There is an old folk tale about the Tortoise and the Hare.  “The story concerns a Hare who ridicules a slow-moving Tortoise and is challenged by the tortoise to a race. The hare soon leaves the tortoise behind and, confident of winning, takes a nap midway through the course. When the Hare awakes however, he finds that his competitor, crawling slowly but steadily, has arrived before him. (Wikipedia)”

You may wonder how the tortoise managed to win, but in winning, the tortoise teaches an extremely valuable lesson that can be applied to investing.   Although slow moving, the tortoise won the race because he relied on persistent, stead, continuous, committed action to reach his goal.  This piece of folklore is a great way to motivate new investors, like YOU, to stay the course.  Investing is not a sprint, it’s a marathon.

Education:

In investing, you will encounter and may even be intimidated by many Hare-type people.  I define these individuals as investment savvy, affluent, well connected, well informed, and so forth.  Sure, they may have more money than you, they may have been taught the principles of investing before you and they may already be wealthy, but that does not mean that you cannot win the race of investing.  Many Hares will burn out, they win gamble big and lose because slow-moving activities are boring to them.  They thrive off of excitement.  This is where YOU, the tortoise, can WIN!

There are two methods of investing that involve slow and stead action – Dollar Cost Averaging and Dividend Reinvestment.

Dollar Cost Averaging (DCA)

The Dollar Cost Averaging method is investing a small amount of money regularly over a period of time.  For example, if you invest $100 every month from your paycheck, eventually that pool will grow into a large pool of resources.  This strategy is the best method for new investors.  Don’t believe that you have to move quickly like the Hare, be the proud tortoise because you can still win using this strategy.  Sure, it will take you longer, but remember that this is not a race.

Dividend Reinvestment Plan (DRIP)

The Dividend Reinvestment Plan method enables you to build up the number of shares over an extended period of time.  In Lesson #15, we discussed dividends and picking stocks that pay dividends.   I also told you that dividends were paid in two ways, via cash or stock.  Instead of receiving cash outright, some companies allow you to use your dividends to purchase more shares in their company. That’s dividends on dividends.  For example, if you are in a DRIP, when a corporation pays its dividend to you, instead of them giving you cash, they will use that money to buy additional shares.  Let’s look at an example.

“Let’s say that Mary Johnson owns 1,000 shares of Pepsi. The stock currently trades at $50 per share and the annual dividend is $0.88 per share. The quarterly dividend has just been paid ($0.88 divided by 4 times a year = $0.22 per share quarterly dividend). Before she enrolled in Pepsi’s dividend reinvestment plan, Mary would normally receive a cash deposit of $220 in her brokerage account. This quarter, however, she logs into her brokerage account and finds she now has 1,004.40 shares of Pepsi. The $220 dividend that was normally paid to her was reinvested in whole and fractional shares of the company at $50 per share. (Dividend.com)”

This strategy may not be as sexy as cashing a check, but your stock portfolio can go from nothing to something over time.  This is another method of SLOWvesting!

Be a proud Tortoise!  You can do it…you can WIN!

Resources: 

Dividend.com – Internet source for dividend investing.

The Motley Fool  (www.fool.com) – The Motley Fool is a multimedia financial-services company dedicated to building the world’s greatest investment community.

 Important terms from this lesson:

 Action Step:        Watch and Read!

1. Go to http://bit.ly/1cZZmKw and enter your email address to receive a free report entitled, Secure Your Future With 9 Rock-Solid Dividend Stocks.  Use the report to learn some strategies about how to pick dividend paying stocks.
2. Click to watch the video, What is a Dividend?

Do you want Mo’ Money…Mo’ Money…Mo’ Money?

I may be dating myself a bit, but in the 90s, there was this quirky movie starring Marlon and Damon Wayans called Mo’ Money.  The gist of the movie was that the Wayans brothers were always looking for gimmicks to make money.  Whether it was Three-card Monte or using the laws of misdirection, they were constantly on the move to swindle someone in search of Mo’ Money…Mo’ Money…Mo’ Money.  Well, if I could jump in the time machine and speak to the brothers, I would say drop the hustle and start investing. Let’s explore why investing is one of the greatest hustles on earth.

Education:

The last two lessons were used to set the foundation by establishing some key principles in the world of investing – Risk vs. Reward and Diversification.  Now that we have spent some time flushing out those concepts, let’s get to the money making.  How do you make money investing? Why…I’m glad you asked?  The answer is x + y = z.    Remember that formula from pre-algebra?  Let’s see how we can use this formula to make Mo’ Money.

