I just read an article about a reporter who had his finances critiqued by a group of multi-millionaires. The results were surprising.
Tiger 21 is an investment club, where members get together once a month to discuss money. They share investment ideas and personal finance tips. Membership at the club costs $30,000 a year, so it’s definitely not cheap. But guess what, rich people love talking about money. Maybe, that’s why they’re rich to begin with?
The reporter submitted his personal finances and agreed to have the members give him advice. He thought they’d tell him to stop spending so much on eating out. Otherwise, he thought he was in good shape.
But they didn’t care about how much he spent on eating out.
Instead they gave him some really good advice.
One, start saving more.
Saving just 10% of your income isn’t enough. He could easily bump it up to 15%.
Two, stay liquid.
The reporter had a vacation condo in Florida. It was a money sink. Everyone thought is was a bad idea and told him to dump it. Sell, even if you take a loss, was their advice. Rich people are always concerned about maintaining their liquidity. Money-sucking “investments” kill one’s liquidity.
Liquidity helps you take advantage of real opportunities to make money.
For example, when the stock market crashed in late-2008. I know rich people were jumping in to buy great stocks at ridiculously low prices. You can only do this if you are liquid.
Additionally, liquidity provides a safety net in bad times.
Speaking of bad times, the best advice they gave was about his lack of insurance.
Most people are incredibly under-insured. The reporter was no different.
I remember when my dad died. I can’t believe how little insurance my dad carried. It was absurd.
He had a 30 year Term-life policy which he had paid for 26 years. Unfortunately, he had never increased the policy to keep up with his increasing salary, or inflation. The death-benefit amount my mom received was about 6 months of my dad’s gross income at the time. It was a joke.
Luckily, we were able to sell his medical practice which provided a sizable amount to take care of her. But as soon as my dad was out of the picture, it was worth 50% less. If he had sold it himself, we would’ve received double.
Tiger 21 members said if you’re not spending 1-3% of your annual income on insurance, you’re not spending enough.
In addition to life, you need disability insurance as well. If something were to prevent you from making a living, you’d be surprised how tiny the premiums would seem.
I know a family that made over $500,000 a year. The wife was a dentist who made $250,000. At the age of 35 she developed a problem with her hand and was unable to work. For a few thousand a year in disability premiums, she could have collected $70,000 in tax-free money. Now, she can’t work, and they have to pay someone to take care of the kids even though she stays at home.
Like most things in life, insurance is a thing you miss the most when you don’t have it.
Get insurance folks, its cheaper when you don’t need it!
And if you need a referral for a good insurance agent, let me know.
View the original article here
Showing posts with label Financial Planning. Show all posts
Showing posts with label Financial Planning. Show all posts
Friday, July 8, 2011
Saturday, June 18, 2011
Questions To Ask Before You Refinance
Refinancing your mortgage can be a great way to save money, but it's not a sure thing. Before you take the plunge, ask yourself these six questions to avoid making a major money mistake.
1. Do I have the time to spare?
This question is very basic, but you shouldn't overlook it. If you're already very busy with work or other major obligations, it may be in your best interests to wait until you have more time to deal with the details of the loan. If you are too busy or stressed out, you might make a mistake, missing something important in the fine print or falling prey to a bad loan. Refinancing should be done with the same extreme care you put into getting your original mortgage - it's just as big of a decision.
2. Will I break even or come out ahead?
Most people assume that refinancing will put them ahead, otherwise, they wouldn't do it. But how realistic is this assumption? Any number of situations could arise - from work relocation to family emergency – that could influence your financial situation and make your decision to refinance an unprofitable one. Unfortunately, it's not possible to predict with complete accuracy whether you will own the home long enough to come out ahead on a refinance, but you can make an educated guess. Since it is possible to lose money on a refinance, it's important to consider whether you can afford that risk.
3. Am I disciplined enough to resist rolling other debt into my mortgage?
It might sound like a good idea to pay off some of your other debts by refinancing them into your mortgage. Why owe money to multiple people and make multiple debt payments every month, when you could have just one debt and just one major monthly payment, all at a low interest rate? Well, let's use an auto loan as an example. Auto loans often have higher rates than mortgage loans (depending on what market conditions were like when each loan was taken out, of course), but they also have fairly short terms. If you take that short-term loan and turn it into a 30-year loan, even at a lower interest rate, you're likely to end up paying more. You didn't think the bank was offering to consolidate your debt out of the kindness of its heart, did you? Banks are businesses. They're in it for the profit and if they can stretch out a loan for you, they're often happy to do it because it allows them to collect more interest.
4. Am I likely to qualify for the rate I want?
The current interest rates for a refinance quoted on major financial web sites and the evening news can only give you a general idea of what interest rate you might be able to get. The details of your specific situation, such as your credit score and the type of loan you want to refinance into, will affect the rates actually available to you. If you don't qualify for the lowest advertised rates, is it still worthwhile to refinance? Talk to a few lenders to see what kind of rate you can expect, but keep in mind that the unscrupulous ones will quote any rate to get your business. If you trust the person who did your first mortgage, that's a good place to start your research.
5. Can I meet today's tighter lending standards?
If you took out your last mortgage before the housing bubble, when no-doc loans were commonplace, you may be stunned by the borrower requirements and documentation requirements to refinance in today's market. Many lenders will want you to have a high credit score and ask you to provide full documentation of your financial situation, such as recent pay stubs, bank account statements, tax returns and more.
6. Can I prevent going from a good loan to a bad loan?
If you're not savvy when it comes to money, contracts and salespeople (in this case, loan officers), or you just don't trust yourself to not make a mistake, refinancing might not be in your best interest. If you know you have a good loan, you may not want to roll the dice and see what you end up with when you refinance. And if you already have a bad loan, refinancing will be useless if you just end up in another bad loan. Also, there's always the risk of bait and switch - just like when you first bought your home, a lender may quote you one interest rate and set of fees on the day you decide to work with them and give you something entirely different when it's time to sign the paperwork.
The Bottom Line
Yes, refinancing can be a great way to save money. If you do it right, you can improve your short-term cash flow while also increasing your long-term net worth. But a bad refinance can put you in a situation where the only person benefiting is the loan officer. If your answer to any of the questions in this article is "no," you may be better off looking for simpler ways to decrease your expenses, such reviewing your insurance policies, cutting your grocery bill or looking for ways to lower other household bills.
View the original article here
1. Do I have the time to spare?
This question is very basic, but you shouldn't overlook it. If you're already very busy with work or other major obligations, it may be in your best interests to wait until you have more time to deal with the details of the loan. If you are too busy or stressed out, you might make a mistake, missing something important in the fine print or falling prey to a bad loan. Refinancing should be done with the same extreme care you put into getting your original mortgage - it's just as big of a decision.
2. Will I break even or come out ahead?
Most people assume that refinancing will put them ahead, otherwise, they wouldn't do it. But how realistic is this assumption? Any number of situations could arise - from work relocation to family emergency – that could influence your financial situation and make your decision to refinance an unprofitable one. Unfortunately, it's not possible to predict with complete accuracy whether you will own the home long enough to come out ahead on a refinance, but you can make an educated guess. Since it is possible to lose money on a refinance, it's important to consider whether you can afford that risk.
3. Am I disciplined enough to resist rolling other debt into my mortgage?
It might sound like a good idea to pay off some of your other debts by refinancing them into your mortgage. Why owe money to multiple people and make multiple debt payments every month, when you could have just one debt and just one major monthly payment, all at a low interest rate? Well, let's use an auto loan as an example. Auto loans often have higher rates than mortgage loans (depending on what market conditions were like when each loan was taken out, of course), but they also have fairly short terms. If you take that short-term loan and turn it into a 30-year loan, even at a lower interest rate, you're likely to end up paying more. You didn't think the bank was offering to consolidate your debt out of the kindness of its heart, did you? Banks are businesses. They're in it for the profit and if they can stretch out a loan for you, they're often happy to do it because it allows them to collect more interest.
