Listen Money Matters - Free your inner financial badass. All the stuff you should know about personal finance.

What exactly are dividends and how do they work? When you invest in a company you get paid a portion of a company’s profits as a way to compensate you for your investment. These payments are called dividends and they are a form of passive income. What are Dividends? When you own stock in a company directly or through a fund you may receive dividends. A dividend is a distribution of a portion of a company’s profits. They are decided by the board of directors and can be issued as cash payments, as shares of stock or other property. It’s an opportunity for a company to reward shareholder loyalty. The amount you receive depends on how much stock you own and how much profit there was to divide. Why Buy Dividend Stocks? Investors, particularly retired investors, like the steady income that dividend stocks provide and also like the option of reinvesting dividends to buy more shares of stock. Not All Companies Offer Dividends Most companies don’t offer dividends, and if they do, they can cancel them if it’s a bad time to make a payout. Companies can increase dividends if times are good. Startups and some high-growth companies in certain sectors like tech and biotech usually don’t pay dividends because all of the profits are plowed back into the company so they can maintain higher than average expansion and growth. If a company wants to increase it value (which increases the share price) it may opt to reinvest earnings rather than pay out dividends. Some companies choose to use that money to fund new projects, buy new assets, buy back some of its shares or acquire another company. What Kind of Companies Pay Dividends? Bigger well-established companies are more likely to pay out dividends regularly. Companies in certain sectors including oil and gas, financial, healthcare and pharmaceuticals, historically have had some of the highest dividend yields. Why Pay Them? A bird in the hand is worth two in the bush. Investors are less sure that they’ll receive capital gains at a later date when earnings are reinvested as retained earnings than they are of receiving current dividend payments. In other words, better the sure thing now. There are tax reasons too. In some countries income derived from dividends is taxed at a lower rate than regular income. This is particularly an incentive for investors in high tax brackets. We’ll cover taxes below. If a company has a long track record of paying dividends, eliminating them or reducing the amount might be taken as a sign by investors that the company is in trouble. The reliable income that dividends can provide is appealing to many investors, so they’ll be more tempted to buy stock in a company that pays them. Paying dividends is also typically a sign that a company is healthy and that management expects future earnings. When Should You Buy? Should you buy before or after the dividend payment goes out? Bird in hand theory means you buy before the payment goes out while the stock is more expensive because you can expect a payment soon. Once the payment goes out, the stock will, in the short term, be worthless. For a bigger yield, buy after the payment has gone out. Cum Dividend And for your daily dose of the sophomoric, a share is said to be “cum dividend” when it is offered for sale with an entitlement to the next dividend payment attached. See also, “jizz dividend.” Don’t google that, Matt just made that up. When are Dividends Paid? If a company is going to pay dividends, shareholders are notified by a press release sent to the big stock quoting services. A record date is set. All investors who own stock as of that date will receive dividends. Learn more about your ad choices. Visit megaphone.fm/adchoices

Our guest, the Mad Fientist delves deep into advanced IRA strategies. Find out why you should have one and which one will best fit your needs.Brandon shares the same goal as many of us, to retire at a young age and avoid paying as much tax as is legal! How you handle your IRA’s can be a big part of achieving both goals.Traditional IRAA Traditional IRA is not taxed upfront but at the point of withdrawal. The money grows tax-deferred. Upon withdrawal after age 59 1/2, the money is taxed as income. For 2016, you can contribute up to $5,500, $6,500 if you are aged 50 or older.Roth IRAA Roth IRA is taxed upfront and not upon withdrawal after age 59 1/2. For 2016, the contribution limits are the same as for a Traditional IRA.401kMany people have a 401k through their employer. A 401k is similar to a Traditional IRA. The money goes in tax-free. When you leave your job, whether it’s to take a new one or to retire, roll that account into a Traditional IRA. This simplifies things so you aren’t trying to keep