The Bare Minimum on Stocks

Let’s say that you enter a conversation that’s entirely above your head. Coworkers are having a lively discussion about investing strategies, and you’re suddenly asked, "So, the Dow is down 100 points. How’s your stock portfolio doing in this turbulent economy?" Your eyes widen and slowly shift out of focus. You consider fabricating an answer, but the chance of follow-up questions seems likely. You mumble something along the lines of, "I have…stuff to do… elsewhere," and awkwardly exit the conversation.
If this sounds familiar, no need to hang your head in shame—it’s your lucky month! April has been declared National Financial Literacy Month, so what better time to brush up on investing basics? Read on, and at minimum, you’ll be able to hold your own in ego-centered investment conversations. But more importantly, you’ll be laying the foundation for a sturdy portfolio of your own.

So let’s address a basic question—what is a stock? If you’ve ever heard of the United States, you probably know that private companies play a big role in its wealth. Let’s say you would like a piece of that pie. Perhaps you’ve noticed that Microsoft seems to be doing rather well for itself. Sure, a lot of companies aren’t doing too hot right now, but all in all, Microsoft appears to be making lots of money. And you figure, "Hey, I like money. In fact, I’d like to have more money." So when you buy a share of Microsoft’s stock, you are basically buying a little sliver of Microsoft. That’s right; you own a little, itty, bitty chunk of Microsoft. Perhaps something equivalent to a secretary’s paper clip at headquarters. Now, because you are a shareholder in the corporation, you are entitled to a little, itty bit of its profits.

Let’s get technical for just a second. Assume that you bought 1000 shares and each share cost you twenty bucks, so you have $20,000 of your hard-earned money invested in Microsoft. When business is booming, you’re feeling pretty good. And because things are going so swimmingly, people are now willing to buy your shares at $25 per share—(the share price has increased). If you sell, you’ll get $25,000 for those shares, and can now go buy 5,000 things from the dollar store with your profits. This share price can change throughout the day. If a company is doing really well and people be-lieve it will continue to do well, then the price of that stock generally goes up.

But what if Microsoft doesn’t do well? What if Steve Jobs introduces the iPad 5000 that can surf the web and make you a sandwich, and people buy Apple products instead of Microsoft? You would still be able to sell your stock, but people may only be willing to pay $15 per share. That $20,000 you invested is now only worth $15,000. If you were to sell, you would lose money in the stock market. Ever heard of that happening? So if you’re wondering why people talk about the stock market almost as much as they talk about Lindsey Lohan, it’s because they are either losing their money or raking it in.

And what are people talking about when they mention the Dow, the NASDAQ, or the S&P 500? It’s likely that they are trying to sound impressive, but these are called indexes—or as some like to think of them: lists of companies. The Dow, a nickname for the Dow Jones Industrial Average, essentially tells you how well a list of certain companies is doing. Different indexes will tell you different things. For instance, the S&P 500 will estimate how well (or not well) 500 of the largest U.S. companies are doing at any given time. The Dow has 30 companies, while the NASDAQ Composite contains about 3,000 components. People use these indexes to estimate how certain areas of the economy are doing.

All right, so what does this have to do with you? Believe it or not, you can actually make a lot of money using the stock market if you go about it the right way. It’s not some get rich quick scheme; in fact, it’s more of a get rich slowly kind of deal. Unfortunately, one newsletter is not nearly enough room to scratch the surface of investing basics, but you’re heading in the right direction. Stay tuned for next month’s newsletter, and in the meantime, go ahead and hop into those coworker conversations with confidence.

More Exciting Than a New Transmission...

Do you get a rush of adrenaline when you purchase gasoline? Can you barely suppress giggles of joy when your mechanic hands you the bill for a new transmission? Do you think an oil change is more exciting than puppies, fireworks, and Christmas combined? If you answered no to any of these questions, applaud yourself for sanity, and sit tight—there are some simple ways you can make car ownership a far more enjoyable experience.

The first way is easy—walk whenever possible; or run, if you’re late. You’ll feel better about that doughnut you had for lunch, help the environment, and avoid mileage on your car all in one go! Another option is public transit. Cache Valley has an award-winning bus system that is free of charge. Anyone near USU’s campus also has access to the Aggie Shuttle. Let’s face it, parking is a nightmare and booters are lurking around every dark corner. Why not avoid the hassle?

Next up, make sure your tires are inflated properly. Many gas stations offer free air, and a tire inflated to the right PSI actually gets better gas mileage. Better mileage means less money at the pump.

Although it feels good to pass that truck, excessive acceleration guzzles your gas faster. If you’re fancy enough to have a car with cruise control, flip that puppy on and be content not to "win" the race to your destination. Each car has a different optimal speed, but generally, anything over 60 mph starts reducing your miles per gallon.

