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9ffda0f027a57ae9b46aa02e0c9187e8	How can a 529 plan help me save for my child's college education?	[ { "docid": "aa4ffcd4f3c8fecb1eb09d43627077cb", "text": "You get to put money away with special tax incentives (ie - no or less taxes to pay) They are state sponsored and therefore pretty reliable, but some states are better than others. Like with many of these tax incentive type accounts (FSA, Dependent Care Spending Accounts) they are use it or lose it. (In a 529, use it or transfer it). So the money put away is a sunk cost towards education and cannot be repurposed for something else should your kid not want to attend school. http://money.howstuffworks.com/personal-finance/financial-planning/529.htm", "title": "" }, { "docid": "0aff45074a78612c35a10ee89986c131", "text": "\"If you're ready to start a 529 account, it makes a big difference which state you choose (some states have excessive fees). It doesn't have to be your own state, but some states give you tax incentives to stay in-state. What you need to do is check out Clark Howard's 529 Guide and check to see if your state is in the \"\"good\"\" list. If not, then pick out a good state.\"", "title": "" } ]	[ { "docid": "d2327929d4ae4a25f7cd38d555d2c894", "text": "You can take the money back out of a 529 plan if you end up not having enough educational expenses to use it on. The penalty is 10% of the earnings (you don't pay a penalty on the principal). You can also open a 529 in any state, not just the one where you reside. The minimums and fund selection for each state can vary widely, so it makes sense to look around and see if there's a state with a fund selection you like.", "title": "" }, { "docid": "818edb54d776c4eabb8f6feafd817655", "text": "If I were in your shoes (I would be extremely happy), here's what I would do: Get on a detailed budget, if you aren't doing one already. (I read the comments and you seemed unsure about certain things.) Once you know where your money is going, you can do a much better job of saving it. Retirement Savings: Contribute up to the employer match on the 401(k)s, if it's greater than the 5% you are already contributing. Open a Roth IRA account for each of you and make the max contribution (around $5k each). I would also suggest finding a financial adviser (w/ the heart of a teacher) to recommend/direct your mutual fund investing in those Roth IRAs and in your regular mutual fund investments. Emergency Fund With the $85k savings, take it down to a six month emergency fund. To calculate your emergency fund, look at what your necessary expenses are for a month, then multiply it by six. You could place that six month emergency fund in ING Direct as littleadv suggested. That's where we have our emergency funds and long term savings. This is a bare-minimum type budget, and is based on something like losing your job - in which case, you don't need to go to starbucks 5 times a week (I don't know if you do or not, but that is an easy example for me to use). You should have something left over, unless your basic expenses are above $7083/mo. Non-retirement Investing: Whatever is left over from the $85k, start investing with it. (I suggest you look into mutual funds) it. Some may say buy stocks, but individual stocks are very risky and you could lose your shirt if you don't know what you're doing. Mutual funds typically are comprised of many stocks, and you earn based on their collective performance. You have done very well, and I'm very excited for you. Child's College Savings: If you guys decide to expand your family with a child, you'll want to fund what's typically called a 529 plan to fund his or her college education. The money grows tax free and is only taxed when used for non-education expenses. You would fund this for the max contribution each year as well (currently $2k; but that could change depending on how the Bush Tax cuts are handled at the end of this year). Other resources to check out: The Total Money Makeover by Dave Ramsey and the Dave Ramsey Show podcast.", "title": "" }, { "docid": "ed0a834861a6e3accdc94feb5d815429", "text": "If these are children that may be employed, in a few years, it may well be worth walking them through some basics of the deductions around employment, some basic taxes, uses of banks, and give them enough of a basis in how the economy of the world works. For example, if you get a job and get paid $10/hour, that may sound good but how much do various things eat at that so your take-home pay may be much lower? While this does presume that the kids will get jobs somewhere along the way and have to deal with this, it is worth making this part of the education system on some level rather than shocking them otherwise. Rather than focusing on calculations, I'd be more tempted to consider various scenarios like how do you use a bank, what makes insurance worth having(Life, health, car, and any others may be worth teaching on some level), and how does the government and taxes fit into things. While I may be swinging more for the practical, it is worth considering if these kids will be away in college or university in a few years, how will they handle being away from the parents that may supply the money to meet all the financial needs?", "title": "" }, { "docid": "152b637940a0aa25faccd23d12b3fb4e", "text": "\"Place your savings into safe interest-bearing accounts. Take out the loans. Keep constant track of your net worth. Having 100,000$ and 80,000$ in interest free debt is better than having 20,000$. You can always convert money + debt into less money and less debt, but you cannot always convert less money and less debt into more money and more debt. Now, there are risks; that is why you want an interest-bearing account to place your savings in to offset the debt. This minimizes the risk. It also reduces the return. It is arguable that you should be at your most financially risky at a young age. I'd argue that your future earnings are your by far largest asset at this point, and as a high school student going into college those future earnings have extremely high variability. Your financial situation is extremely unpredictable; being conservative about your high-leverage student-loan + education investments is probably justified. The fact you can manage arbitrage here means you should; and if you are careful, you can eliminate risk and get almost risk-free profit from the maneuver. If your money is in less than perfectly safe accounts, you are now doing leveraged investing and magnifying the risk and return of said investments. If your money must be spent on college or you'll be financially punished, then you may want to consider pulling it out before the last possible legal point just in case something goes wrong. Apparently 529 plans may not treat \"\"paying off student loans\"\" as a valid way to spend the money. You may need to talk to a lawyer or accountant about the legality of using these plans to pay off student loans, and the tax/penalties involved.\"", "title": "" }, { "docid": "16e25911a45c2f58774a7d7359982862", "text": "I was in a similar situation with my now 6 year old. So I'll share what I chose. Like you, I was already funding a 529. So I opened a custodial brokerage account with Fidelity and chose to invest in very low expense index fund ETFs which are sponsored by Fidelity, so there are no commissions. The index funds have a low turnover as well, so they tend to be minimal on capital gains. As mentioned in the other answer, CDs aren't paying anything right now. And given your long time to grow, investing in the stock market is a decent bet. However, I would steer clear of any insurance products. They tend to be heavy on fees and low on returns. Insurance is for insuring something not for investing.", "title": "" }, { "docid": "f17ea3ea13adcec5a67e063bb2b58a9f", "text": "Yes, it's considered the students asset, regardless of the custodian aspect. I don't know how you'd propose to put it in a retirement account, even with the earned income to facilitate this, the limit is $5500/yr. The larger issue is parental income. That and parental assets. Tough to game that part of the system to get aid. In the end, one should look to scholarships, both merit and non merit based to maximize college support.", "title": "" }, { "docid": "fd1024f7cd9f34366d2a4e2d2d54b67e", "text": "When I think of the loopholes that the richest of the rich exploit to get out of paying taxes, this article does seem kind of pointless. Why attack the 529 plan? It would be better to attack the expense of the education and the need for the plan in the first place. Upper middle classers shouldn't have to give a second thought to how much it will cost to send their kids to university, unless it is a private school. 