track of several accounts, and it gives you more control over fees.You may not even know how much you’re paying in fees for your 401k, and if you take the time to find out by reading the prospectus, there isn’t much you can do about it anyway because your options are selected by your employer. And investment account fees can cost you a lot of money. Americans pay over $6 billion dollars in investment fees per year.Vanguard makes rolling over your 401k easy, and they have very low fees.Why Traditional Over Roth?When you’re in the prime of your career, you’re being taxed at a higher than you are likely to be in the future. You want the tax advantage of the Traditional IRA during your highest earning years because once you give up those tax advantages, they’re gone forever.Will tax rates be raised in the coming years? Yes, probably. But new loopholes will be added too and as long as there are people like Brandon around, we will know ways to take advantage of them. Is it a risk? It is, but it’s a calculated one.Roth IRA Conversion LadderBoth types of IRA’s are used at different stages of life to reap the most tax benefits possible. Brandon has a method for this, the Roth IRA Conversion Ladder. You contribute to a Traditional IRA during your working life because it’s likely that your tax rate is higher now than it will be after retirement.After you leave your job, you will have less taxable income. During this time, you slowly roll the Traditional IRA to a Roth. This rollover counts as ordinary income so to do this tax-free, convert a dollar amount equal to your tax deductions and exemptions.During this time, you live off your capital gains and dividends because they are taxed at 0% so long as you’re in the 10 or 15% tax bracket. For 2016, anyone making less than $9,225 is in the 10% bracket, and anyone making between $9,226-$37,450 is in the 15% bracket.LLCAs we learned in our Natali Morris episode, it’s the people who earn salaries from an employer who take the hardest tax hit. The reason a bunch of LMM listeners are rushing out to start LLC’s! Unsurprisingly, Brandon has a way to super hack your LLC to mine even more tax benefits.We did a little calculating during the episode, and if you paid yourself $80,000 a year via dividends from your LLC, you would only be liable for $5,000 in taxes! If you were making $80,000 from a salaried job, you would pay over $19,000 in taxes!What To do With $3, Learn more about your ad choices. Visit megaphone.fm/adchoices

Social security is a decisive topic but we’ll give you the facts while leaving the politics aside so you can draw your own conclusions. Social security was established by FDR in 1935 as part of The New Deal.  It was intended to alleviate poverty for the elderly, unemployed, and fatherless children.  Workers pay in during their working lives and draw from it once retired, each generation funding the previous one. Since 1983, the cash flow has been positive, more coming in than going out.  By 2021, just seven years from now, it’s forecast to be paying out money faster than it comes in.  Some experts think this is not apocalyptic and the money will be diverted from somewhere else to continue the program.  The surest way for a politician in America not to get elected or re-elected is to try to mess with Social Security so the government will always find a way to fund it. One way to save the program is to privatize it.  It would be less like a tax and more like a 401K.  This way the money could be left to family after death, the money could be invested in the market, and it would reduce the role of government as they would not longer manage this enormous pool of money.  The problem with this plan is that during the transition, it would add one trillion dollars of debt to the economy.  There is also no way to know exactly how much you will receive as there is with the program as it stands. Two more realistic plans are to raise payroll tax by 2%.  This would ensure solvency for the next seventy five years.  Another option is to decrease the benefit by 13.3%.  This would ensure solvency indefinitely. The takeaway is that people of working age now will probably collect social security but it is not something that should be depended on for the entirety of your retirement income.  Keep investing, continue maxing your 401K, those are things you can control unlike the future of social security. Show Notes Betterment:  Our favorite investing tool.  Use this link to get six months without fees. SSA Calculations:  See an estimate of what you will collect from Social Security in the future. Learn more about your ad choices. Visit megaphone.fm/adchoices

