The Next Rich Girl

Looking for the Silver Lining... Dow Hits New High, But What About the Jobs?

2009-11-09T18:33:26-05:00

The new high in the Dow Jones Industrial Average has me wondering... "How do you get a job working for the Dow?" After all, the stock market seems to be the only thing actually "recovering."

Those of us who aren't day traders (do they even exist anymore? I imagine most day traders - at least those who day traded at home for survival - were destroyed in the financial crisis... but who knows?), aren't exactly feeling buoyed by the rising stock market. Sure, it's nice to see our tiny little 401Ks rising again, but it doesn't exactly affect our day-to-day earnings in the way a paycheck does.

But, I refuse to be bummed out by the parts of the economy I can't control (namely the jobless situation and the dire state of consumer confidence). Instead, let's look for that silver lining that must be around here somewhere...

1. The stock market is a leading indicator.

You may have heard this before, but it bears repeating (and explaining). A leading indicator is an indicator that changes before the rest of the economy changes. Think of it as a harbinger of things to come.

The stock market is the most famous of leading indicators - it tends to decline before the rest of the economy declines and rise before the rest of the economy rises. This is most likely because the stock market itself is forward looking. People buy stocks because they think that the particular company they're investing in is about to increase in profitability. If people don't think many companies will profit in the future, the overall stock market will go down. In that sense, the stock market is really a way to look at the way investors feel about the overall economy.

So, if the stock market is really a leading indicator, things are looking like they're about to get better soon!

2. Correlations between stock market bottoms and unemployment

But, if you want to really blow your mind (and impress your friends at your next cocktail party), look at this chart.

In short, this chart shows that stock prices tend to bottom out about a year before the stock market bottoms. If this bears out, the employment market will start to look better around March of next year. Sure, it's not exactly tomorrow, but at least it means the end is in sight. We'll see if this bears out again, but, if it does, we can expect the economy to really start improving in just a few months.

I think, if we've made it this far, we can make it a few months more. How about you?

Rich Girl Lingo: What is a Money Market Account?

2009-11-05T20:25:00-05:00

A money market account is sort of like a savings account on crack.

It usually earns higher interest, but may have more restrictions. For example, you may need to keep a higher minimum balance than a regular savings account. Money market accounts are regulated like savings accounts, so you can only make six withdrawals a month. But, your money is also insured by the FDIC, a good thing in these volatile markets.

The money you put in money market accounts is typically invested in relatively "safe" investments like government bonds or certificates of deposit.

In general, money market accounts are a great place to hold your money for a rainy day. You don't have the same earnings potential as investments in the stock or commodities (gold, oil,etc.) markets, but you don't have the volatility either.

To invest in money market accounts, check out online banks like ING Direct. Online banks often give better rates, because they don't have to offset the costs of ATMs and bank branches.

House Fever!

2009-11-03T18:20:23-05:00

Ever since that fateful conversation with our landlord put the home ownership bug into the ears of myself and my husband, we've become a family obsessed.

We're obsessed with monitoring the first time homeowner tax credit extension process (it's looking likely). We're obsessed with looking for distressed properties in nearby neighborhoods that might need our love. We're obsessed with researching the plethora of programs offered in our city and state that could help us buy our first home.

Let's just say, I can see how people got carried away during the housing bubble.

There are so many opportunities out there right now, it feels like the universe (or at least the local government) is holding the American Dream out to us on a silver platter... just begging us to grab it while we have the chance.

So, I'm trying to tell myself to chill out. To research everything. To crunch every number a dozen times. To talk to as many people who've been through this as possible. Basically, I know how easily I can get carried away (that's how I got myself into debt a few years back. Of course, that same singular obsession is how I got myself out of it too.), so I want to make sure that I'm looking at this logically. I don't want to fall in love with the idea of a house and send myself (and my husband!) careening down a path that doesn't work for us.