30 years ago it cost 350 bucks for a semester. Now it is 10k or more. We all see that this is ridiculous, but it goes on and on. Rents have doubled or even tripled in the last 7 years and this is normal?", "title": "" }, { "docid": "eba5c2ba274df6502e56ad38243d40fb", "text": "I'm not a 'rule of thumb' guy, but here, I'd suggest that if you can set aside 10% of your income each year for college, that would be great. That turns out to be $900/mo. In 15 years, if you saw an 8% CAGR, you'd have $311K which happens to be in your range of expenses. And you'd still have time to go as the baby won't graduate for 22(?) years. (Yup, 10% is a good rule of thumb for your income and 3 kids) Now, on the other hand, I'd research what grants you'd be able to get if you came up short. If instead of saving a dime, you funded your own retirement and the spouse's IRA if she's not working, and time the mortgage to pay it off in 15 years from now, the lack of liquid funds actually runs in your favor. But, I'm not an expect on this, just second guessing my own fully funded college account for my daughter.", "title": "" }, { "docid": "5305cdb5756aaf5eb92e7db0276beb90", "text": "\"There are entire books devoted to this topic... :) I'd suggest focusing on a % of income that you can set aside for each child and start doing that instead of looking at a specific dollar target. I would look at a 529 plan to get the state tax benefit for growth. Also, be careful to counter the \"\"advice\"\" given by admissions folks, who encourage high school kids to \"\"choose the college that will make you happy\"\" and expose them to as many pictures of lovely, leafy private campuses as possible. The lawns at the private school are nice, but state colleges offer a great education at a relative bargain. Try to teach your kids about money so they understand the downsides of the loans that schools throw at you. I went to a state school, had very supportive parents and worked throughout. I came out with $750 of debt (on a 0% credit card for a laptop replacement). I have a friend who went to a similar, private school who came from a similar background and who is now in a similar place career-wise. Except he has a $500/mo monthly tribute to Sallie Mae. My parents started working on me when I was about 12, and it worked!\"", "title": "" }, { "docid": "0b418207b6cf9316c2b7b5d6ebf0b31c", "text": "\"There is no simple answer to your question. It depends on many things, perhaps most notably what college your daughter ends up going to and what kind of aid you hope to receive. Your daughter will probably fill out the FAFSA as part of her financial aid application. Here is one discussion of what parental assets \"\"count\"\" towards the Expected Family Contribution on the FAFSA. You can find many similar pages by googling. Retirement accounts and primary residence are notable categories that do not count. So, if you were looking to reduce your \"\"apparent\"\" assets for aid purposes, dumping money into your mortgage or retirement account is a possibility. However, you should be cautious when doing this type of gaming, because it's not always clear exactly how it will affect financial aid. For one thing, \"\"financial aid\"\" includes both grants and loans. Everyone wants grants, but sometimes increasing your \"\"eligibility\"\" may just make you (or your daughter) eligible for larger loans, which may not be so great. Also, each college has its own system for allocating financial aid. Individual schools may ask for more detailed information (such as the CSS Profile). So strategies for minimizing your apparent assets that work for one school may not work for others. Some elite schools with large endowments have generous aid policies that allow even families with sizable incomes to pay little or nothing (e.g., Stanford waives tuition for most families with incomes under $125,000). You should probably research the financial aid policies of schools your daughter is interested in. It can be helpful to talk to financial aid advisors at colleges, as well as high school counselors, not to mention general financial advisors if you really want to start getting technical about what assets to move around. Needless to say, it all begins with talking with your daughter about her thoughts on where to go.\"", "title": "" }, { "docid": "74b8f93f0dfe865fef3b174b3699a1da", "text": "For a parent deciding on contributing to a 529 plan the first consideration is the plan run by the state government that will trigger a state income tax deduction. You do have to at least look at the annual fees for the program before jumping into the state program, but for many people the state program offers the best deal because of the state tax deduction. Unfortunately for you California does not offer a state tax deduction for 529 plan contributions. Which means that you can pick another states program if the fees are more reasonable or if the investing options are better. You can even select a nationwide plan unaffiliated with a state. Scholarshare is run by TIAA-CREF. TIAA-CREF is a large company that runs pension and 403(b) funds for many state and local governments. Many teacher unions use them. They are legitimately authorized by the state of California: The ScholarShare Investment Board sets investment policies and oversees all activities of ScholarShare, the state’s 529 college investment plan. The program enables Californians to save for college by putting money in tax-advantaged investments. After-tax contributions allow earnings to grow tax-deferred, and disbursements, when used for tuition and other qualified expenses, are federal and state tax-free. The ScholarShare Plan is managed by TIAA-CREF Tuition Financing, Inc. The ScholarShare Investment Board also oversees the Governor’s Scholarship Programs and California Memorial Scholarship Program. note: before picking a plan from another state make sure that they allow outside contributions.", "title": "" }, { "docid": "0a7256c869390ae3442a3831d5568b59", "text": "If you have kids, there are also 529 funds to consider. They aren't pre-tax, but do have tax advantages. If your employer doesn't have a 401k, chances are they don't offer Health Savings Accounts, but that is another thing to look at.", "title": "" }, { "docid": "34023394bf31a456359b7021c120bf34", "text": "\"I will answer the question from the back: who can NOT afford luxury cars? Those whose parents paid for their college education, cannot afford luxury cars, but buy them anyway. Why? I have what may seem a rather shocking proposition related to the point of not saving for kids' college: parents do NOT owe children a college education. Why should they? Did your parents fund your college? Or did you get it through a mix of Pell grants, loans, and work? If they did, then you owe them $ back for it, adjusted for inflation. If they did not, well then why do you feel your children deserve more than you deserved when you were a child? You do not owe your children a college education. They owe it to themselves. Gifts do not set one up for success, they set one up for dependence. I will add one more hypothesis: financial discipline is best learned through one's own experiences. When an 18+ year old adult gets a very large amount of money as a gift every year for several years (in the form of paid tuition), does that teach them frugality and responsibility? My proposition is that those who get a free ride on their parents' backs are not well served in terms of becoming disciplined budgeters. They become the subjects of the question in this post: those why buy cars and houses they cannot afford, and pay for vacations with credit cards. We reap what we sow as a society. Of course, college is only one case in point, but a very illustrative one. The bigger point is that financial discipline can only be developed when there are opportunities to develop it. Such opportunities arise under one important condition: financial independence. What does buying children cars for their high-school graduation, buying them 4 years of college tuition, and buying them who knows what else (study abroad trips, airfare, apartment leases, textbooks, etc. etc.) teach? Does it teach independence or dependence? It can certainly (at least that's what you hope for) teach them to appreciate when others do super nice things for them. But does free money instill financial responsibility? Try to ask kids whose parents paid for their college WHY they did it. \"\"Because my parents want me to succeed\"\" is probably the best you can hope for. Now ask them, But do your parents OWE you a college education? \"\"Why yes, I guess they do.