Financial Planning Tips

Three Basic Approaches To Debt Resolution

FPT Guy — Sat, 05 May 2012 01:03:32 +0000

Debt is a four letter word, literally and figuratively. In America, it comes up in virtually every discussion of the economy. According to MSNBC, one in four Americans has more debt than savings. This would seem to be a shocking number, and it’s not even counting the number of individuals and families who are one emergency away from sliding into the red, due to hard times or poor financial planning.

From a young age in this country, we are taught how to use credit cards, but we aren’t taught financial responsibility or how to deal with debt. So for people who are looking for options, here’s a few ways you can approach major debt:

Debt management—Debt consolidation refers to a contractual arrangement you make with a service—typically a private company—who will consolidate all of your debts into a single monthly payment that has a considerably lower interest rate. The main advantages, besides lower monthly payments and interest, are that your debt management issues are kept confidential, meaning your employers won’t find out about it unless they somehow get access to your credit report.

Another advantage is that you won’t have to deal with the creditors at all, and in many cases, your consolidation company can do a direct deposit from your account each month, further simplifying the process. In many cases, you won’t have to write a single check.

Bankruptcy—Declaring bankruptcy has some pretty nasty connotations attached to it, but in many cases, it is the only option for individuals and businesses who have been financially ravished. One and a half million Americans can testify to that. Bankruptcy ceases any legal actions that are being taken against you by creditors. Filing for bankruptcy can also protect certain assets, such as homes and cars, from creditors’ claims.

While a bankruptcy will certainly diminish your credit rating, it will also give you a relatively clean slate financially speaking, though it could discourage future financial partners from funding endeavors with you.

Hunker down—It’s not pretty, but one way to combat debt is to simply hunker down and spend years painstakingly repaying your creditors. This will require disciple, frugality, and patience. It will also require extreme organization. But the process could teach you a thing or two about financial responsibility.

Each of these options are tiered, in that they depend on your level of debt. If you have a relatively small amount of debt—a few thousands for instance—you have a better chance of being able to hunker down and slowly solve your problems. Larger increments of debt may require more drastic actions, such as debt management and/or bankruptcy.

Stock Investing in a Slow Growth Environment

FPT Guy — Wed, 02 May 2012 01:01:16 +0000

The economy is growing at a really slow pace. And I’m not just talking about the US either. Europe is super slow and is probably in a double dip recession due to the debt crisis. I don’t see either of these situations improving significantly for a while. Growth in Asia, specifically in China, is slowing as well. This makes it really hard to get a decent return on your money these days. Regardless, there are still good stocks that you can buy in this type of climate.

Innovative Technology Stocks

I really like to look for mega trends when it comes to stock investing. Okay, I’ll do the standard investment strategy, i.e. invest in dividend stocks and bonds when times are bad. But I will work extra hard to find those great stocks that have a bright future. The best place to find that, in my view, is in technology stocks.

That is because there are companies out there that are innovating and coming up with solutions to the world’s current and future problems. It takes a little bit of extra work to find good stocks in this type of field. You also need to get yourself educated on the scientific and technological background to find the good ones, but they can be well worth it.

Alternative Energy Investments

I particularly like companies that are innovating tomorrow’s energy solutions. Remember, we cannot go on using fossil fuels like we have been. The days of cheap oil are gone. Now, the companies coming up with cleaner and cheaper energy will be the stock winnders of tomorrow.

I really like stocks that are engaged in business that is currently selling. I don’t like to buy pre-market ready companies. In other words, I want to make sure that their company’s product or service is out of the research and development phase and being sold to a viable and growing market. That means if the fuel is still sitting in a lab and no one is paying money for it, then maybe look elsewhere.

Biotech Stocks

I also like biotech stocks. Again, I want to make sure that they are out of the clinical trial phase and things are looking good for FDA approval. But if it’s a groundbreaking drug that helps a lot of people, then it is going to make a lot of money.

GUEST POST: To get more information on investing and find a constant stream research and analysis, to go this website for more information: http://stockstobuy.tv. It’s a website that I just started. The best thing about it is that it has a ton of videos with interviews and talks from the world’s best investors.

