Everything Finance

A Guide to Reverse Mortgages

noreply@blogger.com (Everything Finance) — Fri, 06 Nov 2009 12:45:01 PST

If you are a senior and own your home, you might be eligible for a reverse mortgage. A reverse mortgage allows you to borrow against the equity you hold in your home and enjoy the money as you see fit. The only requirements are that you must be at least 62 years of age as well as own a substantial amount of equity in the home that you live in. When you pass away, your home will be sold by your estate to pay the reverse mortgage back in full. In some cases there will be money left over, and sometimes not, however this is a great way to ensure that you get all that you can out of your home without leaving your estate or heirs, in any kind of debt.

With a reverse mortgage you do not need to make monthly payments like you do with a traditional mortgage, instead the lender pays you. Reverse mortgages operate in the opposite fashion, offering a borrower money up to the balance of the equity they have in their home. Therefore, there is no risk of losing your home due to missing a payment. This is a benefit many seniors appreciate, especially those that don’t have a source of income to draw from.

Reverse mortgages are also commonly referred to as “rising debt, falling equity” loans or simply “rising debt loans” because instead of paying down a loan balance and increasing your home’s equity, equity is decreasing as a result of increasing debt. Also, keep in mind that a reverse mortgage will become due in full if you move. So if you want funds for a down payment on a new home or even just cash to spend after you move, it would be wise not borrow the full amount of your home’s equity.

If you like the idea of being able to spend your time and money as you choose during your golden years, a reverse mortgage might be the perfect way to go.

5 Tips to Help Save for Your Retirement

noreply@blogger.com (Everything Finance) — Sun, 01 Nov 2009 06:33:53 PST

Saving for your retirement picks up natural speed in your fifties as most people earn the most income during their fifties. You may be at the top of your field in pay and position. The realization of stopping the daily grind of work seems so close. Friends and co workers may have already retired. Here are three tips to help save for your retirement.

1. Maintain Your Health to Stay in Work

Exercising each day puts you in better touch with your health needs. The action of exercising makes the realization closer than you will not be able bodied for ever. Exercising for a few hours throughout the week will help keep you more active to earn additional income to put towards savings.

2. Increase Your Savings

What is your current income to debt ratio? The amount of debt that you owe currently on car payments, unsecured consumer debt, and credit cards may make it almost impossible to increase savings. Consider selling one or more car, van, SUV, motorcycle, RV, or boat that is financed. Sell the vehicles and pay off the loan, then purchase an inexpensive car in cash to free up cash so you can save more.

3. Think About Getting a Second Job

Work an additional part time job or find a creative way to get paid more when you do work. For example if you have worked as a school teacher for twenty five years, consider offering consulting services to the public. This could be through private tutoring in person, tutoring online, or to help give guidance to other people in your field. These clients would pay you an hourly fee based on your experience and would be much higher than many part time hourly rage jobs.

4. Consider Taking on a Lodger

If your budget feels squeezed when its time to pay the mortgage, consider renting out the house. If your mortgage is hard to stay up to date with due to other outstanding debts, think about renting out one or more rooms to lodgers. The mortgage may be $1500 a month, however the home may be able to rent for $1900. Contact a realtor to walk through your home and let you know how much the property would rent for.

5. Short Term Inconvenience is Long Term Gain

Many of your co-workers and family will be solely dependent on family, government assistance, and lines of credit when they stop working, which means that in reality many people are not truly prepared to stop working. Living within your means, getting out of debt, and finding creative ways to make more money is important. It may be inconvenient to take a second job consulting, have yard sales, sell your financed vehicles, and clip coupons. However, when you are able to live debt free in your retirement with enough savings it will be worth it.

About The Author

Mark works as a writer for an Australian business that offers credit cards and debit cards. You can also read more of his writing on their blog, The Credit Letter.

What's in a Credit Score?

noreply@blogger.com (Everything Finance) — Sun, 25 Oct 2009 11:28:00 PDT

Backyard Living & Staycationing
You've heard the term plenty of times, but what exactly is a credit score and why is it so important? Your credit score represents an analysis of your credit history, and represents how credit-worthy you are. Lenders use the score to determine how much of a risk you represent, and to determine if you qualify for a loan.

Five Credit Score Elements
There are five basic elements that are taken into account to calculate your credit score:

1. Payment history. Make sure you're paying your bills on time. If you've missed payments in the past, do your best to get current.
2. Amounts owed. Keep your outstanding debt as low as you can. Remember, it's better to pay off debt than to move it around.
3. Length of credit history. The longer you can show a responsible credit history, the better it is for your credit score. If you've just started out, try not to open too many credit accounts too quickly.
4. New credit. Credit bureaus distinguish between a search for a single loan and a search for too many new credit accounts. So, if you're shopping for credit, make sure you do it within a particular amount of time. The golden rule for new credit? Get it only if you need it.
5. Types of credit used. From credit cards and retail accounts to installment loans and mortgages, we use different types of credit. It doesn't really matter what types of credit you have in your report, what's important is that you're managing them responsibly.

Thanks to a 2005 law, consumers can access one free credit report a year from each of the nation's top consumer credit reporting companies, Equifax, Experian, and TransUnion. These agencies track your credit history and award you a score based on whether or not you pay bills on time. The better your score, the more likely you can borrow at lower rates, reduce insurance premiums and even cut utility bills.

A Poor Score Can Cost You
Prospective employers, landlords, insurance underwriters, as well as others who grant credit, may all acquire your credit report. That's why it's so important for you to check your report at least once a year. Even if you pay every bill on time, mistakes can happen. According to the Public Interest Research Group1, With up to 70 percent of credit reports containing errors ranging from mistaken identities to multiple listings of the same loan, it is up to you to keep on top of your credit history.

Industry experts recommend you review your credit report at least once a year to check for mistakes or misrepresentations that could potentially ruin your credit rating. By checking your credit report regularly you can also spot any attempts at identity theft, and monitor your debt management.

Source: Wachovia eNewsletter

Know More about Credit Counseling

noreply@blogger.com (Everything Finance) — Mon, 26 Oct 2009 06:51:06 PDT

What is Credit counseling in the First Place?

People with a bad credit rating, stands a fair amount of chance to repair their credit rating with the advice of a credit counselor from a good credit counseling agency. What this aims at is helping the creditors understand their buying patterns and help then understand the difference between spending and being a spendthrift. Further more they also help people manage their debts by means of careful budgeting of their income along with education on enhanced money management techniques.

What could be the benefits of seeking credit counseling?

The credit counselors not only talk to you about budgeting and things like that, they also proactively negotiate with the credit companies on arranging for a repayment plan other wise also known as DMP or the debit management plan. By this debit management plan both the creditor and the credit card company is benefited. The creditors get an opportunity to repay their debts in a easy manner that is not tough on them and their family because of the reduced interest rates and the worked out installments for them. While the credit companies get to realize their money from the people which would other wise have been a bad debt for them. There fore it’s a win-win situation for both the parties involved.

How to choose a credit counseling company?

This calls for a little bit of research work for the person who thinks he needs help. The first and foremost thing that is required to be done is the person should check out their web sites and read what other people had to say about them. Then talk to the company and understand how they would plan to help, next thing that is very important is that the counseling company should be certified credit counselors and be registered with the Better Business Bureau.

Now once all that is done with a positive reply for all, then you are good to pass on your financial information to the agent counselor from the company and post that it’s his responsibility to work out some thing that’s good and beneficial for you.

VA Refinance

noreply@blogger.com (Everything Finance) — Mon, 19 Oct 2009 12:13:25 PDT

Mortgage applications are on the rise, driven in large part by homeowners looking to refinance.

For America’s veterans, that’s just another signal that now is the time to capitalize on a VA refinance.

