FINANCE: THINGS THAT MAKE YOU POORER

Lets continue from where we stopped the last time. Hope you find this interesting and useful but remember the suggestions are mere opinion, act wisely!

 

Money market funds

The average paid on a money market account has inched up a bit, to just under 0.5%. But with inflation at 1.7%, you're losing ground every day your cash languishes in a money market account.

Plus you run the risk, however slight, of losing a bit of your principal....

Money market mutual funds are not FDIC-insured, and former U.S. bank regulator Sheila Bair has warned the market needs more reforms to prevent fund providers from "breaking the buck," or returning less than people invested.

The average paid on a money market account has inched up a bit, to just under 0.5%. But with inflation at 1.7%, you're losing ground every day your cash languishes in a money market account.

Plus you run the risk, however slight, of losing a bit of your principal....

Money market mutual funds are not FDIC-insured

If you've earmarked this money for retirement, it should be invested in something that can offer better returns over time. If you're an investment newbie, consider a lifestyle or target-date maturity fund.

If this money is your emergency fund, on the other hand, or you'll need to access the funds within a couple of years, you'll need to keep it relatively liquid. Consider an online, FDIC-insured savings account or certificates of deposit with different maturities.

Cigarettes

Smokers typically earn less, pay more for insurance and shell out more for health care. And then there's the cost of the cigarettes themselves.

If you're a smoker, you're paying about $2,000 a year for a pack-a-day habit.... More

If you invested $2,000 a year between ages 18 and 68, you'd end up with more than $1 million (at an assumed annual growth rate of 8%). Plus you'd likely have more years to enjoy that money in retirement, since you probably wouldn't die early of some horrible lung disease.

Television

Television watching is associated with obesity. The more you watch, the fatter you tend to be. Obesity is, in turn, associated with lower incomes for white and black women (although not in men or women of other races, interestingly).

Television picks your pocket far more directly, of course.... More

Pay television now costs Americans an average $83 a month, according to research firm NDP Group, and we're projected to pay $123 a month by 2015.

You don't pay just once. Most television is supported by advertising. Most advertising is bent on getting you to buy stuff you don't need and didn't even know you wanted until you saw the advertisements. If it didn't work, companies wouldn't spend billions of dollars doing it.

Collectibles

To be truly valuable, a collectible must be relatively rare, in good condition -- and greatly desired by others. Copies of the first Superman comic book have sold for seven digits because a) Superman is still popular and b) so many mothers threw out so many geeks' comic book collections.... More

The vast majority of figurines, plates, toys and other items produced as "collectibles" aren't investments. They typically have limited appeal, and mass production ensures the supply will outstrip any future demand. That means if you try to sell them, you'll get only a fraction of what you paid -- assuming there are any takers.

If your collection is purely for your own personal pleasure and you aren't going into debt to support your habit, then have at it. If you're ever tempted to buy a collectible because you think it will be valuable later, head over to eBay and search for "Beanie Babies," "Hummel figurines" or "Franklin Mint" anything. That should cure the urge.

A Date

You can be rest assured that a new date will make you spend extra. This is because you will probably try everything manly possible to impress your new date and leave a pleasant lasting impression in the mind of your new mate. You can figure out for yourself the financial implications.

A house

Even after the housing bust, homeownership is still associated with wealth. The median net worth of homeowners was $174,000 in 2010, according to the Federal Reserve's Survey of Consumer Finances, compared with $5,100 for renters.... More

Homeowners can benefit from the forced savings of paying down a mortgage over time, as well as price appreciation (remember that?) over time. A majority of American households are homeowners, and many that aren't want to be.

But homeownership is usually expensive, and the unexpected costs can swamp the finances of people who aren't prepared. In addition to the mortgage, insurance and property taxes, you'll pay for:

·     Maintenance and repairs. These costs can vary a lot, but expect to spend 1% to 2% of the home's value each year just fighting entropy.

·     Updates. You don't have to be an HGTV addict to spend a lot updating your home. After all, just about everything in a house can wear out and need replacement: roofs, furnaces, air conditioning and surfaces (including countertops and floors).

·     Disasters. Homeowners insurance typically doesn't cover floods or earthquakes and may not cover hurricanes. You'll typically need to buy separate policies that usually come with higher deductibles. And some hazards are uninsurable. You can't get coverage for landslides, nuclear disasters or acts of war. Neglect isn't covered either: If you ignore a water leak or a termite infestation and your roof caves in, you'll have to fix it on your own dime.

So before you buy a home, do your best to make sure you can afford it. That means getting appropriate insurance and setting up a savings account to pay for the inevitable extra costs.

Ciao!