Growing Money

I recently saw the movie, Mad Money and in the movie, the main characters accumulate large bags of money in their homes. They had so much cash they had to fill every drawer and cabinet in their house.
If you have a significantly amount of cash to put away, where would you hide them? There are people today that still don’t like keeping all their money in a bank. These people would store cash in their homes, in places that they think nobody can find. In fact, I heard a very interesting true story about a couple hiding their cash.

One couple safely put away $20,000 in hard cash behind a stove/gas unit in the kitchen. It was hidden in a sealed area completely out of sight and nobody would even think about looking there for cash. Many years later, the couple sold the house and moved out. Needless to say, the cash was so well contained and stored away for so long, the couple had forgotten about the cash. The new house owners somehow later discovered the secretly stored stash of cash. It was like winning a lottery for the new house owners.

A very popular place to store cash is under the mattress. In the old days, people always put important things under their bed. Over time, everyone knows about the under-the-mattress secret location, so people have become more creative and have thought of new places to hide cash. Here are several places I could think of that are great for hiding cash.

Living Room

1. In a place that looks boring and doesn’t seem attractive
2. Behind a clock
3. In a self-created mouse hole
4. In a CD/DVD case on the bottom of your collection
5. Underneath the couch

Kitchen

1. In an old food box behind other food boxes on the top shelf of the cabinets
2. Under the sink
3. Behind the oven/stove
4. Behind the refrigerator

Bathroom

1. Behind the toilet
2. Behind the cabinet mirror
3. Inside a medicine box on the top shelf of the medicine cabinet

Bedroom

1. In the pockets of an old jacket in the back of the closet
2. In an old shoe box
3. Inside a desk lamp

Free free to share your thoughts and let us know what do you think is the best way to safely and secretly store cash at home.

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The disadvantage of tracking financial accounts and transactions is the amount of time it consumes. I have spent hours on entering transactions and keeping account balances in harmony with the financial statements. The worst part is when I take a break from keeping track of the transactions. And recently, I have that experience again. I have not updated the transactions in my bank account for a few months. Going back to adjust balances is a pain for me, because I have lots of transactions in my accounts. I do a lot of trading in my brokerage accounts and I use my credit cards frequently. It makes me wonder if it’s even worth the time to be some detailed in my tracking progress.

The worse part is trying to recollect the transactions in my cash account. I do not always have receipts to trace back and there are no electronic records. Also, the cash balance in my Money frequently does not match the amount of cash I have on hand. It drives me crazy because I like to be organized, especially with my financial accounts.

Sometimes, I want to set myself free of this trouble and quit tracking each transaction. But then I would never know where my spending goes and what my net worth is. There is one way to compromise. I can track only the ending balances of my accounts at the end each month and not the daily transactions. This way, I can still keep track of my financial status and alleviate myself from hours of data input of the detailed transactions. This is an option in the future if I lose track of all the transactions again.

By the way, I do not believe that you have religiously tracking your financial accounts to be financially successful. I have seen entrepreneurs who do not keep track of every penny of their financial accounts and are still successful. I do believe, however that you have to be aware of your financial accounts and transactions. These entrepreneurs may not care about every penny but they do make sure they are generating profits. I believe the moral of the story is that as long as your cash flow is always positive, you are on your way to success.

Related Posts:

Financial Bookkeeping - Products (Part 1)

Financial Bookkeeping - Advantages (Part 2)

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The primary advantage of tracking financial accounts and transactions is that it allows you to continuously monitor the status of your financial health. It helps with budgeting and year-end taxes. Money serves as a database for all my expenses and income and investments. I use Money to track my stock trades, asset allocation, and trading history.