Demand for refinancing loans last week hit its highest level since the first week of June, according to figures from the Mortgage Bankers Association. In all, applications for purchase and refinance loans increased 7.5 percent for the week ending Aug. 21.

Refinance applications continue to increase their share of the market.

With the housing market showing signs of life, veterans with VA loans and conventional home loans may want to consider the benefits of a refinancing through the Veterans Administration.

The VA has different refinancing options for veterans with VA loans and for those with conventional loans. Veterans who used a VA loan to purchase their home can utilize the VA’s Interest Rate Reduction Refinancing Loan, often known as a VA Streamline.

VA Streamline loans don’t require credit underwriting, certificates of eligibility or even appraisals. Veterans with less than perfect credit may be eligible for a Streamline. At the outset, prospective borrowers must at least be current on their mortgage payments and have no more than a single 30-day late payment within the past calendar year.

Some veterans can obtain a VA Streamline with no out-of-pocket costs. Borrowers can also roll up to $6,000 for energy efficient improvements into their Streamline loan.

Streamline recipients are on the hook for the VA’s funding fee (half of 1 percent), but that can be paid in cash or included in the cost of the loan.

Any lender with the requisite approval can issue a VA Streamline. Veterans don’t have to stick with the lending institution that that issued their current VA home loan.

Veterans with conventional loans can also refinance using the VA. Borrowers who qualify can refinance up to 100 percent of their home’s appraised value.

Converting to a Roth IRA ? Read this

noreply@blogger.com (Everything Finance) — Sat, 10 Oct 2009 10:08:00 PDT

Should you convert?

The benefit of converting to a Roth is that you can potentially put some or all of your retirement savings out of reach of tomorrow's tax collectors. Qualified withdrawals from a Roth IRA are tax-free, which means any future investment gains can be shielded from the IRS. In addition, converting allows you to avoid the IRS's required minimum distributions (RMDs) that kick in the year after you turn age 70½.
More on Roth conversion rules

But converting isn't for everyone, and it's a good idea to check with a tax or financial advisor before you make a decision. As you weigh the pros and cons, here are some important points to keep in mind:

1. You have to pay taxes on the amount you convert.

In return for the potential future tax breaks of a Roth, you have to pay income taxes when you convert. That means if you have money in a traditional IRA that you haven't yet paid taxes on, you could have a substantial tax bill. Say you're in the 28% tax bracket, you could owe $28,000 on a conversion of $100,000.

Still, converting may benefit you in the long run if you expect you'll be taxed at a higher rate when you retire. If you expect your rate will be lower, converting may not be beneficial. If, like most people, you're not sure what your future tax rate may be, you could consider converting just part of your traditional IRA to a Roth. Doing so gives you "tax diversification" because you've got some money in a Roth and some still in a traditional IRA.

2. Don't convert if you have to pay the tax on the conversion with money from your IRA.

Stick with the traditional IRA if you don't have money available outside of your IRA to pay taxes on the conversion. Pulling money out of your IRA to cover taxes can defeat the purpose of making the switch in the first place. By reducing your retirement savings, you reduce your ability to generate future tax-free earnings on money invested in the Roth. In addition, if you are under age 59½, the amount pulled out of your IRA to cover the taxes may be subject to a 10% IRS penalty. A cash account is generally the best place to get the money to pay the taxes on the conversion.

3. You can lighten the tax burden of a conversion.

If you don't have enough money to pay taxes on converting all your traditional IRA assets, or if doing so would push you into a higher tax bracket, you can consider converting just part of your assets.

In addition, a special provision applies to 2010 conversions that gives you the option of postponing the tax bill and paying it off over two years. If you choose this route, taxable income that results from the conversion gets spilt evenly between 2011 and 2012. But be aware that tax rates are scheduled to go up in 2011, so—barring any new tax legislation—you could end up paying taxes at a higher rate.

4. The longer your time horizon, the more you can potentially benefit from a conversion.

A conversion may not be for you if you expect you'll withdraw the money within five years. Generally speaking, you'll only be able to withdraw earnings from the account without taxes and penalties if you're age 59½ or older and you've held the Roth IRA for at least five years.

As for withdrawals of your original conversion amount, those are tax-free. But to avoid a 10% IRS penalty, you generally must be either at least age 59½ or wait at least five years after your conversion to make the withdrawal.

5. Your heirs may benefit from the conversion.

During your lifetime, you don't have to take money out of the Roth IRA because you're not subject to RMDs. That means you can leave the entire accumulated balance to someone else. And while a beneficiary who inherits your Roth IRA may be subject to RMDs, he or she can withdraw the amount of your original conversion tax-free. Any earnings are also tax-free, provided that the Roth IRA meets the five-year holding requirement.

Source: Vanguard

Tips for Eating Well in Lean Times

noreply@blogger.com (Everything Finance) — Mon, 05 Oct 2009 06:40:00 PDT

All it takes is advance planning and creativity to eat nourishing, balanced meals on a budget, according to Cleveland Clinic registered dietitians. Preparing food at home is not only less expensive than eating out, it can be a source of fun family time without an admission price! All ages can assist in preparing meals, finding new recipes and scanning the grocery ads for the best bargains.

Buy perishable foods in quantities you'll use. Spoiled food that's tossed into the garbage is no bargain! Look to frozen fruits and vegetables, which are less perishable and allow for portion-controlled servings, unlike canned foods.
Buy fresh fruits and vegetables in season. You'll not only save dollars, you'll also enjoy the most wholesome food on the market. And buying locally grown produce helps stimulate your local economy!
Buy meat in bulk and cut into servings at home. Each stroke of the knife in processing costs more at check-out. Try buying fresh pork loin and slicing it into low-fat loin chops at home. Buy a roast and cube it into chunks for beef stew. Buy a whole chicken and cut it up at home. The less time spent in processing, the better the food value.
Beware of BOGO - buy one, get one free. Either you'll wind up buying foods that you won't eat, or you'll be paying an inflated price for the "buy" item to cover the cost of the free one.
Be an informed shopper and stick to your list. Impulse buying at the grocery store leads to the demise of your food budget!
Limit your purchase of ready-prepared foods. Go to the deli or refrigerated sections for ready-made foods only on occasions when you're willing to pay more for the convenience. You pay a higher price to have someone else prepare the meal.
Clip coupons with caution. Coupons may persuade you to purchase items you generally wouldn't buy. But if the coupon is for an item you can use, look for stores that give double-coupon redemption for extra savings.
Use your imagination with leftovers. Create soups, casseroles and brand-new dishes with your leftovers to avoid tossing out unused food. If you run short of ideas, browse websites for recipes; just key in your leftover ingredients.
Look for outlet stores such as day-old bakeries. Prices are reduced by more than 50 percent from store prices. Bread products freeze well and are versatile - they can be used in sandwiches, in recipes calling for breadcrumbs and for stuffing.
Avoid portion-controlled snack packs. Not only are they more costly, they may not save you calories, either. Remember that fat-free doesn't mean sugar-free, and vice versa!

Inside the World of Penny Stocks

noreply@blogger.com (Everything Finance) — Wed, 21 Oct 2009 06:56:11 PDT

Investing in penny stocks can be both a challenging and lucrative avenue if you are an investor. Knowing what your doing is essential for success, so before we start talking about how to make money with penny stocks, lets first talk about the basics:

What is a Penny Stock?

A penny stock is a stock that trades for less than $5 per share. Most Penny Stock companies have only been in operation for a few years and typically carry less than a few million dollars in assets. Penny stocks are not listed on the three major stock exchanges- AMEX, NYSE or NASDAQ- but are rather quoted on an over-the-counter service such as the OTC Bulletin Board or Pink Sheets.

