This is where your finance takes place

At first blush, the idea of using a credit card to save money sounds like a contradiction in terms. After all, mismanagement and overuse of plastic can lead to financial trouble, which does not sound like a typical recipe for financial security. However, if a person knows what to look for in a credit card and then uses the credit properly, there are many benefits—including saving money—to be gained.

The primary criteria to use when looking for the right credit card is understanding your reason for owning the card. If you are trying to establish or repair credit, you may want to find an introductory or secured card. These cards are designed specifically for your circumstances. An introductory card helps you build a credit history and work towards a credit rating that will save you money on larger purchases like a vehicle or home. A secured card—a card backed by a cash deposit—allows you to work on repairing bad credit since you may not be able to get a card otherwise. These two card types traditionally charge higher interest rates so you can save money with these cards by paying balances monthly within each card’s grace period. Purchases paid for within the grace period do not accrue interest so money is essentially borrowed interest free in these cases.

If you have existing credit card debt and are looking for cheaper rates of interest, finding a balance transfer card with low interest rates on transfers should be your priority. Many cards have low interest rates on purchases but charge higher rates on balance transfers. A little shopping will help you filter out the cards that are not good deals and identify the best options. Balance transfers usually include a transfer fee so do a little more shopping to find a balance transfer card that also assesses the smallest fees.

Finally, you may simply be looking for a card with the best interest rate on purchases. These low interest rate cards may not have many bells and whistles but you can count on paying the best interest rates in the event you carry a monthly balance. Keep in mind the best way to use credit is to pay balances monthly so interest doesn’t get a chance to accrue. In any case, with good credit, you should be able to find a card with a low interest rate, no annual fee, and maybe some opportunities to earn rewards when you make purchases. These rewards and promotions will ultimately save you money because you are taking money you’ve spent already and using it again in the form of reward points that can be redeemed for a variety of products and services. These rewards are many and varied and can include airline tickets, free gas, gift cards, and cash back.

In addition to shopping for credit cards at the usual venues, researching the best products at sites like thefinancialblogger.com can be a good way to prioritize your credit needs. Regardless of the reason, credit cards can be helpful and beneficial if used correctly. As long as they are used as tools and not just conduits to free money, credit cards actually CAN save you money.

We decided to buy beer…. I mean chips before the game starts. So my wife ask William how is going to do to pay for those chips. William first answered:

- I’m going to trade chips for Amy’s necklace.

We told him that the guy won’t accept.

- I’m going to give him a piece of paper then.

I guess he was referring to money but since he doesn’t have any, a piece of paper would do just fine for him. 3^rd try:

- I’m going to give him a card.

- Which card I replied?

- Daddy’s card!

We all started laughing. My son already learned about 3 fundamental rules about economics and personal finance:

#1 On the market, you can trade what is not yours (short sell, options) but you better make sure that someone will want your asset anyway.

#2 Money will worth something only if people believe in it. A piece of paper is a piece of paper; however, there are some pieces worth more than others

#3 If you can’t afford something, you have to concentrate on finding a sponsor who will pay for it. Parents are pretty good sponsors in general

Happy Halloween!!!!

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They played a game with high risk, temporary reward and an absolute loss at the end of the night.

Other people will blame commercial banks of lending to people who can’t afford mortgages or credit card companies of advertising everywhere until they get you in their claws. However, I think the problem has a deeper root; financial education.

I was re-reading an old post I wrote about the lack of financial education in our school. I don’t know how it goes in your country, but in Canada, there is no such thing as credit 101 or basics of financial planning for teenager. However, we have Much Music offering a pre-paid Master Card for people of 16 years old!

I truly believe that we should teach the basic of personal finance to our teenager. At the age of 14, 15, they start working and paying for themselves for specific goods. They have been bombarded by advertisement since they were born and they now have the chance to buy all those goods without asking anybody. In a few years, they will have the right to have a $500 student credit card and max it out to buy new clothe, the latest IPod or a Playstation 3 (hum… I wish I was 18 again!).

