Amanda Stanhaus

Tag: financial literacy

Asset-Backed Security

Banks take loans for things like houses and cars, break them up, and squish them into packages called an asset-backed security. These make money from interest payments on the outstanding loans.

(Originally published on Amanda Stanhaus’s financial literacy vocab blog: XO, Bettie Vocab.)

Why am I buying Twitter?

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Why am I buying Twitter?

To be a shareholder, just like Jack Dorsey. He’s dreamy! Hopefully, our paths will cross at the next shareholder meeting.

Yes, I’m a value investor.

Yes, tech start-ups, such as Twitter, are not traditionally thought of as value investments.

And yes, even Dr. Aswath Damodaran’s evaluation of Twitter leads me to understand the current price is inflated—the exact opposite time to buy according to the value investing definition.

But, as Dr. Aswath Damodaran concedes himself, accounting balance sheets are completely useless for young firms, especially tech firms. Financial services industry, let’s fix this! I want to be able to tell from the start, whether a start-up will become a Google or not.

Shouldn’t it be worth something that hundreds of millions document their every move/thought on Twitter? Not to mention, Twitter facilitated a revolution!

I’m buying one—just one—share of Twitter, so I can attend a shareholder meeting and meet Jack.

His twitter feed is the best, duh. I really like his shirts. And, after reading this New Yorker article about Jack, I know we would be the best of friends!

Jack is democratizing payments with Square. I am democratizing financial literacy with my blog.

Can’t wait to chat, Jack!

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(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)

Change the locks

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Babe, my bestie, is still going strong with the financier. They are taking it slow, after he popped the question after a few weeks. This slow process includes Babe keeping an apartment to call her own.

Babe has found a fabulous new apartment for February. Perfect location. Clean. And most importantly, respectful roommates.

There is just one sticky talking point: changing the locks.

Babe’s boy and Babe want the locks changed—front door and bedroom door—please and thank you!

The landlord is not into their non-revolutionary idea. Changing the locks should be an obvious perk of moving in. The roommates support them morally, but not financially.

Babe’s boy is footing the bill and paying to have the locks changed.

Why is Babe’s boy so adamant about changing the locks? Because he wants Babe and her pricey gifts from him to be safe & sound. He trusts her prospective roommates. But he is having nightmares of how many keys are floating around because of this anti-lock changing landlord.

Are Babe & her man being ridiculous? I think not! Changing the locks is one of those things that will easily leave us saying “I should’ve…” after something bad happens.

Better safe than sorry.

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(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)

The Wolf of Wall Street

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Usually I am weary of a $12 movie ticket.

But, 3 hrs with Leo? I’m in.

The Wolf of Wall Street is an epic tale. It’s funny. It’s ridiculous. And I’m just saying, Leo’s character, Jordan Belfort, would have benefited from forfeiting some fabulosity for some frugality.

If Jordan hadn’t been so ostentatious, saved $$ by not buying drugs or sex from prostitutes, and stayed away from his illegal ways in general, things might not have turned out so badly for him, but also there probably wouldn’t be a movie about him!

The Wolf of Wall Street is a reminder of what can happen to us if money corrupts us. Of course, money is necessary to make us fabulous. But also, friends & family play a key role in our fabulosity equation. So play nice.

Essentially, Leo (via Jordan Belfort) shows us what not to do. It’s a must see!

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(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)

Airbnb

Airbnb is my travel lifesaver because as we all know—especially after the holiday season—traveling is not cheap.

In Airbnb’s own words, “Airbnb is the easiest way for people to monetize their extra space and showcase it to an audience of millions.”

I’m an audience member clapping and shouting “Bravo!”

There is a range of options (entire castles to a shared room), but how I see it, Airbnb is cheaper than a hotel, classier than a hostel.

I am able to search by neighborhood, type of room (please ladies, do not select shared room), and price point. (Psst…don’t take the prices as given…negotiate.) I can also read up on the host’s bio and reviews. And if all look good, then I can see the availability on the listing’s calendar.

