. The area where living with the parents has a big upside to your future financial management is it should allow you to get a flying start on saving for big ticket items like a mortgage down payment, wedding, or setting up an emergency fund.

If you decide to go this route, sit down with both parents and have a discussion about what the living conditions will be. Find out if they will require rent of some sort or maybe increased responsibility towards household chores. Will there be a curfew and, if so, can you abide by it? To avoid hard feelings, make sure everyone is perfectly clear about how much you will pay, if any, and how often you’ll need to stagger downstairs in the morning to wash dishes.

The Young Wealth Team

Flickr / inhisgrace

You might think bankruptcy is the way out from under this crushing financial debt. Sorry to be the bearer of sad tidings but student loans are not, as a matter of course, able to be automatically discharged through bankruptcy. You first must prove “undue hardship,” which is not an easy matter. Generally it means you or your spouse must have a mental or physical condition that prevents you from working and earning at a high enough level to ever pay back the amount you borrowed. Claiming you simply can’t afford the payments is not good enough.

The courts take the whole idea of personal responsibility quite seriously when it comes to student loan repayment. The “undue hardship” test is three prong in nature and was mostly established by the precedence of a 1987 case known s Brunner vs. New York State Higher Education Services Corp. It goes like this.

1. That the debtor cannot maintain a minimal standard of living, based on current income and expenses, if forced to repay the loans.

2. That additional circumstances indicate that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans.

3. That the debtor has made good faith efforts to repay the loans.

While many graduates with stratospheric levels of student loan debt might meet the first part of the test, it’s the second prong about “additional circumstances” that weed out the vast majority of claimants. This is where you must prove a physical or mental condition, basically a disability, to qualify for the “undue hardship” out.

This leaves student loans as a debt rarely discharged by bankruptcy. If that is the primary reason you’re considering the process, ponder the reality before you do.

The Young Wealth Team

Flickr / Wallula Junction

The first thing to keep in mind when shopping for an investment broker is that they are in the business to make money. There are two basic ways for a broker to accomplish this. The first is to manage your trades diligently and shrewdly and only take an agreed upon percentage of the profits as a commission. The second is to hit you up with numerous transaction fees and administrative charges and try to get you to churn your account with pointless trades.

You’ll need to decide whether to go with a discount broker or full service broker. As a young investor, there’s a good chance you won’t have the means necessary to attract the interest of a full service broker. His extra customer service comes at a price of higher fees and, normally, a higher minimum deposit to open an account. Discount online brokers like Scottrade or Etrade only require $500 or $1,000 to get started and the fee structure is usually simple to understand, which brings us to three points we’d like to make about brokers and why you should do your homework to make sure you’re hiring a legitimate one.

1. Some brokers are crooks. You might as well face this reality up front. Rarely a year goes by that we don’t learn about a serious bit of chicanery going on that costs investors a bundle and the dishonest broker jail time.

2. Some brokers are incompetent. Don’t let a million dollar smile, flashy three-piece suit, and firm handshake fool you. Some people are dolts and the broker career is no exception.

3. Some brokers are nickel and dimers. If the fee structure is too complicated to understand or takes up more than one page of printed material, say thanks but no thanks. What’s the point of even making a profit if you give most of it back to an investment broker who makes his living inventing new fees for your account?

At the very least, check to make sure that the investment broker you are considering for your first account is a member in good standing with the National Association of Securities Dealers or the Securities Investor Protection Corporation.

The Young Wealth Team

Flickr / gcoldironjr2003

1. It takes money to make money: Teens may be taken aback when the Bank of Mom and Dad eventually turns off the spigot and the realization sets in that, ughh, it’s time to think about working for your money. It’s a tough lesson but that’s how the cookie crumbles. Unless you’re a trust fund kid, Disney tween star, or plan to invent the next world conquering computer operating system, you’re going to have to slave for your wages. That’s okay. Learn the value of work and how much you don’t want to do it the rest of life. Therein might be the motivation to save and invest!

2. Set a Goal: It’s tough to get anywhere in life without setting a goal. It could be as simple as buying a new iPod or more lofty like retiring before the age of 30. Either way, learning to set goals is an invaluable part of finances. Set a price tag and time frame and let your industriousness take care of the details.

3. Income is a good thing: The reality of life is that the majority of us are going to have to go to work every day to make ends meet. The sooner we internalize and accept that fact, the better. The important idea here is to learn to make the connection between effort and achieving the goal. Plus there’s the small matter of being able to afford to put food on the table and gasoline in the car.

4. Motivation means reward: To accomplish anything of substance in life requires motivation. That’s where goals and rewards come in. Though our first goals might be a new bicycle or Wii, eventually we move on to more substantive life accomplishments like retirement or a new car. That’s when the lessons of childhood pay off in a big way. Motivation takes you to the reward, which provides more motivation for the next goal and an even bigger reward. Rinse and repeat.

These financial lessons might seem simplistic to those out of college or in the work world but, if you find yourself experiencing money hardships, maybe it’s time to go back to these very simple financial lessons and re-apply them to your life. It’s normally the basic, simple ideas that carry the most power.

The Young Wealth Team

Flickr / Chad Crowell

The price of food is a killer. Here’s how to give your budget a fighting chance.

1. Eat at Home: The fact is that any tasty meal at your favorite restaurant can likely be prepared at home, or at least a close approximation of your favorite meal, for pennies on the dollar. As a young investor trying to save money, you absolutely cannot make dining out a daily habit.

2. Make a Shopping List: If you wander into the grocery store hungry and stumble around around throwing stuff in your cart, there’s a good chance you’re going to get back home with a pitifully small amount of high-priced, low nutritive “food.” Make a list and ignore the scrumptious distractions.

3. Work the Maze: Grocery stores are intentionally set up so that you have to run a gauntlet of tempting junk items to find the basic necessities around which to build meals. Stay mostly on the perimeter where the actual food is, only wandering into the maze in the middle for a few stray items at the end.

4. Eat First: Fill up at home on a good meal before shopping. You can’t imagine (or maybe you can) what incredibly bad impulse buys end up in the cart if you make the mistake of going into the store hungry. In fact, fill yourself past the point of comfort, so that food is extra less appealing. That should keep you on point.

5. Skip Bottled Water: That liquid gold sold in the store called bottled water is one of the biggest crocks in Western civilization. And it you’re one of those pansy whiners who whimper that you don’t like the taste of tap water, buy a filter. The whole point of this is to cut back on food costs so you’ll have money to invest. Paying for water in bottle is simply ridiculous. Jump on the Internet sometime and do some real research on where that stuff comes from – completely, absolutely, totally a waste of precious financial resources.

We’re beginning to fear that our readers may be on the verge of reaching their tolerance for browbeating today, so we’ll cease and desist for now. Just keep in mind that to neglect creating proper food habits today could be the difference between a stunning portfolio tomorrow, or suffering the paycheck-to-paycheck routine the rest of your life. For real.

The Young Wealth Team

Flickr / Jeff Keen

In short, danger, Will Robinson; very much danger!

So how can we at Young Wealth suggest a method of low risk commodity investing and still sleep at night with a clear conscience? The trick is to, “Unlearn what you have learned,” as Yoda would say, not that we suggest basing critical financial decisions on the unhinged ravings of a fictional Jedi Master. What we’re talking about is an approach sometimes called Packaged Commodity Investing, which is another word for real estate.

You might have never thought of it this way but basic commodities are the building blocks of the houses we live in: lumber, copper, steel, gold. The advantage to investing in commodities already pre-packaged into a structure is that you’ve taken an investment with no real useful value – are you ever going to actually take delivery of that pork belly contract – and transform them into a product (home) that everyone uses and demands. Humans need water, food, and shelter. By investing in real estate, then renting it out, you provide one of the most sought after commodities around – shelter.

And think of this, at the time of purchase you have locked in the cost of the commodities that went into construction of your investment forever, or at least a good 50 years if the thing was built stoutly. So while your cost is fixed, a rising demand for commodities causes the value of your house to continuously increase while, at the same time, you create cash flow from the investment in the form of tenant rent.

A pork belly contract is made up of 40,000 lbs worth of 12-18 lb frozen pork bellies. If you can figure out a profitable way to rent those things out to create cash flow and still retain ownership, please let us know. All investment requires some risk, or it wouldn’t be investing, but a conservative approach to commodity investing in the form of real estate has the potential to return a heck of a lot of return for your dollar.

The Young Wealth Team

Flickr / FotoosVanRobin

Suffice it for now to say the stock market, driven by irrational speculation, amounts to little more than taking a spin at the roulette wheel in Vegas except it’s not as much fun. About now, you might be saying to yourself, “Well, where does that leave me, the young investor, most pious and pompous editor? If not the stock market, then what?”

Good question and it just so happens we have an answer for you. It’s called income property and it so happens to be the most powerful method we know of to create wealth in America today. We’d like to present, as an example, a single family residential property in Atlanta that would make an excellent starter property for your portfolio.

The purchase price for this piece of real estate is $102,000. If a young investor has decent credit and stable employment, a lender will likely ask for a 20% down payment, which works out to a little over $20,000. The home is red brick, built in 1999, located in a nice neighborhood, and will be fully rehabbed and rent ready for the new owner. Rent in the area is about $1,150 monthly – we’ve run the numbers because this is the kind of deal we love to jump on – and the cash flow AFTER the mortgage and all other expenses have been paid is about $151 monthly. No one here will try to convince you that the amount is a fortune because it’s not but cash flow is only part of the range of benefits. In addition, you’re getting your mortgage paid off by someone else (the tenant), while your investment appreciates over time.

The icing on top of the cake is that this income property will be owned outright by you at the end of the mortgage term. Considering you only put down 20% to buy the thing and someone made payments on it, the result is same as if you bought the property outright for twenty cents on the dollar. If you are one of the fortunate few to read through this short description and latch onto the possibilities, congratulations, we’ll be seeing you on Lifestyles of the Rich and Famous before it’s all over.

By the way, don’t try this strategy on Wall Street; it doesn’t work.

The Young Wealth Team

Flickr / Neurofibromatosis – Reggie Bibbs

There are three separate programs a small business owner might consider if he finds himself in need of working capital, each designed to address a separate situation. In no particular order, they are:

1. Basic 7(a) Loan Program: This is the one to look for if you want to start a small business or already have one but need general purpose money to keep the ball rolling. This is the most used loan program available that is backed by the SBA. Qualified borrowers receive a quick turnaround decision on their application, normally within 36 hours.

2. CDC 504 Program: This loan program is for established, growing businesses who need a steady source of long-term, fixed rate financing for acquisition or improvement of major assets like land, buildings, or who find themselves in need of major equipment for expansion. As a Certified Development Company (CDC), if you qualify for financial assistance under the CDC Loan Program, the SBA will help you locate private, non-profit foundations looking to provide money to improve a community’s economic base.

3. Microloan Program: The SBA microloan program operates a bit differently and does actually provide funds indirectly to qualified small businesses, up to a limit of $35,000. Small or start-up businesses wishing to access this program still should approach their local lender because all approval decisions are made at the local level – SBA merely provides money for local lenders to distribute.

There you have it. A nice, simple description of what the Small Business Administration does, and more importantly, does not do. As you can see, your time would be better spent approaching a local bank who works with the SBA rather than wasted chasing your tail in circles trying to tap into the agency directly.

Prospective small business owners – good luck!

The Young Wealth Team

Flickr / ShashiBellamkonda

Prime offenders for fee-hiking are, as one might reasonably guess, ATM convenience fees and overdraft “protection,” though we wonder how the lowly consumer manages to differentiate between protection and a gouge. You know, a hard working bank’s gotta make a living somehow.

First up, out-of-network costs for using an ATM. By now, you’ve probably realized that accessing cash on the road is not as simple as inserting your card into any old machine and drawing out a few bucks. Sorry, but no pay means no play. The average fee to use an ATM that isn’t hosted by your local bank was $2.33 this year, up five percent from 2009. Meanwhile, the average overdraft charge for not having enough money in the account to cover a check or withdrawal is over $30! And what used to be all the rage in banking commercials, free checking, is slowly going the way of the brontosaurus, with institutions that offer the service dropping from 76% to 65% over the course of the last twelve months.

Since the bank really doesn’t care if you hold your breath until they change their fee structure, you’re going to need to hit upon another alternative. Save big on ATM fees by using the “cash back” option when you’re shopping. Most grocery stores and other big box retailers offer the service at no cost. Remembering this simple workaround solution could save you a few hundred dollars a year in out-of-network fees. As far as overdrawing your account; the only answer we have to that one is keep a close eye on your balance and simply don’t exceed it. If you’ve ever lost track of your checking account and added up the steady line of thirty dollar charges at the end of the month, you realize that this sort of checkbook balancing scheme can go wrong in a hurry.

The Young Wealth Team

Flickr / quinn.anya

1. The ability to get a cell phone

2. The ability to rent an apartment

3. Getting hired for a great job

Let’s take #2 (apartment) and see how it plays out. With the high rate of deadbeat tenants, landlords have realized that it saves them headaches to try and weed out problem rentals before they ever hand over a set of keys. A stable rental history helps but what if you are just out of college and have no past rentals to fall back on? The sort of landlord who gladly takes your one month security deposit and welcomes you into his complex might be the one you should have second thoughts about.

These days it’s become the normal course of events to have a credit check run before you can rent that great apartment you really want. Guess what? Bad or spotty credit might mean you either are politely told, “Thanks, but no thanks,” or find yourself faced with an outrageous security deposit that would make Bill Gates blanch. Remember, there is more than one way to keep out the “undesirables.”

The point of this exercise is to remind you that it’s never a good idea to let debt accumulate until one day you snap out of your walking coma and realize you have a serious problem on your hands. Luckily, getting out of debt is not complicated. It’s hard for many people but the steps themselves are infinitely easy.

1. Stop spending and start paying off debt. Remind yourself that the easy way to get rich is stop spending money. The same goes for reducing debt. Stop spending money and apply it to debt instead.

2. Honest assessment. Take a good long look at your finances and admit to yourself what got you into trouble. Like an alcoholic, the first step is admitting that a problem exists. Often spending is done for emotional reasons and we’re of the opinion that retail therapy is hardly ever a good idea.

3. Set goals. Even modest goals help you get started. Pick the smallest debt you have and throw everything at it with furious vengeance until it is gone. Now pick the new smallest debt and repeat the process.

Before long you’re going to be what they refer to in technical terms as debt free and that’s a great place place to inhabit.

The Young Wealth Team

Flickr / Roozbeh Rokni

But then reality. Ugh.

As is usually the case, investing such ridiculously high hopes in a run-of-the-mill politician is bound to end in frustration and disillusionment. Why are we being such sticks in the mud all of the sudden? We hate to be the messenger of sour news but, according to a Harvard University newspaper poll, young voters are less enthusiastic about voting this year than last. How far has the shine dulled? A mere year ago, 36% of Generation Y voters said they would “definitely vote.” This year that percentage has slumped to 27%. Additionally, the percentage of young voters choosing to describe themselves as “politically engaged” fell from 24 to 18 percent.

The Harvard paper goes on to suggest that the plunging numbers might be attributed to disillusionment following Mr. Obama’s failure to implement his grand campaign promises. He certainly had the political savvy (or advice) to tap into the idealistic nature of young voters naïve enough to believe he was anything other than the standard model politician. The problem with promises is that sometimes people expect you to keep them and, when you don’t, the resulting disenchantment can sweep you from office as quickly as it swept you in.

Playing to the Wii, MTV, and Facebook generation is fraught with peril anyway, because they don’t have the requisite amount of patience to wait for change before they click away. And with unemployment numbers stubbornly clinging in excess of 10%, voters of all ages are:

1. Afraid of losing their job.
2. Tired of looking for another to replace the one they lost.
3. Sick of the grandstanding, teleprompter reading, Sycophant-in-Chief

But that’s just our humble opinion. History tells us that American leaders who don’t solve economic problems rapidly become yesterday’s news and tomorrow’s footnote. Voters of all ages are notoriously impatient when you start messing with their livelihood. Does anyone out there still cling to vaporous “hope” and experience a shooting thrill through their nether regions at the nebulous phrase, “Yes, we can?” Looks to us like, “No, you didn’t.”

Now what?

The Young Wealth Team

Flickr / jurvetson

Accountants, particularly those who have earned the CPA license, can charge up to 15% more for their services than other plain Jane accountants. The reason is simple – it’s harder to become a CPA. The process includes education and examination, a high code of ethics, and experience. Plus there are some services CPA’s provide that are legally forbidden to the traditional accountant, such as the capability to actually audit a company’s books and sign off on the validity of the financial information contained therein.

And it is not in the CPA’s best interest to fudge anything they sign their name to. Each state has a board of accountancy that can review work and revoke a license at any time. Believe us, these boards do not trifle with those who skate on the verge of unprofessional, unethical conduct.

This becomes an exciting career when you consider what you could do with that extra 15% you’re earning above and beyond accountants. Why not skip the new car, daily stop at Starbucks and invest the extra pesos like you mean it. We’re talking about income property because, when it comes to investing, it always comes back to real estate if you want to earn serious returns.

The bottom line is this, if you have a talent and tolerance for crunching numbers, check out the CPA possibilities. Even if you think it’s a less-than-exciting career, it certainly could fill your pockets with a nice paycheck.

The Young Wealth Team

And the smart young investors are using the power of the Internet to multiply their effort. Take Chris Stallman, 21 years old and owner/publisher of the website www.TeenAnalyst.com, which he runs from his University of Michigan dorm room. Or Sarah Harper, who wants to be a CPA when she graduates from Hampton University and runs an investment club she started on campus that now has a 100 members. Harper offers her insight on the topic. “Kids want to know: How can I become a millionaire with just an average salary?”

An interesting tidbit about young investors is that they are graduating from college with more bills and debt than ever before BUT more are also investing earlier than their parents did. Student Monitor, a marketing firm that specializes in young people, found that 23% own savings bonds, 13% individual stocks, 11% bonds, and 7% mutual funds. Hmm, where in all these numbers is the number one return on investment in America, income property? Sigh, guess we still have some work to do when it comes to financial education.

