The James Dicks Blog

We are approaching the final quarter of the year and I just want to remind you about something that I consider a very important aspect of any well-balanced financial life.  Make sure that you accomplish frequent financial checkups to ensure that you are on the proper path to develop your assets effectively.  Situations can change very quickly in life and you must consider, on a regular basis, the composition and structure of your personal financial goals, tools and investments.  There are many issues to consider.  Things like getting rid of unnecessary debt, developing proper spending habits, checking your insurance needs, examining your taxes, and determining whether or not you need to rebalance your portfolio. I’m sure you could come up with a number of other areas that, on a personal level, will positively or negatively affect your financial life.  Check it all.

There are numerous methods of determining the best methods of handling our money that didn’t exist a decade ago.  Most of us have personal computers at home that can be used to assist your financial development.  There are many software programs that can help guide you by showing where your money is currently going.  These programs can help you determine the best methods of using your cash to enhance your investments.  Determine how much is coming in, how much is going out and establish where the money is going.  It’s really that easy.  Once you know those facts, you can make your adjustments.

One question that you really should ask yourself is whether the investment methods you use are actually working for you to build financial wealth.  If there have been problems, changes in the market trends, an alteration in your personal lifestyle (a new baby, a recent move, a new job, you’ve just married, just divorced) then make the necessary changes to make sure your money is working to fit your life’s changes and goals.  Interest rates are down today and it may be time to consider refinancing your home but only you know whether that’s something you should do or not.  Plus, make sure you build at least three to six months worth of living expenses, if you don’t already have that amount put away safely. 

Other areas of interest to your personal financial life include your insurance coverage.  If your agent hasn’t called you recently, pick up the phone and dial your agent’s office and request that you take an inventory of your coverage (home, life, auto) and adjust where needed.  For goodness sake, examine your credit report at least once a year.  It might be a good idea to actually contact the credit agencies twice a year, especially if you are about to make a major purchase.  

Just as you need to develop and then redevelop your short and long term goals throughout the year, so it goes with the state of your financial well-being.  This should not be an unpleasant chore but rather something enjoyable.  Remember, by conducting these occasional checkups, you are insuring that positive financial results are more likely to be attained. 

Anything can happen throughout the year (as this year has shown), which can force you off your fiscal course.  Events that can make a difference in your life occur at a moment’s notice.  Just make sure that when unforeseen events occur, you make the needed corrections that will rebalance your financial life.  Plan to make a quick check every three months or so.  This is all part of goal setting that I believe is so important to leading a balanced and prosperous life.  Stay focused and make sure you perform your personal checkups on a regular basis. 

JamesDicks General credit cards, deficit, economy, education, expenses, FICO, investment, james dicks, mortgage, payments, personal finance, premieretrade, refinancing, saving money, stock market,  financial growth,  financial responsibility,  forex,  goals

Buy and Hold – bet you have heard about that financial strategy at one point or another.  The older you are the more likely you have heard it and probably the worse off you are today.  When the markets go down, like we have seen over the last few years (forget about the rebound of late) your portfolio seems to go down harder.  Why does it seem that your portfolio can fall 50 percent or more over night but you can’t seem to get it to move higher at the same rate? Great question!

If you are plugged into the financial news of the day, you know that we just had the best July in the markets since 1997. I say “whatever.” I know one too many investors that don’t agree with that.  Buy and hold as a strategy has been around a long time, I mean since the beginning of trading. Gone are the days when you could buy a good blue chip like the IBM of late, sit on it year after year and receive a safe double digit return without ever having to look at your stock. 

The problem with “buy and hold” as a trading strategy is that it is like any other great way to make money; the first one in makes all the money.  If you get in at the bottom and you start your buy and hold plan, odds are you will make money in the long run.  However, at some point the market will retrace its moves and then give back your gains, some or all of them. Then if you get into a reversal for a prolonged period of time, which is what we saw when the markets went down significantly to the levels it is currently holding, you may not have enough time to recover.

For those of you that get in at higher points, you then get caught up in great so called strategies like cost average down.  You start allowing your emotions to take over as you ride the stock all the way down.  You feel like it’s a great company and are sure it can’t go any lower…it will come back…I have a feeling about this! Any of these sound familiar?  You bet! How did that feeling work out for you? Probably not too well.  All you did was build a portfolio that has a lot of a stock that you cost averaged down and that is still a long way from break even.