Asset Allocation: Investing In The Best Stocks

FPT Guy — Thu, 26 Apr 2012 04:01:21 +0000

Historical data has a lot to say about where you should put your investment capital. For example, when it comes to asset allocation, how you divide up your money may determine you chances of the best return on investment for your portfolio. It’s not just about finding good stocks to buy. It’s also about whether you should be in stocks at all.

Why Stocks are the Best Investments Over Time

The short answer is that you should be in stocks, but only if you have 5-10 years before you need the cash. That is because it is more volatile than say bonds. But they will also give you a better return over time as well.

People who have 90% in stocks and 10% in bonds will fair better over time than those who have 60/40. That’s just historical fact. Although it can’t guarantee future outcomes, it will give you the best chances at a decent return for your retirement fund. Investing is risky. Find a professional financial advisor to help you before making any decisions.

If you take any 10 year period in the Dow Jones Industrial Average, you will make money 100% of the time. If you invest in a broad market index fund for over 20 years, the changes are very high that you will get at least a 10% annualized return during that period. That is even with the ups and downs of that the stock market naturally experiences during the course of time.

Times When Bonds are a Better Investment

There are at least a couple of situations where investing in bonds makes sense. The first is if you are mega wealthy. There are times during the business cycle where if you have a ton of money, there just aren’t enough stocks to buy out there that are good deals.

This probably means that the economy is not doing well and stocks are taking a beating. Then it might make sense to park your money in bonds.

Another instance where investing in bonds may make sense is if you are close or at retirement age. If you don’t have 7-10 years to wait for the stock market to run it’s down cycle, you may want to allocate it into bonds.

That is because bonds give fixex income and they are less volatile. That is why as you get older, the proportion of bonds in your portfolio should rise.

Other Asset Classes

There are other asset classes like derivatives, money market funds and commodities. Hwoever, generally you will want to stay away from these asset classes. Derivatives and commodities are very risky, volatile and complex instruments. And money market funds give way too little return overall if you want to beat the market.

Reducing Energy Costs At Home

FPT Guy — Sat, 21 Apr 2012 17:50:07 +0000

Sometimes frugality can get a little out of hand, when we cut ourselves off from simple pleasures like our favorite latte at the mom and pop coffee shop we like to support. But how mindful are we about things that could save us money in the long term, and not really put us out of our way? Besides looking at purchasing the cheapest gas and electricity available. taking a look at reducing home energy costs is a great category for this kind of thinking.

Here are a few tips in this short (and useful) guide for reducing your energy costs at home.

Unplug What’s Not Needed

If you have any appliances that your seldom use, such as a second refrigerator in the garage or basement, unplug them. Your utility bill may be $10 a month less. Keep chargers unplugged until needed. In every home there are those little plastic devices used to charge digital cameras, cell phones, cordless tools, PDA’s and other gadgets. Unplug them to save energy. Have your home theater equipment, televisions, and stereos connected to power strips and switch them off when not in use. Even when turned off, they continue to use the energy of up to a 100 Watt light bulb. Flip the power switch off.

Have Computers Set to Hibernate or Sleep

When you are not using your computer, have it set to sleep mode which uses less power during inactivity. Click on Control Panel to find management settings in Windows. For Mac PCs, find settings under system preference in Apple’s menu. Set the computer to hibernate when inactive for 30 minutes. In the hibernate mode it will turn off in such a way that you will not have to reboot everything when you want to use it again. Save energy and time by having your computer hibernate instead of restarting each time. Shut down at the end of the day.

Control the Temperature in your Home

In winter, keep the thermostat set at 68 degrees or below during daytime hours and 55 degrees before bedtime of if you will be out all day. Set thermostat no lower than 78 degrees in summer. Make use of sunlight. Leave blinds and shades open to the sunlight in the heating season. At night, close them to prevent heat loss through the windows. During summer, close blinds and draperies when air conditioning is in use. Have hot water temperature set from 120 to 130 degrees. You may run low on hot water, however, or use more to boost the hot water in the dishwasher. Wash dishes only when full.