The future may not be so bright we have to wear shades just yet, but it does appear, for the time being, that the younger generation is finally beginning to pick up on the importance of investing. Save early and often and you can set yourself up for an incredible life style later.

Onward and upward!

The Young Wealth Team

Flickr / Schroder+Schombs PR_Brand | Media | Lifestyle

Get back to you on that one.

But for the good news, Consumer Reports brings us amazing news that the percentage of people carrying more than $10,000 in credit card debt shrunk from 30% last year to 23% today. The median balance is also down by $1,100 over the same time period. It’s official. We’re using our cards less and even reducing debt loads. These are significant numbers that might even be said to reflect a basic change in attitude toward the plastic devil cards. The woefully inadequate financial education in public schools insures that younger Americans will leave high school and college with not even a smidgin of common sense related to how freaking fast a credit card will eat your lunch and leave you wondering what the heck just happened.

Why the sudden restraint among credit card users? Well, we could point to new regulations that force parents to co-sign for card holders younger than 21, or how the terms of payback must be spelled out more explicitly than before. All that is poppycock. People are people. No smarter or dumber. The truth is a healthy dose of fear did it. We’ve got no sense that this recession thing is going to end anyone time soon and self-preservation mode just kicked on. Nothing says financial education like kick in the proverbial teeth.

The Young Wealth Team

Flickr / kainr

We have it on good authority that a member of our staff, during his college days, used to sell his blood plasma (as opposed to someone else’s) twice weekly to support his Red Lobster habit. But the opportunities to make money as a human guinea pig go even further than that, especially if you happen to have a medical school nearby. Normally there are at least a few clinical trials ongoing. Some may only pay $20 for answering a few questions but others are in-patient tests that continue for weeks and pay thousands. Check out www.clinicaltrials.gov for a nationwide list.

Seen those god-awful but strangely appealing cars with the full-on paint job advertising a business? Well someone’s getting paid to drive that thing. Maybe $400 to $500 a month. Just think, It could be your sled. Free Car Media matches up driver’s who don’t mind their car getting a painted promo makeover with a company who will pay you just for driving around. As might be expected, this is a popular choice for many younger drivers, so be prepared to go on a waiting list. But then again, you never know – maybe your demographic and location is perfecto.

Bodily fluids aren’t the only thing you can sell to make money and eBay isn’t your only choice. Used CD’s and clothes can earn you a buck or two each when you take them to your local secondhand store. Hit the garage sales on the weekends and snag stuff you think you can re-sell. And eBay is always there if you want to get more serious about the whole thing.

Last but not least, don’t forget the trusty old bottle and can redemption centers. While you can make money without a real job using these methods, don’t expect to get rich, although you might make enough to take your best girl (or guy) to a movie on Friday night.

The Young Wealth

Flickr / Serge Melki

Use a Secure Browser
If you don’t have a clue whether or not your browser is secure, look for the “locked” icon in the status bar and the “https” at the beginning of the web address. If you’re on an order page and about to disclose credit or debit card information but don’t see both these items, take a moment and re-assess if you really trust the website.

Privacy Policy
Some very legit websites have ridiculous privacy policies. Laws require they disclose how your personal information will be used – i.e., sold to any third party who will thereafter mass e-mail you some truly disturbing offers. Find the policy at the bottom of the home page or in the “About” or “FAQ” section. If you don’t like, our financial advice is to consider taking your business elsewhere.

Keep Your Private Info…Private
The whole idea behind having private information like Social Security number, telephone number, address, credit card or banking account numbers is that they stay that way. You’ve probably heard this song and dance before but let’s review. Don’t give out your password, don’t download files from strangers, and don’t click hyperlinks you don’t recognize. Doing so could open your computer to hijackers, making it ever so easy for them to steal your information.

The Young Wealth Team

Flickr / Joe Shlabotnik

The first exchange that approximated today’s stock market appeared in Belgium in 1531. Since then, successful practitioners of the art and science of the stock trade can tell you a few things. Whether you listen or, better yet, incorporate them into your own investing strategies remains to be seen. The following simple statements are the wisdom of the ages when it comes to participating in financial markets.

1. Time is Money: This means invest early and hang on for a long time. According to research by the Wharton School of Business, since 1802 a broad market portfolio would never have lost money for a stretch longer than 17 years. The short version – buy and hold.

2. Diversify: So utterly boring to contemplate but so intrinsically true. Sectors and entire industries rise and fall. So far, the only sure bet has been that the United States economy will continue to grow, sometimes fitfully and only after wicked pullbacks but always moving forward. If you guess wrong on this one, your portfolio will be the least of your concerns.

3. Gambling is not investing: Young whippersnappers sometimes think they have a gift for stock picking. Actually it’s called being delusional. Old timers know the market goes where it wants to go. Smart money hangs on for the ride.

There you have it. Nearly five hundred years of market wisdom wrapped up in three neat little investing strategies. Now go forth and conquer the world. Of course, there’s more to it than this but at least you’re facing in the right direction now.

The Young Wealth Team

Flickr / epicharmus

Don’t get depressed about it and start yammering though; instead create a plan to make money young and go somewhere else if the roof caves in. We hear Central America is nice this time of year (and any other). Seriously, places like Costa Rica, Panama, and even Nicaragua are drawing American expatriates like flies. What’s not to like? Tropical weather, low prices, affordable property.

A retired couple can live quite high on the hog in coming-of-age locations like these for $1,500 to $2,000 monthly. Develop a few sources of passive income and you’re good to go. Now this is not to encourage America’s talented youth to make money young and bail out on your country, although if you want to move somewhere else, by all means go.

No, the point of this missive is to encourage youth to think ahead and don’t feel like your way of life is invincible. It can vanish in the blink of an eye. Here’s an idea. Do a little traveling off the beaten path, specifically to countries that won’t be sitting in the crosshairs of a superpower when all hell breaks loose. Maybe take a few vacations to a place like Costa Rica. Eventually you might want to buy a house there to spend summers. Heck, rent it out if you can’t get away to make it worthwhile, but the point is this, some day, if you have to run from America, you’ll have somewhere to go and that’s a great reason to make money young.

The Young Wealth Team

Flickr / The|G|

Avoid the Irrelevant. Yes, sometimes being thorough is a bad idea. Case in point…

“When I’m not programming, I perform magic. I like solar applications, optical stuff, cool technology and anything to do with radio waves. I juggle and twist balloon animals. I bungee jump on occasion, and I would like to experience skydiving soon.”

Be specific, except when you shouldn’t…

“Since the project was coming to a close and it was obvious I was leaving anyway, after the last bugs were fixed, I was fired, and my credits in the game were all but removed to make it more difficult to get a job with a competitor. It’s a given that Mike Stevenson, my old boss, has been calling up everyone in the industry spreading God only knows what types of hideous rumors about me, to scare off any competitors from hiring me.”

There’s a fine line between self-confidence and insanity…

“My objective is simple: I want your job. I don’t mean the one I’m applying for, but your job. I’m a communications major with a minor in creative writing at a California school. I still have two semesters to go, but I know more than some of my teachers. Once I hit the real world, though, you’re gonna hear from me.”

That’s all we have the stomach for now. Thanks to John and Rachel for saving and sharing these truly atrocious examples of resume’ styles. If you don’t see anything wrong with what we just presented, stop job hunting right now until a boulder falls on your head and knocks some sense into you. That’s all.

The Young Wealth Team

Flickr / Tom Raftery

Let’s look at the stock market, specifically the video game industry, though this idea works anywhere. Some factors that contribute to a company’s worthiness are easy for anyone to track – revenue, profit, growth. But then there are the intangibles that come along with intimate knowledge or interest. Maybe you’re a huge gamer with knowledge that can work to your advantage to build wealth through savvy stock picks.

Here’s a real world example. Take Two (TTWO) and Activision-Blizzard (ATVI) are competing NASDAQ companies who sell video games. At a cursory glance, they seem about even for potential investment. Maybe their side-by-side numbers look dead equal. However, what if you, as a hard core gaming addict, knew that Take Two was about to release another in it’s uber-popular series of games called Grand Theft Auto (GTA). GTA sales have always been through the roof and no one would expect this time to be any different.

You know about GTA’s imminent release down to the hour because you’re wet-your-pants ready and have already pre-ordered it from Amazon. That simple bit of “insider” knowledge could make the difference in how much wealth you build off a gaming industry investment. In this instance, Take Two clearly becomes a better bet at this point. So, when it comes time to pick stocks, what are you interested in?

The Young Wealth Team

Flickr / Rob Boudon

Next up was his role as founder of the private space travel company, SpaceX, and the electric vehicle company, Tesla Motors. Mr. Musk also created his own charitable foundation, the Musk Foundation, that supports education and research in the fields of space exploration, pediatric care, and renewable power. So far, his life has been a testament to the power of thinking outside the box when it comes to generating a return on investment. This young investor saw the potential in finding profitable ideas in answer to problems he observed in the world around him.

A multi-millionaire by the age of 31, he wasn’t content to sit around on a beach the rest of his life, basking in the bliss of the next margarita. Nope, it’s always been onward and upward for this young investor and, perhaps more than any other attribute, shows us what is possible if you have enough energy and thirst for conquering the unknown.

Way to go, Elon. Excellent job. We’re excited to see what he’s going to get into next. Time travel? A non-aging pill? Whatever it turns out to be, we’re betting it will make a splash.

The Young Wealth Team

Flickr / OnInnovation

Now a company named Varolo has stepped into the mix with a brave new approach that might just as quickly go down in flames. They don’t actually claim that watching their ads will help you build wealth but you can earn money by doing it.

Works like this.

Varolo has completely upended the advertising model by paying you money to watch them and pays you more the more people you bring into your “friend” network who watch ads also. If you think all this sound suspiciously like a social network, you’d be right. It is. The catch is you don’t earn money until you get friends into your network. Watching on your own gets you entered into weekly prize drawings which increase in size as more people tune in.

The good part of the whole deal is the ads are tailored to topics you might be interested in. In the market for a car? You’ll see car ads. Ready to go on vacation? Travel ads. While Varolo’s concept may not usher in the end of traditional internet advertising, it is the kind of out-of-the-box thinking that sometimes works – sometimes.

Time will tell if cyber-surfers are ready to turn their YouTube viewing hours into a chance to build wealth, or collect pennies as the case may be.

The Young Wealth Team

Flickr / JMRosenfeld

Sony Corp. (SNE)
Is there anything in the entertainment industry that Sony isn’t dabbling in? They’ve got electronics, video games, entertainment, and financial sectors covered. Products like PlayStation, high-definition televisions, computers, digital cameras, and much more. This market variety provides built in diversity and stock price protection for when Adam Sandler releases “You Don’t Mess With The Zohan II.” Please, God, we’re just kidding. Don’t let the day ever come when he does that.

Carmike Cinemas (CKEC)
Or you could take a different approach with your stock picks and invest in a company that actually shows the movies. Carmike controls a total of 2,350 screens through a combination of ownership, partnership, and leasing. And here’s a weird little but not unexpected factoid. Recessions don’t normally effect movie attendance that much. When real life gets to be a drag, people don’t mind raiding the dog food fund to pay for an evening at the movies.

Regal Entertainment Group (RGC)
Or you might want to aim your stock picks at Regal, the largest theater owner with 6,385 screens. Even better, in these days of vanishing stock dividends, Regal pays a not too shabby 6.8 % to shareholders. Not too shabby! Wait, we already said that.

There you go movie aficionados. Don’t say we never gave you any completely unqualified stock picks. Enter positions at your own risk. However, if you decide you’d like to actually have a good chance of making profits with your investments, we have another idea – income property!

The Young Wealth Team

Flickr / fauxto_digit

The concept of compound interest is simple. No matter the asset you invest in, take the profit every year and, rather than running out to buy an iPad and drawer full of video games, turn around and plow it right back into the investment. Let’s assume an anemic 5% rate of return. After 5 years an investment of $20,000 has grown to $25, 525. After 10 years $32,577. After 20 years $53,065. And that’s without ever adding another cent to the pot above what you’re making in profit from the initial investment.

If you decided to add an additional $1,000 per year over that two decade span of time, you’d end up with $85,000 for your $40,000 investment. Pretty darn good, even assuming a terrible rate of return and very little follow up investing. The idea of compounding interest is why you need to start investing young. Most people spend their lives working hard for their money. The smart ones figure out how to make their money work hard for them. The magic of compounding interest is one way to go about it.

Another benefit to the reinvesting of dividends strategy is that you pay no tax on the dividends when you do so and most brokers will do it at no charge. They want more money in your account because it means more for them to skim with fees. If investing young can be this good with mediocre assets like stocks, imagine the possibilities with a standout asset like real estate.

The Young Wealth Team

Flickr / mansionwb

It’s not that loaning money to a friend is always a bad idea. After all, you may have a better idea about their propensity (or lack of) for paying off debt incurred. Actually, you should put on your banker’s hat when considering the request. Maybe it’s a loan to get out of debt, cover the month’s rent or open a business. Maybe it’s your friend’s money management skills that should be called into question. Do you believe it’s a one time occurrence or is there evidence of a continuing pattern?

If it’s a pattern, you might not want to get involved. After all, it’s easy to tell a little white lie and claim financial exhaustion yourself from “unexpected” expenses. But it’s long been an American tradition to turn to friends and family when economic times get tough. It’s part of the informal economy. Do a good favor and it might be returned down the road.

The downside is that there is a distinct possibility the money will never be paid back. Keeping that in mind, we suggest that any money you decide to loan to friends or family should be considered a gift. Don’t expect to ever get it back and don’t get touchy if you never see it again. Better not to lose a friendship over a little money. If you can’t afford to never have it paid back, you can’t afford to loan it in the first place. That’s real money management.

‘Nuff said.

The Young Wealth Team

Flickr / kevindooley

Assume that each year brings at least some amount of inflation, which causes a decrease in your purchasing power. For every rise in inflation, there is a corresponding drop in the value of a dollar. That’s why the idea of the COLA is critical to those living on fixed incomes, like retirees. But how does the COLA apply to a young whippersnapper just out of school?

Pay attention. Here comes another financial education lesson plan that was probably neglected by your school. It has to do with investments. At the end of the year, when you add up your total return on investment, it had better be higher than the COLA or you’re not making any money at all. Here’s an example. The government reports an annual increase in inflation that is usually around 5%, a laughable number, in our humble opinion. We believe it’s more like 10% or maybe even higher.

The point is that if you have a mutual fund that performs at a decent rate and returns about 10% per year, you’re only breaking even. Yes, the number of dollars in your account might be increasing but, in terms of purchasing power, unless you’re making more than the real inflation rate of 10%, you’re not coming out ahead. You’re actually losing money by investing, even if it shows a profit on paper.

What you need is an investment asset that profits in the face of inflation. Don’t think it exists? Wrong. Real estate investors who employ an income property strategy correctly could see annual returns in the 20% to 30% range, a high enough level to overcome inflation.

The Young Wealth Team

Flickr / Stefan

We’re talking concepts here. In almost any educational endeavor, get the concepts right and the rest follows naturally. The concept at hand is universal demand. Learn it, live it, put it in your youth investment tool box for safekeeping. Universal demand can be defined as those items humans can’t live without. Notice we didn’t say “don’t want to live without.” It’s true you (and 12 kazillion other people) don’t want to do without an iPad but the truth is life will continue in the absence of one.

Examples of true universal demand items are food, water, shelter, clothing. These things will always be in high, consistent demand because we must have them. Perhaps food is the biggest universal demand item of all. Unfortunately, to invest in it requires you buy stock from Wall Street or a commodity exchange brokerage. Recent years have shown that the stock market is one of the least effective mechanisms through which to invest. Learn it now or learn it later. Now is preferable. Too much of your money is siphoned away through administrative fees and commissions.

Let’s look elsewhere to invest in a universal demand product. We suggest you consider shelter for your youth investment dollar, specifically shelter in the form of houses which can be rented to tenants, or what is called in the industry “income properties.” Great appreciation plus cash flow. Don’t try that with the stock market. With income properties you also cut out the middleman and administrative fees.

Trust us, the concept of universal demand can make you a lot of money.

The Young Wealth Team

Flickr / cote

A post-graduate real job entails regular income. Great! But what if you still treat your paycheck like free money found on the sidewalk. Disaster! You’re eating out every meal for a week and now the money’s gone – with rent due tomorrow. Trust us, kiddies, it happens. To avoid this troubling scenario, you need to learn personal money management skills, a concept likely skipped over at every institution of education you attended. Just like Adam Lambert didn’t learn to sing in a day, you shouldn’t panic at your lack of control over finances and put yourself on an ironclad responsibility regimen all at once.

If you can do it cold turkey, that’s great. For many, it’s a recipe for failure. Most need to ease into the adult life of budgeting slowly, to get acclimated. The first step (we’ve been here before, people) is to write down every single cent you spend for an entire month and then, at the miserable end, pull it out and analyze the bloodbath. You might well discover that 95% of your income goes to video games and shaken green tea from Starbucks. What’s left for rent, gas, insurance, and emergencies? Ring ring…”Hello, Dad? Mikey here. I’m a little short this month…”

Get started on the journey to real personal money management by creating a realistic budget and sticking to it. When you fall off the wagon at some point during the month, get right back up and recalculate your budget from what you have left. If the damage is bad enough, like an impulse purchase of The Lord of the Rings box set – the extended versions, you might have to start from scratch again with your next pay day.

Remember, no matter how bad it gets, no matter how embarrassing, keep trying. This is important stuff.

The Young Wealth Team

Flickr / playadura

Why does a line like that appeal to young investors? Easy. Because it feeds a very natural human trait called greed; the desire to make something from nothing and do it quick, then head to the beach for the rest of their life. Adults in the 18-25 age group are often especially susceptible to these come-on lines from fraudsters at the very point in their financial development when they should be holding onto what they’ve got with both hands.

Read the following example from YoungMoney.com:

A defendant in Florida, headed an investment fraud business which took in money from more than 1,500 victims throughout the United States and Canada. In 2006, the defendant pled guilty to failing to file a federal income tax return and various mail and wire fraud charges.

