Making money...

ritaotayApril 7, 2006

Is there something out there that earns more than 3 or 4 %, something where the principal is 100 % safe???

Rita

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devorah

I don't know anything about government securities. Maybe someboy can weigh in on that. I got 5.22 on my last CD - did you want more then that?

    Bookmark   April 7, 2006 at 11:30PM
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ritaotay

Yeah, CD's are good and fairly flexable... Just wondering if there's anything else out there...

Rita

    Bookmark   April 9, 2006 at 11:31AM
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itsawrap

The ING Direct orange savings account is currently at 4%. You can deposit and withdraw at any time. Just a small opening balance is required.

Here is a link that might be useful: ING Direct

    Bookmark   April 10, 2006 at 5:47PM
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ritaotay

What kind of fees do they charge?

Rita

    Bookmark   April 10, 2006 at 11:39PM
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joyfulguy

ritaotay,

If you get a guarantee that the principal can't shrink, that they toot their horns about a lot, there's another guarantee that they never mention ...

... it can't grow, either.

So that asset only produces one kind of income - interest.

In Canada, if you earn interest, you pay tax at top rate, so that income is eroded heavily.

There are two rats that eat your cheese - the income tax rat wants to talk to you each year about all of your income that year - and wants part of it.

Not only that, all that your principal earns for you is paid now - well, maybe next year.

And tax-liable now (well, maybe next year).

Suppose you'd put $10,000. into a guaranteed certificate for 5 years, 15 years ago, and renewed it twice, later.

Now - you want to take it out.

When you gave that money to the bank, that $10,000. would have bought a nice car, 15 years ago.

Not now.

The value of each of those dollars shrank each year that the bank used it.

There's another rat that eats your cheese - the inflation rat gnaws away a portion of the value of each dollar of your principal (if it's fixed-dollar-denominated asset) every year.

You can't avoid the depradations of the income tax rat - well, you can try, but some get big fines, even jail time for that.

(How come so few of the scoundrels that have absconded with millions in some of these corporate scams in recent years have yet to see the inside of a jail?)

And you can't avoid the annual shrinkage of value of each of your dollars because of inflation, either.

Know what?

The rats eat first.

I bought some shares in one of Canada's major banks 39 years ago - for about 4 dollars each, I think (not sure if I took all of the splits into account - I think so).

The value of each share has gone up, down and sideways over the years. Once each was worth $56. Some time after - only $24. (was that after one of the splits - I'm not quite sure, but I think it may have been).

I didn't plan to need the money for quite a while, so they just sat there.

Gathering dust?

No - money.

Originally they paid something like 6 cents or a dime annually as a dividend. On which I pay a much lower tax rate than on the same amount of interest.

Some years ago, they were paying 80 cents. Then $1.00. Later $1.60, then $2.00.

Now I think they're paying me $2.40 as dividend on each share, each year.

And each share is worth something over $80.00.

Had I invested that $4.00 in an asset that couldn't have grown - it'd still be worth $4.00.

If paying 4% a year - that'd be about 16 cents.

I like my apples better.

Also.

I haven't had to talk to Canada Revenue Agency about the increase in value of those shares - so far, it's all at my credit - but not all "mine", as I haven't realized it, yet.

I don't have to talk to the income tax people, until either I sell the shares - or die.

Don't figure to do either, this week or next.

When I do sell them ...

... I deduct the amount that I paid in the first place (tax had already been paid on that). As you don't have to answer to the income tax people for the principal when you cash in your certificate.

The I divide the amount of the gain in half.

I keep half, free of tax.

I pay tax at regular rate on the other half.

I like them apples, as well.

Learning how to manage money effectively - a great hobby.

**That pays well**!!

Have a great week.

ole joyful

    Bookmark   April 11, 2006 at 7:39PM
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ritaotay

Well, I'm leery about buying stocks... Hubby took all his 401K in Ford stock, if he had cashed them in when he retired we would have had over $100,000. ( if he had put in as much as I wanted him to we would have had over a MILLION US dollars. ) Anyway, he still will not get rid of HIS Ford stock and it is now worth a whopping $26,000... If we had cashed in the stocks when he retired I could have put it into an annuity that pays 4 % and we could be taking out $4,000. + a year, forever...

From 1976 to 1980 we invested $18.75 a week for $25 US Savings Bonds, we put in $3,400 and right now they're worth $20,900... A $17,500 gain sounds pretty good to me... lol

In the US the interest you make on US Savings bonds, annuities, CD's and the like are taxed as regular income... The money you make off of stocks is taxed as capital gains, which is higher... ( and then there are the brokers fees, which eat up more of your money ) At least that's the way it is now, no telling what it'll be like when I start cashing them in... With hubby's luck the taxes will probably be tripled... lol

I do understand inflation but I'd still rather earn 3 or 4 % and know that ALL my principal is safe than have the dividends fluctuate from 15 % to 0 % and every thing in between then have to worry that there's a chance I might loose everything... I never was a risk taker... LOL

Rita

    Bookmark   April 12, 2006 at 1:37AM
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devorah

My financial decisions haven't been the greatest. I do well at saving. I sometimes do well at investing - BUT I have a rabbit like nature and am not good at riding out the storms. At the first sign of a dip, I do my imitation of chicken little. I sold Macromedia at a loss just before it went up 1000%. I used my bargain hunting skills to pick up beat up stocks just like I buy clothes etc., but the stock market doesn't work that way. My only solace was that the Mensa investment club was doing as badly as I was. I sold my last house for less than I should have because I listed on 9-11 and was really spooked. My husband should have a good government pension, so we should be okay. I have half of our 403B in a conservative stock/bond mix and half in an annuity. I have 95k I keep in CDs and I am currently getting over 5%. I like the liquidity. If my husband were to lose his job at age 59, it might be tough to get another. I have a small amount of money in a rental house that my daughter is managing. It was not the best possible investment property because I wanted to buy something I would enjoy living in should I choose to do so. Fortunately, nobody is going to let me sell that off at a loss just because the market is softening.

