Disposable Income

What is disposable income? It is the amount of money that households have available for spending, saving and investing after income taxes and mandatory payments (i.e. mortgage, food, transportation and health insurance) are accounted for.


A recent survey initiated by Money Magazine disclosed that the disposable income of American households is disbursed as follows:

Travel: 30%

Home and Beauty: 22%

Eating Out: 20%

Clothing: 17%

Recreation: 11%


Did you notice anything missing?  Yes, you got it!  Based on this survey most American households apparently aren't using any of their disposable income  to put towards savings or investments.  We can not expect our finances to grow if there is no system of saving and investing.  


This is  a huge problem that will result in Americans having to work far longer than their parents and grandparents had to.  Let's get in front of this and begin developing a plan to save and invest.

Grow Your Money Tree

It is a fact that most of us will have several hundred thousand dollars pass through our hands in our life time.  You don't believe me do you?  Well lets say you work for the minimum wage ($7.25 per hour), full time (40 hours per week) for the next fifteen years.  If you did that you would have earned $226,200.00.

With that knowledge you and I both most figure out a way to grow our money tree. There are several obstacles that are trying to kill the growth of our tree: bad money choices caused by hereditary and environment, debt, clear understanding, etc.

We can clear up bad money choices with continued exposure to information that will increase your financial literacy. In this post I want to challenge your understanding and debt.

Some people, professional and otherwise, will tell you that you should pay off all of your debt first before you can grow your money.  I believe that this is poor advice for most people.  You should develop a strategy where you are reducing debt, saving and investing for growth simultaneously. Work with someone who can help you develop this strategy

This way your money tree has the best chance of growth.

Also please keep in mind these three principles:

1. The fastest way to increase wealth is to invest.

2. There is a significance in making more money and increasing wealth.

3. When you start to invest don't get discouraged if you are not able to be a part of the "big deal".  A few "small deals" can put you in a position to be part of the "big deals".

Image courtesy of ddpavumba at FreeDigitalPhotos.net

Why Do I Need That?

Some times people view financial literacy as something they don’t need or think that they already have.  This article is not to debate either of those facts or deceptions.  It is simply meant to get each of us to think about the need for true financial literacy.  Below I have compiled a small list of life issues that require some level of financial literacy.  Remember what you don’t know can really hurt you, so let’s get educated and use that education wisely.  Here is that short list of life events:

Marriage                                 College education

Obtaining a loan                      Purchasing a car

Sickness                                 Retirement

Parenting                                Improving and evaluating your credit

Obtaining insurance                 Purchasing a home

Divorce                                  Death of a loved one


Each of these situations requires financial literacy.  Depending on how financially literate you are will determine the type of decision you make. Get educated; educated people are in position to make educated choices.  Others are simply rolling the dice and hoping something good happens! 

You can also seek the assistance of a professional in these areas as well.

Worried About Investing?

Are you worried about investing?  If you are like most US residents the answer is probably yes.  Based on a survey only 2 out of 3 US citizens have a savings or retirement account.  That is a third of the population.  Now obviously saving is not investing.  The point is that is if a third of American isn't saving they are probably not investing either, as the two usually go together.

Here is a quick way to begin investing - ETFs or Exchanged Traded Funds.  Please understand, I am not saying that this is the best way to invest but it is a quick way, let me show you how.  These funds are securities that track a particualr index or commodity. For instance let's say use want to invest in gold, you would look up the ticker symbol GLD and see how the gold index is doing. Please understand that the values of these ETFs change rapidly so it is always good to do two things:

Do your homework - ETFs are great but you want to track the past progress of these funds to see if they are a good fit for you.

Ask a professional - speak with a financial planner regarding your investment in ETFs.

The Key to Investing

There are some things that professional investors know that many of us don’t because of their experience, education and instinct.  But there is something that places us all on the same playing field, and it’s not a huge secret – its cash.  The key to investing is having cash available.

Cash is the key because it gives us options.  Take a look at your portfolio and determine how much you have invested in the market.  Are you investing more than 75% of your disposable income?  If so, that might be a mistake. Maybe you should think about only investing 50% of your disposable income in the market. 

In 2010, keep cash on hand in order to take advantage of great investment opportunities as they present themselves.

Investing In a Turbulent Market

Brokers are begging you to leave your money in their suggested funds or investment instrument. Financial planners advise you not to take your out of the market. Fear of losing every dime you invested runs through your mind. What is the best advice when looking to invest in a turbulent market? The best advice in my opinion is to invest together.

This is the new “hedge fund”. Likeminded people should form an investment group and pool their monies together in order to get ahead in this turbulent market. Would you rather risk $100K on some investment that might bottom out and never recover or would it be better to team up with none other people that will invest $10K each in the same investment.

Investing together with likeminded people can “hedge” your money and theirs as well. Of course investing together isn’t always easy but it can be worthwhile and lucrative. In a few months I will be opening a company similar to what is stated here where likeminded people can invest and potential make some money in this turbulent market.

It is something for you to think about with your family and friends. Also be sure to seek the advice of an attorney and accountant before entering into something of this nature. Stormy weather always creates fertile ground!