WHEN TO GET THE TOOLS

Here's a letter from Jen, who wants to know whether now's the time for her to sign up for professional investing tools.  Read on.

Hi Phil Town,

I'm a single mother (the real kind –no support, no contact from her dad) of a 4-year old.  I have a good secure 100k professional government job with early retirement (I'm eligible in 2019 — at age of 50).  But I'm not mediocre.  I give everything plus to what I do.  The catch phrase on my evals is that I am "passionate" about what I do and this is used as a negative against me.

With 100K in student loans and my 150K mortgages, I pretty much spend every dime I make.

I have great credit, but do not have any commercial debt at this time.
Though, my car is a 1995 with 196,000+ miles and not getting any
younger.  I have a possible health scare that I am working through
(small nodules in my lungs possibly the big "C").  By the end of June I
will know whether things are dire, but the likelihood is I will be
monitoring the condition for several years.  I have paid cash for a
college tuition pre-pay for my daughter and have a fair amount of life
insurance.  That, coupled with my TSP (like IRA), the survivor annuity
from my retirement, and social security should leave my daughter with a
sound financial future.  Even if I quit my job and move back to the
beach, I know I can purchase this financial security for her with the
proceeds from the sale of my home.

So what's my point?  I went to the Get Motivated seminar in Tampa last
Wednesday and I am motivated.  I know nothing about money.  I lack a
basic understanding of money generally, let alone the stock market.
Nevertheless, I was motivated on Wednesday and signed up for the
investing tools class.  I've been playing with it on my own since
then.  I want to take this class (3/25) and I want to try it out.  I
believe I could do it if I put my mind to it, but I don't know if I can
make this work for me given my current circumstances.

I hope you can tell me how you may answer these questions:

If I charged the course ($995.00) and paid it off over 10-12  months at
8.9% interest, and could probably come up with $200-300 to invest, what
kind of return would I need to make over this same time period just to
break even?  Would this be a reasonable goal?

S. Orman says to have six months living expenses set aside before doing
anything else.  I know you are gung ho about this company's tools (and
it helps that your book coincides with their offerings), but honestly,
would you recommend this type of investing strategies to someone in my
current situation? Or would you suggest I have greater financial
stability before embarking down this path?

I want to be giving my testimonial about having transformed my life
with the assistance of your principles and of course the investing
tools which makes it so user friendly!!!  But timing is everything and
I just don't know have the skills to figure out if economically, this
is my time.  Thanks for considering my questions.

Thanks,
Jen

Here's what I told her.

Hi Jen,

You have an amazing attitude for a woman dealing with a really serious
issue.  As serious as it gets.  And yet you are ready to dive in and
make something happen.  Lady, a lot of people could use just a little
of what you got.

So let's look at the question:  Basically in debt deep, running pretty
much on empty but willing to go for it.  Should you invest in good
tools even if you only have a bit of money to invest at this time.
Short answer:  No.

Think about it like this.  You have to get a bit of gas in the tank
first.  You're running too close to empty.  Between the $995 you borrow
and the annual cost of the toolset plus the trading commissions, with
almost no capital to start, you'll eat up your gains with expenses.
Better to put that cash into short term (3 month) treasuries while you
are going through the learning curve and saving money.  Investools will
still be there in a year or two.  Meanwhile you should be using MSN and
Yahoo tools, building up a watch list and doing virtual trading. (For more info, go here.)

And Suze is right.  You need to get rid of the debt and you need the
six month cash cushion.  Nobody knows what tomorrow will bring so it's
better to be prepared than to be sorry, especially when you're looking
out for a child.  But once you are a good Rule #1 investor, your
investment account can act as the cash cushion.  As long as you are
paying attention, there is no need to violate Rule #1, so the cash will
be there when you need it.  Just pull it out of whatever you are
investing in and there you go.  Being a small investor is lovely.  Our
money is always about 8 seconds away from being back in our pockets.

And remember this.  Great investors were great before there were any
internet tools.  Great investing is based on finding a wonderful
business and buying it on sale. The stock market regularly fluctuates
and will bring you your wonderful businesses on sale if you are
patient.

So there isn't any rush to jump in right this minute and buy
something.  You need to find the things you want to buy first, anyway.

So use this time while you are tightening the belt a bit and saving
some of that $100,000 to do some shopping for four or five wonderful
businesses.  Get to know the industry they compete in.  Read about it.
Know who is the best in the business.  Figure out what they are worth
as a business (not as a stock to speculate with but a business to
own).  What would you pay for all of Whole Foods or all of Coke?  Get
comfortable with the idea that you can actually do this and you can
actually make 15% a year or more no matter what the market is doing.

Yeah it's nice to have great tools.  Everybody wants to do more in less
time.  But you can do this with free stuff for a while.  Its a bit more
time.  A bit less obvious.  But MSN Money is an amazing toolset
compared to what we used less than ten years ago.

And don't worry.  It doesn't help.  Take it one day at a time.  Get the
most out of that day.  Be a warrior for yourself and your daughter.

We'll all pray for you.

Now go play.  Really.

Phil Town