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Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Thursday, October 05, 2006

Money Rules

  1. Never purchase a mutual fund with a load: The only people who profit when you buy a front or back load fund is the fund and the broker and his firm. e.g. You invest $10,000 in a fund that has a front load of 5%. Right off the bat you are in the red and you do not have the basis of $10,000 to build off of--you have $9,500 to begin and the honor of paying $500 for poor investing advice.
  2. Never put money that you will need in the next 5 years in the stock market. Let's say you and your spouse plan to buy a home some time within the next three years. While you could get some good growth by putting it in the market, but if the market tanks anytime in those three years of accumulation that could mean another 2 years until you can buy a home.
  3. Bank online: Many people are old school and want to see their banker, but there are few benefits for most people to go to a bricks and mortar bank. You can have a checking account that bears interest, a savings account that gets a better interest rate, and you can have automatic bill payment. Over a life time this will save you and and make you much more money.
  4. Avoid ARMS, Interest only, piggy-backs and all those methods that mortgage brokers will temp you. Sadly, many Americans are finding this out the hard way. Interest rates rose and their payment went up 50%; their ARM came up and their mortage payment is much much bigger; you need to get out of your home and you had an interest only loan--the real estate market is down and because you have no equity in your home you are up-side-down
  5. Avoid ATM fees: Unless it is an emergency situation you should not pay ATM fees. Yout think it is only a couple bucks, but if you do that once a week for a year you are out $100-150. Get cash when you get groceries--they allow you to get cash back with a purchase for no fee.

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