The 5 Best Pieces of Financial Wisdom From Warren Buffett

The "Oracle of Omaha" truly lives up to his name.

Between 1964 and 2014, the S&P 500 increased by a whopping 2,300%. On the other hand, the stock price of Berkshire Hathaway, the company of which Warren Buffett is chairman, president, and CEO, grew an even more mind-blowing 1,800,000% over the same period.

This performance cements Buffett's reputation as the most successful investor of the 20th century. Here are his five best pieces of financial wisdom that you should take note of.

1. Invest in Stocks

In his 2012 letter to shareholders of Berkshire Hathaway Inc., Buffett wrote "American business will do fine over time. And stocks will do well just as certainly since their fate is tied to business performance."

Buffett's optimism in the American economy is backed up by strong facts. Remember that stocks still managed to return 2,300% between 1964 and 2014 — despite wars and recessions. The takeaway is that the average investor shouldn't be discouraged by the normal ups and downs of the U.S. stock market. Invest in stocks and do so in the long run. In Buffett's own words, "if you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes."

2. Don't Chase "Winners"

Everybody is looking to buy low and sell high.

For example, if you had purchased AOL stock at a rock bottom price of $12 per share on September 1, 2011, you would be jumping with joy at AOL's May 2015 price (now over $50 per share due to Verizon's acquisition of AOL). (See also: The 4 Greatest Stock Reversals in the Last Decade)

However, Buffett recommends that the average investor not play stock picker. Instead, he recommends that the average investor invests in a low-cost S&P 500 index fund.

Keeping true to his own advice, Buffet laid out in his will that his trustee puts 10% of the cash left to his wife in short-term government bonds and the remaining 90% in Vanguard's S&P 500 index fund. That's as simple as it gets.

In simple terms, you already have a day job, so stick to it. You'll save a lot of money on trading fees, too.

3. Avoid Get-Rich-Quick Schemes

In the book The Tao of Warren Buffett, you can find many inspiring sayings from The Oracle of Omaha. Here is a great baseball analogy from Buffett about the stock market:

"The stock market is a no-called-strike game. You don't have to swing at everything — you can wait for your pitch. The problem when you're a money manager is that your fans keep yelling, 'Swing, you bum!'"

Past stock-picking performance is not a guarantee of future success. Take any five-year period and only 20% to 35% of actively managed funds beat the benchmark for their category. Resist the temptation of jumping on any "hot investment," particularly when you don't understand what the investment is about. (See also: 5 Investors With Better Returns Than Warren Buffett)

"When promised quick profits, respond with a quick 'no'", Buffett suggests.

4. Pay Yourself First

Roughly half of Americans are saving 5% or less of their incomes. Even worse, 18% of us are not saving at all.

The main problem is that most people are going the wrong way about saving. Most of us first pay rent or mortgage, then take care of bills and debt payments, and after that spend on dining out and shopping. With such a strategy, it's no wonder that 18% of us aren't saving.

"Don't save what is left after spending; spend what is left after saving," recommends Buffett. Just like your budget based on your net paycheck after federal and state taxes have been applied, you need to start planning on your net paycheck after savings.

There are three key ways to pay yourself:

• Retirement account: Participate in your employer's retirement plan or set up your own, such as a Solo 401(k), to build up your nest egg and postpone your tax bill until retirement.
   
• Savings account: Set up an automatic monthly deposit into your savings account. Take advantage of high-yield online savings accounts, such as Ally Bank and Capital One 360.
   
• Emergency fund: 26% of Americans have no emergency savings.

Pay yourself first by automatically funding your retirement, savings, and emergency fund accounts. Only start paying bills and spending on necessities after you have taken care of these three key items.

5. Pay Down Debt

Of course, to be able to save, you must first take care of debt.

In another letter to shareholders of Berkshire Hathaway Inc., Buffett warned, "Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks."

The "chronically leaking boat" that Buffett is referring to is living paycheck-to-paycheck, which 76% of Americans are doing. On the other hand, the "patches" are expensive forms of financing, such as car and payday loans, and withdrawals from retirement accounts. (See also: 25 Dumb Habits That Are Keeping You in Debt)

Robbing Peter to pay Paul will catch up with you. For example, the more you treat your 401(k) as an ATM, the bigger the financial hole that you'll build. A study of borrowers from 401(k) plans shows that 25% of them took out a third or fourth loan, and 20% of them took out five or more loans. Borrowing from your nest egg too often turns into a vicious and expensive cycle.

