What Are the Golden Rules for Investing in Gold?

The following is a guest post. Enjoy!

To many people, gold is the ultimate safe-haven financial instrument. This is only true if you understand the nature of the financial markets, and how the interactions between elements will impact the gold price. For example, the recent case of the Fed rate hike on March 15, 2017 serves to remind us that traditional theory does not always apply in practice. Typically, a Fed rate hike would increase the interest-rate and drive up demand for the USD. Since gold is a dollar-denominated asset, the demand for gold and the price of gold should decrease accordingly.

We saw a complete reversal taking place. The USD weakened dramatically, hitting 5-month lows against major currency pairs, and the demand for gold skyrocketed. Of course the Fed interest-rate decision does not disprove the correlation between the gold price and the strength of the USD. It is simply the lack of coherence between the Fed rate hike and the USD that let us down in this case. Many people today purchase gold in one form or another to hold as an investment. Some folks purchase gold ETFs such as SPDR (GLD) on the New York Stock Exchange, while others purchase physical gold coins, gold stocks and/or gold jewelry.

Is Gold an Appreciating Asset Over the Long-Term?

One of the things about gold that is almost universally accepted is its safe-haven status. But what exactly does this mean? As we have seen, strong financial markets can also lead to a strengthening of the gold price, despite protestations to the contrary. Many gold ETFs (exchange traded funds) are comprised of multiple businesses such as gold mining companies, physical gold bullion, gold ETFs etcetera. If other investments are falling in value, will the gold price rise in value? Not necessarily. At the height of the financial crisis in 2008, the gold price spiked, and it makes sense because global markets were going into meltdown. But anything other than a financial meltdown should be able to provide direction to gold traders.

Rather than worrying about whether gold is the perfect safe-haven investment when equities markets sour, it’s important to have gold as part and parcel of a balanced financial portfolio. It can be thought of as a hedge against uncertainty and equities weakness. The gold price is extremely volatile, even at the best of times. 10 years ago, the price of gold was approximately $650 per ounce, and it has doubled in price since then. Overall though, the gold price is subject to massive fluctuations.

Back in 2011, gold peaked at $1,900 per ounce, but now it’s trading around $1,250 per ounce. One of the ways to capitalize on gold price movements is with CFD Trading. If you’re not adept at trading the financial markets with institutional brokerages, it behooves you to consider contracts for difference as a better way to dabble in gold trading. CFDs are fully regulated by the FCA (Financial Conduct Authority) in the United Kingdom, and elsewhere across Europe. Rather than actually owning stocks of gold, traders are speculating on future price movements and generating profit accordingly.

A Fascinating Look at the Performance of Gold in 2016

Gold is one of the most interesting financial instruments to trade. It is revered for its safe-haven status, and it is the go-to investment option when equities markets sour. In 2016, some interesting trends were evident in gold demand. For starters, gold demand increased by 2% (year-on-year) in 2016 and reached a 3-year high figure of 4,308.7 metric tonnes. One of the biggest drivers of gold – exchange traded funds – saw annual inflows of 531.9 metric tonnes, the second best reading ever. However, there were some negatives in gold demand in 2016.

For example, central bank purchases of gold bullion dropped markedly and demand for gold jewelry also plummeted. As far as ETFs are concerned, the recent performance (2016) showed an uptick of 532 metric tonnes of gold, marking the second highest figure ever. For the year ending December 31, 2016, the gold price inched up 8%, largely due to capital inflows. On the flip side, gold jewelry demand plunged to a 7-year low and this offset many of the gains enjoyed by gold.

The Bottom Line – Making Gold Trades Count

CFD trading, ETFs, mutual funds, physical gold bullion, gold shares and other investment options are available to traders looking to capitalize off this precious metal. Gold should certainly be considered as part of a balanced financial portfolio, as it has tremendous resilience over the long-term. However, traders should be cautious not to go all-in with gold as it has proven itself highly volatile over time. Be advised that the performance of gold ETFs does not always mirror the performance of gold itself. Once you’re ready to invest in gold, consider your options accordingly.