One of my favorite features of Money is the reporting tool. I can run reports to see how much I have spent for selected categories during a specified time frame. I can also see my net worth over the time. These reports give me a very good understanding of my finances and allow me to see where I am with my goals.
It is also good to be able to see all my accounts in one place. With credit cards, savings and checking accounts, investment accounts, mortgages, and loans, I have over 20 accounts. It would be a disaster to keep track of these accounts by hand. I wouldn’t remember all the credit cards or investment accounts I have opened. But with Money, I have all my accounts listed in one place and I can see which ones are still active. I can always look back at which accounts I no longer need and I can close them.

There are many other features in Money, such as Budgeting and Bills Summary. Budgeting allows you to set up a monthly or yearly budget and the software alerts you when you have exceeded your budget. Bills Summary keeps track of when your bills are due. I have already set up email reminders for myself from the individual companies so I don’t use the bill payment reminders feature in MS Money.

Keeping track of your expenses is a good way to see where you have spent that paycheck. And you can compare how much percentage of your paycheck goes to rent, food, travel and other categories. This way, you will know where your money is going, as opposed to guessing where the money has gone.

The bottom line is that having a program, such as Money to keep track of your financial accounts will make your finances much more organized. Whether it’s budgeting, reminding yourself to pay bills, or to run reports to see your monthly expenses, financial bookkeeping allows you to be constantly updated with your finance.

Related:

Financial Bookkeeping - Products (Part 1)

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Goal: Reduce the number of accounts being tracked in Money

On the front page of Money, I see a list of all my accounts every time I open it. I remember I started with only a few accounts in 2003. Today, I have 40 accounts actively tracked in Money. I think I have way too many accounts now and it’s time consuming to keep track of all the accounts, even with Money. I will close accounts I don’t need and keep only those I still use.

Here’s a snapshot of my Account List in Money:
Bank Accounts: 6 accounts
Credit Accounts: 12 accounts
Investment Accounts: 12 accounts
Loans and Liabilities: 9 accounts
Asset Accounts: 1 account

Total Accounts: 40 accounts

I plan to consolidate my Account List. I will close bank and credit accounts I no longer use. There are some accounts I use infrequently, but I will still keep them open for now. After analyzing which accounts I can close, I think reduce my Account List by 10 accounts, to a new total of 30 accounts.

Here is a list of accounts I will be closing off in Money by March 1, 2008.
My HSBC
Ing Direct
Capital One Credit Card
Chase Perfect Card
Chase Visa card
Washington Mutual
Old tenant accounts
Old loan accounts.

The new snapshot of my Account List in Money should be:
Bank Accounts: 4 accounts
Credit Accounts: 9 accounts
Investment Accounts: 10 accounts
Loans and Liabilities: 6 accounts
Asset Accounts: 1 account

Total Accounts: 30 accounts

I think managing 30 accounts would be much better than managing 40 hours. This should shave some weight off my accounts list and will save me time when I try to balance my Money accounts.

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We use financial software to track our financial accounts and transactions. There are many programs created to serve this purpose. The two most popular ones are Microsoft Money and Intuit’s Quicken. I use Microsoft Money. It came with my computer a long time ago and I have been using it since.

There are also alternatives to these two commercial products if you need something more simple or if don’t want to pay for them. Someone asked me earlier if there was any good free product out there to keep track of financial accounts. I have recently found Finance Explorer from Metalogic Software. I read up on their features and description and the product looks good at a glance. Best of all, it’s free. Below is a screen shot. If I weren’t already using Money, I would give this software a try. Finance Explorer looks simple to use and can do the job of keeping track of my accounts.

Before Microsoft Money, I used Excel to keep track of my financial accounts and transactions. Excel is a great tool if you already have it. The great thing about Excel is that you can customize your spreadsheets. I have always liked to make my own templates to suit my needs. However, if you want to have something to use immediately, there are many templates available on the web.

Personal budget

Personal monthly budget

Monthly and Annual Expenses Planner

Expense reports

Back in the days, I kept a financial diary on paper. I have found old records of my financial bookkeeping. I wrote down the dates of each month and next to each day, the daily expenses. I see dates going back to my childhood, but of course, there are many gaps. I am surprised I have started tracking expenses so young. I guess it’s in me, even as a kid to be organized and keeping track of my financial records.

