301 Finance

The Trouble with Public Colleges and State Universities

2009-05-12T02:40:00.001-07:00

At the 50,000-student University of Florida, only 50 or so undergrads major in geology.

Pretty key things in this era of climate change, especially in a coastal wetlands state like Florida. But Perfit's department may soon be unable to offer so many courses to non-majors. UF fears severe state budget cuts in May and has warned that it may have to lay off half the geology faculty.

Record applications. Soaring tuition. Tighter budgets. State U. may no longer be as great a deal or as easy a backup as it once was. Parents and kids, time to rethink your strategy.

Peter Laumann, a UF senior active in a student group protesting the cuts, says some of his instructors have asked students to stop submitting papers by e-mail.

But now, just when families most need low-cost, high-quality schools, State U. is under intense financial pressure. Arizona State University will be charging a temporary $510 annual surcharge over tuition to get it through the recession (see editor's note).The University of Washington is bracing for a 26% cut in state money, bringing funding back to where it was a decade ago. Meanwhile, families searching for a bargain have deluged some of the better public schools with applications, making them even more selective.

Their average resident tuition of $6,600, or even the $17,500 charged to nonresidents, still pales in comparison to the average $25,000 at the privates.

If you want to make sure your child gets into a great school, and that you can afford to pay the bill when she does, you're going to have to rethink your game plan.

Sources:

By Pat Regnier, Money Magazine assistant managing editor
CNNMoney

Senate Approves Measure to Reduce Home Foreclosures

2009-05-07T09:59:00.001-07:00

The Senate on Wednesday approved a bill that would expand federal efforts to prevent mortgage foreclosures, shield mortgage service companies from lawsuits if they participate in federal loan modification programs, and give renters of foreclosed properties at least 90 days’ notice before eviction.

The bill’s other provisions would make it easier to modify loans and give renters at least 90 days’ notice before being evicted.

The Senate bill, however, did not include Democrats’ most ambitious proposal to aid troubled homeowners: a provision that would have allowed bankruptcy judges to modify the terms of primary mortgages.

The new Senate bill does not include additional money to aid mortgage borrowers, but it does draw $2.3 billion from the Treasury’s $700 billion financial bailout fund for various provisions. The bill also would increase the borrowing authority for the Federal Deposit Insurance Corporation to $100 billion from $30 billion, a move that will save banks billions of dollars by reducing the extra premiums that they would have had to pay to shore up the deposit insurance fund.

“The bill does other things, but certainly, a major target is to deal with peoples’ housing issues and try to stem the tide.” Senator Jack Reed, Democrat of Rhode Island, a main proponent of the bill, had a strong role in the homeless prevention provisions and others that would give the Treasury secretary more latitude in deciding when to use taxpayer money to buy stock in financial institutions receiving bailout assistance.

The Senate bill would provide $2.2 billion for homelessness assistance and up to $440 million for prevention.

Sources

By DAVID M. HERSZENHORN
NYT

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Money Management - Personal Finance Tips For All Ages

2009-05-07T09:41:00.001-07:00

Young people get a bad reputation in society these days. Actually, the concept of blaming ills on younger adults is nothing new. Certainly the non-conformist generation of the 1960’s got their fair share of bashing in their day. Nowadays, young adults contend with many stereotypes, some imagined, others that are real and are completely unique to their generation. One of the preconceptions is that they are not responsible with money. In a lot of cases, that notion is true.

Most college graduates leave school with an average of $20,000 worth of school loans saddled to them. Couple that figure with several more thousand from the numerous credit cards they’ve accepted and possibly even a car loan, and some college graduates can feel as though they’ve lost before they’ve even begun. Irresponsibility and indebtedness is common within younger generations, yet that fact doesn’t make the challenges that debt presents easier to deal with. There are, however, some very real ways to manage debt and to prevent falling back into it.

If young adults are already in debt, then the ship has already sailed on preventing themselves from getting into that trap. It is never too late, however to right the ship. Even though a person may be starting in a harder position, they can always learn from their experiences and add those experiences to their money management-personal finance knowledge.

It’s important to note that debt is necessary for most people and that not all debt is bad. For instance, lenders look upon student loans and mortgages favorably as positive debt if the account is in good standing. Credit cards, though useful at times, are the things that get most young people into trouble. Many credit card companies approach people as young as eighteen with credit card offers, often times on college campuses. If a parent or another guardian hasn’t properly taught a young person of the pitfalls of credit card debt, ignorance and irresponsibility could very well be causes that makes a young person indebted. There is no such thing as a free anything!

To prevent young adults from falling into poor money management habits, it’s important to give them money management-personal finance responsibilities early. In addition, an overall financial education is vital to a responsible view of how money flows through our global economy and how it affects their bank account. For instance, opening a low balance checking account, requiring them to get a job and budget and save income can be key learning tools and a good foundation for young people. Fiscal responsibility is essential to understand how money functions as a tool in our society.

Once they’ve reached adulthood, encouraging young adults to continue to educate themselves about money management - personal finance becomes even more important. The doors that open to further indebtedness are just as vast as the doors that open to financial freedom. An understanding of money as a tool and a respect for it will help to make smarter, more financially savvy adults. It's also important to review that how you see money and wealth is a choice. What will happen is that financially savvy adults teach their children to be financially savvy, and it becomes a domino effect. Think of the doors that would open to so many more people if they chose financial freedom versus indebtedness.

Young adults can learn proper money management-personal finance techniques if they are taught early on in life and stay committed to those principles. Once a young person becomes independent, it’s easy for that newfound freedom to turn into irresponsible spending habits. Young people, with help and the proper money management strategies, can become responsible adult consumers and investors.

Bernanke Outlines the Future of Financial Regulation

2009-05-07T09:39:00.001-07:00

Highlights from Fed chairman’s remarks to the Federal Reserve Bank of Chicago’s conference on bank structure and competition.

Ben S. Bernanke, the Federal Reserve chairman, spoke today (via satellite) at the Federal Reserve Bank of Chicago’s 2009 Financial Structure Conference.

He primarily talked about the need for more than just supervisory “spot checks” — the need for private sector institutions, and the agencies that supervise them, to look at institutions as a whole, not just the individual branches of a given company; how companies interconnect with one another; the incentive structures for compensation; how companies would fare under various market conditions; and what the “possible unintended consequences” of “innovative” financial instruments (presumably things like credit-default swaps).

By Catherine Rampell
NYT
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Jobless At Lowest Level Since January

2009-05-07T09:17:00.001-07:00

New applications for jobless benefits plunged to the lowest level in 14 weeks, a possible sign that the massive wave of layoffs has peaked.

The Labor Department reported Thursday that the number newly laid off workers applying for benefits dropped to 601,000 last week. That was far better than the rise to 635,000 claims that economists expected.

Decline of 34,000 in latest week a possible sign of easing job losses .

The four-week moving average of initial jobless claims, which smoothes out volatility, totaled 623,500 last week, a decrease of more than 30,000 from the high in early April.

In a separate report, the government said that productivity, the key ingredient to rising living standards, grew at a 0.8 percent annual rate in the January-March quarter, slightly better than the 0.6 percent increase that economists had expected. Wage pressures, as measured by unit labor costs, increased at a 3.3 percent rate, down from a 5.7 percent spike in the fourth quarter.

Regulators and economists are not worried about inflation since many workers are more concerned about keeping their jobs in the recession than demanding higher wages. Even with the big drop in new applications for jobless benefits last week, the claims remained at elevated levels. By comparison, weekly jobless claims totaled 372,00 a year ago.

They expect the jobless rate will keep rising through the rest of this year even if their forecasts for an end to the recession in the second half of 2009 are accurate.

Analysts expect the jobless rate will climb to 8.9 percent from the current 25-year high of 8.5 percent. Many analysts expect the jobless rate will hit 10 percent by the end of this year. The rise in continuing claims to 6.35 million was registered for the week ending April 25, the latest data available.

Among the states, Michigan saw the largest increase in claims with 9,998 more for the week ending April 25, which it attributed to more layoffs in the automobile industry, according to the Labor Department.

General Motors Corp. laid out a restructuring plan that includes cutting 21,000 U.S. factory jobs by next year. Microsoft Corp. said it was starting thousands of the 5,000 job cuts it announced in earlier this year and left the door open to even more layoffs. Chip maker Atmel Corp. last week said it would lay off 300 people, or 5 percent of its work force.

Sources:

MSNBC.com

Housing: 'Better' doesn't mean 'good'

2009-04-29T08:47:00.001-07:00

The rate of decline in U.S. house prices moderated in February. Prices fell 2.1%, according to the Case-Shiller composite index of ten cities.

Just because prices briefly slowed their slide doesn't mean it's time to ballyhoo for a bottom.

After all, real estate prices are a key factor in the stress tests the biggest banks are undergoing, right? Not so fast. Better isn't synonymous with good. The decline is less dramatic than January's 2.6% fall, but it's still an awful figure. Prices have fallen 18.8% over the past year, according to the index.

At the end of the year, prices would be 19% lower - worse than the baseline case under the stress tests. And while the idea that price declines are moderating makes sense - prices cannot fall to zero - the evidence they are is feeble.

Spring is also the busiest time for selling homes, so prices tend to be a bit stickier than they are at other times of the year. Finally, the worst declines in February predominantly took place in cities where prices have fallen the most. For example, home prices in Phoenix have already fallen by more than half from their peak. Read more...

Sources:

By Robert Cyran, breakingviews.com

Home Mortgage Applications Drop to Lowest Since Mid-March

2009-04-29T07:56:00.001-07:00

U.S. home loan applications fell last week to the lowest level since mid-March, driven by a big drop in refinancing demand even as mortgage rates clung to record lows, according to the Mortgage Bankers Association on Wednesday. Refinance applications fell 21.9 percent in the week ended April 24, overwhelming the 0.6 percent dip in home purchase loan requests to drag the trade group's total loan index down 18.1 percent.The drop in total mortgage applications brought that index to 960.6, its lowest since 876.9 in the March 13 week.

The rate nearly matched the all-time low of 4.61 percent set in the week ended March 27 and was well below 6.01 percent a year ago.

Still, it remained well above 2,722.7 in early February, when the average 30-year mortgage rate was more than 1/2 percentage point higher. Refinancings represented about 75 percent of all mortgage applications last week, down from a nearly 80 percent share the prior week.

"A combination of the lowest rates in generations and a pretty healthy decline in property values in most parts of the country strikes me as something that certainly is positive for the housing market, although it's hard to predict certainly where the bottom in pricing will be," said Scott Happ, chief executive at Mortgagebot, a mortgage origination software company in Mequon, Wisconsin.

Sources:

Reuters

Obama Administration Expands Housing Aid Plan

2009-04-29T02:35:00.001-07:00

The Obama administration said Tuesday it is expanding its plan to stem the housing crisis by offering mortgage lenders incentives to lower borrowers' bills on second mortgages.

Obama administration launches effort to aid troubled borrowers with second mortgages.

While home prices soared, such mortgages were even extended to borrowers with poor credit scores and people who didn't provide proof of their incomes or assets. That's because borrowers who are trying to get their primary mortgage modified at a lower monthly payment need the permission of the company holding the second mortgage.

The new incentives are estimated to help up to 1.5 million borrowers with second mortgages, Housing Secretary Shaun Donovan said.

As an incentive to modify second loans at lower interest rates, mortgage companies would get $500 upfront for each modified loan, plus $250 a year for three years as long as the borrower doesn't default.

Lenders would also be given the ability to remove second mortgages entirely in exchange for larger government payouts. The administration also plans to give mortgage companies $2,500 payments to entice them to participate in the "Hope for Homeowners" program.

Sources:
By ALAN ZIBEL AP Real Estate Writer
WASHINGTON April 28, 2009 (AP)
ABCNews

Home Prices Drop 18.6 Percent in Feb.

2009-04-29T02:20:00.001-07:00

In another sign the housing crisis could be reaching the bottom, home prices dropped sharply in February but for the first time in 25 months the decline was not a record. The Standard & Poor's/Case-Shiller index released Tuesday showed home prices in 20 major cities tumbled by 18.6 percent from February 2008.

Index shows housing prices falling by 18.6 percent in February, but didn't set annual record.

All 20 cities in the report showed monthly and annual price declines, but half recorded annual records. In fact, Phoenix home prices have lost more than half their value since peaking in July 2006.

"We will certainly need a few more months of data before we can determine if home prices are finally turning around," said David M. Blitzer, chairman of the S&P index committee.

Existing home sales fell just 3 percent from February to March, and new home sales seemed to have hit bottom. Consumers overall are becoming more optimistic about the economy.

By J.W. ELPHINSTONE AP Real Estate Writer
NEW YORK April 28, 2009 (AP)

Sources:
ABCNews

Federal Loan Or Private Student Loans

2009-04-24T10:49:00.001-07:00

Congratulations. You got into college and start in the fall. Now comes a bitter dose of reality. Perhaps the value of your parents' college savings has tanked and maybe the home equity loan they'd been counting on to cover tuition didn't go through and the summer job you thought was in the bag didn't materialize after all.

"Federal loans are cheaper, they have fixed [interest] rates as opposed to variable rates and they're more easily available" than private student loans, says Mark Kantrowitz, publisher of FinAid, a Web site that tracks the college financial aid industry.

Whatever the reason, millions of students rely on student loans to pay for some or all of college. In total, two out of three leave college with student debt. The average: A sobering $22,700 per graduate. (At least they have a degree to show for it; half the students who enter college never graduate, though many are still on the hook for student debt.)

Often, it takes these newly minted graduates one to three decades to pay it off. Given how much, and how long, the commitment is, it pays to know what you're getting--and whether it's the best deal going--before you sign any loan papers.

There are important distinctions between federal and private student loans, but they have one thing in common: neither is likely to be forgiven if you have to file for bankruptcy, making them lasting financial commitments. Unless, of course, you pay them off.

Before you take out a loan, throw aside the cliché that "college always pays" and ask yourself some tough questions. Will salaries in your desired field of study allow you repay the loan?

Put away the rose-colored glasses too. While every law student dreams of making $175,000 as a first-year associate, the reality is that very few earn those eye-popping salaries. Let a large salary be a pleasant surprise, rather than a requirement to pay off debt.

Research the average pay of the field you've chosen by going to the Bureau of Labor Statistics, a federal office that publishes the Occupational Outlook Handbook. Here, you'll find information on projected earnings, expected growth rates and typical work environments for most occupations.