We’re breaking down Listen Money Matter’s Twelve Financial Philosophies.  Think and meditate on them and then live by them. 1.  You are responsible for your own wealth.  Don’t expect to marry rich, inherit a fortune or win the lottery. Don’t blame your back ground, the economy, or any other excuse you can come up with.  If you want to build wealth, the onus is on you. 2.  Getting out of debt is an emergency.  If you have debt, use the stack method to pay it off. 3.  Always take free money.  If your employer offers matching 401K, take it.  Even if you have debt, contribute to the 401K. 4.  Super frugality is a waste of time and money.  We’re all for frugal but if it takes two hours to make your own laundry soap, that’s perhaps not the best use of your time.  You would save more batch cooking for two hours so you don’t have to buy lunch at work for the week. 5.  Credit cards make spending cheaper when correctly used.  A good cash back card will save you a small percent on your purchases. 6.  Avoid bank fees and find low investing fees.  Seek out a bank that doesn’t charge crazy fees for things like checks, automatic payments, and minimum balances.  Choose an investment tool that has low transaction fees.  We discussed bank fees in Episode 9 and Vanguard, a low fee investment company in Episode 109. 7.  Automate your finances.  Set it and forget it.  Use auto pay, use Mint, use auto transfers.  Andrew explained how in this article. 8.  Savings accounts are stupid.   In episode 107 we explained where your emergency fund should be kept and it’s not in a savings account. 9.  Materialism inhibits wealth building and leads to debt.  A house full of stuff you don’t use costs you money when you buy it and money in the future because you didn’t invest it. 10.  Budgeting makes smart people smart with money.  You’ve got to know what you have to work with and where it’s going otherwise you’re navigating blind. 11.  Health is always more important than wealth.  The money you spend on your health whether it’s good food, a gym membership, or regular check-ups, will more than come back to you in the future.  Being sick is expensive, especially in America. 12.  Investing is a long-term strategy.  Once you start investing, remember you’re in it for the long haul.  Be fearful when others are greedy and greedy when others are fearful. That’s it, LMM’s raison d’etre in twelve simple ideas.  Let us know in the comments what your philosophies are. Check out this fun little money-saving tip video I did over the weekend: Show Notes The Obstacle is the Way:  A modern philosophy book. Betterment:  An investing tool that let’s you set it and forget it.  Use this link and get six months of fees waived. Mastering Mint:  Our book on how to get the most from Mint.  Listen to the episode and find out how to get it for free. Learn more about your ad choices. Visit megaphone.fm/adchoices

Debt affects your credit score and makes life more expensive. We’ll show you the cost of debt and reasons you need a kick ass credit score. A good credit score saves you money in many ways. You don’t have to achieve the “perfect” score but having a score above 760 will go a long way towards making life cheaper. What is a Credit Score? A credit score is a number calculated using a number of factors to show how creditworthy you are. Lenders use this number to decide whether or not to lend you money, what rate of interest you will pay on that loan and in the case of credit card companies, whether or not to issue you a card and what your limit will be. Card interest rates are pre-set so your score doesn’t affect that. What Makes Up a Credit Score? There are six major components that make up your credit score. We did an in-depth article on it but to quickly re-cap, these are the factors; * Payment History: If you pay your bills on time. * Credit Utilization: How much of your available credit is being used. * Derogatory Marks: Do you have delinquent accounts, past bankruptcies, judgments against you etc * Length of Credit History: How long you have had a credit file. * Total Accounts: How many credit accounts you have open and how many types (credit card, mortgage, student loan, personal loan, auto loan, etc) * Credit Inquiries: How many times has your credit been checked because you’ve applied for a new card or loan. What is a Good Score? There is a credit score range you will can into. Each credit bureau has their own credit scoring models but in general, the Fico score ranges are as follows: * 300-630 is bad. * 630-689 is fair. * 690-719 is good. * 720-850 is excellent. Either end of those is pretty hard to achieve and some people obsess over their credit score way more than necessary. There are lots of reasons you need a score but kick ass can be achieved at 760. So if you are there, you’re set. The most well-known types of credit score are FICO Scores, created by the Fair Isaac Corporation. The 3 major credit bureaus that run your FICO score are Experian, Equifax, and TransUnion and it should be done once a year. Remember, with the Fair Credit Reporting Act (FCRA) you are entitled to get a free credit report once a year. You can get your free credit score on the Government website www.annualcreditreport.com.  