4. Am I likely to qualify for the rate I want?
The current interest rates for a refinance quoted on major financial web sites and the evening news can only give you a general idea of what interest rate you might be able to get. The details of your specific situation, such as your credit score and the type of loan you want to refinance into, will affect the rates actually available to you. If you don't qualify for the lowest advertised rates, is it still worthwhile to refinance? Talk to a few lenders to see what kind of rate you can expect, but keep in mind that the unscrupulous ones will quote any rate to get your business. If you trust the person who did your first mortgage, that's a good place to start your research.
5. Can I meet today's tighter lending standards?
If you took out your last mortgage before the housing bubble, when no-doc loans were commonplace, you may be stunned by the borrower requirements and documentation requirements to refinance in today's market. Many lenders will want you to have a high credit score and ask you to provide full documentation of your financial situation, such as recent pay stubs, bank account statements, tax returns and more.
6. Can I prevent going from a good loan to a bad loan?
If you're not savvy when it comes to money, contracts and salespeople (in this case, loan officers), or you just don't trust yourself to not make a mistake, refinancing might not be in your best interest. If you know you have a good loan, you may not want to roll the dice and see what you end up with when you refinance. And if you already have a bad loan, refinancing will be useless if you just end up in another bad loan. Also, there's always the risk of bait and switch - just like when you first bought your home, a lender may quote you one interest rate and set of fees on the day you decide to work with them and give you something entirely different when it's time to sign the paperwork.
The Bottom Line
Yes, refinancing can be a great way to save money. If you do it right, you can improve your short-term cash flow while also increasing your long-term net worth. But a bad refinance can put you in a situation where the only person benefiting is the loan officer. If your answer to any of the questions in this article is "no," you may be better off looking for simpler ways to decrease your expenses, such reviewing your insurance policies, cutting your grocery bill or looking for ways to lower other household bills.
View the original article here
Saturday, June 11, 2011
Finances in 55 Seconds: Needs vs. Wants
One of the fundamental concepts of personal finance is understanding the difference between needs and wants. Being able to make this distinction is key to financial success. You should be able to identify needs and wants, and then make decisions about your finances based on what is truly needed, and what is merely wanted.
Before you can find financial success, it is vital that you take control of your money, rather than letting it control you. The first step toward doing that is learning the difference between needs and wants. If you have 55 seconds, you can figure out what constitutes needs and what constitutes wants.
List your expenses: Create a list of your expenses. Either write them out, or use your personal finance software to create a list for you. (23 seconds to write them down, 5 seconds to have the personal finance software list them)
Honestly evaluate the list: Skim over the list, and honestly evaluate which expenses are needs, and which are wants. As you go over the list, keep in mind that needs include food, shelter, clothing and transportation to a job. Everything else is basically a want. (32 seconds; if you used computer finance software, you are done in much less than 55 seconds)
Of course, now that you have identified which items in your list are needs, and which are wants, some harder, more time consuming work is warranted. Look at your needs. Even though you need clothing, do you need expensive clothing? Or so much of it? Consider your grocery bill. Can you cut back? Are you spending part of your budget on junk food? Keep in mind, too, that even though eating out constitutes food, you don’t need to spend money eating food from restaurants.
Once you have identified your wants, you can work on cutting back on those items to make a little more breathing room in your budget. You can better get an idea of which items to cut from your budget by prioritizing your list. Take care of your true needs first, and then take care of items of great importance to you. If you want to save for retirement, that should be taken care of before going to the movies. Consider what you value, from providing music lessons for your kids, to donating to charity, to building up your emergency fund, to saving for a vacation.
The exercise of identifying needs and wants should get you thinking about what’s really important to you, and what you really want to use your money on. After prioritizing your list according to needs and wants, and then deciding which wants are most important, you can begin to change your spending habits to reflect your priorities. List expenses in order from most important (starting with needs) to least important. Then, when you need to make a spending decision, cutting back during the month means forgoing the items on the bottom of your list, and working your way up.
What do you think? How do you decide which expenses to cut back on when the budget is tight?
View the original article here
Before you can find financial success, it is vital that you take control of your money, rather than letting it control you. The first step toward doing that is learning the difference between needs and wants. If you have 55 seconds, you can figure out what constitutes needs and what constitutes wants.
List your expenses: Create a list of your expenses. Either write them out, or use your personal finance software to create a list for you. (23 seconds to write them down, 5 seconds to have the personal finance software list them)
Honestly evaluate the list: Skim over the list, and honestly evaluate which expenses are needs, and which are wants. As you go over the list, keep in mind that needs include food, shelter, clothing and transportation to a job. Everything else is basically a want. (32 seconds; if you used computer finance software, you are done in much less than 55 seconds)
Of course, now that you have identified which items in your list are needs, and which are wants, some harder, more time consuming work is warranted. Look at your needs. Even though you need clothing, do you need expensive clothing? Or so much of it? Consider your grocery bill. Can you cut back? Are you spending part of your budget on junk food? Keep in mind, too, that even though eating out constitutes food, you don’t need to spend money eating food from restaurants.
Once you have identified your wants, you can work on cutting back on those items to make a little more breathing room in your budget. You can better get an idea of which items to cut from your budget by prioritizing your list. Take care of your true needs first, and then take care of items of great importance to you. If you want to save for retirement, that should be taken care of before going to the movies. Consider what you value, from providing music lessons for your kids, to donating to charity, to building up your emergency fund, to saving for a vacation.
The exercise of identifying needs and wants should get you thinking about what’s really important to you, and what you really want to use your money on. After prioritizing your list according to needs and wants, and then deciding which wants are most important, you can begin to change your spending habits to reflect your priorities. List expenses in order from most important (starting with needs) to least important. Then, when you need to make a spending decision, cutting back during the month means forgoing the items on the bottom of your list, and working your way up.
What do you think? How do you decide which expenses to cut back on when the budget is tight?
View the original article here
Wednesday, May 11, 2011
How To Improve Your Credit Score
If you thought about buying a home and during the loan application process you realized that your credit score was holding you back – don’t worry, you’re not alone! In fact, below-average credit scores are one of the most common reasons why mortgage applications are denied.
According to a survey done by the US Public Interest Research Groups, 8 out of 10 credit reports contain some kind of mistake and some of these mistakes are serious. You can often raise your credit score by disputing and fixing mistakes in your credit report by contacting the three main credit bureaus, Equifax, Experian and TransUnion.
One way to easily start monitoring your credit score is by creating a profile at Quizzle.com. What is Quizzle, you ask? It’s a free personal finance site that helps you get a better understanding of your credit and an easy way to manage your home, money and credit in one spot. You basically answer a few questions about your financial status and BOOM- you get your free instant credit report plus much more.
Quizzle also gives your credit score a grade, shows you how many points you could improve your credit by (based on your credit report) and offers tips and tools to help you raise your credit score. They help you create a budget and come up with a plan to pay off debt faster. And, if you do find a mistake in your credit report, you can dispute the information with the credit bureaus directly from your Quizzle profile.
When you create your profile, you will be pleasantly surprised to see that:
1) Creating an account is FREE – no free trials or gimmicks
2) Quizzle never asks for your Social Security Number (this is a big one because of the risk of online identity theft)
3) You only enter your credit card number when you choose to sign up for one of their products
Anyone who is interested in either improving, building or maintaining their credit score could benefit from Quizzle’s services. This is especially true if you are thinking about purchasing a new home or refinancing. So, check it out and tell us what you think!
View the original article here
According to a survey done by the US Public Interest Research Groups, 8 out of 10 credit reports contain some kind of mistake and some of these mistakes are serious. You can often raise your credit score by disputing and fixing mistakes in your credit report by contacting the three main credit bureaus, Equifax, Experian and TransUnion.
One way to easily start monitoring your credit score is by creating a profile at Quizzle.com. What is Quizzle, you ask? It’s a free personal finance site that helps you get a better understanding of your credit and an easy way to manage your home, money and credit in one spot. You basically answer a few questions about your financial status and BOOM- you get your free instant credit report plus much more.
Quizzle also gives your credit score a grade, shows you how many points you could improve your credit by (based on your credit report) and offers tips and tools to help you raise your credit score. They help you create a budget and come up with a plan to pay off debt faster. And, if you do find a mistake in your credit report, you can dispute the information with the credit bureaus directly from your Quizzle profile.