The perpetrator and another individual formed Pacific Achievements International (PAI) and used PAI to solicit investment funds, primarily through the internet. Based upon various false promises, investors transferred more than $13 million into PAI bank accounts in Oregon, Washington and Florida.

Individuals were led to believe that for every $5,859 invested, they would see a return of $9,720 within three weeks; and they could earn more than $1 million per month thereafter. As with most investment fraud cases such as this, the perpetrators used a ponzi scheme. They took money from late investors to pay early investors so that it appeared that PAI was successful.

The defendant and another PAI promoter diverted more than $2 million from investors to fund their lavish lifestyle. For his crimes, the defendant was sentenced to six years in prison and ordered to pay over $8.7 million in restitution to the victims.

And this kind of stuff happens every day. Don’t be one of the young investors who falls for this kind of scheme. Stay alert, stay real, and stay in control of your money.

The Young Wealth Team

Flickr / anonymous9000

Think this digital information revolution might have a little bit of an effect on your future financial life as a young entrepreneur? You bet your sweet petunias it will, especially if you jump in and hold on with both hands. The old media has lost control. No longer does it require a journalism degree, years of working the trenches, and finally finding gainful employment with one of the Big Three (or Four) networks to get your voice disseminated to the masses.

Anyone with an opinion and internet connection can bleat their thoughts to the world. Blather and bloviating is no longer confined to a select few organizations who managed to set themselves up as the information gatekeepers. Equality and democracy in media has never been more evident than it is right now.

What does this have to do with the young entrepreneur? Everything! The worlds of investing, publishing, marketing, and business require new tools and new ways of thinking to succeed. But it’s for the better. Believe us, it is all for the better. Your assignment for today: put your brain to work dreaming up ways digital media can make you filthy rich.

The Young Wealth Team

Flickr / Yutaka Tsutano

This explains why so many recent graduates walk out the doors with a shiny new diploma but lacking even the basic money management skills necessary to create a personal budget or balance a checkbook. Consequently, it’s not much of surprise that saving is down and consumer debt is up.

Jason Hartman decided to create a non-profit foundation to help correct this woeful level of financial ignorance by not only developing a constantly growing website filled with financial literary educational blogs but also to help deserving entrepreneurs and others in a way that really helps – with grants of money for appropriate projects. Jason’s ultimate goal is to help as many young citizens as possible learn how to build wealth and create their own version of the American Dream, whatever that might be. To do so requires particular tools and knowledge – the kind you won’t get in school.

Our country can truly be an economic miracle, even today. Jason Hartman firmly believes that. But nothing comes easy. It’s up to you to believe it can happen also, then to take advantage of the opportunities contained on this website.

Good luck!

The Young Wealth Team

Flickr / @MSG

Unfortunately, Suzie Lemonpusher forgot to pony up the $120 for an official business license, an error that opened her to a $500 fine, when the big, bad health inspector swooped in and told her to leave, that her lemonade was putting the well being of the entire county at risk. Apparently, quite a scene developed as nearby vendors gathered to support Suzie’s dangerously illegal business.

Luckily, the whole lot weren’t immediately hustled off to jail and deported to random Third World countries. That’s what you get for investing young, Suzie. Let that be a lesson to you that it’s far better to keep your head down and scratch for a pitiful hourly wage than exhibit the temerity to start your own business.

Multnomah County chairman, Jeff Cogen, quickly realized his inspectors were acting like blooming idiots and issued this statement: “A lemonade stand is a classic, iconic American kid thing to do. I don’t want to be in the business of shutting that down.” He apologized for the behavior of his overzealous inspectors and said more “professional discretion” would be used in the future.

Cogen’s words come too late for Suzie Lemonpusher who has sworn off investing young, or ever again at all, and contacted Kathie Lee Gifford about possible openings in her Honduran garment sweat shop.

Welcome to America, where you need a license to clear your throat.

The Young Wealth Team

Flickr / laffy4k

The end result is bad debt, which multiplies like rabbits at an all night sex party. What do you get? Too many bunnies!

But if you really want to make money young, the first thing you should do is forget about the stock market. An unhealthy obsession with this second rate class of asset investments will not serve you well in the long term. Pay close attention here. No matter what the shrieking, babbling heads say on television and radio, the stock market is not where Americans go to make fortunes any more. At least not on the investment side of things. You need to get yourself on the other side of the desk.

There is still certainly wealth to be created if you start a massive Ponzi Scheme (Bernie Madoff), employ criminal accounting techniques (Enron), or simply become a broker for a firm that reimburses you quite well to funnel clients into their recommendations, churning accounts with superfluous trades that earn extra commissions for – lucky you – the broker.

See? You can make money young!

The Young Wealth Team

Flickr / theritters

Today let’s cut through the feel good about yourself junk and learn how to get rich while you’re still young:

1. Invest early and often

2. Skip Wall Street and focus on real estate

3. Income producing properties are the key

That’s really all you need to know to reach the land of young wealth. Start in your early twenties and you, like Jason, should be into millionaire status before you reach 30. The basic strategy works like this. Use whatever equity you can find to finance income producing properties tied to long-term, fixed-rate mortgages, putting as little actual money into the deal as you can. While cash flow from tenants pays your monthly note, the effect of inflation actually erodes the amount of the loan you have to pay back, in real terms.

After about seven years, when property values have doubled, refinance your properties using the same strategy, employing a cash out principle to buy even more income producers. At this point, you are standing firmly in the land of young wealth and at the head of a mini real estate empire.

Enjoy life, young millionaire. It’s only going to get better.

The Young Wealth Team

Flickr / thelastminute

Pay attention to the small stuff. That’s what eating your budget alive.

We’re talking about the daily morning stop at Starbucks, the Big Gulp caffeine buzz soft drink at lunch that gets you through the afternoon – and exactly how much are you spending on your cell phone bill every month? Is it absolutely necessary to be that much in touch? The reason expenses like this are so insidious is that they are such a part of your routine you don’t notice them. Probably don’t even think about them or take the time to add up how much it costs to grab a fancy morning coffee every working day of your life.

This is where so much of the financial literacy training you get in school falls woefully short. Intro to Business 101 loves to talk about the big business cycles that make the economies of the world go around but never bothers to show you where your budget is bleeding out. All the investment advice in the world won’t do you a bit of good if you have no funds to do it with.

In the beginning of your working life, it’s hard to find money to save. You owe it to yourself and to your future to stop wasting what you do earn or at least be aware of exactly where every dollar goes each month. Maybe a morning latte is more important than future financial security. If that’s your decision, so be it but make the call from a position of financial literacy and realize the price you’re paying.

The Young Wealth Team

Flickr / stephenccwu

“There’s no free lunch!”

This little phone/web surfer/back scrubber is the latest and greatest gadget to hit the market and, if you’re like a few million others in technologically savvy generation, you can’t wait to lay your grubby little hands on one. Even better, look at that incredible introductory pricing of $199! Holy mackerel. While electronic gadgetry is awesome indeed, be honest with yourself and recognize that it doesn’t really cost $199 – that’s just the upfront fee to put the thing in your mitts.

Then the real money education begins. The phone itself is what companies like Apple call a loss leader, which means it costs more to make than they sell it for, but the plan is to earn back way more with back end ancillary products like software and services.

To begin, to get the $199 price on the iPhone requires a two-year contract, which includes a data traffic package for around $25 a month and voice/text package at about $45 monthly. Right there, you’re already up to $70 a month. And that doesn’t even take into account other software, ring tones, etc, you will likely decide multiple times along the way you can’t live without.

This is all well and good. Nothing wrong with blatant consumerism. It makes the world go ’round but don’t fool yourself into thinking that Apple will sell you a $199 iPhone out of the goodness of their hearts. Sorry to burst the bubble but they plan on squeezing you for years afterward until no more money comes out.

That’s a money education you can count on.

The Young Wealth Team

Flickr / Yutaka Tsutano

Debt like this doesn’t sneak up on you all the sudden, creeping onto your financial ledger in the middle of one dark and stormy night. This debt we’re talking about is a result of a long series of poor money management decisions over a period of months and years. You’re probably are telling yourself that when you get out of school and get that great job, everything will be okay.

If only it were that easy.

In the first place, the United States unemployment rate, though slightly improved since early in the year, currently sits at almost 10%. One out of every ten people in the country can’t find work at all. And the rate is even worse for those with a bachelor’s degree or higher, something like 16% as of 2009. We’re not here to rain on your parade. The point is that it might take a while to land that job that you think is going to eradicate the mountain of debt. But even once you’re employed, unless you develop sane money management skills, you’ll continue to mismanage your new income just like you did college loans and credit cards.

Until you learn to manage your personal economy, it won’t matter how much you make, you’re still going to be in a world of hurt.

The Young Wealth Team

Flickr / kainr

It seems unfair that you don’t have it.

Hold on a second. Let’s top and ponder this a moment. You don’t think they started out their working life with all that, do you? For almost everyone, wealth building takes time. Remember you didn’t know your parents when they were younger. You didn’t see them scrimping and scratching to save for a down payment on that first apartment and, later, a first house.

Unless you manage to catch lightning in a bottle and make your fortune in one brilliant invention, like Bill Gates did with the Windows operating system, you’re going to have to do it the old fashioned way over time. It took Warren Buffett decades to maneuver himself into the renowned position of billionaire that he finds himself in now.

So here’s our advice. Do whatever you have to do to cure your stuffitis. Don’t take on consumer debt for new cars, kick-ass stereos, and all the other crap that saddles you with financial bondage you may never recover from. Live according to your means from the beginning and watch your means steadily increase as time goes by. That’s the secret to wealth building.

The Young Wealth Team

Flickr / Neubie

Let’s run the numbers to get your attention.

The decade of your 20s is a critical time frame within which to take advantage of compounding interest. Drop the IRA maximum of $3,000 a year into your account during this ten year span ONLY, earn a middling 7% average annualized return, and you’ll have $442,000 waiting for you at age 65. Keep in mind, this considers that you never invest another cent in your IRA past the age of 30.

For the second scenario, let’s say you wait until the age of 30 to start. Put $3,000 into your account every year UNTIL your 65, assume the same rate of return, and you’ll only have $238,000 when you get there. Keep in mind this time that you keep putting $3,000 yearly into your account for the entire 35 years between 30 and 65.

Compare those numbers and you’ll hopefully come to realize that saving and investing young, especially in the decade of your 20′s is a big freakin’ deal when it comes to wealth later in life. If you put your nose to the grindstone and save $3,500 a year during that all important decade and retire with a cool million in the bank at age 65.

How ’bout dem apples?

The Young Wealth Team

Flickr / Enkhtuvshin’s 40D

The question becomes this: Do you want EVERYTHING from your FB account to be available to EVERYONE on planet Earth? When we say everyone, that includes your boss. And co-workers. And next door neighbor.

Security consultant Ron Bowes used a simple piece of code to troll 100 million unprotected FB personal profiles and posted the results on BitTorrent for all to see. Even though it was only a publicity stunt and there was nothing illegal about the action, it served the purpose of illustrating exactly how porous FB is. Or “was” if you choose to believe the FB moguls’ claim that everything has been tightened up and it’s all hunky dory now.

The important part is this – a prospective boss could quickly scan your profile to read your posts, learn your hobbies, religion, and whatever else you were injudicious enough to post there. Think they might make a snap judgment about your employability if your favorite relaxation involves midget bowling, and you are a hardcore scientologist? Hey, right or wrong, people have lost great jobs by being a little too free and easy with their personal junk.

Don’t lose your first great job to stupidity and a porous social media interface. The very first thing you should do to prevent this is set your FaceBook settings so that un-registered users like Mr. Bowes can’t have surf your stuff. And give a really long thought to not being so damn personal all the time.

The Young Wealth Team

Flickr / Max-B

A trader plans a strategy around short term market fluctuations. He might jump in and out of positions several times (or several dozen times) each day. The trader believes there is money to be made in the ebb and flow of the market day. Most traders prefer to be flat at the closing bell, which means they don’t hold open positions over night.

The investor looks at longer term market direction – months, years, decades – and employs a buy and hold strategy that, like the trader, takes advantage of a trend. The difference being that this trend takes much longer to play out. The investor does not concern himself with the daily hiccups that pull prices back and forth. They prefer to step back, look for quality positions, and add to them regularly.

One could extend this analogy to real estate. A trader would be a person who buys undervalued houses and flips them quickly for profit. An investor is one who acquires a property and holds onto it, allowing for long term price appreciation to create wealth. The young investor will likely be drawn to one side or the other and it makes sense to pay attention to your preference. Trading/investing against your natural style could make you a little crazy. Here’s an idea from Young Wealth. If you can’t make up your mind, try this – put most of your portfolio in investments and keep a small percentage, say 10%, to play short term trends. This is one way to satisfy both desires.

The Young Wealth Team

Flickr / artemuestra

June  5, 2010 – Credit expert, Danny Rosario of Starting Over LLC, joins the Young Wealth Show to give young adults helpful information on building credit. During the third episode, Jason Hartman asks Rosario, “why is it so important to take care of your credit?” Rosario replies, “for anyone who is 18 or older, credit is going to be a quintessential part of your life.”

Although 80 million Americans have credit problems, bad credit is not the end of one’s life because it can ultimately be repaired. Using a secured credit card (backed by one’s own capital) for 12 months with on-time payments will result in the credit card’s conversion into an unsecured credit card (the institution’s money).

During the episode, Rosario stresses the importance of the FICO score and what it means to a consumer. The score ranges from 300-850 and serves as an identity by placing a risk category on consumers; the higher the score means that the banking institution views you as a lower risk. The score represents the likelihood that you will go 90 days late in the next two years. “The magic score is 740,” Rosario states, “it used to be 720, but now that credit is tighter, 740 viewed as an A+ to the banking institutions.”

Concluding the episode, Rosario gives away tips to help listeners improve their credit score. “Don’t screw up the first 12 months of having credit, but really, you don’t ever want to be late,” he says. “Keep a mixture of credit, keep credit history open and active, and keep a debt-to-income ratio around 10% and pay the balances off as soon as you can.” He also suggests obtaining the FICO score regularly. “Go to www.myfico.com,” Rosario continues, “and avoid all of the “free” credit report marketing schemes on TV.”

The Jason Hartman Foundation recognizes that life as a young adult can be very confusing and chaotic.  In the midst of completing formal education and beginning a career, there is a constant level of uncertainty concerning what will transpire in the future. The Jason Hartman Foundation is specifically concerned with helping young adults develop the necessary skills for financial success. The Young Wealth Show offers free educational information to help young adults develop the financial literacy needed to become financially independent. The show can be found on www.JasonHartmanFoundation.org/articles/young-wealth-show or the iTunes store.

###

Contact Info:
Brittney Roberts
The Jason Hartman Foundation
Phone: 714-820-4267
Email: Media@JasonHartman.com
Web: http://www.JasonHartmanFoundation.org

June 27, 2010 — Jim Lowell, author of “Investing from Scratch,” joins the Young Wealth Show to speak on financial planning for young investors. The interview aims at the 20 to 30 year old beginning investor by suggesting actions to take to get on the right track.

Host of the Young Wealth Show, Jason Hartman, asks Lowell what basic actions young adults can take prior to investing. Lowell replies, “Time is on the young investor’s side to secure a bright financial future… make sure you are employed, have three to six months saved for a rainy day, then, with limited capital, invest in no-load indexed mutual funds to take advantage of compounding interest.”

Lowell spent most of his childhood and young adult life talking about stocks, bonds and cash around the dinner table, not sports, and suggests that investing clubs or groups can be beneficial for young adults to gain financial literacy. “But take a cautious approach to the existing investor clubs,” he says, “if you can, assemble an investing club with friends and share notes; often times, the long-standing clubs may require you to purchase the funds they are involved in.

Financial planning and goal setting can cast a young investor in the right direction; and increasing financial knowledge, and paying attention to economic activities, can help a young investor recognize opportunities or risks that exist. Lowell states, “With the government spending itself into oblivion, we need to secure our own financial future. Remember, it’s time in the market, not timing the market that creates long-term wealth.”

The Jason Hartman Foundation recognizes that life as a young adult can be very confusing and chaotic.  In the midst of completing formal education and beginning a career, there is a constant level of uncertainty concerning what will transpire in the future. The Jason Hartman Foundation is specifically concerned with helping young adults develop the necessary skills for financial success. The Young Wealth Show offers free educational information to help young adults develop the financial literacy needed to become financially independent. The show can be found on www.JasonHartmanFoundation.org/articles/young-wealth-show or the iTunes store.

###

Contact Info:
Brittney Roberts
The Jason Hartman Foundation
Phone: 714-820-4267
Email: Media@JasonHartman.com
Web: http://www.JasonHartmanFoundation.org

Despite the crowd of investors clamoring to join this gold rush redux, Jason is not a fan. In fact, he likens buying precious metals with investing in insurance since neither meets his standards of a true investment, although they are touted as such. If you want evidence, consider that insurance companies turn around and invest your premiums in real estate.

Few would argue that gold and silver are essentially money. Thus, precious metals are equivalent to savings or wealth stores, not investments, and they are vulnerable to the weaknesses inherent in currency. Paper money is also referred to as “fiat” currency, meaning its value is conferred by authority; that is, it is only secured by a pledge. Furthermore, Jason predicts that “Money is in for a long-term loss in value,” prone to inflation and subsequent devaluation – similar to what happens with your investment in insurance.

This discussion is prompted by an addition to Jason’s list of disqualifiers that make gold and precious metals a bad investment, bringing the total to 7 reasons:

1. In contrast to property investment, there is no financing, thus no leveraging to allow you to build wealth.

2. In contrast to tax deferment opportunities, there is no tax advantage.

3. In contrast to real estate rental, there is no income potential.

4. Your investment is subject to confiscation; arguments that collectible coins are immune from seizure are flawed since there is no guarantee this protection won’t ever change.

5. Precious metals are prone to manipulation by those motivated to suppress their value in order to boost paper money.

6. The myth of superior gold liquidity. This argument fails on a couple counts. Proponents tout the facility of buying and selling gold, but there are hidden costs in offers of guaranteed buy-back of gold purchases. When you are ready to liquidate your investment, you’ll be penalized with a 1.5% premium for melt-down value, on top of shipping & handling plus insurance expenses. Real estate actually benefits from its lack of liquidity because combined with higher transaction costs, this equates to lower volatility. In contrast, the low transaction costs and high liquidity claimed for precious metals are a perfect formula for greater volatility.