If you use a different service lookout for any extra charges. sometimes they will charge you extra for monthly credit monitoring services, or fraud alert plans. You need to know what your score is before you improve it so, go on, take the band-aid off. Reasons You Need a Kick-Ass Credit Score If you don’t have a good score, here are some reasons to get one. Interest Rates This is the big one. The two most expensive things in life are taxes and interest and if you can avoid them, you will reach financial independence much faster. If you want to buy a home, a new car, or borrow money for anything from starting a business to renovating your house, a good credit score will determine the rate of interest the lender sets for the loan. What’s a point here and a point there? A lot when we’re talking about interest rates. If you buy a $300,000 house with 20% ($60,000) down payment with a 30 year fixed rate mortgage at 4.5% rather than 5.5%, over the life of that loan, you will save $52,794. Learn more about your ad choices. Visit megaphone.fm/adchoices

As demonstrated in Vimes’ theory of boots, sometimes it saves money long term to spend more up front.  What items are worth the splurge and which are not? Quality versus cost is not about being fancy and always buying the most expensive version of everything or being cheap and always buying the least expensive version of things.  It’s about making sure what you buy lasts as long as possible so you don’t have to spend more money constantly replacing the same item. Technology is a great example.  Apple products are less vulnerable to viruses than pcs.  A virus will cost you money either having to pay for repairs or replace the computer entirely. A good rule of thumb on where to spend the extra money is “anything that comes between you and the ground.”  So shoes, mattresses, and tires.  You spend a third of your life in bed so mattresses are not the place to save some money. Anything that needs to last a long time is worth the extra money.  Things like cushioned furniture and appliances.  What you put into your body.  You don’t have to buy only the most pure, organic vegetables harvested at the light of the full moon by Buddhist monks, but thinking you’re getting a deal by eating from the dollar menu everyday is a costly mistake in the future. Where can you choose the less expensive option?  Matt says clothes.  I would say you can spend less on casual, around the house clothes but a little more in dress and office clothes.  Wood furniture will last a long time without spending a fortune.  The only caveat would be weight bearing furniture like book cases which can bow if they’re the ultra cheap press board ones. Let’s hear from you in the comments.  What do you spend more on and where do you save? Show Notes Terrapin Mosaic Red Rye India Pale Ale: “A liquid art form.” Sierra Nevada Blindfold Black IPA:  Bright hops and roasty darkness. Betterment:  Our favorite investing tool.  Use this link and get six months free. Learn more about your ad choices. Visit megaphone.fm/adchoices

A shopping sniper knows what they want, gets it, and gets out.  We’ll teach you a few tricks to become the shopping sniper with the most confirmed kills. Welcome to your training. I hope you enjoyed the video. But now it’s time to begin. It’s time to know all the secrets on how to spend less money. This is a 2,000-word training manual that will walk you through becoming a Shopping Sniper, and in turn, teach you how to spend less, save more money and allow you to focus on what’s really important. Why Are Americans Addicted to Shopping? You’d think because of the economic crash in 2008 that Americans would be a lot more conscious of their spending. You’d also think Americans would have toned down their shopping just a little bit, but instead, shopping totals have increased. In April of 2013, retail shopping sales increased by 0.1%. Not a huge increase, but an increase nonetheless. We are a culture of consumerism. It’s been ingrained in our DNA to want stuff, to keep up with the Joneses, to “shop till you drop.” It’s no wonder why American’s have trouble saving their money — they’re spending it while they shop. Shopping is so popular that we have TV shows based on it, including: * My Shopping Addiction * Supermarket Sweep * HSN & QVC * Million Dollar Shoppers * Extreme Couponing * The Entire Style Network * Guy’s Grocery Games We are being brainwashed into shopping. Shopping has become a skill and a sport in our country. In fact, the only way to avoid being sold to is to go