But, I'll admit... the idea of a little house with a mortgage payment lower than our rent (which is what we're looking at), is incredibly appealing.

So, we're taking it slow... sort of in the "wine-and-dine" phase of house hunting, not the "commitment" phase.

Have any of you out in the blogosphere looked into buying a house in the aftermath of the bubble? What have you experienced?

Will Women Save the Economy?

2009-10-29T13:27:15-04:00

Maybe. According to the World Bank, the earning power of women around the world is expected to reach $18 trillion by 2014 - a $5 trillion rise from current levels.

Seems like great news right? Unfortunately, companies seem unable to actually tap into this market. According to a study from Boston Consulting Group, women feel under served at best by companies. And many just feel ignored.

"The current way companies appeal to women is to take a male product and paint it pink," said Michael Silverstein, a partner at BCG.

No kidding. Which of us isn't sick of this idea that women want their products to look like Barbie vomited on it?

Where did this idea of "shrink it and pink it" (via Jezebel) even come from?

If "girl" stuff is pink, why isn't "boy" stuff blue? It's one thing to paint a nursery blue for a little boy or pink for a little girl, but don't we all grow out of that after we're, I dunno... two years old?

This makes me think back to an interview I read with Alyssa Milano about her clothing line for female sports fans.

"I have had Dodgers season tickets for four years. Every game I attended, I would rush into the team shop and look to see if there was anything new and cute to buy. I would look for something that would fit my body and that wasn't pink!"

How ridiculous is it that there was this entire market out there that no one was even bothering to tap, just because sports marketers arbitrarily decided that the only sports fans out there were guys and the girlfriends they dragged along with them who would only wear a hat supporting the team if it was pink? Did they even bother to look in the stands?

As a huge sports fan, I always absolutely hated the idea that wearing something in pink was supporting my team... Unless one of the team colors is pink, you aren't supporting the team.

The deeper issue here is the fact that this whole concept that women will buy something because it's pink is just lazy. It's clear that there wasn't any market research being done. There has been very few attempts to understand what sort of products that women want to buy, what sort of needs women have that aren't being filled.

Instead, everything is based on a few asinine assumptions:
1. Women like things to be dainty (the small and pink theme...see pink blackberrys, pink sports apparel, pink netbooks, etc.)
2. Women are always on a diet (see the delightfully degrading Only in a Women's World campaign for Baked Lays)
3. Women are afraid of technology and math (see infamous "math is hard" talking Barbie, insulting Della website from Dell ("Once you get beyond how cute they are, you'll find that netbooks can do a lot more than check your e-mail." oh golly gee... really?))

That means women's products are routinely: small, pink, and low fat.

Part of this comes from the odd idea that things like potato chips, cell phones and laptops have to have a "regular" (read: for males) version and another version for females.

Does there really need to be a separate website for women who want laptops? Do they really want such different things from their laptops than the average male does? To me, it seems like there is more likely to be a division based on how one wants to use their laptop or how technically savvy one is (male or female). Perhaps a company like dell would be better served with a general site for consumers who mainly use their computer for word processing, email and surfing the web and another site for higher powered computers or something like that... rather that wasting time and resources telling women that a computer can be used to check email. Frankly, any women who doesn't know that probably isn't going to find her way to the Dell website anyway.

The irony here is that there are plenty of products that can benefit from having a "female version" either a female-centric product or female-centric advertising. The problem is that most of them aren't being created or the market isn't being tapped as well as it could.

The best example here goes back to the Alyssa Milano clothing line.

From her MLB interview: "The silhouettes were equally as important because I wanted women to feel good in the pieces. As a woman, I find it's more important that I feel good in what I wear than the actual styles. So I went through great lengths to make sure all the styles were flattering and catered to a woman's body shape. For instance, my tank tops all have shelf bras attached because I always had a hard time figuring out what to wear under the fan apparel tanks that were available to us. My hoodies have double zippers so we won't have any bulges while sitting in the stands rooting for our teams."