Would You Spend $28,000 for a One Week Vacation?

The following post is by MPFJ staff writer, Marie. You can read more of Marie’s articles over at her own blog, Family Money Values. Enjoy! 

Home and Garden TV has a show called Island Hunters. This past week, they featured a couple (business owners and spouses celebrating a 15 year wedding anniversary) with a budget of $28,000 for a one week vacation. I watched in absolute disbelief as they surveyed 3 ultra luxurious private island retreats and chose the one that $6000 over their budget.

Could you (would you) spend as much for your one week vacation?

How do the ultra rich spend their vacation time and money?

While we are not part of the billionaire club, we have spent thousands of dollars on vacations. Our most expensive one was to Hawaii. We took (and paid all expenses for) one of our adult sons. But even staying in ocean side vacation homes and indulging every activity whim, we parted with $5000 a week for our 2 week trip. That amount put me in shock for quite awhile prior to committing to my years long dream of visiting the island states.

Billionaires sometimes build their own vacation dreams.

According to How to Vacation Like An Eccentric Billionaire some of the wealthiest folks build themselves a dream vacation home and then decide to make it available to others – for a hefty fee of course.

One of the most mentioned is Sir Richard Branson (Virgin Group). He built his private getaway on an entire island – Neckar Island and later opened it up to anyone who wants to spend From $80,000 per night for up to 34 guests ($2,353 per person per night) to book the entire island. At certain times of the year, you can get just a room instead of the entire island for around a mere $4000 a night.

A couple of other billionaires with similar retreats for rent include:
• Nick Troubetzkoy – Jade Mountain – which can be rented for the night for around $2200 to around $3000 but this might not be all inclusive.
• Thurston Twigg-Smith – Twin Farms – an all inclusive in Vermont – starting at $1500 a night for 2.

The ultra rich don’t want mundane luxury travel.

While I was thrilled to sleep to the roar of the ocean waves and breakfast on the deck watching the sun rise over the sea, some aren’t quite so satisfied with typical vacation experiences

According to Adventures in Affluence: How the Billionaire Vacations they seek out extraordinary adventures like diving with the sharks or having a world famous chef cook them dinner in the chef’s home or being safely escorted to or through digs they would never consider visiting while at home. They might want to visit a dive bar or walk through a funky neighborhood with their guide.

Still other vacation pursuits of the affluent might include a hunt your own dinner, where they stay at a luxury cabin, get shooting lessons, go on a hunt and (assuming they actually catch something) have the chef prep it for dinner – hairy deer pelt to yummy venison steak.

Of course, there are still folks who enjoy activities at luxury all inclusive resorts – such as taking a snow sleigh ride or helicopter ride over beautiful scenery.

Who spends like this?

I believe there are three categories of travelers that might consider spending huge amounts on vacations.

People so rich that money is no object.

These folks are already used to a luxury lifestyle and don’t usually want to down grade it for a vacation experience. Similar to what Donald Trump had to do to become the US President and downgrade his living style to camp out in the White House. He has already designated Mara-a-Lago in Florida as his winter white house.

People who can write off the cost as a business expense.

Our HGTV couple wanting to spend a week on a private island probably fits this profile. They own a pool design company together and were checking out the way the different resort pools were designed and executed, even while touring them.

On our Hawaii trip, my spouse met someone who fessed up to traveling on the company expense account quite a lot. Heck, I even expense out my trips to our lake condo when ever I can. If you pay US taxes, expensing trips to a business reduces your bottom line profit and hence the taxes you own on income for that business.

People who have saved up for a special occasion.

Our HGTVcouple may also fit this category, as they were celebrating their 15th wedding anniversary.

This category fits me best. My spouse and I worked hard for years to achieve our degree of financial freedom. A Hawaii trip has been one of my suppressed desires since the 1970’s when my brother was stationed there in the Army and the rest of my family got to visit him there.

