I finally called to start the process of rolling over my 401k and it’s all thanks to my blog. Well, sort of. I’m a wicked procrastinator, so last week I figured I’d write a post about how I need to roll over my old 401k and I set a goal for myself to do it within a week. It’s been a week now and I’m proud to report that I called USAA and got the process started. Granted it will take 2-4 weeks for the account to fully roll over, but at this point all the hard work is now out of my hands.

I couldn’t be happier.

Through all of this I was reminded how important it is to know your own strengths and weaknesses. Like I said already my weakness is procrastination. Without something to remind me or push me into doing something I know I need to do, I’ll likely keep putting it off over and over and over again.

I knew I needed to do this. I knew what I needed to do. I just couldn’t find the inspiration – if you will – to actually get it done.

Here’s where psychology comes into play, along with the benefit of recognizing your strengths and weaknesses. I knew that if I held myself accountable (which I did through my blog post last week) that I would get it done. Sure enough I did.

Human behavior (psychology) is something that personal finance bloggers don’t talk about nearly enough. As Ramit said during a speech at the financial blogger conference (I’m paraphrasing here): people know they need to get out of debt, and they generally have the knowledge on how to pay it off as well, but they just can’t find the will to actually get out of debt.

Why is that? Ultimately it’s just who we are. The best way to overcome that is to figure out what your shortcomings are and then find ways to overcome them. That’s what I did to help with my procrastinating. That’s what I’d like all of you to do as well.

I’m often lazy when it comes to managing my money. I’ve talked about automating a million times before and that’s because I automate everything I can. The more I automate the less chance I have of screwing something up. Unfortunately sometimes you’ve got to do something that just can’t be automated. Switching banks for example, or rolling over a 401k. The latter is what I need to take care of at the moment. It’s been three months since I quit my last job and I have yet to rollover my 401k.

Many of the regular readers here know that I recently quit my old job and took on a new job with a startup.I don’t have a 401k at my new job (yet) and I haven’t set up an IRA yet either (and I call myself a financial nerd — I’m going to be burned at the stake when other PF Bloggers read this!) since I quit my old job. I also have yet to rollover my old 401k. The procrastinate-o-meter is boiling over the top here.

I think part of what has me procrastinating is I’m not sure where I want to roll my 401k over to yet. For convenience I’ve been leaning toward USAA (since that’s where a huge amount of my financial accounts are already), but I’m also considering Vanguard and maybe even T Rowe Price. Who do you all have your IRA/401k Rollovers with? Any recommendations? J Money would undoubtedly say USAA ( sometimes I think he’s on their payroll ). What say you?

I’ve been known to use this blog in the past to check myself (before I wreck myself). I’ll be doing that with this. I owe all of you an update in a weeks time. If I haven’t at least begun the rollover process on my 401k then I’ll either share a dirty secret with all of you… or eat my hat. I’ll let you decide if it comes to that.

Investing and emotions don’t belong together. They never have and they never will. In fact if you want a sure fire way to lose money while investing then by all means let your emotions make your decisions. However if you are in it for the long haul and just want to grow your wealth by smart investing then hang on for just a second here and listen to me. If you’re more interested in freaking out over the 634 point drop in the Dow Jones Industrial Average (DJIA) yesterday (August 8, 2011) then please head back to the Debit versus Credit blog and find another post to read.

I tweeted this yesterday after the chaos had ended on the open markets:

Investing and emotions don’t belong together. Ever. If you’re letting your emotions get involved then trust me, you WILL lose money.

It’s as true now as it has ever been. Studies have repeatedly shown that if you let your emotions rule you will always lose money. By pulling out after a large loss you may indeed avoid losing even more, but don’t forget one thing here. If you have your money invested in stocks, mutual funds, etc. it’s all paper losses. You don’t actually lose anything until you cash out. So after the 634 point drop you initiated a sell order for your stock or a mutual fund. Before it wasn’t really a decrease in your cash holdings. Now that you’ve sold it is. Maybe you’ll get lucky — maybe the market will continue to drop another 10-15% before finally rebounding. Or more likely you’ll sell now and the market will rebound by the end of the week. Your paper losses would have disappeared, but you cashed out. So now you’ve really lost money, while those of us who stayed level-headed are back to where we were (much better than a loss isn’t it?).