If you think that paying down that huge credit card balance is near to impossible, think again. One couple was able to pay off $48,000 in debt over 2.5 years and a young entrepreneur paid off $40,000 in student loans by age 24. Any debt monster can be slain no matter how scary it may appear. All it takes is consistency and time.

What are other Buffett-isms that have improved your financial situation?

Source:http://www.wisebread.com/the-5-best-pieces-of-financial-wisdom-from-warren-buffett

5 Traps that Will Rob You of Your Financial Peace

'There is no trap so deadly as the trap you set for yourself.'

Financial traps lurk around every corner. We fall into these traps when we become a little too smart in how we manage our money. Perhaps we think we can get a great deal with 0% financing. We have a spending plan but don’t really follow it each month (spending is under control). Or we buy in advance, borrow from our savings with the good intention of paying ourselves back. While on the surface these moves seem harmless, dig a little deeper and you’ll see how they can rob your financial peace.

0% Financing Deals

I know 0% financing seems to make sense and on the surface seems like a great deal! After all, you’re not paying any interest unless you miss a payment. A lot of people use 0% financing for TVs, appliances, and cars. We’ve certainly used 0% financing for items in the past. However, this is never as good of a deal as it seems. 0% financing is still debt no matter how you look at it. You’re locked into making payments every month until your payoff date and there are typically big penalties if you miss.

The biggest problem with this type of financing, or any financing really, is presuming you will always have the money to make the payments each month. The bigger the payment, the bigger the presumption you’re making. Surprise expenses come up from time to time for all of us and that’s just a fact of life. If money is tight, you might be forced to miss a payment or have to put that surprise expense on a credit card because of your 0% payment obligation. Forget about 0%, avoid the temptation, and simply consider whether or not you want the debt hanging over your head.

Not Following a Spending Plan

We create a budget to plan our spending each month and it would be ridiculous to pretend that we’ll always stay within our budget. As good of a planner as we may be, there are still going to be times we spend a little more than anticipated. Maybe because we bought more groceries than usual or gas prices increased. There are many reasons. But if we consistently ignore our spending plan and don’t correct overspending problems, we’ll dig ourselves into a hole that can be difficult to get out of. Too much eating out? It will eventually catch up. We’re either forced to take money from another budget category to keep our spending in balance or use a credit card to make up the difference. Otherwise, we won’t have the money to meet other expenses. Don’t beat yourself up about overspending a little, but don’t let it run out of control either. Create a plan so that you have a plan for your money and your money isn’t spending you.

Borrowing from Savings

Borrowing from savings is easy to do sometimes. Perhaps you’ve been told you’re getting a work bonus, but you won’t receive the money for a couple of months. Anyone remember Clark Griswold presuming upon the future and purchasing his swimming pool in the movie, Christmas Vacation.

It’s easy enough to spend ahead from savings and then some. But the problem is using money today you may very well need tomorrow. Again, life happens and we all need our savings from time to time, right?

Things get really complicated when you have to put new expenses on a credit card because you’re waiting for the future money to pay back your savings. Borrowing from savings gets more complicated when you borrow based on an assumption that you’ll earn the extra money later.

What happens if you don’t earn that money? Again, you’re forced to swipe a credit card to meet expenses!

Buying a House with Little Money Down

The home of your dreams is certainly enticing, especially when you’re out touring homes on a Sunday afternoon. The bottom line here is that we’ve learned that a house isn’t necessarily a safe investment. It’s subject to economic swings just like the stock market. So, not having at least 20% down for a house potentially costs you more than monthly PMI and a higher monthly mortgage payment.  Should our economy go into a recession, you risk being upside down in your investment and either having to short sell or foreclose if you need to get out of it.

Play it safe and rent until you can save for a 20% down payment. There is no shame in renting and having more flexibility, less maintenance overhead, and perhaps a more desirable location. Long term, buying a house is a great move, but step into it with financial sense and control dream house emotions.