\"\" Why? \"\"Well, I guess because they told me they do. They said they owe it to me to set me up for success in life.\"\" Now think about this: Do people who become financially successful achieve that success because someone owed something to them? Or because they recognized that nobody owes them anything, and took it upon themselves to create that success for themselves? These are not very comfortable topics to consider, especially for those of you who have either already sunk many tens of thousands of dollars into your childrens' college education. Or for those who have been living very frugally and mindfully for the past 10-15 years driven by the goal of doing so. But I want to open this can of worms because I believe fundamentally it may be creating more problems than it is solving. I am sure there are some historical and cultural explanations for the ASSUMPTION that has at some point formed in the American society that parents owe their children a college education. But as with most social conventions, it is merely an idea -- a shared belief. It has become so ingrained in conversations at work parties and family reunions that it seems that many of those who are ardent advocates of the idea of paying for their childrens' education no longer even understand why they feel that way. They simply go with the flow of social expectations, unwilling or unable to question either the premises behind these expectations, or the long-term consequences and results of such expectations. With this comment I want to point to the connection between the free financial gifts that parents give to their (adult!) children, and the level of financial discipline of these young adults, their spending habits, sense of entitlement, and sense of responsibility over their financial decisions. The statistics of the U.S. savings rate, average credit card debt, foreclosures, and bankruptcy indeed tell a troubling story. My point is that these trends don't just happen because of lots of TV advertising and the proverbial Jones's. These trends happen because of a lack of financial education, discipline, and experience with balancing one's own checkbook. Perhaps we need to think more deeply about the consequences of our socially motivated decisions as parents, and what is really in our children's best interests -- not while they are in college, but while they live the rest of their lives after college. Finally, to all the 18+ y.o. adult 'children' who are reeling from the traumatic experience of not having their parents pay for their college (while some of their friends parents TOTALLY did!), I have this perspective to offer: Like you are now, your parents are adults. Their money is theirs to spend, because it was theirs to earn. You are under no obligation to pay for your parents' retirement (not that you were going to). Similarly your parents have no obligation to pay for your college. They can spend their money on absolutely whatever they want: be it a likeside cottage, vacations, a Corvette, or slots in the casino. How they spend their money is their concern only, and has nothing to do with your adult needs (such as college education). If your parents mismanage their finances and go bankrupt, it is their obligation to get themselves back in the black -- not yours. If you have the means and may be so inclined, you may help them; if you do not or are not, fair enough. Regardless of what you do, they will still love you as their child no less. Similarly, if your parents have the means and are so inclined, they may help you; if they do not or are not, fair enough. Regardless of what they do, you are to love them as your parents no less. Your task as an adult is to focus on how you will meet your own financial needs, not to dwell on which of your needs were not met by people whose finances should well be completely separate from yours at this point in life. For an adult, to harbor an expectation of receiving something of value for free is misguided: it betrays unjustified, illusory entitlement. It is the expectation of someone who is clueless as to the value of money measured by the effort and time needed to earn it. When adults want to acquire stuff or services, they have to pay for these things with their own money. That's how adults live. When adults want to get a massage or take a ride in a cab, are they traumatized by their parents' unfulfilled obligation to pay for these services? No -- they realize that it's their own responsibility to take care of these needs. They either need to earn the money to pay for these things, or buy them on credit and pay off the debt later. Education is a type of service, just like a massage or a cab ride. It is a service that you decide you need to get, in order to do xyz (become smarter, get a better paying job, join a profession, etc.). Therefore as with any other service, the primary responsibility for paying for this service is yours. You have 3 options (or their combination): work now so that you can earn the money to pay for this service later; work part-time while you are receiving this service; acquire the service on credit and work later to pay it off. That's it. This is called the real world. The better you can deal with it, the more successful you will become in it. Good luck!\"", "title": "" }, { "docid": "4f6b7f91feb3b35363e3f89ea2ff6128", "text": "Saving for college you have a couple of options. 529 plans are probably the best bet for most people wanting to save for their kids college education. You can put a lot of money away ~$300k and you may get a state tax deduction. The downside is if you're kid doesn't go to college you may end up eating the 10% penalty. State specific prepaid tuition plans. The upside is you know roughly the return you are going to get on your money. The downside is your kid has to go to a state school in the state you prepaid or there are likely withdrawal penalties. For the most part these really aren't that great of a deal any more. ESAs are also an option but they only allow you to contribute $2k/year, but you have more investment options than with the 529 plans. Traditional and ROTH IRA accounts can also be used to pay for higher education. I wouldn't recommend this route in general but if you maxed out your 401k and weren't using your IRA contribution limits you could put extra money here and get more or really different flexibility than you can with a 529 account. I doubt IRA's will ever be asked for on a FAFSA which might be helpful. Another option is to save the money in a regular brokerage account. You would have more flexibility, but lower returns after taxes. One advantage to this route is if you think your kid might be borderline for financial aid a year or two before he starts college you could move this money into another investment that doesn't matter for financial aid purposes. A few words of caution, make sure you save for retirement before saving for your kids college. He can always get loans to pay for school but no one is going to give you a loan to pay for your retirement. Also be cautious with the amount of money you give your adult child, studies have shown that the more money that parents give their adult children the less successful they are compared to their