Thursday, October 28, 2010

The Importance Of An Emergency Fund when making Millions

Especially in today’s economy, establishing an emergency fund is a critical step on your journey to make millions. We all know that life happens, and if all of the sudden you needed cash quick, would you have it on hand? If not, do you know what the long term consequences could be? Here is a look at what an emergency fund is and why it is so important.

An emergency fund is simply a fund that you stash cash into in case of an emergency. Let’s face it, emergencies do happen. What if you came home one day and your furnace had died, what if you had a sudden accident with thousands of dollars in uncovered medical bills or what if you showed up for work, only to find out your job had been eliminated. What would you do? If you have an established emergency fund you can take the money from there without a lot of unneeded stress. If however, you don’t have an emergency fund you will be scrambling.

If you don’t have an emergency fund for when life happens, your options are not the greatest. You could cut into your monthly budget to get by, but what would you have to sacrifice? Would you have other late payments with tacked on late fees? Would you be able to pay your mortgage and put food on the table?

You could use your credit cards, but when would you be able to pay them off? Credit card interest and other fees add up fast, and the long term consequences can be financially devastating. Also, in today’s tough credit world, you may not have enough credit or even be able to get credit to cover emergencies.

Another option would be to take the money from your retirement, but that is not wise either. Most likely you will have early withdrawal penalty fees and depending on the account you may also have to pay taxes on the money. Not to mention that every time you withdraw from these accounts you are taking hard earned money away from your retirement.

The solution is to save some of your money in an easy access account for emergency purposes. The amount you save is really up to you. You need to look at your own individual circumstances. As a rule of thumb, many financial experts will tell you to save somewhere between three and twelve months worth of living expensed in your emergency fund. If you have a stable job, usually the three to six month range is good, but if you are in fear of losing your job, the more months you have saved, the better.

Where to keep your emergency fund is the next question. The key is to make sure it is accessible, while hopefully making a little interest. Some options include keeping the fund in a high yield savings account, , in short term CD’s (Certificate of Deposits) or in a number of CD’s using what is called CD laddering. The goal is to have cash at hand.

As a recap, an emergency fund will:

* Keep you financially prepared for unexpected “life happens” emergency events.

* Keep you from having to rely on credit and in turn prevent you from going into debt.

* Keep you away from your retirement accounts.

* Help keep you from experiencing financial stress.

If you don’t already have an emergency fund, start one today. Work to fund it quickly and then don’t touch the money except for emergencies. Having the protection of the emergency fund very well could help you achieve saving millions.

This article was the result of a joint cooperation with my friend and colleague,

Barbara Montgomery is a freelance writer who specializes in articles and blog posts on numerous topics including banking, finance, debt management, health, travel and more. She is a frequent writer for and a guest blogger for, where you can compare savings account rates from dozens of banks in one place.

Keep your comments coming, with wise Investing and great ideas.

Monday, October 11, 2010

$1.5 million Nobel economics prize

While submerging myself on economic theories and various Investing methods to acomplish my goal of a Million Euros in less than 5 years I just find out that two Americans and a British-Cypriot economist won the 2010 Nobel economics prize, for developing a theory that helps explain how many people can remain unemployed despite a large number of job vacancies.

Federal Reserve board nominee Peter Diamond was honored along with Dale Mortensen and Christopher Pissarides with the 10 million Swedish kronor ($1.4 million) prize for their analysis of the obstacles that prevent buyers and sellers from efficiently pairing up in markets.

Diamond — a former mentor to current Federal Reserve chairman Ben Bernanke — analyzed the foundations of so-called search markets, while Mortensen and Pissarides expanded the theory and applied it to the labor market.

Their work, dating back to the 1970s and '80s, sheds light on why the classical view of markets, in which prices are set so that buyers and sellers always find each other and all resources are fully utilized, doesn't always apply to the real world as we already knew.

One example is the housing market, where buyers can struggle to find new homes even though there are a number of unsold properties available.

Another is the labor market. Because searching for jobs takes time and resources, it creates friction in the job market, helping explain why there are both job vacancies and unemployment simultaneously.

The laureates' models tries to help us understand the ways in which unemployment, job vacancies and wages are affected by regulation and economic policy,.But it seems that we already knew that...

Their work resulted in the so-called Diamond-Mortensen-Pissarides model, a frequently used tool to estimate how unemployment benefits, interest rates, the efficiency of employment agencies and other factors can affect the labor market.

"One conclusion is that more generous unemployment benefits give rise to higher unemployment and longer search times," a clear example of that phenomena could be analized in Finland.

Diamond, 70, is an economist at the Massachusetts Institute of Technology, and an authority on Social Security, pensions and taxation.