Use Appliances More Efficiently

Keep refrigerator no lower than 40 degrees Fahrenheit. Set freezer between 5 and 0 degrees. Do not peek inside the oven more often than needed and do not preheat. In the laundry, set washing machine to correct water level for the load size. Wash most things in cold water. Always use cold water to rinse. Make sure your appliances have the best energy star ratings available, if possible.

We hope you found those simple tips above useful for energy cost reduction in your home. Remember, just be mindful using this list and you can generate some serious savings in the long run, for things you really enjoy doing.

Applying For A New Credit Card

FPT Guy — Tue, 17 Apr 2012 18:43:06 +0000

There are many things to consider when applying for a new credit card and it can get pretty confusing. If you don’t currently have a credit card or even a credit score, you may not know where to start. It doesn’t help that there are so many options for getting credit, you may become overwhelmed with the choices. Most people apply for some sort of credit right after they turn 18, whether it’s a store credit card, a gas card, or just your standard everyday credit card. The best way to start is to start small, and try not to ahead of yourself.

Most people start with something simple to build their credit like a car loan, a student loan, or a gas card. You will of course have higher rates, but it will be better for you in the long run.

The first thing you should do is decide what type of credit you need. If you absolutely need the financial flexibility of a credit card look for something that offers instant or pre-approval. You may want to avoid credit providers like American Express, or Discover and look for something more flexible like CapitalOne or a credit union. If you are looking for something simple that will help you build your credit score, you may want to consider a gas card or a store credit card. Those are easy to monitor and you are going to spend that money anyhow. Most people spend over $100 a month on gas using cash or their debit account. Putting those purchases on a gas card and paying it off immediately will help to improve your credit score.

Another safe option for building credit is a secured credit card. A secured credit card requires you put a deposit down to provide you with your initial credit line. If you put down $1500, you will have $1500 available in credit. Secured credit cards are a great way for people with a low credit score to get approved for a card and start building their score.

Photo: Robert Scoble

Whatever you choose, be sure to monitor your spending and the time it takes you to pay back. A good rule of thumb is never spend more than 30% of your available credit and always make your payments on time. This will let creditors know you are trustworthy and don’t overextend you finances to more than you can afford. You want to avoid spending your entire available credit in one month as this can look bad on your credit report. This can lower your score and even bump you down to the next category on the credit score chart.

Questions To Ask Your Stock Broker

FPT Guy — Fri, 13 Apr 2012 19:26:05 +0000

Managing your finances is perhaps the most challenging aspect of day to day living. Investment strategies vary, and no two people’s portfolio or options are ever the same. When contacting an independent broker dealer, you should consider carefully the types of questions you wish to ask. Any qualified stock broker will welcome your inquiry and be happy to help you learn to invest better. Keep your questions tailored to your personal investing goals and be prepared to discuss all the options available to you. Here are some questions you can use to begin a dialogue to build a long term investment relationship with your independent broker dealer.

1. “Can I get an investment profile?” or if you already have one, “Why did you choose the options for me that you did? How can I expect to see these work for me long term and short term?”

This will help you outline what your financial goals are, and if your broker is the right match for you. If you already have a profile drawn up, you should inquire as to why your independent broker dealer chose the investment options for you that they hav

Did they value your willingness to take risks with the possibility for high yield investments?
Were their choices safer, and better tailored to smaller investment opportunities? These discussions will help decide how to best diversify your investing and portfolio options and help you and your independent broker dealer put your money to work for you.

2. What are they doing to stand out from the competition? Ask your broker how they handle challenges and the things they are doing to help earn and keep your business. Some things to inquire about could be:

Is this firm one of many?
Are they a little fish in a big pond, or do they stand out from the crowd?
How do they attract new business and help their clients get the best return on their investments?
How can you reach someone if you have a question? How soon will they return your call or email? Is there a way to always reach a live person instead of a recording?

