Military Finances: New Car or Financial Security

The following is a guest post from one of our readers. If you would like to write a guest post for compounding returns, please click here!

Very few career paths provide a greater opportunity to achieve long term financial success than military service. Doctors and lawyers might make a good deal more money, but early in their careers they are  burdened by student loan debt and have difficulty saving, while many other professionals have difficulty finding steady, gainful employment that pays well.

The military, however, has several financial advantages. Some examples include:

• Steady Pay Check
• Little Threat of Unemployment
• Tax-Free Shopping at Exchange and Commissary
• Tax- Free Housing Allowance (or Government Provided Housing)
• GI Bill (with Generous Housing Stipend)
• Tax Free Income on Deployment
• Affordable Medical Care
• Steady Pay at a Young Age

Military members have no doubt earned these benefits through their commitment to service and constant sacrifice, and used correctly, these benefits can help military members become well established financially for the future.

Given these circumstances, there is no excuse for military members not to start saving. 10% of a PFC’s salary is $183 per month (before BAH, BAS, Combat Pay etc). Save that much for the next 35 years, in a mutual fund that earns 8% per year (below historic average), and that comes out to $480,000.

One option for your savings is the Thrift Savings Plan. Another option for saving for your future is to consider a Roth IRA through Zecco or ING Direct. Both provide low cost savings vehicles that can help you save money in a tax sheltered account for retirement. For more information on Roth IRA accounts, visit our post explaining Roth IRA accounts. 

Another thing to consider is the effect of increasing your savings rate as you get promoted. Doing so can mean that the money you sock away for retirement is exponentially more. Visit Becoming a Millionaire on a Military Salary for more information.

Another consideration for many military members is the tax free combat pay with which these members return from deployment. Quite often, many of our younger Soldiers are arriving home with $25-30K saved. This is especially true for single soldiers. Often times Soldiers are tempted to buy the latest car like a brand new Mustang.

Go to a major military base after a unit redeploys, and go to the parking lot. You will see what I am talking about.

So, we can see that a military member has two options when receiving an influx of cash. Quite frequently this money is used to buy expensive consumer items like a new car or electronics. But what about the road less traveled?

Option #1: The Mustang- Besides the initial cost, one has to pay for maintenance, higher insurance, fuel, wear and tear (which is often in the military), parking, and other incidentals. It is likely that even with the deployment money, the car will prove to be a huge liability, taxing the Soldier’s already small salary.

Option #2: Investment- The member can put 30k into a low cost index fund. In 35 years, without adding a single penny, that money would grow to $443,000, assuming an 8% return (below historical averages). The interest on that (at 5%) would be about 1700 per month, which is roughly equal to a pension of a retiring Master Sergeant. So basically, that investment would substitute for a pension if the Soldier wanted to leave active duty immediately.

Few understand this calculus when making decisions on post deployment finances.

So bottom line, if you are having financial struggles, don’t blame the government, chain of command, President Obama, or the pay day lender outside the gate. The ability to achieve financial independence is in your hands, and you have advantages that few others have.

If you are looking for a great way to get started tracking your expenses and building long term wealth, consider using an online budgeting software to help you get started.

Photo By: Sanchom

Launch Your Next Business Venture with Rock the Post

Ever had a great idea?

If you have a business plan or moneymaking venture that you're just not sure how to get off the ground, perhaps you should consider reaching out to like-minded and talented professionals from across the human spectrum to turn your next idea into a business, patent, or project. 

According to the Millionaire Next Door, a vast majority of this nation's wealthiest men and women are entrepreneurs or business owners. So, if you aspire to build real wealth, perhaps its time to turn your ideas, passions, or business ideas into a small business or entrepreneurial venture that could be your ticket to an exciting new career (where you set your own hours).

Rock the Post can help you find the human capital which can propel your idea forward, or turn a passing thought into a business plan or joint venture between other entrepreneurs. 

Rock the Post is a business social networking site that is designed to serve as a bridge between entrepreneurs and talented parties (or investors) that can help turn a simple idea to the next level. Rock the Post is intended to serve as a communication platform that can allow business partnerships to form between disparate parties in order for projects, dreams and passions to come to fruition.