Many penny stock investors make their money via day trading. Day trading is a strategy that involves buying and selling stock within the same trading session. Investors will open and close a stock position on the same day making their profit on intraday price fluctuations.

A typical trade would work like this:

A trader finds a stock that looks attractive and is selling at $.90. He or she decides to buy 100 blocks (1 block= 100 shares of stock) and pays $9,000 in addition to trading fees. Now say two hours later, the price for that same stock has climbed to $.915. The investor would send a sell signal, and with luck, hopefully find a buyer at that price. If the investor manages to attract a buyer, they would close out their position and pocket the profit.

Of course, real life is not always as simplistic as the example above and there are a lot of variables that can affect the price of a penny stock. However through maintaining a high level of research and dedication, as well as having a little bit of luck, it is very possible to become a successful penny stock trader.

TWO MYTHS that you as an investor might grapple with...

noreply@blogger.com (Everything Finance) — Mon, 28 Sep 2009 08:04:00 PDT

Myth 1: Funds with highest *Star Ratings* or Rankings make better buys

Beware! While you may be tempted to invest your hard earned money in that 5-Star rated Fund, let us throw some light on what could be the consequences of doing the same.

It is commonplace for Fund Houses to flaunt the number of *stars* / points their funds have garnered. In turn, the same is utilized by distributors and agents alike, to convince investors about the merits of the fund. There is nothing wrong with the idea of granting rankings / star ratings to Mutual Funds. However, you should not completely depend on them.

Our Concerns regarding rankings and ratings stems from the following two reasons:

Firstly, the method of computing rankings/ratings tends to be largely quantitative. The norm is that risk-adjusted returns (i.e. returns clocked by a fund vis-à-vis a risk-free investment avenue) and performance vis-à-vis similar funds are the factors considered.

Qualitative factors like the fund management team’s skill sets and the processes followed by the fund house are never factored in. Similarly, fund-specific features like the portfolio management style or adherence to the stated investment style are not considered in the rankings/ratings process either.

Secondly, it is important to understand the nature of the fund and whether it is fit for a particular investment objective. A 5-Star rated fund need not be suitable for your Portfolio. Why? If you are going to invest for a period of 3-6 months, a 5-Star rated Equity Fund or Balanced Fund is not a right selection. Similarly, for a 10 year time horizon, a 5-Star rated liquid fund is the wrong choice.

The Reality: Star Ratings cannot help you make the final decision on funds. They are, at best, a starting point.

Myth 2: I don’t want to invest in Mutual Funds... I prefer investing only in stocks

Who wants to invest in financial instrument like a mutual fund that probably grows half as fast as some ‘exciting’ stocks during a bull run? The poser is relevant. Underperformance almost always gets a thumbs down, no matter what the reason. After all, every investor wants his money to work for him and if a stock does that better, why invest in a mutual fund?

Mutual funds may lack the excitement of a stock, but it’s the kind of excitement that investors can often do without. Mutual funds may not scorch the investor’s portfolio in a bull run like some ‘exciting’ stocks, but you can be sure they won’t burn a huge crater in the investor’s portfolio either, when individual stocks are crashing by 40%, for instance.

You as an investor have the liberty of investing in stocks, debt funds and Gold.

The Reality: Mutual Funds give you the privilege of diversifying your Portfolio by allowing you to access other’s expertise.

Let me tell you a good story. A father and his son were once traveling to their native place. The son who was carrying a lot of money with him put all the money in his shirt’s pocket.

Seeing this, his father said, "Son, don’t put all the money in your shirt, keep aside half the money in your socks". By doing this, you will not lose all your money if you get robbed!

The Moral: Don’t put all your eggs in one basket!

So, would you prefer investing your hard earned money in Mutual Fund Schemes based on *star ratings* or choose ‘fundamentally researched’ Mutual Fund Recommendations?

You Need To Start An Emergency Fund...TODAY!

noreply@blogger.com (Everything Finance) — Mon, 21 Sep 2009 07:14:00 PDT

Major expenses have a way of coming along when you least expect them. A leaky roof. A sudden illness. A furlough or job loss. Such events can leave you scrambling for cash at a moment's notice.

That's why you need to have an adequate emergency fund—an account apart from your regular savings that you can reach quickly when you need to. Having a "rainy day" account will save you from having to dip into your retirement savings and other long-range investments, or taking on high-interest debt.

A common rule of thumb is to set aside enough for three to six months worth of living expenses. However, given today's uncertain economy and job market, you may want to stash away even more.

So how do you figure the amount you'll need to stock away?

First, add up your fixed monthly expenses—the ones that don't change from month to month. Include your mortgage and/or rent payments, insurance premiums, and property taxes. Then add in the average monthly amount of your variable expenses, including groceries, utility bills, transportation, clothing, and other expenses. Then calculate how much your monthly expenses will be during a six-to-nine-month period.

Don't include your discretionary expenses—restaurant meals, vacations, and other non-necessities—since you won't likely be paying for them during an emergency.

Start saving now

Accumulating a sufficient emergency fund will take some time, so it's important to get started if you haven't already. Keep your immediate goals small and manageable. Review your savings and checking accounts to determine how much you may be able to move to an emergency fund. Consider any windfalls you might be receiving, such as a bonus or a tax refund.

You should also track your discretionary spending for a month to figure out where you can cut back, and divert that money to your emergency fund.

Emergency fund needs to accessible

Convenience, stability, and liquidity are crucial in choosing where to keep your emergency fund savings. You'll need an account that's easy to access by electronic withdrawals and checks.

Consider keeping your emergency fund in a bank account or in a conservative investment like a money market fund so that the funds will be readily available.

Whichever type of account you choose, make sure it is separate from your other investments so you won't be tempted to use the money for anything other than real emergencies.

Once you establish the account, get into the habit of adding money to it regularly. A simple system to boost savings is to set up an automatic investment plan. Whether it's weekly, biweekly, or monthly, create a schedule and stick to it. When you make saving automatic, you won't even have to think about it.

Above all, remember to add to your emergency fund regularly, even if it's a small amount. The success of any savings plan depends less on the rate of return than on consistently putting money away and leaving it there.

10 Rules of the Rich

noreply@blogger.com (Everything Finance) — Tue, 15 Sep 2009 11:01:32 PDT

1. Give yourself a raise.
10% of your net income should go on auto-deposit into your 401(k), IRA, health savings account, etc. Period. Stop whining, complaining or procrastinating. It’s tax deductible. Pay yourself now, or pay the IRS later. And if you don’t know how to invest, put it in a FDIC-insured savings or money market account while you educate yourself.

2. Be charitable.
Tithe 10% to charity. Fuel your favorite cause with your cash and reap the benefits of helping your community, of networking with others who have like-minded goals and of the tax write-off! Pay your favorite charity now, or pay the IRS later. Every rock star, including Bono, Sting and Mary J. Blige, know the value of this!

3. Educate yourself, your family and others.
Education is the single highest correlating factor with income. So invest in your education. Surgeons make more money than gardeners, and surgeons who have educated themselves about investing make greater gains than those who invest blindly (or not at all). According to the Bureau of Labor Statistics, full-time workers without a high school diploma earned $465/week on average in June of 2009, compared to $1,140 for a Bachelor’s Degree, and $2,130/week (women) to $3,434/week (men) for professionals with a master’s or higher. Find a way to put money aside for your education. Typically that means cutting your costs in the basic needs department. College students might consider sleeping on a couch for a few years, in order to earn double the income for life!

4. Have fun.
Here are the goods. Health is wealth. You can’t earn a great living if you can’t get out of bed. And if you want to really have great results, you need to be a great team player. So, your time on the golf course, on the tennis court or on the racetrack means that you’re going to be more fun to be around – someone whom others want to interact with and do business with! Exercise is one of the best things you can do for your health and beauty, and pleasure is a free endorphin that releases anti-oxidants that keep you youthful and sexy. Beautiful reasons to have some fun today!