For those who missed it, the reason women need different clothes than men is not because we like pink more than men... it's because we're shaped differently. You know, the boobs and hips and all.

It also behooves companies to market to women to try to counteract the hundreds of years of stereotypes that taint a lot of products and services. "The BCG survey of 12,000 women in 40 regions around the world found that financial services -- such as providing ibanking, investment and insurance products and advice -- are worst at connecting with female consumers." This can be as easy as putting more women in commercials for banking (without talking down to them) or advertising in women's magazines.

Why not take the effort to find out what women want and cater to their actual needs... rather than the ones you've decided that they have? Especially considering that women worldwide control $20 trillion in annual consumer spending... a number that is projected to grow to $28 trillion in 2014.

Seems like a good idea to tap this market before someone else does. Just a thought.

Soaring College Costs: How Much is College Really Worth?

2009-10-23T10:23:00-04:00

Despite tame inflation, college costs are rising again. In fact, the annual cost to go to a four year institution is now $35,636.

That's crazy.

That's way more than I earned in the first year after I graduated from college.

I look at my own outstanding college loans (I still owe over $20K, even though I graduated in 2002) and have to wonder what the kids who will graduate in four years will owe. $50K? $80K? $100K?

How on earth can it be beneficial to strap all the bright, young 22 year-olds in this country with tens of thousands of dollars in debt? Is college worth it?

It's frustrating to me because I'm a big supporter of our nation's youth going to a four-year university... preferably more than a town away from Mommy and Daddy.

Why? Because I think of the four year learning experience as a nice ramp from childhood to adult independence. College is the time for kids to first experience living away from home. To drink for the first time. To do their own laundry. To think for themselves, make their own decisions, to learn to live with the consequences. To figure out what they're interested in, what they're passionate about and what they want to do with their lives.

For a lot of kids, college is the first time that they set their own schedules and take care of themselves. It's when you learn that staying up all night is awesomely fun, but that hangover is a bitch. It's when you learn that your actions have consequences. Want to forgo studying for a month? Go ahead. But have fun explaining those F's to your parents. Want to skip class? Go nuts. But don't be surprised when your professor won't let you reschedule that exam.

It's a time for kids to royally screw up.... but in a safer environment than the real world. Sure, you might fail a class or pass out from drinking too much. But, it's better to do that stuff in college, where you can retake classes and where there are (real) adults around to help you get out of trouble. It's the real world lite. And I think we underestimate how important that is.

But, is this sheltered gateway to the real world worth $35,000 a year? I'm not so sure.

Of course, at the same time, a lot of today's high schoolers are being told that if they don't go to college, they won't get a job (and, that might be true... it's certainly harder to get a job without a degree) and the better school they go to... the better job they'll get.

Four years later, those kids are armed with fancy degrees, but also a huge pile of debt... a pile of debt that severely limits their freedom in a time of their life when they should be able to most enjoy their dependence. It's no wonder that those of us who graduated 10-ish years ago are now finding it hard to buy a house or travel or have a kid.. because we're all already saddled with huge debt and we can't take on any more.

This problem is only getting worse. And I think it's hurting the whole country. How can we be competitive if our best and brightest are forced into jobs they hate just so they can pay off their loans?

Rich Girl Lingo: What Are These ETFs I Keep Hearing About?

2009-10-21T20:39:00-04:00

Taking mutual funds to the next level are exchange-traded funds, or ETFs. Much like mutual funds, ETFs are single investments that have a large number of underlying stocks. So, you make one purchase to basically own hundreds of different stocks.

But, unlike a mutual fund, you don't have to go through a mutual fund company (like Fidelity or T. Rowe Price) to buy them, you can buy and sell ETFs on the stock exchange (or through eTrade or whatever), just like any other stock.

How convenient!