7. If gold does go up in value, the gain is nominal rather than an actual increase in buying power. This is because when gold appreciates it typically coincides with a devaluation for paper money. Moreover, those gold profits are taxable, in contrast with the “most tax-favored” status enjoyed by real estate investment. By exploiting the 1031 tax-deferred exchange it is possible to trade up tax-free with property for a lifetime. Even if the dollar depreciates, your asset appreciates with inflation and you will have locked in a long-term loan that you repay “for free”.

Subscribe to The Creating Wealth Show in iTunes or listen online at http://www.jasonhartman.com/radioshows/.

June  20, 2010 – The Young Wealth Show, a free, educational podcast show, launched its first episode by discussing the 3 C’s of Financial Success – Credit, Capital and Competency.

Jason Hartman, founder of the Jason Hartman Foundation, begins the episode by introducing the Young Wealth Show and highlights the overarching objectives of the podcast show, while also speaking about specific topics coming up in future episodes.

During the 14 minute introductory episode, Jason Hartman spotlights a professionally read article on “the 3 C’s of Financial Success” contained in the first the Jason Hartman Foundation Newsletter.

The Jason Hartman Foundation stresses the importance of the 3 C’s its significant role in obtaining long-term success as a young adult. “Credit is necessary for obtaining long-term fixed-rate mortgage to purchase assets that produce income,” the article reads. “Capital is necessary for investing in future opportunities…this can be obtained from your own savings, friends and family, or private investors.” Competency, or financial literacy, “represents the most valuable capital…it will allow an investor to see opportunities easier and make intelligent decisions.”  The article also states that knowledge and action are the core competencies of an investor.

The Jason Hartman Foundation recognizes that life as a young adult can be very confusing and chaotic.  In the midst of completing formal education and beginning a career, there is a constant level of uncertainty concerning what will transpire in the future. The Jason Hartman Foundation is specifically concerned with helping young adults develop the necessary skills for financial success. The Young Wealth Show offers free educational information to help young adults develop the financial literacy needed to become financially independent. The show can be found on www.JasonHartmanFoundation.org/articles/young-wealth-show or the iTunes store.

###

Contact Info:

Brittney Roberts
The Jason Hartman Foundation
Phone: 714-820-4267
Email: Media@JasonHartman.com
Web: www.JasonHartmanFoundation.org

Let’s define what we’re talking about. Financial management means taking the actions necessary to insure that your personal cash flow remains positive. That sounds like a good thing, right? Positive cash flow is an idea we all should be able to get behind. Most of us have experienced the opposite at some point in our lives. Maintaining positive cash flow is possible at any age but the sooner you learn it, the more likely you are to have extra cash to throw around as you get older.

Financial management is about managing risk. Risk is what can destroy your assets. Protecting them should be job number one. And wandering blithely through life waiting for the risks to wave a red flag normally doesn’t work. You’re going to need the knowledge to identify them, which comes only with education and experience. Experience – well that kind of unrolls at it’s own pace. Education is something you can accelerate on your own. When should you be in stocks? Bonds? Real estate? How can you protect assets from the tax man? These are all questions that you answer on a day-to-day basis as you go about the financial management of your growing portfolio.

We’re not big fans of turning all this over to a financial planner. That’s just adding another set of fingers to the mix and another chance for a screw-up. Manage your own finances and watch the wealth rise.

The Young Wealth Team

Flickr / Mitmensch0812

And now comes news that doctors are prepared to leave medicine altogether if Obama’s health plan is actually put into action.

The issue here is one that might make your noggin hurt a little bit. You might have to think, darn it. Here it is: What exactly does a human being deserve? The only thing our Declaration of Independence guarantees is the life, liberty, and the pursuit of happiness. By what chain of logic does a group of people come to the conclusion that health care is their right?

Just because you want it doesn’t mean you deserve it. The word deserve, in this instance, indicates there is some innate quality inside each and every one of us that causes us to claim ownership of the fruits of another person’s labor. Where we come from that’s called communism, socialism, or flat out thievery, none of which are tenets our country was based on.

And where does it stop? Do you also deserve a high-paying job, a new car in your garage, and a six-figure salary for doing nothing but picking your nose?

Just wondering where the 52% draw the line at what they deserve.

The Young Wealth Team

Flickr / Fibonacci Blue

Here are few of the more choice tidbits:

1.$100,000 for socially conscious puppet shows in Minnesota

2.$2 million for a replica railroad tourist attraction in Nevada

3.$700,000 to Oregon fishermen to recover lost crab pots

We’re stopping at this point, not because there are no more glaring examples of wayward stimulus spending but because we’re about to lose our lunch at the lengthy list of political stupidity. But we can’t go without revealing a special little boondoggle to the tune of $3.4 million. Have you heard about the poor little sea turtles down in Florida that get crunched on the road by passing automobile tires every season when they go the wrong way and miss the ocean? Lake Jackson, Florida, is spending the $3.4 million to build an underground turtle crossing.

Didn’t they already try something like this down in the Florida Keys to keep the key deer from getting run over? And the silly things couldn’t figure out how to use it and are STILL getting splattered. Sorry, unless they’re writing the directional signs in “Turtlese” the critters will only be using the new tunnel by accident.

Lesson for today. Do not build your personal financial plan using government logic.

The Young Wealth Team

Flickr / andryone

So you’ve been laid off. Don’t freak. It’s not forever. You will find another job. In the meantime, there are some constructive things you can do rather than mope around the house, watching television, and eating ice cream.

1.File for Unemployment: Do this immediately, before anything else. It’s not hard and you’re just being silly if you don’t take advantage of this benefit. Swallow that silly pride and get real. Being unemployed is just a speed bump in life; don’t let it de-rail you.

2.Start Looking for a New Job: When is the best time to start looking? Today! The day you walk out of your old job. Network. Tell everyone you know you’re looking for work. Get into a routine of searching job sites and sending out letters of interest every single day. Until you are hired, your job is to find a job.

3.Tweak Your Resume: Add your last job to your resume and take advantage of the opportunity to update and revise the whole thing while you’re at it. Be clear and focused with your language. Try to keep it to one page – never more than two, and tell your references they might be getting a call.

4.Get Health Insurance: If you had health insurance at your old job, federal law requires they make it available to you for 18 months after you are laid off. You’ll have to pay the whole monthly premium yourself but it’s still cheaper than buying an individual policy off the street. Without it, one accident and your whatever savings you might have had could be toast.

5.Cut Out Extras: Now would be a good time to learn to go without cable television, your morning Starbucks latte and other frivolities. You can add them back in later but, for now, you need to be clipping coupons and eating Ramen noodles.

The main thing to keep in mind is that being unemployed is not forever. Finding work is simply a numbers game. The more jobs you apply for, the nearer you are to securing your one.

The Young Wealth Team

Flickr / erix!

The trick is how to get a close approximation to live trading conditions without losing real money. Currency market brokers had this figured out a long time ago and now we’ve begun to notice stock brokers taking the cue – practice accounts are what we’re talking about.

A practice account with an online broker is exactly what it sounds like. You register at no charge, open an account, and are immersed in a real world computer screen with charts, graphs, news, live streaming quotes. There’s money in your account even though but it’s not real. This is how to simulate trading and not lose a penny.

In almost any endeavor, practice makes perfect, or at least a lot better than you were before you started practice. With a simulated trading account you can execute trades, lose or gain money, test strategies, or just find out if you’re ready for the big time of making trades with real money.

We think it’s a great idea for a young investor to use his practice account as long as it takes to prove himself a profitable trader. If you can’t trade profitably on a practice account, why the heck would you want to move on to a real one? Be patient. Sooner or later, you’ll get there.

The Young Wealth Team

Flickr / YoTuT

The housing market has crashed and burned in many areas, or so says conventional wisdom. Well, the Young Wealth Team is here to tell you this is the very time you should be looking to invest in real estate. We’re not talking about randomly buying any old house in any old bottomed out market. Chances are you should stay away from those.

What you should be looking for is single family residential real estate that you can rent out. If you haven’t heard it before, let us be the first to tell you, there is no overall “housing market.” Like politics, all housing markets are local and there are plenty of them offering great investments for young money ready to invest right now.

Our sister company, Platinum Properties Investor Network, finds real estate deals every day and shares them at no cost via our free membership services. If you’re interested in learning how to uncover safe, profitable property deals on your own, listen to the latest episode of Jason Hartman’s Creating Wealth Show to learn how we are finding properties right now in places like Indianapolis, projected to earn 23% annually. You’re not going to beat that burying your cash in mayonnaise jars in the back yard.

The Young Wealth Team

Flickr / thelastminute

The secret to finding money to invest in a tight budget? Learn to save first. Even if you make a modest salary, say $30,000 and live in an expensive city, you can develop the habit of saving by practice, practice, practice. It’s just like exercise. Get used to doing it and soon it will be second nature. Don’t start with the intention of putting back some crazy amount that equals half your income.

That’s a recipe for failure.

Pick a sane amount and stick to it, even if it’s only $25 a month. Soon you’ll realize that you can create a savings account, and there are all kinds of nifty uses for that extra money. Save for a new car, house, or…INVESTING! See how easy that little bit of money management can be? You may be living paycheck to paycheck now but it doesn’t have to be forever. Change your financial future by learning how to save.

The Young Wealth Team

Flickr / alancleaver_2000

Chances are, if you’re like most recent college graduates, you’ve developed some pretty godawful spending habits as a result of never having cash to spend. Consequently, when you did stumble across a few spare dollars in the laundry hamper it was off to the local bar or fast food franchise.

Hey, it’s college. We won’t crucify you for it but realize this behavior is adamantly opposed to investment success. The problem we see with debt is it eliminates choices; remember, we’re talking about stuff like car, student loan, and credit car payments. These kind of things must be paid or you’ll get into even bigger trouble. Even with a good job, it takes a good portion of your income to cover debt payments, rent, and food.

Whether it be a nice honeymoon or investments, having no debt lets you save for the future. That’s good, right? It’s about quality of life and the sooner you realize how detrimental debt can be for that, the sooner you’ll start living the life you dreamed of.

The Young Wealth Team

Flickr / AMagill

After all, do you want them to grow up and spend money they don’t have, like the government? Or worse, start printing it when they run out, once more, like the government? The obvious answers to these questions are “No!” and “Hell, no!” The temptation for financial irresponsibility is even greater if you happen to have a moderate amount of wealth and can afford to spend on non-essentials.

So what are you going to do about it?

Our first suggestion is set limits. Teach them to understand the difference between needs and wants. Other ideas are:

1.  Discuss how money works in an age-appropriate way. Explain the bills and everyday expenses your money pays for.

2. Get a piggybank and have your child divide the contents into spending and saving. This helps instill the idea of long term planning. Don’t get frustrated if it takes them a while to catch on. Some reach the age of ten before internalizing the idea.

3. Playing is learning. Even pre-schoolers enjoy a game of shop that simulates a retail environment complete with play money and receipts.

Hopefully, by now you get the idea. The goal is to send your kids out into the real world with a solid grasp of how being a good money steward will improve their lives forever.

The Young Wealth Team

Flickr / mikebaird

Think of it this way. Most of your consumer debt is attached to a high interest rate. What’s the point in making a nice investment return when the new profit is running out the back door to pay for debt? Your profit is already taking a hit from inflation and taxes. Tack on debt payments and it’s the very definition of spinning your wheels.

Be patient, grasshopper. The time for investing will come. Pay off debt first, however long that takes. Throw every spare dime and penny at it until the debt beast is dead, dead, dead. Then it will be time to crank up the investments – stocks, bonds, mutual funds, real estate – go crazy with it all, though we would seriously suggest you visit http://www.JasonHartman.com to learn how we make money with our investments no matter what the economy or inflation is doing.

Use the time spent eliminating debt to learn how to invest so you’ll be ready to hit the ground running when the time arrives.

The Young Wealth Team

Flickr / alancleaver_2000

The end result is that to build wealth year in and year out, you have to make a high enough return to pay the capital gains tax, cover the annual inflation rate, and still have some left over as profit. We believe Buffett, as does almost everyone, severely underestimates the true rate of inflation but at least he’s thinking in the right direction. In an average year, the government will admit to about a 4% rate of inflation. The actual rate is probably closer to 10% but we’ll use the government number for the upcoming example.

Before anything else happens, you have to figure your investment profit has been reduced by 4%. Let’s say you have a $10,000 profit. Subtract $400 for inflation and you’re already down to $9,600. Next up is the capital gains tax, which can be as much as 40%. You’re going to owe Uncle Obama $3,840 to pay for his next boondoggle. That drops your profit to $5,760 of the original ten grand.

That sucks, doesn’t it? There is a way around it. Visit www.JasonHartman.com to learn how to turn inflation on it’s head and make it turn you a profit with real estate investments. People are doing it daily. Why not you?

The Young Wealth Team

Flickr / CainAndToddBenson

1.Bloomberg mobile – take this uber-financial service titan with you everywhere. Check up on news, stock quotes, trend analysis, and more. By the way, did we mention it’s in real time and the app is free? That’s a great price no matter which way you slice it.

2.Paypal – is there any company more ubiquitous for the mad rush toward internet money transactions than this online financial jack-of-all-trades? Who doesn’t have a Paypal account any more and now you can check you balance, send money, and more from your iPhone, all accessed by the same user name and password established online already. There are some limitations – you still have to go online to check your transaction history and see when money has arrived but, once again, this app is free.

3.Day Bank – this powerful little doo-dad of a check register app is great for entering transactions and tracking spending. How about this – photograph receipts or items you purchase! Day Bank costs $1.99 but is an excellent way to not completely lose track of your banking account throughout the course of a busy day.

If you have yet to incorporate these three applications into your daily cell phone use, give them a try. The key to successful life as a young investor is to know how much money you have and what you’re spending it on. We all know how it trickles away through the process of frittering. Now you’ll know what you’re wasting it on.

The Young Wealth Team

Flickr / compujeramey

The good news is that almost no decision is irreversible (notice we said “almost”). Join the military and you might have a hard time backtracking for about five years. Here are two factors to take into account when preparing to make the leap into Adultland.

1.Research career fields not only in your degree field but in other areas that interest you. The crossover might be more than you realize.

2.Make a list of your strengths and weaknesses. If you hate talking to people, a career in hardcore sales might not be the ideal choice.

If you still find yourself at a strategic loss for direction, try this. What were you doing when you were the happiest in your life? Hopefully not sleeping with your binky or gorging on Fruit Loops but, if so, there might be a way to work with that. If you figure out what it is, please let us know. Another approach is to figure out the lifestyle that works best for you. Consider things like:

Do you like to travel?

Work environment – home office, traditional office, outdoors?

How much do you want to earn?

How many hours daily do you want to work?

See where we’re headed? Answer these lifestyle questions and the picture begins to clear considerably.

Good luck out there!

The Young Wealth Team

Flickr / Manuel Van De Meijer

In other words, take an active role in your own investing and don’t leave all the heavy lifting to a broker. You know what? They’re going to charge you for the privilege and that comes out of your profit.

What’s the best way to get started managing your own investing? Here are a few tips.

1.Figure out how much you have to play with. First, you’ve gotta pay living expenses, bad debt, and create an emergency fund. After that, divvy up what’s left between long and short term investing goals. Don’t worry if it’s not much in the beginning.

2.Assess risk tolerance. It’s a fact of life that no two people have the same level of risk-taking built into their personality. Figure out what yours is. Skydiver or plodder? One’s not better than the other but you need to know beforehand because it will make a difference in how you spread your assets.

3.Shape your portfolio. Here’s where you get down to the nitty gritty of wealth management. How much will you put into stocks, bonds, mutual funds, or real estate? Based on your self exploration in the first two points, it’s time to create and execute your actual investing plan.

While the preceding isn’t everything you need to know about managing your wealth, it should get you moving in the right direction. Good luck!

The Young Wealth Team

Flickr / AMagill

Your credit card company must…

…give you 45 days advance notice before they raise your interest rate or any other fee. At the same time, they must offer you the chance to cancel the card before the change occurs. If you choose to cancel the card, they can cancel your account and raise your monthly payment (subject to limitations). In addition, your friendly neighborhood credit card slinger must post the following plainly on your monthly bill:

1.How long it will take to pay off the balance making minimum payments

2.How much you must pay monthly to pay the balance off in three years

Rates, fees, and limits…

After signing up for a new credit card, your company cannot increase the interest rate for 12 months unless it is tied to a variable index, is an extremely low introductory rate (which must remain in place six months), or you are later than 60 days paying your bill. Consumers under the age of 21 must show they have the financial resources to make payments on a credit card or must have a co-signer before they can open an account.

There’s more to the new regulations but that’s probably enough for now. Don’t want your brain to overheat.

The Young Wealth Team

Flickr / TheTruthAboutCreditCards

1. Expense: Basic resume’ writing service start at around $75 and can run up over $1,000 or more if you opt for all the bells and whistles. Is this a necessary expense? Surely there are better uses to which you can put that money. You are going to be an educated, accomplished professional of some sort, right? Shouldn’t you be the one to write your resume’?

2. Who knows you best: Relating to point number one, how can a complete stranger possibly do a better job presenting your story to an employer than you would yourself? It doesn’t make sense to us. You know yourself better than anyone. You’re smart and capable. Crack your knuckles, sit down at the keyboard, and get busy.

We’re not saying it’s a felony if you decide to go with a resume’ writing service, but give it some thought about whether the end result will be better than what you could do with a few hours of good, hard focus. Just our two cents worth.

The Young Wealth Team

Flickr / SOCIALisBETTER

To succeed, you’ve got to stay alive, financially speaking of course. Before you sink your first dollar into an investment, consider the following three factors that have derailed many a young investor career. Watch out for these sharks and maybe you’ll stay alive long enough to actually make some money.

1.Transaction costs – it’s easy to overlook these when perusing a mutual fund prospectus or calling your broker and telling him to “Sell, sell, sell!” or “Buy, buy, buy!” Pay attention to the transaction costs. If it’s too much, go somewhere else. If all your profit is being eaten up by the broker’s cut, find another broker.