When you create your profile, you will be pleasantly surprised to see that:
1) Creating an account is FREE – no free trials or gimmicks
2) Quizzle never asks for your Social Security Number (this is a big one because of the risk of online identity theft)
3) You only enter your credit card number when you choose to sign up for one of their products
Anyone who is interested in either improving, building or maintaining their credit score could benefit from Quizzle’s services. This is especially true if you are thinking about purchasing a new home or refinancing. So, check it out and tell us what you think!
View the original article here
Tuesday, May 10, 2011
How To Take Care of Your Medical Debt
Getting sick or having a major medical condition is awful, but many people who’ve been in that situation say that the bills that follow a major illness or injury are just as bad. In fact, these can pile so high that they feel like another injury in addition to the original one. Some patients find that the stress that comes from trying to figure out how to pay for their illness makes them sick all over again.
While most people have health insurance of some sort, many only find out that theirs is not as good as they’d hoped after they’ve already been in the hospital or racked up many bills another way. That’s part of the healthcare crisis in the United States, because being under-insured could be as bad (or worse, sometimes) than not being insured at all.
Planning for emergency expenses is always the best way to avoid the situation altogether. But even the most conservative budget ninja could find herself in a medical situation that requires large amounts of money. If you find yourself in a situation where you owe more in medical bills than you can pay, don’t let the stress overwhelm you. Instead, take a deep breath, assess your situation, and follow the steps below.
Talk to the People You Owe
Before you do anything else, call the hospitals and other companies that you owe money to. Let them know your situation, and explain that you cannot pay the full amount. Be ready to demonstrate how much you make and the total of your monthly expenses, as they might need these before they can negotiate with you.
Note that making this call may have a different effect with different companies. Some are happy to work with you, and in fact reduce bills routinely for patients who cannot pay the full amount. Others may be more difficult, or may not have a standard procedure in place to deal with your situation. Give them the benefit of the doubt, though, and you may find your bills reduced drastically.
Find Out if There’s Public Assistance Available
This can vary widely based on the state you live in and even where in each state you live. However, there are many public assistance programs geared toward helping people pay off medical debt that they cannot pay themselves. Check with your hospital and other government agencies to see what’s offered in your area and what you need to do to qualify for it.
When exploring this option, be extremely careful not to go with scammers. If you use your favorite search engine for words like "debt relief" or "medical debt program", you will find hundreds of for-profit businesses, some of them not very ethical, that are only looking to make a buck off of you. Look for non-for-profit organizations or foundations driven by ethical or religious motives such as the Neighborhood Health Initiative (NHI) in Des Moines as featured by the Annie E. Casey Foundation.
Start Making Payments
Even if you cannot pay off all of your debt, start making monthly payments towards it. Ten dollars a month may not sound like much to you, and it may not be more than a drop in the bucket of what you owe, but paying it each month demonstrates your goodwill to the company you owe.
In some states, companies to whom you owe medical debt cannot pursue you for the balance as long as you’re making monthly payments. Laws on this issue can be complicated and will vary widely by state, but it’s worth looking into if you find yourself in a difficult situation.
Another option is to use a service that allows you to delay payments for a month for a fee such as Billfloat.com. This helps you delay your payments for a short time period to help you get your numbers in order.
Look at Getting a Personal Loan
Going into more debt in order to pay off debt may not make much sense the first time you think about it. However, securing a personal loan for the medical balance that you owe to medical companies may give you a chance to pay your bills, get the company or the debt collection they reported you to off your back, and let you make payments that you can afford.
Some lenders may also be more likely to give you a personal loan if they know the situation behind your debt. While you don’t want to manipulate anyone, simply stating why you need the money can let them know that you are a responsible person who pays your debts, even if you’re currently in a bad situation.
However you manage to take care of your medical debt, don’t just ignore it. It’s easy to feel overwhelmed, especially if you’re still recovering from the illness or injury that caused the debt in the first place. Medical debt won’t go away on it’s own, though, and it’s usually easier to deal with it before you’re reported to a collections agency. So take a deep breath and get started today. The sooner you find a solution, the sooner you can stop worrying about it.
View the original article here
While most people have health insurance of some sort, many only find out that theirs is not as good as they’d hoped after they’ve already been in the hospital or racked up many bills another way. That’s part of the healthcare crisis in the United States, because being under-insured could be as bad (or worse, sometimes) than not being insured at all.
Planning for emergency expenses is always the best way to avoid the situation altogether. But even the most conservative budget ninja could find herself in a medical situation that requires large amounts of money. If you find yourself in a situation where you owe more in medical bills than you can pay, don’t let the stress overwhelm you. Instead, take a deep breath, assess your situation, and follow the steps below.
Talk to the People You Owe
Before you do anything else, call the hospitals and other companies that you owe money to. Let them know your situation, and explain that you cannot pay the full amount. Be ready to demonstrate how much you make and the total of your monthly expenses, as they might need these before they can negotiate with you.
Note that making this call may have a different effect with different companies. Some are happy to work with you, and in fact reduce bills routinely for patients who cannot pay the full amount. Others may be more difficult, or may not have a standard procedure in place to deal with your situation. Give them the benefit of the doubt, though, and you may find your bills reduced drastically.
Find Out if There’s Public Assistance Available
This can vary widely based on the state you live in and even where in each state you live. However, there are many public assistance programs geared toward helping people pay off medical debt that they cannot pay themselves. Check with your hospital and other government agencies to see what’s offered in your area and what you need to do to qualify for it.
When exploring this option, be extremely careful not to go with scammers. If you use your favorite search engine for words like "debt relief" or "medical debt program", you will find hundreds of for-profit businesses, some of them not very ethical, that are only looking to make a buck off of you. Look for non-for-profit organizations or foundations driven by ethical or religious motives such as the Neighborhood Health Initiative (NHI) in Des Moines as featured by the Annie E. Casey Foundation.
Start Making Payments
Even if you cannot pay off all of your debt, start making monthly payments towards it. Ten dollars a month may not sound like much to you, and it may not be more than a drop in the bucket of what you owe, but paying it each month demonstrates your goodwill to the company you owe.
In some states, companies to whom you owe medical debt cannot pursue you for the balance as long as you’re making monthly payments. Laws on this issue can be complicated and will vary widely by state, but it’s worth looking into if you find yourself in a difficult situation.
Another option is to use a service that allows you to delay payments for a month for a fee such as Billfloat.com. This helps you delay your payments for a short time period to help you get your numbers in order.
Look at Getting a Personal Loan
Going into more debt in order to pay off debt may not make much sense the first time you think about it. However, securing a personal loan for the medical balance that you owe to medical companies may give you a chance to pay your bills, get the company or the debt collection they reported you to off your back, and let you make payments that you can afford.
Some lenders may also be more likely to give you a personal loan if they know the situation behind your debt. While you don’t want to manipulate anyone, simply stating why you need the money can let them know that you are a responsible person who pays your debts, even if you’re currently in a bad situation.
However you manage to take care of your medical debt, don’t just ignore it. It’s easy to feel overwhelmed, especially if you’re still recovering from the illness or injury that caused the debt in the first place. Medical debt won’t go away on it’s own, though, and it’s usually easier to deal with it before you’re reported to a collections agency. So take a deep breath and get started today. The sooner you find a solution, the sooner you can stop worrying about it.
View the original article here
Friday, May 6, 2011
Budgeting Can Improve Your Life
Budgeting is helpful for obvious reasons, but did you know it can do more than help you count your pennies? It's true, and a budget can actually improve your life in other ways. It can reduce stress, improve your marriage, help you retire early or put your kids through college, and much more. Sure, it isn't all that fun to sit down and create a budget for the first time, but it can clearly pay for itself in short order.
View the original article here
View the original article here
Monday, April 11, 2011
4 Common Financial Issues We Battle With Everyday
As a human being we encounter common financial issues all most every day. If you know how to handle these common financial issues then you will have an upper hand then many other people who tend to pulverized when it comes to face these common issues. Realize these common issues in yourself and take control of your own life.
You know emotion run stronger than your thoughts, so one must know how to deal with this kind of situation. It is always difficult to make emotional decision and here we make mistake. Financial decision should be made by your brain rather than making it by heart. You may be offered a high return on the investment that you are making; however you should be intelligent enough to know the facts by making the right decision.