5. Double your pleasure.
Double your fun budget! Make sure that you are taking 10%-20% of your income for FUN! I take 10% out in cash and spend it until it’s gone. The other 10% I save up for a year to do something really adventurous. It makes working so much more pleasurable when I am anticipating exactly how I’m going to enrich my own life as a result. (In 2009, I spent a month in Italy!)

6. Stop complaining.
Some people say, "I spend my fun money on my home." That’s cool, but then stop complaining that you don’t take vacations and start enjoying your home more. Can you have artist salons, or a front porch bayou Bluegrass party where someone blows on a jug and another plays spoons? A barbecue and three-legged race? A monthly yoga potluck dinner? Make sure that you are enjoying what you own, otherwise your retail therapy isn’t working!

7. Basic needs must be under 50%, including taxes.
Ha! Think this is impossible? Guess which ethnic group is the highest income earner in the U.S. in 2009. Before I reveal the answer, I want to point out that this group was one of the lowest wage earners in the U.S. at the turn of the last century. How did one ethnic group rise from the gutter to the palace so quickly? By focusing on education and dramatically reducing basic needs expenditures. If two families had to live in a two-bedroom apartment so that the kids could go to medical school, they did that. And now, Asian men make a weekly income that is 21% higher than whites and almost double the weekly income of blacks and Hispanics. (source: Bureau of Labor Statistics, July 16, 2009)

8. Think partner, not competitor.
In 2006, Universal Music Group was posturing to sue MySpace and YouTube for posting their videos free of charge. In June of 2009, UMG and YouTube announced a new channel, utilizing the YouTube technical platform and portal. YouTube is the 4th most trafficked site in the U.S., but UMG has the great artists and videos. Smart move! Remember back in the 70s when mega-department stores decided to create the malls! By teaming up to put everything you need in one place, all of the retail stores benefit. What can you do to partner up with your competitors and create a win-win for everyone?

9. Dream bigger.
When John D. Rockefeller went into the oil business, in 1863, no one dreamed of freeways and that Exxon Mobil would be worth almost half a trillion dollars. When Google founders Sergey Brin and Larry Page began perfecting online search, most people were still on dial-up. When President John F. Kennedy promised to walk on the moon, it still took a week to mail a letter from New York to San Francisco. What great dream do you have? What can you do now to start on the path of creating it?

10. 21 days off the grid.
Stuck in a rut? Got a bad habit that is taking you out at the knees? 21 days is all you need to create new possibilities. Seven days is only a vacation from the status quo. Two weeks is a tease/tiptoe toward the edge of new ideas. 21 days is where new habits and thought patterns become ingrained. If you have never been on a 21-day sabbatical, there is no greater or more fun way to expand your possibilities and your thinking. In fact, I’ve created a 21-day Walk to Wealth Consciousness coaching call series, which is FREE for retreat attendees. Call 866.476.7442 to enact a new way of living for yourself!

So, sing your song… loudly. Dance as if everyone is watching. They are… (on Facebook. And Twitter. And YouTube. And BlogTalkRadio…) And become the rock star of your own dream life.

About Natalie Pace:
Natalie Pace, is the author of Put Your Money Where Your Heart Is and CEO of one of the most respected, independently owned financial news corporations in the U.S. She has been ranked as a #1 stock picker from TipsTraders.com.

Fresh Look at Mutual Funds

noreply@blogger.com (Everything Finance) — Thu, 10 Sep 2009 05:39:00 PDT

Mutual funds get a fair amount of attention on Wall Street and many investors love them. Before you jump in, it's important to first read up* and understand the basics.

What's a mutual fund by the way?
A mutual fund essentially is a pool of money managed by a team of professionals. The Fund Manager invests the money in stocks, bonds, short-term money-market instruments, other securities or assets, or some combination of these investments, while maintaining the objectives and risk tolerance.

What to like:

* Diversification – Fund managers spread the pooled money across many investments. This reduces the risk of losing all your money if one investment goes sour. Keep in mind that diversification does not assure a profit, or protect against loss, in a down market.
* Professional management – A real financial pro (or a team) decides when to buy and when to sell the securities held by the fund.
* Divisibility – Mutual funds allow investors to contribute round dollar amounts. This makes it easy to invest a little each month.

What to keep in mind:

* Investment minimums – No matter which mutual fund you select, all funds have an initial investment minimum. You might have to save up some cash to get started.
* Charges and expenses – Some funds charge a "load" or a "sales charge" when you buy or sell. Some charge an "early redemption fee" if you sell too soon. Be sure you understand all the costs before investing.
* Liquidity – Mutual funds only trade when their value is calculated, which is at the end of the day. This can limit how quickly you can act on market news.

No single investment is for everyone and only you can decide whether mutual funds are right for you.

via IngDirect

The Good and Evil of discount vouchers

noreply@blogger.com (Everything Finance) — Sat, 05 Sep 2009 05:46:00 PDT

There is a practice that is gaining increasing dominance in financial website circles recently owing to broke recession-suffering online shoppers looking for ways of saving money - discount vouchers.

We've all seen the boxes at the checkout step that tell you to put in a discount code. After putting in the appropriate code, the fee of the item drops by 10% or further. When they initially appeared, the discounts seemed genuine, but with voucher code websites everywhere, one has to wonder whether these discounts are just marketing gimmicks.

Lots of websites now publicise these promotional discount codes, allowing users to save on a plethora of branded goods and services, including fashion, financial services, books, CDs, DVDs, gifts, gadgets, travel, hotels, and restaurants. The offers range from a specific price to scaled percentage reductions to free delivery. Most websites also provide vouchers that you can print off and use to get discounts in high street shops, such as £20 in a popular clothing chain when you spend over a certain amount.

Most of the codes on the sites have been arranged directly with the retailers but some are meant for specific special customers and have somehow leaked on the internet. These are often surprisingly valuable. If you are buying online and are presented with the chance to put in a code, a good trick is to open up a new browser window and use a search engine to try and find a code. Then it’s something you were going to buy anyway, so it’s a real saving.

Recently, consumer aggregate 'Which?' investigated the five biggest voucher sites, and discovered that multitudes of discount codes were out of date or just didn't work. And scarily, they found out that sometimes standard price comparison sites or personal finance software sites can offer better deals than the discounts you get from the voucher codes. Some sites do put up a disclaimer saying that codes may expire, and invite you to register for email updates. Try registering with additional sites, because each negotiates its own "exclusive deals" that you (allegedly) won't see anywhere else.

Most of the chief players now subscribe to a new code of conduct introduced by the Internet Advertising Bureau (the internet marketing industries trade association) from 1 January this year, which has shrunk the fake discount problem. Some sites encourage users to click on a retailer's name and are then linked to their website, only to start that no discount code exists. The new honor code introduced by the IAB has banned the use of "click to reveal" features, when there isn't a real or up-to-date offer.

Over all, discount vouchers are a magnificent opportunity to save cash, but don't forget to scan the net to see if you can find a better deal somewhere else.

7 Key Benefits to Using Prepaid Debit Cards

noreply@blogger.com (Everything Finance) — Sun, 23 Aug 2009 07:39:00 PDT

Prepaid debit cards are similar to credit cards, but they require upfront collateral (cash) before you can use them. There are actually several benefits that come with using prepaid debit cards versus a traditional credit card.

1. Perfect for College Students

One of the easiest and most convenient ways to provide money for a student is with a prepaid debit card. You can set monthly limits that get reloaded at the end of the month, helping the student operate within the budget you specify.

2. Safer Than Carrying Cash

Like credit cards, if your prepaid debit card is stolen, you are protected. If someone takes your cash, you are not!

