I just opened an ING Direct High Yield Savings Account today. Having moved across the country, I had to get different bank accounts and I wasn’t able to find a high yield savings or money market at any of the local banks.

I believe that it’s incredibly important to keep a certain amount of cash on hand. You’ve probably heard the old saying, “Cash is King”. Well, it’s still true today.

When you’ve got available cash, you have options. Sometimes there’s a situation that requires immediate action, and to either cover an emergency or take advantage of a new opportunity you’ve got to have access to cash.

My eventual goal is to have the equivalent of one year’s worth of expenses in liquid savings. There’s many differing opinions on this, and you’re free to express them if you like. Having this amount in savings, however, will allow me to invest with more confidence than I’d have otherwise. If an unforeseeable problem occurs, I’ll be able to ride it out and make the best rational decision instead of making a hasty “what if I lose it” decision.

Anyway, these emergency reserves should be kept in a risk-free account. That’s what you have investment accounts for. This account at ING Direct is FDIC insured up to $100,000 and it currently yields 4.5%. There’s nothing wrong with earning as much interest as possible; just remember the purpose of the account: Emergency Reserves.

I’d highly recommend an account with ING Direct because they combine security with a decent yield. It’s also easy to access from anywhere. Check them out and open one online for yourself today.

By now everyone should have their taxes filed or at least be just about ready to send them off. Unfortunately, most people have not only already filed them, but they’ve gotten the refund and already spent it. Usually it’s a weight off the shoulders knowing that you’re finally finished and don’t have to think about it for another year.

The key phrase here is “don’t have to”. While it’s true that you don’t have to think about taxes until next year, it might not be the wisest move. Now is the perfect time to do some tax planning for next year.

Getting that big refund is nice, and maybe you even exercised some financial savvy by stashing it in a retirement fund or investing it in some way. Wouldn’t it have been better if it had been working for you all along? These are some of the things you should be thinking about.

I’m not going to say that there’s a one size fits all formula. Some people prefer to get the refund and stash it away because they know they don’t have the discipline to save the same amount little by little during the year. This is further complicated because you don’t know how much it’s going to be until the end of the year. How would you know how much to put away monthly or biweekly? Ultimately, you’ve got to do what works for you.

You may want to evaluate, however, how much you’re putting away into tax advantaged investment vehicles such as a 401k or an IRA. Were you surprised by how much you had to pay in taxes? Take some time to figure out ways to reduce this tax bill in the future.

If investing in real estate peaks your interest, schedule an appointment with a CPA to discuss the tax advantages that are available to you as an investor. The advantages don’t just stop with the mortgage insurance deduction.

You may want to talk with a good CPA anyway, if you’re going to have some free cash flow for investing. He/She will be able to advise you as to what type of investment vehicle would be right for you and your particular tax situation.

I would suggest that you don’t just wait for the tax man to come again next year. Be proactive and take the necessary steps now to reduce your tax liability in the future. You’ll only thank yourself later.

First of all, I didn’t even know Don Imus existed until this whole situation arose and broke out onto the main stream media scene. For those of you who haven’t heard what happened, Don Imus, a radio show host and shock-jock, apparently called some members of the Rutger’s women’s basket ball team “nappy headed hos”. After apologizing for his remarks, CBS and MSNBC promptly fired him. It’s amazing how this whole story can get so blown out of proportion.

Some are calling it an infringement on our “freedom of speech”. Interestingly, Don Imus still has his freedom to speak his mind. CBS and MSNBC just took his microphone away.

Others are talking about a double standard here. Take Rosie O’Donnell for example. She wasn’t fired after her comment about Asians, and the only apology she offered was of the, “sorry if what I said offended you”, variety.

There’s a whole industry of “shock-jock” and opinionated radio and TV shows. Howard Stern, Rush Limbaugh, Al Sharpton, Hannity and Colmes. These shows draw a lot of viewers and listeners and therefore a lot of money in advertising revenue. It just so happens in this case that large companies such as Proctor and Gamble decided to pull their advertising dollars. Whatever your view on Don Imus’ remarks, CBS and MSNBC simply made a business decision.

What he and others say in the media is sometimes offensive. If you don’t like what they’re saying, then don’t watch or listen to it. People are so easily offended these offended these days because they care so much what others think of them. Only you can decide who you are, and you can make the choice not to be a victim.

We can also learn a great lesson from the Amish school shooting. Maybe we can’t change the situation or behaviour of others, but only we can choose how we react.

What are your thoughts?

The real estate market and the stock market. Before I get to this, let me first talk a little bit about markets in general.

A Market Economy

In the United States, we live in a market economy. The economy relies primarily on the interactions between buyers and sellers to allocate resources. Prices are generally determined by basic supply and demand.

There are many different types of markets such as flea markets, farmers’ markets, financial markets, real estate markets, stock markets, etc. Each market serves its purpose.

Financial markets exist to match those who want capital (businesses) with those who have it (investors). Stock markets are secondary markets where buyers and sellers of company stocks come together and trade. Real estate markets bring together buyers and sellers of real estate. I hope you’re noticing the pattern.

Even though all the markets bring buyers and sellers together, they are all different.

The Comparison

Recently we’ve been hearing a lot about the real estate market and how the bubble’s bursting and the market’s crashing. In February, we’ve also seen the stock market experience a little crash of its own and then recover. Take a look at the difference though.

The stock market is full of different prices, but at any given point in time there is only one stock price per company. If you want to buy a share of General Electric, you have to pay the current market price for that share. It doesn’t matter if you live in New York, L.A, Seattle or Omaha. There’s one price. When that price crashes, it crashes everywhere. When that price goes up, it goes up everywhere. Also your 100 shares of stock are exactly the same as the next guys’.