X + Y = Z

One way to make money is to create MSIs or Multiple Streams of income.  In Lesson #14, I told you that there are two ways to make money (z) through investing – stock appreciation (x) and dividends (y).   To illustrate, let’s look at the following diagram.

 X

The table below illustrates stock appreciation, based on the IPO or Initial Public Offering price per share of some of the most expensive stocks available.

Y

When you buy stock in a corporation, you invest in that corporation.  The stock or common stock or equity as it is known, is a security that represents ownership in a corporation…you are an OWNER! A share of common stock entitles the holder (OWNER) to receive dividends that may or not be paid, depending on the fortunes of the company.  Say you invest $10 and receive 10 shares in ABC, Inc.  That translates into $1/share. The company has a great year and indicates that it wants to share its great fortune with the owners of the corporation (its stockholders…YOU).  ABC Inc. announces that it will give each stockholder a $1 dividend for each share held.  Wow…what did you say?  As my Pastor would say, rewind and press play.

Let’s break this down.

A – You own 10 shares

B – You will receive $1 for each share that you own

C – You still own your 10 shares and now you have a $10 cash dividend.  Kaboom!

The only problem is that not all companies pay dividends, so a great investment strategy is to invest in a company that does….it’s that simple.  Dividends can come in two forms – cash and stock (see definitions below).

Resources: 

Yahoo Finance – Yahoo! Finance is a web site sponsored by Yahoo! that provides financial information and commentary with a focus on US markets.

Important terms from this lesson:

 Action Step:       Calculate Mo’ Money – test the x + y = z

• Find the X – What is the stock appreciation on 100 shares of Google stock purchased at the IPO price?
• Find the Y –Google announced that it would pay a $10 cash dividend to stockholders for each share held.  How much will you receive?
• What is Z – your Mo’ Money?
  

Make you money get a job…make it work…while you sleep!

Did you know that a dollar a day could grow into a million dollars?

Now that I have your attention, I want to teach you to RESPECT YOUR DOLLARS!

In Matthew 25:14-30, Jesus teaches the timeless Parable of the Talents.  You can and should read it for yourself, but it teaches the principal of being profitable and that no matter what you have, it can be increased if invested properly.  Verse 25:27 in particular reads, “So you ought to have deposited my money with the bankers, and at my coming I would have received back my own with interest.” Wow, the bible never ceases to amaze me, but in this instance, Jesus was actually acting as a financial advisor by giving very sound advice.  I will let the theologians analyze that, but I will take the lesson at face value.

Now that you have diagnosed your financial health through your net worth, found a ripple through your cash flow budget and created a vision, you are ready to begin the real work.  In this lesson, I would like to teach you about the different methods to save your money and earn INTEREST…that is putting your money to work.

First, think about money as a seed.  If you hold the seed in your hand, then it will remain just a seed and/or die. However, if you plant or sow the seed, then the seed has the opportunity to grow and produce fruit.  For financial purposes, WE WANT FRUIT!  Fruit will enable you to reach your goals and live a life of financial freedom. Fruit creates more fruit!

Here are some Savings Alternatives that you may aid you to produce fruit.

Resources:

1. Bankrate.com    – Great consumer finance website to compare financial products.
2. Ally.com               – Offers competitive rates for its savings, CD and Money Market Accounts.

Important terms from this lesson:

1. Interest                – Return on the use of your money
2. APR                        – Annual Percentage Rate is the rate that you will receive if your money is invested for a full annual period. For example, if you invest $1000 at a 1% APR, you would earn $10 annually on your investment.

Action Step:       Pick a Savings Alternative for 2014.

1.        Go to bankrate.com
2.        Click the BANK ACCOUNTS tab.
3.        Play with the menu options to see the different savings alternatives available to you.
4.        Pick a new one for 2014 and begin saving today.

ASSETS – LIABILITIES = NET WORTH

In the first two lessons, we concentrated on the concept of assets and what you OWN, however, that is only one side of the coin and I would say the “positive” side.  But, for every ‘ying’, there is also a ‘yang’…the flip or “negative” side of the coin.  In this lesson, the flip side of the coin is called  LIABILITIES.  This concept is more prevalent and dare I say, more important than knowing your assets, because LIABILITIES are what you OWE!