3. Helps You Better Manage Your Budget

Since a prepaid debit card isn’t a credit card, it won’t allow you to make purchases on credit. Thus forcing you to stay within your set budget.

4. No Credit Check or Application

A prepaid debit card, like the kind you can get from ACE Cash Express, uses upfront collateral, so there’s no need for credit checks, long applications to fill out, or the concern of being denied an account because of bad credit.

5. No Credit Card Bill

There’s never a credit card bill with a prepaid debit card, because it’s already been paid for. Prepaid credit cars help you only spend what you have.

6. Accepted Everywhere

Prepaid debit cards utilize either Visa or MasterCard, so they can be accepted by any merchant that supports those electronic payment networks.

7. Get Cash from any ATM

You can use a prepaid debit card at almost any ATM to withdraw cash.

Related Sources:
ACE Cash Express provides financial services, including payday loans, short-term consumer credit, check cashing, bill payment and prepaid debit card services

The Savings Experiment

noreply@blogger.com (Everything Finance) — Mon, 17 Aug 2009 22:36:00 PDT

Today I would like inform you about a new website called "The Savings Experiment". It is a part of AOL News and their main sponsor is Bank of America.

The Savings Experiment website features a weekly video that examines a common money-saving idea and determines whether the benefits are really there.

The Savings Experiment came about as a way to show consumers what things really cost, and where the real value is.

The first two videos debunked whether or not you can save money by making your own “fast food” tacos yourself (result: yes, sort of, but you’d end up making a whole batch of tacos vs. just making one), and whether homemade soda really makes good financial sense (result: it’s more trouble to make your own, but certainly cost-effective and more environmentally friendly).

The Savings Experiment is running 10 experiments to see what things really cost, and where the real value is.

Watch a new video each week, and get some extra cost-saving advice on the side.

This week the video is about how much money can you really save by unplugging all those electricity drains?

I feel that answering these type of questions via video is very valuable.
So please check back regularly with The Savings Experiment website. I know I will.

Pointers on Points

noreply@blogger.com (Everything Finance) — Fri, 14 Aug 2009 22:36:00 PDT

So you decided to take the leap and buy the split-level house you always wanted? That's great. If you can put down a big chunk (20% plus), even better. You'll lower your interest rate and monthly payments and be that much closer to owning your home sooner. But what if you don't have the big down payment? Paying points is another way to potentially save.

Let's talk points:

* What is a "Point"? A point (as in 1 percentage "point") is payment made on the interest of the total loan at closing and typically paid upfront by the buyer (sometimes the seller). So, 1% of $100,000 = $1,000. With us so far?

* When to pay them. Generally, points can lower the interest rate on your loan and save you some dough if you're planning to live in the house for 10 or 20 years. Less than 5 years? Probably not. Another plus? If it's a residential mortgage (new, not a refi), you can claim points at tax time. As always, make sure to consult your tax advisor for more information.

* And when not. Obviously, paying points will tack on more costs at closing time. If you don't have the money saved to pay for them, go with the rate you were offered. It can take over 5 years to break even if you purchase points at closing.

Bottom line? Figure out your breakeven "points." Look at the amount you pay and figure out how many years you'll need to come out even. And make sure to talk to your lender or check out a good mortgage calculator online. Good luck and don't forget to grab the new garage door opener at settlement. That's one of the best parts.

Source: INGDirect

Choosing the Right Broker

noreply@blogger.com (Everything Finance) — Sun, 09 Aug 2009 22:38:00 PDT

How to find the right broker for you? Let's rule out the dartboard, first off. We can narrow your search to just 6 tasks that will help evaluate your needs – and decide which broker fits best.

* Evaluate your needs

Investing experience – Beginner, pro, or in-between? The answer tells you whether you'll need educational support (most beginners do) or more complex tools or trading choices (some pros do).
Amount to invest – Starting with $100 or $10,000? Do you plan to continue investing regularly, or invest lump sums when you have them? These answers indicate whether you'll eliminate some brokers for investment minimums.
Investing strategy – Watch the market closely and immediately jump on opportunities? Or invest slowly and steadily over time? The first requires real-time trading (buy/sell right now); the second can use dollar-based investing (more on that later).

* Evaluate brokers

Services offered – Poke around their educational resources, take demos, try out their tools, look for the investment types you want (stocks, mutual funds, exchange-traded funds [ETFs], options, margin trades), etc.
Trading method – Are you a do-it-yourselfer when placing trades (immediately online) or a do-it-for-me person (call or tell your broker in person to handle it)? What does the brokerage specialize in?
All the costs – Brokers rarely have just one. Check the transaction cost (how much to buy or sell an investment), inactivity fee, maintenance/account fee, and add-on charges (investment advice, phone trades, advanced tools, etc.).

Once you decide on a broker, open an account and get started right away. Keep in mind, you're not stuck with your choice. If your needs change or your broker isn't all you'd expected, take your investments elsewhere. Just not to the dartboard. After all, they're your investments.

New Learners for the New Economy By Kirsten Olson

noreply@blogger.com (Everything Finance) — Tue, 04 Aug 2009 08:55:20 PDT

While things are looking a little brighter, the economy still seems to be in a bit of free fall. (Except if you're at Goldman Sachs.)

If you aren't looking for work yourself, you know someone who is searching for a job, who just graduated, or is tuning up their skills so they don't get permanently furloughed or downsized. What qualities do you need as a learner to adapt to our new economy? What learning attributes do employers seek in the flatter, fragmented, and constantly changing workplace? Based on a book I just wrote, it's clear many of the ways we were taught to be learners in school are directly in contrast to the qualities we need in today's economy and job market.

Below are twelve critical "habitudes" of learners in the new economy. These habits and attitudes are critical to adapting to our new information-overload economy, thriving amidst constant change, and allowing you to enjoy your work more. Moving out of the old ruts of learning -- that it is boring, and that someone else is in charge -- will help you grow personally, expand your skills much more rapidly, and allow you to experience greater pleasure in your work. And seeing what you do as pleasure is perhaps your greatest asset you can bring to any potential employer.

New learners for the new economy . . .

