Beating Broke

Personal Finance from the Broke Perspective

Motif Investing

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How much do you know about investing?  If you needed to build a balanced, diversified portfolio of investments, would you even know where to begin?  What if you wanted to take advantage of a certain trend by investing in the companies behind that trend?  Could you do the research necessary to find those companies and pick the ones that are best suited to taking advantage of the trend?  Yeah, me either.

Motif Investing; Investing in Patterns

That’s where Motif Investing (affiliate link) comes in.  They’ve done the research for us.  They know how to build a portfolio of investments that is poised to take advantage of a new trend.  And, they’re sharing that knowledge.  They’ve created motifs that you can invest in.  In their own words: “A motif is a carefully researched and balanced grouping of up to 30 stocks that combine to give investors diverse exposure to a single big idea.”  But, what does that mean?  Well, let’s say you think the economy is going to continue to stink for the next several years.  You know that as the economy goes down, places where you can buy stuff cheaply do well.  How about a motif called “Discount Nation” that is an array of discount retail stocks?  What if you also think that when the economy goes down, things like gambling, alcohol, and tobacco pick up, and the companies that produce those things do well too?  The “Seven Deadly Sins” motif might be for you.  Check out the description they’ve given it.

Even in tough times, consumers continue to partake in things that may not be considered particularly virtuous. From cigarettes to sex, burgers to Botox®—consumer indulgences require products and services from a wide range of publicly traded companies. Some luxuries see reduced demand during tough times. But smokers could keep smoking, drinkers keep drinking, and the lustful keep…lusting. Bad habits are hard to break. And when times are rough, who wants to even try? Nobody can predict the markets, but consumers are only human. And economic conditions may not be able to defeat their appetites for sinful stuff.

Funny! You’ve got to have an account, and be logged in to see the individual stocks for each motif.  I couldn’t resist, so I signed up just to see what was in the “Seven Deadly Sins” motif.  It’s got 25 stocks in it.  I recognize almost all of the names, like Anheuser-Busch under the Gluttony category, and Sturm Ruger & Co. under the Wrath category.

Investing with Motif Investing

Motif investing might be something to look into.  It looks like they’ve got a pretty low minimum investment of $250 per motif with a fee of only $9.95 for the entire motif.  If you tried to replicate the above motif, you’d have to buy 25 individual stocks, and even at the $4.95 I’ve seen at a few discount investing houses, you’re going to spend a ton more to achieve the same diversification.  In a way, it’s a bit like an ETF or mutual fund, but without the added expenses of either.  Plus, unlike an ETF or mutual fund, you own the shares of the individual stocks, not the shares of the ETF or mutual fund.

The motifs are also customizable.  You can adjust the weighting of the motif to lean a little more heavily on one stock or another, and can even add or remove stocks to the motif to fully customize it to your liking.  Each gives you a simple way to buy a little diversification as is, or you can customize it to fit your liking.  I like that.

I don’t necessarily like that there is a minimum investment, but I’m sure it’s in place to keep their costs as low as they can. They also don’t reinvest dividends, which would be nice to see since they’re already doing fractional shares, but, I do like the fee structure.  $9.95 might seem a bit much, but when you consider that you’re buying up to 30 stocks at a time, it’s really a pretty good deal.  Plus, once you own a motif, you can sell/buy individual stocks within the motif for $4.95 a trade.  They’ve got IRA accounts available which is nice.

If investing seems like a big confusing mess to you, you might want to check out Motif Investing.  I like the idea, and having some knowledge behind the stock picking is always a good thing.  I’m not sure that too many seasoned investors will be picking up the idea, simply because most of them know how to do their research, and usually have a set way they go about investing.  Maybe I’m wrong, but that’s the way I see it.  It’s a cool tool for beginners.

 

The Life Insurance Movement

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Much like the Roth IRA movement that I participated in a while back, Jeff from Good Financial Cents is spearheading a Life Insurance movement today.  The movement is designed to help educate people on the different types of life insurance, the ways to go about getting life insurance, and on how life insurance works, in general.

