So many people want to invest but they never get started because they’re afraid of jumping into the market at the wrong time. This is a valid concern; no one wants to lose money. So what is it?

Dollar Cost Averaging is a simple technique employed to mitigate the risk of investing a large sum of money at the “wrong time”. It is accomplished by purchasing a certain fixed dollar amount of some particular investment at set regular intervals.

Because you’re always investing the same dollar amount, you’ll be buying more shares when the price is low and fewer shares when the price is higher. This strategy has an averaging effect on your cumulative purchase price that actually favors the lower price.

Let’s take an example.

We’re going to invest $500 a month in XYZ Corporation. In the first month the stock is trading at $20 which allows you to purchase 25 shares. Next month the stock is trading at $10 per share and you’re able to buy 50 shares.

At first glance, you might expect the average price to be $15, but this isn’t the case. After two months, you’ve invested $1,000 and have purchased 75 shares. This comes out to $13.33 per share. This is due to the fact that you’re not only buying shares at different prices but also different quantities.

This strategy works really well for people wanting to get started investing because they may not have a lump sum to invest in the first place. Consistent use of this strategy is a great way to reduce your investment risk.

So what’s holding you back from getting started?

Robert Kiyosaki, the author of the book “Rich Dad Poor Dad”, has a board game out that is supposed to teach you about investing and how to grow your personal cash flow. For obvious reasons, it’s called CASHFLOW 101.

I’ve been wanting to play the game for a while now, but since it’s a specialty game you can’t just pick it up at Target or Walmart. The price tag is also a little daunting at $195.

I did, however, find the game on eBayfor a pretty good deal considering. I was able to pick it up for $137 including shipping.

I’m pretty excited to play it, but since I just got it yesterday I haven’t rounded anyone up yet. It’s also not your usual party game so I’ll have to find certain people that are interested in playing it.

The game focuses on your personal financial statements; these being your balance sheet and your income statement. As you move through the game, you have to keep your financial statements up to date so it forces you to actually go through the motions instead of just thinking about it.

Once I play the game, I’ll let you know how it is. If nothing else I’m sure it’ll be fun and entertaining.

Charles Schwab released the news today that they are rolling out a brand new checking account. With this checking account, you earn an astonishing 4.25% annual percentage yield.

There are a few other places where you can earn a nice yield on a checking account, but they come with certain restrictions. ING Direct offers high yield checking but you have no access to paper checks. Etrade also offers high yield checking but you have to maintain a $5,000 minimum.

I don’t think that any of these are bad options, but the account from Schwab definitely makes things much easier.

The question I have, though, is whether this yield is enough to get you to switch over to a Charles Schwab account. There is always a lot of talk about what investment vehicles yield higher returns and are easiest to use, but are we that concerned about our checking accounts?

Founder and CEO Charles Schwab had this to say:

“The financial world lives off lazy money. There is inertia, and in some respects, that’s exactly why we decided we had to make this a very powerful offering.”

I’m convinced he’s pretty much right on about this. Most people aren’t really looking to change their checking account because they’re comfortable with what they have and they’re used to it.

I’d also like to talk about another aspect of this and other accounts. The yield of the account is not the only important aspect to concern yourself with. We also need to have account separation and distinction.

The point of having a high yield is to speed up the effects of compounding. This only happens when the paid interest stays in the account and contributes towards future gains. Checking accounts aren’t usually known for their increasing balances.

If you’re thinking of using an account like this to serve as both your checking and savings accounts, you’ve got to be careful. It’s far too tempting to tap your savings if you don’t have the balances separated.

Like any financial product, you’ve got to weigh your options and make decisions after careful consideration.

I made a phone call today to Bank of America customer service. As I’ve done every month, I mailed in two mortgage payments in the same envelope a little over a week ago. There were two different payment coupons with two different checks. I’ve never had a problem with this until now.

I checked my accounts online recently and noticed that one of the payments has posted, but the other has not. Usually both post on the same day since they are mailed together, so I was a little concerned.

Once I got someone on the phone, I was told that it’s really best to mail in the payments separately in two different envelopes due to their payment processing being “highly automated”. I wasn’t really aware (and don’t really believe) that the envelopes are opened by machines and completely processed automatically, but I could be wrong.

In order to resolve my concern, I was told that I should just put a stop payment on my check and send in another form of payment. I didn’t really like that idea since I’d have to pay a fee to stop payment on a check that I know they received. Why should I be penalized for their mistake?

After having this option repeated to me a number of times, I finally responded very clearly that I wasn’t happy with having to pay a fee to fix their error. I was finally put on hold for a minute so he could “see what he could do”.