Are highly adaptive. They are able to see where opportunity lies and network to it. Perhaps you were hired for program development, but that market is withering. As a new learner, you are strategically attuned to the signals your sector offers, and are able grow your skills and experiences toward new opportunities. Where is opportunity right now in your sector? Where will it be in a year? If you a job seeker, in interviews be ready to talk in about how you adapted to workplace or educational change, and provide examples. Then, when you get that job, be that adaptive person you described.
Ask great questions. Powerful learners ask lots of questions. After that, they pause, and listen carefully and deeply to answers.
Are curious about everything. Folks who do not take advantage of new ways to understand their businesses or their work, through blogs, online newspapers, newsfeeds, wikis, Googlereaders, are missing important opportunities. Great learners are very self propelled and entrepreneurial about their learning, and have lots of "learning projects" going all the time. Read avidly about your business or market sector. In fact, read avidly. As much as you can, whenever you can.
Have a broad knowledge base that they are always expanding. (See above.) Although many of us are pushed to specialize in our jobs, new learners for the new economy are also broad thinkers. They have interest in lots of different knowledge domains.
Are good at seeing patterns. As you sort through mountains of information available all the time, what patterns do you see? What sources are reliable? Why? And how can you synthesize? One of your most valuable attributes as a new learner is your ability to "see" the underlying patterns in information, workflows, organizational crises, and synthesize. Look for ways you can organize and see patterns in information.
Are team players who share what they know willingly and generously. New learners for the new economy lead horizontally, through influence, not competitive moves, backstabbing, or out maneuvering others. As a learner this means not hoarding what you know, but offering up knowledge to others and collaborating around tough problems. You really are a better learner and thinker when you work with others, and your own influence only grows through right-spirited cooperation.
Are a glass-half-full resource managers. The New York Times recently reported that the University of Washington's department of communications decided eliminate landline telephones. "We found a way of saving money that doesn't hurt the student experience, and I think everybody's happy," said the communications department chair. Landlines, the department concluded, were an old fashioned technology that weren't needed anymore. Can you figure out how to survive -- and thrive -- on less? We are on the forefront of a massive shift in American life, where we consume less, own fewer things, and do more for ourselves. New learners for the new economy consume less, and manage resources very carefully, not just because it saves money, but because it is the right thing to do.
Understand that every contact matters. Great learners are tutored by everyone. From the man you give a dollar to on the street on the way to work, to the president of the company whom you meet in the elevator, every time you interact with another human being you are learning. Every encounter is a learning moment. You embrace this.
Know that hierarchy doesn't matter. The old command and control ways of managing the world are being disrupted and disordered, even as this upsets folks who love hierarchy and the old rules. The new reality is influence comes from everywhere, and success and profitability can be found from virtually ANY position. Like #8 above, new learners for the new economy believe this and live it in their actions at work. If you answer phones, are you putting every bit of yourself into it? Are you learning all you can from every phone interaction? Every position matters; everything you do matters.
Are choiceful about how they socialize. Where are you linked in? How do you spend your time? Who influences what you think? Great learner-employees are choiceful about their social contacts and habits, because they know this affects their learning. Take your influences seriously.
Own mistakes and are error alchemists. New research tells us we actually learn more from our mistakes than our successes. Successful new learners are good at owning their mistakes, admitting errors, and fluent at figuring out what valuable lessons they contain. No matter how painful, practice seeing your screw ups as opportunities. Turn lead into gold.
See learning as pleasure. It is! There is almost nothing more exciting than the adventure of a new learning project. Live this adventure. This alone will make you a vital, energetic, standout employee.

Finally, here's the great thing. Probably almost everything you've been doing since you were a kid, playing online games, IMing, Facebooking, and Tweeting will help you be the employee you need to be. Enthusiastic, engaged, cooperative, self-propelled learners are now more than ever highly valued employees. They are the new learners we need. Enjoy.

Author Bio
Kirsten Olson, author of Wounded by School: Recapturing the Joy in Learning and Standing Up to Old School Culture, is a writer, educational consultant, and national-level Courage To Teach facilitator, and principal of Old Sow Consulting. She has been a consultant to the Bill and Melinda Gates Foundation, the Kennedy School at Harvard University, and many large public school systems and charter schools.

Getting the best home insurance deal

noreply@blogger.com (Everything Finance) — Thu, 06 Aug 2009 08:58:41 PDT

Home insurance is one of the most important kinds of insurance that a family or individual can purchase. Because of the many disasters that can face a home, it is essential to have several different kinds of insurance on your home. Many people do not know their options for getting the best home insurance deal. However, with a few simple tricks and a little bit of shopping around it is possible to find the cheapest price for home insurance.

Know your area
It is important to know the area in which you want to get insurance. Some areas have higher insurance prices just because the homes are valued more or the homes are in a higher crime area. Areas with higher natural disaster ratings will also be more expensive. This is something that should be examined before any property is purchased. If you know the average pricing for insurance in your area then you will be able to make a more informed decision on what price for home insurance is a good deal.

Consider common disasters
Some insurance companies may try to offer services that you do not need for your home. If you do not live in an area that floods, then you do not need flood insurance. It is always a good idea to have home and contents insurance that covers the contents from robbery and fire. If you live in an area prone to hurricanes or tornadoes then it is also a good idea to make sure you are covered for those disasters.

Examine policies
Different home insurance companies will offer slightly different policies. The difference in these policies can make the difference in price between two companies. Always examine the policies to make sure you are covered for necessary categories. One way to save money on home insurance is to choose a plan with a higher deductible. Then put some money into ISAs to cover the cost of the deductible if you have a disaster at your home. This way the money will be working for you.

Ask for discounts
Getting a great deal on home insurance requires courage. Ask each company what discounts they offer. Some companies offer discounts if you have additional insurance with that company, if you are over a certain age, or if you have a certain kind of home. The discount savings can really make a difference in the cost of home insurance.

Summertime Money saving tips for your home

noreply@blogger.com (Everything Finance) — Sun, 26 Jul 2009 23:28:00 PDT

I got these tips from Quicken and thought I should share these with you.

If you’re planning on spending some of your well-deserved vacation time around the house this summer, check out these five simple ways to make the most of your days off. Inexpensive projects like these can add a whole lot of value and efficiency to your most important asset – your home.

Give Your Plugs A Tug. Here’s something you probably didn’t know: Plugged in toasters, coffee-makers, TVs and other electronic devices in your home actually use a small amount of electricity even when they’re not in use! By unplugging them when you’re not using these devices, you can save electricity and lower your utility bills.
Go With The Right Light. Compact fluorescent light (CFL) bulbs are an easy way to make your home more environmentally (and economically) friendly. Although they’re a bit pricier up front, CFL bulbs last a lot longer than traditional bulbs and can save you about $30 each in energy over their lifetime.
Not-So-Hot Can Save A Lot. Want to see a dramatic difference in your energy bills? All you have to do is lower the water temperature on your hot water header to 120 degrees from the standard 140. You won’t feel the difference when you wash your hands, but you’ll appreciate the difference it’ll make in lowering your budget.
How Low Is Your Flow? By switching to low-flow showerheads, you can not only reduce the amount of water your family uses every day, but also the energy needed to heat it. On average, you may be able to see a savings of up to $75 per year on water and up to $50 per year on energy bills by going low-flow.
Care About Your Air. Summer is the perfect time to clean and replace the filters on your air conditioning system. A clogged air conditioning filter can increase your cooling costs by 10% or more. Also consider installing a programmable thermostat. It will increase the efficiency of your air conditioner in the summer as well as your furnace in the winter months.

Summertime home improvements are a great way to spend your free time. And you can feel good knowing you’re making the most of that time by increasing your home’s value and efficiency.

How can I pay off my credit cards?

noreply@blogger.com (Everything Finance) — Fri, 17 Jul 2009 03:57:00 PDT

Tips for cutting interest and slashing debt

It almost always starts out small. Maybe your DVD player conks out, and you don't have cash in the bank to buy a new one.

That's what credit cards are for, right? Or there's a new CD you just have to have, and you don't have the 15 bucks with you. Put it on plastic. Gifts for your family at Christmas? Heck, it only comes once a year.

As Wilma and Betty on The Flintstones used to say, "Cha-a-a-a-rge it!"

Of course, if you're asking this question, you already know how to get into debt. What you want to know now is how to get out. Well, don't despair. It can be done.

The following advice will show you how to lighten your debt load and keep you from getting weighed down for good. Know what you owe. If your credit-card and other debt payments are getting in the way of important life goals, such as buying a house, saving for your children's education or contributing to your retirement plan, chances are that you owe too much.

Tackle your high-cost debt first

Figuring out what you owe is the first step toward getting your debt under control. The next thing you need to know is how much it costs you. For example, the average interest rate on credit cards is typically in the mid- to high teens. In late 2005 it was about 12 percent, not including introductory rates.

By comparison, the interest rate on an unsecured loan from a bank or a credit union or a new car loan is often close to half that. In dollars and cents, this means that: $5,000 in credit-card debt at 15 percent will cost you a total of $7,237, including interest, if you take five years to pay it off.

A $5,000 unsecured loan at 8 percent paid off over the same period will cost you $6,083. Obvious conclusion: You'll save the most by paying off your high-interest credit-card balances first.