This category also may fit engaged couples seeking an alternative to an expensive church wedding and reception. Spending $5000 or $10,000 on a destination wedding/honey moon could end up being a whole lot cheaper than a traditional ceremony/reception.

Most of us, even the high net worth folks, don’t spend nearly this much.

What do the high net worth folks spend?

In 2015, Business Insider reported on a BMO Private Bank study that claimed affluent Americans (these folks have over a million in investable assets) spend around $13,000 a year on leisure travel.

What do average North Americans spend?

Until recently, we vacationed only every 2nd or 3rd year. Each year we would take just one trip. On that trip we typically spent around $3000 total for the two of us – including all travel, meal, lodging, activity and souvenir expenses.

Value Penguin Value Penguin reports that the average cost of mainland trips is $144 a day. So for our typical 10 day trip that would total up to $1440.

That seems low to me, how about you?

How about you all? Do you vacation? How much do you usually spend?

Share your experiences by commenting below!

****Photo courtesy https://www.flickr.com/photos/hotelinternazionaleischia/33066776756/

How Our Spending Patterns Have Changed Over the Last 100 Years

The following post is by MPFJ staff writer, Melissa Batai.  Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food.  She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.

Do you go out to eat several nights a week?  Do you feel like you’re just getting by financially even though you have a decent income?  Do your kids have so many clothes that they can’t close their closet doors?  Do you have three cars in your driveway?

Think back in time 100 years ago to 1917.  Our finances and conveniences have changed drastically since then, yet many of us still feel dissatisfied and that we don’t have “enough.”  Why is this?  Why are we unfulfilled when we have so much more than our ancestors who lived 100 years ago?

Our spending habits have changed dramatically since then, but we’re still not satisfied.

 

Spending Habits in the Year 1900

The Atlantic put together an eye opening article about how drastically our lives have changed since the year 1900.  Back in 1900, “A quarter of households have running water.  Even fewer own the home they lived in.  Fewer still have flush toilets.  One-twelfth of households have gas or electric lights, one-twentieth have telephones, one-in-ninety own a car, and nobody owns a television.”

Just stop for a minute and imagine being without these things.  If a 1900 household didn’t have to pay utilities, make care payments, or purchase a television, cable, Netflix, etc., how did they spend their money?

According to The Atlantic, “Families [in 1900] spend a whopping 80% of [their money] on food, clothes, and homes.”  Eighty percent!   More precisely, this breaks down to approximately 43% for food, 14% for clothing, and 23% for housing.

Undoubtedly, life in 1900 was simpler in some ways, but a family needed to be diligent with their money just to take care of the necessities of life.  There was very little leftover for extras and “fun money.”

 

Spending Habits Now

Thanks to outsourcing our textile industries to foreign countries, our annual apparel cost is only 4% per year, and yes, that includes those big spenders who have many, many more clothes in their closet than they will ever be able to wear.  Thanks to big company farms, our food costs are now only 13% of our annual income (The Atlantic).

While it cost 57% of an annual income to pay for food and clothing in 1900, now those same categories only require 17% of our annual income.  That’s a lot of extra money left over.

In 1900, housing costs were 23% annually, while they are now 33%.  That accounts for some of the difference.  Health care is now 6% of our annual spending; it was 5% in 1900.  Another category that is now costing us more is transportation.

However, there can be no denying that our interpretation of “necessities” has changed.  We now consider many luxuries necessities, and that mindset is squeezing our budgets.

 

How Americans’ Attitudes Toward Spending Have Changed

My husband and I like nice stuff as much as the next person, but for the 16 years of our marriage, money has always been tight.  We’ve always been a one-income family.  First, I worked full-time while my husband attended graduate school full-time.  Then, when he graduated, I stayed home with the kids while he worked full-time.

Thanks to student loan payments and a fairly average income while living in a high cost of living area (Chicago), we’ve always had to live on a fairly tight budget.  That means we were a one car family until this last fall.  For 15 years of marriage, we made do with one car.  That car is now 12 years old and has nearly 180,000 miles on it.