2.Your broker is a crook – sad but true. The stories are out there…Enron…Bernie Madoff. Stay alert for crooks in the financial business because they will always be there. Don’t be the next poor sap to see his nest egg disappear in a poof of chicanery.

3.Your broker is incompetent – crooked dealing isn’t the only way to lose money. Your broker could be straight as an arrow but simply not cut out for the job. Maybe he’s in the wrong field. Maybe he doesn’t have the IQ for the gig. The lesson is don’t trust your future to an obvious incompetent.

While we can’t give you an entire financial education in one blog, keep your eyes open for these three pitfalls and your chances for success just increased astronomically.

The Young Wealth Team

Flickr / rednuht

Take McDonald’s for instance. This ubiquitous burger chain won’t even talk to you unless you have $250,000 cash on hand. As in cash – borrowed collateral doesn’t count. So do you have to already have money to build wealth?

Not quite.

There are plenty of tried and true franchises, many of them geared toward providing services, that allow you to buy in with $9,000 or less. Here are a few:

1.Bonus Building Care – this commercial cleaning company has been franchising since 1996 and now has over 2,400 franchises. For as little as $9,000 you can work out of your home and even have the option to purchase an exclusive territory.

2.Breath Testers USA – this brilliant little idea franchises machines for you to place in bars, restaurants, anywhere people might have a drink. For a small fee, they can blow in it and find out their blood alcohol content before driving. Great idea? We think so. This buy-in opportunity also costs about $9,000.

3.Global M.A.R.S – this is a great franchise if you’re interested in making cars look good and really don’t have much money to spend. Offer customers a quick, economical way to remove scratches, dings, burns, or any other discoloration on paint, plastic, leather, vinyl, velour, metal, carpet, or glass on their car while they wait. Buy in for $500, a price that includes comprehensive support and full training.

There are literally dozens of other low cost franchise opportunities. We suggest you use your good friend Google to find them.

The Young Wealth Team

Flickr / azrainman

No worries. You just experienced electronic check conversion (ECC) and now it’s time to get your financial literacy up to speed and understand it.

Stores love the process for a few reasons. First of all, they get their money faster than with a paper check transaction. Information from the check is immediately collected (account number, routing number, financial institution, check number) and used to debit funds from your account. Normally this happens more quickly than with the traditional paper check process, so be sure you have the money in the account! The second reason stores love electronic checks is they don’t have to keep track of the paper check – they give it back to you right away. It doesn’t take up space in their cash register and they don’t have to worry about losing it before it is deposited in their bank.

Any business that uses the ECC process must post notice prominently at the checkout counter. If you don’t agree to it, they’ll probably make you use another form of payment like credit/debit card or cash. Keep an eye on your account summary each month. If you find an ECC error, law requires your financial institution to investigate.

At Young Wealth, we don’t believe ECC is inherently good or bad, but it is part of the digital migration that will likely see the end of paper checks entirely before too many more years pass. The key is to be aware of how your payments are processed so you can monitor your account for errors.

The Young Wealth Team

Flickr / .ack-online.de

How will you get to work when your car craps out and you don’t have money for repairs? Or when the dog eats an entire chocolate Easter Bunny and needs to have his stomach pumped – quickly? When an errant pass in a spirited game of touch football in the front yard goes through the neighbor’s window? Or worse, unplanned medical expenses.

The point is that any of these and a variety of other minor/major emergencies can happen at any time. You need an emergency fund. Period. Start by saving a thousand dollars. While not a big cushion, it can handle car repairs, medical visits, and assorted life events up to a point. The ultimate goal is to have six months worth of income readily available for whatever life throws at you. If you’ve never tried it, you don’t realize how much daily stress is lifted from your shoulders when you’re not flying without a net.

Imagine you suddenly lost your job, through no fault of your own. Maybe it was downsized out of existence. No worries. You’ve got six months to find one, while your buddy Fred, who was also released and was of the opinion that your emergency fund idea was crazy, is left in shock to pick up the pieces. And he better do it quickly if he wants to keep eating.

Just our two cents worth from Young Wealth.

The Young Wealth Team

Flickr / A. Strakey

At Young Wealth, we say “Go get ‘em!” Entrepreneurs are the lifeblood of capitalism. But starting a business isn’t something you should do off-the-cuff or on whim. The most creative, high-flying imagineers will do better with a of basic grounding in reality and elbow grease applied to creating a solid business plan.

Why do you need a business plan and what is it for anyway?

In our point of view, a business plan accomplishes three critical tasks.

1.Communication – a well-developed business plan must communicate the potential for success of the idea to people with investment capital, bank loan officers, possible business partners, and prospective employees.

2.Management – consider your business plan to be a roadmap, with every possible contingency planned for. This living document will allow you to track, monitor, and evaluate your progress along the route. Include milestones, even if they have to be adapted along the way.

3.Planning – one of the business plan’s most valuable attributes is in planning. Map out in advance roadblocks and obstacles you foresee arising. Maybe they will come to pass, maybe they won’t. Certainly you can’t predict the future but beginning with a blueprint will put you that much farther along the path to profitable success.

Does a small business need a business plan too? Absolutely! Plan it out. Write it down. Make a million dollars or two.

The Young Wealth Team

Flickr / Ivan Walsh

Until you finally cry “Uncle!” and begin looking at your credit repair options.

If there’s one thing you can count on in America, it’s that scammers find desperate people like Tiger Woods finds women who aren’t his wife. Don’t let your overwhelming desire to make your credit problems disappear in a POOF of smoke affect your good judgment. The following are warning signs that you’re about to be snookered:

1.The credit repair company wants you to pay money before they do anything. This is against the Credit Repair Organizations Act.

2.The company “forgets” to tell you your rights and what you can do yourself for free.

3.The company recommends you not contact the Big Three national credit reporting companies directly.

4.The company tells you they can get rid of most (or all) negative credit information, even if it’s accurate and current.

5.The company suggests you create a new identity by using an Employee Identification Number rather than your Social Security Number.

At Young Wealth, we’d much rather see you visit the Federal Trade Commission website here to learn legitimate ways to repair your credit.

The Young Wealth Team

Flickr / TheTruthAbout…

They do not give up easily. They’ll call you in the morning and in the evening. They’ll call your friends and parents, even senile old Grandma Betty, who will be glad to give them your cell phone number you made her promise to never share.

Collection agency grief is an aggravation you do not want in your life.

If you don’t have the income or resources to make new car or house payments, or worse, electronic junk payments bought on a department store credit card, then don’t make the purchase! Better to live in a hovel and eat Ramen Noodles than be dogged by an aggressive bill collector. Yes, you can file bankruptcy but that should be an absolute last resort. Ever tried to get a home loan with a bankruptcy on your record? It’s not easy.

In the midst of acquiring your investment education, don’t forget to pay your bills.

The Young Wealth Team

Flickr / psyberartist

You can figure there will always be a market for things relating to kids like:

• Day care
• Personal tutoring
• Secondhand clothing
• Toy kiosk
• Instructional classes
• Targeted amusement parks/restaurants

The first thing to consider is whether or not you actually can stand to be around the little rug rats all day every day. Some people can’t. If this describes you, recognize that fact and don’t even try. For the rest, a bit of research into the possibilities might be in order. The kid industry is not going anywhere and moms and dads tend to open up the wallet when it comes to satisfying little Johnny or Jane’s every mad whim.

It’s something to think about.

The Young Wealth Team

Flickr / Swami Stream

Everybody working at or near the bottom of the payment scale likes to think government enforced upward pressure on wages is a good thing. In a perfect world, where small businesses had unlimited resources, that might be true. Unfortunately, that’s not the real world. For several reasons, a higher federally mandated minimum wage is likely to make it harder for young workers’ to find a job.

Why?

It costs a lot of money for an employer to hire, train, and then pay a new worker. Being forced to pay a higher minimum wage makes it more likely they will decide to go with the current work force in place and implement a hiring freeze. It’s easier to toss more work at current workers than bring in new ones. As minimum wage rises, it makes jobs more attractive to retired or out of work people with experience and a proven track record of work. They migrate into the job force and snatch positions from young workers.

Don’t believe us?

Before the last minimum wage increase in July 2009, the rate was $6.55 an hour and teen unemployment was 24.3%. Three months later, with a federal wage of $7.55 in place, teen joblessness has risen to 27.6%, and this was AFTER the Obama administration assured us the worst of the recession had passed.

Minimum wage does not make sense for you.

The Young Wealth Team

Flickr / NIOSH

The first thing to know is that all funds have expense ratios. The second thing to know is that they are not all created equal. An expense ratio is a percentage of your portfolio that goes back to the mutual fund every year to cover their (mis)management and administrative fees. When you invest in stock funds, you’re not going to avoid this fee. Sorry. Whether you make or lose money, you pay the fee. That’s why we prefer real estate, though we won’t complain too loudly if you want to dip your toes in an index mutual fund first.

Just keep this in mind. Expense ratios vary from 0.75% to 1.75%. Here are some numbers to put it in perspective. If you invested $5,000 in a fund with a 2% expense ratio for five years and averaged 10% return, you would pay the fund a total of $642 over that time frame. While that’s not a bloodcurdling amount, it’s a chunk – a chunk of your money that you handed over to someone else.

That’s why we like the direct investment model of real estate. Cut out the middleman and keep all the money for yourself. Regardless of how you choose to invest, you now know what an expense ratio is.

The Young Wealth Team

Flickr / iluvrhinestones

Keep in mind there are restrictions!

A typical scenario is this: Be a first time applicant to open a checking account at Bank X. Minimum deposit is $100. You have to make at least five debit card transactions and keep the account in good standing for at least 90 days. Do all this and Bank X pays you $125 in cold, hard cash.

Obviously, the details regarding such an arrangement can vary greatly depending upon the bank you’re using. National chains tend to all have some sort of comparable program but read the fine print closely. If you have to jump through too many hoops for a small return, maybe it’s not worth it. A little bird told us that Internet banks have the best deals when it comes to cash back accounts.

The secret is do your research and don’t go with a bank you have a bad feeling about just because they’re giving you free money. Ultimately, you’re in it for the long haul, so choose a suitable partner.

The Young Wealth Team

Flickr / NCinDC

We’re pretty sure our lives would be better having never witnessed the family dynamics of the Osbournes, the Gosselins, or the Real Housewives – not to mention The Bachelor, etc. But just how much money do these attention whores receive?

Smarmy, asexual Ryan Seacrest is the unquestioned king of reality television. He recently signed a three year, $45 million deal to introduce American Idol contestants. Likewise, Idol judge Simon Cowell hauls in multiple millions while Paula Abdul left in a snit because she couldn’t pry more than $4 million from producers. Here are some other various tidbits.

Messed Up Families
The Osbournes (Ozzy and family) were paid $5,000 per episode the first year. Skyrocketing popularity boosted that figure close to a million by year two. Jon and Kate Gosselin were paid $75,000 per episode for their TLC show Jon and Kate Plus Eight. Hopefully, they set some aside for their kids’ therapy bills.

Other Screwballs
1.Real Housewives currently make $30,000 but are negotiating for six figures.

2.The Hills secondary characters get $45,000, while star Lauren Conrad made $2.5 million.

3.Big Brother contestants are paid $750 each week they are in the house.

4.Survivor contestants get a free trip to a tropical hellhole, an awesome weight loss program, and then win a cool million if they’re the last one standing. $100,000 goes to second place.

Ready to chuck it all and take your chances on reality television? Our advice – don’t. If you’re looking for fortune and glory, consider that investment fortune without glory might be better than being the freak of the week.

The Young Wealth Team

Flickr / watchwithkristin

Here are a few dangers in particular.

1.Family Concerns – Like it or not, the whole family is going to be involved in your business venture to one extent or another. Keep them in the loop. Let them help if they want. Lay out beforehand the time drain and sacrifices that you will have to make, especially in the early days. This should help nip the “I didn’t know it was going to take THIS much time” whining in the bud.

2.Isolation – When burning the startup candle at both ends, it’s easy to let business and personal relationships suffer. Remember there is a world outside your eternally churning brain. Take time out to participate in it every once in while. And don’t let your networking skills lie fallow. Networking could turn out to be the make it or break it factor in your venture.

3.Don’t network too much – Having just said you need to maintain your business network relationships, that doesn’t entail hitting the golf links every sunny afternoon at 2 pm with a friend. It’s easy to murder productivity. There will be time for that later, after the business is up and running and you hire a competent manager. Then go golfing all you want.

There are, of course, other spots of quicksand to be wary of along the way. Ultimately, it comes down to the fact that a new business needs time, attention, and loving care. Don’t abandon it to the vagaries of the world too soon or you might kill it.

Now get out there and start something!

The Young Wealth Team

Flickr / Cayusa

Everyone agrees unemployment is bad but here are some specific reasons why.

1.Outsourcing of white collar jobs to countries where labor is cheaper causes U.S. Unemployment to keep climbing.

2.Higher depression rates, which leads to drinking, drugs, marital stress, poor nutrition and health.

3.Anti-immigrant feelings towards those who will do the job for less money.

4.Residents of high unemployment neighborhoods may turn to illegal ventures (drugs and crime) for income.

5.Less happiness at work because you’re afraid to leave the job no matter how much it sucks.

And the biggest result of high unemployment might be less tax money for states. Think about it. With so many people out of work, less comes into the coffers via income tax, and less is spent by consumers to be collected on the back end of sales tax. This thing is a vicious cycle. That’s why politicians talk incessantly about creating new jobs with every election cycle. It matters to us all that as many people as possible can find gainful work.

The Young Wealth Team

Flickr / Tony the Misfit

When Warren Buffett took control of the company Berkshire Hathaway in 1964, its market capitalization was $22 million. 35 years later that has grown to $115 billion. Obviously, Mr. Buffett knows a little about creating wealth through the stock market but where did he learn his tricks?

Turns out that Buffett’s mentor was a man by the name of Benjamin Graham, who was working as a partner in a brokerage when the stock market crash and subsequent Great Depression hit in the 1920′s and 1930′s. He lost all his personal fortune but went on to gain it back and learned a little about investing and human nature in the process. Graham’s skills at financial analysis were superlative. At the age of 25 he was already earning $600,000 yearly – keep in mind this was in early 20th century dollars.

The important thing to remember about Benjamin Graham is that he and David Dodd wrote a book called Security Analysis, in which the pair proposed their belief that investing takes research, training, and experience to be successful, and that speculating was nothing more than irrational gambling.

Though written in 1934, the fundamental wisdom holds rock solid today. You would be well served to begin your investing career by finding a copy of this financial masterpiece.

The Young Wealth Team

Flickr / Art Comments

Yes, we said the “R” word. Retirement sounds so old and settled to young ears full of, well, young stuff. When you hit middle age, wouldn’t it be nice to do so with a stuffed portfolio and not still scrounging coin slots at the local laundromat for beer money?

The beauty about investing early is you don’t have to rely on spectacular returns to retire comfortably. It only takes $7,400 invested annually (beginning at age 20) at 10% to make you a millionaire in 40 years. Actually it will net you $3.26 million, which considering the under-reported government inflation rate of 3%, would allow you to live comfortably in retirement.

If you wait 10 years to start (age 30) you’re going to have to invest $20,000 annually at 10% to hit the same mark by retirement. Lesson? Save early!

The wild card in all this is the 10% yearly return on investment. We can show you a reliable, low-risk way to do better. Conventional wisdom tells you to head for the stock market. That’s a sucker’s bet. When you’re ready to learn how the quietly rich invest, head over to www.JasonHartman.com. You don’t need huge amounts of cash but you do need to be able to unlearn much of what passes for investment advice today.

The Young Wealth Team

Flickr / Epicharmus

It’s not hard. Just do it.

The first part of any budgeting process is to figure out where your money is going right now. Keep track of every penny you spend for a month. Hit Burger King (or the fast food franchise of your choosing) twice a week and you’re coughing up over $500 a year. Toss in a couple of daily sodas from the vending machine and you’re looking at another $300 annually. Geez, you could have taken a modest vacation with that coin. Or maybe began saving for investments.

It doesn’t mean you’re a bad person; just that you have a few bad habits to break. Tracking your expenses for a month will give you an idea of how to handle routine expenses but you can’t ignore the unexpected. It’s a lack of planning for the sudden expense out of left field that will waylay your financial plans.

Here are some items to think about: car repairs, medical costs, holidays and birthdays, weddings and baby showers, emergency travel, office parties, broken appliances, job loss, and much, much more.

In the coming days and months we’ll revisit basic budgeting. It’s that important. For now, get busy with your 30 days of logging expenses.

The Young Wealth Team

The entirety of Stack’s suicide note is included below. Good luck finding a point besides, “The world hates me!”

“If you’re reading this, you’re no doubt asking yourself, “Why did this have to happen?” The simple truth is that it is complicated and has been coming for a long time. The writing process, started many months ago, was intended to be therapy in the face of the looming realization that there isn’t enough therapy in the world that can fix what is really broken. Needless to say, this rant could fill volumes with example after example if I would let it. I find the process of writing it frustrating, tedious, and probably pointless… especially given my gross inability to gracefully articulate my thoughts in light of the storm raging in my head. Exactly what is therapeutic about that I’m not sure, but desperate times call for desperate measures.

We are all taught as children that without laws there would be no society, only anarchy. Sadly, starting at early ages we in this country have been brainwashed to believe that, in return for our dedication and service, our government stands for justice for all. We are further brainwashed to believe that there is freedom in this place, and that we should be ready to lay our lives down for the noble principals represented by its founding fathers. Remember? One of these was “no taxation without representation”. I have spent the total years of my adulthood unlearning that crap from only a few years of my childhood. These days anyone who really stands up for that principal is promptly labeled a “crackpot”, traitor and worse.

While very few working people would say they haven’t had their fair share of taxes (as can I), in my lifetime I can say with a great degree of certainty that there has never been a politician cast a vote on any matter with the likes of me or my interests in mind. Nor, for that matter, are they the least bit interested in me or anything I have to say.