Here’s the trick to avoid emotional investing

Don’t check your bloody portfolio every day.

Seriously. Especially if you hear about a down day on the market. Don’t check your stocks, don’t check your 401k. Don’t check any of your investments! If you don’t check them you can’t freak out about the “paper losses” and you won’t ever lose to your emotions and do something that will compromise your ability to build wealth.

Another thing. If you aren’t already taking advantage of dollar cost averaging through automatic investing you’re missing out on the ability to take advantage of great buying opportunities. Make sure you get that set up if you haven’t already. Now get out there and don’t let the market volatility freak you out. I’ll be watching.

picture courtesy of Icanhazcheezburger

I’m constantly scouring the internet for interesting articles and posts about personal finance, entrepreneurship, business trends and whatever else I happen to find interesting at the time. I then turn around and share the best material I can find with my followers on twitter. I wanted to share a few of my favorites from the week of July 18th with all of you today. The topics? Acquisitions, the US Tax Burden, Retirement accounts (specifically the 401k), DIY skills and an interesting approach to finding yourself a new job/career.

This 21-year-old just sold her startup for $100 million: http://bitly.com/noRVfL

The US Tax Burden Falls Disproportionately On Individuals and Small Business: http://bitly.com/rh4p2U

A Young Man’s Guide to Understanding Retirement Accounts: The 401(k): http://bitly.com/oTjZW4

How to Hone Your DIY Skills: http://bitly.com/pg9Mcv

Work For Free. It’ll Grow Your Brand.: http://bitly.com/pKM2RZ

That’s just a small taste of the quality content that I link to every single day on twitter. If you are not already following me, you should do so by clicking here.

The market has been more than crazy over the past several months. It’s a bit depressing to look at all of the losses that I’ve had, at least on paper, but I know that eventually it’ll all come back. Nonetheless it’s definitely scary out there for a lot of people.

I’m interested to know how all of you are responding to the current market conditions. What are you doing with it being so crazy out there?

I’m still throwing just as much into my 401(k) but I’ve not done any individual investing in stocks or any mutual funds for about a month now. The reason for that is mostly because I’m saving cash for certain upcoming expenses. I’m definitely curious what you’re doing and I would love to hear your comments as well!

Good luck out there!

As a personal finance blogger I find it interesting to read other personal finance blogs not only to learn from these individuals but also to see how they perceive money and the world around them. You can always find links to some of my favorite finance blogs in my blogroll, but today I want to talk a little bit about a fantastic personal finance blog that has been around for a while now: MoneyNing.

I bring up MoneyNing for two reasons. The first reason is that David knows his stuff and he is committed to sharing with his readers what he’s learned from his own financial life. The second reason is that I’m actually being featured on his blog today with a guest post that I wrote about my journey to prosperity.

A Journey To Prosperity

For today’s post I’d like to expound a little bit more on the goals that I’ve set for myself on my journey to prosperity. Before you continue reading here you definitely ought to check out Debit and Credits Plan to Prosperity over at MoneyNing (clicking the link will open in a new window) and then come on back for some further clarification.

Ok. Did you read it? What did you think? Please if you have any comments related specifically to that article leave them over at MoneyNing. Otherwise let me help you understand a little bit more about my financial goals.

Being Rich Requires Thinking Rich

Like I mentioned over at MoneyNing I think that being prosperous is so much more than just being lucky. It requires hard work and dedication to achieve wealth. As an example let’s take a look at the worlds richest man, Warren Buffett. This is a man who has worked hard and smart every single day of his life. His wealth didn’t come easy to him, but because he was willing to learn and willing to work hard he’s been able to achieve extraordinary things. Being extraordinary doesn’t just come from hard work though, it requires some level of goal setting and follow-through. Think of it this way: If you want to be rich then you need to learn how to be rich.

I’ve set several goals for myself. Let me share them with you now, along with how I plan to achieve them:

• Be in a position to retire by the age of 55

I will contribute as much as possible to my 401k retirement plan. Currently this number is 10% of my income.
I will make smart financial decisions such as only buying a house that I can easily afford.