Rita, I think you need to re-check the tax code. I didn't have any dividends this year, but as I recall from last year, the code has changed and dividends are taxed at a lower rate than ordinary interest. Somebody can correct me on this.

    Bookmark   April 12, 2006 at 12:47PM
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mxyplx

Here is one way to do it. There's others, of course.

Go to www.publicdebt.treas.gov

13 week T-bills last were 4.62% selling @ 99.5
26 week T-bills last were 4.88% selling at 97.6

2 year T-notes at 4.73% selling at 99.8
5 year T-notes at 4.79% selling at 99.9

Selling at 97.5 means you pay $9,750 for a $10,000 instrument and you get 4.88% interest on $10,000. A 26 week bill getting 4.88% is the yearly equivalent interest so for the 26 weeks you only get 1/2 the equivalent yearly interest $ amount.

All these are Fed taxable but state tax exempt which gives you an overall (state + Fed) higher after tax net dependent on your tax bracket.

These are about the most conservative (safe) investments possible. You can get varius combinations of these instruments. You can pick various reinvestment scenarios. Since rates seem to be going up (short term rates are currently going up faster than long term rates) it might make sense to get some short term stuff and let it reinvest contiuously. Thus every reinvest gets a slightly higher rate.

Read the entire site. Go to a library and get several books, NEW books. Then BUY a good one for reference. I daytraded for years, had a shelf full of books, and always had 1 or 2 open on my desk to brush up on things. The first book I bot was "Financial Planning for the Utterly Confused" Joel Lerner, $6.95--.

Dividends are taxed at various rates. Some divs are "qualified" which means they are taxed at a much lower rate than ordinary divs. You usually never know till the year end just what % of your divs are qualified. Dividends are generally those moneys paid to you through a fund. So if you owned a T-note directly the money paid to you would be interest. If you had a mutual FUND the money paid to you would be a dividend.

Liquidity: If you can convince yourself to put some money with an online broker so you don't have to deal with a human (a BIG plus) you can get CD's and such often at a discount and sell them anytime on the secondary mkt. Now the thing to do is to just have SOME of your cd's at the broker so these are the ones you can liquidate easily at no penalty should the need arise ie a safety valve for you.

Well I coulda wrote more and probly shoulda wrote less but it just sorta slid out onto the screen. Luck2ya.

    Bookmark   April 13, 2006 at 12:48PM
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joyfulguy

Just remember, gals/guys ...

... ***nobody*** cares as much about your money as you.

(Except to slip it out of your pocket - into theirs).

Learning how to make it work effectively for you is one of life's important tasks/hobbies/whatever.

But - it needs to be done.

Not doing it is ... (almost always) costly.

ole joyful

    Bookmark   April 13, 2006 at 4:26PM
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ritaotay

Devorah, I'll have to check into that... Years ago when I had Michigan Bell stock and they split up the company I ended up with stock in all the baby Bell's and AT&T... I was having my income tax done by Nationwide and they told me, at that time, stock dividends were taxed higher... I took their word for it and sold my stock... I haven't bothered to check since then because I no longer have any stocks and hubby has told me, in no uncertain terms, that the Ford stocks are HIS.

Mxyplx, I had thought about T-Bills but don't like the idea of going through a broker and I will not transact any business online... I will check out the site to see what my options are though... Thanks.

JoyfulGuy, sometimes I think the most efficient way of making my money work for me would be to cash in all the annuities, IRA's and savings bonds and blow it all on me then find a really rich man so I wouldn't have to think about it any more... LOL

Rita

    Bookmark   April 14, 2006 at 12:09AM
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devorah

The rich guy - see if he has a brother for me

    Bookmark   April 14, 2006 at 1:51PM
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ritaotay

Devorah, you can be his mistress so I won't have to do all the 'work'... LOL

LOL

Rita

    Bookmark   April 16, 2006 at 1:24PM
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joyfulguy

Rita,

The housewife does the housework.

It's the mistress that gets to go out on the town with him to play.

o j

    Bookmark   May 20, 2006 at 11:09PM
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joyfulguy

Rich spouses
are inclined to be louses,

if they're gonna pay ...
they want their own way!

o jay

(who wants his own say
... anyway)

    Bookmark   May 25, 2006 at 9:23PM
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jannie

I read a magazine article, It said live on 60% on your take hone income. Allow ten percent each for fixed and unexpected bills, like comouter equipment and gifts, and save ten percent. Whoops, that only adds up to 90. I'll have to look for that article. . .Sorry.

    Bookmark   July 6, 2007 at 5:47PM
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