One of the greatest benefits to Rock the Post is the wide variety of professionals with whom members can connect. These men and women include entrepreneurs, artists, and professionals with a wide variety of specialties as well as investors eager for unique opportunities to support. In addition to the wide variety of men and women available to connect with your next business or non-profit venture, Rock the Post also crosses all borders allowing partners from around the world to connect to provide the tools, connections and support necessary for projects to succeed. 

So, if you have been wondering how to get your next project or business venture off the ground, consider Rock the Post to connect with other professionals that can help you take your business to the next level. 

Photo By: @Boetter

Seven Ways to Grow Your Assets in a Bad Economy

The following is a guest post from Ashyia Hill of CreditDonkey.com. While Ashyia provides us with some ideas of ways to prosper in a bad economy, some people remain in dire straights. If that describes your situation, you may want to consider a credit counseling course. Thanks for the great post, Ashyia!

According to the United States Bureau of Labor and Statistics and Department of the Treasury, the official dates of the great recession indicate that the downturn began in 2007 and ended in 2009. Unfortunately, many Americans didn’t get that memo. Fast forward to two years later and may people continue to struggle to get ahead in the United States. 

Unfortunately, the worst recession since the Great Depression has had a major impact across the country. In fact, according to government statistics as reported in December of 2011, household wealth dropped by 20% since the start of the recession in 2008.

However, it is not all bad news; there are signs that the economy is starting to improve. Some analysts are warning that the recovery could be sluggish but now is the time to start thinking about how to growing assets.

The following tips can help consumers grow their assets while the economy starts to improve.

Find Ways to Increase Your Income 

Although increasing income is much easier said than done, if you want to grow your assets, it does mean making sacrifices. Unfortunately because of rising inflation, if you are married, it has become almost necessary for both parties in a household to bring home an income. 

In previous generations it was unthinkable both parties in a married household would need to work. But because income has not kept pace with inflation (unless you happen to be a corporate CEO), it has become almost essential for the former stay at home mom (or dad) to bring in an income. If leaving home for work isn't an option, however, one could consider some creative ways to make extra income from home. But your spouse might not be the only option for increasing your family's income.

If you have children who are of working age, maybe it is time to encourage them to find a part-time job. This can allow you to save money on their allowance while they learn the value of a dollar and the all too important saving habit. 

To be sure, we are not condoning sending your children to work in a coal mine... but a paper route, odd jobs like gardening and snow removal are jobs they can easily do and pocket an income.

Cut Discretionary Spending 

If you want to grow your income the first step is to take a page out of most corporate handbooks and cut costs. Since it is unlikely you will be able to fire anyone in your family, you should probably choose to cut spending. 

The first step in slashing expenses is to create a budget which will allow you to separate necessary costs: mortgage or rent and car payments; and your discretionary spending: dinners out, coffee and entertainment (for example).

The more you are able to cut from your bottom line, the better financial shape you will be in. In addition, this will allow you to take advantage of investment opportunities when the economy improves.

Pay Down Debt

At first it might sound counter-productive to take all the money you are saving and pay off your debts; however, paying off your debts will both help to improve your credit score while simultaneously lowering your payments, two things which will pay off big in the long-term. In fact, one personal finance blogger recently shared that "having a high credit score will allow you to refinance loans and mortgages at lower interest rates and help you qualify for lucrative reward credit cards".

One other option for improving your credit score is to use your credit card and pay it off monthly, a plan that will keep you from paying growing interest, while creating a favorable credit report. 

Don’t Forget to Invest 

If you are seeking to grow your assets, it's essential that you invest, despite the turmoil in the financial markets.

In March 2009 the S&P 500 hit a low of 666.79, and in May 2011 the market hit a high of 1,370.58. For people who had invested in the market low they saw a return of more than 105%.

Okay... while this may be an unlikely scenario in the current market, it does demonstrate the opportunities that are available when the market turns around.

Another bonus for investors in stocks is that some equities can provide an annual income through dividends. But, while dividend investing can be a lucrative long term strategy, it is important to talk to a financial advisor to find the right investment strategy for your particular situation.

Consider Purchasing Hard Assets

It is important to remember that there are two types of property. The first type are assets, which appreciate (or increase in value) over time. The second type are known as liabilities, which depreciate (or decrease in value) over time.