With facts there is fiction too, so you should be capable enough to distinguish between facts and fiction. If you are not expertise in the field of finance, then you tend to take suggestions from others which might not be the fact, perhaps it could be fiction. So it is necessary for you to know how to separate facts and fictions.
There is always a chance of you getting into a catastrophic financial risk. Many a times many people tend to get carried away by the high returns that are promised by the lenders. Do not take such financial risk be very sure about the program before you get into it. You should always keep your savings for emergency situation, there will be time when you will be tested with your intelligence on how you should use your savings make sure that you make use of your logical brain to tackle these kind of situation. It is very difficult in life to recover from any catastrophic financial failure.
Last but not the least do not focus too much of your time on money. Many people give the priority to the money than life, which is absolutely wrong. Just do the Wright thing in life an you will see that money is following you, in the long run you would see that people who run after money ends up with nothing. These kind of people end up spending money rather than making it because their focus is only money. They are different aspect involved in our life apart from money. I believe health and happiness comes first than any other things.
View the original article here
You know emotion run stronger than your thoughts, so one must know how to deal with this kind of situation. It is always difficult to make emotional decision and here we make mistake. Financial decision should be made by your brain rather than making it by heart. You may be offered a high return on the investment that you are making; however you should be intelligent enough to know the facts by making the right decision.
With facts there is fiction too, so you should be capable enough to distinguish between facts and fiction. If you are not expertise in the field of finance, then you tend to take suggestions from others which might not be the fact, perhaps it could be fiction. So it is necessary for you to know how to separate facts and fictions.
There is always a chance of you getting into a catastrophic financial risk. Many a times many people tend to get carried away by the high returns that are promised by the lenders. Do not take such financial risk be very sure about the program before you get into it. You should always keep your savings for emergency situation, there will be time when you will be tested with your intelligence on how you should use your savings make sure that you make use of your logical brain to tackle these kind of situation. It is very difficult in life to recover from any catastrophic financial failure.
Last but not the least do not focus too much of your time on money. Many people give the priority to the money than life, which is absolutely wrong. Just do the Wright thing in life an you will see that money is following you, in the long run you would see that people who run after money ends up with nothing. These kind of people end up spending money rather than making it because their focus is only money. They are different aspect involved in our life apart from money. I believe health and happiness comes first than any other things.
View the original article here
Tuesday, April 5, 2011
Get to know some RMD basics
You've probably spent a good chunk of your life working and setting aside money for retirement through IRAs and tax-advantaged employer-sponsored plans—such as SEP-IRAs, SIMPLE IRAs, 401(k)s, 403(b)(7)s, or qualified plans. These types of investments allow you to postpone paying income taxes on such assets until you reach age 70½.
At that point, the IRS requires you to start drawing down those assets and paying the appropriate taxes by taking required minimum distributions (RMDs). There are two important exceptions. First, any Roth IRA you hold is exempt from RMD regulations during your lifetime. Second, if you're over 70½ but still working, you may not be required to begin taking RMDs from your employer's plan until you stop working (unless you're a 5% owner).
The IRS penalty for failure to take your proper RMD amount by December 31 each year is stiff—50% of the amount not taken. For example, if you were required to withdraw $1,000 from your IRA but failed to do so, the penalty would be $500. RMDs are generally taxed as ordinary income and reported on IRS Form 1099-R.
You can calculate how much you need to withdraw from your traditional IRAs and employer plans each year. Take your year-end account balance for each IRA or employer-sponsored plan account and divide the balance by your applicable life expectancy divisor—a number that you can get from IRS Publication 590 (Individual Retirement Arrangements). If you have several IRAs, you must calculate your RMD separately for each; however, you can aggregate the total RMD amounts and take a distribution from one or more of the IRAs.
Note that you must take RMDs from IRAs and employer plans independently; you can't aggregate the required amount and take a distribution from only one account type. For more about RMDs from your employer plan, contact your plan administrator.
A reminder: If you're planning to roll over assets from your employer plan or convert from a traditional IRA to a Roth IRA, you must take your RMD first.
If you turn 70½ in a given year, you may opt to delay your first RMD until April 1 of the following calendar year. If you choose to hold off, you'll then need to take your second required distribution by December 31 of the same year. You'll also have two tax liabilities—one for the prior-year amount and one for the current-year amount withdrawn.
For example, suppose you turned 70 on November 15, 2010. That means you'll be 70½ on May 15, 2011. You may take your 2011 RMD by December 31, 2011, or wait until April 1, 2012. If you defer, you must take a second distribution—for 2012—by December 31, 2012.
View the original article here
At that point, the IRS requires you to start drawing down those assets and paying the appropriate taxes by taking required minimum distributions (RMDs). There are two important exceptions. First, any Roth IRA you hold is exempt from RMD regulations during your lifetime. Second, if you're over 70½ but still working, you may not be required to begin taking RMDs from your employer's plan until you stop working (unless you're a 5% owner).
The IRS penalty for failure to take your proper RMD amount by December 31 each year is stiff—50% of the amount not taken. For example, if you were required to withdraw $1,000 from your IRA but failed to do so, the penalty would be $500. RMDs are generally taxed as ordinary income and reported on IRS Form 1099-R.
You can calculate how much you need to withdraw from your traditional IRAs and employer plans each year. Take your year-end account balance for each IRA or employer-sponsored plan account and divide the balance by your applicable life expectancy divisor—a number that you can get from IRS Publication 590 (Individual Retirement Arrangements). If you have several IRAs, you must calculate your RMD separately for each; however, you can aggregate the total RMD amounts and take a distribution from one or more of the IRAs.
Note that you must take RMDs from IRAs and employer plans independently; you can't aggregate the required amount and take a distribution from only one account type. For more about RMDs from your employer plan, contact your plan administrator.
A reminder: If you're planning to roll over assets from your employer plan or convert from a traditional IRA to a Roth IRA, you must take your RMD first.
If you turn 70½ in a given year, you may opt to delay your first RMD until April 1 of the following calendar year. If you choose to hold off, you'll then need to take your second required distribution by December 31 of the same year. You'll also have two tax liabilities—one for the prior-year amount and one for the current-year amount withdrawn.
For example, suppose you turned 70 on November 15, 2010. That means you'll be 70½ on May 15, 2011. You may take your 2011 RMD by December 31, 2011, or wait until April 1, 2012. If you defer, you must take a second distribution—for 2012—by December 31, 2012.
View the original article here
How to protect your savings
Defined benefit ("DB") retirement plans—often referred to as pension plans—are not as common as they once were. And some plan sponsors are expected to terminate their plans in the near future.
If this happens to your pension, you'll probably be offered a lump-sum payout from your plan sponsor as an alternative to the plan's annuity benefit. And you'll face an important decision: What should you do with the money?
If you find yourself in this situation—whether because your pension plan was terminated or for a different reason, such as retirement or changing jobs—you generally have three options:
Put the money to work. To keep your savings earmarked for retirement, you could invest your pension assets through a rollover into a traditional IRA or a 401(k) plan sponsored by your employer. Either approach can keep your money working tax-deferred through a variety of investment options. This option can be particularly beneficial if you're in the early stages of your working career. (See "Rollovers made easy" below for more information.)
Select an annuity. An income annuity may be an attractive option if you're looking for cash flow in retirement and you're concerned about outliving your savings. But annuities aren't for everyone, and the decision to invest in an annuity is generally irreversible. Your existing DB plan will probably offer annuity options, which usually require you to take your entire distribution as an annuity. Another option would be to consider rolling your distribution into an IRA and allocating a portion of your funds toward the purchase of an annuity. Learn more about lower-cost annuity options available through Vanguard.
Take a taxable distribution. It may be tempting to receive your money immediately. But be warned: A lump-sum payout that isn't rolled over will be taxed as income. If you spend it now, it'll reduce your income in retirement. Even if you invest it in a nonretirement account, it will no longer grow tax-free.
"There are advantages and disadvantages to each approach," said Evan Inglis, chief actuary in Vanguard's Strategic Retirement Consulting group. "However, the tax consequences of taking an immediate distribution mean that it's usually not advisable. That's why we generally suggest that pension plan participants roll over their assets or select an annuity."
Performing a rollover couldn't be simpler or more straightforward. At Vanguard, you'll get hands-on guidance from an experienced rollover specialist who can help you get started, answer your questions, and offer ongoing support for your financial goals.