Let’s think about Michael Jackson before his untimely death (R.I.P. King of of Pop).  Well, Michael Jackson had a great deal of assets…remember the ferris wheel at Neverland? The white glove? Ironically, which is currently hanging in the Mandalay Bay Hotel in Las Vegas  Although he had a plethora of assets, the man in the mirror actually OWED more than the value of those assets. That put him in a hole, which I still believe was the impetus for his early death. So, let’s take a deeper look at your LIABILITIES.

In laymen’s terms, an LIABILITY is something that you “OWE”!  That’s it…you OWE some person, business or entity (a debt).  You are in the hole!  Several years ago, a friend of mine named Cliff Goins IV wrote a book entitled, Stop Digging!:  A Spiritual Guide to Financial Freedom and Sound Stewardship, that you can still purchase on amazon.com (http://amzn.to/1iqIfov) I always loved that title because you cannot realize wealth until you did yourself out of the hole.

Some examples of LIABILITIES for individuals are:

Important terms from this lesson:

1. Liabilities    –  Something that you OWE.
2. Debt            –  The total value of your liabilities (how deep the hole is).

Action Step:       What LIABILITIES do you OWE?

Please print and complete the Liabilities Inventory Worksheet.  This may take a little effort, but force yourself to jot down every single item that you OWE and take a real inventory of the size of the hole that we have to dig from!  You absolutely need to understand what you OWE to determine how much digging will you need!

Click the link to download the Liabilities Inventory Worksheet – http://bit.ly/1iskbBV

ASSETS – LIABILITIES = NET WORTH

In Lesson #1, the goal was to introduce a very important (critical) concept to the discussion of wealth, ASSET.  As important and critical as it may be, many people have no reference for what this simple five-letter word means. Assets are quite simply, the building blocks of wealth!  Without assets, wealth just does not exist much in the same that you cannot build a mansion without a solid foundation. Then how can something so important and critical to the understanding of wealth be foreign to so many people?  The answer is that we live in a SPENDING society of super Consumerism (my new term).  The people who sell goods are often ASSET, while many of our super Consumers are ASSET POOR.  It comes down to understanding your assets, namely how they are created, accumulated, protected and the transferred to future generations.  What do the following families have in common?

The Kennedy Family

The Rockefeller Family

The Carnegie Family

Forbes Magazine calls these families, The Dynasties.  You can see many of the current dynasties highlighted in this article http://www.forbes.com/2002/02/28/0228dynasties.html.

Dynasties are families who create ASSETS >>> accumulate ASSETS >>> protect ASSETS >>> transfer those ASSETS to future generations.  That is it! There is nothing special or unique about them. It is something that everyone…all of us can do! Let’s look at the journey of ASSETS through this illustration.

In Lesson #1, I asked you to complete the Asset Inventory Worksheet.  It’s okay if you have not finished, but I want you to begin thinking about everything that you have.   For my visual learners, go through each bubble, and check off what you currently OWN. So, do you have any ASSETS?

Important terms from this lesson:

1. Asset Rich           – The abundance of ASSETS.
2. Asset Poor          –  The absence of ASSETS.
3. Dynasties            –  Families who create, accumulate, protect and transfer ASSETS to future generations.

Action Step:       Let’s Create some ASSETS!

The easiest asset to create is cash because most of us have at least $1! The cash in your pocket or pocketbook is sitting in the chamber ready to be fired at the next purchase.  Instead of doing that, I want to challenge you to look at that cash as your opportunity to CREATE AN ASSET.  Many of you have heard about the 52 week money challenge.  I actually did this in 2013 along with some colleagues.  On 1/3/14, I took that money to my financial adviser at Edward Jones and we put that cash into a Bond Fund (Investments Category).  I will explain what that means in a future lesson.  It’s that easy, I took something that was lying around ready to be spent and created an asset.  I’m doing it again for 2014, but instead of holding it and then taking it to my adviser, I have set up a money market fund and each week, I transfer that week’s contribution to the fund.  Now, my money is making money (interest – to be explained in the future).

I want you to take the 52 week money challenge for yourself and each of your children.

For you, follow the program without deviating.  At the end of the year, you will have CREATED A CASH ASSET worth $1,378.

For your children, divide the normal 52 week challenge by the number of children that you have.

For example, if you have two children, the contribution for Week 1 is $1.  You would split that so that each child has $.50 saved for Week 1. 

Repeat this every week following the chart.  At the end of the first month, you will open up a money market account for yourself and your children. Don’t worry, I will teach you about Money Market Funds and advise you about how to select the best option for you and your family.

Click the link to download the 52 Week Money Challenge Worksheet – http://bit.ly/1edTVUz