If you want your assets to grow then it seems like a no-brainer to buy assets that will appreciate over time. But this strategy is easier said than done. Historically, one of the best appreciating assets is property. With housing prices as low as they are, many people are looking at buying investment property, but buying a second home does create some risk, and it is important to talk to a professional realtor to find the right real estate investment for your situation. 

Another hard asset that many people have begun to purchase in the hopes of capital appreciation is gold. But, while investing in gold has proven lucrative for many over the past several years, there is speculation that we may be in the midst of an international gold bubble. 

Go Back to School 

The skills you have acquired over the years are probably your biggest assets. It is not easy to go back to school, after you have been out in the work force for a while, but might be a move in the right direction.

Unfortunately, unemployment in the U.S. is near record highs (currently standing at 8.6%) so the workforce has been extremely competitive. Going back to school and upgrading your skills is a great way to get an edge over the competition, which could lead to your dream job.

Make Sure You Stay Healthy

This maybe the last point in our list; however it is actually one of the most important. If you can’t keep yourself healthy, how can you expect to support your family and grow your business? The reality is that medical costs in the states are extremely high. In fact, the number one cause for bankruptcy in the U.S. is from high medical costs.

For a young person, health insurance may seem like an unnecessary expense, but having the right coverage will help you save money in the long run. 

Final Word: 

It takes a lot of hard work, focus and perseverance to prosper during difficult economic times but it is not impossible. When you are creating your plan and setting your goals to build your assets, it is important to gather as much information as possible and weigh all the risks.

Don’t be afraid to talk to experts to find the answers you need to make the best decisions for you and your family.

Photo By: DigitalMoneyWorld

3 Ways to Save Money on Credit Card Bills

The following is a guest post by one of our readers. If you are interested in guest posting on compounding returns, click here! Enjoy the post!

It's no secret. Banks are trying to get your money right and left. And credit cards have historically proven a great way for the financial institutions to get their hands on your hard earned cash. But, shunning the financial institutions completely is not a wise strategy, as having a credit or debit card has become almost a necessity in modern America.

Of course, the best way to use a credit card is to find a no fee rewards card (we recommend Discover), and pay it off monthly.

But for some people, using credit cards the right way may not be an option because of financial difficulties. If that's the case, you may want to consider visiting A Guide to Paying Off Your Credit Cards for advice on how to dig your way out of credit card debt.

If you find yourself in a tough spot, and aren't yet in a position to bravely eliminate your credit card dependence, there are some options available that can help lower your payments and get you on solid financial footing for your journey out of debt.

Here are three relatively easy ways to carry a short term balance, and save money on your credit card bills while you develop your debt elimination strategy.

Switch To a Credit Union

One of the easiest ways to save money on debt payments over the short term is to switch to a credit union, like thousands of Americans have already done. This is great because it shows banks that consumers have a choice of institutions. But for the consumer, it can also lower interest rates on credit cards since credit unions are non-profit and thus don't try to scrape every ounce of money they can get out of you.

In fact, especially in the wake of the recent financial meltdown, thousands of people have made the migration to credit union based banking, and often rate their new financial service providers very highly, so not only will switching to a credit union allow you to save money, since they are generally non profit, but they also well known for doing an excellent job of keeping the customer first.

Get a Credit Report

If you decide to get a credit report online, you will finally know where you stand in the eyes of the financial institutions.

Knowing your credit score is imperative to being an empowered individual within our current capitalist society. Your credit score is used for everything from qualifying for the best rates on debt instruments (credit cards, car loans, and mortgages), to screening applicants for potential employment opportunities. In fact, your credit score and credit report are the two most important pieces of information that can make or break your financial future.

Knowing your credit score is not only empowering, but can also give you leverage with the financial institutions. In many cases, with a good credit score you can negotiate the best rates on your outstanding credit card balances, and other debt. This can save you a bundle on your long term credit card payments, because if you have good credit (Above 740), the banks (or credit unions) know that you will be more likely to pay back your credit card than if you have a bad credit score (Below 600). In general, the better your credit, the more you can save on a credit card.

If you are looking for a great and easy way to get your credit report, consider Equifax. Another option to consider is getting your credit report and ID protection with TrustedID. Just make sure you know your credit score and credit history!

