More Reasons to Keep Contributing to Your 401(k)

I found this article on Money, where a concerned employee wanted to know if he should cut back his 401(k) contributions and invest the difference elsewhere. You would miss out on being able to contribute your money pre-tax and the tax deferral can lead to greater growth over the years. To access the full story, just click here.


Wishing You Wealth in all its Greatest Forms

Alex

New Home Sales Rise in September

This just in...New home sales showed strength in a rise of 23% after showing a disappointing decline of 30% in August. The law of supply and demand states that if prices drop enough, people will buy. The profit margin for home builders have dropped significantly, yet interested buyers are waiting to take advantage of the weakness in home prices.

For more information and the complete story from Xinhua click here.

Wishing You Wealth in all its Greatest Forms

Alex

National Assn. of Realtors - Existing Home Sales up 5.5%

It looks like there is some good news in real estate (for once). The affordability factor of homes is improving leading to buyers stepping off the sidelines. To read the full report from Realtor.org click here.

In Orange County, the median sales price has dropped to 2003 levels. This is partially the result of homes decreasing in value coupled with the fact that financing remains much easier to obtain (and afford) for properties below $500,000. To read the OC Register article, click here.

Wishing You Wealth in all its Greatest Forms

Alex

"Stop Contributing to your 401(k)"

I am not advising that, but it's what I overheard while out at dinner this past Saturday. "If you put your money in your 401k, you are just going to lose it anyway." When my grandfather was still alive he told me to do the opposite of everyone else and I would be wildly successful. I have found that to be good advice time and time again...In the beginning of 2000, everyone was talking about the secretary at Netscape who became a millionaire...By April, the dot com companies were known as the "dot bombs." A financial commentator once said that "when people are greedy, you should be fearful and when people are fearful, you should be greedy."

Many people have seen the values of their 401k's drop in value, so instead of wanting to contribute more, they want to contribute less or discontinue contributing altogether. We must follow the golden rule of investing "buy low, sell high." Unfortunately, our emotions can play dirty tricks and take us to Jerry Seinfeld's "bizarro" world...where up is down and down is up. Most investors buy high and sell low since they allow their decision to be based on popular sentiment and not logic. When everyone is talking about the great performance of a particular stock, they buy and when others get scared, they sell. They have just bought high and sold low. The law of averages tells us that to create an average, you need both high numbers and low numbers. If the stock market has outperformed dramatically, then it may be time for a period of underperformance.

It's believed that 20% of employees have ceased contributing to their 401k plans in the last year. If you decide to halt contributions until the market stabilizes, then you are saying that you would rather pay higher prices for stocks and you spurn the idea of taking advantage of lower prices. It's normal to allow our fears to play a part in our decisions, but logic needs to lead our actions toward greater success.

Want to know what other people are thinking? Here is a poll from Yelp

Wishing You Wealth in all its Greatest Forms

Alex

College and Beyond...

Many college seniors will be graduating this upcoming June, but there are stark realities that need to be dealt with. They know that with widespread layoffs, that the job market is going to be more competitive...possibly leading to fewer jobs and reduced pay scales. Yet, the decision to continue on to attain graduate degrees are going to be more difficult as well. The well has dried up for many student loans and taking on the additional debt of student loans seems frightening giving the current economic environment. Parents who intended to pay for their children's education are now thinking twice since the stock market has impacted the value of their 401(k) and IRA's. The boomers have watched their net worth decrease by $2 trillion dollars between home value and stock market prices.

The truth is that in difficult economic times, to get the job of choice, a person needs as much education as possible. Prospective graduate students should do everything in their power to continue on with higher education. There are still millions in grants and scholarships available to those who seek them out. With the birth of the internet, applying for a grant is as easy as going to Grants.gov by registering and applying.

Resources are always available for those committed to achieving more.

Wishing You Wealth in all its Greatest Forms

Alex

Slowing Down with Traffic School

Yesterday, I attended traffic school. I received a speeding ticket for going 75 mph on the freeway 3 weeks ago at 6:00am. At first, I felt slighted and tried to rationalize that others were going 80-90mph, so they should be getting tickets. Then, I tried to dismiss the idea that I was in the wrong since there were very few cars on the freeway at this time in the morning. The bottom line is that I was going above the speed limit and I need to take responsibility for my actions. Anyhow, the Highway patrolman was very nice and nearly apologized for giving me the speeding ticket.

I was dreading traffic school since I have been so busy these last few weeks. You might be surprised, but it was the best $57, I have spent in a long time. The instructor was kind and had a good sense of humor. During our 8 hours together, he told us about how his life has changed over the years. He used to have “road rage” and be in a constant hurry. He read us a story from a former student that tried to get in front of another car, but ended up losing control and veering into the bike lane and hitting a couple on bicycles. She ended up surviving, but her husband passed away from this accident. The truth is we all lead busy lives filled with things to do and we often try to minimize the time we spend on the road by speeding, cutting in front of other cars or driving erratically. We drive so often that we forget how large of a responsibility it is. Many people are in a rush and bring their stresses on the road.

I hope that during this holiday season, we take the time to focus on what’s really important, getting to our families and friends safely.

Wishing You Wealth in all its Greatest Forms

Alex

Road to Someday…

We are living in difficult times. House values have fallen, the stock market is at multi-year lows and there is reduced access to credit. Home prices are much lower in Southern California then they have been in years. The S&P 500 is down (32.15%) year to date, reflected in quarterly 401(k) statements nationwide. I have stellar credit, but was told that my credit line would be reduced by 25%. I knew this day would come and I am prepared for it.

Most people talk about saving, but never do it. The truth is that to become financially successful, either you have to work harder or your money has to. I choose my money since I only have 24 hours a day and I would much rather spend it with family and friends than working. Your choices are saving more today or working into your “golden” years. People in their twenties often feel that they have plenty of time to save later so they spend freely. Then, in their thirties and forties, money becomes tight since they are now paying for a new home or raising kids. In their fifties, they discover that they have less than 15 years (only 780 week) until they retire. At this point, it usually takes too much money create an adequate retirement fund. This means that living the retirement of your dreams will be nearly impossible.

Retirees often look back and are disappointed that they didn’t begin saving and investing when they were younger. If you develop good financial habits during these difficult times, it will pay dividends and serve you well into the future.

Wishing You Wealth in all its Greatest Forms

Alex