Not Having a Least $1000 in Savings

“Make sure you have saved at least 6 months to a year in your emergency savings account!” The advice goes something like that. Honestly, I appreciate this advice from many financial gurus, but I sort of snicker when I hear it. I agree with it, don’t get me wrong. Sure, save, save, and save to cover your expenses in the event of a job loss or illness. Cover yourself for emergency situations. But truthfully, Americans have a hard time saving, especially, this much. If it’s within your means, please do so.  Work hard to put away excess cash and find ways to save money. But, focus on one goal first: save $1000. I’ve met some emergency situations over the years and honestly, most of them are fundable at $1000 or less. I’m not suggesting that’s all you should have, but you’re going to meet an emergency here or there and $1000 is the minimum you need to have stashed to keep the financial peace.

All these things are certainly easy traps to fall into. Believe me when I say my wife and I’ve experienced every one of them and they’ve definitely robbed us of our financial peace, creating some stress and worry.

What do you think about these traps and what traps have you experienced?

Source: http://ptmoney.com/traps-that-will-rob-you-of-your-financial-peace/

4 Things You Can Gain By Not Buying That Chanel Handbag

 Chanel Handbag

A friend hailing from overseas once commented that she was amazed to see so many genuine Chanel handbags being toted around on the MRT in Singapore. In fact, most of my female friends have at least one bag from Chanel, costing about $5,000 to $7,000 a pop.

And no, most of them aren’t the daughters of tycoons but middle-income saleswomen. Now, nobody’s judging, but am I the only one who thinks it’s weird that to so many Singaporeans, $5,000 represents a chance to buy another Chanel bag… and not the chance to go on sabbatical for a month or two? Here are 4 things you gain by NOT buying that Chanel handbag:

1. Less stress

One of my friends, whose modest handbag collection is worth at least $20,000, tries to save money by having only two vegetable dishes with her economy rice at lunch. While her salary is above the national median, she is constantly stressed out by the rising cost of living. Because seriously, who isn’t?

But that’s the whole point why you might want to not go out and spend all your money on a Chanel handbag. If my friend could trade her Chanel 3.55 for cash right this minute and put it towards her emergency fund or invest it for retirement, she might just find herself feeling a little less pessimistic about the future.

2. Early retirement

Despite the general consensus that the average Singaporean citizen is pretty much doomed to put his nose to the grindstone well beyond retirement age, it seems that many do little besides complain.

Just imagine you hadn’t spent that $5,000 on a Chanel handbag. Instead, you invested the money at a rate of 5% per annum. In 30 years’ time, thanks to the power of compounding interest, that $5,000 would have become… $21,609.71. If your handbag cost $7,000, your investments would have ballooned to $30,253.60.

Now, if you spend $2,000 a month, that means that one Chanel bag could be making you retire around 1 year later. Is a Chanel bag really worth an extra year of toil? You be the judge.

3. More free time

While Singapore has its fair share of billionaires (and children of billionaires), many average income earners have Chanel bags, too. Assuming you earn an above-average salary of $4,500, it means that a $5,000 to $7,000 Chanel handbag is worth more than one whole month’s worth of salary.

Instead of spending 1-2 months’ worth of salary, you could have taken an entire month of unpaid leave to go see the world or just rest your tired body, no doubt overworked from having to toil to fund all those Chanel bags.

People often look enviously at young people who take time off in between jobs to go travel the world or pursue their hobbies. Well, if you held off on buying that high-end designer bag, you would technically have saved enough money to survive for at least a month or two without being paid.

4. Spending money on experiences

As much as it lets you channel your inner Audrey Tautou (or so you wish), that Chanel handbag isn’t going to make your life more interesting. So the next time you complain that there’s nothing to do in Singapore, think about what you could have done with the money instead of buying another bag.

Here’s what $5,000 can get you:

• 3 years of unlimited classes at Pure Yoga, probably the poshest yoga studio in Singapore
• A high-end DSLR camera + lenses and accessories +  a full suite of photography classes
• 1-year unlimited membership at Evolve MMA gym + full set of equipment and accessories
• Flight to Australia + hotel stay of 3 nights + 10 skydives (if you’re really that into it)
• A years’ rent in a luxurious Bangkok apartment
• 10-weekend trips to Bali including flights and stays at luxurious resorts

Do you have a Chanel handbag? Why or why not?