to sleep. That is until dream TV is invented. Exposing 5 Retail Store Marketing Secrets I’ve been working in retail stores since I was 13 years old. I’ve also spent time as the head of marketing for a chain of retail stores. My job was to make people buy more stuff, and I learned these secrets from the best and the biggest stores in the country. As a former marketing director, I know what goes into making people buy more and buy often. My job was to create colorful circulars (newspaper ads), packed to the brim with coupons. I filmed funny TV commercials, created ads for magazines and spots for radio. I did whatever it took to get my brand in front of your face, over and over again. I’ve learned a lot during my time, and I think it’s time I expose myself…I mean my secrets to retail marketing. Having this knowledge will give you power and make you a better Shopping Sniper Secret #1: No Clocks, No Windows The simple reason for the this is because the stores don’t want you to pay attention to the time. They also don’t want you to realize how nice it is outside. By denying you insights to the outside world, they hope to keep you in the store and shopping longer. They also play very easy-to-listen music throughout the store. This music is meant to put you in a good mood to increase your shopping time. Oh, and they always crank the AC in the summer. Feels so good to shop in the mall during the summer, doesn’t it? Secret #2: Loss Leaders Walmart is well known for this marketing tactic, especially during the holiday season. Loss Leaders are products that are very popular and desirable, so the stores will sell these items at the lowest possible price without losing any money — however, Walmart is known for actually losing money on these items. The trick is to get you into the store by pricing these desirable items so low that you can’t pass up that kind of deal. Learn more about your ad choices. Visit megaphone.fm/adchoices

What does the ideal financially responsible person look like?  Is it you? We’ll discuss achieving financial perfection.  See how you stack up. The ideal person will have no student loan, credit card, or car debt.  Their housing expenses will be no more than 30% of their income, total expenses no more than 50%. They will devote 20% of their salary to investing.  The other 30% is discretionary income. Andrew wrote a detailed post about how you should be investing that 20%.  You get $25,000 in an investment account as your emergency fund first and then can branch out to riskier options.  Age is important too.  In our book, Mastering Mint there is a graph on page 92 showing what percentage of your income you need to save to retire in X number of years. Credit cards can be a tool for the financially responsible.  As long as you pay the entire balance each month.  You can leverage credit cards for travel discounts, cash back, and purchase protection. The ideal person has a budget.  No matter how few expenses you have, they are hard to keep track of unless you have a system in place.  Use Mint, use You Need A Budget, the envelope method, whatever works for you but you have to use a budget. Financially responsible people spend money on experiences rather than things.  A great vacation, a nice dinner, a concert.  These are things worth spending money on and will make you happier than a closet full of new shoes or a giant TV.  Less stuff takes up less space in your home and in your head.  If you have too much stuff, find out how to get rid of it and make some extra money in Episode 96. The ideal financial person starts young.  Your money is so much more powerful when it has thirty years to marinate in investments rather than ten years.  Putting a lot of work in the front end means less work when you’re older. How did you do?  Don’t worry if you fell short.  This is the perfect person and you don’t see them much in the wild.  But practice makes perfect.  You know what to do so keep at it. Show Notes 1792 Ridgemont Reserve:  Small batch Kentucky Bourbon. Betterment:  Get 20% in here.  Use this link and get six months free. Learn more about your ad choices. Visit megaphone.fm/adchoices

