If you’re not careful, you might not get the maximum from your company’s 401K match. No, I’m not talking about contributing too little to get the full match, I’m actually talking about contributing too much to get the full match.

Here’s the problem:
There are contribution limits to your 401K set at $15,500 for 2008 ($20,500 if your 50 or older).

Let’s assume that your company

Continue >>

With the current crisis in the mortgage industry, the likelihood of getting a mortgage with little or no money down is considerably less. Usually coming up with 10% down is sufficient to get a loan. The major drawback of putting down less than 20% is that you almost always have to pay PMI.

The method I used to avoid paying PMI on my first house was something called an 80/10/10 mortgage. The idea is that once you put 10% down on your house, you automatically have 10% equity in your home. That most likely qualifies you for a Home Equity Line of Credit for at least 10% of the value of your home. Taking out that credit effectively allows you to double your down payment and avoid PMI.

Continue >>

Most reports of the proposed 2008 Economic Stimulus Plan state that the rebates will be phased out for taxpayers with high incomes. The only details normally reported is that phase-outs begin at $75,000 for individuals and $150,000 for couples.

Here’s how it will actually work:

Figure out your rebate (including child credits) as if there were no limits. Then subtract 5% of the amount your income is over the limits for an individual or couple.

Continue >>

The recent volatility in the stock market, along with what appears to be a sagging economy, has led a lot of people to believe that the crash of 87 is an event likely to repeat. Of course, given a flimsy economic stimulus package and one day of positive gains on the stock market, many people are already saying this crisis has been averted.

Short term predictions are mainly a guessing game. There are just too many variables to accurately say what the stock market may do in the next days or weeks. Longer term trends are easier to read and thus make more accurate predictions.

Continue >>

Using stops gets more complicated when trading options because options tend to be more thinly traded. So you might set a stop for $3 on an option that has a bid of $3.10 and and ask of $3.30.

As the underlying stock declines, the bids and asks may decline together without ever being met. So the ask might go to $3.20 when the bid is at $3.00, $3.00 when the bid is at $2.75, etc. If no options are actually traded in that range, you can see how the trend might continue until the options are worth much less then your stop price. The option might not actually trade until the the bid and ask are much lower.

The intent of your stop was to place your order when the bid got down to $3.00 or lower, but the possibility that the option doesn’t trade at that level means that your stop is useless. So pay extra close attention if you use stops for options. You can’t rely on them to protect you nearly as well as you can for more heavily traded stocks.

Stop orders can be used to help you protect gains or limit losses when selling. Setting a stop price means that a sale must happen at or below that price before the rest of your order is filled. So if you had a stop order set for $50, then your order would become a market order as soon as the stock sold at or below $50. Market orders can be risky in this case, though, since a single blip in a stock price could cause you to sell prematurely. Also, if the stock is dropping quickly, your market order could be filled at a much lower price than the stop was triggered at. See my limit order post here.

Using a stop limit order provides some protection of this, but with a cost attached. Let’s say you had a stop set at $50 with a limit set at $51.00. Then if the price dropped to $50, and your stop was met,

Continue >>

The current state of the stock market can leave even the most fearless investor a little nervous. The uncertainty and volatility can be scary. Of all the different investment methods I use, there’s only one that I don’t worry about in such times: the one built on dollar cost averaging.

By automating that portfolio, I don’t have to think about it. I chose companies whose long term prospects looked appealing. As such, I don’t need to think about the day to day prices of the stock or worry about when to buy or sell. When the market takes a big hit, like it has recently, I sleep well knowing that my automated contributions are buying larger amounts of the stocks that I chose. Like anything else, when the price of something you want to buy goes down, that’s the time to load up on it. A downturn in the market is like all of your favorite stocks going on sale.

My overview of Dollar Cost Averaging is here.

In the strictest sense, negative cash flow can only be removed from your budget by increasing your income or reducing your expenses. Most commonly though, when a negative cash flow shows up in Quicken or Microsoft Money, it’s due to an error in one of your estimates. While overestimating your expenses is better then underestimating them, it can leave you with a projected negative cash flow even if your finances really would balance. Using the most accurate estimates possible and updating your budget as actual expenses become known is the best way to remedy this problem. Also look for obvious errors such as entering a budget item as a weekly expense rather than monthly or things of that nature. The downside of an apparent negative cash flow, if your budget actually should show a positive one is two-fold: First, you don’t have an accurate picture of your financial situation. Second, in order to balance your budget, you might cut back in some areas that you’d prefer not to. Making cuts that aren’t necessary, but only appear necessary because of an apparent negative cash flow, are the most painful.

The contribution limits for Roth and Traditional IRAs for 2008 are:
$5,000

The Catch up provision brings the limit up to $6000 for people aged 50+.

Note that those with high incomes may have reduced limits for Roth contributions. Married couples with adjusted gross incomes above $160,000 can’t contribute to a Roth, for instance.

401K Contributions Limits for 2008 are:

$15,500

The Catch up provision brings the limit up to $20,500 for people aged 50+.