Next, ask potential lenders for monthly loan repayment estimates in writing. It makes little sense to take out $100,000 in student loans to go into a field where you will be making $20,000 a year.

To make sure that you're not getting in over your head, limit the total amount of student debt you take on to the salary that you expect to make the first year out of college. That way, your monthly payments will likely be less than 10% of your take-home salary.

The right choices can save you thousands of dollars from the loans.

What to do if the numbers don't add up? See if there are other ways to finance some or all of your education. The first, and best, way is to limit what you pay in the first place. That means searching for scholarships and grants that may reduce the costs of college. The federal government lists grants (which do not have to be repaid) at studentaid.ed.gov. Private Web sites, such as FinAid, FastWeb and NextStudent, list scholarships.

Once you've minimized how much you'll have to borrow, it's important to keep in mind that there are two main types of student loans: those backed by the federal government and those issued by banks and other private lenders. In almost all cases, federal loans are the better deal for student borrowers.

One key difference between federal and student loans is how they charge interest. All federal loans written after July of 2006 have a fixed-interest rate, which means that the rate that you are quoted will not change for the lifetime of the loan. Private loans, in contrast, typically carry variable interest rates, meaning that they often reset every quarter based upon the interest rates that banks pay each other. Lenders will then add a percentage on top of this baseline rate to your monthly payment. There is no legal limit to the interest rate that private lenders can charge you.

The average private loan currently carries an interest rate of 12%, which is about double what federal loans charge, Kantrowitz says. Though both federal and private loans accrue interest while you are in school, you generally won't have to begin making payments until six months after you graduate.

The best bet? Don't let your enthusiasm for college overwhelm you. Instead, be methodical and have your parent or trusted adviser read over everything and render a second opinion. read more...

Sources:
David K. Randall from Forbes.com

Is it time to buy American Express?

2009-04-19T10:17:00.001-07:00

American Express is feeling the consumer's pain. In the fourth quarter of 2008 the credit card giant's earnings fell 79% from the year before as consumers spent less, more customers failed to make payments, and charge-offs for unrecoverable debt increased.

Of its four main businesses - including international and corporate credit cards, and expense management - the U.S. credit card business has been hit hardest.

The credit card giant has been hit hard by consumer woes, driving the stock down to 1997 levels.

To adjust, the company has slashed expenses and reduced credit limits for some cardholders. But still, its stock, down 52% over the past year, now trades at 1997 levels.

Is AXP (AXP, Fortune 500) a value at this price? We asked two analysts for the answer.

Bear: Don Fandetti, Citigroup

The first words out of any investor's mouth about American Express are, "They grew too fast from 2005-07." We rate it a hold.

They have more exposure than other credit card companies in hard hit regions like California and Florida. And they tend to service the higher-end consumer. That's where this downturn is different than others. Spending, in particular discretionary spending, is slowing on the high end.

One key is that AmEx did not take a big write-down last quarter. It needs to do that at some point in 2009 to account for higher charge-offs. Charge-offs are going to go up to around 12% in mid-2010, from 8.6% in February.

The other problem is the consumer. AmEx's billings will fall by a high single-digit number this year. In the last quarter it was down 10%. There's going to be an extended period of less spending. And AmEx is very leveraged to spending trends - half of its revenues come from its billed business and the fees charged to merchants when members make purchases. The savings rate already moved up to the 5% range from being negative. The consumer is deleveraging, just like a hedge fund.

One positive is that there is anywhere from $8-$15 of per-share value from the card network processing business. That will support the stock.

Once investors get comfortable with the economy, they're going to want to buy this stock - it's a great brand and company. But it's still too early.

Bull: Robert Napoli, Piper Jaffray

The key, and what people are missing, is that American Express can handle high charge-offs and still generate profits. Historically, it has traded at 20 times normalized earnings. If you believe earnings power is $3 a share when the economy stabilizes - in mid- to late-2010 American Express should be earning at historical levels as we get through this - we're now trading at five times earnings power.

American Express can remain profitable at a 12% U.S. unemployment rate for a full year. It's not easy. But because fee income from its credit card processing business is 80% of revenues, they're much less credit sensitive than other credit card companies like Capital One (COF, Fortune 500), for example. If unemployment goes up 1%, and spending goes down, that has three times the negative effect on Capital One's earnings than it does on American Express's because of all the fee income that American Express generates.

I admit American Express screwed up. It grew too fast from 2004 through 2007. Still, it did not loosen credit to a significant extent. Its customer base is a premium customer base, and its average FICO score has not changed much from prior to the cycle to today.

The economy is not free falling like it was three months ago. So as that $3 earnings power becomes clearer, the more dangerous being bearish on it is.

Also, the company is cutting out $1.8 billion of expenses this year and restructuring. These are permanent expense cuts. I'm not saying it all goes to the bottom line, though it could. Our target price is $36.

Source:
By Scott Cendrowski
Fortune Investor Daily

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How To Nab A Low-Rate Home Loan

2009-04-18T21:46:00.001-07:00

On paper it seems like the perfect time to refinance. The average rate on a 30-year fixed mortgage recently hit a 20-year low when it fell below 5% in mid-March. And the Fed has said that it will spend $300 billion to buy back government-backed Treasury bonds; that will probably keep loan rates low for months to come.

Getting a new loan can save you a bundle, but cautious lenders will make you jump through hoops. These strategies can help.

But wade into the mortgage market, and you may quickly feel as if you're trying to grab a dollar in a game-show booth where the money is blowing around: Those ultralow rates are right in front of you, yet maddeningly elusive.

Lenders, grappling with deadbeat homeowners and shifting regulations, have pared back on mortgage products and upped credit requirements. Still, you have a good incentive to try: If you took out a mortgage two years ago, when rates were in the mid-sixes, you stand to drop your rate nearly two percentage points, saving almost $300 a month on a $300,000 loan. Here's how to navigate the roadblocks.

Figure out if you qualify. Nowadays, credit score and equity are king. To land the best rates, you'll probably need a credit score of at least 740, and 20% equity. "Banks are looking for reasons not to lend you money," says Mark Miskiel of Lighthouse Mortgage in Sedona, Ariz.

If you don't have 20% equity, a refi isn't out of the question - President Obama's housing package allows homeowners who owe as much as 105% to receive government-backed loans. To qualify for that program, however, your original mortgage must be held by one of the government-sponsored entities, Freddie Mac or Fannie Mae; you must prove that you can keep up with payments; and you'll get stuck with fees that tack 0.25% to 3% onto your rate.

Get rid of the HELOC. Home-equity loans and lines have become the enemy of would-be refinancers. Before you can close on a new loan, your home-equity lender must agree to "subordinate" the secondary loan (meaning that your primary lender will get repaid first in the event you run into financial trouble). That can take at least a month, says Bob Moulton of the Americana Mortgage Group in Manhasset, N.Y.

One way to speed up the process is to do a consolidation refi through your home-equity lender. If that's not possible, aim to submit the subordination paperwork as you start shopping for a primary mortgage. And know that other lenders may add up to 0.25% to your rate to cash out the secondary loan.

Know where to look. No matter how stellar your credit, you won't get a great rate without doing some serious shopping. That's because every bank is using different standards for underwriting loans, so while you may look like a risky borrower to one, another may welcome you with open arms. In general, says Keith Gumbinger of mortgage data firm HSH Associates, you're likely to get the best rates from small local banks and credit unions.

Unfortunately, if you need a jumbo loan (typically $417,000, but it can go up to $729,750 in high-cost areas), you can kiss those super-low rates goodbye. While jumbos normally run about half a percentage point higher than smaller ones, today the spread is a point and a half.

Pay a point upfront. A point, which equals 1% of your mortgage amount, typically buys you an eighth to a quarter of a percentage point drop in your rate. Today some overloaded lenders are knocking half a percentage point off for those who pay a point, hoping this extra initial cost will deter serial refinancers.

If you're planning to stay put for about five years, it may be worth it. Conversely, consider adding an eighth of a percentage point to your rate to lock it in for 45 days. Banks and lenders are putting a lot more effort into vetting applications, so it can take up to two months to close a loan, vs. about 30 days in the past; you don't want to risk rates' moving against you while you wait. The payoff for patience: a loan you can live with, for a very long time.

Not so long ago, having a pulse qualified you to take out a mortgage. These days lenders are vetting applicants with the ardor of a Senate committee grilling an AIG executive. Here's a summary of what's changed.

Sources: Carla Fried, Money Magazine

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Financing in Modern & Creative Ways

Personal Finance Do's and Don'ts

2007-10-09T08:51:00.001-07:00

Every single one of us, no matter our location, age, gender, hair color, family background or race has to manage our personal finances.
For some, it’s an exciting passion, a never-ending game of “how much can I accumulate in one lifetime”. For others, it’s just part of life, something that needs to be dealt with but doesn’t border on obsession. And finally, for many of us, personal finance is nothing but drudgery at best and an emotional trigger at worst.

Every single one of us has to manage our personal finances. Fortunately, there are a few simple rules that will help anyone stay on track, and reduce the amount of stress involved when it comes to making sure personal finances are well in order.

Fortunately, there are a few simple rules that will help anyone stay on track, and reduce the amount of stress involved when it comes to making sure personal finances are well in order.

Do get organized: Even if you’re a “messy”, this is crucial. You’ll miss important due dates, pay exorbitant late fees and possibly get into serious debt (or credit trouble) if you don’t have a handle on what you owe and when you owe it. A simple rule of thumb: the messier you are, the simpler your system.

Do draw up a spending plan: Every dollar that comes into your household goes out in one way, shape or form, even if it’s to a savings account. Know where your money’s coming in and where it’s going. Without this information, you can’t possibly make wise financial choices. Overwhelmed by the thought? Ask a financially responsible friend or relative (whom you trust) to do it for you. You can’t argue with success and they can help you make the hard decisions when it comes to having to “trim” spending in certain areas.

Don’t cut out all your fun: Decide, along with your family, what’s most important to you in terms of living a happy life. Then divide up your budget accordingly. If your family really enjoys eating out, plan for it. Just keep in mind you may have to spend a lot less on groceries or clothing. If none of us are the same then our spending plans shouldn’t be the same. If you love to read then cutting back on cable TV wouldn’t be a problem. If you love to watch sports, then cutting back on cable TV would be a serious problem.

Do allow impulse spending: You read it correctly. Unless you plan for a certain amount of miscellaneous, unexpected expenses in your spending plan, you’ll always feel as though you’re blowing your budget when you pick up items you weren’t planning to buy. Just like anything else, give yourself a “buffer”. A side benefit: you get to skip the guilt when you pick up that neat velour Elvis on the boardwalk.

Don’t use your local bank: Unless you absolutely have to. Check out all available credit unions first. In most cases, they’ll have better rates and more friendly policies on everything from fees to lending practices. Each dollar you deposit buys you a share, or membership, in the credit union. So instead of being a customer you’re actually a “member”. Like the ad says, membership has its privileges.

Do use a debit card with protection: Before you use a debit card, make sure your checking account is safe in case you lose your card or it’s somehow stolen. Also make sure you have the right to reverse charges in case merchants don’t provide the goods or services you purchased.

Don’t buy a new car: Considering the fact that new cars depreciate thousands of dollars as soon as you drive them off the lot, can anyone explain why buying a new car would be a good idea?

Do run numbers before every major financial decision: Conventional wisdom works most of the time. But there are always exceptions. For example, in most cases, it doesn’t make sense to borrow from a 401(k). But there are instances where it’s financially beneficial. You’ll hear it preached from the rooftops that you shouldn’t use a home equity loan to pay off credit cards, or that debt consolidation loans are nothing but trouble. But if you’re financially responsible and ran into some tough circumstances, a HELOC or debt consolidation could be a lifesaver. Search online for calculators that will help clarify the situation. Numbers don’t lie.
And finally, perhaps the most important “Do” of all…

Do remember that personal finance is just that personal: Everyone loves to give advice, and everyone loves to share their opinions. What worked for your mom and dad may not work for you. On the other hand, they probably have years of wisdom you can draw from.

Consider your personal finances an extension of who you are and where you’re going. Study the topic, and take the time to develop your own unique strategies when it comes to saving, spending and investing. During this information age there’s never been a better time to find the facts you need, in record time.

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Understanding Business Tax Write Offs

2007-09-25T16:43:00.001-07:00

A tax write off is the same thing as a tax deduction, and if you don’t know what expenses are legitimate deductions on your tax return, you won’t know what you can legitimately write off either. In the case of tax write offs, what you don’t know can be very painful indeed.

Tax write offs are taken by business owners and are items which in normal circumstances might not be allowable deductions but become so when the situation of a business changes.

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Because the amount of taxes a business pays are based on the income it gets, a debt which not been paid, or receivables which never show up can be categorized as bad debts and written off. You have to declare any bad debts but do not have to include them when you calculate your income for your annual return.

Loans: If you have loaned your personal funds to help support your business, you can write them off, even though you may have referred to them as income in order to raise the net worth of your business for borrowing purposes. But they remains loans, not income, and cannot be subjected to tax. And if you’ve taken a business loan from a third party lender, you may be able to get a tax write off on the interest payments.

Pension Plans: If your business has less than a hundred employees and you are providing them with pension benefits, you can get a tax credit and it will be deducted not from your business’ gross income, but directly from the amount of money you owe in taxes. This may not be called a tax write off in the IRS literature, but for all intents and purposes it is.

The government is concerned that social security will not be adequate to fund the retirements of millions of Americans, so it does what it can to encourage businesses to look out for their employees. You’ll help your workers, and the tax credit/tax write off will help your business’ bottom line.

You can also take a tax write off on any state and municipal taxes which your business pays. This write off includes both state and municipal income taxes and state and municipal sales taxes, deducting them from your total taxable income.

Travel Expenses: While the IRS regulations are somewhat vague on the matter, you can claim a tax write off on trips during which you spend more time devoted to business than to pleasure. You can keep records of your transportation costs, like cab fare, air fare, and rental car expenses. If you drive your own vehicle, you can take a write off for the mileage.

Do Hedge Fund Need Regulations

2007-09-15T09:08:00.001-07:00

The popularity gained overtime and the ever-increasing crowd of investors in the hedge fund industry has augmented the need for higher degree of regulation in the hedge fund market.

Hedge fund investing guide 101
Before investing one should first have a basic idea of what hedge funds are all about. A hedge fund is characteristically a privately organized joint investment fund, predominantly invested in public traded securities...