peers.", "title": "" }, { "docid": "cd55f90bd71c1fc6fbf7018fd284c21f", "text": "\"Uniform Transfer to Minors Act (UTMA) and Uniform Gift to Minors Act (UGMA) accounts in the United States are accounts that belong to your child, but you can deposit money into. When the child attains his/her majority, the money becomes theirs to spend however they wish. Prior to attaining their majority, a custodian must sign off on withdrawals. Now, they are not foolproof; legally, you can withdraw money if it is spent on the child's behalf, so that can be gamed. What you can do to protect against that is to make another person the custodian (or, perhaps make them joint custodians with yourself, requiring both signatures for withdrawals). UTMA/UGMA accounts do not have to be bank savings accounts; for example, both of my children have accounts at Vanguard which are effectively their college savings accounts. They're invested in various ETFs and similar kinds of investments; you're welcome to choose from a wide variety of options depending on risk tolerance. Typically these accounts have relatively small fees, particularly if you have a reasonable minimum balance (I think USD$10k is a common minimum for avoiding larger fees). If you are looking for something even more secure than a UGMA or UTMA account, you can set up a trust. These have several major differences over the UGMA/UTMA accounts: Some of course consider the second point an advantage, some a disadvantage - we (and Grandma) prefer to let our children make their own choices re: college, while others may not prefer that. Also worth noting as a difference - and concern to think about - in these two. A UGMA or UTMA account that generates income may have taxable events - interest or dividend income. If that's over a relatively low threshhold, about $1050 this year, those earnings will be taxed (on the child's own tax return). If it's over $2100 (this year), those earnings will be taxed at the parents' tax rate (\"\"kiddie tax\"\"). Trusts are slightly different; trusts themselves are taxed, and have their own tax returns. If you do set one of those up, the lawyer who helps you do so should inform you of the tax implications and either hook you up with an accountant or point you to resources to handle the taxes yourself.\"", "title": "" } ]	fiqa
8fc71035931a4e92813a925551ee8d81	Returning to the UK after working in Switzerland, What to do with my Swiss Francs?	[ { "docid": "44b8a72d907e3394b395de649fd6c6d4", "text": "\"If you \"\"have no immediate plans for the money and will probably not return to Switzerland for a long time or at all\"\" then it might be best just to exchange the money so then you can use/invest it in the UK. Maybe keep a bill or two for memory-sake - I do that whenever I travel to a foreign country.\"", "title": "" }, { "docid": "b6f1845980e14e2a771a1640c2189af8", "text": "\"A general principle in finance is that you shouldn't stick with an investment or situation just because it's how you're currently invested. You can ask yourself the following question to help you think it through: If, instead, I had enough GBP to buy 20000 CHF, would I think it was a good idea to do so? (I'm guessing the answer is probably \"\"no.\"\") This way of thinking assumes you can actually make the exchange without giving someone too big of a cut. With that much money on the line, be sure to shop around for a good exchange rate.\"", "title": "" } ]	[ { "docid": "0ead1dede2e47b352659caf9da89e7ee", "text": "This kid gives a good summary of the silver market as it currently stands, and why you should own the physical: https://www.youtube.com/watch?v=oAK9ohz9h7M But yes, you will do well to have bank accounts in China and Switzerland, diversifying into yuan and francs... and also jurisdictionally diversifying.", "title": "" }, { "docid": "72b452624646db70ff1533aa27000710", "text": "I haven't seen this answer, and I do not know the legality of it, as it could raise red flags as to money laundering, but about the only way to get around the exchange rate spreads and fees is to enter into transactions with a private acquaintance who has Euros and needs Dollars. The problem here is that you are taking on the settlement risk in the sense that you have to trust that they will deposit the euros into your French account when you deposit dollars into their US account. If you work this out with a relative or very close friend, then the risk should be minimal, however a more casual acquaintance may be more apt to walk away from the transaction and disappear with your Euros and your Dollars. Really the only other option would be to be compensated for services rendered in Euros, but that would have tax implications and the fees of an international tax attorney would probably outstrip any savings from Forex spreads and fees not paid.", "title": "" }, { "docid": "93ed9100864a8c4146441b8c7bc0dab5", "text": "Now, is there any clever way to combine FOREX transactions so that you receive the US interest on $100K instead of the $2K you deposited as margin? Yes, absolutely. But think about it -- why would the interest rates be different? Imagine you're making two loans, one for 10,000 USD and one for 10,000 CHF, and you're going to charge a different interest rate on the two loans. Why would you do that? There is really only one reason -- you would charge more interest for the currency that you think is less likely to hold its value such that the expected value of the money you are repaid is the same. In other words, currencies pay a higher interest when their value is expected to go down and currencies pay a lower interest when their value is expected to go up. So yes, you could do this. But the profits you make in interest would have to equal the expected loss you would take in the devaluation of the currency. People will only offer you these interest rates if they think the loss will exceed the profit. Unless you know better than them, you will take a loss.", "title": "" }, { "docid": "0fd538fc159c43b2f4b4b2970fd86ad4", "text": "Basically, all the same reasons you might not want to keep piles of your own country's cash, plus or minus the exchange rate question. Banks exist for good reasons. You probably want to use them unless you are explicitly playing the exchange rate game -- And if that's what you want, there are probably better ways to do it. If you need help not touching the money, CDs or other term accounts might give you enough disincentive. Or might not.", "title": "" }, { "docid": "a6f3673e71cdfeb5998f0abfae96975d", "text": "In general, to someone in a similar circumstance I might suggest that the lowest-risk option is to immediately convert your excess currency into the currency you will be spending. Note that 'risk' here refers only to the variance in possible outcomes. By converting to EUR now (assuming you are moving to an EU country using the EUR), you eliminate the chance that the GBP will weaken. But you also eliminate the chance that the GBP will strengthen. Thus, you have reduced the variance in possible outcomes so that you have a 'known' amount of EUR. To put money in a different currency than what you will be using is a form of investing, and it is one that can be considered high risk. Invest in a UK company while you plan on staying in the UK, and you take on the risk of stock ownership only. But invest in a German company while you plan on staying in the UK, you take on the risk of stock ownership + the risk of currency volatility. If you are prepared for this type of risk and understand it, you may want to take on this type of risk - but you really must understand what you're getting into before you do this. For most people, I think it's fair to say that fx investing is more accurately called gambling [See more comments on the risk of fx trading here: https://money.stackexchange.com/a/76482/44232]. However, this risk reduction only truly applies if you are certain that you will be moving to an EUR country. If you invest in EUR but then move to the US, you have not 'solved' your currency volatility problem, you have simply replaced your GBP risk with EUR risk. If you had your plane ticket in hand and nothing could stop you, then you know what your currency needs will be in 2 years. But if you have any doubt, then exchanging