We rented until we finally bought our first house 2.5 years ago.  In many ways we were more like a 1950s family than a family living in the 21st century.

In the book, The Overspent American, Jennifer Lawson, who participated in a focus group on spending said:

“In the fifties, growing up in upstate New York, my parents were considered middle-class pillars of the community. My father was an accountant. It’s a fairly poor rural area, and most people worked in a factory or waitressed or something. My dad was actually a professional person with a sign out in front. [My parents] had one car, and they drove it until it fell apart, and then they bought a new one, usually a station wagon. They had a fairly modest house. We took a vacation as a family for two weeks and rented a little cabin in Maine. And drove–nobody flew anywhere. I can’t remember anyone who had a second car. Everyone walked everywhere; children certainly didn’t have $100 sneakers. It amazes me now that my younger brother, who still lives there and who has a job that’s roughly equal to the job my dad had when I was growing up … he has three teenage daughters. And since they were about nine, they’ve each had their own color TV, and they have their own CD players, they all have their own telephone lines, because they complain about calls not being able to get through” (The New York Times).

Our lifestyles have changed dramatically since the 1950s, even more so since the 1900s.  What we now consider necessities—two cars per family (at least), exotic vacations, designer clothes, Internet access and cable tv, college education, just to name a few—were not priorities, or even available, in earlier times.

 

Another phenomenon of spending is that the U.S consumer is quickly bored by what he has.

We can see this phenomenon whenever new electronic devices are released.  Even though their current smartphones, iPads, etc. are working just fine, people are eager to get the newest release.  Never mind that it may cost hundreds of dollars that they really don’t need to spend.

The same mindset is present when people choose to lease a car rather than buy it so that they can continually have a “new” car to drive every few years.  Never mind that leasing costs them much more than buying a car, especially if they buy a used car.

People also frequently redecorate their homes, even though what they have is working just fine.  When they redecorate, they often buy all new towels, couches, etc., depending on what room that they’re “updating.”  Now, we tend to replace long before an item is worn out.

This is a luxury that people in the 1900s didn’t have.  My grandmother, who lived through the Great Depression, regularly washed out plastic baggies over and over again.  Rather than throwing them away, she would get 5 to 10 uses from each bag.  If something like a kitchen towel got a hole, she didn’t throw it away; she mended it.  We’ve lost that bit of frugality that earlier generations developed out of necessity.

Undoubtedly, many in the middle class are feeling a financial strain.  While some of that is due to modern day high costs (such as earning less money because our employers have to take so much out for taxes and insurance costs), much of it is also due to our increased expectations and standards.

The next time your budget feels unbelievable tight, look around your house and see how much you have compared to what your ancestors had 100 years ago.

How about you all? Is there a “necessity” you can do without to find more room in the budget?  Can you be content without the latest new electronic upgrade?

***Photo courtesy of http://www.idpinthat.com/edit/5340

7 Things Wealthy People Never Do

The following post is by MPFJ staff writer,Laurie Blank.  Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.

If you’ve ever read Tom Corley’s Rich Habits or Thomas Stanley’s The Millionaire Next Door, you probably know that there are things wealthy people never do. The rich have a habit of behaving differently than the non-rich and in learning, studying and working to emulate their habits I’ve learned that the results of living the way the wealthy live affect both life and finances.

Here are seven things the rich never do. If you can learn to follow their lead, I’d be willing to bet your money would grow.

 

Fall for Advertising Gimmicks

If you ever take the time to view commercials and advertisements with a skeptical eye, you’d find that the goal of advertisers is to make you think you cannot live a full life without their product. Product users are always smiling, usually look phenomenal and give off the illusion that they have a perfect-beyond-perfect life.

The wealthy don’t fall for that lie. They have a clear understanding of what truly makes them happy and they know “stuff” isn’t part of the answer.

 

Neglect Their Savings Account

This report shows us that the Average American saves 5.7% of their income. And you know that since that is the average, it means that many people aren’t saving at all. In fact, this report shows that 62% of Americans have less than $1,000 in savings.