There are many ways to help you keep track of your financial accounts - pen and paper, Excel, Microsoft Money, Quicken, and Finance Explorer. You can decde on the software or method, but the point is to keep track.

Related Posts:

Financial Bookkeeping - Advantages (Part 2)

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In response to my post, Money Management 201, here is an overview of my accounts:

Credit Card Accounts
This account is use to make purchases on credit. Use this account to build up credit and rack up points/miles/cash. Make sure you can pay off amount before charging. Preferably, this account pays rewards and has no annual fees.

Citibank Platinum Select Dividend - This is my primary personal credit card. I make most of my purchases on this card since it gives me cash rewards.

American Express Blue - Used to pay rent. My building accepts AmEx payments. Great way to rack up points.

DiscoverCard - Used this card a lot in the past, but don’t use it anymore. Thinking of canceling it.

Chase Freedom - This card is in idle status. I used it this briefly in the beginning because of the promo cashback rewards. It’s sitting in my drawer now and it hasn’t seen light for more than two years.

Chase Amazon - Used only for Amazon purchases. Pays 3 points per dollar spent.

American Express Business Platinum Card - Primary card for business purchases. Supports MS Money downloads, which is helpful for tracking expenses. Also, AmEx has excellent customer service.

Advanta Platinum BusinessCard - Used only for business purchases. Hardly use this card anymore. Replaced it with the American Express Business Platinum Card.

Checking Account
This account serves as a front line for financial transactions. Use this account to write checks and handle transactions not accessible in savings accounts. Preferably, this account pays interest. However, it’s more important to be fee-conscious.

Citibank Checking Account - I use this account to write checks for bills that do no accept credit cards, such as my electric bill. In fact, I have setup automatic payments for bills. I leave about $500 in this account.

Short term Savings Account
This account serves as your emergency fund and should host about three to six months of income. Cash should be easily accessible. Preferably, this account has a high-yielding interest rate.

Citibank e-Savings - I deposit all my checks to this account. I use this account to fund my checking. If my Checking Account runs low on funds, I can transfer money instantly from this account over to Checking. I also have setup automatic payments for bills. This account also serves as my emergency fund.

Long term Savings Account
This account serves as a dedicated place for your savings. Accessibility can be sacrificed for higher yields. Certificate of Deposits and other secured investments are options here.

Washington Mutual CD - Promotional interest rate. Matures on 9/30/2007. Going to move funds to the investment account.

Non-Retirement Brokerage Account
This account serves as a trading center for stocks, mutual funds, bonds, or other investments. It should have low commissions and no annual or maintenance fees. Discounted brokerage accounts are options here.

Fidelity Investment - This is my primary trading account. Fidelity has a large array of research material and helps keep all my investment accounts in one place.

TD Ameritrade iZone - This was my primary trading account until I started trading in Fidelity. I like the low commissions in iZone so I keep this account active.

Retirement Brokerage Account
This account serves as an investment center for your retirement portfolio. It should have low commissions and no annual or maintenance fees. Index funds, mutual funds, and dividend stocks are options here.

Scottrade Roth IRA - This is my designated Roth IRA account.

Guardian Retirement 401k Plan - This account was opened by my ex-employer. I am no longer contributing to this account but I leave my funds with my ex-employer because I like the funds there. I may consider moving this account to Scottrade in the future.

Account Management
Manage all your accounts using financial software such as MS Money or Quicken. Track all incoming and outgoing financial transactions.

Microsoft Money - I use this software almost daily to keep track of all my accounts and transactions. The online download feature makes it easy to update all the transactions from financial institutions. Money also has great reporting tools.