Don’t email me and say it’s not a loss until you book it on paper. Are you kidding me!?  I have heard this one time too many. It’s a loss, oh believe me it’s a loss.  Try paying a bill or retiring on a stock that is down 80% or more in your portfolio.  You can’t because it’s a loss. Let’s try this concept on for a moment- Time Value of money.

Time Value of money is something we must take into account, especially those of us that are already in retirement or nearing that very important point in our financial lives.  If you are sitting in a stock that has done well with your “buy and hold” mentality then great! Now do something to protect your profits.  Try using a stop loss order, which will allow you to set a price that if (or when) the stock drops to will get you out of the market.  If you love the stock so much, buy it back when it bottoms out in order to protect the profit.  You can’t book the profits until you sell the stock.  Why be up 40 percent on your favorite stock, and then watch it retrace its profits to break even or worse, wind up with a loss.  You can sell at the 40 percent profit and buy it back if you love it so much when it gets back to your original price.  While it is going down you can put your money in something that is doing well. Thus, the Time Value of money.

If you aren’t making at least 3 to 5 percent on your money, you are losing out to inflation.  You better be planning on bumping that return on investment higher as inflation is surely on the rise.  So you sit in your favorite stock and if you are lucky enough to make 5 percent a year and you feel happy.  But inflation is running higher than 5 percent.  Guess what? You are losing money more than you think, and your retirement will not be what you had hoped for, if at all.

It is okay to let someone manage your money for you, but you had better know a little about what they are doing for you so you don’t wake up one day and wonder how your portfolio is doing and where all the money went.  All I am saying is take a little time to learn about the markets and learn how to use some of the tools out there to help you do that. You can always go to my web site James Dicks.com to learn about some of the best tools out there to help you trade or learn about the markets.

No reason anymore to sit in a stock that is about to go down or that is going down when you can be in one that is moving forward.  With a little education and support, you can take control of your financial future.  Add a little diversification and money management and there is no stopping you

Happy Investing,

James Dicks

JamesDicks General economy, expenses, financial growth, financial responsibility, forex, goals, interest, investing, investment, james dicks, money, personal finance, premieretrade, saving money, stock market, Treasury

It’s here the next great cycle in real estate.  If you want to make some money in real estate then now is probably the time to think about getting in.  I have been investing in real estate for nearly 20 years, and my family has been in the business for a lot longer than that.  I have personally invested through several cycles and have seen many more.

It seems that the real estate market runs in cycles, about five to ten years.  We just got through a big one where everything was going up.  Homeownership in the U.S. has risen to nearly 70 percent.  Now we are on the down side and we are already near homeownership levels of 1985.  The time for rentals is back.

But what you will see is that most of the apartment buildings that sprung up during the last great rental period have converted to condos, and thus have started to experience foreclosure.  Today we are facing a huge inventory of foreclosed properties, and all of the people that lived in those properties will be looking for places to live.  Why not in your condo or home?

The next great real estate cycle is now at your feet.  When is the best time to get into the real estate rental market?  How about when interest rates are low and prices are even lower?  Ah…..would that be now?  I think so.  Now what we have to do is get creative and we have to find out how to get into the market using leverage or better yet – cash.  I personally have begun a life of living debt free, I simply believe that cash is king and credit will enslave you.  However, with that said, leverage and finance have their place and you may not be able to run out and pay cash for your next rental property.

There is no question that buying bank-owned properties for cash will get you the best deals, but banks are now more motivated than ever before to get real estate they own off their books.  They are motivated by their own business model and oversight by the federal government.  So, these banks are more willing to loan you money now than ever before.  Laugh out loud if you will but it is in their best interest to do so.  You can get creative and work some pretty good deals out with them and they will be the bank.  It is better for them to loan you the money on the house than to have the bank sit on it.

The way this cycle will work is that you can go out buy a house or a condo for dirt cheap prices – I mean 30 cents on the dollar.  Remember that the real estate market will run in cycles (trends, if you will).  On average a typical home in the U.S. will double in value every eight to ten years.  And we saw that prior to the last pull back.  If you bought or buy at the end of the cycle you can get hurt, so we buy our home now when prices are at an all time lows; we rent the home and start using the strategy in which we pay extra principal payments.  With interest rates so low you should be able to have enough extra principal payments that will allow you to pay this home off in eight to ten years. 

