Since I began this journey, I made a commitment to myself to continue to check in and work on improving my knowledge and application of financial matters. Boy is it exhausting!

Today I finally squeezed in finishing some of my legal documents – I now have a Living Will, a Power of Attorney for Medical stuff, a Will, and a Memorial Planner Information. I still need to spend a little more time on the concept of Estate planning, but I’m not in a huge rush yet as I don’t have that amazing of an estate.

So, let me take a moment to celebrate, YIPPEE!

Okay, I still have to get them all notarized and filed away safely. Sigh, another financial TO-DO.

Next Up on my Financial To-Do List This Month:

1. Look into refinancing my home. I just took it off the market as it is not selling. I have an inquiry into my mortgage provider to see if its possible to refinance after you take your home off the market or if they have some type of waiting period. Rates are certainly low, so I do hope I can. Seeing as I have had a major career shift, and the value of my home has probably gone down significantly since my last mortgage, it should be interesting to see if its a real financial possibility for me to re-fi. Crossing my fingers.
2. Convert my Traditional IRA to a Roth IRA at Vanguard. I’m willing to pay tax consequences this  year if it means that I get to move my Traditional IRA Funds (that were previously my 401k when I was a corporate gal) to a Roth IRA.
3. Set up a Roth IRA at Lending Club. I’m going to roll at least part of my Vanguard money to Lending Club. My experiment with Lending Club panned out to be an awesome choice that I can really support. I am excited to find an investment opportunity that doesn’t make me want to cry and pull my hair out unlike my experiences with Fidelity and Vanguard.
4. Get life insurance. I can’t believe I still haven’t gotten around to this. Need to get it done – I’m going to opt for the $500K policy I think. But I do need to do more research into this area.
5. Snore. Okay. I find this stuff painfully boring and awful. Thank you to this website for reminding me to stay on track with it. It’ll be worth it one day right??!!

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With the volatility of the stock market, I have been interested in other investment opportunities. They can be hard to find.

So far, I am very pleased with the peer to peer lending model offered at Lending Club. I can honestly say that its simple to set up and use, and is providing me an average return of 14% so far. I’m so impressed in fact, that I would like to invest in this option rather than my 401k. At least for a bit.

Diversification always sounds like a good idea, but it isn’t lately in both real estate and no matter what stock or fund I seem to choose. But peer to peer lending feels good because I’m helping out someone with consolidating their debt, and I’m earning a little interest for doing it. A win-win.

Visit their site and find out more for yourself if you haven’t already. Plus, they give great incentives for you to try them out, with $25 in your pocket, and $25 for you if you refer your friends.

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About 2 months have gone by since I left the corporate grind. Amazing. Time has flown by. So far, so good. My fears proved to be wrong, and I am surpassing my expectations for generating business. I have some really supportive clients and new referrals and have started a part time gig as well for an ecommerce firm in Denver. I actually have more work than I probably should for the true balance that I am looking for in my life. So the key for me now is making sure to take time for other important things. It’s not all roses, as I am really working hard, but its so much more rewarding and I am learning and growing every day.

I haven’t been updating this blog as much lately and that is for two main reasons:

1. I’ve created a new blog that I intend to spend more professional writing time on for my re-branded business leadonlinemarketing.com
2. I am stuck at the investing stage of finding financial freedom

Investing overwhelms me. It seems the more I learn, the more choices there are. There is always a lot of risk. Take my 401K rollover for instance. I was so proud of myself that I managed it so well and got some nice mutual funds at Vanguard. Without knowing what I was doing, I ended up ‘buying high’ and losing about 800 in value in 1 week with the dip in the market last week. Awesome. I am so disillusioned with the stock market. I already was, but time and time again I continue to be. I’m sure its great for the really well educated investor, but for me, who only has SO much time to devote to finances a week, its hard. I try to dedicate at least 1-2 hours a week since I began my journey towards improving on and/or working at our finances. There are so many directions that this goes.