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The stock market goes up and down like ocean waves. It is impossible to predict the movements of the stock market. How often do we make mistakes in the market by buying higher and selling lower? Greed drives us to jump on a rising stock price and fear drives us to sell because everyone is selling. Because of greed and fear we often buy and sell on the wrong times.

One way to eliminate these emotions is by automatic investing, or emotionless investing. That’s right, we have to admit our emotions are the cause of our mistakes. And to eliminate the mistakes is to eliminate our emotions. We can fight our emotions by setting up a systematic way of investing.

The key is to invest a set amount at a set time interval. That is, put away an x amount of dollars every z period of time. This automatic investing allows you to take advantage of down markets where you can buy more shares of the market at a lower price.

For example, XYZ company is currently worth $10. If you invest $500 now, you will buy 50 shares of XYZ. Assume XYZ goes down to $5 next month. You invest another $500 on the next month, the same amount of money you did on the first month, but on the second month you would be able to purchase 100 shares. And assume, on the third month, XYZ becomes $20, you would only buy 25 shares on the third month. Over time, as stocks generally trend upwards, you will be buying more shares on the dip and end up with more shares than you normally would if you had not set up an automatic investing system.

The automatic investing system is very simple to set up and will be working behind the scenes until you put a stop to it. Say, you earn $5,000 a month. You can decide to put away 10%, or $500 of your monthly gross income for 401k investment every month. A lot of employers allow you set this event up to be recurring. It is simple, just set it and forget it. This leaves you time and energy to focus on other things. The money is transferred to your retirement funds every month behind the scenes and working for you. Over time this $500 a month will add up. Compound it with the average 10% market returns over the long term, you will soon build yourself a very nice nest egg.

This type of event works for non-retirement accounts as well. You can set up recurring deposits with your investment firm. Say, you want to put money away in an index fund with Fidelity every 2 weeks. You can set up an account in Fidelity and have your money transfer to Fidelity every 2 weeks from your bank account automatically.

The automatic investing system saves time and saves you from worries. There’s no more worrying about whether the stock has hit its low. If the stock dips, you simply buy more shares. The truth is nobody knows what will happen in the market. By putting away a set amount of money at a set time interval, you eliminate the factor of emotions and simultaneously apply discipline to your long term investing strategy. In the long run, regardless of how wild the market has gone through, the automatic system will surely make your ride in the market a smooth one.

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My MS Money 2004 software has expired and can no longer download transactions from the web. I was not aware that there was a time limit on the download feature. I am planning to purchase the MS Money 2008 version. Has anyone used the MS Money 2008 or the 2007 version yet?

Yahoo Finance recently published an article about the best personal finance software to track your financial accounts. MS Money is listed in the article, along with Quicken. For your convenience, I have copy-pasted the article below along with the link to the actual page.
——————————————————————————————–

The Best Personal-Finance Software

by David Futrelle
Thursday, August 30, 2007
Woody Allen once said that 80 percent of success is just showing up. You could also say that 80 percent of financial success is just keeping track.

Knowing what you have stops you from bouncing checks; knowing how your investments are performing helps you move toward your goals. Trouble is, keeping track can be a royal pain in the posterior. A personal-finance program can ease the ache. Here are our six faves.

Microsoft Money Plus, Windows; $20 to $90, depending on version
Quicken, Windows, Mac; $30 to $100

These two programs dominate for good reason. Both let you download your bank and credit card info and pay bills and manage investments online, creating cool charts and tables along the way.

Both offer everything from a cheap basic version (if you’re looking for little more than a system for balancing your checkbook) to a pricier one with sophisticated tools to help you pay down debt, save for retirement and more.

Both give tax advice and let you transfer your data into tax prep programs like Intuit’s TurboTax and H&R Block’s TaxCut .

The 2008 editions of these programs, out this month, include several new features meant to help you budget and track expenditures more precisely. (The 2008 versions were unavailable at press time; we tested the 2007 versions.)