Adversely, the wealthy save as much as 51 percent of their income. While you might say “Well, yeah, they can afford to save that much of their income – duh!” there is another factor to their wealth and their plush savings accounts – they started saving early (usually as teenagers) and they formed a habit of putting money in savings every month – no matter what.

The study linked in the last paragraph found that one of the key factors in their willingness to save was that their parents taught them the importance of building a savings habit from an early age. Ironically, many of these young teen savers also starting investing a portion of their savings in the stock market while very young.

 

Stop Learning

Eighty-eight percent of wealthy people read non-fiction books every day for at least thirty minutes. They have a love for learning and then using what they’ve learned to reach goals that they’ve set. They spend very little time in front of the TV, opting instead for bettering their lives and increasing their knowledge via learning.

 

Make Impulse Purchases

The wealthy make it a habit to avoid impulse purchases. They think through any purchases, determining what – if any – value the purchase will truly bring to their lives before they buy.

 

Ignore Their Health

Seventy-six percent of the wealthy get some type of aerobic (cardiovascular) exercise such as running or biking four days a week or more. The thing about good health is that it helps you to think more clearly, and to have more energy to work toward the goals you’ve set.

 

Live Without a Plan

Seventy percent of the wealthy set at least one goal per year – and then make a plan with actionable steps that will help them reach that goal.

 

Act with Mediocrity

Speaking of goals, that’s another thing the rich never do: they never act with mediocrity. In other words, when they choose to do something, they commit to doing it well. Go big or go home is their theory.

Successful people – whether it’s being successful at growing wealth, gaining health or whatever avenue of success they choose – reach their level of success because they do things differently than those who aren’t successful. If you’re looking to bring more success into your life, consider doing what the successful do and dropping the habits like those mentioned above, as those habits will most certainly lead to unrealized dreams.

How about you all? What are things you are currently doing – and not doing – in order to reach your goals?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/togawanderings/5899676716/in/

How Hard it is to Hang Onto Your Money?

The following is a guest post. Enjoy! 

One of the main reasons that we use banks is security. Sure there are other benefits – organization, centralization of different accounts, cards, benefit programs, lending, etc. But central to a bank’s identity is the fact that they keep your money safe. The concept simply doesn’t work without that aspect.

That’s why the ongoing PPI scandal from the past several years has been so alarming. Bank customers, without their knowledge or consent, were issued policies for Payment Protection Insurance (PPI for short). PPI isn’t a bad form of insurance on its own, but when it is sold fraudulently, as it was to thousands of consumers across Europe by banks and insurers, then there is a major problem.

PPI claims have poured forth by the thousand since the scandal emerged several years ago. Multiple class action and individual lawsuits are pending, and many individuals have already received restitution. If you find PPI payments drafting from your account, it’s important that you read a PPI claims guide soon, and get in touch with PPI claims handlers.

PPI as Emblematic of a Deeper Banking Problem

Even if you do not personally have PPI auto-drafting from your bank account, there are a number of other ways that large banks have been recently caught in defrauding their own customers. We only have to look back at Barclays Bank as an example.

The results, in some cases, were harmless. In other cases, the bank mis-sold ppi insurance to many of its customers. Customers were confused when they had no received annual letters in the mail updating them to how much they were spending on protection and their rights to cancel.

Other large banks have had large-scale theft of customer data. These have included the loss of sensitive information, such as account and social security numbers. Wells Fargo is one of the banks that have had such breaches, but in this case, the bank responded well, by issuing free identity theft protection services for the affected customers.

In the end, banks are businesses just like any other. Just because they are large doesn’t mean that fraud and mistakes will not occur. For people with money stored in these institutions, it is important to demand that they do their due diligence in protecting the customer’s wealth and preserving the customer’s interests.

Don’t take it for granted that your money is safe in a major bank. Keep an eye on the balances of your accounts, and take action immediately if something seems amiss. Fast action will allow you to achieve quick resolution of any problem that you encounter. The sooner you bring problems to your bank’s attention, the more likely they will be to make the issue right.