Overall, the main barriers for me for my next step in this journey are being able to make truly WISE investment decisions, and learning when to pay off debt, when to take out debt and when to save. It seems to be a constant balancing act.

There are 3 TO DOs are on my list of financial matters in the coming months:

1. Finalize a will / power of attorney / living will
2. Get life insurance coverage for myself since I am self-employed
3. Setup automatic transfers for new retirement vehicle (though I’m not sure I want it to be in a mutual fund!)

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Rolling Over a Traditional and Roth 401K Plan

I have 2 types of accounts in my 401k from my previous employer – a tranditional 401k and a Roth 401K. After doing some research and weighing my options, I have decided to roll over my 401k into  Vanguard due to the lower fees and a variety of investment choices. I still do not feel educated enough to trust my 401k funds to a fully self-managed account with individual stocks and bonds, so the fund option is still appealing to me at this stage in life. Hopefully, one day I will have the time and knowledge to invest more specifically and strategically. For now, I plan to put some research into the  funds, diversify wisely and monitor my investments.

How a Roth 401 Works

Some organizations allow you to invest all or a portion of your “after-tax” dollars in to a Roth IRA type of 401K, called a Roth 401K. This can be good for some investors because the earnings will not be taxed at withdrawal. The withdrawal rules can get tricky, with options such as the 5-year rule, but I do not plan to withdraw (or otherwise called a distribution) any time soon.  There are many more things to consider to fully understand the Roth 401K, and it does vary in rules from the Roth IRA. I recommend going to Roth401KInfo.com as a starting point for information or consulting your financial advisor. Another interesting point is that employer matching funds cannot be contributed to the Roth 401k – they have to go to your traditional 401k. I didn’t even realize this. Apparently the laws allowing Roth 401Ks will be re-evaluated in 2011, so they may not be available forever.

Here Are My Steps to a Complicated 401k Rollover

1. In order to roll over my 401k, I had to sign up for 2 new accounts at  Vanguard, both a traditional IRA and a Roth IRA. The folks at Vanguard were quite helpful on the phone.
2. I then had I believe 3 different phone conversations with someone at Fidelity discussing the process of rolling over my Roth 401K. At one point, he was convinced that the earnings on my Roth 401k would have tax implications because of my rollover. He said because I didn’t have the account open for at least 5 years, the earnings could be taxed. This made absolutely no sense to me as the whole point of a Roth 401K or Roth IRA for that matter are that you put after tax dollars into them in order to NOT have to pay taxes on the earnings in the future. Or at least that is MY understanding of them. A rollover should still be a tax-sheltered process and should not count as a distribution. After much debate, he agreed with me and initiated the request.
3. Mailed documents have been sent to me that I now have to send to my former employer for approval. I find this odd since I no longer work there, why would they care about my rollover?
4. After these documents have been processed they go back to Fidelity and then Fidelity will cut me checks for the rollovers addressed to my Vanguard account.
5. I have to send the checks with a cover letter and instructions that I create to Vanguard in order to process the funds.
6. I then will have my money in a Money Market fund temporarily that earns basically nothing until I figure out what funds to invest in.
7. I invest my funds into a new portfolio, in 2 different accounts, the Traditional IRA and the Roth IRA.
8. Then, now that I am self employed, I figure out if I want to contribute to my new Vanguard accounts on a regular basis or find out more about SEP and Keough plans.
9. Pass out from exhaustion.

If you find this of interest, here’s a few resources on Roth IRAs and 401K rollovers:

• http://www.roth401kinfo.com
• http://banking.about.com
• http://www.investopedia.com

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One thing that has suprised me so far in my journey to financial freedom is the laborious process for signing up for certain types of accounts to manage and improve my finances.

Since I started this blog, I have been reading and learning a lot, but actually opening accounts has been a bit of a nightmare. Noneless, I’ve had success and ease with a few of them:

Awesome & Easy Financial Accounts I have Opened So Far

SmartyPig Savings Accounts – I am so impressed and in love with this simple banking model.