3. How do they get paid?

Are they working on commission? If so, how are their suggestions tailored to your investment needs instead of trying to just get your business to win a prize or a better paycheck?
Are they pushing a particular stock or investment option? Why? How does it fit your needs, and if it doesn’t, inquire as to why they are adamant on trying to sell you on it. Good business practices go far. You’re not shopping for a car; you’re investing your money.
Do you pay them by singular transactions? By flat fees? Addressing these issues early is the key to avoiding miscommunication further down the line.

Lastly, your independent broker dealer should value your time and your investments. The assets in your portfolio are just that – assets. You should always know the value of them, and it is important to amass as much knowledge as possible. Asking these questions of your broker can lead to a long and prosperous relationship for both parties, if communication is open and honest. Honest investments are solid investments, and the return on them is immeasurable.

How To Find The Best Secured Credit Card

FPT Guy — Thu, 12 Apr 2012 03:26:47 +0000

There are two main types of credit cards. One is the unsecured type, which is what the majority of those issued by banks are. It is provided without requiring a material guarantee that payments will be made by the cardholder. The other is the secured type, which calls for some sort of insurance that the bank will recover its money, thereby minimizing risk. Creditors are increasingly becoming conscious of their clients’ ability to pay in the aftermath of the credit crisis. For people who are struggling with bad credit ratings, getting a secured credit card is a way of rebuilding their stature in the eyes of lending institutions.

Secured cards are guaranteed by money deposited in a bank account, the amount depending on the contract. This makes creditors more likely to issue the cards to anyone who can meet this minimum requirement, even those with bad credit ratings who are usually turned away otherwise. It functions much the same way as unsecured credit cards with the payment history being monitored as well. This enables conscientious cardholders to earn high credit ratings which would enable them to apply for loans at low interest. People seeking to rebuild their damaged credit ratings often resort to this method with apparent success.

How to Pick the Best Secured Credit Card

Some might be wondering whether the unsecured type of credit card is just another way of referring to the debit card. This is not so. Although both cards are easy to obtain and come with a risk-mitigating factor, only the first has usage recording that reflects financial behavior. The frequency of this monitoring should be inquired into, with the rule of thumb being a 30-day cycle.

Additional Factors

1. Deposit protection – Whatever happens to banks, their clients should be assured of recovering a certain amount through insurance. Try to discover the exact amount and see whether the institution is insured by the FDIC.

2. Interest earnings – As the deposit will likely sit in a bank account for a while, check its interest earnings potential. It may not be much but it can be significant in the long run.

3. Qualification period – The length of time before an application for an unsecured card is approved. Most will implement a 9-month observation period before allowing a switch from secured to unsecured cards.

4. Charges – Beware of hidden fees and charges. Some of these are one-time penalties while others are recurring. Be sure to study the contract carefully, reading all fine prints to avoid surprises later on. Make payments on time to prevent excessive fees.

5. Maintaining balance – Banks will enforce a minimum balance on the deposit account. How much the card can purchase may depend on the current balance. Find out what happens if this dips below a certain level in terms of charges, credit line, and other consequences.

The Real Meaning Of Mortgage Insurance For Borrowers

FPT Guy — Wed, 04 Apr 2012 15:57:10 +0000

Getting a mortgage loan approved can be difficult if the borrower can’t pay at least 20% down payment for the house whether individual or family mortgages – it’s a fairly large amount that many simply cannot afford. One way to bypass this requirement is to agree to pay for mortgage insurance for a period of time. Such a deal minimizes the risk for lenders in the event that borrowers end up defaulting on payments. This safety blanket makes them more amenable to approving loans despite the low equity.

While mortgage insurance presents an added cost to the borrowers, it does help them attain the loan quickly. For some, this is more desirable than waiting until there are available funds to cover the hefty down payment of no-insurance loans. Borrowers can take comfort in a piece of legislation that allows them to write off the mortgage insurance of their tax returns. There are limitations based on income so it is best to read up on the law to determine eligibility.