Hedge funds are very similar to mutual funds except that there are fewer regulations on hedge funds. As a result hedge funds require a much larger investment. Hedge funds are very reticent, that is, they are private, between individuals, and do not have to be made known to the government or other companies. This allows hedge funds to be free from the regulations that mutual funds have to adhere to. Because of this large companies move undisclosed amounts of money and gain significantly without authorities noticing. This reticent nature of hedge funds makes them look suspicious and leads to many apprehensions in the minds of the investors, such as; these funds are unethical, speculative and risky. Also their high price tag and the extravagant amount of money required for their initial purchase makes people think that the investors are being hood winked into putting money into these funds. Only ensuring high levels of transparency in the working of the hedge fund industry so that an investor knows exactly where his money is going can clear these apprehensions.

Moreover, better regulation will produce more accountable hedge fund managers in future and the investors would be able to simply research the background of a hedge fund manager before entrusting their money into his hands.

Research Guide about Hedge Fund
The origin of Hedge Funds dates back to the year 1948 when Alfred Jones, a Harvard University graduate, while writing about current investment trends was inspired to try his hand at managing money...

Another negative aspect of the non-regulation of hedge funds is that there are no official hedge fund statistics. Most hedge fund holders are large companies and hence, little is known about their financial movements. Hedge funds are based in offshore jurisdictions, making them look even more suspicious. For instance, unlike mutual funds that have a base in large cities like New York, hedge funds are based in places like Bermuda, Cayman Islands, and the Virgin Islands.

Hedge funds also have a higher failure rate than traditional funds. Many of them fail by the second or third year of operation. It has been estimated that about 5.7% of the existing 8500 hedge funds closed in 2005. This vulnerability to quick falls that can be detrimental and can lead to sudden losses can be brought down with the help of regulations.

In London, the techniques used for the hedge funds operating from there, have bothered the Financial Services Authority. Hence, to check the functioning of this industry, the FSA has now decided to start regulating hedge funds and their managers. Also, a special hedge fund unit has been set up to determine how the London hedge fund industry which has been estimated at £500-billion, can be controlled better.

However, the Canadian Securities Administrators that is the umbrella organization for Canada's provincial securities commissions has decided that the currently existing rules for investment vehicles are sufficient to regulate the burgeoning Canadian hedge fund industry (a $30-billion industry). This implies that no additional rules and regulations would be laid down specifically for hedge funds in Canada.

Thus, with the proper regulations in place, the clouds of suspicion and uncertainty that are hovering over the hedge fund industry will certainly clear up and would pave the way for a much safer hedge fund market that would attract a larger number of investors.

Hedge fund investing guide 101

2007-09-09T06:50:00.001-07:00

Hedge funds have become a new craze among the investors who are looking for higher net returns and to diversify their investment portfolio.

However, before investing one should first have a basic idea of what hedge funds are all about. A hedge fund is characteristically a privately organized joint investment fund, predominantly invested in public traded securities. It is a pool of invested capital, used mainly by wealthy or financially experienced individuals and institutions.

Tock Research - As Hedge Fund Industry
Both the hedge fund and private equity industry had free rides during George Bush's Administration when the Congress was safely in Republican hands. All that changed in November 06 when the Democrats swept the Congress, and with the change in control came new Democratic responsibilities to...

Usually, law to just 50 to 100 investors per fund restricts hedge funds. Thus, most hedge funds set very high standards for an individual to be a qualified purchaser. Most often, an investor with a net worth of above one million dollars and an annual income exceeding two hundred and fifty thousand dollars is only considered as a qualified customer. Hedge funds are very similar to mutual funds. The difference between the two is of strategies they use. Hedge funds use a set of strategies other than investing long in bonds, equity, mutual funds and money markets. Thus, its strategies can generate positive returns irrespective of the rise and fall in the equity and bond markets.

One way to invest in hedge funds is to invest in a company just before a major merger, as shares go up significantly once the merger occurs. This technique is called ‘Risk Arbitrage'. However one should have a prior knowledge of the merger before buying large amounts of shares in a company, as it is a very high-risk investment strategy since some mergers may not occur at all. Another technique, which one may adopt while investing in hedge funds, is ‘Leverage'. This means using borrowed capital in to own capital for investment. ‘Selling Short' is also a popular strategy where one invests in apparently undervalued securities, trading commodities and FX contracts, and takes advantage of the difference between current market price and the highest purchase price in events such as mergers.

Even though most hedge funds promise higher net returns, they are accompanied by some limitations. For instance, in case of many hedge funds, there are certain restrictions on one's right to redeem his shares. Often, there is a lock-in period that can extend to over a year. During this period one cannot redeem his shares. Hence, one should reconsider his options and take into consideration a long-term perspective before investing in hedge funds.

Research Guide about Hedge Fund
The origin of Hedge Funds dates back to the year 1948 when Alfred Jones, a Harvard University graduate, while writing about current investment trends was inspired to try his hand at managing money. He followed...

Moreover, hedge funds also have a higher failure rate than traditional funds. Many of them fail by the second or third year of operation. It has been estimated that about 5.7% of the existing 8500 hedge funds closed in 2005. Also, because of their non-regulation there are no official hedge funds statistics. Besides, hedge funds are more suited for large businesses because they have a price tag.

However, hedge fund is a very helpful tool for the diversification of one's investment portfolio. It reduces the overall portfolio risk and volatility, as it is not related with the broad stock market indices. Thus it is a smart choice for those who are willing to take the risk.

Tock Research - As Hedge Fund Industry

2007-08-30T00:02:00.001-07:00

Both the hedge fund and private equity industry had free rides during George Bush's Administration when the Congress was safely in Republican hands. All that changed in November 06 when the Democrats swept the Congress, and with the change in control came new Democratic responsibilities to address the fiscal deficits generated during the time, the Republicans controlled both the executive and legislative branches of government.

All About Hedge Funds : The Easy Way to Get Started
by Robert A. Jaeger

Explains how any investor can take advantage of the high-potential returns of hedge funds while incorporating safeguards to limit their volatility and risk. This clear-headed, commonsense guide tells investors:

What hedge funds are and what they are not
Four key hedge fund strategies
How to incorporate hedge funds into an existing portfolio
Types of risk involved in hedge fund investing

It is strange to ponder, but the Republican Party which is considered by most to be the party of fiscal responsibility has probably generated 80% to 90% of the nation's accumulated national debt. Nevertheless, myths still persist that the Democrats are the big spenders. Just today, the major newspapers featured articles stating that Bush says Democrats must control spending.

Now there are only two ways to deal with spending. The first is to spend less, but no politician likes that concept. The first rule of government is that politicians regardless of party spend money. The second way is to raise taxes in an attempt to close the gap between spending and revenues taken in. With the Democrats in power, they will use the second method, which now brings us to Hedge Funds and Private Equity.

Under the provisions of the current tax code, both Hedge Funds and Private Equity are given preferential tax treatment. Certain items of income which might be considered subject to ordinary income tax rates are instead subject to 15% capital gains tax rates. As for the equity of this policy, the quick and dirty of it, is that there is no equity or fairness. The tax code is 80,000 pages of special interests. Every provision in the tax code was written in a certain way to benefit some one, or some special interest, whether it's the farmer or a hedge fund, or the restaurant industry. Everybody exercised their political muscle at one time or another to get what they could out of the tax code.

These special interests just head down to Washington DC and meet with the people who control the Congress, go to fancy restaurants, and try to re-work the tax code to benefit themselves. The latest journeyman to Washington is none other than Henry Kravis, the man who made the private equity industry what it is today, through the formation of Kohlberg, Kravis, Roberts and Company (KKR). Democratic Congressman Sander M. Levin is proposing to more than double the amount of taxes Kravis now pays. Kravis is a billionaire several times over, and he's still looking to cut his tax bill. Whatever happened to giving back. Whatever happened to Andrew Carnegie's approach to civic responsibility?

The Congressman's staff asked Henry Kravis very pointedly, if increasing taxes on private equity would adversely affect workers and other middle income type families by distinctly lowering returns that pension funds got on their investments. When Kravis answered "No", the meeting ended abruptly.

In other meetings, Stephen Schwartzman who founded the Blackstone Group, and David Rubenstein, who co-founded the Carlyle Group have met with other regulators in an attempt to stall the tide. Lobbying groups are being set up in a hurry, and money is being poured into them by private equity and hedge funds, who up until recently were asleep at the switch. They did not realize to what extent Washington has had them in their gun sights. For more on this topic, please visit our website.

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Protecting Your Credit Card Information Online

2007-08-26T08:55:00.001-07:00

One of the biggest trends of today's world is shopping online. It is convenient, easy, and saves a great deal of time, not to mention that it, in many cases, saves you a great deal of money at the same time. However, while shopping online is the latest and greatest trend for consumers, hackers and other dishonest people have also turned to online shopping as a way to obtain credit card information for fraudulent use.

You take a risk every time you use your computer and the internet to do your shopping, however, if you know what to do and what to look for, you can take steps to ensure that you do everything possible to protect your credit card information.

Fraud Prevention Techniques for Credit Card Fraud
by David A. Montague

Effective credit card fraud prevention programs can increase sales revenue while decreasing administration costs and fraud losses. Learn the techniques and strategies to feel secure about accepting credit cards.

Safe and Secure – That's the Ticket
Before you start shopping on ANY website and provide your credit card information, you want to be sure that the website you are shopping with has taken measures to secure your order and payment. There are two specific things you want to look for:

Encryption Sign
Secure Website Address

The encryption sign can be found on the bottom of the webpage you are viewing. This typically looks like a padlock. An "open" padlock indicates that the website is not secure. It will not encrypt your credit information when you provide it. A "closed" padlock indicates that the site is using security and encrypts the information you provide. Typically, this is shown on the website page that is asking for this information.

A secure website address is a good way to tell that the information you provide is secure as well. When asked to provide your credit card information look at the website address. https:// indicates a secure website; http:// indicates that the website is not secure.

Check Your Credit Card
It is advisable to make sure you understand the terms and conditions of your card, as well as benefits. Use only cards that protect you and your liability if something were to occur. Some credit cards protect you entirely against credit card fraud while others will have a liability limit.

It is a good idea that you keep track of your credit card statements and your purchases. If you notice things out of place, it is important to contact your credit card company immediately to take action and remedy the situation.

Know Where Your Information Is Going
It is important to read the terms and conditions of use for the website you are shopping from, as well as the privacy policy. The information contained in both of these documents should inform you as to how, when, and where your information is stored, if it is at all. The most important thing in protecting your credit card information is that you trust the website you are conducting online shopping with. Some things to ask yourself include:

Does their privacy policy protect my information?
Does the company sell my information to other companies?
Did I read the fine print and understand it?
Does the company store my credit card information?
If so, where is this information stored? An online database, their own business files, or both?
When filling out credit card payment forms, what information is required?

The security for many online shopping sites has been beefed up. At one time, it was only necessary to provide your credit card number, expiration date, name, and address. Well, it turned out that hackers and scammers had the ability to obtain this information in multiple ways. Now, more and more sites are requiring that you provide the CVC2 code, which is a series of three digits located on the back of the credit card.

Make sure the site you do your online shopping with is secure, safe, and requires the information you deem pertinent to ensure fraudulent activity does not occur on their site.

Year End Financial Tips

2007-08-24T07:46:00.001-07:00

When year-end is fast approaching, taking a few minutes to give your finances an once-over will help ease the post-holiday money hangover. By completing just a few tasks, you will save money on your taxes, make your tax preparation much less stressful and give you a bit more peace of mind during this hectic holiday season.

At Work
Use up your flex spending dollars at work. If you don’t, you will lose it! This is for those extra medical expenses (eyeglasses, prescriptions). Don't miss out on saving those hard earned dollars. Schedule those doctors’ appointments or get those new glasses you need. Plus, there are some over-the-counter drugs that some flex-plans cover, such as Claritin and Zantac. Check with your HR department about new items that are now covered. If your company offers a flex spending account and you don’t take advantage of it, you could be missing out on saving hard earned dollars. If you are self-employed, you can check out a medical savings account to get similar benefits. If you haven’t already, maximize your retirement contributions for your 401(k) or self-employed retirement plan. Also, if you have moved recently, let your employer (or previous) know therefore you can get all your W-2 forms together. This will save you so much time when you are doing your taxes.

At Home
It’s time to clean out your closet. Donate any clothing or other items you don't use any more to your favorite charity. It is a great tax deduction! Make sure you keep your receipts. You can also attend a charitable benefit (another reason to celebrate with friends and support a good cause). If you itemize your deductions, it should help save money on your taxes. Consider setting up an automatic savings plan. Why not get a head start on your New Year's Resolutions? Start small, $50 a month, and then raise it in 6 months. You will be saving so much money without even thinking about it. If you already have one, raise the monthly contributions by $100.

Your Investments If you are expecting a tax refund, get your paperwork together now (i.e. charitable donations, work-related expenses, brokerage account statements, medical receipts)! You will have a head start on collecting your refund - and putting it straight into the bank - which will save you time and get you your money sooner. Even if you are not expecting a refund, this is a good time to start collecting information for your taxes. You should also put off buying any mutual funds for your taxable accounts until January 1st. Many mutual funds declare capital gains in December and you could be hit with a tax bill right away.

Now, when January 1 rolls around, you can start thinking about your New Year’s Financial Resolutions with a head start.

Related Post:

Let Your Tax Attorney Answer IRS Questions

2007-08-24T07:36:00.001-07:00

The beginning thought of T.S Eliot’s masterwork “The Wasteland” states that “April is the cruelest month,” and while his poem deals with themes far more universal than tax time in the US, millions of American taxpayers can only nod their heads in agreement at its opening words. But those taxpayers for whom April has added insult to injury in the form of an IRS or state tax board dispute, a tax attorney can be a longed-for ally.

Tax This! An Insider's Guide To Standing Up To The IRS
by Scott M. Estill

Written by a former IRS attorney, Tax This! gives you an edge in dealing with the IRS by showing you how to level the playing field and win at the tax game.

Having to come face-to-face with any tax authority, be it the IRS or at the state level, can be very intimidating for most average taxpayers. And taxpayers who try to deal with tax authorities on their won may find themselves completely immersed in legal speak which they do not understand, and agreeing to things contrary to their own best interests.

Entrepreneur Tax Guides & Tips
Your accountant depends on you to provide the details on all your income and expense transactions so they can apply the most advantageous tax strategies. Documentation is the key to sustaining all tax positions. Without documentation it is easy for the IRS to call foul and deny your tax position. Or even worse penalize you with back taxes and interest.