Why is it that a handful of thugs and plunderers can commit unthinkable atrocities (and in the case of the GM executives, for scores of years) and when it’s time for their gravy train to crash under the weight of their gluttony and overwhelming stupidity, the force of the full federal government has no difficulty coming to their aid within days if not hours? Yet at the same time, the joke we call the American medical system, including the drug and insurance companies, are murdering tens of thousands of people a year and stealing from the corpses and victims they cripple, and this country’s leaders don’t see this as important as bailing out a few of their vile, rich cronies. Yet, the political “representatives” (thieves, liars, and self-serving scumbags is far more accurate) have endless time to sit around for year after year and debate the state of the “terrible health care problem”. It’s clear they see no crisis as long as the dead people don’t get in the way of their corporate profits rolling in.

And justice? You’ve got to be kidding!

How can any rational individual explain that white elephant conundrum in the middle of our tax system and, indeed, our entire legal system? Here we have a system that is, by far, too complicated for the brightest of the master scholars to understand. Yet, it mercilessly “holds accountable” its victims, claiming that they’re responsible for fully complying with laws not even the experts understand. The law “requires” a signature on the bottom of a tax filing; yet no one can say truthfully that they understand what they are signing; if that’s not “duress” than what is. If this is not the measure of a totalitarian regime, nothing is.

How did I get here?

My introduction to the real American nightmare starts back in the early ‘80s. Unfortunately after more than 16 years of school, somewhere along the line I picked up the absurd, pompous notion that I could read and understand plain English. Some friends introduced me to a group of people who were having ‘tax code’ readings and discussions. In particular, zeroed in on a section relating to the wonderful “exemptions” that make institutions like the vulgar, corrupt Catholic Church so incredibly wealthy. We carefully studied the law (with the help of some of the “best”, high-paid, experienced tax lawyers in the business), and then began to do exactly what the “big boys” were doing (except that we weren’t steeling from our congregation or lying to the government about our massive profits in the name of God). We took a great deal of care to make it all visible, following all of the rules, exactly the way the law said it was to be done.

The intent of this exercise and our efforts was to bring about a much-needed re-evaluation of the laws that allow the monsters of organized religion to make such a mockery of people who earn an honest living. However, this is where I learned that there are two “interpretations” for every law; one for the very rich, and one for the rest of us… Oh, and the monsters are the very ones making and enforcing the laws; the inquisition is still alive and well today in this country.

That little lesson in patriotism cost me $40,000+, 10 years of my life, and set my retirement plans back to 0. It made me realize for the first time that I live in a country with an ideology that is based on a total and complete lie. It also made me realize, not only how naive I had been, but also the incredible stupidity of the American public; that they buy, hook, line, and sinker, the crap about their “freedom”… and that they continue to do so with eyes closed in the face of overwhelming evidence and all that keeps happening in front of them.

Before even having to make a shaky recovery from the sting of the first lesson on what justice really means in this country (around 1984 after making my way through engineering school and still another five years of “paying my dues”), I felt I finally had to take a chance of launching my dream of becoming an independent engineer.

On the subjects of engineers and dreams of independence, I should digress somewhat to say that I’m sure that I inherited the fascination for creative problem solving from my father. I realized this at a very young age.
The significance of independence, however, came much later during my early years of college; at the age of 18 or 19 when I was living on my own as student in an apartment in Harrisburg, Pennsylvania. My neighbor was an elderly retired woman (80+ seemed ancient to me at that age) who was the widowed wife of a retired steel worker. Her husband had worked all his life in the steel mills of central Pennsylvania with promises from big business and the union that, for his 30 years of service, he would have a pension and medical care to look forward to in his retirement. Instead he was one of the thousands who got nothing because the incompetent mill management and corrupt union (not to mention the government) raided their pension funds and stole their retirement. All she had was social security to live on.

In retrospect, the situation was laughable because here I was living on peanut butter and bread (or Ritz crackers when I could afford to splurge) for months at a time. When I got to know this poor figure and heard her story I felt worse for her plight than for my own (I, after all, I thought I had everything to in front of me). I was genuinely appalled at one point, as we exchanged stories and commiserated with each other over our situations, when she in her grandmotherly fashion tried to convince me that I would be “healthier” eating cat food (like her) rather than trying to get all my substance from peanut butter and bread. I couldn’t quite go there, but the impression was made. I decided that I didn’t trust big business to take care of me, and that I would take responsibility for my own future and myself.

Return to the early ‘80s, and here I was off to a terrifying start as a ‘wet-behind-the-ears’ contract software engineer… and two years later, thanks to the fine backroom, midnight effort by the sleazy executives of Arthur Andersen (the very same folks who later brought us Enron and other such calamities) and an equally sleazy New York Senator (Patrick Moynihan), we saw the passage of 1986 tax reform act with its section 1706.

For you who are unfamiliar, here is the core text of the IRS Section 1706, defining the treatment of workers (such as contract engineers) for tax purposes. Visit this link for a conference committee report

(http://www.synergistech.com/1706.shtml#ConferenceCommitteeReport)

regarding the intended interpretation of Section 1706 and the relevant parts of Section 530, as amended. For information on how these laws affect technical services workers and their clients, read our discussion here

(http://www.synergistech.com/ic-taxlaw.shtml).

SEC. 1706. TREATMENT OF CERTAIN TECHNICAL PERSONNEL.

(a) IN GENERAL – Section 530 of the Revenue Act of 1978 is amended by adding at the end thereof the following new subsection:

(d) EXCEPTION. – This section shall not apply in the case of an individual who pursuant to an arrangement between the taxpayer and another person, provides services for such other person as an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work.

(b) EFFECTIVE DATE. – The amendment made by this section shall apply to remuneration paid and services rendered after December 31, 1986.
Note:
• “another person” is the client in the traditional job-shop relationship.
• “taxpayer” is the recruiter, broker, agency, or job shop.
• “individual”, “employee”, or “worker” is you.

Admittedly, you need to read the treatment to understand what it is saying but it’s not very complicated. The bottom line is that they may as well have put my name right in the text of section (d). Moreover, they could only have been more blunt if they would have came out and directly declared me a criminal and non-citizen slave. Twenty years later, I still can’t believe my eyes.

During 1987, I spent close to $5000 of my ‘pocket change’, and at least 1000 hours of my time writing, printing, and mailing to any senator, congressman, governor, or slug that might listen; none did, and they universally treated me as if I was wasting their time. I spent countless hours on the L.A. freeways driving to meetings and any and all of the disorganized professional groups who were attempting to mount a campaign against this atrocity. This, only to discover that our efforts were being easily derailed by a few moles from the brokers who were just beginning to enjoy the windfall from the new declaration of their “freedom”. Oh, and don’t forget, for all of the time I was spending on this, I was loosing income that I couldn’t bill clients.

After months of struggling it had clearly gotten to be a futile exercise. The best we could get for all of our trouble is a pronouncement from an IRS mouthpiece that they weren’t going to enforce that provision (read harass engineers and scientists). This immediately proved to be a lie, and the mere existence of the regulation began to have its impact on my bottom line; this, of course, was the intended effect.

Again, rewind my retirement plans back to 0 and shift them into idle. If I had any sense, I clearly should have left abandoned engineering and never looked back.

Instead I got busy working 100-hour workweeks. Then came the L.A. depression of the early 1990s. Our leaders decided that they didn’t need the all of those extra Air Force bases they had in Southern California, so they were closed; just like that. The result was economic devastation in the region that rivaled the widely publicized Texas S&L fiasco. However, because the government caused it, no one gave a shit about all of the young families who lost their homes or street after street of boarded up houses abandoned to the wealthy loan companies who received government funds to “shore up” their windfall. Again, I lost my retirement.

Years later, after weathering a divorce and the constant struggle trying to build some momentum with my business, I find myself once again beginning to finally pick up some speed. Then came the .COM bust and the 911 nightmare. Our leaders decided that all aircraft were grounded for what seemed like an eternity; and long after that, ‘special’ facilities like San Francisco were on security alert for months. This made access to my customers prohibitively expensive. Ironically, after what they had done the Government came to the aid of the airlines with billions of our tax dollars … as usual they left me to rot and die while they bailed out their rich, incompetent cronies WITH MY MONEY! After these events, there went my business but not quite yet all of my retirement and savings.

By this time, I’m thinking that it might be good for a change. Bye to California, I’ll try Austin for a while. So I moved, only to find out that this is a place with a highly inflated sense of self-importance and where damn little real engineering work is done. I’ve never experienced such a hard time finding work. The rates are 1/3 of what I was earning before the crash, because pay rates here are fixed by the three or four large companies in the area who are in collusion to drive down prices and wages… and this happens because the justice department is all on the take and doesn’t give a fuck about serving anyone or anything but themselves and their rich buddies.

To survive, I was forced to cannibalize my savings and retirement, the last of which was a small IRA. This came in a year with mammoth expenses and not a single dollar of income. I filed no return that year thinking that because I didn’t have any income there was no need. The sleazy government decided that they disagreed. But they didn’t notify me in time for me to launch a legal objection so when I attempted to get a protest filed with the court I was told I was no longer entitled to due process because the time to file ran out. Bend over for another $10,000 helping of justice.

So now we come to the present. After my experience with the CPA world, following the business crash I swore that I’d never enter another accountant’s office again. But here I am with a new marriage and a boatload of undocumented income, not to mention an expensive new business asset, a piano, which I had no idea how to handle. After considerable thought I decided that it would be irresponsible NOT to get professional help; a very big mistake.

When we received the forms back I was very optimistic that they were in order. I had taken all of the years information to Bill Ross, and he came back with results very similar to what I was expecting. Except that he had neglected to include the contents of Sheryl’s unreported income; $12,700 worth of it. To make matters worse, Ross knew all along this was missing and I didn’t have a clue until he pointed it out in the middle of the audit. By that time it had become brutally evident that he was representing himself and not me.

This left me stuck in the middle of this disaster trying to defend transactions that have no relationship to anything tax-related (at least the tax-related transactions were poorly documented). Things I never knew anything about and things my wife had no clue would ever matter to anyone. The end result is… well, just look around.

I remember reading about the stock market crash before the “great” depression and how there were wealthy bankers and businessmen jumping out of windows when they realized they screwed up and lost everything. Isn’t it ironic how far we’ve come in 60 years in this country that they now know how to fix that little economic problem; they just steal from the middle class (who doesn’t have any say in it, elections are a joke) to cover their asses and it’s “business-as-usual”. Now when the wealthy fuck up, the poor get to die for the mistakes… isn’t that a clever, tidy solution.

As government agencies go, the FAA is often justifiably referred to as a tombstone agency, though they are hardly alone. The recent presidential puppet GW Bush and his cronies in their eight years certainly reinforced for all of us that this criticism rings equally true for all of the government. Nothing changes unless there is a body count (unless it is in the interest of the wealthy sows at the government trough). In a government full of hypocrites from top to bottom, life is as cheap as their lies and their self-serving laws.
I know I’m hardly the first one to decide I have had all I can stand. It has always been a myth that people have stopped dying for their freedom in this country, and it isn’t limited to the blacks, and poor immigrants. I know there have been countless before me and there are sure to be as many after. But I also know that by not adding my body to the count, I insure nothing will change. I choose to not keep looking over my shoulder at “big brother” while he strips my carcass, I choose not to ignore what is going on all around me, I choose not to pretend that business as usual won’t continue; I have just had enough.

I can only hope that the numbers quickly get too big to be white washed and ignored that the American zombies wake up and revolt; it will take nothing less. I would only hope that by striking a nerve that stimulates the inevitable double standard, knee-jerk government reaction that results in more stupid draconian restrictions people wake up and begin to see the pompous political thugs and their mindless minions for what they are. Sadly, though I spent my entire life trying to believe it wasn’t so, but violence not only is the answer, it is the only answer. The cruel joke is that the really big chunks of shit at the top have known this all along and have been laughing, at and using this awareness against, fools like me all along.

I saw it written once that the definition of insanity is repeating the same process over and over and expecting the outcome to suddenly be different. I am finally ready to stop this insanity. Well, Mr. Big Brother IRS man, let’s try something different; take my pound of flesh and sleep well.

The communist creed: From each according to his ability, to each according to his need.

The capitalist creed: From each according to his gullibility, to each according to his greed.

Joe Stack (1956-2010)”

The Young Wealth Team

As a newbie to the professional world, get over that silliness now!

Drive the sort of car your budget can afford and no more. Your investments will thank you for it later. Before the economy tanked, budget experts suggested that your total outlay of car expenses, no matter how many you own, should never be more than 20% of your net monthly income.

These days, you might even want to shoot for a more modest number than that. Remember the cost of owning a car doesn’t magically stop at the sticker price. Factor in fuel, repairs, and insurance for a more accurate picture.

When car shopping, consider obtaining a pre-approval letter that you can show to dealers. Put down at least a 15% down payment and the payoff will be a lower monthly payment. These days, house mortgages aren’t the only thing people can get “upside down” on. You don’t want to end up owing more than the car is worth.

Is a new car absolutely necessary? “Used” is not synonymous with “junk.” There are plenty of perfectly snazzy previously owned vehicles across the street from the new car dealer. Take a look at them and save about 30%.

The Young Wealth Team

Big Business owns his show. One hand washes the other. He (and others like him) pimp for Big Business. It’s really that simple.

Here are three solid reasons we prefer real estate to the stock market:

1. You might be investing with a crook: Do names like Enron, World Comm, or Global Crossing, or Bernie Madoff ring a bell? They should. Criminal behavior on Wall Street is institutional, entrenched, and devastating to the average investor that gets blindsided by the latest scam.

2. They might be incompetent: It’s not difficult to become a stock broker. Yours might unintentionally cost you a fortune. Maintain control over your investments!

3. Administrative fees: Another reason we say maintain direct control over your investments is you don’t need someone else to manage your deals or make your investments for you. The entire stock market game is built on management fees paid to brokers that come straight out of your profit.

So ignore the hype on television. It’s nothing more than flash and misdirection. Stay tuned and we’ll demonstrate why we love real estate, proven the best investment in history, and why you’re never too young to start.

The Young Wealth Team

As a collection of investments like stocks, bonds, commodities, or even real estate, an ETF is similar to a mutual fund in that it can be purchased through an investment company or brokerage house. Compared to mutual funds, ETF’s have a lower turnover rate of their holdings which, in turn, reduces your tax burden. Remember, any time a fund buys or sells a holding it triggers:

1. taxes
2. commissions
3. transaction costs

All the above are passed on to the investor so, all other factors being equal, it makes sense to invest where there is little turnover. With a mutual fund, you can normally expect to pay about 1.5% of your total yearly return just for the management fees. An ETF is substantially lower. ETF’s also offer the ability to target certain segments of the economy with your investing.

There is a transaction cost of $10 to $50 every time you buy or sell an ETF, so keep in mind this should be a buy and hold type of investing. Hyperactive traders need to look elsewhere for their gambling fix.

The Young Wealth Team

You read right.

If you’re getting shot at, you don’t owe Sammy a single cent. While maybe not enough of an incentive to actively seek a combat assignment, if you’re already there or on the way, it could help when you get back. The Iraq, Afghanistan, and Kosovo theaters all apply. Even better, you can use this tax free pay to contribute to your Individual Retirement Account (IRA). Since you don’t have to pay taxes on IRA holdings until withdrawal, it makes a lot of sense to contribute as much tax free dinero as you can today.

There are a few other tax related items to keep in mind when taking shelter behind that Iraqi sand dune. While engaged in combat operations you qualify for up to a 180 day extension to:

1. File your return
2. Pay your taxes
3. Claim a refund
4. Contribute to an IRA

Other tax deductions you should investigate are related to 1) moving expenses 2) transitioning back to civilian life 3) free tax assistance.

The Young Wealth Team

1. the Board of Governors
2. the 12 Reserve banks (located around the country)
3. the Federal Open Market Committee

At this point the questions becomes, “Do you want the REAL version of how the Federal Reserve was created or the manipulated one?” You want the manipulated one? Sigh. So boring but here it is.

(Adopted cheery tone) “In 1913 a group of forward thinking and patriotic Americans created the Federal Reserve to insure the United States continued status as the healthiest economy in the world. And we all lived happily ever after.”

If you’re more into reality and want to listen to an excellent interview on the topic, go to www.JasonHartman.com and introduce yourself to The Creating Wealth Show with Jason Hartman. In show #84, he interviews G. Edward Griffin, author of “The Creature from Jekyll Island.” In this book, Griffin defines and describes the banking conspiracy of the early 20th century which put into law an unholy cartel between Big Money and the Federal Government.

The party line is that Reserve Banks conduct continual research on the state of the economy, supervise banks in their region and provide financial services to private banks and the US government. The stated goal of the Federal Reserve System is to manage the nation’s money supply and keep the economy growing at a sustainable rate.

Sounds all well and good, right? A little too good if you ask us. Why not click the link up there and find out the real history of the Federal Reserve?

The Young Wealth Team

But for those eager to make an early and positive impression on potential employers, check out the following websites:

1. Carbonmade
2. Knowledge Genie
3. Jobrary

Carbonmade allows you to post your portfolio/resume by category and skill. Use Photoshop, Illustrator, Flash and more to make yourself stand out in a sea of bland. Knowledge Genie lets you track the users who visit your account and even offers the option for people to buy your work through PayPal, Google Checkout or Amazon.com. Jobrary is a user friendly option that allows easy navigation via preview thumbnails.

These three websites are especially handy for those looking for art or graphic media oriented employment, but anyone in the job market should give it a look. Technology ain’t just for nerds any more.

The Young Wealth Team

Every single person on this planet other than Bill Gates and Warren Buffett need an emergency fund. Okay, maybe we can add most professional athletes to this list also but you get the point.

Let’s say you’ve started with the baby step of recording every expense for a solid month to find out where it’s all going. Let’s even say you took that information and came up with an honest-to-goodness budget and you’re even sort of sticking to it.

Congratulations! You’re ahead of most of us. The trouble is, unless you have an emergency fund ($1,000 is a good number), your budget is a ticking time bomb waiting to get blown to smithereens. What happens when you or your car gets sick? Or you have to book a last minute plane ticket to bail your mother out of a Tijuana jail? You gotta do it – get the car fixed, bail her out, whatever IT is.