1. The process to open the account was so easy and all online.
2. I have many simple savings account goals set up
3. I have small but recurring transfers being sent to my specific savings goals
4. I earn 2% interest
5. Not to mention if I should choose to buy a gift card with one of the savings goals (ie wedding season!), I get a bonus cash back.

529 College Invest Account with Vanguard

1. I opened this account entirely online and funded it through ACH from my daughter’s expired CD.
2. I diversified the options of investment allocations
3. I’m planning to monitor it on a monthly basis.
4. I have recurring transfers set up, which will increase slightly automatically annually. Done and done.

Key Bank Business Account

1. This was the best website I could find in my local area for information on the full features of a free business account, rates, fees, online tools, etc
2. The online sign up process was simple
3. I didn’t like having to wait 7-10 days for the follow up paper work
4. Other than that I am happy with this account so far.
5. Added bonus is they are going to give me a few hundred bucks promotional money

What I’ve Learned About IRAs & 401K Rollovers

IRAs are not very easy to open online. Also there are tax implications with converting to a Roth from a Traditional, rollover processes, etc. I have more to learn here before I’m done.

I’ve opened a TradeKing account and tried to figure out how to transfer my Traditional IRA over and then convert it to a Roth IRA. There was a $50 charge to do that and they said I had to re-apply all over again. So, I am in uncomfortable territory here and its making me go slower.

Additionally, I considered rolling over at least a portion of my former employer 401K to LendingClub. I really want to get started with LendingClub as well as some very well researched stock trading. LendingClub has something in its documentation with its partner company for IRA’s, Entrust CAMA, about a $150 annual fee that I’m not too happy about. So, I need to read over the documents for IRAs and fees with a lot more attention to detail before making a decision.

But I’m still a novice, scared investor. The 529 is easy because its fund based, but I of course will pay management fees. I’d like to not have to, but I don’t want to be a super active day trader either.

So, all in all, investing and investment accounts are scaring me, but I don’t really want to go pay an advisor, so I’m going to have to overcome this fear and figure it out sooner than later!

How do you overcome your lack of knowledge with investing in uncharted territory?

photo by: ndevil

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In my pursuit towards financial freedom, I have been able to narrow down my goals and realize key elements that I want to focus on for my career and life style.

I have now managed to categorize and budget my expenses, long term and short term savings accounts, and I have begun to understand tax rules and how they affect investment accounts and options.

Nonetheless, I still find it difficult to determine the order and priority to assign to saving, paying off debts, investing, and business start ups.

There are so many competing philosophies on this topic, and I believe that there truly is not any one answer. Most advisors and financial ‘gurus’ will base their recommendations for you based on your risk tolerance, age and stage in life, and other factors. Lately, many advisors are much more conservative in their recommendation that you save and save and save your money for emergencies.

Here’s a look at what our short term plan is to balance all of these categories:

Save

Short Term Savings for Spending: I am doing a better job of setting aside small amounts towards short term savings goals including a wedding gift fund, a car maintenance fund and a tuition fund for my husband’s college.

Long Term Savings: We also are saving towards longer term savings goals such as our contingency fund, software business expenses and my daughter’s education fund.

Pay Off / Reduce Debt

We are selling out house in an effort to reduce our debts and get to a level where we are more comfortable with our savings options. It hasn’t sold yet though (bummer!). I’m also looking forward to renting and not owning for a while so that we have a bit more flexibility with where we live.

Besides this, I used some of our tax refund to go towards our car loan. One of our goals is to pay off our 7 year car loan in 1.5 years. That will involve some aggressive payments. According to the calculator I used something like paying $150/month more than what we owe. I am considering setting up a bi-weekly payment also for this to help reduce the balance and interest paid. This will allow us to begin paying off our new student loans for my husband’s college expenses. They aren’t huge, but we’d like to be able to make that transition. So, paying off the car loan debt is definitely a focus for us.

Invest

I invest in my 401k, but it mostly depresses me to follow it. No matter how I allocate it, it vastly under peforms the S&P 500 index fund.