By hiring a tax attorney, you as a beleaguered taxpayer can have someone speaking the same language as the authorities and interpreting what they are saying in easy-to-comprehend terms. A tax attorney will also be able to help you dial down the stress level a few notches by letting you know when the taxmen are bluffing you.

When To Call A Tax Attorney
If for some reason you find yourself in the position of being in debt to the Internal Revenue Service, and thousands upon thousands of taxpayers are, you should not waste another minute before contacting a tax attorney. A lawyer trained specifically in tax law, a tax attorney can find you the quickest and least expensive way out of your predicament.

Giant business entities have stables of tax attorneys on retainer simply to keep them from running afoul of the IRS Tax Code. A tax attorney can address your tax issues regardless of their nature, from the failure to file, to audits, to property seizures and liens, to wage garnishment.

Is It Really Worth it?
While the cost of hiring a tax attorney may at first seem prohibitive, you will save far mire in the long run than if you let the IT run roughshod over your bank account. The IRS is interested in only one thing: getting what you legitimately owe and whatever penalties they can tack on to it. A tax attorney will negotiate the best possible terms for you and that can mean a significant reduction in penalties.

If you have the IRS coming after you, hiring a tax attorney is the best way of protecting your interests. All the effort you have put into building a life for you and your loved ones can be wiped out with a single IRS decision, and you need someone who talks the IRS’ language to speak for you. Your accountant, if you have one, may be able to recommend a good tax attorney; otherwise, you can contact the American Bar Association. If you are lucky enough to find a tax attorney who is also a CPA, you’ll improve your odds of a fair outcome even more.

Entrepreneur Tax Guides & Tips

2007-08-24T07:19:00.001-07:00

One of the most popular myths among business owners is that their accountant will take care of their taxes. FALSE! All the numbers included in your tax return are your responsibility. Your business transactions create the numbers not your accountant. Essentially, your tax return and the amount of your deductions are only as accurate as the records you have maintained and provide to your CPA.

Tax Savvy for Small Business: Year-round Tax Strategies to Save You Money
by Frederick W. Daily, Diana Fitzpatrick

Tax Savvy for Small Business provides valuable strategies that will free up your time and money for what counts -- running your business, and running it effectively.

It explains how to:

deduct current and capitalized expenses

write off up to $105,000 of long-term assets each year

compare the advantages of LLCs, corporations, sole

proprietorships and more

take advantage of fringe benefits

keep records that will head off trouble with the IRS

get tax breaks from business losses

deal with payroll taxes

negotiate payment plans for late taxes

handle an audit

get IRS penalties and interest reduced

maximize retirement funds

use retirement funds as a tax break

Your accountant depends on you to provide the details on all your income and expense transactions so they can apply the most advantageous tax strategies. Documentation is the key to sustaining all tax positions. Without documentation it is easy for the IRS to call foul and deny your tax position. Or even worse penalize you with back taxes and interest.

The IRS unlike a court considers you guilty until you prove you are innocent. The burden of support is on you.

So what can you do get start putting more money back in your pockets and audit proof your tax returns?

Build a Documentation System
The system should include three components: permanent files, monthly files and daily files. Permanent files would include your prior years’ tax returns, stock buy and sell confirmations, contracts and real estate records. Monthly files would include invoices, cash receipts, canceled checks and payroll support. Daily files are basically your appointment book. We will provide tips in later articles on how to beef up your appointment book as it is an overlooked area where many deductions are missed.
Never Use Your Personal Checking Account or Credit Card for Business Purposes
This is a tough one for young businesses but I always recommend to my clients that they should separate the two as soon as possible.
Have All your Records Digitally Imaged
Your accountant should be taking advantage of imaging technology and putting all the records you provide them into a digital database. This will help to guarantee they are maintained for the required 3 years. In addition, I also recommend to all my clients they prepare a digital video for all their personal and business assets. Video everything in your home and business. This will help if documentation gets lost and it will also give you solid evidence to support an insurance claim. Unfortunately, you never know when a fire or burglary might occur.

When you’re prepared the IRS or insurance examiners have a lot less ammunition to fight you with.

Related Post:

Dow Jones Industrial Average Explained

2007-08-22T21:47:00.001-07:00

We see the numbers nightly on the evening news. The Dow Jones Industrial Average may be up 100 points one day, down 30 the next. But what happens when the Dow rises 100 points? Is that a good day? Or just an average one? Measuring the markets can be a daunting task if you don’t know what to look for.

Investments: Analysis and Management
by Charles P. Jones

Teaches readers not only how to identify successful investment opportunities, but how to anticipate and deal with investment problems and controversies. Jones carefully and gradually develops key concepts, while covering all the necessary background material. Only essential formulas are included. It's one of the most readable, comprehensible investments titles available!

Details the variety of securities available, the markets in which they are traded, mechanics of securities training, and insight into the important concept of risk and return.
Examines portfolio analysis, valuation and management of stocks and bonds.
Complete discussion of Exchange Traded Funds, operations on NYSE and NASDAQ, margin trading, electronic communication networks, global investing, and technical analysis.

Actually the Dow Jones Industrial Average (sometimes known as the Dow 30, the Blue Chips or just the Dow Jones) is only one of several markets on Wall Street. Every evening, with the Dow numbers, you may see the NASDAQ or the S&P 500. These are some of the other markets. But it is the Dow 30 that is the most recognized and most talked about market.

A journalist named Charles Dow first created the market indicator. In the late 1800’s, people on Wall Street found it difficult to interpret the clutter of numbers tossed around on a daily basis. Some companies would be up an eighth of a point or down a half. It was easy to tell how a company was doing if it had a string of down days, but it was much more difficult to figure out how the market was doing as a whole. On May 26th, 1896, in an attempt to clear the confusion, Dow started putting out a nightly report in which he combined the daily results of 11 stocks. Railroad industries were the big traders of the day, but when utility companies started to come along, the number of industries in the report jumped to 20. Today, the Dow holds 30 companies. You probably recognize most of them. They are some of the biggest names in American business- General Motors, Microsoft, Coca Cola, 3M, Disney, IBM and Exxon are just a few. It is a rare occurrence for these businesses to change. Coca Cola has been listed since 1932. We’ve seen GE since 1907. This is why the Dow is the most talked about market on Wall Street. Because these are the most established business in the country, the Dow30 provides the best indicator of how the market, as a whole, is doing.

Historically, there have been good times and bad times for the Dow Jones. During the Great Depression, the markets were performing so poorly, and so many people were losing all the money they had, some turned to suicide. It was only after the bombing of Pearl Harbor and the start of World War II, that the markets started to turn around. The call for war supplies boosted many industries and secured their bottom line. During the economy boom of the late 90’s, the Dow traded around 11,500. However, just a couple of years later, in the middle of an economical recession, it hovered around 7,500.

Daily, investors buy a tiny piece of these Blue Chip companies. These pieces are called shares. The value of these shares goes up or down depending on how many people buy or sell these shares. If several people buy shares of the company on a particular day, the value of one share will go up. If several people sell shares, the value will go down. For example, if you buy 1 share of “Company X” at $10, and over the course of the day, the value of the shares go up to $11, you just made $1. Many times, these numbers are reported in percentages. In this example, “Company X” gained 10%. However, if the value of the share goes down to $9, you lost $1 or 10%. Easy, isn’t it? This is the simplest of examples, however. Companies in the Dow see millions and millions of shares exchanged in a single day. Generally, if the company is doing well, more people will buy shares, and the value will go up. However, there are several factors that decide if a company is doing well. If a report comes out stating “Company X” didn’t reach their sales goals for a particular quarter, investors might see that as a bad sign and start selling shares. This would decrease the value of a share. If “Company X” surpassed their goals, investors will see that as a good sign and buy more shares, thus increasing the value. If only it were that easy. Because companies can’t control what people think, many times companies have little control of the value of their company. For example, let’s say both “Company Y” and “Company X” sell widgets. If “Company Y” sees a bad earnings report, investors might see that as a bad sign on the entire widget industry, and start selling their shares of “Company X” as well. World events also play a major role on how the markets do. Usually, these events have a negative affect on the market initially. Sometimes, the market recovers within a couple of months. Sometimes they don’t. The day a gunman assassinated President Kennedy, the Dow fell 2.89%. A year later, the market gained 21.58%. The day the Federal Building in Oklahoma City was bombed, the Dow gained .68%. One year later, it was up 14.07%. On 9/11, the market fell 7.12% and was still down 10.66% a year later.

Sometimes, companies reward their investors by splitting a portion of their profits. These are called dividends. If 10 people own 1 share of “Company X”, and “Company X” makes a $100 profit, each investor would get $10. Again, this is the simplest of examples, as the Dow 30 companies each have millions and millions of outstanding shares. IBM, for example, has somewhere in the neighborhood of 1.7 billion outstanding shares. That means, a dividend for a single share is usually only around a couple of cents. So which companies offer dividends, and which don’t? That’s up to the Board of Directors of each company. Some companies share their profits. Others think it is a better business move to reinvest their profits to make the company better- thus raising the value of each share.

Many people spent hours a day studying companies that are poised to make a significant gain. The nice thing about the Dow 30 stocks is that these are usually a safe bet. Most people don’t expect Coca Cola to go out of business any time soon. Even if they have a bad couple of quarters, these companies have proven leadership that will eventually turn the company around. They wouldn’t have lasted all these years if they didn’t. So with thousands and thousands companies trading on Wall Street, you now have a better understanding of what all those numbers mean, the next time you see them on the evening news.

Make your Choice on Mutual Fund

2007-08-20T04:49:00.001-07:00

There are thousands of mutual funds to invest your money in. So how do you pick one over the other? Here are some things to look for when making your choice:

Fund Performance. The single most important measure to consider is how the funds have performed over time. Check the three- and five-year annual return (and ten-year if available) and see how well it’s done through the years. Anything that has returned at least 10% or more per year over a long period of time would certainly be worth considering.
Fund Management. The next thing to look at is how long the current management has been managing the fund. If a fund has returned 20% a year for the past five years, and the current manager is the one who managed it for those entire five years, you should certainly feel comfortable with that person’s skills. If the fund returned 20% for four years and 3% last year, and the current manager just took over last year, I’d be skeptical until he’s managed it a few more years.
Volatility. The most volatile funds (like aggressive-growth) will return more in the long run, but will also drop more on bad market days. If you can stomach volatility and are in it for the long-haul, go with a more volatile fund. If you are in it for the short-term or just can’t stand to see your fund go down even for a day, get into something more conservative.
Cost of getting into a fund. Every fund will have an expense ratio. This is the percentage of the fund’s money that is deducted each year for the fund manager’s salary, mailings, marketing, and other costs. As long as the ratio is in line with most other successful funds, I wouldn’t be concerned about it. If it’s extremely high compared to others, I would certainly expect a much higher return than other funds. Also, you need to be concerned with whether the fund is a “load” or “no-load” fund. In other words, do you have to pay (load) to get into the fund or is there no cost to get in (no-load)? There are many successful no-load funds to get into. I’d only get into a loaded fund if it has produced exceptional returns year after year.

All of the information I mentioned above on mutual funds can usually be found in a special mutual fund issue published at the beginning of each year by Kiplinger’s or Money Magazine. Using those sources, along with asking a financial professional should help you pick the fund that is right for you.

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Finance Tips for Stock Market Investor

2007-08-20T00:12:00.001-07:00

So, you're ready to dive in and become the next Gordon Gekko. Alright! Time to get on the wait list for that Rolls Royce Phantom, right? Not so fast. Stock picking is tricky business and is, frankly, not for everyone. Many newcomers have discovered just how fast their life savings can evaporate, and that's a lesson you probably don't want to learn first-hand.

The Stock Market Investment
by Richard J. Teweles, Edward S. Bradley

Packed with clear definitions, cutting-edge strategies, and helpful examples, this new edition provides in-depth information on topics that have changed how stocks perform, as well as how they should be handled. In addition to the globalization of the securities business, regulatory changes, program trading, and advances in online services, you'll find details on key developments in several important areas, including the derivatives market, index fund investing, and technical and fundamental analysis.

But let's start on the other end; your financial situation. Before you plunk a single cent into the stock market, you should take a hard look at your other assets, debts and financial obligations. If you have thousands of dollars in revolving credit card debt (i.e. you don't pay your balance in full each month), the wisest investment you can possibly make is to pay that off first. Why? Since credit cards typically charge some 15-20% interest, any investment you'd make instead would have to have a guaranteed return of at least as much - and there's no such thing.

Other types of debt, such as mortgages and student loans, are less of an emergency. Mortgages are tax-deductible (as opposed to credit card debt) and student loans generally have generous terms. Some like the peace of mind that comes from being entirely debt-free, but it's not really important once you've cleaned out the credit cards. Car loans is a gray area - if you got a good deal, it's ok, but if the dealer slammed you with a high interest loan you're wise to pay it off.

How The Stock Market Works
by John M. Dalton

Explains the workings of the securities industry, including the initial public offering, types of stocks, who's who inside the brokerage firm, back-office operations and investment analysis. This new edition includes new chapters that cover ongoing changes at the NYSE, the AMEX, Nasdaq, online trading and the globalisation of the stock market. It has been thoroughly updated to reflect changes that have taken place on Wall Street and in the way securities transactions are conducted.

Next, make sure you have a sufficient cash cushion for emergencies. Remember, the stock market goes up and down. If you get laid off or have a sudden big expense dropped in your lap, you may have to sell your stock at the worst possible time. By keeping 3 to 6 month's worth of living expenses in a savings account or money market fund you can handle the curveballs life throws at you without the added grief of losing money in the stock market.

Last but not least, do you have the nerves for stock investments? If the market takes a sudden plunge and you see thousands of hard-earned dollars disappearing into a black hole, will you panic and sell at a loss? Will you be stressed out at the expense of work and family? Will you check the online stock tickers every hour to track your investments? If you said yes to any of the above, you may want to stick with treasury bonds, Certificates of Deposits (CDs) and other safe investments where you have a modest but guaranteed return on investment. You probably won't make as much money in the long run, but at least you'll sleep well at night.

Ok, now that we have the fundamentals out of the way, let's focus on the actual investing. If you are fresh to the game, you may not want to jump off the deep end and try to pick the next Microsoft out of the thousands of publicly traded stocks. By investing in an index fund or a stock mutual fund, you can be part of the stock market drama without having to lift a finger once you've mailed in your check.