View the original article here
If this happens to your pension, you'll probably be offered a lump-sum payout from your plan sponsor as an alternative to the plan's annuity benefit. And you'll face an important decision: What should you do with the money?
If you find yourself in this situation—whether because your pension plan was terminated or for a different reason, such as retirement or changing jobs—you generally have three options:
Put the money to work. To keep your savings earmarked for retirement, you could invest your pension assets through a rollover into a traditional IRA or a 401(k) plan sponsored by your employer. Either approach can keep your money working tax-deferred through a variety of investment options. This option can be particularly beneficial if you're in the early stages of your working career. (See "Rollovers made easy" below for more information.)
Select an annuity. An income annuity may be an attractive option if you're looking for cash flow in retirement and you're concerned about outliving your savings. But annuities aren't for everyone, and the decision to invest in an annuity is generally irreversible. Your existing DB plan will probably offer annuity options, which usually require you to take your entire distribution as an annuity. Another option would be to consider rolling your distribution into an IRA and allocating a portion of your funds toward the purchase of an annuity. Learn more about lower-cost annuity options available through Vanguard.
Take a taxable distribution. It may be tempting to receive your money immediately. But be warned: A lump-sum payout that isn't rolled over will be taxed as income. If you spend it now, it'll reduce your income in retirement. Even if you invest it in a nonretirement account, it will no longer grow tax-free.
"There are advantages and disadvantages to each approach," said Evan Inglis, chief actuary in Vanguard's Strategic Retirement Consulting group. "However, the tax consequences of taking an immediate distribution mean that it's usually not advisable. That's why we generally suggest that pension plan participants roll over their assets or select an annuity."
Performing a rollover couldn't be simpler or more straightforward. At Vanguard, you'll get hands-on guidance from an experienced rollover specialist who can help you get started, answer your questions, and offer ongoing support for your financial goals.
View the original article here
Thursday, March 31, 2011
Create a Financial Safety Net
Where do you turn when a financial emergency strikes? Do you resort to credit cards, borrowing money from friends and family, or do you have some money set aside?
How you respond to a financial crisis can significantly impact your finances for years to come. Tapping into resources that are meant for something else to cover an emergency can set your retirement back, take money away from a college fund, or even lead to bankruptcy. Creating a financial safety net lies at the foundation of any financial plan. We hope to never have to use it, but we're thankful when it's there in a time of need. Learn some of the ways you can create your own financial safety net.
View the original article here
How you respond to a financial crisis can significantly impact your finances for years to come. Tapping into resources that are meant for something else to cover an emergency can set your retirement back, take money away from a college fund, or even lead to bankruptcy. Creating a financial safety net lies at the foundation of any financial plan. We hope to never have to use it, but we're thankful when it's there in a time of need. Learn some of the ways you can create your own financial safety net.
View the original article here
Wednesday, March 30, 2011
Make the Most of Your Savings
Where is the best place to stash your cash? Under your mattress? In a cookie jar? Your checking account? Savings account? Certificate of Deposit? With so many choices, it's easy to throw up your hands and take the path of least resistance, but that can end up costing you money in lost interest.
It also doesn't help that lower interest rates are making it more difficult to find good rates of return on your money. Nevertheless, this isn't a time to abandon your emergency fund just because the rates are low. Your goal should be to maximize returns while maintaining the liquidity you need.
There are five common places that you can use to manage your short-term savings:
Checking Accounts
Savings Accounts
Money Markets
Certificates of Deposit
Savings Bonds
Learn more about where you should keep your savings, and check out the primer on U.S. savings bonds to help you make the most of your savings.
View the original article here
It also doesn't help that lower interest rates are making it more difficult to find good rates of return on your money. Nevertheless, this isn't a time to abandon your emergency fund just because the rates are low. Your goal should be to maximize returns while maintaining the liquidity you need.
There are five common places that you can use to manage your short-term savings:
Checking Accounts
Savings Accounts
Money Markets
Certificates of Deposit
Savings Bonds
Learn more about where you should keep your savings, and check out the primer on U.S. savings bonds to help you make the most of your savings.
View the original article here
The Secret to Saving Money
I hate to break it to you, but there's no simple secret to saving money, but there are a few good money habits that can make it feel like you've discovered a secret. Granted, there's no silver bullet that will magically put money into your savings account, but there are a few things you can do to make saving money that much easier.
It really comes down to three things:
Budgeting
Paying yourself first
Spending less than you earn
Does it seem like common sense? Well, it really is, but that doesn't mean it's easy to do.
View the original article here
It really comes down to three things:
Budgeting
Paying yourself first
Spending less than you earn
Does it seem like common sense? Well, it really is, but that doesn't mean it's easy to do.
View the original article here
Monday, March 28, 2011
How To Live Without Borrowing Money
A few short years ago, consumers had a very different outlook on debt and personal finance. After decades of excessive consumerism, many people grew accustomed to living in debt. Unlike previous generations who had a real understanding of saving money and avoiding debt, a noticeable shift away from a more frugal lifestyle evolved. Of course, the recession has taught us several important lessons regarding personal finance, one of which is the need to reduce or eliminate debt. Here we look at how you can pay off existing debt and move forward without having to borrow money in the future.
Before you can embrace a life without more debt, you have to pay off any debts you currently owe. Depending on the type of debts you owe and the amount, this could take as little as a few weeks or as long as several years. The key is taking inventory of any debts you currently owe and developing a plan to pay off these debts in as short a period of time as possible.
Living free of debt may require sacrifice on your part. This is especially true for those who have become accustomed to a lifestyle that exceeds their income level. Living beyond your means is the easiest way to get in debt, therefore any chance of living without having to borrow money from one source or another will require lifestyle changes that reflect your income.
If you truly want to avoid borrowing money for the rest of your life, you will have to be serious about saving money from this point forward. Not only will you need money to live off of today and tomorrow but also have money set aside for emergencies and big ticket items in the future. A life without debt requires an individual to have both short and long terms goals which allow the person to save money in advance for major purchases in the future. Learn as much as possible about different savings and investment vehicles to get the most bang for your buck.
Just because you want to live debt free doesn’t mean you have to eliminate any chance of qualifying for credit in the future. Consider the ramifications of living a cash only life, one of which is the absence of credit history. If for any reason you find yourself needing to apply for credit at some point in the future, you may not qualify if you have successfully eliminated any history of credit. It is possible to maintain a good credit score and history without going into debt. This is an important element of personal finance that should not be overlooked in your quest to live without borrowing money.
There are some things that require the use of a credit card. For example, traveling without a credit card could be next to impossible. You need to book hotel rooms, rent cars and reserve airline tickets. Although not all debit cards are accepted in lieu of credit cards, you will find life is much easier if you have a debit card for many of these situations. Debit cards will offer many of the same conveniences of a credit card without owing anyone a balance when it is all said and done.
It is not impossible to live without borrowing money, however it does require a certain level of discipline and patience that is not common in our fast paced society. Understand that you can manage your money in a way that supports your lifestyle if that lifestyle is within your budget. To do this, many changes will have to take place and a new approach given to money management.
View the original article here
Before you can embrace a life without more debt, you have to pay off any debts you currently owe. Depending on the type of debts you owe and the amount, this could take as little as a few weeks or as long as several years. The key is taking inventory of any debts you currently owe and developing a plan to pay off these debts in as short a period of time as possible.
Living free of debt may require sacrifice on your part. This is especially true for those who have become accustomed to a lifestyle that exceeds their income level. Living beyond your means is the easiest way to get in debt, therefore any chance of living without having to borrow money from one source or another will require lifestyle changes that reflect your income.
If you truly want to avoid borrowing money for the rest of your life, you will have to be serious about saving money from this point forward. Not only will you need money to live off of today and tomorrow but also have money set aside for emergencies and big ticket items in the future. A life without debt requires an individual to have both short and long terms goals which allow the person to save money in advance for major purchases in the future. Learn as much as possible about different savings and investment vehicles to get the most bang for your buck.