Beyond that, I am in the process of transitioning my Traditional IRA to an online brokerage. I also am opening up a Roth IRA, but realistically won’t be able to contribute to it until our home is sold.

I’ll be moving my daughter’s certificate to a 529 College Invest plan in April.

Building Businesses

I don’t plan on building just one business, I plan on having multiple, including the consulting business that I already operate. I want to focus my efforts on business opportunities but once they are developed and running well, I would like to diversify and branch into other businesses (hopefully product based) for multiple income streams. This is not an overnight thing, but I firmly believe that this is possibly the most valuable thing I could be spending my time and some amount of investment on. Plus, I think this is what America needs right now. More start up small businesses, more entrepreneurs to get things moving.

As much as I am happy to be making efforts in many financially-savvy categories, I do still struggle with balancing and prioritizing them. I’d love your insight on this.

photo by calliope

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There are many savings and investment vehicles to choose from when it comes to saving for your children’s college. They range from ESAs to CDs, and in some states, you can invest in a 529 savings fund.  I have been confused and intrigued by the 529 College Savings Plans since I had my daughter, but have made it a goal to start one by April 2010 when her CD expires. I’m not clear what states these are available, but they are where I live in Colorado.

529 plans are more than just savings accounts. These state-sponsored college savings plans were established by the federal government in Section 529 of the Internal Revenue Code to encourage families to save more for college. They offer unique state and federal tax benefits you can’t get from other ways to save, making them one of the best ways to save for college. – College Invest

Benefits of 529 College Savings Accounts are Numerous:

• Possible state tax deductions from contributions
• Savings are tax-free
• High contribution limits
• Withdrawals and account options are flexible for your needs

Why not invest in something stable for my daughter and get a little help at tax time? Here’s a summary of what I’ve learned about what’s available and how to select a 529 College Savings Plan.

There are 4 plans to choose from. Some of the plans available, such as the one from Vanguard, offer a range of investment options for your funds with varying levels of risk. The main concern I have is that I would rather have a stable return with little risk, and have the tax incentives than have a volatile savings plan for my daughter’s education savings.

Great Resources:

• Smart Choice College Savings Plan eFirstBank.com – Offers a money market and a 1 year savings option.
• Vanguard’s Direct Portfolio College Savings Plan – There are options for all risk levels, use their Risk Tolerance Allocation Tool to find out your level
• Scholars Choice College Savings Program – Offers a variety of investment options through Legg Mason Global Asset Allocation, LLC. and thier financial advisors only.
• CollegeInvest Stable Value Plus – A partnership with Metropolitan Life Insurance Company of Connecticut (MetLife) to offers a guaranteed fixed income college saving option
• Comparison of the difference between 529, Coverdell Savings ESAs, UTMAs and more for 2009. Compare College Savings Options. [PDF]
• CollegeInvest.org – Full Detail on the 529 Program Options

One thing is certain, don’t bank on your children getting a scholarship, start saving today. As parents we don’t have to do everything for our children, but what we can do makes a huge impact. I know it did for me, as the help my parents have given me has been invaluable.

Please note, this post is not to be considered financial advise. I do not take any responsibility for your investment or financial decisions. Please see my policy for more details.

UPDATE 3.29.2010: Yay! I finally opened and funded this account for my daughter through the College Invest website. It took me about 20 minutes to fill out the application, decide if I wanted to also enroll in the UPromise (shopping cash back that is directed and linked to your 529 account), and read over all of the documentation. I opted for the Vanguard fund after all, as I allocated a diverse mix of investment elections and plan to monitor it over time. I also set up a small recurring monthly transfer that will increase yearly by a certain amount. Progress!

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Silver and Gold are Pretty and Shiny, But is the Allure Driven by Fear in the Economy or a Sound Investment Decision?