As stated, this mortgage insurance need only be paid for a set period of time and not until the completion of payment. The exact timeframe will vary depending on what has been agreed upon. The minimum is one year, though this may be lifted sooner if the remaining balance has been reduced down to less than 80% of the purchase price. Borrowers may have to make a formal request by sending a letter to the lender if stipulated in the contract. There could also be a certain level that will automatically trigger the termination of the insurance. Another option is to have the property appraised as an increase in value can provide 20% of equity. Loans guaranteed by the FHA, however, have more stringent requirements. Mortgage insurance payments on these have to be paid for a minimum of 5 years. Termination is contingent on reducing the balance to 80% of the original price. They do not take the newer appraised value into consideration.

Romantic Vacation Ideas For Couples On A Budget

FPT Guy — Wed, 04 Apr 2012 14:13:36 +0000

Everyone needs that well deserved R&R, especially if you’re a couple (with or without kids) that needs to decompress from the stress of work and/or family, and catch up on your romance. So here’s are some great ideas for couples to have a romantic getaway, for not-alotta-money!

Resorts
Resort vacations are great for couples on a budget. There are plenty of resorts that offer a place to sleep, access to a beach and pools, food, and airfare for less than $1,000 a person per week. The Caribbean and Central America are great places for resorts that have great rates for both on-season and off-season packages, plus even cheap holiday deals . If you want to avoid crowds, try to travel during an off peak time. Avoid the Spring Break and Christmas peak travel times in the Caribbean. You can find lower rates during off peak times during the fall and early summer.

National Parks
Flying is expensive, but given the cost of gas, so is driving to another state. To save some money on your next vacation, consider visiting a park in your home state. National Parks make great cheap vacations for couples. Arizona’s Grand Canyon and California’s Yosemite are popular parks, but if you want a little more seclusion, try a less popular park. Consider the beautiful seaside Point Reyes National Seashore in California or the dramatic views of Wyoming’s Grand Tetons. These parks offer romantic and inexpensive getaways.

Festivals
If you enjoy music, local culture, and seasonal celebrations, think about spending a romantic weekend away at a festival. Burning Man Festival in Nevada is a huge festival full of unlimited self expression. If you want something a little quieter, consider a food festival like the National Cherry Festival in Michigan. No matter what you are interested in, you are likely to find a festival devoted to it. There are film festivals, state fairs, and celebrations of history. Even the biggest and most expensive festivals do not charge more than a few hundred dollars to enjoy them.

Road Trips
If you want to explore your own country from the comfort of your car, try a road trip. Although gas can be expensive, a road trip can be a relatively inexpensive kind of trip. When you travel, make sure to take a different route home so that you can see more landmarks during your trip.

The Low Down On Variable Vs. Fixed Rate Mortgages

FPT Guy — Wed, 04 Apr 2012 02:58:06 +0000

Even though they sound complicated, fixed rate and variable rate mortgages are actually very simple. But it’s important to know the difference when you are searching the Internet or talking to brokers in order to find the best mortgage deals. With a variable rate mortgage, the rate of interest can change over a period of time and changes depend on the current market rate. The interest on a fixed rate mortgage is locked in from the start and can never change for the life of the loan. Each type of mortgage has its advantages and disadvantages. Choosing the right one for you depends on whether you are able to pay different mortgage amounts whenever the rates change.

A fixed rate mortgage is likely the best choice if you like to work with a set payment schedule. If you are flexible with paying different amounts from month to month, then you may realize some savings by agreeing to a variable rate mortgage.

Look Deeper, Dig into the Details
Either of these loans can be a bit more complicated than they first seem. With a fixed rate mortgage, for instance, monthly payments stay the same for the life of the loan, but the payment is dispersed differently depending on how long you have been paying on the loan. Most of the monthly payment is applied to the interest during the first three years or so and only a small amount is applied to the principal.

Terms are different for a variable rate mortgage. The adjustment frequency is the interim between interest rate changes. The percent of interest you pay above the rate the market sets is called the margin. The largest interest increase that can be charged in any month is known as the cap. The ceiling is the highest interest rate that can be charged during the loan.

Choosing a Mortgage That’s Right for You
With a variable rate you can usually borrow more but do not know for sure what you will pay monthly over time. If the budget is a bit tight, then a fixed rate mortgage is the best choice.