currency now may not be reducing your risk at all. What if you exchange for EUR today, and in a year you decide (for all the various reasons that circumstances in life may change) that you will stay in the UK after all. And during that time, what if the GBP strengthened again? You will have taken on risk unnecessarily. So, if you lack full confidence in your move, you may want to avoid fully trading your GBP today. Perhaps you could put away some amount every month into EUR (if you plan on moving to an EUR country), and leave some/most in GBP. This would not fully eliminate your currency risk if you move, but it would also not fully expose yourself to risk if you end up not moving. Just remember that doing this is not a guarantee that the EUR will strengthen and the GBP will weaken.", "title": "" }, { "docid": "776a0fad3abfce8445dedec1de473ff6", "text": "Short the Pound and other English financial items. Because the English economy is tied to the EU, it will be hit as well. You might prefer this over Euro denominated investments, since it's not exactly clear who your counterpart is if the Euro really crashes hard. Meaning suppose you have a short position Euro's versus dollars, but the clearing house is taken down by the crash.", "title": "" }, { "docid": "4b0ee27131352ba2474001a33c6a0ef9", "text": "\"I wouldn't worry about \"\"it probably wouldn't be best time for withdrawal\"\" aspect too much. With a bit of planning and organization, you could cash out investments held in one country and have them reinvested in another one in a matter of days (if not less), minimising your \"\"time out of the market\"\". If the markets are cheap when you sell, the chances are you'll be able to buy in again at much the same price. There's a small chance you miss out on the markets lurching upwards, but you might just as easily miss out on a fall and come out ahead. Old saying: \"\"time in the market is more important than market timing\"\". Tax it's hard to discuss without mentioning specific countries. e.g if you were resident in the UK you'd probably want to invest within an \"\"ISA\"\" tax-free wrapper; gains are tax free and there's no penalty for withdrawing when you leave. No idea what equivalents there are around Europe. Interestingly there seems to be some recognition by the EU that this sort of thing is an issue for an increasingly mobile workforce; was recently some news of plans for a pan-European pension savings vehicle.\"", "title": "" }, { "docid": "27786575a27ce8bc535f773353be107f", "text": "Any large bank that you trust would be happy to help you by holding the money for you. One of the big advantages with a Swiss bank account is privacy. The names of lottery winners are public, so this advantage would not mean much to you. Swiss banks are generally very large, secure, and capable of handling large amounts of money, however, so if Switzerland isn't too inconvenient for you, it's worth considering. You won't want to keep all of it in a bank account for long; the majority of it should be invested. It would definitely be worth paying for a trusted financial advisor to guide you through that. Avoid the urge to swim in a pile of gold coins.", "title": "" }, { "docid": "eafe19575c9337cfa63e45572f1e32ba", "text": "Huh. It appears it's only currencies in sterling that are fully exempt. https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg12602 Government manuals are more detailed than .gov but still not perfect as it's HMRCs interpretation of legislation and has been overturned in the past. There is also another (old) article here about foreign currency transactions. https://www.taxation.co.uk/articles/2010/10/27/21191/currency-gains I have never come across forex capital gains in practice but I've learnt something today! Something to look out for in the UK as well I guess.", "title": "" }, { "docid": "5d7f244020437e6a98abac60a57ca848", "text": "While it’s your personal choice on HOW you save for later its essential that you save. My sister works in a bank and recommended me not to put any money into retirement plans since the tax-advances seem fine but have to paid back when you take the money out of the accounts (in Switzerland, don't know about the united states). Many reasons exist that you suddenly need the money: Buying a house, needing a new car, health issues or just leaving the country forever (and the government trying to make it as hard as possible for you to get your money back). I recommend putting it on a savings account on a different bank that you normally use, without any cards and so on. In short: It can be dangerous to have money locked away – especially if you could easily have it at your hands and you know you're able to manage it.", "title": "" }, { "docid": "feac8aba143a4a01affea2a93292e1ae", "text": "\"If you live and work in the euro-zone, then even after a \"\"crash\"\" all of your income and most of your expenses will still be in euros. The only portion of your worth you need to worry about protecting is the portion you intend to spend on goods from outside the euro-zone (i.e. imports). In that case, you may want to consider parking some of your money in short-term government bonds issued by other countries, such as the UK, Switzerland, and USA (or wherever else your favorite goods tend to come from). If the euro actually \"\"massively devalues\"\" (an extremely unlikely scenario), then you can expect foreign goods to cost a lot more than they do now. Inflation might also pick up, so you might also want to purchase some OATis.\"", "title": "" }, { "docid": "db7a27bf0afb30d12a004f760578f6a8", "text": "\"is there anything I can do now to protect this currency advantage from future volatility? Generally not much. There are Fx hedges available, however these are for specialist like FI's and Large Corporates, traders. I've considered simply moving my funds to an Australian bank to \"\"lock-in\"\" the current rate, but I worry that this will put me at risk of a substantial loss (due to exchange rates, transfer fees, etc) when I move my funds back into the US in 6 months. If you know for sure you are going to spend 6 months in Australia. It would be wise to money certain amount of money that you need. So this way, there is no need to move back funds from Australia to US. Again whether this will be beneficial or not is speculative and to an extent can't be predicted.\"", "title": "" }, { "docid": "ea86fd7b4d8b9b47a0d883a41209fb7c", "text": "Yes, if all my savings were in Euro, I would absolutely be converting everything to US dollars, and possibly some gold. You probably don't want to sit around with lots of Euros while watching the shit hit fan. Talk to your bank, possibly they can open a US dollar bank account in your own country for you. Definitely any bank that has an international presence, like HSBC, should be able to do this for you. And if not US dollars, British Pounds would also be another option.", "title": "" }, { "docid": "c5e0d911af62091f18a6573283d3b230", "text": "would you say it's advisable to keep some of cash savings in a foreign currency? This is primarily opinion based. Given that we live in a world rife with geopolitical risks such as Brexit and potential EU breakup There is no way to predict what will happen in such large events. For example if one keeps funds outside on UK in say Germany in Euro's. The UK may bring in a regulation and clamp down all funds held outside of UK as belonging to Government or tax these at 90% or anything absurd that negates the purpose of keeping funds outside. There are example of developing / under developed economics putting absurd capital controls. Whether UK will do or not is a speculation. If you are going to spend your live in a country, it is best to invest in country. As normal diversification, you can look at keep a small amount invested outside of country.", "title": "" }, { "docid": "2977444346bc6bafa9b6942e71be2609", "text": "\"Due to the issues in the Eurozone, many foreign investors were buying Swiss Francs as a hedge against a Euro devaluation. They were in effect treating the Franc like gold, silver or some other commodity with perceived intrinsic value. This causes huge problems from the Swiss, as the value of the Franc increased and their exports became more expensive for foreigners to purchase. Things were getting bad enough that the Swiss in some places were travelling to Germany to buy groceries! To enforce this \"\"fixing\"\" of the Franc, the Swiss Central Bank announced that they would buy foreign currency in unlimited quantities by printing Francs. In reality, just announcing that they were going to do this was sufficient to discourage foreign investors from loading up on Francs. NPR's Planet Money did a really good job covering this topic:\"", "title": "" } ]	fiqa