   We’re answering listener questions about gold, stock options, coupons, investing, and how to avoid student loan debt. 1.  Should I invest in gold and silver?  The short answer is no.  It’s risky and speculative.  Gold and silver prices fluctuate wildly from ridiculous highs to tremendous lows.  To make money this way you would have to time the market and we’ve discussed before that it is inadvisable to do so. 2.  Should I buy company stock at a 15% discount or continue with Betterment?  This question was detailed but at the end of the day, the company was getting a year long loan and the money was not accessible.  It’s also the problem of too many eggs in one basket.  Having your income and investments coming from the same place is risky.  Continue putting the money into Betterment. 3.  Are coupons worth your time? Coupons are to get you into the store knowing that once you’re there, you’ll buy more than what you came in for.  If you have a lot of self control and are using the coupon to buy something you normally buy, than they can be a good thing. 4.  I have an $8000 loan with 3.45% interest.  Should I pay it off before investing or invest and make a lower monthly loan payment?  Andrew calculated this out.  If you put $1000 into investing every year for eight years and got a return of 7%, you would make $410.90 more than if you did the same with the $1000 by buying off the loan.  But that was on paper and actual life is variable so you can’t count on 7%. Also, the interest rate on this loan is very low.  So in a vacuum, you would invest the money rather than pay down the loan but in the real world, pay off the loan before investing. 5. How do I avoid going deep into debt during my two year graduate program?  If you have to take out loans, take out federal loans over private when possible.  The interest rate is lower and there are programs for debt forgiveness for federal loans.  Put any savings into an investment account.  The day you graduate, pull it out and pay on your loans.  They don’t accrue interest while in school.  Even if your program is full time, find a few hours a week for a side hustle.  An Uber driver sets their own hours and has clients seek them out.  Take everything you just learned in class and create a blog or a Youtube video.  It’s tutoring but to a potentially huge audience.  I’ve added our student loan episodes to the show notes. Thanks guys, we love these episodes so keep sending in your questions. Show Notes LMM Episode 32:  Adam Carrol educates us about student loans. LMM Episode 70:  Student loan expert Heather Jarvis talks about student loan repayment and forgiveness programs. Smart Passive Income:  Pat Flynn’s site that teaches ways to make passive income. Betterment:  The easy to use investment tool.  Use this link and get six months free. Learn more about your ad choices. Visit megaphone.fm/adchoices

We all have the same 24 hours to work with.  But there are lots of ways to get more out of those hours.  We’ll give you some tips to make the job easier. Whether you work from home, work in an office, work for yourself, or for someone else, there is a tip out there that will organize, streamline, or enhance your process. 1.  Stay away from social media.  Don’t get sucked into a Twitter hole when you’re supposed to be working.  Stay off Twitter, Facebook, Pinterest, all of those while you’re supposed to be working. 2.  Figure out  when you best work.  Some of us are larks and some are owls.  Forcing yourself to get up an hour earlier to get things done is useless if you’re nodding off.  Structure your day so the most important tasks get tackled when you’re at your peek. 3.  Learn how to say no.  Whether it’s an invitation, a phone call, or taking on a project when you already have too much on your plate, say no. Once you’ve finished, then you’re free to accept those things. 4.  Exercise, eat and sleep properly.  You’re brain and body can’t function if you’re poorly nourished, tired, and immobile. 5.  Get organized.  Clutter and mess are distracting.  Tidy your work area. Our personal tips: 1.  Drink coffee.  Or your stimulant of choice. 2.  Wear headphones.  Especially if you work in a loud office, get some noise cancelling headphones to block out the distracting noise.  Music or podcast optional. 3.  Mailbox.  Manage your e-mail faster and more effectively. 4.  To do list.  It should be short but detailed with everything you need to accomplish each task to hand. 5.  Set time constraints.  Set a timer and when it goes off, you’re done.  The limited window will force you to get things done.  30/30 is an app designed for this. 6.  Rescue Time.  The Mint for your time.  See how much time you’re wasting on Reddit. We’ll put a lot more ideas into the show notes for you.  Even using one of our tips or tools will make your day easier. Show Notes Wise Bread:  A great resource for personal finance information and frugal tips. College Info Geek:  Our buddy Thomas’s guide to getting the most from your college experience. Four Hour Work Week:  Productivity Tricks for the Neurotic, Manic Depressive, and Crazy Like Me. Trello:  Organization for groups. Getting Things Done:  Learn the concept of “brain dumping.” Understanding the Value of Time:  LMM’s episode 76. Evernote:  Lose the sticky notes with this digital app. Lift:  The habit building app.  Learn more at Episode 66 where we interview founder Tony Stubblebine. Learn more about your ad choices. Visit megaphone.fm/adchoices