The post 4 Things You Can Gain By Not Buying That Chanel Handbag appeared first on the MoneySmart blog.

10 Easy Ways to Simplify Your Life

   I'm grateful for the simple joys of life

We live in a world where modern lifestyles pull us in all directions. It’s no wonder we are overwhelmed and stressed out by our busy lives and cluttered homes.

UCLA researchers even wrote a book on the subject, “Life at Home in the Twenty-First Century: 32 Families Open Their Doors,” and found many families had garages too full to accommodate cars, backyards that are never used, and mothers with elevated stress hormones.

If you’re ready to step off the hamster wheel, here are some basic strategies to simplify your life.

1. Consolidate accounts

It’s hard to say no to the $100 bonus for opening a checking account when the new bank comes to town. Or maybe you can’t refuse the great sign-up offer available from the latest rewards credit card.

Before you know it, you could have a half-dozen accounts at various institutions. Your IRA is in one place, the checking account is in another. You also have a mortgage, emergency savings and insurance products to juggle.

Rather than having accounts scattered to the wind, try to consolidate them in a couple of places. Pick one bank for money and credit and one company for all insurance needs. In the end, you not only have fewer accounts to manage but also may get better rates or terms for bringing more of your business to a particular institution.

2. Purge the paperwork

Consolidating accounts is only the first step. Next, purge the paperwork.

Sign up for paperless statements, which most financial institutions offer. With the exception of a few vital documents such as birth certificates and titles, scan and shred almost everything else in your filing cabinet.

For more pointers, check out this article with five tips for paperless finances.

3. Pay cash whenever possible

Don’t underestimate the power of cash to simplify your finances.

Paying with cash can prevent you from overspending, and it eliminates much of the stress of daily money management. Never again will you have to worry about whether your card will be declined because the fuzzy math in your head isn’t quite right.

4. Automate your life

Free yourself from the anxiety of paying the mortgage on time by automating your finances.

If you’re not being paid via direct deposit, sign up. Some employers will let you split your paycheck among two or more accounts. If that’s possible, send at least 10 percent of earnings to your savings account.

Use a bill-pay service. Depending on your bank and billers, you may be able to request bills be electronically delivered, and the amount due paid automatically. Otherwise, you can set up recurring monthly payments.

For expense tracking, skip the spreadsheets and use an app or tracking software, such as our partner PowerWallet.

5. Stop buying more stuff

Minimalism is one of the core principles of simple living.

The less stuff you have, the less time you’ll spend maintaining, rearranging, and obsessing over what you’ve got. Plus, when you stop spending, you have more money for saving, or for splurging on important things.

6. Declutter what you have

As the UCLA researchers discovered, clutter can stress us. So focus on getting rid of the excess stuff you already own.

Before investing in yet another organizational system or storage unit, consider boxing items and shipping them to the thrift store or the landfill. Or, sell what you don’t need. After all, simplifying can be good for your wallet as well as your state of mind.

7. Cut loose toxic and high-needs people

When simplifying, don’t forget to look at the people around you.

Toxic personalities make lives difficult. They steal our good days and put demands on time and attention that could probably be put to better use elsewhere.

Consider how many times you’ve gotten off a phone call with a high-needs friend only to discover you’ve lost your mojo to get anything done for the rest of the day.

Do yourself a favor and cut off the emotional vampires feeding on your positive energy.

8. Reconsider your commitments

Juggling multiple activities is much more complex than focusing on one. Simplify your schedule by reconsidering everything on your calendar.

Ask yourself:

• Do I need to do this?
• Do I want to do this?
• Can I delegate this to someone else?
• What happens if this doesn’t get done?

We wear our busyness like a badge of honor, so saying no won’t come naturally at first. However, an uncluttered calendar is the key to a simple life.

9. Unplug at least once a week

At least once a week, put away all the electronics. Power down the computer put away the phone and turn off the TV. Spend time getting reacquainted with paper books, an old hobby, or your backyard.