Bottom line: You can’t go wrong with either program. (If you’re a Mac user, your only option here is Quicken.) Quicken and Money aren’t perfect, though. They’re so big that they can run slowly and be difficult to navigate.

Annoyingly, both try to sell you on other products and services. And they’re not cheap especially if you factor in their monthly fee for online bill paying ($6 with Money; $10 with Quicken).

Simpler (and usually cheaper) alternatives

AceMoney, Windows; $30

AceMoney offers a solid, basic personal-finance package. If you’re a frugal sort with only one bank account to track, you can download AceMoney Lite for free.

While the $30 version doesn’t include online bill paying, it does let you track multiple accounts and entitles you to free upgrades for life - or at least for as long as the small software company behind AceMoney sticks around.

MoneyDance, Windows, Mac, Linux; $30

If you’re a Mac user, this is the only passable alternative to Quicken. It’s sleek and simple to use, and it covers all the basics of personal finance. You can also download an assortment of free “extensions” - useful tools like credit card paydown calculators.

Moneydance doesn’t charge for online bill paying, but your bank may.

Managing your money from the back of a cab

Pocket Quicken, Palm, Pocket PC; $40
Ultrasoft Money, Palm; $40

Attention, handheld-PC addicts: These two very similar programs are the only ones worth bothering with.

After you manage your finances on your handheld, you can transfer the data into your desktop personal-finance program (as long as that program is Quicken or Money, respectively). Because man cannot live by teeny keyboards alone.

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I had a meeting session with my financial planning consultant, Dan at Fidelity on last Wednesday (5/16/07).  He is very knowledge about finance and I learn something new every time I meet with him. Here are some of my notes:

Professional Portfolio Management
I asked Dan whether professional management is beneficial. He explained the benefits of professional management.  Professional portfolio management (in Fidelity) is a process that manages your portfolio and diversifies your risks. When a section of your portfolio is doing well, that section will be sold off to follow the predetermined percentage of the portfolio. For example, if your portfolio is to composed of 20% in small-caps funds, but the small-caps funds have gone up to 30%, then your portfolio will be rebalanced. 10% of your small-caps funds will be sold off and redistributed, reverting to a holding of 20% in small-caps funds.

The Upside: This consistent and disciplined practice protects you from bad market runs. In the example above, should your small-caps fund see a large drop, the rebalancing of your portfolio will make you less exposed to the drop.

The Downside: This consistent and disciplined practice limits you from good market runs. Should your small-caps fund continue to run higher, the rebalancing of your portfolio will limit your gains from the run.

The Bottom Line: Professional Portfolio Management applies consistent and disciplined practice regardless of the market conditions to keep your portfolio in check. The result is a “smoother” ride to your financial goal.

Develop a System and Employ Discipline
Dan told me a story about his friend in the dot com age. His friend took on a second home mortgage loan and sock the money in the stock market. In the beginning, his friend increased his stock portfolio ten folds and decided to quit his job. His friend thought it was way too easy to make money and decided to quit his job. Obviously, it didn’t take long for him to get a wake up call. In the year 2000, the stock market crashed and Dan’s friend lost 90% of his stock portfolio in a very short period of time.

Dan stressed it is important to develop a system in investing and whatever that system is, be very disciplined in it. It could be selling a stock once you reach ha 20% profit, or cutting losses at a 10% drop. Whatever the system is, you must follow it consistently and not let emotions interfere with your judgment.

For Dan, he leaves his money to portfolio management because he doesn’t have the time or interest to follow the market. He admits that during the good market years, he misses on some gains, but is willing to give up those gains for a well-protected portfolio. During the bad market years, he is less impacted from the sharp drops. He hardly looks at his portfolio. He doesn’t want to let his emotions distract him from his goal.
I agree with this point. I think the common people should leave the portfolio management to the professionals or to a very disciplined system. I am planning to leave a portion of my money to professional management in the future and concentrate more on my entrepreneurship.