I can imagine a class separated in 4 parts:

- Credit 101: we would learn the basic of credit, the impact of interest charges when minimum payment is made on a credit card, how to manage credit cards properly and the result of bad credit over time.

- Saving 101: we would learn how to save money efficiently. How to resist ads’ temptation and how to find good deals (who would not listen if you tell them how to save $25 on their $200 Diesel jeans?).

- Investment 101: we would learn the power of compounding interest, basics of diversification and the advantage of periodic investment.

- Retirement planning 101: This would be joint with Investment 101 in order to show them how saving at the age of 15 for their retirement would make them millionaires. They have to know the basics of retirement plans (such as RRSP’s or 401k) and the impact of inflation over time.

A stronger education builds a stronger society. Since economic is the base of our North American system, it seems normal to me that we teach it to our kids!

Now I just wish one day some politicians will get to this blog and steal my idea

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Did you see what happened to the market yesterday? Many factors weighed in but the outstanding rise of the Dow Jones, especially in the final two hours, gave hope to investors that maybe the worst is now past us. An important part of it is because of 2 factors:

-Once more, the G7 countries put out a statement explaining how committed they are to resolving this issue. This time, a lot of it was related to the Japanese Yen, the currency that is often used as the barometer of risk. It has been extremely volatile in the past few months and many think that this has had important effects on the world stock markets.

-The G7 countries, through organizations such as the IMF, have also started to help emerging economies that are currently having severe liquidity issues. One such example is the 16,5B$ load to Ukraine.

-And also, the governments are pondering more rates cuts. Speculation is that the Japanese government will take down rates to 0% (yes you read that correctly) while the Fed is reportedly considering a 50 points decrease, which would help as well.

However, if you look at this second graph, you will see that this is still very much a downward trend. And many traders considered today’s volume to be weak considering the move. It will be interesting to see if the market can hold these gains tomorrow. It’s probably that a lot of the investors and funds that have been trying to unload their stocks might now want to do it and take the important gains that they had today!

TFB believes that while there will be many more ups and downs, the worst is over and that we will not go under 8000 on the Dow Jones. However, there are still many remaining fundamental issues with the economy and the ride will not be easy. We are certainly not predicting anything easy.

One of the interesting topics to be discussed in coming months is the involvement of the US government in the economy. Many have been talking about a socialist state, but even the Republican nominee John McCain who has been talking against the notion is in favour of the 700$B plan that includes a partial nationalization of the US banks and has even suggested the government partially buy an important portion of the defaulting mortgages of the US consumers… should be very interesting times…

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For example, we just went thought government’s election and we didn’t get much coverage on it since media were too busy talking about the Apocalypse on the market. Some people may say that sex sells, well catastrophe sells even better!

There is nothing to help people getting reassured by the market. We can now follow the VIX – aka The Fear Index. When I first read about it, I was quite curious to know how it works. In fact, it is quite simple; it measures the daily fluctuation and assesses the global volatility on the market.

The Fear index was created by Robert E. Whaley a renowned expert in the field of derivative securities. The VIX exists since 1993 (in September 22,2003 CBOE upgraded to the “new” VIX which is now based on the more popular S&P 500 index (SPX)). but it increased in popularity recently because of the market turmoil.

By following this graph:

You can see if people panic or not. As you can see, it reached unknown peaks during September and October. At the beginning of October, somebody told me that he had good news about the market: “the month of September is over”. I asked him yesterday what he thought about October so far with a smile

How do we handle fear on the market?

This is actually quite easy; don’t listen to people Ask yourself why you bought stocks or mutual funds back in 2005,2006,2007. The reasons why you went into the market back then should be as good today.

In order to understand better the fear factor; here is another definition over at wikipedia.

You can also watch this video about fear and the price of oil, gold and US dollar value : FEAR VIDEO

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