These count as emergencies. If you have an emergency fund, life goes on. If you don’t, your budget gets destroyed, you have to sell blood plasma for grocery money, and bad luck multiplies.

Don’t be a doofus. Make saving until you have a $1,000 emergency fund a HIGH priority.

The Young Wealth Team

The trick is to appear incompetent. A firing for cause like misconduct might get your application for unemployment denied. Two obvious scenarios that will not disqualify you from unemployment checks are a hostile work environment or you were discriminated against – legitimately quit for either of these reasons and it’s time to call a lawyer. But the third scenario, being fired for being unable to perform the job, is more nebulous.

How can you get fired for being unable to perform? Here are a few work habits you should work towards cultivating.

1. Always be mean and cranky, with a boatload of personal problems you never hesitate to share the down and dirty details about.

2. Pretend you don’t know how to do something, especially if it’s a new task.

3. Work very, very, very slowly and spend an inordinate amount of time forwarding “funny” emails.

4. Never be happy. Opt for anger, depression, whining, outrage, or a combination thereof.

Have you seen the movie Office Space? Then you know what we’re talking about. And remember not to talk about religion, disability or other topic that might make them afraid to fire you for fear of a lawsuit.

Obviously, the preceding is presented somewhat tongue in cheek but remember – there are always options if you’re stuck in a bad job – make everyone as miserable as you.

The Young Wealth Team

Let’s have a semi-random statistic. Last year, the average American household wrote about 12 checks a month.

Here’s the life of a check:

1. You go shopping for a shiny new iPod and write a check from an account you have established with the financial institution of your choice.

2. The store deposits the check with its bank. The store, bank, or Fed prints a magnetic strip in the lower right hand corner of the check to make sure the store gets credited with the proper amount.

3. The store’s bank sends the check to either a Federal Reserve bank or a private (correspondent) bank. About one-third of all checks are cleared through the Federal Reserve system.

4. The Federal Reserve bank runs the check through its sorting machines.

5. After the FR processes the check, it is sent back to the to the depositing financial institution to credit or debit the customer account.

6. There is a short period of time called “float”, between which the store’s bank is credited and your bank is presented with the check. During the “float” period, both banks have the funds available to them.

7. The transaction shows up on your monthly statement.

There you go. It’s that simple and that complicated. You can no longer claim check ignorance.

The Young Wealth Team

Here are a few particularly hideous schemes.

1. Fake Check Scam – The new love of your life (whom you’ve never met in person) has a sudden problem with their bank account. They ask you to deposit a check in yours and wire them cash or otherwise send money to cover an emergency. Your answer should be, “No, thanks!”

2. Re-Shipping – After a similar profession of love, your paramour suddenly develops a problem with their mailing address and needs you to accept packages, then forward them. What you’re doing is receiving merchandise bought with a stolen credit card.

3. Mail Order Bride – You meet someone on an incredible new dating site that no one has ever heard about. She accelerates the relationship until she’s ready to cross the ocean to be with you. The only fly in the ointment is there’s a hang up with her Visa or a traveling tax or some other such reason and, you guessed it, you need to send money.

Think you’d never fall for any of these or one of the dozens of other internet scams? Are you sure? Scams like these are big business. Criminals roam the same online spots where lonely hearts hang out. Don’t fall for their devious schemes. If someone asks you for money, don’t send it.

The Young Wealth Show

Problem is, most people don’t talk about financial habits before marriage. Should it then be a surprise to anyone that money matters are one of the biggest problems in marriage?

(For him) Come on, he’s used to spending at least $100 a week on new video game release. You think that’s excessive? What are you, some kind of ascetic?

(For her) That $100 bottle of skin conditioner is not optional. It’s a freakin’ necessity, thank you very much.

Face it. We’re different. We should talk about certain stuff before getting hitched. Have you…

1. Discussed long and short-term financial goals.

2. Implemented a plan to structure household finances.

3. Decided how to divide up money management.

4. Established a realistic budget.

5. Know how much debt the spouse brings to the union.

Of course, this list could fill a volume of encyclopedias but it all comes down to this; are you aware of, and more importantly, comfortable with your soon-to-be partner’s money personality? If so, then you may kiss the bride or groom.

The Young Wealth Show

For the rest, exactly what lifestyle DO you want to live? Will you need an extra twenty grand monthly for shopping? Do you want to be a stay at home parent while the spouse works, travel, volunteer your time, build a business, or buy real estate? Maybe it’s something else that floats your boat.

Regardless, the time to start planning on how you will have the money to follow your dreams is…wait for it…NOW, especially if you fall into the madcap shopping category. You need to have a plan in place to generate income in large quantities. That might initially come in the form of a high paying job but eventually working regular hours will cut into your gratuitous consumerism and the job will have to go. At that point you better have a little something going on the investment side.

Honestly, no matter what lifestyle you choose (except welfare), it’s sure to go down easier when you take the time to plan for it and then follow through with investment action to get you to the financial promised land.

The Young Wealth Show

Best Jobs
1. Anesthesiologist ($292,000) – Here’s a high stress job that pays big bucks. Surgical deaths in the United States have dropped from two per 10,000 in 1980 to one in 200,000 today. Get ready for 12 years of study.

2. Obstetrican/Gynecologist ($222,000) – This high demand profession is short on doctors. Nosebleed malpractice insurance premiums contribute to the lofty salary.

3. Psychiatrist ($177,000) – One of the few mental health professionals who can prescribe medicines, conduct physicals, and order/interpret lab tests. In a nation full of stressed citizens, the brain doctor is king.

4. Others – nurse anesthetist, sales director, actuary, finance director, software architect, lawyer, and insurance broker.

Worst Jobs
1. Food prep and wait staff ($17,400)
2. Fast food cooks ($17,620)
3. Dishwashers ($17,750)
4. Others – dining room/bartender helpers, shampooers, cafeteria and coffee shop counter attendants, restaurant hostesses, cashiers, amusement and recreation staff, ushers and ticket takers.

At Young Wealth, we believe all work is of value but, everything else being equal, why not prepare yourself to be as valuable as possible?

The Young Wealth Team

If you want to make absolutely sure no job offer is forthcoming, and feel compelled to stay on the parents dole a while longer, here are five excellent ways to bomb the interview.

1. Arrive late – Maps and directions? Such navigational aids are for losers. Check your watch and hurry the interviewer along to assure your resume gets tossed in file 13.

2. Dress inappropriately – This means scruffy aloha shirt and flip-flops for guys, tons of makeup and too much cleavage for the girls. That ought to keep that pesky job offer at bay.

3. Go into zombie mode – Dead pan face, no enthusiasm, stare at the floor, and grunt your answers.

4. Smoking, drinking, gum chewing – Heck, why not do all three? Spit out your gum and stick it on the chair, light up a stenchified non-filtered Lucky Strike, and pop the top on a lukewarm beer from your pants pocket.

5. Research failure – Be sure not to have any idea what products or services the company offers and only have a vague idea of the job you are applying for.

Stick with the preceding advice at all costs. That ought to put a dagger through the heart of any prospective employer silly enough to call you in the first place.

The Jason Hartman Foundation Team

“I’m lucky to have one job. Where am I going to find another?” you say.

Oh ye of mundane thinking. You are not constrained to forever cash pay checks in the current amount. Stop thinking about limitations and start figuring out sideline careers/businesses to work during your down time. Here are a few ideas: author, internet marketer, real estate agent, investor. Use your primary job that you have right now to maintain your lifestyle and pour everything from the secondary income into increasing your net worth.

Investing in income property is a great way to go. Not only do you reap incredible tax benefits but you’re establishing a flow of passive income.

So clip coupons and micro manage that budget for short term disposable cash. Undertake a business endeavor where you don’t trade time for money on the side. That’s where the secret to creating a life of financial independence can be found.

The Young Wealth Team

Hmm, that certainly IS a problem.

Luckily we’re here to save the day with five cheap Valentine’s Day ideas. We can’t promise these will keep your butt out of the doghouse but they’re better than nothing.

1. Dinner and a Movie, Part 2: Cliché? Certainly. That’s what love is all about. But plan this one at home with a candle-lit, home-cooked meal and a romantic comedy rental. Snuggle on the couch and watch the brownie points soar.

2. The Open Road: What’s so special about taking a drive? Everything if you use your imagination. Take your special lady to a nearby town or landmark you’ve never seen before. Re-visit special places and take pictures. There are no boring drives. Only boring people.

3. Game Night: Invite some friends and break out a classic like Monopoly or crank up the Wii and have a bowling night without choking on cigarette smoke. Don’t forget Valentine’s-themed cake and candy.

4. Night at the Museum: Cheesy Ben Stiller flicks notwithstanding, a trip to your favorite nearby hall of art or history shouldn’t cost too much. Combine this with suggestions 1,2, or 3 and make a whole day of it.

5. Insert-an-Idea: We can’t do all the work. Come up with your own offbeat, inexpensive way to show her, by gosh, she’s all right.

Happy Valentine’s Day!

The Young Wealth Team

Get it into your head right now, hopefully as you’re starting out in the grand adventure of adult life, you CAN amass a fortune on your own just as well as a man can. Don’t accept the false limitations of your own thinking or a “glass ceiling.” Smash that sucker and take what you want.

One would hope that in today’s world the outdated view that a woman needs a man to be financially successful would have fallen completely to the wayside. We’re pretty sure that hasn’t happened yet. There are other things a man is good for, which we needn’t get into right now. And that’s not to say a woman can’t want or desire a male life partner. Just don’t think that you need one to survive.

You don’t.

When love does come knocking at the door, you’ll be ready to contribute a healthy portfolio of your own to match that of Mr. Right and what a powerful and financially independent couple the two of you will make.

The Young Wealth Team

What if he gets sick and dies? Income for his family stops immediately.

An alternate scenario involves a person who owns a single hotel that brings in $300,000 per year. This lucky individual hires a management company to do all the work associated with the hotel. He sits back and cashes checks. It won’t affect cash flow if he keels over dead from a bad Waldorf Salad. He could go to the Bahamas for a six month tropical round of binge drinking and the $300,000 is still coming in.

So is a high income the secret to financial success? Not in and of itself. The best of both worlds would be to have a high income and smartly invest it in income generating properties like the afore-mentioned hotel or a handful of residential income properties.

The Young Wealth Team

We know, that’s SO boring. Is having complete financial freedom boring?

If you’re a recent college graduate, this is prime time in your life to get busy investing. Here are some numbers:

1. $10,000 invested at 11% interest for 10 years is $167,220. Not chump change but you’re not going to live a lifestyle of the rich and famous on it either.

2. $10,000 invested at the same rate for 40 years is almost $6 million.

Regardless of which investment vehicle you choose to follow (we prefer the proven superiority of real estate), get busy with it early and often. Squirrel away $10,000 at that interest rate at the age of 20 and you have a guaranteed easy retirement no matter how badly you screw up the intervening four decades. If you continue to resist the power of compounding interest, you deserve to have a coconut fall on your head.

The Young Wealth Team

No worries. You’ll adjust soon enough. The real worry, the one that could blindside you all the way to the poor house, could be the one you haven’t even been thinking about. Are you prepared to deal with the financial side of life as an adult? If your primary source of money education included such theory-mired classes as Statistics, Economics 101, or a random sampling of Marketing and Finance classes, we hate to be the ones to say it but “You don’t know enough!”

The first step is admitting you have a problem. Think about it. Most college business and financial curriculums are based on dusty ideas that don’t amount to a hill of beans when you’re faced with a checkbook that needs balancing. Or how about when you decide you want to be wealthy? Hopefully that decision will be reached sooner rather than later. “No thanks, I’d rather be poor for a while.” Investing would be a good idea but first you need to save money to get started and then what? Jump into the stock market and buy a good mutual fund? Umm, no. You can do better than that and we’re going to show you how to become a financial guru while the age of 30 is nothing but a distant line on the approaching horizon.

The Young Wealth Team

Realistic – straightforward with no beating around the bush. Best fits are civil engineer, electrician, surveyor, computer support.

Investigative – questions any idea without cold, hard facts to back it up. Enjoys scientific, analytical research. Good bets are doctor, professor, librarian, or veterinarian.

Artistic – creative, imaginative, and great problem solvers. Likely jobs are in the arts, architect, editor, or graphic designer.

Social – likes to help people. Look towards nursing, psychologist, mediator, physical therapist, or social worker.

Enterprising – extroverted people who like to work with big ideas and are natural leaders. Try financial service agent, CEO, sales manager/rep, or CIS manager.

Conventional – pays attention to detail. Without these, the world would not run. Accountant, financial analyst, actuary, or technical writer (among many).

You should be able to spot yourself among these six basic personality types. You probably already have a good idea where you land on the spectrum. Matching your personality to a particular job is not a sure bet but it could help you find a satisfying life’s work rather than simply a paycheck.

Good luck!

The Young Wealth Team

1. Only 26% of American teenagers aged 16-19 are employed.
2. 28% of all Americans are not working or in school.

Neither of these numbers should inspire confidence in young people beating the streets to find work both to make ends meet and develop job skills for the future. With laid off blue and white collar workers now competing for the sorts of jobs normally left for teenagers and young Americans, the trickle down recession is in full effect. Obviously, owners are more likely to hire maturity, experience, and availability to work, especially if desperation has driven them to accept lesser wages.

Not to mention that the actual jobs available pool continues to shrink as the recession grinds on. Owners are closing down or trying to make it with fewer employees.

This leaves young people on the outside looking in. It also tends to have an effect on future earning potential. A 2001 study by found that “a six month unemployment spell can reduce future wages by 2.3 percent.” Teens who can’t find work tend have a good chance of turning into adults who can’t find work.

Miracle solution? Sorry, we don’t have one of those yet but a real world financial education is a good start. Stay tuned.

The Young Wealth Team

Plowing ahead – there are hundreds of factors to consider when it comes to cost analysis but let’s focus on a few to get your grey matter going. What sort of venue are you planning for your business? More importantly, which one would be the most profitable? Some choices are retail store, online sales, or sales calls by appointment only. Formulate a budget for each. Consider costs for the venue, inventory, employees, marketing, product, and more. Sit down and compare the results. The cost analysis should be a major part of your decision.

Do you need funding? What sorts of loans, grants, or other sources can you tap into? Will the business be profitable enough to make it worth your time and effort? If you need $10,000 in startup money and only forecast to clear $1,000 in annual profits – it might be time to slam on the brakes on that idea sooner rather than later.

Of course, none of this is set in stone but even a simple cost analysis is better than flipping a coin.

The Young Wealth Team

For starters, take on one project at a time and really pay attention to it. Choose the one that is speaking to your heart the loudest. There will be plenty of time for your other ideas in the future. Why not give each one your undivided attention for a while to give it an honest chance?

Before establishing your business, wouldn’t it be nice to know if there is a need for the service/product or an already established market? These days research is a simple matter. Google a handful of terms related to your idea and look at the sponsored links on the right side of the search results. If there are paid ads there, you know somebody is making money – especially if the ads appear over a matter of months. It’s still up to you to make your business stand out from the competition but at least you know people are spending money in that market.

The human brain is capable of bad ideas as well as good ones. When it comes to business and entrepreneurialism, it’s better to figure out which is which sooner rather than later.

The Young Wealth Team

Technology makes a difference. Rather than standing in line to rip paper coupons out of an easily recognizable book, food stamp benefits are transmitted via small plastic cards that swipe at grocery store counters like any other debit or credit card.

Some conservatives tried to greatly reduce the food stamp program in the 1990’s, but during this decade, President Bush charted a course reversal and made it easier to apply for benefits by classifying it as “nutritional aid” rather than a welfare program.

Traditional poverty stricken areas remain heavy users but previously affluent cities and towns hit by the recent housing bust are catching up fast, including Phoenix, Las Vegas, and a swath of southwestern Florida from Bradenton to the Everglades.

Look around. We are food stamp nation.

The Young Wealth Team

By the way, if you don’t have time to do research necessary to insure your future financial security, we’d like to ask you to hold your left hand up, reach over with your right hand and slap it smartly. Come on! What’s more important than that?

Moving on.

A Target Date Fund (TDF) is a mutual fund designed to meet the “average” investment objectives of a person your age. The portfolio adjusts over time to coincide with the “average” investor of a certain age. Obviously, a TDF cannot take into account your specific life situation, but investing in a TDF is better than spending all your excess cash down at the pool hall or on happy hour drinks at the local pub. Most mutual fund companies can set these up for you, even including automatic monthly withdrawal from your bank account.

A TDF is excessively easy to setup and maintain. If you’re having a hard time getting started with an investment plan, check it out.

The Young Wealth Team

Cooking won't kill you

Entering the work force after college is a great time to develop good budgetary habits. In the beginning, you may not be able to control how much you earn but you sure as heck can get a grip on how much you spend. The following items are a sequel to the recent list of ways to stop the money hemorrhage. Yes, you will probably shriek and curl up in a ball on the floor when first contemplating these changes but give it a change to bounce around in your cranium.

1. Kill the Friday afternoon/evening Happy Hour. In case you haven’t noticed, even the cheap drinks are expensive, especially if you end up with a DUI on the way home. Why not limit yourself to one drink, gather at a friend’s house, or give it up completely and spend the extra money on a gym membership instead?

2. Speaking of gym memberships, if you haven’t noticed, March attendance is but a shadow of January. Don’t fall for the high-pressure, multi-year sales pitch. If there’s even a smidgin of a chance you’re going to bail on workouts, opt for the month-to-month plan instead.

3. Tony Stewart driving habits. Jack rabbit starts, slamming stops, and speeding can decrease your gas mileage by 30%. Try the speed limit in town and 60 mph on the highway. Sure, everyone will hate you for the slowpoke that you are but drop that extra moolah in a savings account instead. Take that, speed bunnies!

4. Shoes. How much footwear does one human being need? Probably less than you might think.

Put one or all of these suggestions into practice and you’re going to be light years ahead, financially speaking, of your boozing, speeding, shoe abusing, lazy compadres.