11443a8499fc2c326bee26ef31a6b27a	Put idle savings to use while keeping them liquid	[ { "docid": "8c77c689e316cfeb3789dc124740bd18", "text": "First of all, look for a savings account with a decent interest rate. Online banks are good at offering those, and you can transfer your money back and forth from the checking account with a couple of business days' delay. ING Direct offers 1.1% APY right now - lame, but much better than nearly-nothing. If you'd like a little nicer rate of return you should also consider putting some of the money (the part you need least) in a short- or intermediate-term bond ETF or mutual fund. You can sell them quite readily, they pay more interest than a savings account, and because of the shorter maturities involved the interest rate risk is limited. (That's the one that makes your bonds less valuable now because the rates went up after you bought them.) I have some NYSE:BIV that's yielding 3.8% or so.", "title": "" }, { "docid": "e9e33a468c248932449a65b23d02f4b5", "text": "I suppose it depends on how liquid you need, and if you're willing to put forth any risk whatsoever. The stock market can be dangerous, but there are strategies out there that will allow you to insure yourself against significant loss, while likely earning you a decent return. You can buy and sell options along with stocks so that if the stock drops, your loss is limited, and if it goes up or even stays where it's at, you make money (a lot more than 1% annually). Of course there's risk of loss, but if you plan ahead, you can cap that risk wherever you want, maybe 5%, maybe 10%, whatever suits your needs. And as far as liquidity goes, it should be no more than a week or so to close your positions and get your money if you really need it. But even so, I would only recommend this after putting aside at least a few thousand in a cash account for emergencies.", "title": "" }, { "docid": "1e11555027058c615d0e7427ecf6e208", "text": "Since you're coming out of college, you're probably a new investor and don't know too much about stocks, etc. I was in the same situation as well. I wanted to keep my cash 'liquid' and wanted to make low risk investments. What I ended up doing was investing the majority of my money in higher interest GICs (Guaranteed Investment Certificate) and keeping the rest in my chequing/savings account. I understand that GICs aren't exactly the most liquid asset out there. However, instead of investing it all into 1 GIC, I put them in to smaller increments with varying lock-in times and roll-over options. I.e. for 15000 keep $3000 on hand in your account 2x$1000 invested for 2 years 4x$1000 invested for 1 year 3x$1000 invested for 180 days 3x$1000 invested for 90 days When you find that you run out of cash from your $3000, you'll have a GIC expiring soon. The 'problem' with GICs is that redeeming them before the maturity period usually incurs a penalty in the form of no interest. Keeping them in smaller increments allows you to redeem only the amount you need without losing too much interest. At maturity, if you don't need the money, you can just have the GIC renew. The other problem with GICs, is that interest rates, though better than savings accounts, aren't that much more. You're basically just fighting off inflation. The benefit is that on maturity, you are guaranteed your principal and the interest. This plan is easy to implement if your bank/credit union allows you to create and manage GICs online.", "title": "" }, { "docid": "da7ca13310fe4d4a7607b6123f0a1b8a", "text": "I would suggest a high interest checking account if you qualify, or if you don't, an Investor's Deposit Account (IDA).", "title": "" }, { "docid": "58065cd7e8b02e2176e0b476ec35e97e", "text": "\"Provide you are willing to do a bit of work each month, you should apply for a \"\"rewards checking\"\" account. Basically these accounts require you to set up direct deposit (can be any amount and your employer can easily deposit $25 into one account and the rest into another if you like). They also require you to use your debit card attached to the account (probably about 10 times per month). Check out the list on the fatwallet finance forum. Right now the best accounts are earning over 4%.\"", "title": "" }, { "docid": "45a94835e7b1f2f31c82908701d2220c", "text": "I'd have a look at Capital One's Online account too, they've got 1.35% interest rate with 10% bonus if you have over $15k deposited. It is still low like all interest rates, but at least it is on top (or at least close)!", "title": "" }, { "docid": "65b489c3f610de3e3622600f09fb1ab7", "text": "I'm new to this, but how about putting a big part of your money into an MMA? I don't know about your country, but in Germany, some online banks easily offer as much as 2.1% pa, and you can access the money daily. If you want decent profit without risk this is a great deal, much better than most saving accounts.", "title": "" }, { "docid": "b3ccba376cef3f12a8bad4fc3558abc8", "text": "This may sound a little crazy but I would take $5K of that money and buy whiskey with it (Jack Daniel's would be my preference). My guess is that in 5 years that whiskey will be worth more than the $10K you put in the bank. I just can't see how the dollar survives the next 5 years without a major downward adjustment. If I'm wrong then you have a nice party and give whiskey for Christmas gifts. If I'm right at least you will have some savings instead of $15K of useless dollars. Here is my justification for converting your US dollars into tangible assets. Do you really think the money printing will ever stop?", "title": "" } ]	[ { "docid": "9927cf53e6d00e8c5c9d5bf800e2f6be", "text": "No. That's the point of a passive strategy: you maintain a more or less constant mix of assets and don't try to figure out what's going to move where.", "title": "" }, { "docid": "249d93017da63b773ae7bb6de44e8ff9", "text": "Most funds keep a certain amount in cash at all times to satisfy outflows. Net inflows will simply be added to the cash balance while net outflows subtract. When the cash gets too low for the manager's comfort level (depends on the typical pattern of net inflows and outflows, as well as anticipated flows based on recent performance), the manager will sell some of his least favorite holdings, and when the cash gets too high he will buy some new holdings or add to his favorite existing holdings. A passive fund works similarly, except the buys/sells are structured to minimize tracking error.", "title": "" }, { "docid": "db9b7098da16d8ce4d3a07a3e55bfe35", "text": "There is no slack of money. People who are saving their money don't have it stored under their mattress. Instead they have it saved in a bank that is in turn being loaned out at the lowest rates in history. All of this manipulation of the economy has finally caught up to us and the last thing we need is more manipulation. We just have to let the bad investments and the misallocations weed out first. I agree with you that it's a tough thing to endure in the short term but it will help us in the long term.", "title": "" }, { "docid": "ec1bd6cc358334f5a0aef37cd798fd8b", "text": "i think emergency fund should be in a more liquid account (like regular saving or money market) so you can withdraw money any time, while your regular saving can be tied up in a long term CD, bond or an investment account.", "title": "" }, { "docid": "7c7dbf0512932aa995f8d4924466f134", "text": "\"Here's what I suggest... A few years ago, I got a chunk of change. Not from an inheritance, but stock options in a company that was taken private. We'd already been investing by that point. But what I did: 1. I took my time. 2. I set aside a chunk of it (maybe a quarter) for taxes. you shouldn't have this problem. 