After a while, he came back on the line and told me what he had done. Bank of America has a program called “Customer Wow” whereby they try to “wow” a customer who is unhappy with their experience. This is the insider verbiage that they use in the customer service department.

He submitted what’s called a “cus wow” for me, and upon approval they would send me out a $50 check. To tell you the truth I was actually quite surprised, if not “wowed”, by this resolution. Of course it is still pending approval, but I was told that it shouldn’t be a problem.

Hopefully everything will work out and I’ll receive this check after which I’ll have no problem issuing a stop payment and writing another check.

What’s important here is the fact that the customer service department is able to remedy a problem even when they say they can’t at first. Too often we give up when we here “No” the first time. Don’t be rude (no one will want to help you) but firmly express your concern and that you expect some sort of resolution that is equitable.

I’m not saying that you’ll always get your way, but if you’re not receiving the level of customer service that you’d expect, let them know. In the end, you’re the one who decides who you’d like to do business with.

I’ve been thinking quite a bit lately about different ways to make money. I’ve talked before about the two ways to increase your free cash flow. There’s a lot of information out there about different ways to decrease your expenses. It’s a little more difficult to find ways to increase your income or at least add to it every now and then.

Here are few things that I’ve thought of:

1. Ask for a raise / look for a new job.

I’ve combined these into one item because I don’t want to focus too much on your job. That being said, it is normally one’s sole source of income. Think of ways that you can make yourself more valuable to the company. Remember your selling a product, your time. Think of ways to improve this product so that you can charge more for it.

2. Take on a part time job.

This isn’t my favorite option because you’re limited by the amount of hours in a day. The metric here is cost per unit. The cost is your hourly rate, and the unit is an hour of your time (it’s a little different for salary, but you get the idea).

3. Sell unwanted/unused items.

We’ve all heard of Ebay. If you haven’t, check out the link on the right. It’s pretty simple. List an item, watch people bid on it, collect payment, and ship the item. This is a fabulous way to reduce clutter around the house and to make a little cash on the side. I helped my parents with this and they were very pleased with the results. I also just sold one of my bass guitars that I didn’t play anymore. This can work for you in a variety of ways.

4. Get paid for your thoughts.

If you think you have something to say, post it online and let people hear it. There are many ways to make money this way; in fact, there are entire websites dedicated this subject. Don’t, however, start your own site for the sole purpose of making money. Find a topic your passionate about see what happens. You’ll never know till you try.

5. Let your money work for you.

It’s been said that it takes money to make money. Truth is, it’s only one way to make money. The common term for this is investing. Most people, however, invest their money and then reinvest there gains with an eye towards living off of them in retirement. Try living off of your investments now and investing your job income. It may not seem as if there’s a difference, but once you see it… Ah-ha.

6. Start a business.

This seems like a daunting task and it raises all sorts of “what ifs”. Starting a business doesn’t have to be a full time pursuit. You don’t have to incorporate and get a business license and everything (at least not yet). All you have to do to get started is sell something. You don’t have a business until you have revenue. Try and think of something you could make or a service you could provide. Here your metric is a little better than with a job. The cost is what you sell the item or service for. The unit is whatever you’re selling or providing. There’s only so many hours in a day, but there’s no real limit to how many products you can sell.

Hopefully some of this has been helpful for you. Let us know some of your ideas and what’s worked for you.

I started my Roth IRA a little over a year and a half ago. Everyone talks about what a great thing the Roth IRA is so I thought I’d share what it took to get one up and going.

First of all, you can set up an IRA at pretty much an brokerage firm or even bank. I looked at all my different options which included Sharebuilder, Scottrade, Etrade, TD Ameritrade or Charles Schwab. Each one has different rules and fees. I chose to set mine up with Scottrade because each transaction costs just $7. I don’t have to execute a certain number of trades in order to qualify for a lower transaction fee.

To set up the account, I went to Scottrade’s website and applied for the account. You have to fill out the application with your information and specify that you want the account to be either a traditional or Roth IRA. If I remember correctly, you may have to print out a form, sign it, and mail it in with a check to open the account.

Another reason I chose Scottrade was because I could make online transfers into the account. Unfortunately they had some issues a while back and took that feature away. They’ve since re-instituted the online transfer for regular accounts, but I’m still waiting to have the feature back for my IRA. Until then, I just write checks to the account.

With Scottrade (and I assume the other online brokerages) you’re able to pick from hundreds of different mutual funds, index funds, ETF’s and individual stocks and bonds. I choose to buy individual stocks, but the options are open for you to decide what’s right for you.