Index funds are pre-packaged baskets of stocks that follow the market ups and downs in lockstep. The S&P 500 index funds, for example, invest in the 500 largest US companies. That's it. There is no team of bean counters and analysts working the phones all day long trying to catch the latest trends. The fund simply buys shares of those 500 companies and does absolutely nothing else. When you buy into the fund, the fund buys a tiny bit more of each other 500 companies, and when you sell your share of the fund, it sells a tiny bit of each company.

This is obviously not very exciting, but it has the advantage of low cost (since there are no analyst salaries to pay, the fund companies can offer very low management fees). Another advantage is that your odds of long-term gains are pretty good. History shows that someone who plunked down money in this type of fund in the 1950s and sat on his hands through ups and downs would have an average annual return in excess of 10% by now.

You can also buy index funds with a more narrow scope, such as small-cap (smaller companies), but the principle remains the same. The smaller index funds are typically more volatile (higher possibility of bigger gains or bigger losses) which can be an option if you feel that a specific section of the market has better potential than others.

Another route is the regular stock fund, where you pay a bit more in fees to have the analysts try and beat the market. Some succeed and reward their investors handsomely, others lose a big gob of dough even though the rest of the market is heading up. The most important thing to realize here is that last years winner isn't necessarily this years winner. In fact, if a fund brags about having returned so-and-so much last year, they probably took great risks to achieve such spectacular results. That's the bummer about risk; the more you stand to gain, the more money you'll lose if the fund manager is wrong. Simply put: avoid the hotshots and seek out the mature funds with competent, experienced managers and a track-record of moderate but consistent gains.

If you decide to try your own hand at stock-picking, get an online discount broker such as Ameritrade, E-Trade, Scottrade or Sharebuilder. These offer cheap trades (less than $30) while many also provide basic research tools. If you pick a broker that doesn't offer research tools, don't fret - there are tons of free websites that will help you get started. However, no tool will replace your most important asset: your mind.

Getting good at identifying strong companies with good growth potential takes years and requires a lot of homework. Tons of books have been written on the subject, most of which are fads and shortsighted baloney. Start with down-to-earth books like Investing for Dummies and the like, and don't forget to tap the power of the Internet. The Motley Fool (www.fool.com) is a great place to start for beginner do-it-yourself stockpickers.

Full service brokers charge considerably more for each trade, but they also offer investment advice. Many of these guys are brilliant and earn a lot of money for their clients, but you pay accordingly and have no guarantee that their "hot tip" won't go belly-up next week. As a rule, a small-time beginner eager to learn is best off with a cheap online discount broker where trial-and-error is simple and won't hurt very much. A well-heeled investor with a busy schedule may be better off handing the money over to a broker and make it her problem to make the pile grow.

Finally, a word about fees. Whenever you invest, the house always takes their cut whether you're up 20% or down 20%. Over the years, that half-percent makes a big difference. Whether you're shopping for a fund or a broker, compare the fees with others. Do your homework, watch the fees and keep your cool when the market doesn't, and you're off to a great start in stock investing. Good luck!

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How Financial Planner can Help you Meet your Goals

2007-08-19T23:42:00.001-07:00

Choosing a financial planner can help you meet your financial goals. However, the process is not without pitfalls. Selecting a financial planner is a very personal decision depending upon what you would like to accomplish, but there are broadly applicable criteria as well.

Personal Financial Planning
by G. Victor Hallman, Jerry S. Rosenbloom

Provides in-depth coverage and analysis of the latest tax law changes. In addition, it features an entirely new chapter on planning and paying for education expenses, including the new 529 plans; ramifications of the GST estate tax repeal; new checklists and questions to tie up each chapter; and more.

The most important thing to remember is that the financial planning industry is unregulated. The majority of planners have not passed any tests to demonstrate their competence. Only about 40,000 of the 250,000 or so planners in the United States are Certified Financial Planners. Chartered Financial Consultants and Personal Financial Specialists, which are certifications offered by the insurance and accounting industries, account for only a small portion of the remaining planners. Selecting a planner with a certification is a critical initial consideration. Finding someone who is also experienced and participates in continuing education is important as well.

In addition to their qualifications, it is important to understand how you will be compensating your financial planner. Many supposed financial planners are really just sales representatives for a particular financial product. Understanding whether your planner subscribes to a code of ethics that includes fiduciary responsibilities can shed light on the degree to which the planner is likely to place your needs ahead of their compensation system.

Two compensation systems are prevalent in the world of financial planning. Most planners get a portion or all of their compensation through commissions on financial products they sell you. These arrangements can create a conflict of interest between you and your planner. Your planner should be forthcoming about how commissions affect their compensation and will influence the products they will recommend to you.

Alternatively, some planners are compensated solely by an annual fee. The fee is typically based on a percentage of your assets under management. One percent per year is typical. Fee-based planners are not subject to the same conflict of interest that exists with commission-based planners. However, you may pay more for their advice than you would by going the commission-based route. They are also more difficult to find.

Another important consideration is the aspects of your financial life that you are seeking advice about. Many financial planners only have adequate knowledge to address a small portion of a client’s financial condition. Those with an insurance background are best at insurance, while those with a brokerage background tend to be better at investing. It is best to find a planner who can understand your entire financial situation and provide comprehensive financial advice. At the very least, try to match your planner’s background with your most important problems or obtain advice from multiple planners with different specialties.

The final consideration is the nature of the firm you would be working with. Larger companies and smaller companies will likely provide different degrees of service and fee structures. Understanding whom you will be working with on an ongoing basis to formulate and implement a financial plan is very important. There is little point in interviewing a famous financial planner if you are ultimately going to be assigned to a staff planner that you have never met to actually create your plan.

By interviewing multiple financial planners before you make a selection, you will best be able to find one you are comfortable with. Personality, qualifications, and compensation structure are all important areas to evaluate. Before making a final selection, check into any disciplinary problems your prospective advisor has had by contacting your state’s insurance department, the National Association of Securities Dealers, the Securities and Exchange Commission, and the group overseeing their planning certification. While not guaranteeing you will not encounter problems, applying this approach will greatly reduce your chances of having an unpleasant experience.

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Open a "Swiss Bank Account"

2007-08-18T19:02:00.001-07:00

In 1934 the Swiss passed a law which made it illegal for any bank to disclose any information about an account, including the fact of whether an account actually exists or not.

This act, passed in response to the growing strength of the Nazi revolution, and underpinned by a long-standing commitment of the Swiss to the notion of privacy, was the embryo of the now infamous “Swiss Bank Account”.

For most of us such accounts are the domain of corrupt politicians, the mega wealthy, arms dealers, despicable dictators and mythical arch villains and spies. For the most part the mention of the words “Swiss Bank Account” conjures up images of mysterious big black sedans bearing faceless men, of eyes of cold steel guarding the cache of secret numbers that are the key to untold riches.

Like all legend, this one is somewhat based in fact, however the “Swiss Bank Account” is a far more mundane creature than this and something that is accessible to most people from most parts of the world.

In fact, opening an account with a Swiss bank is much the same as opening an account with any bank, and provided one has good reason to do so, provides some useful advantages over banking in many countries.

Firstly and foremost Swiss law decrees absolute secrecy of banking details in all civil matters including divorce, lawsuits, creditor claims, inheritance disputes and the like.

This secrecy does not extend to any activities that are criminally related, but the Swiss authorities do not regard tax evasion as a criminal offence (it is regarded as a political matter).

Put simply, unless a foreign government can prove that an individual has committed one of the specified crimes that is also a crime in Switzerland, and link the individual to an identified bank account used for transactions associated with that crime, the bank may not release any banking details to anyone without their customer’s consent.

While the cloak and dagger stuff may be beneficial to some, there are other advantages to opening a Swiss account which are more applicable to the common person.

Switzerland is a politically and socially stable economy, with a reliable legal system and a history of economic prosperity. The Swiss have a long standing tradition of excellence in banking which has been legitimately earned and their bankers offer outstanding levels of experience, knowledge and service.

Furthermore, the banking system is based on the concept of a full service bank, with banks performing services such as securities brokerage, investment counseling and portfolio management.

Put simply, if you put your money in a Swiss bank account it will still be there as the rest of the world’s financial institutions crumble.

There are basically three ways to open a Swiss account. Firstly you can pay someone to do it for you at a cost of between $US400 to $US1000 depending on the account type. Just do a search with the keywords “open Swiss bank account” and you will find a number of firms who are willing to take your money to open the account for you.

If you are likely to be dropping into Switzerland at any time then you can simple drop into one of the banks and open an account in person. Its handy in this case to have some record of past earnings just to prove to the bank that you are on the “up and up” and you’d also need to be carrying the minimum deposit in one form or another.

If you value your hard-earned cash then opening an account via the mail is the best option.

Choosing this option is time consuming as you have to wade through the huge variety of services that Swiss banks offer, however it is your money so a little extra time spent finding out how to best use it is not a bad way to go.

While most of the banking options include the standard services such as checking accounts, credit cards and internet banking, you may have to search harder to find a bank that will purchase and store bullion for you.

In basic terms there are four types of accounts that may be opened.

1. The Swiss Postal Account
This account is offered by the banking arm of the Swiss postal service, requires no minimum balance, has minimal fees, but does not have a checkbook. Unfortunately the bank offers few investment offers but the account can be useful if you are trading on the internet (for example) and choose to pay all your bills via the bank’s card services.

It is the bank of choice should you want to be able to drop the “just send it to my Swiss bank account” line at dinner parties and can easily be searched out on the net.

2. The Standard Account
One notch up from the postal account is the standard account that gives you the added options of phone banking, online trading, enhanced investment options and checkbook. This account does require a minimum balance of somewhere around $US4000 and has small annual fees.

3. The Investment Fund Account
If you want to want to ‘play the markets’ then this account is the one to opt for. To do so, however, carries a necessity for a $5000 minimum balance. With this account you fix an investment strategy with the bank and they do all the securities trading for you. Come withdrawal time they simply liquidate the necessary shares and forward you your money.

4. The Swiss Numbered Account
The stuff dreams are made of, expensive dreams. We’re talking a minimum balance of $US100,000 but for that you buy total discretion, attention from the best people in the bank, total discretion and the ability to purchase anything that is traded on the public markets.

Also you get the pleasure of only a few select bank officials knowing who the name behind the numbers is.

The only hitch with this one is that you have to apply for it in person, but of course with that sort of money to hide away a trip to Switzerland is part of the business.

Opening your Swiss Bank Account
You’ve made one trip to the Swiss Consulate, waded through the list of Swiss banks that they’ve given you, sent off for all the information and forms and painstakingly gone through every one of them. Finally after an eternity of sorting and resorting you have identified an account with a bank that you want for yourself, what next?

Once you’ve filled out the requisite forms, take them and your passport to your closest Swiss Consulate, or an affiliated bank and get your signature verified; simple red tape.

At this point it is wise to contact the bank and ascertain whether they need any extra information (such as proof of income for the past whatever years) and whether they need a deposit to be forwarded with the forms. In all likelihood a deposit won’t be required until after the account is verified and then it is prudent to send it off as a money order.

After you have everything the bank needs then just mail it off and wait a couple of weeks. The bank will get back in touch with you and tell you where to go from there.

Remember that banks exist because they want your money, and if everything is on the up and up they’ll be happy to take it.

Depositing and Withdrawing Money
There is no secret to depositing and withdrawing money from your Swiss bank account, it is simple as trading with checks, money orders and credit cards.

Should you want to divulge your secrecy then you can also simply wire money back and forth through your local bank accounts.

Clearly, the best way to operate your secret Swiss bank account is to have others deposit money in there for you and for you to pay for goods and services through the vehicles of that bank. That way, no one other than the bank will know and remember, they can never, ever tell.

Some words of caution
While Swiss banks are under legal obligation not to disclose account details to anyone (except in criminal cases), in many instances, such as with the IRS, it is the obligation of the individual to disclose their financial affairs with their local taxation authorities.

There is no way that such authorities can find out about a Swiss bank account that is held by someone however to deny ownership of such an account in court is to commit perjury. In the case of divorce proceedings for example, it is quite legal to have a fortune tucked away in such an account but if you are asked whether you have such an account, it is illegal to deny it. Food for thought.

One further concern of operating a Swiss bank account is that Swiss authorities impose a 35% withholding tax on all interest earned by the account.

Much of that (depending on your country of residence) can be refunded but in order to do so you have to disclose the account to your local authorities. Bye, bye secrecy.

Internet banking
Swiss banks do offer full internet banking services, however, such activity is restricted in many countries including the USA. Nevertheless, as time progresses it is probable that many of these countries will ease up on this restriction and that such accounts will be viable in these countries.

Most recently an online Swiss bank, Swissnetbank.com have set up shop and are offering a simple fee free worldwide moneymarket account. This account operates in three currencies, the Swiss Franc, the Euro, and the US dollar.

Deposits and withdrawals can be made in any of the currencies via nominated accounts and you can shift your money into any of the three currencies with a few strokes of the keyboard.

Its not a Swiss bank in the time honored tradition of Swiss banks but it is another feather in the cap of those who are unwilling to let their wealth dwindle away in some petty interest bearing account somewhere.

Let’s see how long it takes 007 to jump onto this one.

Modern Creative Financing

2007-08-18T09:14:00.001-07:00

Creative financing is usually a term used in real estate, where you are able to buy a home with little or no money down. If you take these ideas and look on a broader term or expanse you can come up with funds you had no idea where available to you. If you are starting your own business, to a small purchase of a new computer system for your child going to college.

Many people today feel that using a credit card or other loan procedures is creative financing. It isn’t, all that does is to create a new bill that you must add to your monthly budget.

Simple ways to creatively finance any venture you would like to make are unbelievable easy. First you must set a budget, estimate the amount of money you want to spend. Once you come up with that figure it is then time to look at your surroundings, what do you have that you can gain monies from that you have not thought of?

If you own land, look around your land: do you have trees? Why not call the local saw mill, or timber company and sell the trees from your land? You may be asking yourself will this take away from the value of my property the answer is no it will not, but you will end up with cash in your pocket.

What else do you have that you are willing to get rid of? Antiques? Rare coins? Books? A swing set your children have outgrown? Do you have a vehicle that you rarely use and want to sell? Used computer programs, CD's, movies, tapes, and clothes? List them in the local paper as a must sell. Use the Internet to your ability and list them on Ebay or one of the other leading auction blocks.

If you are willing to go into a small amount of debt to gain financing try a local institution such as a lending company or bank. Use a vehicle that is paid for and apply for a signature loan for the amount you need. If you are unsure of what your car’s going rate is you can also use online Kelly blue book price guide for used cars.