You are then sitting on a piece of property that is 100 percent cash flowing, even if the market pulls back again you will still have cash coming in with little overhead which will allow you to make the next cycle.  But this is the best part, let’s say you buy a home for 50 cents on the dollar.  Say a $200 thousand home that in today’s value is $100 thousand. Believe me, you can get them for far less today.  Over the next 10 years you pay it off and the value of the home increases to nearly $400 thousand.  But you own it free and clear; so let’s say you have another correction.  It would have to go a long way down before it really starts to affect you because you own it free and clear.  Even if it went back to 10 year lows you still have equity to pull out. 

On a side note you can always get a mortgage or refinance later and pull cash out to invest tax free later.  Although this is not a debt free type of mentality, there are circumstances when leveraging money will be to your advantage.

With all that said, keep looking for more articles from me on this subject as I am personally doing this.  I love real estate as a way of diversification and now is the time to make your next fortune in real estate.

Happy investing,

James Dicks

JamesDicks General business, credit, economy, expenses, financial responsibility, goals, housing, interest, investing, investment, james dicks, market crash, money, mortgage, payments, personal finance, premieretrade, real estate, refinancing, rentals

I was sitting around this weekend, and as I often do, I check my credit reports. I try to examine my credit reports at least once a month; that seems like a lot and probably is for the average consumer.  But for me my credit standing is vital for my business and its success.

I am probably not the best person to talk to about credit, or at least the credit bureaus; since I believe the credit bureaus are the biggest scam of all.  I mean they give you one free credit report a year so you can see what’s on it, but that only happened after they were forced to do so.

I pay for credit report monitoring and, unfortunately, I suggest you do the same.  Be assured I don’t get paid for recommending this but it’s the only way to really know what is going on with your credit reports.  All three bureaus have a monthly service that will send you alerts as things change on your report.  You probably don’t need all three just chose one, that way if you get an alert you can check it and then you will know most likely the other two reporting agencies will have the same information.

I have been keeping track of my credit reports for many years, and I literally have a three ring binder for each bureau that is five inches thick full of old reports. I keep very close track of what is on my file.  Listen in the last few months I have had several things hit my report that were erroneous.  It pays to check.

The first error involved a bank I had a loan with; they said I was 30 days late on a payment which wasn’t even close.  I had to actually show them my receipt of the payment to prove I wasn’t.  Then I had to diligently stay on top of the bank to make sure that they fixed my credit report. In the last year, I have had at least three or four separate instances where a payment was not recorded correctly.

Here is a good story for you.  I had a car that I wanted to trade in. I went to the dealer, bought a new one and traded in the old car.  Thirty days latter I received an alert that something had changed on my credit report.  I logged in only to discover that I had a 30 day late pay for the first car – the car I traded in!  After tracking down all individuals involved I came to find out that the car dealership didn’t pay off the first loan.  Can you imagine that!? Apparently this is going on far more than one would imagine.  Anyway, I finally got the dealership to do what they were supposed to do and, from that point, it took about a month to get my credit report fixed and back on track.

In the past, I have had erroneous inquires, people and organizations pulling my credit that shouldn’t.  Each inquiry can affect your credit score so you want to make sure that your credit report isn’t being pulled unnecessarily.

These examples are extremely important and fairly common, especially in today’s economic climate.  The credit bureaus are very busy right now and lots of people are having issues.  With all the reporting going on things are getting messed up more now than ever.  That’s why it’s ever so important to stay on top of your report and credit score.  If your score goes down you could be paying a lot more for your credit in the future.

The whole credit scoring system is just simply broken.  In fact, the FICO scoring system is one of the reasons the whole housing industry is crashing.  The credit reporting agencies were supposed to provide a score that helped lenders lend money, but obviously it didn’t work out well for them or for us.  In addition, I hear the major banks are in the process of suing the credit reporting agencies because of their scoring systems.

Just recently Experian pulled out of its agreement with myFICO.com, which had been the only place where consumers could buy their FICO scores from all three bureaus.

The FICO scoring system is suppose to be a leading credit scoring formula used by most lenders. Experian will continue selling it to lenders, acting like it’s no big deal by not offering it to consumers anymore. In my opinion, it is just another way for the credit reporting agency to keep us in the dark.