Hopefully this has been helpful for you. There is so much written about the benefits and reasons to have a Roth IRA, but some are still a little hazy as to how exactly to go about setting one up.

Let me know if you have any questions. I’d be happy to help you out. Comments are also welcome.

I read an article today on CNN Money entitled, 25 Rules to Grow Rich by. I’m always fascinated by these lists because they try and break our financial lives down to a simple laundry list of easy to follow steps. Personally, if things were really this simple, more people would “have their act together”.

I’m going to give you now the aforementioned “Rules” along with my own commentary (it wouldn’t be my own personal blog if I just regurgitated it):

1. For return on investment, the best home renovation is to upgrade an old bathroom. Kitchens come in second.

First of all, I thought this was an odd one to put first in the list. Not everyone even owns a home yet, and others bought homes with already up-to-date bathrooms and kitchens in them. I do agree that these updates can add value to the home (I won’t comment on the percentage of added value since every market is different), but I don’t really view a personal residence as an investment. I think it’s a wise financial decision to purchase a home, I just wouldn’t label it an investment. You don’t even realize the gains till you sell (where are you going to live?) or take out a home equity loan (more debt). Plus, I hope that I can earn more than 2 percent on my money in the case of the bathroom (try a money market), and I certainly hope that my “investments” won’t lose money as in the case of the kitchen. Upgrade your home as you see fit and because you want the upgrade. If you’re talking about a rental or other investment property, then we’re in a different ballgame.

2. It’s worth refinancing your mortgage when you can cut your interest rate by at least one point.

This is, in my opinion, a broad generalization. There’s simply too many factors to consider when refinancing such as the old and new interest rates, the length of time you’ll own the home, the amount of the associated closing costs, and the hassle of doing the whole thing.

Here’s my take on refinancing. Get the total closing costs. Figure out what the monthly savings will be with the new rate. Divide the closing costs by the monthly savings amount to figure out how many months it’ll take to recoup the closing costs. This is the amount of time it’ll take to just break even. Ask yourself how long you think you’ll stay in the house (I say “think” because you never really know) and see if the monthly savings will be worth it. That’s a start and then go from there. It’s really quite simple.

3. Spend no more than 2 1/2 times your income on a home. For a down payment, it’s best to come up with at least 20%.

This is conventional wisdom and I agree with it even though each situation is different. For example, you may decide to buy a duplex, live in one side, and rent the other side out. In this case, you can decide to spend more than the “recommended” amount because someone else will be paying part of the mortgage in the form of rent. Yes there are other considerations, but you get the gist. The down payment is really immaterial as long as you can afford the monthly payments. I bought my first house with no money down and with owner financing. I made a choice between having money sit in my house as equity, or being able to invest it at another rate of return. Keep in mind that I didn’t spend as much on the house as I might have been tempted to by adding in a down payment. Again, circumstances vary.

4. Your total housing payments should not exceed 28% of your gross income. Total debt payments should come in under 36%.

This is another generalization but at the same time a well accepted guideline; so I’m not really going to say much here. You get the idea that every situation’s different.

5. Never hire a roofer, driveway paver or chimney sweep who is going door to door.

To this I say, Random. I think a better “rule” to put in the list would have been, “Don’t get scammed”. This is just one of the many ways that you could get taken. To put it as a life rule to grow rich by seems a little narrow. But I would agree that it’s bad to get scammed.

6. All else being equal, the best place to invest is a 401(k). Once you’ve earned the full company match, max out a Roth IRA. Still have money to invest? Put more in your 401(k) or a traditional IRA.

We’ve all heard this, but some would say it bears repeating. I do have these accounts but I’m not the typical IRA homer. If you look into things further you’ll find other ways of minimizing your taxes for investing. I look to real estate as one amazing way. And once you accumulate enough, you can switch to a self-directed IRA where your options really open up.

7. To figure out what percentage of your money should be in stocks, subtract your age from 120.

This again is often repeated, but I’m not in total agreement. This narrows your view to 2 basic asset classes: stocks and bonds. What about real estate, commodities, currencies, or business and franchise opportunities. Not all of these may be for you, but you may not want to exclude them all.

8. Invest no more than 10% of your portfolio in your company stock - or any single company’s stock, for that matter.

I pretty much agree with this one. I would however add that if you own your own company, it probably consumes most of your “portfolio”. Bill Gates and the guys from Google probably don’t follow this advice. Enough said.

9. The most you should pay in annual fees for a mutual fund is 1% for a large-company stock fund, 1.3% for any other type of stock fund and 0.6% for a U.S. bond fund.

I’m not a huge mutual fund junkie, but I would agree that you should keep your fees as low as possible. I’m picking my own stocks and putting together my own sort of “mutual fund”. The only fees I pay are the trading fees from Scottrade.