I have been researching and reading and researching some more on the commodity market and I have no idea what to do. I admit that I am a novice at investing. However I do not deny that it will be an essential component in my journey to financial freedom. My experience investing consists of this: I got burned in 2000 when I invested in a four star mutual fund, thought that I didn’t need to watch it, then it tanked with the rest of the stock market. Beyond that, I tried day trading a few individual stocks and felt like I was uneducated and gambling rather than making sound investment choices. My main problem is, right now I just don’t know exactly where to begin on my limited funds. I have read contradictory things, and still have a lot of financial lingo to learn.

The Gist of the Typical Advice in Many Personal Finance Books and Blogs:

1. Save for an emergency/contingency fund (Various advise between 3 – 8 months expenses… That’s a lot of money sitting there not earning anything!)
2. Max out investing in your company’s 401K, or at least enough for the company match (Diversification choices of a mutual fund or another mutual fund)
3. Next make sure you have a Roth IRA (Roth’s are great for the young investor because when you take your money out way down the line, your earnings are not taxed)
4. Then beyond that, there is a lot of debate what to invest in next
5. Most financial gurus suggest your best investment is in your financial and occupational education (That’s what I’m focused on)

I am happy to have some liquid funds saved aside for contingency funds. I do invest for my company’s 401 K match, but I am not happy with the selection of funds available, it is too limited. Also, I hear over and over again that Mutual Funds take too much out in fees, and over 70% of mutual funds under perform against the S&P 500 Index Fund. I have monitored the trend of my 401k funds against the NASDAQ and the S&P 500 and it is true, they vastly under perform. So, needless to say, I am disillusioned with my 401K as a sound investment (not to mention) retirement vehicle.

So Where Do Commodities Fit Into the Mix?

First off, do not consider investing in silver, gold, platinum, oil, etc without doing a lot of research first. There are a lot of people out there trying to scam people in this market. This is why I haven’t invested in it yet, because I am very cautious and skeptical with my money. You work hard for your money, don’t let it go with out a lot of research.

Here are some pros and cons that I’ve gathered to the choice of investing in silver, gold and other commodities.

Pros:

• They can serve as a hedge against inflation (many predict inflation to increase, investors will flee to commodities and the US dollar value will continue to decrease)
• They can be a good investment choice for diversification if you have most of your investments in paper assets (Funds, Bonds, Stocks)
• If you have the physical commodities, you do not have to worry about paying taxes on selling them them (Interesting fact!)

Cons:

• You pay a high tax rate on them if you have owned them less than a year (28%) in ETFs and withdraw (this can be avoided through holding shares in a Roth IRA fund)
• If you have large quantities of the physical commodities, they can get expensive to secure and protect
• The 5 year market trend for most of these is rather volatile (ie, they still carry risk), though seemingly on an upward curve the past year, the 5 year trend is still quite volatile for many commodities
• Often the price of entry to gold, platinum, etc is rather high. (You can go buy a few silver coins, but that doesn’t seem like a true investment to me, just something to add to your coin collection)

For a thoughtful approach to reviewing the balance between commodities, the dollar and inflation , consider reading this post by Dream Manifesto.com on Is Our Monetary System Near a Singularity?

I’d love to get more valid resources, and I will update this post as I read more books and articles on the topic. Let me know your thoughts.

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Top Habit Changes That Help You Stick To a Budget

It can be a struggle to stay within your budget, especially around the holidays. I’ve been more actively monitoring my budget and income/expenses for a while now. I’m proud to say we did decrease our spending significantly in November. We also shifted some spending to more quality things such as education and investments.

However, unfortunately, on one income, we still spend more than we make. Not good. I’m confident our plans will take us where we need to go with this, including lifestyle changes, awareness & monitoring, conscious spending, and increased income from other areas.

1) Watching the Little Dollars – For us, its not about ‘skipping the latte’ specifically, but instead the things that you buy as habit that there are alternatives for. For example, making lunches and cutting back on eating out, even if its fast food, is healthier and cheaper.

2) Sharing the Knowledge – One of the most significant changes has been a true evaluation of what’s important to us, and a family goal of working towards our future. I have previously been managing the money more than my husband, and he is now playing a more active role. Sharing the ‘burden’ helps us be more aligned with our goals together, and has significantly minimized some of the confusion or disagreements.