I’m sure we’ll see lots and lots of excellent articles to help educate the community.  If you want to check them out, Jeff has compiled a list of all the participants and posted them on the Life Insurance Movement homepage.

Where do I stand on life insurance?

I used to be on the fence.  On the one hand, there is a very strong argument for it.  On the other hand, it can be pretty draining on your finances, for something you don’t use (hopefully).

For a young person, struggling with debt and bills, that extra $50-$60 a month to cover my wife and I is a not insignificant chunk of money.  Neither of us is very old, and our probability of dying is pretty small.  So, why spend that money on something that we have no plan on using when it could just as easily go towards paying off some bill?  Maybe when we’re older, we thought, we’ll get ourselves some life insurance.  You know, when we can “afford” it.  I know there are quite a few of you out there who agree with that statement.

But, here’s the thing.  I buy car insurance to help pay for damages to my car should I get in an accident.  I’ve used that car insurance.  My wife and I are good drivers, and neither of us has been in an accident that has been directly our fault.  The few accidents we have been in have always been someone else’s fault.  We had very little control over whether we got into that accident or not.

Life insurance isn’t all that much unlike car insurance.  If car insurance only paid out if you were at fault in the accident, I’d never buy it.  After all, I have never been in an accident that was my fault.  Likewise, if life insurance only paid out if you died of natural causes, it wouldn’t make much sense, statistically, to purchase any before you were at least 45 years old.  But, we all know that people don’t just die of natural causes.  They die in all manner of accidents too.  And those accidents don’t just happen to people of a certain age.  So, it’s really the accidental, not-your-fault sort of death that you are insuring against.  And you have no control over that.  And, should you die as a result of one of those accidents, will your spouse and family be able to pay the bills?  Or, will they be forced to sell the house to pay for the funeral?  Do you really want them to have to make that decision if you die?

What kind of Life Insurance should I get?

There are basically two kinds of life insurance.  Term life, and whole life.  The difference is in how long the term of the insurance is, and how much the premiums are for the coverage level.  A whole life insurance policy is good for your whole life.  Because it’s good for your whole life, the premiums are usually higher for the coverages.  A term life insurance policy is only good for a set term.  It might be a 10-year term life policy, and be valid for 10 years from the purchase date.  At the end of the 10 years, you have to purchase a new plan.  When you are young, the term life policies have much cheaper premiums because, statistically, you aren’t very likely to die young, and so, the chances of having to pay out on the plan is pretty small.  When you renew after the 10 years, the new plan would be based on your age at the time, and would be slightly more expensive because of a higher probability of death.

I can’t really tell you which is the best for you, though.  It’s something that you, and maybe a good financial planner, should look very hard at.  You need to educate yourself on the different types too!  Really do your research, and don’t be misled by Colonial Penn’s “affordable” insurance, for example, look for a reputable life insurance company, that offers everything you and your family might need. I encourage you to click that link above, take a look at all the articles that are part of the life insurance movement, and find out as much as you can about life insurance.  Being educated on the subject will make it easier for you to spot bad policies, and find one that will fit your financial needs.

How much life insurance do I need?

Clearly, we’d all like to have a life insurance policy of several million dollars.  Some amount that would set our family up to never have to worry about money again should we die.  In reality, that just isn’t usually possible.  As the amount of the policy goes up, so do the premiums you pay to keep the policy.  What you really want is a policy that will pay out enough to make the transition from a two person led household, to a one person led household.

  • If you’re single, a policy that would pay off your debt, and pay for the funeral is likely enough.
  • If you’re married, with no children, a policy that can pay off the debt, the funeral, and replace your salary for a couple of years is a good policy.
  • If you’re married, with children, a policy that can pay off the debt, the funeral, and replace 5-10 years of your salary with some left over is an excellent idea.