If you have a car that is not running and you want to sell parts from it, list it with an auto trader: it is a free service. It is unbelievable the responses you will get from people who need just parts. Selling equipment you do not use, or tools that you have not touched in years can also be listed in the classifieds for sale.

Applying for grants for special projects often work well: as stated before this takes some effort, but the rewards can be upward of $30,000 or more depending on your project. Grant information is available online as well as the proper forms to fill out to obtain them. Use them, that is what they are there for.

Everything has a monetary value, and income can be forthcoming if you put the small amount of effort into it. Effort, initiative is what most people lack when it comes too creative financing. Taking the time to actually inventory what is worth value. Even a simple garage sale will bring in income you had not had before. Every penny, nickel, dime, quarter matters when you are in need of creative financing. Use it all to your ability and make it happen.

Which Bond are Right for you?

2007-08-18T05:02:00.001-07:00

Most people know about the basics of investing in the stock market but many people are puzzled as to what bonds are. In one word, a bond is a loan. The loans can be from the federal government, a federal agency, municipality, or corporation. When you purchase bonds you are lending your money to whomever you buy the bonds from. In return for lending them your money you are paid a fixed rate of interest over a set period of time. When the bond matures the investor’s money is usually returned with the earned interest included.

Bonds: The Unbeaten Path to Secure Investment Growth
by Hildy Richelson, Stan Richelson

An expanded and updated version of "The Money-Making Guide to Bonds", is designed to educate novice and sophisticated investors alike and serve as a tool for financial advisers as well. It explains why bonds can be the right choice and how to use them to achieve financial goals. It presents a broad spectrum of bond-investment options, describes how to purchase bonds at the best price, and, most important, shows how to make money with bonds.

Bonds are like stocks because they are both traded. Therefore you can buy the bonds after they are originally issued while at the same time you can sell bonds before they mature. Bond prices are subject to volatility in relation to market conditions.

When a person is issued a bond they are basically promised to get their money back. Bondholders are paid before anyone else, even stockholders and creditors, if the company runs into hard times or goes bankrupt. Bonds give you a stream of income based on their rate of return. Bonds are usually much less volatile then stocks are. Bonds also can provide a tax break because municipal and government bonds are sometimes exempt from state and federal taxes.

When a bond is issued, the issuer is essentially promising to return your investment, the face value of the loan. The main disadvantage to bonds is that they generally have lower returns than stocks and mutual funds. Bonds are like stocks because their prices are sensitive to interest rates as well. Bonds also carry with them some heavy terminology, which can be confusing and hard to understand.

Type of Bonds:

Government Bonds – The U.S. Department of Treasury and other federal agencies issue treasuries and federal agency bonds. Treasuries are basically risk free because the U.S. government backs them. They are issued to help finance all of the costs involved in operating the government. Municipal Bonds – State and local governments to help pay for schools, streets, highways, hospitals, bridges, airports, and other public works issue municipal bonds. You usually don’t have to pay federal taxes on the interest earned from municipal bonds.

Corporate Bonds – Corporate bonds are issued by businesses to help pay for business expenses. There are a ton of different corporate bonds available all with their own interest rates, maturities, and credit ratings. Corporate bonds are generally higher risk bonds in comparison to municipal and government bonds. They also have a higher rate of return than municipal and government bonds. However you do have to pay taxes on the interest earned from corporate bonds.

Municipal bonds are issued by more than 50,000 state and local governments and their agencies to fund projects such as schools, streets, highways, hospitals, bridges, and airports.

Conveniences of Life can Ruin your Budget

2007-08-17T10:14:00.001-07:00

When looking for ways to save money, starting with a budget is the way to go. A budget outlines your various expenses in a given period of time versus the amount of your income, and the balance between the two. A monthly budget is probably the most useful to track your spending habits. In fact about 15% of spending can be lowered without much lifestyle change at all.

Just by writing down a budget you will be better prepared to understand where your money is going. Sometimes it is shocking how much money gets spent on useless items like Starbucks or eating out at lunch. Writing your budget down will help you see where money is being spent and establishes a guideline to look back on at the end of the month. A budget gives you reason to take action and propels you toward a life of financial freedom.

The Importance Of A Budget
Budgeting requires you to look ahead and formalize future goals. By establishing a budget, you can set goals for achieving a certain level of income and monitor your expenses. Many home based and small-business owners have remarked that their increase in profit margins did not occur until they had a written revenue goal and a method with which to monitor expenses.

Coming up with your first budget is fairly straightforward. Gather those involved in either income or spending of the budget and first list items that are monthly necessities. List things like: rent or mortgage, groceries, utilities, gas, and car payment. Payments on credit card debt should also be considered a monthly payment and included in your budget. The next step is to tally up the various sources of income for your family. Now you can compare income versus expenses and see how you are doing. Is there a great need for more income? Are there some things on your list that could be reduced or eliminated completely?

How to Build, Manage & Maintain Wealth
You’ve tried borrowing and consolidating. You’ve tried some sure-fire quick fixes. You’ve denied the situation and justified it because others are in the same situation or worse. And besides, when the kids move out, go to school, or you give up the house for a condo, there will be more money and you’ll have two incomes again!

Take a good look at the items you purchase each month and classify each as necessary or unnecessary. Now, take a look at the items with the unnecessary label and decide where each fits into the budget, and which items don't belong at all. Ask yourself what you need instead of what you want when sifting through these items. Things like food and shelter are clearly necessities, but what about that impulse bought shirt or that expensive sushi lunch you just had to have? Try to keep items in the entertainment, travel, dining, and impulse purchases category to a minimum in order to meet your budget.

Americans are all about convenience and retailers are setting us up to pay more money for a little more convenience. Fast food restaurants, quick marts, and cell phones are prime examples of conveniences. Credit cards are another convenience that could very well be hurting your budget. You can buy just about anything with a credit card and it seems so easy, until you get the bill. The biggest problem with a credit card is that it is quick and you don't realize how quickly you are spending until it is too late. The majority of credit cards have an APR of around 18%. This means that, unless you are consistently on time with your payments, you are paying an extra 18% for all of the goods you purchase with a credit card. Sure cards can be convenient, but they can also be expensive!

By sitting down and thoroughly planning out a budget you are giving yourself a chance at spending money in a wise manner; the benefits of a budget are far greater than any negatives. Most importantly a budget tells you where you are spending money. This allows you to make more informed decisions when making purchases. You are now able to stretch dollars a bit further, pay bills on time, and eliminate needless spending. Plan out a budget and you just may be surprised at how efficiently you can spend money.

Research Guide about Hedge Fund

2007-08-16T21:32:00.001-07:00

The origin of Hedge Funds dates back to the year 1948 when Alfred Jones, a Harvard University graduate, while writing about current investment trends was inspired to try his hand at managing money. He followed his instinct and came up with the innovation to sell short some stocks while buying others. Thus, he raised $100,000 and got some of the market risk hedged. Further, he employed leverage in an effort to enhance his returns.

Investment Strategies of Hedge Funds
by Filippo Stefanini

This excellent introduction to the world of hedge funds takes the reader on a tour of the wide variety of strategies employed by these often mysterious but increasingly important investment institutions. Both students and professionals will value the nicely organized presentation that combines insightful discussions with many interesting facts and figures.

Then in the year 1966, an article in the Fortune magazine highlighted an investment that had outperformed the mutual funds. This gave birth to the hedge fund industry. Just after two years, there were about 140 hedge funds operating. However, a number of hedge funds collapsed in the period from 1969 to 1970. But this downtrend didn't continue for long and the hedge fund market got a new life in 1986 when a hedge fund captured the interest of the investors because of its outstanding performance. After this the ups and downs continued but the hedge fund industry is still prospering and currently there are more than 7000 hedge funds in the United States, with an estimated US $750 billion in assets with a strong role-play in the financial market. They are believed to account for as much as 20% of all US stock trading.

As investors are gradually recognizing the value of hedge funds, the need for the study and research in this field has multiplied. According to a recent study hedge funds do not fall into a strategic asset class. Thus is because hedge funds are heterogeneous and cannot be modeled. Most hedge funds highly specialized and their performance depends on the expertise of the manager of the management team. The returns from hedge funds are usually consistent and have over a period of time outperformed standard equity and bond markets. These have a much lower risk factor as compared to equities. They use a strategy or a set of strategies other than investing long in bonds, equity, mutual funds and money markets. These strategies have the propensity to generate positive returns irrespective of the rise or fall in equity and bond markets.

According to a latest research on hedge funds one classic hedge fund strategy that is gaining popularity is "paired trade". In this strategy an investor buys shares of a company that is doing well, while short selling another company (usually in the same sector or industry) that is struggling. By purchasing shares in one company, and selling borrowed shares short in another, hedge funds can make a greater return than if they just entered a single trade. This strategy offers tremendous profit potential for professional traders. Experts say that this strategy is gaining popularity off late, because hedge funds hedge funds have been struggling to generate the exciting returns to justify charging their investors 20% of profit and a 2% management fee.

Today, in spite of the fluctuations seen in the last few years, the hedge fund industry is flourishing as people have realized that hedge funds can prove to be beneficial as long as they plan there moves carefully.

Government Grants for Single Mothers

2007-08-13T19:24:00.001-07:00

Being a single mother at a very young age can be difficult. Not only will you need to worry about the welfare of your child, you also have to worry about continuing your education. So how can a single mother at age of eighteen afford to go to college and take care of her child at the same time? Fortunately, the government can provide you with a financial aid to ease the burden for you.

Financial Aid
There are many types of financial aids that can help a single mother continue her academic pursuits. In order to get these grants, you need to fill out a form from the Free Application For Federal Student Aid or FAFSA. The application process will take around three days to a week, but once you have completed the requirements, you will be able to start college right away. The requirements for applying for this program include:

Being a valid citizen of the United States
Social security number
A high school diploma or a general education development certificate or pass and approved ability-to-benefit test
Be enrolled or accepted as a regular student working to attain a specific degree.

Aside from these requirements, your eligibility for financial aids also depends on the income tax of your parents or dependents. So if you are a single teenage mother but your family is well-off, then your application for these aids may be denied by the federal government. The amount of funds that the government will provide you will also depend on your income tax. So the single moms with a high income tax who are accepted in the program may be funded a lesser amount of money. Once you have been accepted, you will also need to keep a certain grade point average in order to maintain your aid.

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Negative Equity - A National Disease

2007-08-13T19:18:00.001-07:00

Capitalism has many benefits in a free society. It has inherent benefits to those who are creative and willing to work hard. Nowhere else can such a variety of people from many diverse backgrounds and countries succeed by their own efforts.

An Introduction to Equity Markets

An Introduction to Equity Markets An Introduction to Equity Markets guides novices through the intriguing world of equities. This book explains clearly how equity markets work, what the instruments traded are, who trades them, how equities are valued and how the international markets differ. Subjects addressed in this book include equity valuation, share issues, equity-linked securities and derivatives.

However, sometimes our creative efforts cause serious problems. As a people, we have become enamored of things, possessions, and goods. We want to own the biggest house, the biggest automobile and other possessions without number. And for all the things we say we want, there are manufacturers ready and willing to provide them. In order to be competitive these same manufacturers are always seeking better ways to convince us that it is possible to own that Cadillac El Mundo Gordo Magnifico SUV when realistically we can only afford the Ford Sub-Midsized ordinary Sedan. Desire for things, plus superb salesmanship overcomes common sense and basic math. The result can be what the subject of this article is all about.

Let’s clear up a couple definitions.

Equity: The market value of a property (house or car or whatever) minus any mortgage or money owing on the property.

Example # 1 Positive Equity:
You have owned a house for thirteen years. Its market value is $400,000. You owe the bank $225,000 over the next seventeen years. Your equity in the house is $175,000. This is positive equity.

Example # 2 Negative Equity:
You buy a house for $300,000. The housing market changes and the market value drops to $200,000. You owe the bank $225,000. Your equity in the house is $25,000. This is negative equity and sometimes referred to as being "upside down". This is a very bad thing.

Negative Equity occurs frequently with automobile purchases. What do you do if you’ve had the car two years and want to trade it in? The "upside down" buyer frequently adds the amount on the trade-in onto the loan for the new car. They also stretch out the loan to keep the payments low. This is a losing proposition as the longer the loan, the longer it takes to reach a point where they owe less than the vehicle’s depreciating value. It is a financial Catch-22.

How does this happen?
It is a combination of things. In order to sell more cars, manufacturers offer deep discounts on new cars. This has the effect of depressing the value of cars, which coupled with five and six-year loans means it’s going to take much longer for car owners to achieve a position of positive equity. (two to three years is not unusual)

It is a fact that the moment you drive your car away from the lot it is a used car. If you are paying $45,000, the Kelly Blue Book value may be $40,000. If you still owe $43,000, there’s a $3000 difference. How do you protect yourself if you have an accident? Now the vehicle owner has more problems.

Gap Insurance
Why is an auto gap insurance policy so important? Because standard comprehensive and collision auto policies only cover your new car's "fair market value". And that can be as little as 80% of what you paid for your car, starting the minute you drive it off the lot. This condition of negative equity may exist for the first two or three years of ownership.

This means that if you're involved in an auto accident that leaves your new car "totaled", you could end up paying off a loan on a car that you can't drive. This is where gap insurance comes in. A gap car insurance policy insures you for the difference between what you owe on your car and what your insurance company says it's worth. In some cases this insurance will be required as part of purchase or lease.

Gap insurance coverage would also become critical if your car is stolen. Thieves prefer new cars and they seek out specific models, which usually happen to be the most popular models of cars sold. (Honda Accord, Ford Taurus - etc. etc.)

If your car is stolen, the insurance situation is the same as in the case of an at-fault accident on your part: comprehensive insurance will cover the value of the vehicle, but not necessarily the value of the loan that you owe to the bank. You could be stuck paying thousands for a car that's long gone. Add that to the truly disheartening feeling of having your car stolen, and that makes for a really rough time.

We see many situations of negative equity when a case is being settled with an auto manufacturer. Often it is the first time the owner discovers the reality of being upside down on their loan or lease. It is always painful. We certainly could offer scads of advice about this situation. The first piece of advice would be, never buy something that is beyond your means. This advice will surely be ignored over and over. The other thought, which isn’t really advice is, if you get caught in a situation where your negative equity is going to be expensive, bite your lip and promise yourself you will never get in that sort of situation again. It’s bad for you and accepting these kinds of deals only encourages manufacturers and their financial organizations to offer these "good deals".