Just because you want to live debt free doesn’t mean you have to eliminate any chance of qualifying for credit in the future. Consider the ramifications of living a cash only life, one of which is the absence of credit history. If for any reason you find yourself needing to apply for credit at some point in the future, you may not qualify if you have successfully eliminated any history of credit. It is possible to maintain a good credit score and history without going into debt. This is an important element of personal finance that should not be overlooked in your quest to live without borrowing money.
There are some things that require the use of a credit card. For example, traveling without a credit card could be next to impossible. You need to book hotel rooms, rent cars and reserve airline tickets. Although not all debit cards are accepted in lieu of credit cards, you will find life is much easier if you have a debit card for many of these situations. Debit cards will offer many of the same conveniences of a credit card without owing anyone a balance when it is all said and done.
It is not impossible to live without borrowing money, however it does require a certain level of discipline and patience that is not common in our fast paced society. Understand that you can manage your money in a way that supports your lifestyle if that lifestyle is within your budget. To do this, many changes will have to take place and a new approach given to money management.
View the original article here
Saturday, March 19, 2011
Financial Planning
What is financial planning anyway? It sounds important, yet hard to define. When it’s hard to define, it’s hard to figure out why it’s important.
And who does it? Where do you go to "get" a financial plan, even if you decide you know what it is and you want one?
These questions explain why so many of us don’t have a financial plan. But would the companies or organizations we work for try to operate without a financial plan? Would they be successful 20 years from now if they didn’t have one? Of course not.
So what is an earnest professional supposed to do? Well ... nothing is definitely not the answer.
There are some companies that play with the idea of financial planning. The irony is, the only companies that do financial planning provide it to people who don’t really need it (the wealthy). We’ve all seen the ING commercials where people walk around with 7-figure “numbers”, which are supposed to represent the amount of money you need to retire. The idea of having a “number” is interesting, but hardly financial planning. If you try to “Talk to Chuck” about financial planning, you may find someone to talk about investment planning (if you have enough money in your Schwab accounts), but nothing more.
How is investment planning and financial planning different? Well, how is advertising different than marketing? Advertising is part of the marketing puzzle, but hardly an end to itself. Investment planning is an important part of financial planning, but it is only a part. Financial planning should answer these 6 questions:
1. What are my financial and life goals?
2. What financial resources will I need to achieve those goals, and when will I
need them?
3. How much should I save, and how should I invest to meet these goals
4. Do the following 3 things fit together well, or are they inconsistent with one
another?
a. My personal profile
b. My tolerance for risk
c. My financial goals
5. What do I need to do to protect my assets and my lifestyle as I am trying to
achieve my goals, should the unexpected or unfortunate happen?
6. What kind of flexibility does my financial situation give me if I want to dream
bigger or take on more costs (retire earlier, one spouse work less, have
another child, donate to charity, travel the world, etc.)
That’s what good financial planning should do. Now you can place a value on it and decide if that is something you want. The good news is: it is now available to you, not just those who really don’t need it.
View the original article here
And who does it? Where do you go to "get" a financial plan, even if you decide you know what it is and you want one?
These questions explain why so many of us don’t have a financial plan. But would the companies or organizations we work for try to operate without a financial plan? Would they be successful 20 years from now if they didn’t have one? Of course not.
So what is an earnest professional supposed to do? Well ... nothing is definitely not the answer.
There are some companies that play with the idea of financial planning. The irony is, the only companies that do financial planning provide it to people who don’t really need it (the wealthy). We’ve all seen the ING commercials where people walk around with 7-figure “numbers”, which are supposed to represent the amount of money you need to retire. The idea of having a “number” is interesting, but hardly financial planning. If you try to “Talk to Chuck” about financial planning, you may find someone to talk about investment planning (if you have enough money in your Schwab accounts), but nothing more.
How is investment planning and financial planning different? Well, how is advertising different than marketing? Advertising is part of the marketing puzzle, but hardly an end to itself. Investment planning is an important part of financial planning, but it is only a part. Financial planning should answer these 6 questions:
1. What are my financial and life goals?
2. What financial resources will I need to achieve those goals, and when will I
need them?
3. How much should I save, and how should I invest to meet these goals
4. Do the following 3 things fit together well, or are they inconsistent with one
another?
a. My personal profile
b. My tolerance for risk
c. My financial goals
5. What do I need to do to protect my assets and my lifestyle as I am trying to
achieve my goals, should the unexpected or unfortunate happen?
6. What kind of flexibility does my financial situation give me if I want to dream
bigger or take on more costs (retire earlier, one spouse work less, have
another child, donate to charity, travel the world, etc.)
That’s what good financial planning should do. Now you can place a value on it and decide if that is something you want. The good news is: it is now available to you, not just those who really don’t need it.
View the original article here
Wednesday, February 16, 2011
Get Your Finances Organized for 2011
It's a new year, so that means new resolutions for many. Whether it's losing a few pounds, cutting back on drinks, or whipping your finances into shape, most of us have a hard time sticking with our resolutions for the long run. So, here's one that's easy to implement and it can make a real difference in your finances going forward.
To put it simply: get organized. That's right, it's time to get your finances in order. By starting a filing system and automating many financial tasks you can not only save time, but even save money. Get the new year off to a good start.
View the original article here
To put it simply: get organized. That's right, it's time to get your finances in order. By starting a filing system and automating many financial tasks you can not only save time, but even save money. Get the new year off to a good start.
View the original article here
Monday, February 14, 2011
Have You Set Any Financial Goals for the New Year Yet?
We're only a few short weeks from the start of a new year and most people use the new year as an excuse to set some new financial goals. One of the most common goals is simply to manage money better, spend less, and save more. This is achieved by creating and following a budget. Controlling spending, saving money, and investing for the future are all important aspects of financial planning, but those things mean nothing if you don't have specific goals that you're trying to reach. In order to gauge your financial success, you need to have goals so that you can measure your success. The second step in personal financial planning is choosing and following a course toward long-term financial goals.
The four steps to setting financial goals:
Identify and write down your goals.
Break goals down into short-term and long-term goals.
Educate yourself.
Evaluate your progress.
View the original article here
The four steps to setting financial goals:
Identify and write down your goals.
Break goals down into short-term and long-term goals.
Educate yourself.
Evaluate your progress.
View the original article here
Tuesday, February 1, 2011
5 Secrets of Self-Made Millionaires
They’re just like you. But with lots of money.
When you think “millionaire,” what image comes to mind? For many of us, it’s a flashy Wall Street banker type who flies a private jet, collects cars and lives the kind of decadent lifestyle that would make Donald Trump proud.
But many modern millionaires live in middle-class neighborhoods, work full-time and shop in discount stores like the rest of us. What motivates them isn’t material possessions but the choices that money can bring: “For the rich, it’s not about getting more stuff. It’s about having the freedom to make almost any decision you want,” says T. Harv Eker, author of Secrets of the Millionaire Mind. Wealth means you can send your child to any school or quit a job you don’t like.
According to the Spectrem Wealth Study, an annual survey of America’s wealthy, there are more people living the good life than ever before—the number of millionaires nearly doubled in the last decade. And the rich are getting richer. To make it onto the Forbes 400 list of the richest Americans, a mere billionaire no longer makes the cut. This year you needed a net worth of at least $1.3 billion.
If more people are getting richer than ever, why shouldn’t you be one of them? Here, five people who have at least a million dollars in liquid assets share the secrets that helped them get there.
Set your sights on where you’re going
Twenty years ago, Jeff Harris hardly seemed on the road to wealth. He was a college dropout who struggled to support his wife, DeAnn, and three kids, working as a grocery store clerk and at a junkyard where he melted scrap metal alongside convicts. “At times we were so broke that we washed our clothes in the bathtub because we couldn’t afford the Laundromat.” Now he’s a 49-year-old investment advisor and multimillionaire in York, South Carolina.
There was one big reason Jeff pulled ahead of the pack: He always knew he’d be rich. The reality is that 80 percent of Americans worth at least $5 million grew up in middle-class or lesser households, just like Jeff.
Wanting to be wealthy is a crucial first step. Says Eker, “The biggest obstacle to wealth is fear. People are afraid to think big, but if you think small, you’ll only achieve small things.”
View the original article here
When you think “millionaire,” what image comes to mind? For many of us, it’s a flashy Wall Street banker type who flies a private jet, collects cars and lives the kind of decadent lifestyle that would make Donald Trump proud.