Upon arrival, I pretty much have an automatic new friend, who takes me around the neighborhood introducing me to the hip places & people.

Thank you Airbnb for being awesome and making accommodations accessible!

(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)

Roth IRA

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If the Traditional IRA is the good girl of the IRA family, the Roth IRA is the rebel of the family.

Fun Fact: Senator William V. Roth Jr. of Delaware led the legislative charge to create the Roth IRA in 1997.

Refresher: With Traditional IRAs, the tax man only cares about the $$ at the end when it is withdrawn. The perk is that I’ll be a lower tax bracket when I’m old, compared to when I originally contributed the money as a young money-making machine.

With Roth IRAs, the taxman wants to get his cut at the beginning, because he doesn’t know what will happen with the $$ and when it will be used.

Essentially, contributions to a Roth IRA are taxed initially and then never again taxed. The contribution can be withdrawn at anytime, without a tax or penalty. The rules get trickier with withdrawing earnings from investments. Time to talk to a professional!

As I understand it, the perk with Roth IRAs is that the contribution is initially taxed, can be withdrawn at any time tax-free, and earning—once past a certain age (as of now, 59 1/2)—are not taxed.

When money is in a Traditional IRA or a Roth IRA, the earnings of the investments are not taxed.

So the question becomes when picking between Traditional IRAs and Roth IRAs, do you want to pay the taxman later at a lower tax bracket (Traditional) or pay the taxman now and have my *fingers-crossed* tremendous investment growth untaxed (Roth)?

Watch this Khan Academy video and understand the math to answer this question.

Now that the confusion is cleared up, let’s save for retirement! Let the countdown to Boca begin!

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(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)

Credit Rating Agency

These give out bond ratings. This is what people are referring to when they mention Moody’sStandard & Poor’s , or Fitch.

(Originally published on Amanda Stanhaus’s financial literacy vocab blog: XO, Bettie Vocab.)

Credit Score

A number that  measures  the quality of  one’s personal financial history. If I take on a bunch of debt AND pay it off on time I’m A-okay at 850. If creditors have me on speed dial, I’m in trouble at 300.

(Originally published on Amanda Stanhaus’s financial literacy vocab blog: XO, Bettie Vocab.)

Traditional IRA

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I’ve discussed individual retirement accounts (IRAs) before…remember they are a nice alternative to 401(k)s.

One of the main types of IRAs is the traditional kind. But being a newbie, I am not privy to knowing what is traditional.

It seems the tradition of Traditional IRAs is that the taxman favors these accountholders.  And when I say favors, I mean the taxman ignores the funds in the IRA account and doesn’t tax the $$ until withdrawn. The taxman is doing his favorites a favor, saving them $$.

A deposit into an IRA account is not taxed. Since we are under 50, we can contribute $5,500 each year (FYI this # sometimes changes) to our Traditional IRA.

Once the money is in the account, I will invest it as I see fit. There are no penalties for buying and selling investment vehicles within the account. Plus, the taxman does me another favor,capital gains are not taxed each year, only in the long run.

The taxman will catch up with me when I’m old (59 1/2 +) and withdraw the money. Ideally, my tax bracket when I’m old will be lower than it was at the prime of my life (AKA now). By asking a bit less of me, the taxman is rewarding me for saving for retirement.

But watch out, the taxman will punish me if I withdraw money from my Traditional IRA pre- 59 1/2. The punishment includes taxing the withdrawal and a penalty too. Ouch, that’s harsh.

Watch this Khan Academy video explaining Traditional IRAs and how accountholders save $$.

Psst…Roth IRAs are seemingly similar, yet the exact opposite of Traditional IRAs. I’ll explain later this week. Just focus on figuring out the tradition of Traditional IRAs.

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(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)

Creditor

These people give credit (i.e. loans). They love to be paid back, and will make themselves known, if they don’t get my lovin’ (i.e. my money)!

(Originally published on Amanda Stanhaus’s financial literacy vocab blog: XO, Bettie Vocab.)