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Bank Overdraft Fees Are Sucking Americans Dry

2007-08-13T07:14:00.001-07:00

Overdraft fees, we have all paid them at one point in time in our financial lives. The cost of over-drafting your account keeps climbing. At Sun Trust as of July 1st they raised the fee from $32.00 to $35.00 every time you go in the negative. Most banks will clear the highest item first so that they can charge you a fee on each of the lower items.

The bank is constantly pushing us to set up over-draft protection with one of their credit cards. So when you overdraft they charge your credit card, charge you a $15.00 fee to do this for you, then if you do not pay your bill on time or in full they are going to hit you with interest and late fees. It is a never-ending cycle.

They will link a savings account to your checking account for protection but again, they will charge you $15.00 for transferring the money in your account to prevent an overdraft fee.

According to a recent study by the Center for Responsible Lending the nations 15 largest banks collected $17.5 billion dollars last year from us for over-draft fees.

I love it when they tell you that they are going to give you a “one time courtesy” return of the over-draft fee. No one is perfect and life happens, banks should give us a set amount of “courtesies” per year. I am sure they would attract more customers this way.

There is a bill “gaining moment” that would require banks to tell people at the ATM and possibly at the checkout counter when their accounts run dry, It would also prohibit banks from charging overdraft fees unless customers have agree to pay them and it would prohibit the bank from clearing the highest check first.

Banks have also held and delayed deposits so that an overdraft incurs and they receive the fees.

We should take more responsibility with our money. The only way to not pay these fees is either not letting your account fall in the negative or for example, keep $1000.00 in your account and vow never to fall below that amount and you will not have to worry about being charged a $35.00 fee.

Banks continue to charge these ridiculous over draft while only offering pennies on CD’s, savings accounts, and mutual funds. No wonder there is a new bank popping up on each corner, they are getting rich!

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Getting Your Finances Ready For Baby

2007-08-09T12:13:00.001-07:00

So you are having a baby or maybe this is your second baby. While this is definitely one of the biggest changes of your life from an emotional and physical standpoint, it also impacts your finances. As if you don’t have enough to worry about! Just taking a few steps and making some financial preparations will only help you after the baby comes.

Family Finance Handbook: Discovering The Blessings Of Financial Freedom
by Frank Damazio, Rich Brott

With insights gained from twenty-five years in business and ministry, the authors lead you through the book using biblical principles of stewardship and financial management. They show you how to get out of debt and guide you carefully through the investing process. Family Finance Handbook shows you how to develop a right perspective, especially relating to your value system, priorities, vision, personal goals, and lifestyle.

It’s never too early to start your spending plan and budget. Items are definitely going to cost more than you think they will. Who knew formula would be at least $22 a can and that a baby can go through 2-3 cans a week? Some additional items to think about when redoing your budget: medical insurance, childcare, food, furniture, clothing, and toys. Ask your friends with children what they are spending to get a rough idea of how much things cost in your area. Instead of thinking about how much you are going to give up, think instead about setting priorities on what is important to spend. So maybe you won’t be traveling as much but you still want to get your hair done. If your family is considering a loss of income, this is especially important! Go over your spending plan regularly, at least once a month.

There are a few key financial papers you need to think about, your will and life insurance. Updating (or creating a will) can be one of the toughest decisions you and your family will have to make. It’s not just about changing the beneficiary but deciding who would be the trustee in case anything happens to you. In addition to thinking about who would be the best person to raise your child, you have to decide who the most fiscally responsible person is too!

Money Came by the House the Other Day: A Guide to Christian Financial Planning and Stories of Stewardship
by Robert W. Katz, Jamie Katz

"This is a practical, common sense handbook that every Christian should have. I heartily recommend [it]"
by Ronald E. Cottle, Ph.D., Ed.D., President, Christian Life School of Theology, Columbus, GA

While life insurance isn’t the most exciting thing to think about it, it has to be done. Having a baby is one of those times to make sure you have enough life insurance. Schedule a few appointments with agents to make sure you getting the right type of life insurance (term or whole life) as well. Visit www.accuquote.com to learn more about life insurance.

Finally, don’t forget about your retirement. With more and more women staying-at-home or working part-time, your retirement plan often gets forgotten with everything else going on. Next thing you know, you haven’t been saving for more than five years and you have been missing out on precious compound interest. You can always use the money for your child’s college education. Remember, children weren’t raised in a day and your finances can take a few months to iron out the kinks as well. Just take it month by month and enjoy the newest member of your household.

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Demystifying Mutual Funds

2007-08-09T07:46:00.001-07:00

Mutual funds are an essential part of your personal finances. They are the fuel of your retirement plan, can help you buy a house and the easiest way to take advantage of the stock market. If you don’t have any money saved, you can still start investing in mutual funds immediately. With over 12,000 mutual funds in the marketplace, they can definitely be overwhelming!

A mutual fund is a group of stocks or bonds (and sometimes both). When you buy shares in a mutual fund, you are buying equity in all of its holdings. The rule of thumb is that if you have less than $75,000 to invest, you should stick to mutual funds to be properly diversified. For a small management fee (more on this later), you get a qualified money manager to manage your money. Mutual funds are much easier than individual stocks and bonds to monitor and determine how your investments are performing. Plus, if you don't have a lot of money, you can start investing in mutual funds for as little as $50 per month!

Because there are so many mutual funds out there, it can be overwhelming on where to begin and how to select a mutual fund that is right for you. The first place to start is to determine what your needs are. Do you want the investment for the short-term (less than 3 years) or mid-term (5-7 years) or long-term (10 years or longer) – like retirement? This will help you decide what kinds of mutual funds you should buy. You want to make sure you are properly diversified which means you are spreading your risk among different types of mutual funds.

If you are investing for the short-term, you should stick with relatively safer Money-Market Funds. For the Mid-Term and Long-Term, you want to build a portfolio with a combination of Large-Cap Growth, Large-Cap Value, Small or Mid-Cap, International and Bonds. The percentage you want in each of these categories depends on your age, time horizon and risk level. If you don't have any investments and only a small amount to invest, a great mutual fund to choose is a Balanced Fund (also called a Domestic Hybrid or Moderate Allocation). This is one mutual fund that combines stocks and bonds. There is also the Target or Lifestyle Mutual Funds. You pick the mutual fund according to the date that you want to retire (ex: 2030) and it will combine all the investments you need for a diversified portfolio. I call it One-Stop Shopping.

You have three main choices from where to buy a mutual fund. You can go to a mutual fund company, such as Vanguard or T. Rowe Price and pick five mutual fund styles such as: Large-Cap Growth, Large-Cap Value, Small or Mid-Cap, International and Bonds. Or, you can go to a mutual fund supermarket such as Fidelity or Schwab. There is a lot to pick from here, which can also be overwhelming. Lastly, you can go through a broker. The broker usually suggests which mutual fund to buy. Just be careful because this is the most expensive route and the broker might be "pushing" a certain fund based on the commission he or she gets paid.

If you don’t have the minimum needed for a mutual fund (which is usually $2,500), some of these mutual fund companies will let you invest $50 a month as long as you make it automatic and link it to your checking account.

Pension Management - Can We Do It Better?

2007-08-09T07:41:00.001-07:00

Everybody wants to be able to afford to retire happily and securely in some wonderful place where great hobbies are available, with a nice respectable community of like-minded residents.

Managing Pension Plans: A Comprehensive Guide to Improving Plan Performance
by Dennis E. Logue,Jack S. Rader

Managing Pension Plans is essential for anyone who wants to know about pension fund management. Logue and Rader have distilled an complex subject into a comprehensible work. Their excellent book fills a void, providing an accessible, yet complete guide for finance professionals, students, and anyone involved in the pension plan decision.

The unfortunate drawback to this entire plan is, of course, the money. Such luxuries are expensive and if you imagine you have always spent a small fortune each month trying to keep your lifestyle going along a pleasant track, then think what you are going to have to allow for when every day is fundamentally a holiday.

Some people think that retirement is some sort of holding stage just slightly short of actual death, and it therefore might seem silly to stash away a huge amount of money to fund this stage along life’s rich path. Well, they could not be more mistaken.

Many people spend twenty or even thirty years in retirement. Could you fund your living expenses for the next thirty years without working another day? I know I could not. Many pension schemes and life management companies base their policies on standard scenarios, where the man is four or five years older than the woman, both working, expected to retire at the appropriate time, with no contingencies allowed for, such as sudden death of the man and the woman being considerably younger.

My own parents staged their retirement in the worst possible way. My mother was more than ten years younger than my father and he died with a very small pension payable, as he was still working and expected to continue doing so. My mother was unexpectedly left with a tiny pension yet enormous financial commitments and no other source of income. Her final years were spent worrying about bills.

Friends of mine got themselves into a huge problem by deciding to divorce in their later years. Of course their pension covered only a joint payment based on the assumption they would always be together. In an age where divorce is almost more commonplace than successful marriage, that is a startling assumption to make. Not that I have a solution to the problem. As always I prefer to highlight the difficulties and let someone else find the solution to them, it is what I do best!

5 Reasons Why Index Funds Should Be Part Of Every Portfolio

2007-08-09T07:10:00.001-07:00

Index Funds: The 12-Step Program for Active Investors
by Mark T Hebner

Shows investors how to obtain their optimal rate of return by matching their risk capacity to an appropriate risk exposure.

What is an index fund? An index fund is a mutual fund that duplicates as closely as possible the performance of a stock market index or bond market index that it tracks. A few examples of indices are: S&P 500, Wilshire 5000, Russell 2000 and Dow Jones Industrial Average.

Index Fund Introduction
MUCH LOWER FEES AND EXPENSES. Who wouldn't want to save money on their investments? Because index mutual funds are passively managed, they charge lower fees resulting in some of the lowest expense ratios in the mutual fund market. Vanguard, one of the leading index fund providers, has an average expense ratio of 0.27% versus the market average for all mutual funds of 1.50%!
BETTER PERFORMANCE. Most non-index funds do not outperform their relative index. Only 35% of active fund managers beat their index [according to Ibbotson Associates]. Why not go directly to the index?
TAX EFFICIENT. For your taxable investments, you could have much lower capital gains tax due to less stock turnover - which will save you money on your taxes. Because the mutual fund is mirroring the investments in the index, the manager is trading much less - which means fewer capital gains or losses. Mutual funds with a high turnover ratio are hit with higher capital gains taxes in an up market, even if the investor didn't sell her/his mutual fund shares. For people that have a high investment income tax bill, this is especially important.
LESS STRESS. Index funds are usually easier to monitor and check performance. For example, if you invest in an S&P 500 index fund, you can easily check the Year-to-Date performance each week by just reading the front page of the New York Times Data Bank section on Sunday. Much easier than reading your statements, wouldn't you agree?
EASIER TO FIX YOUR ASSET ALLOCATION. You just finished your financial checkup and found that you are lacking small-cap value stocks. The easiest way to remedy this, assuming other characteristics meet your standards is to find an index fund of small-cap value stocks.

Get Your Hands On Unclaimed Money Texas

2007-08-09T06:13:00.001-07:00

You may be wondering why I have titled this article as "Unclaimed Money Texas". Well, it appears that there are more inquiries for claims coming out of Texas. Why this is, I don't know, but the people of Texas appear to know how much is in the pot of unclaimed money in the United States. It is wise that you know too.

There are startling statistics about unclaimed money in the US. You will be surprised to learn how much is in the pot, and why it is difficult to discover the process in which to make a claim.

Here are some facts:

An estimated 7 out of 10 Americans are owed unclaimed money.
$1,000, $5,000... even $10,000 claims are not uncommon.
The U.S. Government DOES NOT have one central database for unclaimed money.
There is, right now, approximately 35 Billion dollars of unclaimed money, property, stock, cash and more. And the US Government is earning interest on it!

I think you'll agree that these facts ARE startling.

Look at fact 4 above. Notice that the US Government is earning interest on that money. I believe this is why it is made to be difficult to make a claim. If you do your research, you will find this difficulty to be true.

It is not only money that goes unclaimed, but property too.

There are some US States that take further advantage of this money and property. Unclaimed money has been known to be seized, and one State generates about $400 million in annual revenue from this source. Don't forget - this is YOUR rightful money being seized.

If you DO - and I seriously recommend that you do - look into making a claim, then beware of all the scams that are around. There are people and agencies that will make the claim for you... for a fee. Some of these services are legitimate, but many are not. For instance, some States put a cap on what these services can charge, so if you go this route, be aware of this.

I have done my research and found a great resource for the unclaimed money and property process. Alas there was no money for me, but I did find my mother $4200! Believe me, this was a GREAT feeling, maybe even better than if the money had been mine. And since then I have helped others find their unclaimed money too. It still amazes me how much unclaimed money there is out there. So my advice to you is to find out if you have a claim. It is YOUR money after all.

How to Build, Manage & Maintain Wealth

2007-08-08T23:21:00.001-07:00

You’ve tried making more money. You’ve tried cutting back on expenses. You’ve tried borrowing and consolidating. You’ve tried some sure-fire quick fixes. You’ve denied the situation and justified it because others are in the same situation or worse. And besides, when the kids move out, go to school, or you give up the house for a condo, there will be more money and you’ll have two incomes again!

Retire Sooner, Retire Richer : How to Build and Manage Wealth to Last a Lifetime
by Frank L. Netti

This book answer important concerns on these matters, including:

Is a financial planner necessary?
How can I design an effective, personal pension plan?
How can I be certain that my savings will last my lifetime?
What kinds of insurance options do I have?

If you have more debt, not including your mortgage, than you could pay off in three months—yes, three months!! If you have refinanced or consolidated once already and think it’s time again, or you have lived in your house longer than five years and your mortgage balance is still the same or larger, you know it’s time to do something different. But what? You have already tried everything you can think of and your lifestyle can’t squeeze anymore out. There are no magic bullets, but there are some solid steps you can take to create lasting solutions and to move away from financial struggle, overwhelm, and guilt towards freedom, security and significance.

There are three phases of our financial lives: wealth creation, wealth management and wealth distribution. These are not age driven or dollar driven phases. They are also not mutually exclusive. You don’t suddenly say “I’m moving into wealth management now.” And just because you’re working primarily in wealth creation doesn’t mean you ignore the aspects of wealth management and wealth distribution. The foundational principles, habits and knowledge all begin with wealth creation. So when you’ve tried everything you can think of, or when you feel stuck, you go to these foundational skills and principles—regardless of your age or acquired wealth. The number might have more zeros and the impact might extend beyond simply you and your immediate family—but the principles are the same.