The Young Wealth Team

To some, only a Bill Gates type fortune is acceptable. For others, we can lower the bar a bit and phrase it something like:

“A comfortable feeling that your financial resources will be adequate to fulfill any needs you have as well as most of your wants.”

Are you looking to have a nest egg saved and invested and absence of debt? More? Less? Whatever the ultimate answer is, only YOU can define it. The Jason Hartman Foundation believes you need to have some idea of where you’re going before you start off. If you’re just finishing school or find yourself in the early stages of real-worldism, take a moment and think about what financial success means to you. Seriously. Get a cool beverage, an adult beverage if you must and are of legal age in your state, then sit down and think about it.

One thing we can say with almost complete certainty. If you haven’t taken the time to define financial success, how the bloody heck are you ever going to know when you get there?

Just our opinion.

The Young Wealth Team

1. Smoking: Coffin nails cost the serious smoker about $1,600 yearly. Not to mention turning your lungs the consistency of the track at Daytona after a long day of racing. If you want to ever be taken seriously as a thinking human being, give up this habit.

2. Drop the pop: We talked about this one already. Daily liquid sugar overdoses are about as good for your immune system as smoking is for your lungs. Have you noticed how expensive pop drinks are at your favorite fast food franchise?

3. Lattes: This fancy caffeine injections costs about $4. Is this a good business decision for the young wealth builder? We say no.

4. Turn off electronics: Ignore the computer geeks. It saves noticeable money to switch off the gadgets before going to bed or when you’re gone. Opt for energy star models when you can.

5. Television: Do you really watch all those extra channels in the nose bleed subscription and, if so, should you? Go with the basic package or, better yet, none at all. Crack a book and find some real entertainment. Seriously, you won’t die if the television is off.

That’s probably about all the budget busting a person can be expected to handle in one sitting but we’re not done yet. Come back tomorrow, if you dare, for five more habits that are killing your budget.

The Young Wealth Team

In case you have Attention Deficit Disorder, are busy cramming for finals, or simply partied too much last night, here’s the short version. Stick it in your brain somewhere where you can get at it in the coming years.

In this example, we’re going to pretend like two surfer dude friends, Bill and Ted, have $10,000 to invest. Bill’s been drinking the Wall Street Kool-Aid and puts his money into an S&P Index fund. Ten years later, his nest egg has grown to $17,000. Nice but not too impressive. That’s less than 10% a year. Where we come from, that’s small potatoes and certainly not going to make you wealthy.

Ted, advanced leverage expert that he is, uses his $10,000 to put 10% down on a house and property worth $100,000. Even in the terrible California market, ten years later his property is worth $159,000. He’s only been making interest payments, which were covered by rent collected from tenants. Ted sells the house, pays off the $90,000 loan, which leaves him with $69,000. Subtract the original $10,000 he used to get started and he’s got a cool $59,000 for his efforts.

Compare Ted’s $59k profit to Bill’s anemic $7k. That, boys and girls, is what leverage is all about.

The Young Wealth Team

It’s no crime. Just reality. Cheap comfort foods are in (Spam, Kraft Macaroni & Cheese) and expensive restaurants are out. The driving forces behind this new deal in American society are higher food prices and the recession. According to the Chicago Tribune, white flour and dried beans are hot sellers as more people cook at home.

Recession or not, scaling back your “eating out” fund is a great way to save money for investing. Do you seriously need to eat out twice a day every single day? Have you ever sat down and done the math about how much it costs? Try trimming yourself back to a single daily convenience store Mega Gulp. Even better, buy drinks from the grocery store and pack them with you to work.

Here’s a simple example. Two drinks per day at $1.50 each add up to nearly $100 a month or $1,200 a year. By cutting your consumption in half, you can add $600 every year to your investment fund and improve your health at the same time.

What a deal!

Now stop thinking about it and do it.

The Young Wealth Team

1. Interest – Surprise! We included this in both sections. While you can’t control the interest rate, you can control whether you pay it or not. You can also take extra care to develop a great credit score from the very beginning so you don’t get stuck paying outrageous rates just to get a real estate loan. In fact, with a good enough credit score, banks will be begging you to borrow from them.

2. Time – We can’t repeat this enough. Start early and invest often. Even if you don’t have the knowledge to implement a sophisticated investment strategy right out of school (chances are you won’t), you will be light years ahead of others who wait until they are 30, 40, or older before getting serious about it. The leverage you gain by an early start could put you well on your way to millionaire status even if nothing extraordinary happens.

3. Education – We all can recite stories of high school or college dropouts who amassed incredible fortunes. Yes, it can happen. Odds are, it won’t. All the studies show that higher education means higher income. If you have completed or are working toward a degree right now, good job! It should pay off big time.

4. Career – Self explanatory. Don’t wait until you’re a senior to start thinking about this. Get busy as a sophomore or junior networking and attending informational interviews. Figure out what you want to do and go get it!

5. Benefits – This can be as important as salary, especially in this day and age of the incredible dwindling benefit package. Things like medical insurance, personal leave, sick leave, vacation leave, marital counseling, legal services. If you don’t have it as a benefit, you’ll be paying it out of your income and your salary will go down accordingly.

All this stuff is under your control. Choose wisely.

The Young Wealth Team

You are going to get car insurance, right? Don’t be the uninsured motorist goober who messes up the system for everyone else. To the insurer you are a “set of risks” that will determine the premium you’ll pay if they decide to insure you at all. Yep, sometimes they turn people down as being too high of a risk.

Shop around. There can be a great deal of price difference between insurers, even for basically the same coverage. It’s easy to comparison shop online to narrow down choices, then call around to nail down details. Remember it’s not ALL about price. Pay attention to the insurer’s reputation for claim service and financial stability.

Most states have a minimum level of insurance that drivers are required to carry. You might consider bumping up your coverage. Often the price increase is not too drastic. Increased coverage could actually pay to have your car repaired if you cause an accident. This could be very handy if it is your only means of transportation. Lastly, don’t forget to ask for discounts. Insurers might offer a variety of discounts for safe driving, good grades, and more. You’ll never know if you don’t ask.

The Young Wealth Team

Federal Reserve Building - spooky!

Sorry, but, in case no one ever told you, there are some things related to your eventual financial success you cannot control. At least until you get yourself elected Galactic President for life. Even then, you might have trouble controlling the following factors. Some things are simply too amorphous to yield to dictatorial whims.

But don’t get too bent out of shape. Later we’ll talk about the things you can control. Here’s what you can’t:

1. Business Cycle – The eternal cycle of expansion, recession, and recovery are not anything you can do very much about. It’s important and affects lots of other things but, as Mr. Obama is finding out, does not lend itself well to ham-handed intervention.

2. Gross Domestic Product – Reflects the economic activity and financial health of the nation. Less than 2% growth is anemic. More than 4% is vigorous.

3. Index of Leading Economic Indicators – This average of 21 key economic components is intended to predict the near term future direction of the economy. When the index falls for three straight months, we associate it with slow growth.

4. Consumer Price Index – The CPI index measures the prices of an array of consumer goods and services. The eight major groups are: food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services.

5. Inflation – As inflation goes up, purchasing power goes down. Most investments get killed by inflation. A critical part of your financial literacy is about the unique method of investing that actually thrives in inflationary times.

6. Interest – This is the percentage you will pay to borrow money. Unless your last name is Bernanke or you happen to be one of the puppet masters pulling his strings, you can’t do much about this either.

But never fear! There are plenty of things you can control that will set you on the road to incredible financial success. We’ll talk about them next time.

The Young Wealth Team

But is a foreclosure a good idea as an investment opportunity? Not in every case. The house might be trashed but, if it’s not, you might want to take a closer look.

The first step is pre-foreclosure. During this period you can offer to buy the property outright from the homeowner. You have time to research the title and condition of the property and could acquire it at a price 20% to 40% below market value. If there is no interest during the pre-foreclosure period, the property goes to public auction.

At the auction, the opening bid is set by the lender holding the mortgage and is usually equal to the outstanding balance on the loan plus any additional fees associated with the sale. If there are no higher bids, the attorney for the lender buys the property and it is considered bank owned. While public auctions can offer incredible bargains, you will be expected to pay cash at the time of sale (or within 24 hours) and will have little opportunity to research the title of condition of your prospective purchase.

Obviously, this is not an investment technique for beginners but, at some time in your career, you may be interested in taking a closer look at investing in real estate through foreclosures.

The Young Wealth Team

Step 1:
After three to six months of missed mortgage payments, the lender orders a trustee to order a Notice of Default. This officially notifies the homeowner that they are in default and starts the clock ticking on a reinstatement period, known as pre-foreclosure, that runs until five days before the home will be auctioned off.

Step 2:
During pre-foreclosure the homeowner can sell the house to a third party. The benefit to this is it allows them to pay off the loan and avoid having their credit tainted with a foreclosure. A foreclosure will follow you around for about ten years. If the default isn’t corrected within three months, a foreclosure sale date is announced. The Notice of Sale is recorded at the County Recorder’s office, posted on the property, sent to the homeowner, and published in local newspapers.

Step 3:
Just like in the movies, the property is auctioned off to the highest bidder on the county courthouse steps. The transaction must be made in cash within 24 hours of the sale.

And that, ladies and gentlemen, is how foreclosure works.

The Young Wealth Team

Here’s a tip – DON’T!

For various reasons, getting a cash advance on your credit card is even more of a financial trap than using it normally. There are two ways credit card companies figure out how much to gouge you for a cash advance. The first is to charge a percentage that normally ranges from 1% to 4%. The more you withdraw, the more you pay. The other method is to charge a flat fee, say $10. Get an advance of $10 or $100 and they still charge you the same.

Forward thinking companies have now realized they can combine both methods to profit from your terrible choice even more. See how nice they are? Another little nugget to tuck away in your brain is that the interest charged on a cash advance is normally higher than for simple credit transactions. If you usually pay 15% and decide to obtain a cash advance, they might very well jack the interest rate you pay on the withdrawal up to 25% or more.

The real message is this – almost ANY strategy would be better than a credit card cash advance. We wouldn’t suggest taking your roommate’s pet hamster to the local pawn shop but maybe it’s time to swallow a little pride and ask good old Uncle Buck for a small loan.

The Young Wealth Team

It doesn’t have to be that way, kiddies. Not if you get started early saving and investing for your “I quit!” money.

“I quit!” money is exactly what it sounds like. It’s when you reach the point in life that your investments generate enough income all by themselves to live on without the hideous 9 to 5 routine. Start saving early, get educated financially (not with a degree – you need to know what actually works), stick to it, and that magical “I quit!” yelp might come along sooner than you think. So, it’s not necessary to hate and dread the adult world of work. It’s not worth slinging burgers at Mickey D’s until there are no cows left just to avoid it.

At the Jason Hartman Foundation and through the increasingly popular Young Wealth Show, we’re going to keep preaching the financial gospel until every young person hears and realizes that financial independence definitely is within reach of everyone who takes the right action. Say you just turned 20. Put your nose to the grindstone and get serious with your investing. You could be saying “Say long, adult job!” by the time you hit 30, maybe sooner.

Sound good?

We thought so.

The Young Wealth Team

Introduction

Life as a young adult can be very confusing and chaotic.  In the midst of completing your formal education and beginning a career, there is a constant level of uncertainty concerning what will transpire in the future.  At the Jason Hartman Foundation, we are specifically concerned with helping young adults develop the necessary skills for financial success.  These principals are encapsulated in the three C’s of Financial Success; Credit, Capital, and Competency.  These principals serve as the fundamental building blocks not only for financial literacy, but for creating long-term success.

The 3 C’s of Financial Success (Credit, Capital, Competency)

The achievement of long term financial success will require the development of three key attributes.  The first is Credit, which will be necessary for obtaining loans, lines of credit, and can even have an impact on your insurance rates and employment prospects.  The second is Capital, which is the money to invest in future opportunities.  The final and most important factor is Competency or financial literacy.  The first two C’s can be developed over a few years, but competency and financial literacy must become a lifelong endeavor if you wish to achieve long-term success.

The First C – Credit

Credit represents your ability to borrow from banks and financial institutions at attractive interest rates.  Most people only pay attention to their credit for the purposes of buying a home, but there are many more important roles that your credit score plays.  One of these roles is to influence your insurance rates.  Insurance companies frequently use credit scores as a proxy for the risk profile of customers, since there is a higher correlation between customers with poor credit engaging in risky behavior than customers with good credit.  Furthermore, some employers will also pull the credit score of applicants to gauge the extent to which they are responsible with their finances.

Then we get to the ‘real’ advantage of strong credit . . . namely the fact that it allows you to purchase leveraged investment properties with an interest rate that is fixed for three decades.  The reason that this is such an advantage is because leverage allows you to control a much greater asset base than can be purchased with cash alone, and a fixed rate mortgage protects you against price inflation in the future.  With that being said, let’s take a look at how leverage and inflation work.

The way that leverage produces benefits can be demonstrated with some relatively straightforward arithmetic.  Let’s suppose that you purchase an investment property worth $100,000 with cash.  If the value of that property increases by 10%, you will have earned $10,000 on the $100,000 that you initially invested.  Now let’s say that you purchased the same $100,000 property with $20,000 (20%) down and $80,000 borrowed from the bank.  If the value increases by the same $10,000 (10%), but you only have $20,000 invested which means that your return on investment jumps from 10% to 50%!

There is a very important thing to keep in mind with leverage though, and that is the impact of large negative cash flow or price disruptions.  When properties are bought for speculation, and not rented out to tenants for income, it means that the owner of the property must ‘float’ the interest payments until the property can be sold.  If market values decline, and the property is no longer worth what you paid for it things can get very sticky.  Consider what would happen if you purchased a $100,000 property with 100% financing and the value went down by 10%.  Not only are you on the hook for your monthly mortgage payments, but you owe $10,000 more on the mortgage than your property is worth!  One of the best ways to mitigate these risks is to choose investments that generate cash flow to cover your mortgage payments.  This will give you the flexibility to ‘wait out’ declines in market value while the tenants pay for your mortgage with their rent revenue and you can choose to sell when values are high instead of being forced to sell when values are depressed.

Now let’s think about inflation for a bit.  The way that inflation comes about is when the government expands the supply of money in circulation faster than the rate of productivity growth for goods and services.  What happens in this scenario is that the amount of ‘money’ circulating goes up while the amount of products and services stays the same or goes down . . .  more money chasing less goods can only result in higher prices.  When the prices for goods and services go up, it frequently results in higher interest rates as investors become unwilling to purchase bonds at rates of low rates of interest that are being eroded by inflation.  When you take out a fixed-rate mortgage on an investment property and inflation strikes, it results in higher home values, higher rents that your tenants pay to you, but exactly the same mortgage payment that you pay to the bank!

The Second C – Capital

When talking about business and investments, the term ‘capital’ is used to describe the money, equipment, or other tools that are used to produce products and services.  In the context of personal investment, capital represents the amount of money that you have available to purchase assets that can generate cash flow and appreciate in value.  There is an old cliché that states “It takes money to make money” and in many situations, it is very accurate.  Any investment you make will require some form of capital.  In some cases it will be your money, in other cases it will be money that you have borrowed, in many cases it will be your time, and in certain situations it will be funds from investors.  Banks and investors typically want you to have some of your own money at risk so that they know you have a vested interest in success.

So what is the best way to build-up capital?  If your surname is something like Rockefeller, Vanderbilt, Hilton, Carnegie, or Kennedy then capital may not be much of a problem.  However, for the other 95% of us out there we will need to figure out ways to build capital on our own.  The most straightforward way to build a base of investment capital is to save a portion of your salary (frequently 10%) and place it into a separate account that will be used exclusively for investment.  Another thing that many people do is use the equity in their home for investing.  Taking out a line of credit on your house may give you the necessary capital to begin an investment program after you have become educated in different investment options and strategies.  A third option for building capital can be to borrow it from friends and family or take on partners.  This is frequently the most tenuous of strategies, since partnerships can be difficult to manage.  Jason Hartman is fond of saying that the hardest ship to sail is a partnership.  In the end, this is for you, the investor to figure out.  Each person needs to find the solutions and strategies that are best suited to their situation.

Another thing that many people frequently ask is how much capital they need to accumulate.  The answer to this question is highly dependent on the type of investments you will be undertaking.  In many cases, packaged investments with low capital requirements such as mutual funds tend to offer relatively average returns.  Conversely, investment ‘deals’ such as foreclosure rehabilitation may require more capital and will definitely require more expertise.  It is also important to bear in mind that some phenomenal deals require very minimal capital and some deals with large dollar requirements can be big losers.  Ultimately, it is your responsibility as the investor to evaluate which investment opportunities are best suited for your level of expertise, experience, and capitalization.

The Third C – Competency

The third and most important of the three C’s is competency, or your financial literacy.  In practical terms, this represents the most valuable capital that anybody can possess . . . namely the brain sitting behind their eyes and between their ears.  Credit and Capital are necessary tools, but they have no inherent wisdom, no soul, and no creative intelligence.  Both of these ingredients require a competent person to build them into investments that produce things people value.  The person who builds these deals could very well be you.

Another way to communicate the notion of competency is financial literacy.  Specifically, the knowledge of how financial products and processes work.  Becoming educated in the workings of investment and finances allows you to make intelligent decisions.  It will allow you to quickly determine what kinds of deals represent the best opportunity and which are too risky or generate returns that are too low for serious consideration.  It will help to guide your everyday decisions toward financial success.  Financial literacy helps to significantly limit your risk of failure.  This does not necessarily mean that you will never lose . . . investments involve risk, and sometime luck aligns against you.  What it does mean is that you will be investing with full awareness of the risks and rewards so that intelligent decisions can be made.
Thus, the most import concept to internalize is that one should become educated before engaging in an investment program.  Deals come and go, but the knowledge necessary to assemble and execute deals is crucial to successful investing over the long-term.  Practically speaking, this means that you will probably be doing a lot of studying, research, and reading before initiating your first investment.  Sometimes it can be difficult to be patient while absorbing the necessary education, but always remember that there are two components to success . . . knowledge and action.  Knowledge without action becomes nothing more than expensive ‘infotainment.’  Action without knowledge is extremely risky, and likely to produce spectacular problems.  Those who realize financial success build their knowledge base, and then act on it.