10. Aim to build a retirement nest egg that is 25 times the annual investment income you need.

This focuses on the total amount of money you should have. I think the more important thing to focus on is your monthly cash flow. Accumulate enough investments that can provide enough cash flow to replace your income and you’ll be fine. Focus on finding other sources of income instead of just thinking you’ll live off the interest of sum lump sum.

11. If you don’t understand how an investment works, don’t buy it.

I completely agree with this one. They mention in the article that you’d be fine with 2 mutual funds, one with stocks and one with bonds. I will add that just because you know how a mutual fund works, doesn’t mean that you understand the companies in the mutual fund. Warren Buffett advises only to buy stock in companies whose businesses you understand.

12. If you’re not saving 10% of your salary, you aren’t saving enough.

This is solid advice. Earn as much as you can, spend as little as you can, save and invest the rest. Start with 10% and try to increase this as you’re able to.

13. Keep three months’ worth of living expenses in a bank savings account or a high-yield money-market fund for emergencies. If you have kids or rely on one income, make it six months’.

There are so many different views on keeping liquid emergency savings. I wouldn’t necessarily take this advice to the letter. Take the priciple and make it work for you. I personally am working towards having a year’s worth of expenses in cash.

14. Aim to accumulate enough money to pay for a third of your kids’ college costs. You can borrow the rest or use some of your income to help out when your child is in college.

Who knows what a third of their college costs are going to be? This is amazingly ambiguous. I would put your retirement and other financial goals first. So much can happen in 18 years. Maybe your child doesn’t want to go to college. Maybe he/she wants to go to an ivy league.

15. You need enough life insurance to replace at least five years of your salary – as much as 10 years if you have several young children or significant debts.

Insurance is there to protect against a financial calamity that you can’t afford. As you progress towards your goals and begin to accumulate significant assets and sums, you’ll need less and less insurance. You may still want to have life insurance, but that’s up to you.

16. When you buy insurance, choose the highest deductible you can afford. It’s the easiest way to lower your premium.

Enough said previously.

17. The best credit card is a no-fee rewards card that you pay in full every month. But if you carry a balance, high-interest rates will wipe out the benefits.

Credit cards are always an interesting topic. They are a short term cash flow management tool and should be used as such. There are so many rewards and programs and offers that it doesn’t make sense to generalize a rule about them. I say only this, use them wisely.

18. The best way to improve your credit score is to pay bills on time and to borrow no more than 30% of your available credit.

This is good advice. Other than paying your bills on time, I don’t know if this is the best way to improve your credit score. There are so many things that go into figuring your score. I’m not going to go into much detail here, but much can be found about what affects the different scores.

19. Anyone who calls or e-mails you asking for your Social Security number or information about your bank or credit card account is a scam artist.

I’ll say it again, it’s bad to get scammed.

20. The best way to save money on a car is to buy a late-model used car and drive it until it’s junk. A car loses 30% of its value in the first year.

Good advice, but again, everyone is different. Some people place a higher priority on the car they drive than others. Do so in moderation and be smart about what it’s really going to cost you. Remember that certain cars have higher insurance costs, lower gas mileage, and higher maintenance costs. Consider everything carefully.

21. Lease a new car or truck only if you plan to replace it within two or three years.

See previous.

22. Resist the urge to buy the latest computer or other gadget as soon as it comes out. Wait three months and the price will be lower.

I don’t really agree. If you really want it then get it, but I’d ask yourself if you really need it. Just because you waited three months or so doesn’t really make it a wise purchase.

23. Buy airline tickets early because the cheapest fares are snapped up first. Most seats go on sale 11 months in advance.

I think this one is out of place. It belongs in a list of ways to save money and be frugal. It’s a good idea, but how many people are able to plan 11 months in advance. Just be careful with your expenses and plan ahead to the best of your ability.

24. Don’t redeem frequent flier miles unless you can get more than a dollar’s worth of air fare or other stuff for every 100 miles you spend.

Another generalization that’s kind of random in this list. Take it for what you will.

25. When you shop for electronics, don’t pay for an extended warranty. One exception: It’s a laptop and the warranty is from the manufacturer.

For this “rule” they go so far as to point out the only exception. This is so narrow. Some really value the security of having the warranty. This is very similar to insurance, but for consumer goods. It may not make the best financial sense, but it might be worth the piece of mind. I personally don’t buy them, but I accept the risk of possibly having to buy another one.

This was an extremely long list and I congratulate you for making it this far with me. Hopefully it has at least made you think about things.

What would you add or take away from this list?