3) Gotta Love Coupons – And of course, there’s nothing like the good old fashioned coupon. Its my personal belief that I have to save at least $1.00 off of something to make it worth my time. And I only use coupons for something I would have bought already.

4) Awareness & Monitoring – I’m actively monitoring my spending and money habits on Mint and Thrive, and I have weekly email reminders and alerts being sent to me. Even if I wanted to forget, too bad, I have now made it a habit not to.

5) Conscious Spending – I wrote a post about How to Curb Impulse Shopping, and for me, the online shop-a-holic, unsubscribing from tempting emails was the trick. It has significantly helped me from thinking about or wondering if I’m missing out on a good deal. Its helped me from justifying why I just have to buy something because of the bargain, since I don’t actually know about the bargain. My husband is great at sticking to the grocery list, and this saves a lot on impulse grocery buys. Overall, I’m trying to wait at least 1 day to 1 week on purchases outside of the norm to determine if they are impulsive or not. I’m not perfect at this, but this is my goal.

6) Setting Expectations with Friends & Family - This is a tough one, but it helps. I talked with my family and friends this year about cutting back on holiday spending, most of us are in the same boat, so it makes it easier. Its almost a relief when you talk about it that everyone says you don’t have to spend too much. This doesn’t mean you can’t do something thoughtful. I’m already finding that I have more quality time lined up with friends and don’t have to worry about the gifts, but instead can spend a little on the event itself.

Finally, I definitely recommend that you don’t push too hard and cut yourself some slack with changing habits. You can’t change habits overnight, or you won’t stick to them. I know that I’m too hard on myself about this, and it is okay to slip as long as you stay true to your goals overall.

Anything I should add to this list?

photo by girlonaglide

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Best Online Savings Accounts – SmartyPig: Easy, Simple, Savings Account and Tool

Launched in the US in March of 2008, SmartyPig is a very unique tool that combines budgeting for savings tools with online interest-bearing savings accounts. Not only can you start saving, but you can also open up your savings accounts on social tools such as Facebook and others for your family and friends to contribute to as well as watch what percentage you are towards your goal. It is a partnership with DataVision, Inc. and West Bank in Iowa and the founders are Mike Ferrari and Jon Gaskell.

Rating: 4.5 out of 5 stars

Pros:

• Very easy, simple account sign up and set up process
• Automatic deposit from your other bank accounts is simple
• Calculator estimates when you will reach your savings goals
• Helps you stay on track with budgeting through charts and visual tools
• If you want to, you can share your savings fund on Facebook/Twitter or other social tools and get deposits from friends and family
• FDIC ensured savings (with high rate, as of today 11.09 its 2.01 %APY)

Cons:

• Not that easy to withdraw funds (no checking account, etc, this is a savings only vehicle, withdraw by gift card with booster or ACH back to your account elsewhere)
• Some say its geared towards retail spending since they will give you your money back in the form of gift cards if you want (which also give you a ‘boost’ of cash to use if you redeem for retail purchases)

I’ve added their nifty widget to my blog… So far, I’ve set up 2 accounts. I would like to have a Roth IRA and some actual investment tools, but for the moment, some simple savings funds will work great for starting the habit of saving for different goals. I have a contingency (emergency) fund started already that I will be adding to, and I also will be starting a savings account for saving for passive income opportunities in the future.

I am very impressed with the user interface, concept and execution of this savings account and social tool.

Its a common misconception that you can only get your money back in the form of retail cards, but that’s not true. See thier FAQ below:

Can I transfer my funds to an existing funding source, like my bank, or get my money by check?

Upon closing your goal, you may transfer your funds back to your existing checking or savings account for free. This process typically takes 2 business days for the funds to post to your bank account. We do not offer the option of receiving a check.

A recent review on the New York Times: http://bucks.blogs.nytimes.com/2009/11/17/smartypig-savings-accounts-come-with-discount-vacations/

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