Contrast this now with the real estate market. Prices vary across the board here too, but there’s no one market price for a 3 bedroom 2 bath house with a 2 car garage. There aren’t even 2 houses exactly alike. You might find one house in California right now with a market price of about $650,000. A similar house (notice it’s not the same) in Kansas City might have a market price of $150,000.

The differences don’t just stop here though. Just as their can be a price discrepancy, the direction of the price movement isn’t linked either. Every one’s worried because of the bursting bubble right now, but if you lived in Salt Lake City you wouldn’t know what they’re talking about.

The point I’m making here is that you can’t make broad generalizations about the real estate market. There is only one stock market that trades General Electric and MacDo (that’s MacDonald’s if your new to this blog), but there are many markets that sell 3 bedroom 2 bath houses (and some places are even appreciating).

The goal of this post is not to advocate one market over another (be it stock or real estate). I’ll leave that to other posts such as Reasons I like Real Estate and Why I don’t buy Mutual Funds.

I do want to stress, however, that because the markets are different, they require different strategies. With stocks you have to figure out how to win in the one market. In real estate you have multiple markets to choose from.

[Editorial Note: This is why I don’t buy into all the media’s doom and gloom about real estate.]

Every once and a while I find some time (or rather take the time) to read a book, and I’m not talking about another business/investing book. Right now I’m reading the The Scarlet Pimpernel. Now, I know this may not have a lot to do with my main theme here, but I love to learn, no matter what from.

The story is about Sir Percy Blakeney who is the richest man in England around the time of the French Revolution where the aristocrats are being sent in droves to the guillotine. Percy is known as the Scarlet Pimpernel who, along with his band of followers, is engaged in rescuing the French aristocrats from their almost certain death. He’s also married to a beautiful French actress.

So, what am I getting at here? He’s married to a beautiful woman, and is wealthy beyond anything he’d need. Why would he risk his life to save others when he had everything anyone could really want? The book tells us he and his followers engage in this activity for sport. This is what I find interesting.

I’m always curious to know people’s motivations for doing things. The motivation here wasn’t money or fame, but for the philanthropic thrill.

It’s no secret that I enjoy business and investing. I do want to increase my net worth in order to provide myself with more options, but there’s more to it than that.

I like playing the investing game, and money is how we keep score of how we’re doing. Why does Warren Buffett do what he does? He doesn’t need the money; in fact, he still lives in the same house that he bought for just over $31,000. The same with Donald Trump. He could live just fine if he never did another deal. They continue to invest because of the thrill of business and of the deal.

This is why I don’t subscribe to the whole retirement idea. I’m not looking to retire to a life on the golf course (I’m not very good at it either). I’m looking forward to working and doing business the way I want to work and do business. I’d also like to pursue other philanthropic interests. Financial freedom will give me the time freedom to do exactly that.

I hear and read this piece of advice a lot, but I got to thinking about it the other day. Why are we always talking about “living below our means”? Is this just another way of saying spend less than you earn?

I have to be honest. The more I thought about it, the less I liked the phrase. It has a confining connotation to it: We should rein in our spending to fit nicely under some fixed ceiling. This is definitely “inside the box” thinking.

A slightly better way to look at things would be to “live below your means while expanding your means”. This is also commonly promulgated among personal finance and money gurus. Focus on the top line and the bottom line. I’ll admit that I’m also not such a fan of this way of thinking either.

The inherent problem is that as the “means” expand, so does the “living”. You finally are able to trade in the junker for a nice new car. No longer will you eat Ramen noodles. They’re soon replaced with trips to the Olive Garden or MacDo (that’s McDonald’s). People’s lives are seemingly richer, but they still wonder why they’re not getting ahead. This, too, is a case of “inside the box” thinking; the box just keeps getting bigger.

My advice, then, is to stop thinking and living “inside the box”. Why not try sitting on top of the box instead of living in it. Most people spend their whole lives trying to accumulate enough assets to live on when they retire at age 65. I say, start living on your assets now.

Live according to your investments and not your income. This is how you can stop living within your means, and start living on top of them.

There’s such a huge focus today on the lifestyle of the rich. We need look no further than all the hoopla that surrounds the likes of Donald Trump, P Diddy and Oprah. The problem is that the focus is on their wealth and fame and not on what got them there. Instead of trying to obtain the lifestyle of the rich, start developing the mindset of the rich.

1. I’ve already mentioned one of my favorite quotes in Sound Advice. The idea of living for awhile like most people won’t in order to live the rest of your life like most people can’t is very powerful. Too many people get in their comfort zone and begin to coast. Break out of this cycle and push yourself to keep achieving.

2. Changing your way of thinking about money is also crucial. It’s not how much you make, but what you do with what you make. If all your after is the high paying job so you can drive the newest car and wear the latest styles, you’ll have the appearance of wealth with no substance. It’s your choice whether to buy consumer goods or investments.

3. The wealthy have their money work for them. Once you realize that there’s only so much time in a day for you to work, you’ll see that you need to do more than just sell your time. Having a job means you’re selling your time for money. Investing means you’re selling the use of your money for more money. There are many ways to invest, but this is what it boils down to.

4. Just as a business has cash flow, we need to understand the personal cash flow of the wealthy. Normal people earn money and then spend it. Unfortunately people are now spending money and then earning it. The wealthy earn money, buy investments, and spend the money that the investments provide. I’m not saying that we’re all there yet, but understand this cash flow pattern and strive towards it.

5. Lastly, I’d like to take a thought from Henry Ford:

“If you think you can do a thing or think you can’t do a thing, you’re right.”

There’s a lot to be said for the power of thought. Once I told myself that I could by a house while still in college, I went after it and did it. It’s now my first rental property.

In order to become wealthy you’ve got to learn to think like the wealthy. Believe you’re rich and you’ll become it.