Know Which Cards to Pay Back First

Knowing which card or cards to repay first is no easy task, especially if you are managing a number of cards and carrying a balance every month. If this describes your situation, consider signing up with Mint to track your spending and organize your debt into a manageable and easy to track online format.

Mint will allow you to clearly see which card carries the highest balance and highest interest. Generally speaking, this will let you organize your debt from highest priority to lowest.

Obviously, the highest priority cards will be any that you are behind on paying at least the minimum balance. Beyond these cards, you'll want to focus on either the card with the highest balance (as advocated by Dave Ramsey in The Total Money Makeover) or the highest interest rate (which we at compounding returns believe to be the smartest method). Either way way you choose to prioritize your debt, Mint can help you organize your debt and expenses and make your financial life much more manageable.

Another thing to consider (if you can't make all of your payments this month) is that not repaying retail credit cards debt only hurts your credit score around a third as much as missing a payment on a regular, bank-issued credit union-issued cards.

So, if you are in danger of defaulting on your loans it is wise to pay the major cards first. If, however, you are just attempting to prioritize your debt, you should focus on the cards with the highest interest rates.

The Bottom Line: 

All of us are at some stage of our own, personal financial journey. For many, even many of the best personal finance bloggers, this journey seemingly begins with a crushing tale of debt. Read this author's tale in Building Wealth is a Journey, not a Destination. But if you find yourself in a difficult financial spot, juggling massive credit card debt, you can use the tips above to get through your current difficulties, and when you are ready, consider moving on to our First 3 Steps in Debt Recovery.

Photo By: Images of Money

Forex Trading Courses from Nial Fuller

Frequent readers of compounding returns are no doubt aware that we favor tried and true techniques for long term investing success. Chief among some of our favorite methods are dividend growth investing and low cost index investing (for the passive investor). The strategic use of these methods has been shown over time to benefit the patient, long term investor.

But dividend growth investing and index investing are only two of the many methods to make money in the financial markets.

Forex Trading as an Alternative to Stock Trading: 

One popular alternative to investing in the stock and bond markets is Forex trading. Forex trading offers the ability to focus mainly on macro-economic principals across international markets in order for investors to attempt to predict the relative strength of currencies in order to derive short and long term capital gains.

Sound complicated? It is. That's why for Forex traders, it is highly important to keep risk in check, and learn the ropes before you jump headlong into the Forex marketplace. 

Learn to Trade the Market: 

There are numerous websites devoted to helping the aspiring Forex trader learn the ropes and avoid the costly financial missteps that can come from attempting to trade Forex before a full understanding of the marketplace is achieved. One such site that can help aspiring Forex traders is Nial Fuller's Learn to Trade the Market. 

Learn to Trade the Market offers strategies and tips that can help the beginning investor and advanced trader alike refine their Forex trading. The site offers numerous free video tutorials, Forex trading articles and daily forex market commentary, and specializes in price action forex trading strategies. As a bonus, most of these resources are offered free of charge at Nial Fuller's site (although there is an option for paid premium service). 

For the beginning and advanced Forex trader, Learn to Trade the Market is an excellent resource that offers high quality analysis of Forex trading strategies, free Forex market commentary, and high quality instructional videos from Nial Fuller that can assist the Forex trader in making the right choices despite the rapidly changing nature of the Forex market. The site also does a great job of providing insight into the relative strength of currencies and an overview of Forex trading strategies. 

Nial Fuller does an excellent job of making Forex trading accessible to the masses. A Nial Fuller review or a review of Learn to Trade the Market would not be complete without mentioning the fact that Fuller seems to achieve the impossible by making Forex trading understandable, enjoyable, and even profitable through the videos, commentary, and blog available free of charge at Learn to Trade the Market.

The Bottom Line:

If you are seeking alternatives to traditional investing strategies, its imperative to spend the time and effort to ensure that you understand the fundamentals of your chosen alternative investment vehicles. If you are looking to invest in the Forex markets, its absolutely essential that you understand the basics, keep expenses low, and always keep risk in check. A high quality Forex training site like Learn to Trade the Market can help keep your risk somewhat lower than average, even in speculative parts of your portfolio like Forex trading. 

Photo By: Images of Money