Unplugging helps you slow down. Electronics tend to be “in your face” — loud, bright, and engaging. When they constantly surrounded you, it’s easy to lose track of time and start operating on autopilot.

Give yourself some quiet time to contemplate something more meaningful.

10. Create routines

Finally, a simple life thrives on routine. Without it, you may waste time and energy wondering what to do next.

Don’t confuse a routine with a schedule. A routine isn’t set in stone with time constraints. Rather, it’s a general idea of how your day will go.

A routine means knowing that you get up in the morning, have breakfast, load the dishwasher, and go for a walk. It could also be paying the bills on Monday, shopping on Tuesday, and doing your weekly dinner prep on Saturday.

Routines take the guesswork out of regular activities and make life simpler.

Source:http://www.moneytalksnews.com/10-simple-strategies-simplify-your-life/?all=1

7 Ways to Help Protect Your Financial Future From Unexpected Medical Expenses

Unexpected Medical Expenses

In life, anything can happen. Injuries and illnesses cannot always be prevented. But there are things you can do now to help protect your financial future from unexpected medical expenses and keep yourself happy and healthy in the process.

1. Start a Medical Emergency Fund

The time to set money aside for just-in-case scenarios is now. You never know what can happen and having savings set aside will give you comfort and peace of mind. Surprisingly, very few Americans save enough money for emergencies, unexpected job loss, or long-term disability. Of the people ages 18 to 29 that Bankrate.com recently surveyed, nearly half said they save 5% or less. Nearly one in five don't save anything at all. In a Cigna survey, individuals were asked how long their finances would last without a paycheck. 59% said they would exhaust their resources in 12 weeks or less. Almost a third (29%) said their finances would only last a month or less.

2. Keep That Emergency Fund for Emergencies Only

Okay, so you've created a cushion in your bank account. That's great! Almost as difficult as creating an emergency fund is keeping the money until you absolutely need it. Do not dip into it for frivolous purchases.

Think about what might happen if you come down with a serious illness or an injury. You need enough money in that account to cover your living expenses while you heal and recover, especially if you're unable to work.

3. Consider Disability Benefits

You might think this is an expense you can't afford, but protecting your income when you are sick or hurt and cannot work can be worth the cost. According to the National Safety Council, one in eight Americans seeks medical treatment for an accidental injury each year.^[i] And one in four twenty-somethings will become disabled before they retire.^[ii] These numbers are quite sobering. The median American salary is $53,000,^[iii] and a disability plan would typically cover 50%-60% of that income. And, don’t forget to look for value-added benefits available with many disability plans such as discounts on memberships to a local gym.

4. Understand Your Body's Signals

It's crucial to pay attention to how your body feels and reacts to things. You are the only person who can tell if something is off and when that's the case, call your doctor. Catching something in the early stages can save your life, and your budget. Some health plans offer access to telemedicine services. These services allow you to connect with a doctor remotely at any time of day. Emergency room visits can also cost a lot out of pocket, even with medical coverage. Before you get sick, scout out urgent care offices near you and save yourself a surprise medical expense later on. Of course, if you’re in a serious medical situation, don’t hesitate to call for an ambulance.

5. Lose the "I'm Invincible" Mentality

Just because you're young doesn't mean you're immune to health problems. A happy, successful future starts with taking care of yourself now. According to a recent study, sacrificing care for other household needs (food, rent, etc.) is especially prevalent among younger consumers. One-third of younger consumers make these types of tradeoff decisions occasionally, while one in four makes them at least once per month. Anything can happen, so make your health a priority. Poor health can be more difficult to fix as you get older.

6. Learn More About Preventive Medicine

When it comes to overall health, there are always improvements to be made. And even if you've been diagnosed with a certain condition or disease, there are things you can do to keep your health from worsening. The key is to educate yourself. Talk to your doctor about proactive ways you can improve your health. Check out available resources, professional organizations, and support groups through your health plan carrier or in your community. Don't be afraid to reach out. Each group has a vested interest in helping you with your health.

7. Live a Healthier Lifestyle

Good health and bad health are cyclical. A 2014 health study indicated that those in very good to excellent health tend to focus on exercise. Those in fair or poor health are more likely to establish bad habits like smoking. Bad habits cost more because they are gateways to other conditions. For example, obesity can lead to back and knee problems and even diabetes. So if you're obese or overweight, losing weight, eating healthy, and exercising consistently will help you stay on a healthy track. Staying healthy makes you happier now and in the future, and can help you keep more money in your wallet.