But many modern millionaires live in middle-class neighborhoods, work full-time and shop in discount stores like the rest of us. What motivates them isn’t material possessions but the choices that money can bring: “For the rich, it’s not about getting more stuff. It’s about having the freedom to make almost any decision you want,” says T. Harv Eker, author of Secrets of the Millionaire Mind. Wealth means you can send your child to any school or quit a job you don’t like.
According to the Spectrem Wealth Study, an annual survey of America’s wealthy, there are more people living the good life than ever before—the number of millionaires nearly doubled in the last decade. And the rich are getting richer. To make it onto the Forbes 400 list of the richest Americans, a mere billionaire no longer makes the cut. This year you needed a net worth of at least $1.3 billion.
If more people are getting richer than ever, why shouldn’t you be one of them? Here, five people who have at least a million dollars in liquid assets share the secrets that helped them get there.
Set your sights on where you’re going
Twenty years ago, Jeff Harris hardly seemed on the road to wealth. He was a college dropout who struggled to support his wife, DeAnn, and three kids, working as a grocery store clerk and at a junkyard where he melted scrap metal alongside convicts. “At times we were so broke that we washed our clothes in the bathtub because we couldn’t afford the Laundromat.” Now he’s a 49-year-old investment advisor and multimillionaire in York, South Carolina.
There was one big reason Jeff pulled ahead of the pack: He always knew he’d be rich. The reality is that 80 percent of Americans worth at least $5 million grew up in middle-class or lesser households, just like Jeff.
Wanting to be wealthy is a crucial first step. Says Eker, “The biggest obstacle to wealth is fear. People are afraid to think big, but if you think small, you’ll only achieve small things.”
View the original article here
Monday, January 31, 2011
Do You Pay Yourself?
The typical scenario is that you simply get your paycheck. After you recover in the shock at how little is left after taxes, you proceed to divvy it up among all your outstanding bills, intending to put whatever is left above into your savings.
But there never seems to be anything left over and your savings don’t grow.
A better plan would be to pay yourself very first. Don’t let the money get into your hands.
You may well find which you actually start to grow your savings much quicker this way.
If you work for an employer with a 401K plan, the initial point you should do is to fund it towards the max. In case you can’t afford that, at least put sufficient in to get the total matching contribution form your employer.
This investment is made just before taxes. Your investment is larger and with the employers contribution grows rapidly.
Next have a brokerage or mutual fund company debit your banking account monthly. This cash must first go into an IRA – if you have five years or more to go to retirement, make it a Roth IRA.
Next have a few dollars more be debited to go into a no-load, low cost mutual fund. The younger you’re, the more aggressive your choice of fund can be.
After that is done, then figure out how to pay your bills and living expenses. If funds is tight, cut back on your living expenses and use the extra money to pay down your debt.
Start with the lowest balance initial. Once that debt is paid, take the amount of money you had been paying on that debt and add it towards the payment for the next lowest balance debt. Continue performing this and it is possible to be totally debt free within 5 to 7 years.
Another version of this method is paying the highest interest rate debt initial. The principal could be the same, you just see a lot more progress with the initial method, although it could be more costly based on how your debt is distributed.
(Should you don’t believe me, get the premier version of Microsoft Cash or Quicken and use the “Debt Reduction” module. You may be shocked at how a lot funds you’ll save and how fast it is possible to eliminate debt this way.)
The idea is to scrimp at the expense of your current lifestyle, while leaving your savings to grow and you debt to shrink.
I know numerous of the people reading this will scream that that is an impossible plan.
But it can be quite doable with a little will power as well as the ability to delay gratification for any while.
The problem is that in case you don’t do this, your future may turn out to be really bleak.
You can find more information about best online stock brokerage, best site for online trading, and best online trading site reviews
View the original article here
But there never seems to be anything left over and your savings don’t grow.
A better plan would be to pay yourself very first. Don’t let the money get into your hands.
You may well find which you actually start to grow your savings much quicker this way.
If you work for an employer with a 401K plan, the initial point you should do is to fund it towards the max. In case you can’t afford that, at least put sufficient in to get the total matching contribution form your employer.
This investment is made just before taxes. Your investment is larger and with the employers contribution grows rapidly.
Next have a brokerage or mutual fund company debit your banking account monthly. This cash must first go into an IRA – if you have five years or more to go to retirement, make it a Roth IRA.
Next have a few dollars more be debited to go into a no-load, low cost mutual fund. The younger you’re, the more aggressive your choice of fund can be.
After that is done, then figure out how to pay your bills and living expenses. If funds is tight, cut back on your living expenses and use the extra money to pay down your debt.
Start with the lowest balance initial. Once that debt is paid, take the amount of money you had been paying on that debt and add it towards the payment for the next lowest balance debt. Continue performing this and it is possible to be totally debt free within 5 to 7 years.
Another version of this method is paying the highest interest rate debt initial. The principal could be the same, you just see a lot more progress with the initial method, although it could be more costly based on how your debt is distributed.
(Should you don’t believe me, get the premier version of Microsoft Cash or Quicken and use the “Debt Reduction” module. You may be shocked at how a lot funds you’ll save and how fast it is possible to eliminate debt this way.)
The idea is to scrimp at the expense of your current lifestyle, while leaving your savings to grow and you debt to shrink.
I know numerous of the people reading this will scream that that is an impossible plan.
But it can be quite doable with a little will power as well as the ability to delay gratification for any while.
The problem is that in case you don’t do this, your future may turn out to be really bleak.
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View the original article here
Sunday, December 26, 2010
Financial Planning
What is financial planning anyway? It sounds important, yet hard to define. When it’s hard to define, it’s hard to figure out why it’s important.
And who does it? Where do you go to "get" a financial plan, even if you decide you know what it is and you want one?
These questions explain why so many of us don’t have a financial plan. But would the companies or organizations we work for try to operate without a financial plan? Would they be successful 20 years from now if they didn’t have one? Of course not.
So what is an earnest professional supposed to do? Well ... nothing is definitely not the answer.
There are some companies that play with the idea of financial planning. The irony is, the only companies that do financial planning provide it to people who don’t really need it (the wealthy). We’ve all seen the ING commercials where people walk around with 7-figure “numbers”, which are supposed to represent the amount of money you need to retire. The idea of having a “number” is interesting, but hardly financial planning. If you try to “Talk to Chuck” about financial planning, you may find someone to talk about investment planning (if you have enough money in your Schwab accounts), but nothing more.
How is investment planning and financial planning different? Well, how is advertising different than marketing? Advertising is part of the marketing puzzle, but hardly an end to itself. Investment planning is an important part of financial planning, but it is only a part. Financial planning should answer these 6 questions:
1. What are my financial and life goals?
2. What financial resources will I need to achieve those goals, and when will I
need them?
3. How much should I save, and how should I invest to meet these goals
4. Do the following 3 things fit together well, or are they inconsistent with one
another?
a. My personal profile
b. My tolerance for risk
c. My financial goals
5. What do I need to do to protect my assets and my lifestyle as I am trying to
achieve my goals, should the unexpected or unfortunate happen?
6. What kind of flexibility does my financial situation give me if I want to dream
bigger or take on more costs (retire earlier, one spouse work less, have
another child, donate to charity, travel the world, etc.)
That’s what good financial planning should do. Now you can place a value on it and decide if that is something you want. The good news is: it is now available to you, not just those who really don’t need it.
View the original article here
And who does it? Where do you go to "get" a financial plan, even if you decide you know what it is and you want one?
These questions explain why so many of us don’t have a financial plan. But would the companies or organizations we work for try to operate without a financial plan? Would they be successful 20 years from now if they didn’t have one? Of course not.
So what is an earnest professional supposed to do? Well ... nothing is definitely not the answer.
There are some companies that play with the idea of financial planning. The irony is, the only companies that do financial planning provide it to people who don’t really need it (the wealthy). We’ve all seen the ING commercials where people walk around with 7-figure “numbers”, which are supposed to represent the amount of money you need to retire. The idea of having a “number” is interesting, but hardly financial planning. If you try to “Talk to Chuck” about financial planning, you may find someone to talk about investment planning (if you have enough money in your Schwab accounts), but nothing more.