Cut your credit-card cost

Not every credit card charges sky-high rates. Many lenders charge interest rates below 10 percent, and some offer super-low "teaser" rates that last two to six months (but be sure to read the fine print). On a $5,000 balance, those lower rates can save you a bundle.

The problem with teaser rates is that when they expire they are replaced by a rate that may be as high as or even higher than the one you had before.

So you need to make sure to pay off what you owe in full before the teaser rate expires - or move your balance to another low-rate card. An even simpler strategy is to call the toll-free customer service number on your credit-card bill and request a lower rate. In a nice but firm tone say that you are considering taking your business to a company that offers a lower interest rate.

If you've got a solid payment record, there's a good chance they'll lower your rate. If not, go ahead and look for a better deal.

Consolidate your student loans

Uncle Sam has made it easier for people with student loans to handle their payments and that in turn can free up more money to pay down your credit cards.

The Federal Direct Consolidation Loan Program lets you merge all of your federal loans into one big loan with an interest rate of 8.25 percent or less. So if you're paying more than that, get smart and consolidate.

If you're still having trouble making your payments, there's another step you can take. The consolidation program lets you extend the length of your payout from the standard 10 years to as long as 30 years. Your monthly payment will be lower on the long-term loan; however, because you keep paying longer, you will end up shelling out more interest over the life of the loan.

Extending your student-loan payments is a smart strategy if you have a lot of credit-card debt, because you can take the money you save each month on student loans and use it to pay down your much more expensive credit-card debt. Contact the Department of Education Loan Consolidation Center (www.loanconsolidation.ed.gov) for more information.

Maximize home equity

If you own your home, you may be able to borrow against the equity and use the proceeds to pay off your credit cards and other high-cost debt. The interest rates on home equity loans are far lower than the average credit-card finance charge.

So if you use a 7 percent home-equity loan to pay off a $10,000 balance on a 15 percent credit card, you'll save about $2,400 in interest payments over five years. Plus, if you itemize deductions on your tax return, you probably may deduct the interest payments on your home-equity loan.

If you're in the 25 percent tax bracket, that means you get back 25 cents in tax deductions for every dollar you pay in interest.

Seek help if you need it

If none of these debt-busting techniques seem like enough, contact the nonprofit National Foundation for Consumer Credit (www.nfcc.org). NFCC has credit counseling specialists at branches nationwide to help you plan a budget, trim your expenses and negotiate with creditors to lower your monthly payments.

Key Aspects of Adjustable Rate Mortgages

noreply@blogger.com (Everything Finance) — Wed, 14 Oct 2009 09:51:18 PDT

When shopping for different mortgages and mortgage rates it is especially important to take the length and structure of the mortgage into consideration among other things.

As the name suggests, an adjustable rate mortgage (ARM) is one with a fluctuating interest rate. While considered riskier than a conventional fixed rate mortgage, an ARM can provide numerous financial benefits for borrowers in certain situations. Therefore, before considering an ARM it is best to understand the key aspects of these mortgages and how they work.

How ARM Interest Rates are Calculated

The interest rate on an ARM is linked to an economic index. In the US, there are six commonly-used indices, including the London Interbank Offered Rate, the Constant Maturity Treasury, and the Cost of Funds Index. The indices increase and decrease according to economic activity, and the interest rate on the ARM adjusts accordingly. Depending on the terms and conditions of each ARM, these adjustments might be made annually, or two to three times a year.

The interest rate that a lender quotes is comprised of the index figure plus a margin that represents the profit the lender makes on the loan. Unlike the index, the margin usually stays constant throughout the life of the ARM. Your mortgage note will include this information, stating the index your interest rate is based on, as well as the margin.

Adjustment Periods

The adjustment period of an ARM is the time period between interest rate adjustments. In most cases, the adjustment period is one year, but can also be as low as one month for some ARM’s. Adjustable Rate Mortgages are typically hybrid mortgages that are amortized over a thirty year period. The rate of the hybrid ARM is depicted by the fixed rate followed by the adjustable rate. For example, a 3/27 means that the mortgage has a fixed interest rate for the first three years, and the rate is adjustable for the remaining 27 years. Likewise, a 2/28 ARM would mean that the rate is fixed for the first 2 years and adjustable for the remaining 28 years. The exception to this pattern is the 5/6 ARM. This amortization period of a 5/6 ARM is still thirty years, however the adjustment period is every six months for the life of the loan and not six years.

Payment Caps

ARMs have payment caps, meaning there is a limit on how much the interest rate can increase or decrease at each adjustment, and over the life of the loan. There are three different types of caps—initial, periodic, and lifetime caps. Initial caps limit the amount an interest rate can change by at the first adjustment, period caps limit the rate change for each subsequent adjustment, and lifetime caps limit the amount the interest rate can change by over the life of the loan.

For example, if the ARM has a 5/2/6 cap, this means that at the first adjustment, the interest rate can increase or decrease by up to 5%. The rate can change by up to 2% at each subsequent readjustment, but over the life of the loan the interest rate can never deviate more than 6% from the initial interest rate.

Option ARMs and Negative Amortization

Option ARMs allow the borrower to make different types of payments for any given month. A borrower, for example, may choose to make an interest-only payment for a particular month. Or, the borrower also has the option to make a payment that is less than the interest owing for that same month. These types of ARMs are popular because they offer very low initial interest rates and low minimum payments. The danger, however, is that negative amortization becomes possible with an Option ARM. This is a situation in which the payment made for that month is less than the interest that accrued, with the unpaid interest then added to the balance of the principal. When the balance increases, the amount of equity the borrower has in the home decreases accordingly. In the most severe situations and as evident in the recent housing crisis, the borrower may end up owing more than the property is actually worth.

Refinancing out of an ARM

Borrowers who refinance an ARM in favor of a fixed rate mortgage usually do so for one of three reasons. They may have taken out an ARM with the intention of living in the house for only a few years. If plans change and the borrower decides to live in the house for the long term, they may choose to refinance in favor of a fixed rate mortgage because it provides greater financial stability. Alternatively, if interest rates start to rise and look set to increase in the long term, it is sensible to refinance before increasing interest rates affect fixed rate mortgages significantly. Finally, some people just realize that the instability of an ARM isn’t for them—they prefer to have a fixed rate mortgage because fixed monthly repayments allow for more long term financial planning.

If you’re thinking of refinancing out of an ARM, don’t forget that there will be a new round of closing costs to pay on that second mortgage. In most cases they’re payable in cash at closing, and having to pay closing costs might entirely negate the benefits of the lower interest rate on the ARM. Refinancing generally shouldn’t be attempted without a good reason unless you know that you will be living in the house for at least enough time to allow the lower interest rate to recoup your closing costs.

Few Good Books on Investing and Personal Finance

noreply@blogger.com (Everything Finance) — Tue, 07 Jul 2009 11:47:20 PDT

School's out. Still, lots of young students went home with "suggested" reading lists to keep them sharp all summer (sorry about that, kids). So what's on your summer reading list to keep you saving smart? Here are a few of our favs:

* The Everything Kids' Money Book: From Saving to Spending to Investing – Learn All About Money!, by Diane Mayr: From allowances to lemonade stands to lawn mowing, you and the kids will learn a little bit of everything about money – making it, saving it, spending it wisely. There's plenty of money games, mysteries and history lessons to hold everyone's interest, too.

* The Difference: How Anyone Can Prosper in Even the Toughest Times, by Jean Chatzky: Best-selling author and financial coach Jean Chatzky tells us how financially self-made people got that way (spoiler alert: it's not the lottery). She takes a timely topic and wraps it around everyday things – like financial freedom strategies and other sound traits and habits to pick up along the way.

* The Orange Code, by Arkadi Kuhlmann, President of ING DIRECT, and Bruce Philp, founder of GWP Brand Engineering: We're biased, but The Orange Code (TheOrangeCode.com) is a real page turner. Read how ING DIRECT succeeded by "being a rebel with a cause." Our CEO of Savings shares his unconventional approach to all things business, money and living a principled life.