Most ETFs track a index, like the Dow or the S&P 500. So buying a share of the iShares S&P 500 (NYSE: IVV), for example, is like buying a little share of each of the companies in the S&P 500. It's 500 stocks for the price of one!

I like ETFs a lot because they make diversifying your portfolio easier and they're really easy to keep track of - great for less sophisticated investors.

**Rich Girl Lingo is a periodic feature of The Next Rich Girl, where I try to break down the financial terms that we all need to know if we're going to get rich. Check out a few other entries: Stocks, Bonds, Bears and Bulls

Rise of the Female Breadwinners

2009-10-20T19:22:47-04:00

We all knew this days was coming... nowadays (especially in the aftermath of the great recession) there are more an more women acting as breadwinners of their families - even if the husbands work.

That's right. The stereotype of man as breadwinner is becoming less and less of the norm as women have started to earn more (or, in my opinion, earn what they should have been earning all along).

In 2007, 25.9 percent of wives were earning more than their husbands in households where both spouses work, according to the most recent data available from the Bureau of Labor Statistics, reported MSNBC.

I predict that one day soon stories like this will be pretty run of the mill as more and more families realize that typical gender roles don't always apply.

The American family structure is changing. In fact, I think that families are becoming less like the nuclear families of the 1950s (working dad, housewife mom, two kids and a dog) and more like a puzzle with different shaped and sized pieces for each family.

Some families will have stay at home dads. Some families will have both parents working and earning similar amounts. Some families have only one parent to support the kids. Some families have no kids to support at all. The traditional idea fo a family is changing - and it's about damn time.

I also think that rather than every family member staying permanently in one role (the high earner, the supplemental income generator, the stay-at-home parent, whatever), the whole family earning dynamic is becoming more fluid and dynamic. This is especially true as more and more people work for themselves. It might be the case that for a few years the "mom" will be the breadwinner and then - through changing jobs or whatever - the "dad" becomes more of the breadwinner.

Rather than worry about who the "breadwinner" is, we should embrace the idea that there is more than one way to provide for the family. It should give us all a sense of security. When times and situations change, today's more flexible families can adapt more easily. Back in the 1950s stereotype, if the male breadwinner lost his job, it was pretty unlikely that his wife would be able to get a job to help the family survive.

As the woman interviewed in this article says, “I’m very glad I didn’t listen to all those teachers in the '70s (who said), ‘Oh, don’t worry, your husband will take care of you. Oh, don’t worry about getting an education.’”

The Recession is Over!... So, Why Don't Things Feel Better?

2009-10-16T10:54:42-04:00

Good news! The recession is over! A hearty "Huzzah!" all around!

Wait, aren't we all supposed to be magically better now? Shouldn't everyone who's looking for work be employed by now? Shouldn't those of us who were forced into furlough days and pay cuts be getting our money back? Hell, shouldn't we all be at the mall spending our new money and reveling in a burst of consumer confidence?

Not quite. Much like the recession wasn't officially declared until we had all felt it for over six months (a recession is loosely defined as two consecutive quarters of declining GDP), the recession is being declared over by economists who see signs of growth... even if that growth hasn't made it to everyone yet.

And, we might not feel better for a while. Often, businesses over-react in hard times and cut more personnel than they really need to. Then, they enjoy the lower costs for a while until their tiny staffs can absolutely no longer meet productivity goals. Then, when the business is expanding, they tend to hire more personnel than they need... setting up the whole vicious cycle all over again.

So, where are we now in that process? Probably nearing the end of the first phase... dramatically cutting staff. As a result, many economists think that unemployment will trump 10% and that hiring won't really begin until next year, at the earliest.

A little depressing.

On the bright side, the Dow just topped 10,000 for the first time in over a year. Too bad no one has any money to invest in the stock market. But, don't you feel better knowing those high-rollers out there are making their money back? =)

Rich Girl Lingo: What the Heck is a Mutual Fund?