Success Stories from Independent Trading
I asked if Dan knows of any person who makes good money by trading. He told me he has a client who has been trading for 20 years and the client has returns of 20% annually. Dan’s client has outperformed the market by a wide margin. But Dan noted that the average investor does not beat the market consistently. Many mutual funds and individual investors trail the S&P500 over the long run. Still, with that said, there are people who are passionate and disciplined enough to play in the market, have reaped great profits.

It’s good to know that people have beaten the market even over the years. I have been outperforming the market every year so far. I hope I can continue to beat the market.

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Do You Live Paycheck-To-Paycheck, Too?
By Brent Rassmussen, COO, CareerBuilder.com

Counting down the minutes to payday? You’re not alone. Four-in-ten workers (41 percent) say they often or always live paycheck to paycheck, according to CareerBuilder.com’s latest survey.

At the end of 2006, the Bureau of Labor Statistics (BLS) reported the average weekly earnings of a full-time worker was $682. Take out taxes and other deductions like Social Security and Medicare, and that take-home pay is even less. Now subtract money spent on food, clothing, rent or mortgage, utilities, transportation, healthcare, education and other services for day-to-day living and there’s often not a lot left over.

Scrambling to make ends meet is an exercise all too familiar in many homes. One-third of workers report they don’t have enough income to live comfortably. To achieve this, more than half said they would need to earn more than $500 per paycheck. Thirty-seven percent of workers said they have one income for their households while 16 percent say they work more than one job just to make ends meet.

Because workers’ paychecks are often spent before they even hit the bank, saving is often not an option. One-in-five said they don’t set aside any money for savings each month. Twenty-eight percent save $100 or less per month and 16 percent save less than $50. And those golden years might not be so golden: 25 percent don’t participate in a 401(k), IRA or other retirement plan.

So if you had the extra money, what would you do with it? Turns out many of you’d like be saving for a rainy day… or the future. In a 2006 survey, American Payroll Association asked 33,128 Americans the question what they would do if they received a 100 percent pay raise. A combined 51 percent said they would either deposit it into savings, contribute it to a 401(k) or invest it.

While a bigger paycheck may help, planning ahead and maximizing benefits offered by employers can also play a major role in stretching your dollar. Here are some ways to help create a healthy bottom line at home:

Use direct deposit. — Many employers offer this to employees. By having your paycheck deposited directly into your bank account, you resist the temptation of just cashing it or getting cash back.

Pay yourself first. — Even if it’s only $10 a week, set aside a certain amount of money every payday in a separate savings account. Don’t touch it. Over time, you’ll see it add up from your regular contributions and earned interest.

Don’t leave any money on the table. — Take advantage of your employer’s cost-saving benefits including flex-spending, education reimbursement and wellness benefits. Flexible spending accounts enable workers to designate a certain amount of pre-tax dollars for health-related expenses. Consider your commute, too. Some employers will reimburse transportation expenses or provide flexible work arrangements such as telecommuting.

Track your spending. — Although 58 percent of workers have a set budget each pay period, 21 percent say they typically spend over their allotted amount. When asked what puts them over budget most often, the most popular response was eating out.

Skip the ATM. — If you have cash on you, you’ll spend it. Minimize your trips to the ATM by giving yourself a weekly cash allowance and using only that for the week. This might mean cutting back on daily lattes and lunches out, but you won’t miss it over time.

Evaluate your paycheck. — 81 percent of employers surveyed plan to increase salaries for existing employees in 2007 and nearly half expect to increase salaries on initial offers to new employees. Negotiations may be in order.

Start a job search. — Some job search expenses such as agency fees, travel expenses, long-distance calls and copying and mailing résumés are tax deductible for qualifying workers.

Brent Rassmussen is COO of CareerBuilder.com. He is an expert in recruitment trends and tactics, job seeker behavior and workplace issues.

Source: MSN Careers

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