Obviously, all of that is partially determined by what size policy you can afford.  By “afford”, I don’t mean afford in the way you likely do.  I don’t mean, after you’ve eaten out several times in the month, how much money is left over to buy life insurance.  I mean, it should be included in your budget, just like car insurance, your mortgage, and your utility bills.  When all of that, plus your life insurance premium is paid, you still need to be able to keep your bills current, and buy food to stock the refrigerator.  That kind of “afford”.

In the end, when you go and read all the other articles that are part of the life insurance movement, you’ll likely find several viewpoints that clash with mine.  You’ll find people who think that whole life insurance is better than term life insurance.  You’ll even find people who don’t think you need life insurance at all.  I think the important part is that you think about life insurance, learn about life insurance, and then make the decision yourself (preferably with help) on whether you want life insurance, what kind of life insurance you want, and how much you want the policy to be.

Tip: Check with your employer.  Some companies are offering life insurance to their employees.

For me, I think that life insurance of some sort should be mandatory, just like car insurance.  There should be state required minimums that you have to carry.  Far too many people are leaving behind families without any sort of coverage at all.  Even if it’s a small policy that can cover funeral expenses, that’s better than nothing at all, and you can increase it later too!

Saving On Eyeglasses

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If you’re one of the people who needs them, eyeglasses can be one of the most expensive medically necessary things you will have.  Unless you need some other fancy piece of equipment, your eyeglasses can cost several hundred dollars up to a thousand dollars or more if you decide to go with the name brand fashion designer frames.  (If you’re reading this blog, I fully expect you wouldn’t, but we all know there are those that do!)  Before I go much further, I must admit to not being one of those people who needs eyeglasses. (yet.)  I have, so far, been blessed with good vision and very few problems as far as my eyes go.  My wife, on the other hand, is not so lucky.  And, if either of the kids takes after her in the vision department, we’ll be looking at some not-so-fun expenses in the future.

Some people will go to the optometrist, get their prescription, and then order their lenses right on the spot.  And, most of those people will spend a whole lot more for their lenses and frames than they really should.  Depending on how often your prescription, and thus your lenses, changes, you might be buying new lenses and frames on a pretty regular basis.  Add it all up, and the expense can be enough to make you actually consider cutting off the bottoms of coke bottles and super-gluing them to some bent coat hanger wire.  Attractive image, no?

What should you do to save some money on your eyeglasses?

Eyeglasses on TableStart by shopping around.  Just because your optometrist is your eye doctor doesn’t mean you need to purchase all of your eye related devices there.  The doctor already has gotten paid for the visit.  No other compensation for their time and the visit are necessary.  Most towns will have at least two optometrists, and bigger cities will likely have 10-20 or more.  Bigger cities may also have at least one of the new discount eyeglasses stores that have been popping up recently.  Take your prescription home, then call a few of them and ask about prices for the eyeglasses you need.

Take your business online.  If you know what style of frames you want, there are several places where you can purchase prescription glasses online.  Places like Glasses.com (run by the same company that runs 1-800-Contacts), can offer discount prices on eyeglasses because they don’t have as much overhead as many physical retail stores have with employees.  Also, because they aren’t in a physical location, they can tap into the wider customer base of the internet and get bulk discounts on the glasses that they pass along to the customers.

One last place to look that many people forget about are warehouse and membership stores.  Places like Costco and Sam’s Club usually will offer discounted glasses to their members.  Even some Walmart supercenters have vision centers in the building and can offer a better price on glasses because of their size and purchasing power.

Eyeglasses are an important, and often necessary, thing that many people will use over their lifetime.  As your prescriptions and tastes change, you’ll want or need to pick up new pairs of glasses.  Shopping around, both locally at other optometrists and at warehouse stores, and online has the potential to save you hundreds of dollars on your next pair of glasses, and thousands over your lifetime.

Use the money you saved to help pay off a credit card or some other debt!

What other tricks, tips, and hints to you have for saving on eyeglasses?

img credit: NCBrian, on Flickr