What steps have you taken to prevent a life-altering illness or injury from harming your financial future?

Source:http://www.wisebread.com/7-ways-to-help-protect-your-financial-future-from-unexpected-medical-expenses

4 Signs You Are Teaching Your Kids Bad Financial Habits

Teach your child about money matters

You spent that extra money in your bank account on a weekend trip to New York City, instead of using it to pay down your credit card debt. Maybe you even accidentally paid your power bill a week late last month.

Are you inadvertently teaching your teens' bad financial habits?

You might be.

It's not easy measuring how influential parents are when it comes to influencing their children's behaviors. Just ask parents who've tried to change a teen's mind on anything from fashion to dating to finding a job. But a 2014 study by Bank of New York — New Rules for Engagement — found that 52% of Millennials ranked their parents as their most trusted source of financial advice, while just 10% trusted the money advice of their peers.

"Maybe children don't trust their parents when it comes to picking friends, music, spouses, or even careers, but when it comes to financial advice, parents come out on top," says Kendrick Wakeman, founder, and chief executive officer of FinMason.

Because of this, parents have a special burden to pass good financial habits on to their kids. Wakeman says that ideally, parents do this by example — they save money, pay their bills on time, and don't run up their credit cards. Their children see this and do the same things when they're adults.

But what if you are far from the perfect financial role model for your children? What if you often forget to make your car loan payment on time? What if the debt on your credit cards grows every month? Might you be passing bad financial habits onto your kids?

Here are four signs that you are passing bad money habits onto your teens, and what to do about it.

Can't You Just Use Your Credit Card?

You're in the department store shopping for a flat-screen TV. There are models within your budget, models that you've saved up enough to buy with cash. But there's an even better TV that's outside your budget — far outside it. Your teens want it. When you tell them it's too expensive, they ask "Can't you just put it on the credit card?"

This is a sure sign that your children have watched you use your credit cards to buy items that you can't really afford. It's time to act like an adult and only make credit card purchases that you know you can pay off in full once your bill comes due. You want to teach your teens how to use credit cards wisely; using them to buy items that you can't afford is not how to do this.

Let's Get One More Thing

You're at the grocery store with your teens. You've checked off every item on your shopping list. But as you get nearer to the cashier, your teens start tossing packs of gum, magazines, or candy bars into your cart.

The odds are good they've learned how to impulse shop from you. You don't want your teens to grow up to be impulse shoppers. Those extra Milky Way bars and bottles of Diet Pepsi add up. Resist the urge to add them to your cart at the last minute. And make sure to stop your teens from adding them, too.

Can't We Just Buy This One?

You've decided to buy a new laptop for the family to use. Your teens are thrilled with this idea. Your plan is to do some comparison shopping, either online or at local electronics stores. Your teens, though, just want to buy the first laptop they find online, regardless of its price or reviews.

Look back at your own behavior. How many times have you simply gone online and ordered a new washing machine after a 10-minute online search? Have you gone to a car lot and simply picked the first car shown to you by the salesperson? If your teens have observed this behavior, the odds are high that you've taught them that comparison shopping doesn't matter. You can reverse this lesson, though. Next time you need to buy a new dishwasher, refrigerator, or other large items, take your kid's comparison shopping with you. They need to see just how much money you can save when you shop around.

Why Can't I Have It, Too?

Your daughter wants a new pair of expensive jeans because her friend at school has the same brand. Your son wants a new pair of gym shoes because his friend dropped $50 on the same pair.

It's likely that your teens have learned this why-can't-I-have-it-too behavior from you. Have you upgraded to a new car because your neighbor did the same? Have you purchased a swimming pool because you've seen your neighbors enjoying one? It's okay to buy these things if you can afford them. Teach your kids self-control — and help them avoid neighbor envy — by only upgrading to a new car when you're financially ready, no matter what your neighbors have parked in their driveway.

