CHUMA SPIRIT Magazine

Why You Should Start an eCommerce Business

Check out this 4 minute video: http://www.mynumoney.com/flashvideo.html. I found it informative and motivational. It's distributed by a website called the Kemet World Ambassador Program. Watch the video. Despite its brevity, I believe it to be an overview to why people should transcend their business savvy with focus to the internet. CHUMA

Why You Need a Roth IRA

With this indispensable savings tool, your money grows tax-free, you can invest in almost anything and you get several cool perks.

By ERIN BURT

March 9, 2006

This article was updated in 2007.

One of the smartest money moves a young person can make is to invest in a Roth IRA. Follow the rules and any money you put into one of these retirement-savings accounts grows absolutely tax free -- you won't owe Uncle Sam a dime as you let your savings accumulate, or when you cash it out in retirement. Plus, an IRA is more flexible than a 401(k) and other retirement plans because you can invest it in almost whatever you want, from stocks and mutual funds to bonds and real estate.

If you haven't yet opened this gift from Uncle Sam, do it now. You have until your tax return deadline to set up and make contributions for the previous tax year. The government sets a limit on how much you can contribute to a Roth -- currently up to $4,000 annually. That means you can invest $4,000 right now for 2007, giving you a solid start to your savings. The contribution limit rises to $5,000 in 2008.

The idea of saving on your taxes may seem a tad obscure, but it really can pay off big. If a 25-year-old contributes $4,000 each year until she retires and makes an average annual return of 8% on her investment, she'll have more than $1.1 million saved by the time she retires at age 65. And the money is all hers -- she won't have to give the IRS a cent of it if she waits until retirement to cash out. (Use this calculator to see how far your savings can take you. Enter "0" in the tax rate boxes to simulate the tax-exempt status of a Roth IRA.)

If that same 25-year-old invested that same $4,000 a year in a regular taxable account earning the same 8% return, she'd only have about $802,000 after 40 years if her earnings were taxed at 15%. That's more than one-fourth less money than if she'd gone with the Roth.

Buying a Home is Possible in a Slumped Real Estate Market

Written by CHUMA

As the value of homes decrease, and the economy seemingly is in jeopardy of going into recession, one has to decide if this is a good time to buy or sell a home. Unfortunately, selling a home right now is very difficult as the real estate market slumps and foreclosures are at an all time high. But for the serious investor, this is a perfect time to cash in on the decreased home values and the low prices that homes are selling for these days.

Investing these days is about taking a chance, and being able to remain grounded in an uncertain economy. If you are the average home owner trying to sell your home, be prepared to maintain your mortgage payments, because the real estate market has become a bit depressed. The value and prices of homes have been on a decline since the beginning of the year. So if the equity in your home is valued low or zilch, you may want to consider waiting for the market to improve--which may take a few years. If you are interested in buying a home, the mortgage lending companies have tightened up their lax loaning practices and have become very strict on guidelines due to the rise in foreclosures nationwide. But buying a home is still possible, whether you’re intent on being a savvy real estate investor or just interested in having a place to call your own. I’d say consider trying these alternative strategies that I discovered while doing some web-surfing:

• Go "downscale." Instead of buying the best property you can afford in an upscale neighborhood, buy a duplex or other multi-family housing unit in a less desirable neighborhood. There is always a demand for moderately priced housing and having one or more rental units contributing to the monthly mortgage can make a big difference. (There are tax benefits to being a landlord too. Talk to an accountant).

• Become a landlord. Don't want to move to a more modest neighborhood? Fine. Stay in your apartment and buy a piece of income property -- a duplex, four-plex or single-family rental home in a "less desirable" neighborhood. You'll need to invest sweat equity in making repairs, collecting rent, etc., but your tenants will be paying your mortgage and building your equity.

• Think big, spend small. The rich didn't get that way by throwing money around. Cash is always king. Cut back on little luxuries -- Starbucks and that big new SUV for starters. Drink Folgers and get a used Corolla. Stash the cash in a 401(k), CD or reputable mutual fund. In a few years, you'll be in a better position to snap up a nice piece of real estate and get a decent fixed-rate mortgage.

Living Paycheck to Paycheck Becomes Harder

Written by CHUMA

"Michelle Grassia, who lives with her husband and three teenage children in the Bedford-Stuyvesant section of Brooklyn, N.Y. reports that her husband's check from his job at a grocery store used to last four days. "Now, it lasts only two," she said. To make up the difference, Grassia buys one gallon of milk a week instead of three. She sometimes skips breakfast and lunch to make sure there's enough food for her children. She cooks with a hot plate because gas is too expensive. And she depends more than ever on the bags of free vegetables and powdered milk from a local food pantry."

When I read this quote from an article on Yahoo News entitled Living Paycheck to Paycheck Becomes Harder, I felt disgusted. In a country that is so decadently abundant with resources, there is no reason that people have to go hungry. But with a lagging economy, mostly due to the budget deficit caused by the war in Iraq, it seems that a hunger abatement will not be in our future. Instead, it will become worse as the President proposes a $2.9 trillion budget spending plan and a war of perpetuity over 10 years. As this forces low to middle income families to purchase inexpensive and unhealthy food that stretches for an extended period of time, there will be an increase in substandard nutritious habits and poor health, causing a rise in medical care. What is this world coming to? Read more here.

10 Money Tips Toward Financial Security

Written by CHUMA

Recently, a friend of mine asked me for financial advice on how to manage his money because he always regarded me as someone who stayed financially on track. So I imparted to him the 10 tips that I have been using throughout the years, which can help you as well.

1. Open a savings account at ING Direct. Traditional savings accounts at regular banks only yield less than or around 1% interest. But ING offers an annual percentage yield of 4.30%.

2. Figure out a budget based upon your living expenses and bills that need to be paid. No matter what amount they come to, always create a budget where you pay yourself a substantial amount to your savings account first as if that account is a bill....and think of the money as gone.

3. If you are a full time employee eligible for a 401K account, please do not hesitate to open one and try to max out on the pre-tax contributions if you can. If you can't, contribute at least 10% of your salary.

4. I suggest opening a Roth IRA over a Traditional IRA. You can read here to review the differences and compare them. The bottom line is that you need to start contributing to a pension plan or some sort of retirement nest egg so that you won't be eating dog food when you are an old person.

5. Even though the real estate market isn't as good as it was when I bought my new house, I always encourage people to buy property. It fosters security in a cruel world of expensive rents, and in the long run is a great financial investment that will most likely accrue equity with time.

6. If you like to travel, open a separate account where you can save money solely for travel. You decide how much should be applied to it annually, but this amount should never exceed your primary savings account, as your primary account is your liquid security in the event an emergency arises or you are just really in need of something important.

7. Spend less than you earn. Wealth is not determined by how much you make, but by how much you keep and grow. Also, value your time. Your life is now; time is money. Don't waste a moment.

8. Be strategic. Talk with money-savvy people about asset building. Cut out idle chatter and mindless TV and use that time to read about building wealth. I suggest subscribing to Black Enterprise Magazine and Kiplinger Personal Finance Magazine.

9. Hire yourself. Even if you have a regular job, consider starting some sort of business....or perhaps create your lifestyle and a business around your passion, and work will never again feel like labor.

10. Consider starting a savings bond account at Treasury Direct. The advantage of saving monthly into savings bonds is that once you contribute the money, you are not allowed to touch it for a year, which promotes discipline at building wealth.