NEGATIVE SAVINGS SHOCKER

I was recently appalled by a statistic I came across stating that in 2005 the American personal savings rate averaged -0.5%. We have gotten so used to living above our means that we have reached a savings low that hasn't been matched since the DEPRESSION!

Spending more than you bring in is nothing but a recipe for disaster. I know it's a challenge to live within your means but it's a bigger challenge to live under a growing pile of debt.

As Thomas Fuller said, ''Debt is the worst kind of poverty.'' If you're living in the red, you're in pretty bad shape and any money you make isn't really yours, it's your debtors! But there is hope if you can discipline yourself and figure out what method works best for you. Then you can not only be debt free but you can also begin to grow savings and do your part to increase this nation's embarrassing savings rate.

Investing In ETFs

ETFs or Exchange Traded Funds and similar to index fund and mutual funds in that they are invested in an index, commodity or basket of assets. The difference is that they trade like a stock on an exchange.

Investing in both individual stocks and mutual funds have their drawbacks. When you buy an individual stock, all of your investment dollars are riding on the company you invest in. One factor of successful portfolios is diversification and to obtain diversification investing in individual stocks is extremely expensive, it would cost tens of thousands of dollars to create a portfolio that held just one of each of the stocks in the S&P 500. Not to mention the amount of transaction fees you would rack up. The obvious alternative to this mutual funds and index funds.

Mutual funds on the other hand offer the diversity and balance needed for a successful portfolio and there are a wide range of funds that track the different indices, sectors and markets. Mutual funds do have their drawbacks though. Most mutual funds have a minimum investment, $2500 is not uncommon. Additionally, mutual funds carry expense ratios and fees that can take a huge chunk out of your earnings. Mutual funds are meant to be held long term and you don't have as many options as you would with individual stocks. On top of that the majority of actively manages mutual funds fail to beat their benchmark.

ETFs To The Rescue

ETFs offer the best of both worlds. You receive the automatic diversification that you would with a mutual fund but it behaves like a stock. This means that you can buy as little as one share. ETFs also have lower expense ratios than their mutual funds counterparts.Unlike mutual funds that are priced once daily, ETFs price fluctuates throughout the day just like a stock. Since ETFs behave like a stock, you have the option to short sell and buy on margin.

Additionally, there is an ETF for pretty much everything you can think of. The most common are Spiders (SPY) which tracks the S&P500, Diamonds (DIA) which tracks the Dow Jones Industrial Average and Cubes (QQQQ), which tracks Nasdaq 100. There a so many many more though for every index and every and sector. ETFs are also broken into categories such as large cap, small cap, growth, value, etc...There are also ETFs for bonds and fixed income and they too are categorized into everything from total bond market to short term bonds. There are even ETFs for commodities such as gold, oil and silver.

The only costs involved in purchasing ETFs are you're regular transaction fees. You can buy stocks free or at a low cost with either http://www.zecco.com/ or www.sharebuilder.com

Good luck and happy investing,
Finance Girl

Making A Deal With Your Creditors

Creditors lend money with one objective: to make money! They want their principal back and they want their interest revenue. From time to time they have defaulters who just won't pay up. This is when they are willing to recover any amount they can and cut their losses.

If you are severely behind in your bills and have over 90 days past due debt (tsk tsk) you can negotiate. Call your creditors and make them an offer to pay up 20% to 75% in a lump sum to settle the account. If they agree, and odds are in your favor that they will! This will automatically benefit your credit because the outstanding balance will be settled however previous late payments and delinquencies will remain.