Wouldn't you love to find one, just one, good investing book to take poolside? How about 3? Whether you vacation or staycation, here are a few great reads definitely worth your time.

* The Intelligent Investor, by Ben Graham: The father of the "value investing" strategy lays out his successful long-term, disciplined approach. First published in 1949 and later updated, Graham's recommendations are timeless. The intro's written by his best-known follower, Warren Buffet, who calls it "the best book on investing ever written."

* One Up on Wall Street, by John Rothchild & Peter Lynch: Lynch is perhaps the most famous mutual fund manager, having led Fidelity's multibillion-dollar Magellan Fund. His advice boils down to "invest in companies that you like." Rothchild helps Lynch explain the strategy that brought such success.

* Jubak Picks, by Jim Jubak: MSNMoney.com expert columnist Jubak explains his philosophy for profits in good times, protection in downturns and the biggest returns in the next upswing. His returns over the last decade significantly beat all major indices.

Read all you can and don't forget to save a few bucks this summer. We hope this list is a good start.

So Many Shoes, So Little Money: A Girl's Guide to Finance

noreply@blogger.com (Everything Finance) — Wed, 08 Jul 2009 22:43:53 PDT

New Book Helps Young Women Take The First Steps To Becoming Financially Savvy

For many young women, managing their money and understanding the basics of personal finance can seem daunting – but it does not have to be, says veteran chief financial officer Lisa Serwin. In her new book, SO MANY SHOES, SO LITTLE MONEY: A Girl’s Guide to Finance (Booksurge/July 2009), Serwin uses shopping as a framework to help women get a grip on their personal finances – from budgeting, saving, and investing to credit cards, taxes, and insurance. Fast-paced and funny, this insightful guide will appeal to anyone who loves to shop, but is overwhelmed when it comes to balancing a checkbook, staying on top of monthly bills, or planning for a secure financial future.

“Think of the book as a closet filled with a variety of financial subjects instead of clothes and shoes,” writes Serwin, bringing her insights to life with witty shopping and fashion metaphors. For example, she compares credit cards to the “little black dress” that every woman has in her closet – small but very potent. She illustrates why it is best to use credit cards sparingly and only on special occasions, showing how the compound interest that credit card companies charge on unpaid balances can easily grow into a financial headache.

In addition to providing solid financial basics, SO MANY SHOES, SO LITTLE MONEY also includes step-by-step techniques for applying Serwin’s lessons, such as simple, pain-free ways to save money (set up an automatic savings plan, pay your savings account one dollar for every workout you do, eat at home more often, take public transportation, go green to save on utilities, switch from a cell phone to using the Internet for calls). Making the book an even more engaging read are dozens of clever “fashionista facts” – fashion related tidbits as well as tips on such topics as buying cashmere and organizing your closet.

Among the basics Serwin brings to every woman’s financial life are:

•How To Budget — Achieving Your Dreams: “Only by knowing what you have (and don’t have) can you figure out whether you can save, spend, or should cut costs,” explains Serwin. But, she points out, “Most budgets fail because they are seen as a restraint. . .Instead, start thinking of a budget as a way to help you achieve your life’s goals and dreams.” SO MANY SHOES, SO LITTLE MONEY offers an easy method for constructing a budget that works.

•How to Spend – Striking A Balance Between Needs And Desires: “Spending is often what we do best,” writes Serwin. “However, knowing what to spend, and when to spend, is critical. What must we have? What can we live without? And how do we know which is which?” SO MANY SHOES, SO LITTLE MONEY explains how to sort out wants from needs and offers invaluable information for smart spending – from choosing the right debit and credit cards to making major purchases such as a car or a home.

•How To Save – Preparing For The Unexpected: Serwin explains why it’s essential to have cash on hand to protect you from life’s unexpected surprises or to finance a special dream. Not only does Serwin offer ideas for making saving easier, she details where that money should go – outlining the differences between checking accounts, savings accounts, money market accounts, and certificates of deposit – and offers tips for finding the account that best fits one’s needs. She presents a very persuasive argument for starting to save now, instead of putting it off for tomorrow.

•How To Invest – Make Your Money Work Harder For You: Serwin presents a basic guide to stocks, bonds, mutual funds, index funds, 401K plans, and IRAs making it easy for readers to comprehend. She shows why investing is an important step towards creating a secure future, explains how to get started, and how to chose a financial advisor or broker.

Serwin encourages women to periodically take stock of their financial health by figuring their net worth. She also addresses such topics as: debt (and what to do if you have more than you can pay); insurance (“unlike a bad hair day, things happen that can’t be washed away”); taxes (“wrinkles, you can avoid; taxes you can’t”); and how to choose the right experts for help (from accountants to realtors to insurance brokers).

Like many women, Serwin grew up thinking she was good at shopping but bad with numbers and math. But she soon discovered that being a canny shopper gave her all the basics she needed to comprehend finance. With SO MANY SHOES, SO LITTLE MONEY, she passes on those basics to other women, showing how it’s possible to have a full closet and a full bank account, while building a secure financial future.

ABOUT THE AUTHOR
Lisa Serwin has over twenty years experience working in corporate finance. She is the former CFO for The PlumpJack Group, Senior Vice President of Strategic Planning for Fox Filmed Division (a division of News Corporation), and Vice President of Corporate Development for TicketMaster Online – Citysearch, Inc. (a division of InterActive Corporation).

Serwin holds a BA from the University of California, Los Angeles and an MBA from Loyola Marymount University. She resides in Napa, California.

You can buy at Amazon: So Many Shoes, So Little Money: A Girl's Guide to Finance

Can't Control the Markets? Try controlling the Costs

noreply@blogger.com (Everything Finance) — Thu, 25 Jun 2009 04:59:01 PDT

You can't control the markets, but you can control investing costs

As 2008 proved, the financial markets are prone to unpredictable periods of turbulence. That can make investing feel a bit like a roller-coaster ride. The disappointing results that many mutual funds posted in 2008 and at the outset of 2009 may have left you feeling concerned over your financial future. You're not alone.

However, one maxim seems to hold true: There's one very important element affecting long-term investment return that you can exert a great deal of control over, and that's your investing costs.

Keeping costs to a minimum can help boost long-term investment success. That's because every dollar paid for management fees, trading costs, and taxes is a dollar less of potential net return. And while some costs are not as transparent to the average mutual fund investor, a fund's expense ratio is always transparent.

Although lower costs aren't a guarantee of superior mutual fund performance, higher costs don't necessarily translate into higher returns either—turning the adage "you get what you pay for" on its head.

The track record: Higher costs have often led to lower returns

In the interactive illustration below, U.S. stock funds are divided into three categories: small-capitalization, mid-cap, and large-cap, reflecting the size of the companies the funds invest in. The funds are further divided into quartiles (that is, 25% of each respective group), based on expense ratios. As you can see, the best-performing funds for the period were the ones with the lowest costs in almost all capitalization and expense categories.

The components of investment cost

The costs associated with investing in a mutual fund include operating costs—the fees paid to the fund's portfolio manager—as well as recordkeeping, administrative, and reporting expenses. Together, these costs are deducted from every fund's earnings and are expressed as its expense ratio.

Other costs can also affect your mutual fund returns. For example, some funds charge a 12b-1 fee, which covers the marketing and distribution costs. Sales charges may apply if you choose to invest in a fund that collects a front-end load. Yet another expense is the cost of trading securities, including brokerage commissions.

When thinking about the impact of costs on your own investments, bear in mind that although the cost factors that make up a fund's expense ratio aren't directly deducted from your accounts, they do act as a drag on your net returns.