You Don't Need a Big Bank Account to Teach Good Habits

Debbie Crowder, branch banking executive vice president at Richmond, Virginia-based SunTrust Bank, said that parents, even if they are struggling with their own finances, can teach their children how to avoid their mistakes and become financially savvy adults.

"Involve your child in the day-to-day financial decisions you make for your household," Crowder says. "When the power bill is higher than usual, explain the reason why and discuss how the entire family can conserve energy the next month to lower the bill."

Chris Hogan, a financial speaker with Ramsey Personalities in Brentwood, Tennessee, says that parents can pass on good financial habits even if they themselves have a history of financial mistakes.

"The worst thing we can do as parents is to pretend like we're perfect," Hogan says. "It's important to talk about the mistakes we've made financially. That's what can make a real impact on our children's behavior."

How do you model good financial behaviors for your kids?

Source:http://www.wisebread.com/4-signs-you-are-teaching-your-kids-bad-financial-habits?ref=relatedbox

My 7 Investing Rules

Learn how to invest your money

Having investing rules is important as it is what keeps you from following the flock and making questionable moves. How often do you resist buying a hot stock? With some investing rules, you can avoid falling for hot tips or becoming emotional.

I will be the first to admit that it has taken me a few years to really sort out my rules. The goal is not to have a long list but to have some core rules that you cannot ignore when investing. It keeps you honest with your goals.

Investing Rules

1. Invest only in what I know and understand

Peter Lynch said it best if you cannot explain the business so that a child can understand it, then it’s probably too complicated. This mantra is the first filter I apply to the companies I put on my stock watch list.

2. Invest in companies that provide necessities

There are services or products in the world that we cannot live without, those are sustainable services with a consistent or growing demand. For example, financial services, oil & gas, food, utilities, and so on. You can rationalize that something is going to be needed even though it’s not an essential product or service to our lives and that’s fine but your core portfolio should have companies with essential and necessary products.

Once those sectors or necessities are identified, you can start focusing on the best picks. The strength behind this rule is that you can feel confident this company will be around due to the nature of their business.

3. Only invest in dividend-paying stocks

I have made it a focus that I want to be paid when markets go sideways and to that end, my investments must pay a dividend. It also means I can expect a minimum return on my investment while I wait for the stock to appreciate. When you apply this to your stock watchlist, you filter out another really large number of companies.

4. Focus on companies with an economic moat

I look for companies with an economic moat. More often than not, those are large companies. I tend to focus on medium and large-cap companies. Anything under $10B is a little small even if they are developing an economic moat. Companies with an established economic moat will often have grown to be large-cap companies. To that end, I look for an economic moat with a medium to large capitalization

5. DRIP everywhere

I want my money to work, so I let it re-invest itself. This rule will change in retirement but during my wealth accumulation period, I DRIP it all. It’s a form of compound growth. Many companies also offer a discount when you DRIP so you can take advantage of a price discount of 2%, 3%, or even 5% for some companies.

6. Diversify by sector

Diversifying by sectors allows you to add new money to underperforming sectors and take advantage of good buying opportunities. If your diversification is to buy 5 different banks, it’s not really much of diversification from a risk perspective because they are all in the same sector.

You’ll want to assess how much you want to allocate per sector and then start managing it that way. It makes choosing where to add new money an easy task as you want to try to keep the allocation you chose.

7. Limit the number of investments

I have set my number of companies to own and manage at 40. Any more than that and it’s too much to track. I am already there so if I intend to take a new position, I need to sell one. I am also at the point where I simply need to add more money to existing holdings. This number must really come from you and what works for you.

There is an obvious one that I have not added but it’s a hard one … Buy Low, Sell High. The reason I have not mentioned it is that it can be hard to always buy low since you cannot predict what the markets will do. If the market drops for whatever reasons, you can’t beat yourself over it. If you have cash, you can add more but I prefer to rely on my sector allocation to choose where to put my new money. To be a value investor is also quite hard. It’s not easy to identify a good price for a company as it most often trades on future earnings. IF this was easy, why would analysts get it wrong all the time ?!? For some companies, you sometimes have to buy near a 52-week high, that’s just how well those companies do.

Readers: Do you have a rule not listed you want to share?

Source: https://www.dividendearner.com/7-investing-rules/