Speaking of miles per gallon, another way to get more of them is to remove excess weight from your car. Kicking your passenger to the curb might be a bit harsh, but you may be lugging around all sorts of things you don’t need. Take out the fishing gear, the golf clubs, and the rock salt, and you’ll see your miles per gallon hike upward.

Have a car loan? Getting a tax return soon? By paying off your car loan early, you can save on the interest you would have paid to the bank. They’ll be just fine without your money. Just make sure there’s no prepayment penalty for early payments.

Lastly, just like you need regular doctor check-ups, so does your car. The poor thing spends every night out in the cold, takes you to work every day, and waits patiently while you grocery shop—the least you can do is give it some lovin’. Getting the oil changed regularly along with full-vehicle check-ups can catch problems before they explode in your face and save you money down the road.

So, as exhilarating as it may be to spend your bonus on a carbure-tor, there are plenty of ways to save on car expenses. Take a couple of these ideas and put that saved money toward something really exciting—like puppies, fireworks, and Christmas!

Jump Up and Down: You've Got Rights!

You’ve been there. A holiday, birthday, or anniversary is looming ever closer. You’ve been trudging around department stores all day in a haze, unable to find that perfect gift. Then you see the gift card rack like a desert mirage. Perfect. Not tacky like cash, and requiring only general knowledge about your giftee. You pick up a few and happily head home.

Undoubtedly others you know have gone through a similar process and you may find yourself heavy laden with gift cards. If any of these were purchased after August 22 of 2010, then there are some new rules you need to know about.

First of all, these new rules and protections (fashioned by the Federal Reserve) apply to store gift cards and gift cards with a MasterCard, Visa, American Express, or Discover brand logo. Unfortunately, the new rules only apply to gift cards. If you have a reloadable prepaid card that isn’t intended for gift giving purposes or cards that are given as a reward or part of a promotion, they are not covered. But it’s okay. Chin up.

So, how are you, the consumer, more protected now? For starters, any and all fees have to be clearly disclosed on the card itself or the packaging. And start jumping up and down, because many of these fees are now limited. Silly nonsense like dormancy fees for not using your card, or usage fees for actually using your card are now restricted. After all, it makes sense not to charge you for both using and not using your card. There are also restrictions on fees for adding money to your card as well as maintenance fees. You may still be charged fees if you haven’t used the card for at least a year, and you are only charged one fee per month. You can also still be charged a fee to purchase the card, as well as fees to replace a lost or stolen card. Now, you may not want to, but it can save you a lot of money to take the time to read through the card disclosure before buying it.

Here’s another useful tidbit. If your card has expired, you may still be able to use any unspent money by requesting a replacement card at no charge. Sometimes the money expires later than the card itself.

Lastly, any money on your gift card is good for at least five years from when it was purchased. Any added money is good five years from the date it was added.

So, now you can let that special someone know that not only do you care enough to provide them with prepaid money to their favorite store, you love them enough to let them know about their consumer rights!

S.M.A.R.T.E.R.

Happy New Year! It’s the time of setting goals for the coming year….and hopefully follow through with them. It’s a good time to set financial goals, such as setting up a budget, building savings, paying off debt, or improveing your credit score. When making a goal, put it through the S.M.A.R.T.E.R. Goals steps:

• Specific
• Measurable
• Attainable
• Relevant
• Timely
• Evaluated
• Revised

For example, if your 2011 financial goal is to pay off an auto loan, go through these steps:

• Be specific—How much is the car loan?
• Make it measureable—How much will you need to pay monthly?
• Is it attainable—Does your spending plan allow you to be able to pay that much each month towards your loan?
• Is it relevant—Is this a loan that you feel needs to be paid off this year? Can you afford to pay it off?
• Time—Are you giving yourself enough time to pay off the loan? Do you need more time?
• Continued Evaluation—Evaluate monthly how you are doing. Are you able to pay how much you need to monthly? Are you on track to pay it off this year?
• Make revisions—Did something change where you can’t pay as much or you could possibly pay more?

Now, after looking at this example, look at your 2011 financial goal. Put your goals through these steps to help keep you on track!

Nuts and Bolts of Nickels and Dimes

The Nuts & Bolts of nickels and dimes, a financial management workshop that takes you back to the basics. The main topics are budgeting and credit. The workshop is taught every 1st and 3rd Wednesdays. Call 797-7224 to attend. The cost is $15 per household.

Home Ownership Workshop

The Home Ownership Workshop has been developed to educate first time home buyers about the home purchasing process. This education will help them better understand each step in the process and gain confidence in their home buying decisions. Workshop participants will have an opportunity to meet with a housing counselor to discuss their individual concerns. A certificate of completion will be provided upon meeting with a housing counselor. Certificates of completion may be used to qualify for first time homebuyer financial assistance programs. In accordance with our mission, workshops and individual housing counseling is offered free of charge. To get your name on the list, call 797-7224.