3. I set aside a chunk for home renovations. 4. I set aside a chunk for kids college fund 5. I set aside a chunk for paying off the house 6. I set aside a chunk to spend later 7. I invested a chunk. A small chunk directly in single stocks, a small chunk in muni bonds, but most just in Mutual Funds. I'm still spending that \"\"spend later\"\" chunk. It's about 10 years later, and this summer it's home maintenance and a new car... all, I figure it, coming out of some of that money I'd set aside for \"\"future spending.\"\"\"", "title": "" }, { "docid": "481467d7deea46bb5ea3a473c02ce5ef", "text": "\"Pay off the credit cards. From now on, pay off the credit cards monthly. Under no circumstances should you borrow money. You have net worth but no external income. Borrowing is useless to you. $200,000 in two bank accounts, because if one bank collapses, you want to have a spare while you wait for the government to pay off the guarantee. Keep $50,000 in checking and another $50k in savings. The remainder put into CDs. Don't expect interest income beyond inflation. Real interest rates (after inflation) are often slightly negative. People ask why you might keep money in the bank rather than stocks/bonds. The problem is that stocks/bonds don't always maintain their value, much less go up. The bank money won't gain, but it won't suddenly lose half its value either. It can easily take five years after a stock market crash for the market to recover. You don't want to be withdrawing from losses. Some people have suggested more bonds and fewer stocks. But putting some of the money in the bank is better than bonds. Bonds sometimes lose money, like stocks. Instead, park some of the money in the bank and pick a more aggressive stock/bond mixture. That way you're never desperate for money, and you can survive market dips. And the stock/bond part of the investment will return more at 70/30 than 60/40. $700,000 in stock mutual funds. $300,000 in bond mutual funds. Look for broad indexes rather than high returns. You need this to grow by the inflation rate just to keep even. That's $20,000 to $30,000 a year. Keep the balance between 70/30 and 75/25. You can move half the excess beyond inflation to your bank accounts. That's the money you have to spend each year. Don't withdraw money if you aren't keeping up with inflation. Don't try to time the market. Much better informed people with better resources will be trying to do that and failing. Play the odds instead. Keep to a consistent strategy and let the market come back to you. If you chase it, you are likely to lose money. If you don't spend money this year, you can save it for next year. Anything beyond $200,000 in the bank accounts is available for spending. In an emergency you may have to draw down the $200,000. Be careful. It's not as big a cushion as it seems, because you don't have an external income to replace it. I live in southern California but would like to move overseas after establishing stable investments. I am not the type of person that would invest in McDonald's, but would consider other less evil franchises (maybe?). These are contradictory goals, as stated. A franchise (meaning a local business of a national brand) is not a \"\"stable investment\"\". A franchise is something that you actively manage. At minimum, you have to hire someone to run the franchise. And as a general rule, they aren't as turnkey as they promise. How do you pick a good manager? How will you tell if they know how the business works? Particularly if you don't know. How will you tell that they are honest and won't just embezzle your money? Or more honestly, give you too much of the business revenues such that the business is not sustainable? Or spend so much on the business that you can't recover it as revenue? Some have suggested that you meant brand or stock rather than franchise. If so, you can ignore the last few paragraphs. I would be careful about making moral judgments about companies. McDonald's pays its workers too little. Google invades privacy. Exxon is bad for the environment. Chase collects fees from people desperate for money. Tesla relies on government subsidies. Every successful company has some way in which it can be considered \"\"evil\"\". And unsuccessful companies are evil in that they go out of business, leaving workers, customers, and investors (i.e. you!) in the lurch. Regardless, you should invest in broad index funds rather than individual stocks. If college is out of the question, then so should be stock investing. It's at least as much work and needs to be maintained. In terms of living overseas, dip your toe in first. Rent a small place for a few months. Find out how much it costs to live there. Remember to leave money for bigger expenses. You should be able to live on $20,000 or $25,000 a year now. Then you can plan on spending $35,000 a year to do it for real (including odd expenses that don't happen every month). Make sure that you have health insurance arranged. Eventually you may buy a place. If you can find one that you can afford for something like $100,000. Note that $100,000 would be low in California but sufficient even in many places in the US. Think rural, like the South or Midwest. And of course that would be more money in many countries in South America, Africa, or southern Asia. Even southern and eastern Europe might be possible. You might even pay a bit more and rent part of the property. In the US, this would be a duplex or a bed and breakfast. They may use different terms elsewhere. Given your health, do you need a maid/cook? That would lean towards something like a bed and breakfast, where the same person can clean for both you and the guests. Same with cooking, although that might be a second person (or more). Hire a bookkeeper/accountant first, as you'll want help evaluating potential purchases. Keep the business small enough that you can actively monitor it. Part of the problem here is that a million dollars sounds like a lot of money but isn't. You aren't rich. This is about bare minimum for surviving with a middle class lifestyle in the United States and other first world countries. You can't live like a tourist. It's true that many places overseas are cheaper. But many aren't (including much of Europe, Japan, Australia, New Zealand, etc.). And the ones that aren't may surprise you. And you also may find that some of the things that you personally want or need to buy are expensive elsewhere. Dabble first and commit slowly; be sure first. Include rarer things like travel in your expenses. Long term, there will be currency rate worries overseas. If you move permanently, you should certainly move your bank accounts there relatively soon (perhaps keep part of one in the US for emergencies that may bring you back). And move your investments as well. Your return may actually improve, although some of that is likely to be eaten up by inflation. A 10% return in a country with 12% inflation is a negative real return. Try to balance your investments by where your money gets spent. If you are eating imported food, put some of the investment in the place from which you are importing. That way, if exchange rates push your food costs up, they will likely increase your investments at the same time. If you are buying stuff online from US vendors and having it shipped to you, keep some of your investments in the US for the same reason. Make currency fluctuations work with you rather than against you. I don't know what your circumstances are in terms of health. If you can work, you probably should. Given twenty years, your million could grow to enough to live off securely. As is, you would be in trouble with another stock market crash. You'd have to live off the bank account money while you waited for your stocks and bonds to recover.