2009-10-14T20:23:00-04:00

A mutual fund is a managed investment where investors' money is pooled together and the fund's manager invests it all in a variety of financial instruments - presumably making much more money than if the individuals invested on their own (although, sadly, that's not always the case).

Why would you do that?

Well, let's embark on a thought experiment, shall we?

Well, let's say you had $100 to invest and you bought $100 worth of stock in company A.

If that stock goes up, you make money. If that stock goes down, you lose money.

So, by investing in that one company, you are basically putting all your investment eggs in one basket, so to speak.

Now, let's say you took that $100 and bought $50 of stock in company A and $50 of stock in company B.

If stock A goes down 5% and stock B goes up 10%, your overall portfolio will be up 2.5% (Investment in A will be worth $47.5 and investment B will be worth $55 = a total of $102.50 - an overall a gain of 2.5%).

Sure, you'd have been better off investing everything in B, but that's hindsight. How confident are you that every stock pick you make will be a winner (if you're that confident, do you mind sharing your wisdom with the rest of us?).

By investing in 2 different companies, you're hedging your bets a bit, making the whole investment a little less risky.

But, what if you could instead invest in 100 companies? Wouldn't that be even less risky?

That's where mutual funds come in. After all, it would be pretty hard to buy $1 of stock in 100 different companies. So mutual funds do the work for you, pooling your money with other investors and investing the money according to whatever philosophy the fund is designed to follow - growth, retirement by a certain date, international stocks, whatever.

No muss, no fuss and all the work is done for you and your money is managed by a professional. Not a bad deal.

Wow, Could It Be Time To Buy a House?

2009-10-12T20:05:05-04:00

I never thought I'd type those words so soon. After all, haven't we all watched anxiously as former homeowners have been foreclosed on, banks have failed, credit has tightened? In the last year, owning a home quickly turned from the American Dream into the American Nightmare.

But, here I am, wondering if it's time to get in.

On paper, it sounds stupid. I have only enough for a small down payment. My credit, while steadily improving, is less than stellar. My income is stable, but not the income of my husband who owns his own business.

But after a random conversation with our landlord (a real estate investor in our area - not exactly what we want to do), my husband and I started thinking about it.

Were we so convinced that we shouldn't buy a house that we'd blinded ourselves from actually making an informed decision?

With the soon-to-expire $8,000 first-time homeowner tax credit and a host of other incentives available in my area, I started to think that I was about to miss the boat.

Panic set in.

I called my husband, "Quick, send me a copy of our tax return - we're going to miss the credit!"

I started looking at listings online and calculating our estimated monthly payment. For a lot of the homes, all the credits would give us a mortgage payment that was lower than our rent.

We're we completely stupid?

Maybe. But, I was also wary of jumping into a huge financial comittment like buying a home just because a tax credit was about to expire.

I took a deep breath and started to really think about it. If I wanted to get that credit, I would have to have a bid on a house accepted in the next day or so... and then, only maybe would I close in time.

It wasn't realistic. Especially because a decision like this shouldn't be made based purely on the calculations on the back of an envelope. The calculations should be what make you start looking. Because you're not buying an investment (sure, it could go up in value - but we've all learned that it can also go down), you're buying a home. I didn't want to just buy a house that I could settle into for a few years, I wanted one I would be happy in. One I could call home. One I could start a family in.

So, I probably won't be dropping a down payment on a home anytime soon.

But, I think I will start looking. If anything, this little episode has taught me that you should always be aware of what's available for you. If I'd looked into this credit earlier, maybe I'd be in a house right now. Or, maybe I wouldn't. But, at least I'd have had all the information I needed to make the right decision.

And, you can bet, if that credit gets extended, I'll be crunching some numbers right away... and then, I'll crunch some more... and then, I might make my move. But, no faster than that. This isn't a decision to be made lightly.

** I'm proud to announce that this post has been selected for the Carnival of Money Stories. Be sure to check out the other great blog posts that are part of this carnival!