How is investment planning and financial planning different? Well, how is advertising different than marketing? Advertising is part of the marketing puzzle, but hardly an end to itself. Investment planning is an important part of financial planning, but it is only a part. Financial planning should answer these 6 questions:
1. What are my financial and life goals?
2. What financial resources will I need to achieve those goals, and when will I
need them?
3. How much should I save, and how should I invest to meet these goals
4. Do the following 3 things fit together well, or are they inconsistent with one
another?
a. My personal profile
b. My tolerance for risk
c. My financial goals
5. What do I need to do to protect my assets and my lifestyle as I am trying to
achieve my goals, should the unexpected or unfortunate happen?
6. What kind of flexibility does my financial situation give me if I want to dream
bigger or take on more costs (retire earlier, one spouse work less, have
another child, donate to charity, travel the world, etc.)
That’s what good financial planning should do. Now you can place a value on it and decide if that is something you want. The good news is: it is now available to you, not just those who really don’t need it.
View the original article here
Friday, December 24, 2010
What the SF Giants can teach us about financial planning and investments
Nov 5th, 19:01 by Mike Bergines in Financial Planning and Investments and Portfolio Theory If you are not a baseball fan, or if you hate sports analogies, I apologize, but hear me out – I believe that you will take something valuable away from this blog.
In the spirit of full disclosure, I am a lifelong SF Giants fan – I distinctly remember my Dad and me pulling our down jackets out of storage in the middle of July so that we could go to Candlestick Park and freeze with 5,000 other crazy people to watch the Giants play. We have been waiting for a SF championship for 52 years! But what makes 2010 so satisfying for Giants fans, after coming so close in ’62, ’89 and ’02, is as much HOW they won as it was THAT they won.
The story of this team can provide inspiration for many people who are not Giants fans, however, including financial planners and those who give investment advice! I look at the Giants and their year, and I see multiple parallels to good investing and financial planning.
#1) The Giants team is built around pitching and defense. In baseball, good pitching and defense means you’re always in the game. The investing and planning parallel to good pitching and defense is a conservative investment approach and risk management. With a diversified portfolio and good risk management, you are “always in the game” – you will rarely have a “big loss”. That provides valuable peace of mind and increases the chances of long term success. As I have said many times, in investing for the long haul, young professionals often win by not losing. The Giants often won by not losing as well.
#2) The strong foundation of pitching and defense means that the Giants can win without any offensive superstars. If the other team has trouble scoring, you don’t need a lot of offense to win. And in investing, if you don’t have any big losses, you don’t need superlative investment returns to build wealth. This approach is not as sexy as having a star in your lineup like Barry Bonds, Willie McCovey or Willie Mays, to be sure. But, apparently, it’s highly effective. None of those superstars won a championship in San Francisco.
#3) Even though the Giants had no superstars, they had many heroes – every night, someone else was providing the offense needed to win. Having many heroes on a baseball team is like having a well-diversified investment portfolio. Not all investments do equally well within a portfolio year-to-year, but all investments play a role, so that over the long run, a portfolio grows without unnecessary risk and volatility. But with a well-diversified portfolio, investments will perform well when you least expect them to (e.g., Cody Ross, the NLCS MVP, and Edgar Renteria, the World Series MVP), more than compensating for those that you expect to perform well, but don’t (e.g., Pat Burrell).
#4) Whether you are talking about a baseball team or a financial planning and investing program, you need a well-reasoned strategy. Brian Sabean, the General Manager of the Giants, saw the Giants' young pitching talent and decided to build around it – it has affected which players the team acquires and how much they pay them, often to the criticism of fans who didn’t understand the strategy. Sabean teaches financial planners and investment managers that a strategy based on the unique nature of your assets – a strategy that influences everything you do – will ultimately lead to success. The Financial Planner's clients (or a team’s fans) may not always understand it at first, but they will benefit from it.
#5) Baseball teams and investors need thoughtful, confident and active managers. Bruce Bochy, the manager of the Giants, was heralded throughout the playoffs for “pulling all the right strings” and clearly outcoaching Texas’ more passive manager. Investment managers have to execute confidently and not hesitate to change investments as conditions dictate. Mediocre financial planning and investment advisors often tell clients to “stay the course” in the face of structural changes and different conditions – usually because they don’t know what to do or don’t understand the changes.
#6) Good general managers, of either baseball teams or investments, will not get everything right, but their mistakes won’t kill them. Brian Sabean is not without his failures, the most obvious one being the long-term signing of Barry Zito, who didn’t perform well enough in 2010 to even be included on the Giants' 25-man playoff roster. Sabean has made other mistakes as well, but done that caused the Giants to suffer. A good investment manager will not get everything right 100% of the time, but he won’t put himself or you into a position to have that mistake, or any mistake, cost you dearly.
View the original article here
In the spirit of full disclosure, I am a lifelong SF Giants fan – I distinctly remember my Dad and me pulling our down jackets out of storage in the middle of July so that we could go to Candlestick Park and freeze with 5,000 other crazy people to watch the Giants play. We have been waiting for a SF championship for 52 years! But what makes 2010 so satisfying for Giants fans, after coming so close in ’62, ’89 and ’02, is as much HOW they won as it was THAT they won.
The story of this team can provide inspiration for many people who are not Giants fans, however, including financial planners and those who give investment advice! I look at the Giants and their year, and I see multiple parallels to good investing and financial planning.
#1) The Giants team is built around pitching and defense. In baseball, good pitching and defense means you’re always in the game. The investing and planning parallel to good pitching and defense is a conservative investment approach and risk management. With a diversified portfolio and good risk management, you are “always in the game” – you will rarely have a “big loss”. That provides valuable peace of mind and increases the chances of long term success. As I have said many times, in investing for the long haul, young professionals often win by not losing. The Giants often won by not losing as well.
#2) The strong foundation of pitching and defense means that the Giants can win without any offensive superstars. If the other team has trouble scoring, you don’t need a lot of offense to win. And in investing, if you don’t have any big losses, you don’t need superlative investment returns to build wealth. This approach is not as sexy as having a star in your lineup like Barry Bonds, Willie McCovey or Willie Mays, to be sure. But, apparently, it’s highly effective. None of those superstars won a championship in San Francisco.
#3) Even though the Giants had no superstars, they had many heroes – every night, someone else was providing the offense needed to win. Having many heroes on a baseball team is like having a well-diversified investment portfolio. Not all investments do equally well within a portfolio year-to-year, but all investments play a role, so that over the long run, a portfolio grows without unnecessary risk and volatility. But with a well-diversified portfolio, investments will perform well when you least expect them to (e.g., Cody Ross, the NLCS MVP, and Edgar Renteria, the World Series MVP), more than compensating for those that you expect to perform well, but don’t (e.g., Pat Burrell).
#4) Whether you are talking about a baseball team or a financial planning and investing program, you need a well-reasoned strategy. Brian Sabean, the General Manager of the Giants, saw the Giants' young pitching talent and decided to build around it – it has affected which players the team acquires and how much they pay them, often to the criticism of fans who didn’t understand the strategy. Sabean teaches financial planners and investment managers that a strategy based on the unique nature of your assets – a strategy that influences everything you do – will ultimately lead to success. The Financial Planner's clients (or a team’s fans) may not always understand it at first, but they will benefit from it.
#5) Baseball teams and investors need thoughtful, confident and active managers. Bruce Bochy, the manager of the Giants, was heralded throughout the playoffs for “pulling all the right strings” and clearly outcoaching Texas’ more passive manager. Investment managers have to execute confidently and not hesitate to change investments as conditions dictate. Mediocre financial planning and investment advisors often tell clients to “stay the course” in the face of structural changes and different conditions – usually because they don’t know what to do or don’t understand the changes.
#6) Good general managers, of either baseball teams or investments, will not get everything right, but their mistakes won’t kill them. Brian Sabean is not without his failures, the most obvious one being the long-term signing of Barry Zito, who didn’t perform well enough in 2010 to even be included on the Giants' 25-man playoff roster. Sabean has made other mistakes as well, but done that caused the Giants to suffer. A good investment manager will not get everything right 100% of the time, but he won’t put himself or you into a position to have that mistake, or any mistake, cost you dearly.
View the original article here
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