President Barack Obama nominated Diamond to become a member of the Federal Reserve, but the Senate failed to approve his nomination before lawmakers left to campaign for the midterm congressional elections.

Senate Republicans have objected to what they see as Diamond's limited experience in dissecting the inner workings of the national economy.

Bernanke was one of Diamond's students at MIT. When Bernanke turned in his doctoral dissertation in 1979, one of the people he thanked was Diamond for being generous with his time and reading and discussing Bernanke's work.

Diamond said the U.S. stimulus spending last year helped prevent much higher unemployment, and a second round would also be beneficial.

Pissarides, a 62-year-old professor of economics and social sciences at the London School of Economics, was the first Nobel winner with Cypriot citizenship.

Speaking from his north London home, Pissarides told The Associated Press the announcement came as "a complete surprise" though his work had already helped shape thinking on both sides of the Atlantic.

For example, the New Deal for Young People, a British government initiative aimed at getting 18-24-year-olds back on the job market after long spells of unemployment, "is very much based on our work," he said.

"One of the key things we found is that it is important to make sure that people do not stay unemployed too long so they don't lose their feel for the labor force," Pissarides told reporters in London. "The ways of dealing with this need not be expensive training — it could be as simple as providing work experience."now I ask myself is this a real major discovery or just common sense?

Mortensen, 71, is an economics professor at Northwestern University in Evanston, Illinois. He is
currently a visiting professor at the University of Aarhus in the neightbour country: Denmark,

Mortensen told AP he was asked not to share the news until the announcement in Stockholm 30 minutes later.

Diamond wrote a paper in the early 1980s that found that unemployment compensation can lead to better job matches. Workers "become more selective in the jobs they accept" because of the employment aid. And, that makes for better matches and increases efficiency, he found.

He told a Senate committee during his nomination hearing in July that a central theme of his research has been how the economy deals with risks that affect both individuals, and the entire economy.

"In all my central research areas, I have thought about and written about the risks in the economy and how markets and government can combine to make the economy function better for individuals," he said in that hearing.

The economics jury was the last of the Nobel committees to announce 2010 winners.

Last week, British professor Robert Edwards won the medicine prize for research that led to the first test tube baby. Russian-born scientists Andre Geim and Konstantin Novoselov shared the physics prize for groundbreaking experiments with graphene, the strongest and thinnest material known to mankind.

The chemistry award went to Richard Heck and Japanese researchers Ei-ichi Negishi and Akira Suzuki for designing techniques to bind together carbon atoms.

Peruvian novelist Mario Vargas Llosa won the literature prize( a victory for L-A ) and the imprisoned "Chinese democracy "(Axl was visionary :) campaigner Liu Xiaobo was named the winner of the Nobel Peace Prize.

The awards are always handed out on Dec. 10, the anniversary of Nobel's death in 1896.

Some Excerpts from the citation awarding the 2010 Nobel Memorial Prize in Economic Sciences to Americans Peter Diamond and Dale Mortensen and Christopher Pissarides, a British and Cypriot citizen.


"Why are so many people unemployed at the same time that there are a large number of job openings? How can economic policy affect unemployment? This year's Laureates have developed a theory which can be used to answer these questions. This theory is also applicable to markets other than the labor market."


"On many markets, buyers and sellers do not always make contact with one another immediately. This concerns, for example, employers who are looking for employees and workers who are trying to find jobs. Since the search process requires time and resources, it creates frictions in the market. On such search markets, the demands of some buyers will not be met, while some sellers cannot sell as much as they would wish. Simultaneously, there are both job vacancies and unemployment on the labor market."


"This year's three Laureates have formulated a theoretical framework for search markets. Peter Diamond has analyzed the foundations of search markets. Dale Mortensen and Christopher Pissarides have expanded the theory and have applied it to the labor market. The Laureates' models help us understand the ways in which unemployment, job vacancies, and wages are affected by regulation and economic policy. This may refer to benefit levels in unemployment insurance or rules in regard to hiring and firing. One conclusion is that more generous unemployment benefits give rise to higher unemployment and longer search times."


"Search theory has been applied to many other areas in addition to the labor market. This includes, in particular, the housing market. The number of homes for sale varies over time, as does the time it takes for a house to find a buyer and the parties to agree on the price. Search theory has also been used to study questions related to monetary theory, public economics, financial economics, regional economics, and family economics."

So let´s keep investing and finding out what this theory is all about so far it seems to me that the Nobel Commitee is just running out of talent and common sense or maybe is just me that while trying to aproach my difficult task of one Million in less than 5 years, I get more and more critical of all and everything...

Anyway keep the ball rolling, some late picks to keep at least until June 2011 are: Mreal and Marimekko. Keep in touch remember lets make it happen.