Phase One: Wealth Accumulation
First: You need to enlist the help of a professional. However, that’s not as easy as making an appointment at the bank; or arranging a meeting with an investment advisor, insurance agent, accountant or lawyer. Your professional advisor needs to be able to provide you with advice on your entire financial picture and make suggestions based on a variety of reference points (lending, tax, cash flow, investing, business, insurance, etc.). Furthermore, they need to be able to work with you over a period of three to twelve months—perhaps with weekly, semi-monthly or monthly contact as you implement some changes into your finances and your lifestyle. You need to be prepared to pay someone for their help and their professional, unbiased expertise.

Second: You need to commit to a program that will take some work and will take some time. It will involve doing some things that might seem tedious and insignificant, but you must be able to commit to a process that will build a solid foundation, develop new skills and expand your knowledge of wealthy habits. How long this process takes will depend on you, but to implement this phase of financial planning is likely a year-long process—maybe more. Beyond building your foundation, you then need to commit to learning how to build wealth and that might take a few years to get started, and obviously maintenance is a lifelong process.

The third step to moving towards significance and away from overwhelm is to begin to implement strategies according to a logical sequence. The sequence starts with baby steps in the first phase, which is to develop habits, skills and strategies to effectively build a financial plan from which you can maintain, develop and sustain. The following process assumes you are starting from scratch in phase one, but it is important to review even if you feel like your questions are all about passing on your wealth and using if for a higher purpose:

There is no judgment, remorse or blame—where you are is where you start!
You need written goals and you need to know why they are important to you. Get a journal and start writing. If you would like an assisted journal contact us at www.moneyminding.com for more information.
You need to document where you are today, with emphasis on the specific details of your income and expenses by tracking:

a. Every item you spend money on for three months or more. How? Carry a notebook, ask for a receipt or get creative, but you need to be specific—no judging—just the facts.

b. Learn to balance your cheque book. Even if you don’t write cheques you will have transactions from your account. Balancing your books is a skill that you will use throughout your financial life with business accounting, investment statements and personal financial statements. It might seem tedious, but you can’t expect to begin the habit when you have millions of dollars to manage. It’s something that starts small and builds.
As best as you can, use CASH! Studies show that using plastic, even if paid off monthly, will produce an average of 35% higher expenses. Why? Because it’s easy. Individual expenditures fall within comfortable limits and you don’t have to pre-calculate your expected needs when you’re trying to determine your cash requirements. Withdrawing cash in advance will have the advantage of forcing a mini-budget calculation. Furthermore, using cash will enable you to set up specific savings programs that you can’t do with plastic purchases (see below).
Establish banking that enables you to transfer money easily to meet specific needs. The type of bank accounts need not necessarily be with a bank, they can be short-term investment accounts, or special places for saving cash as mentioned above.

a. At a minimum you will need one chequing account and one savings account. A savings account is not the same as an investment account. Savings are for specific purposes, investments are for longer term needs, where your money is expected to be working for you. You might also consider a dedicated account specifically for plastic, electronic transactions.

b. Whenever a deposit is made, your first two transactions (and entries into your cheque book) are an amount for savings and an amount for giving. I recommend immediately transferring 10% of the deposit to your savings account and withdrawing 10% in cash for giving. Giving can be for gifts, causes you believe in, charities, churches, etc. The key is to take this money in cash. If you find that you get to the end of the month and you need some extra money to pay the bills, the first amount to come back into your chequing account is the necessary amount from savings. If you still need more, you will have to take some of your cash and deposit it back into the bank – a much harder task. If you consistently develop these habits, you may find that after a few months the amount transferring back isn’t the full amount transferred to savings in the first place. You can learn more about these cash management strategies from a variety of articles and programs at www.moneyminding.com.
Assign categories to your spending and begin to make informed decisions that will help you come up with a budget that is designed to meet your planned expenditures. A budget will let you feel spontaneous in your spending because you will know that the funds are available. There won’t be any questions, guilt, or uncertainty about your spending because you can pre-plan to facilitate unplanned expenses.
Establish a regular routine and schedule for you to handle financial matters. This involves not only taking time to plan, track, budget, analyze and monitor; but also, to discuss situations with your spouse or partner. Businesses have regular board meetings, they have dedicated functions to handle these tasks; and they would surely not function efficiently without giving finances and planning a key role in the business. How can we expect to operate our homes giving only minimal attention to these important tasks? We need to value the tasks, habits and skills necessary to produce and manage millions of dollars before we actually have the money.

Phase Two: Wealth Management
The skills learned in Phase One are expanded because savings has accumulated and investment decisions are necessary. Perhaps budget planning has expanded options for income generation, and you are earning more. The key to this phase is that it isn’t something you necessarily do after all the steps in Phase One of wealth management. They have to be learned along the way at the same time. The essential components here are a focus on income effectiveness and efficiency, managing risks, investing for regular, stable income; and then adding a growth component and increasing risks as your overall financial situation and personal comfort grow. Throughout this stage a focus on minimizing taxes and implementing loss protection plans is fundamental.

Phase Three: Wealth Distribution
Again, this isn’t something that happens after the other phases. Distribution expands on the skills, and strategies that have been put in place in the previous two areas with a focus now on ensuring that your wealth is helping you focus on your top priorities, and is being used to fulfill purposes and causes for which you believe. This phase also ensures that your legacy is planned and not left hap-hazard. It’s about pulling everything together into a tidy package so your wealth can now benefit others as well as it has yourself. Insurance strategies, planned chartable giving, corporate tax structures, trusts, wills and estate planning programs are all integrated in the wealth distribution phase.

This entire three-phase program might sound overly simple – and it is, sort of. It all starts with a vision and some written goals and a commitment to do whatever it takes to see it through. Believe ~ Begin ~ Become all that you can. Don’t let your questions and uncertainty with how and what to do stop you from living your life!

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You've Heard That Before, Money Brings Money

Working With A Financial Planner

2007-08-06T20:28:00.001-07:00

More and more people are meeting with a financial planner or advisor. They are not for the very wealthy anymore. Perhaps you need a check-up on your current finances or you want to make sure you have enough to retire or you need someone to manage your money or you have a life change and want to check in with a financial professional (i.e. new baby). To get the most out of your meeting and relationship, the following list will provide guidelines and questions to ask.

Are you aware of my goals? If you want to buy a house in the next 5 years, your money will be invested differently than if you don’t want to touch it for at least 10 years.
What is your investing style? Stocks, bonds, mutual funds, Large-cap, to name a few. Many financial planners specialize in certain areas of the market and you want to ensure it matches your goal and you remain diversified.
What is your strategy with my portfolio for my goals? You want to make sure they are aligned with your risk level.
What are your commissions and how do you get paid? There are two main ways financial advisors get paid: flat fee based on a percentage of assets (average is between 1-2%) or a commission based on sales. Make sure you know how they are getting paid. If they say they don’t get paid by you, remember they ALWAYS get paid.
Will I be able to speak with someone regularly? Or will you be calling me regularly? Some advisors seem to forget about their clients. You are paying a lot for service so you want to make sure you get it!
What kind of periodic reports will I receive? Will I meet with you regularly? Have them go over the reports with you.
How many years of experience do you have? And what did you do before you became a financial planner?
What are the names and numbers of other clients that can serve as references?

There are also fee-only financial planners that get paid on a hourly basis. Many of them are completely independent. Therefore, they will be able to give you an unbiased analysis of your personal finances. To get more information, National Association of Personal Financial Advisors (fee-only) www.napfa.org. At the end of the day, it is going to be about your connection with the financial planner. With that being said, don’t forget about the financial fundamentals and how they benefit you.

You've Heard That Before, Money Brings Money

2007-08-06T20:23:00.001-07:00

The Energy Of Money
In ancient times, a fisherman cold go out fishing and with his effort he could bring home a lot of fish. He knew very well that if he wished to keep it until he could eat it all, either he had to salt it or hope it wouldn’t go bad… Salted, wasn’t the same as fresh, so he started to give it away for someone to eat it while it was good. True, there was some sort of exchange, but not always possible… until the invention of money.

Money, Money, Money
If he sold the fish, the money wouldn’t rot and he could keep it as long as he wanted. It was as if his effort on fishing were concentrated and accumulative, giving him the possibility to make it wake up at any time. Then he noticed that if he gave this “energy” to another person who made boats, this man’s effort in turn would be rewarded with this new kind of energy. The fisherman in turn had a better boat to be able to catch even more fish. The same effort but with a better tool, gives better results, right?

Ok, Let’s Get To The Point
What I mean is that money which sits idle, does not multiply its energy. Money was meant to pass on from one hand to another. It can be your cash in the bank or in your wallet, or even big sums of money belonging to investors. If it sits peacefully in the bank, not only does it not give you any profit, but it also loses value. Inflation and the cost of account maintenance will end up by consuming it.

Lenders And Borrowers
There are several great partnerships in this world. A rhinoceros needs the bird on its back to eat the bugs and parasites that live on its skin. The bird needs the bugs to live on. Such is the case of borrowers and lenders. Borrowers need cash to multiply their efforts. Lenders need borrowers to multiply their cash. It’s a never ending cycle, like life itself.

I Don’t Need To Tell You
… what comes next. If you really want to make progress in life, use the principle of the multiplying energy of money. Having lots of money is not bad. It’s what you do with it that counts. It’s supposed to be your friend. After all, the money you generate has your very own energy within. Whatever you get through a loan, is your own energy giving you the capacity to borrow more or less.

I’ve just given you the idea. It should be enough to trigger off your own ideas as to what to do in order to multiply your efforts and the inherent money those efforts will bring.

Can Your Family Live On A Single Income?

2007-08-05T22:44:00.001-07:00

Many families dream of having one parent stay at home to raise the kids. The idyllic picture of having mom (or dad) home, taking care of the kids, cooking great meals, keeping a beautiful home, is hard to resist.

It's also incredibly difficult financially.

However, in many cases it can be done. And with practice the sacrifices you make may not seem so bad. You will probably take fewer vacations, and they'll be simpler. You will probably eat out less often. You will probably buy fewer things. If you and your family can live with that, you will probably be able to cope.

Provided that you can make the remaining income stretch to cover your necessities. You need to look at this to make an informed decision. Here are some steps to take.

Collect 3 months' worth of pay stubs from the person whose income your family will be relying on. Use this to calculate your average monthly income.
Collect 3 months' worth of bills. If you like, you can separate this into more or less fixed bills, which are things such as rent/mortgage payments, water bills, electrical bills and so forth, versus other expenses such as groceries. In any case you need an average of what you are paying out every month.
Subtract your average monthly expenses from the average monthly single income. Will it work?

If not, don't despair. There are often areas you can cut. When you have two incomes it is easy to spend more than you absolutely have to.

You can start with monthly bills. Do you really need cable television? What about having both cell phones and landline phones? Perhaps your family could get by with just one or the other.

Now look at the other things you spend money on monthly, but don't come in the form of bills. Can you cut that grocery bill down? Do you tend to buy more clothing or new electronic gadgets you don't need? What bad shopping habits do you have? Can you give up Starbucks?

Try to work out a budget that will work with the money you would have as a single income family. Then before you are actually a single income family, try living on it. Put the extra into savings. It makes a nice cushion for if things don't work out and for when those extra bills that you really can't plan for hit.

It takes time to learn to live on a single income. It is very possible for many families. It takes planning, both in terms of finances and in terms of what is expected from each person, but it is highly doable. And having the ability to have one parent there for the kids is just a delight.

The Importance of A Budget

2007-08-04T19:35:00.001-07:00

Budgeting is an integral part of society. In today’s hurry up and get it done society; every day we are trying to budget our time, our meals, our kids’ time and our money. Unfortunately for many, most of this process is done mentally and never put on paper. Remember, just as families budget time and money, your business must also develop a financial plan. This type of budget is simply a formal written summary of your goals and intentions in terms of dollars.

Budgeting requires you to look ahead and formalize future goals. By establishing a budget, you can set goals for achieving a certain level of income and monitor your expenses. Many home based and small-business owners have remarked that their increase in profit margins did not occur until they had a written revenue goal and a method with which to monitor expenses.

Other business owners need to know their sales levels in terms of dollars and how hard they need to work to make the budget work. Sound familiar, goals and budgeting is very much tied together. The closer you come to the goals you have set for yourself, the closer you will come to achieving the budget amount you need. You’ll know you are on top of your business when you can tell your accountant that you need to sell 3.25 items per day in order to make your budget work and meet your financial goals.

NCO Financial Services

2007-08-04T11:02:00.001-07:00

One of the financial services that is available to businesses and corporations is the business process outsourcing (BPO) service. This service offers businesses and corporations with a system wherein they can maintain contact with their clients with regard to various matters such as credit collection, technical support, and other means. Companies that provide this service usually put up a contact center where agents are hired to maintain the client-vendor relationship between the companies that use this service and those that buy from them.

An example of such a company is the NCO Financial Services Company, which offers a wide variety of services to its clients. It is the aim of this almost eighty-year-old company to reduce client operating expenses, increase cash flow, and improve the efficiency of their client companies. NCO Financial Services has a wide network of contact centers in various countries wherein they operate. The major services that they offer fall under three major categories: Finance and Accounting, Customer Relationship Management, and Back Office.

The Finance and Accounting units deal mainly in resolving deficient customer relationships, which include the collection of past due obligations. Under this category are specific services, on of which is the Accounts Receivable Management Unit. This unit will be able to help your business collect past due obligations and correct delinquencies in payments of your clients. Other services under the Finance and Accounting unit are the Portfolio Management and Collection Units.

NCO Financial Services also ensures that the customer relationship is maintained through its Customer Relationship Management Unit, which ensures that your clients will have access to technical support and the right information with regard to their transactions through both inbound and outbound calling campaigns. This service can also provide a platform for your company to increase your sales, as outbound calling campaigns increases the awareness of your products.

The Back Office Unit will be able to help your company in your order-processing needs when it comes to the sales generated through the outbound calls. In addition to this, NCO Financial Services will also help you in the delivery of payments to your companies and even in litigation if problems are encountered with regard to the payments.

Businesses have a number of needs to fulfill with regard to maintaining customer relationships; it is then very comforting to know that there are systems and organizations that are available such as the NCO Financial Services. NFO Financial Services can help businesses with these needs by providing effective business outsourcing services.

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