Experian spokeswoman Susan Hensen wrote in a recent e-mail, “There is no one credit score that all financial institutions use to make decisions, and there is also no one credit score that consumers must use to help them understand and manage their credit. There are many reputable credit scores on the market that consumers can use to evaluate their creditworthiness before making financial decisions.”

Experian Executive Vice President Peg Smith downplayed any disadvantage to consumers, saying Experian will still offer individual customers its own credit rating scoring system.

Yeah, whatever…don’t you believe that for a minute!  Bottom line – you should check your credit reports often.  It should be illegal for these reporting agencies to hold us hostage; basically extorting us into having to pay so that we can see what is on our credit reports but they do.  They pay a lot of money each year to lobbyists to push their agenda on us.  So it’s time to fight back, write your Senator and your U.S. Representative and tell them it is time to overhaul the Fair Debt Credit Reporting Act. 

To learn more you can visit www.JamesDicks.com

As always,

Happy Investing

All my best

James Dicks

JamesDicks General business, Congress, credit, credit cards, expenses, FICO, financial growth, goals, government, investing, investment, james dicks, mortgage, personal finance, saving money

All of sudden, everything I read in this new economic stimulus plan is about helping to create or SAVE 3.5 million jobs, when, in fact, this new federal stimulus plan was supposed to actually CREATE up to 4 million jobs.  This is a wakeup call and it is time for you, the American public, to get informed, stand up and speak your mind. Use the Internet to send emails to your senators and congressman.  With today’s speed of transparency, there is no reason that we, the American people, can’t find out exactly what is going on in our government in a moment’s notice.   

Hopefully some of the new initiatives that are being set in place will assist the American family’s homeownership problems. At lunch today, I was talking with someone who is no different than any of us, in that, his family is way upside down in their home.  They owe about $220,000, they paid $260,000 and the house appreciated to about $280,000 but is now worth, on a good day, about $175,000. 

I told him some great news, “Since you are paying your mortgage on time, you don’t qualify for the HOPE Now program, but you will qualify for the new $1,000 credit per year (max three years) for paying your mortgage on time.”

Okay, let’s work this one out.  Let’s say I pay $2,000 a month on the example above on a six percent mortgage.  I get a $1,000 tax credit per year for three years.  Let’s focus on this year.  That means, in reality, I would only pay about $1910.00 per month.  Sounds like a great plan, I save a little money each month and I have no chance to refinance my home ever because I am so upside down, due to no fault of my own.  And maybe 15 years from now the home values in my neighborhood will finally come back.

Now as I discussed in my previous writings, if I quit paying my mortgage for 60 days my bank will start working with me.  On this example, they will cut my mortgage to $160,000, give me a mortgage at four percent for 30 years and my payment goes to $1200.00 per month.  So I can save almost $10,000 per year every year, not counting the astronomical amount of interest I save each year.  Or I can keep paying and be 100k upside down and qualify for $1,000 per year for three years credit.  WHAT!! Are you kidding me?!  Who thought up this plan?  In comparison, let’s examine a project that IS included in the stimulus package. 

Congress included $38 million for wetlands restoration that the Obama administration intends to spend in the San Francisco Bay area to protect, among other things, the endangered salt marsh harvest mouse!

Now, I am not pointing fingers at any one person but House Speaker Nancy Pelosi and her $30 million mice may not be a smart investment for our country. Let’s see – save a mouse that has probably been around for a few thousand years or save a few hundred home owners, teachers, or jobs.  I just don’t get it.   Now don’t start calling me – I am “green,” but I’m not detached from reality.

Saving jobs is a priority but at what expense?  I say let the auto industry file bankruptcy. If the government is so worried about the jobs, then they can guarantee the reorganization, but you have to solve the problem.  The union mentality doesn’t work today and needs to change. I found it very funny when the CEO of General Motors was thanking the union presidents for their support in drafting their new solvency plan to Congress.  Why not thank the union for helping the company go down the drain?  Hey, here is some good news, we won’t have to change the logo for G-M; we can just change the name to Government Motors (GM).

Bottom line; fix the housing problem, get the money to the bottom and eliminate the trickle down affect.  Until then, little – if anything – changes. 

JamesDicks General business, Congress, credit, credit cards, deficit, expenses, FICO, financial growth, goals, government, investing, investment, james dicks, job, mortgage, Obama, personal finance, saving money, stimulus, stock market, Treasury