• Build my personal net worth to $1 million plus dollars

I will keep my liabilities (debt) to a minimum by buying only what I can afford.
I will make smart investment decisions to grow my net worth at a minimum of 10% a year.
I will continue to save money out of my paychecks beyond what I’m saving for retirement.

• Avoid debt as much as possible

I will not use my credit cards for everyday purchases unless I have the cash set aside to pay them off immediately.
I will not make foolish decisions and purchase things that I can’t afford with cash and that I don’t really need.
When I make large purchases (such as a house or car) I will compare my options and borrow as little as possible.

Those are the goals that I’ve set for myself; my roadmap to prosperity, if you will. Do you have a plan to achieve prosperity? I want you all to sit down and think about what you really want out of life and how you can achieve it. It might require some cutting back at first but in the long-run you’ll thank me, but more importantly you’ll thank yourself.

Here’s a question for you: If you put $5,000 dollars into your 401k plan this year and your employer also puts $5,000 into your 401k plan and over the course of a year your investments lose 40% of their value… assuming all of this, how much would you have lost?

The answer may surprise you.  You’ve actually not lost anything – you’re at a gain on your 401k plan at this point.  Remember that 401k plans are usually matched by your employer, and quite often dollar for dollar up to a certain percentage.  Assuming that the $5,000 you contributed was the maximum that your employer would match you immediately net a 100% return on your money.  After all, you put in $5,000 and so did they.  Now if that entire amount ($10,000 at this point) lost 40% of its value you’re down to a 401k plan value of $6,000 dollars.  All from an initial investment (out of your paycheck) of $5,000.

Guess what that means?  Your 401k plan portfolio has still gained 20%.  That’s a fantastic return on your money by any standard.  Things might be dramatic out there in the world of money, but you have to remember that you are in it for the long run, and with the exception of those who plan on retiring sometime in the next 5 years you ought to maintain your 401k plan investments.

Don’t let the news frighten you, don’t check your investments daily and most of all don’t go looking for bad news without thinking about what good can (and ultimately will) come from the difficulties we are now facing.  But most of all don’t sell out of your 401k plan and PLEASE OH PLEASE continue to invest in it.  You’re practically guaranteed a positive return, even with negative stock returns in the 30-40% range.  After all your employer is likely giving you FREE money, just for taking advantage of their 401k retirement plan.

I’ll be the first to admit that losing money is hard.  I’ve lost a decent chunk of change over the past several months, not only in my individual stock investments but also my 401(k) and a mutual fund.  However I’m here to tell you that you need not worry over it.  The stock market has its ups and downs and right now it’s just on a down note.  Here are the top four reasons why you should not worry about your 401(k) and why you should continue to invest.

1.) The markets average around 10% a year over the long run.

Short-term markets have their ups and downs.  Some years they lose a good amount of their value and some years they do nothing but gain, gain, gain.  It’s difficult to be tolerant of the risks involved in short-term trading so in order to maintain sanity its best to maintain a long-term view of things.  Just remember that your 401(k) might be losing money now, but when its time to retire you should have earned a nice large return off of it.

2.) Don’t forget about the law of dollar cost averaging.

Here’s an important rule to remember.  Dollar cost averaging refers to the ability to reduce risk in an investment by investing a certain amount on a regular basis, rather than investing everything all at once.  This way if the investment doesn’t do so well you don’t lose all of your money.  This rule can also keep you from massive gains, but for those who are less risk-tolerant its truly a blessing.

3.) Economic worries are dragging down the market; these will eventually fade away.

Right now we are in a recession, so to speak.  At the very least the American consumer believes we are and that right there is good enough to create one.  Naturally these economic fears are taking a toll on the financial markets and the stock exchanges.  Be patient and continue to invest and eventually the economy will be back on track and so will your investments.

4.) Buying now will increase your long-term returns.

Some great stocks are severely oversold at this point because of recessionary fears.  This can lead to huge decreases in any funds you might be invested in.  Buying more now while these markets are down will allow your returns to be much higher than they otherwise might have been if you were to just sit still.  So don’t worry about your 401(k) or your other investments.  Just continue to invest and things should start to look up.