\"", "title": "" }, { "docid": "04f3a1490966002444e5a4cb61978175", "text": "Imagine that a fund had a large exit load that declined over several years. If you wanted to sell some or all of your investment in that fund you would face a large fee, unless you held it a long time. You would be hesitant to sell because waiting longer would save you money. That is the exact opposite of a liquid investment. Therefore the ideal level for a liquid fund is to have zero exit load.", "title": "" }, { "docid": "31f4c4a3ee243726b250881b50398efc", "text": "You would simply plan for misc. expenses in your budget, and allocate a small amount to this every time you do your budget, eventually building up a pool of money that you can then use whenever you have to make a purchase such as that.", "title": "" }, { "docid": "151ec6d3e24b890cc9732e88649dfd6e", "text": "\"What you're describing makes sense. I'd probably call the non-liquid portion something besides my \"\"emergency fund\"\", but that's semantics mostly. If you have 3 months of \"\"very liquid\"\" cash in this emergency fund and you're comfortable that this amount is good for your situation, then I don't see why you can't have additional savings in more or less liquid vehicles. Whatever you set up, you'll want to think about how to tap it when you need it. You might have a CD ladder with one maturing every three months. That would give you access to these funds after your liquid funds dry up. (Or for a small/short term emergency, you'll be able to replenish the liquid fund with the next-maturing CD.) Or set up a T Bill ladder with the same structure. This might provide you with a tax advantage.\"", "title": "" }, { "docid": "4ee232426f873c73418bdcadf24765ed", "text": "The rule that I know is six months of income, stored in readily accessible savings (e.g. a savings or money market account). Others have argued that it should be six months of expenses, which is of course easier to achieve. I would recommend against that, partially because it is easier to achieve. The other issue is that people are more prone to underestimate their expenses than their income. Finally, if you base it on your current expenses, then budget for savings and have money left over, you often increase your expenses. Sometimes obviously (e.g. a new car) and sometimes not (e.g. more restaurants or clubs). Income increases are rarer and easier to see. Either way, you can make that six months shorter or longer. Six months is both feasible and capable of handling difficult emergencies. Six years wouldn't be feasible. One month wouldn't get you through a major emergency. Examples of emergencies: Your savings can be in any of multiple forms. For example, someone was talking about buying real estate and renting it. That's a form of savings, but it can be difficult to do withdrawals. Stocks and bonds are better, but what if your emergency happens when the market is down? Part of how emergency funds operate is that they are readily accessible. Another issue is that a main goal of savings is to cover retirement. So people put them in tax privileged retirement accounts. The downside of that is that the money is not then available for emergencies without paying penalties. You get benefits from retirement accounts but that's in exchange for limitations. It's much easier to spend money than to save it. There are many options and the world makes it easy to do. Emergency funds make people really think about that portion of savings. And thinking about saving before spending helps avoid situations where you shortchange savings. Let's pretend that retirement accounts don't exist (perhaps they don't in your country). Your savings is some mix of stocks and bonds. You have a mortgaged house. You've budgeted enough into stocks and bonds to cover retirement. Now you have a major emergency. As I understand your proposal, you would then take that money out of the stocks and bonds for retirement. But then you no longer have enough for retirement. Going forward, you will have to scrimp to get back on track. An emergency fund says that you should do that scrimping early. Because if you're used to spending any level of money, cutting that is painful. But if you've only ever spent a certain level, not increasing it is much easier. The longer you delay optional expenses, the less important they seem. Scrimping beforehand also helps avoid the situation where the emergency happens at the end of your career. It's one thing to scrimp for fifteen years at fifty. What's your plan if you would have an emergency at sixty-five? Or later? Then you're reducing your living standard at retirement. Now, maybe you save more than necessary. It's not unknown. But it's not typical either. It is far more common to encounter someone who isn't saving enough than too much.", "title": "" }, { "docid": "ded0e3e2ae24f3120d1de379d488bdd6", "text": "\"You are not wrong - just about anything can be charged and paid off in 30 days with a sale of non-liquid investments. So there are not any emergencies I can think of that require completely liquid funds (cash). For me, the risks are more behavioral than financial: I'm not saying it's a ridiculous, stupid idea, and these are all \"\"what-if\"\"s that can be countered with discipline and wise decisions, but having an emergency fund in cash certainly makes all of this simpler and reduces risk. If you have investments that you would have no hesitation liquidating to cover an emergency, then you can make it work. For most people, the choice is either paying cash, or charging it without having investment funds to pay it off, and they're back in the cycle of paying minimum payments for months and drowning in debt.\"", "title": "" }, { "docid": "0a7c211c9fd02791c72e7f20f59f9a5a", "text": "I agree. I have physical cash hidden in my house, a trick I learned from an elderly neighbor whose husband demanded they do it and it paid off for them twice. I have that and then will rely on credit if needed. My only question is if the statistic they mention is ALL savings or just what is in liquid assets.", "title": "" }, { "docid": "1328d512f1bbce05712bbb70484c3909", "text": "The standard advice is to have 3-6 months worth of expenses saved up in a highly liquid savings or money market account. After you have that saved you could look to start investing. I would recommend reading the bogleheads investment wiki (https://www.bogleheads.org/wiki/Getting_started). Even if you aren't planning on following the bogle head's way of passive investing it will give you a lot of good info on options available to you to start investing.", "title": "" }, { "docid": "61c009824d600a359938973082715984", "text": "\"There are a few major risks to doing something like that. First, you should never invest money you can't afford to lose. An emergency fund is money you can't afford to lose - by definition, you may need to have quick access to that money. If you determine that you need, for example, $3000 in emergency savings, that means that you need to have at least $3000 at all times - if you lose $500, then you now only have $2500 in emergency savings. Imagine what could've happened if you had invested your emergency savings during the 2008 crash, for example; you could easily have been in a position where you lost both your job and a good portion of your emergency savings at the same time, which is a terrible position to be in. If the car breaks down, you can't really say \"\"now's a bad time, wait until the stock market bounces back.\"\" Second, with brokerage accounts, there may be a delay before you can actually access the money or transfer it to an account that you can actually withdraw cash from or write checks against (but some of this depends on the exact arrangement you have with your bank). This can be a problem if you're in a situation where you need immediate access to the money - if your furnace breaks in the middle of winter, you probably don't want to wait a few days for the sale and transfer to go through before you can have it fixed. Third, you can be forced to sell the investments at an unfavorable price because you're not sure when you're going to need it. You'd also likely incur trading fees and/or early withdrawal penalties when you tried to withdraw the money. Think about it this way: if you buy a bond that matures in 5 years, you're effectively betting that you won't have an emergency for the next 5 years. If you do, you'll have to either sell the bond or, if you're allowed to get the money back early, you'll likely forfeit a good amount of the interest you earned in the process (which kind of kills the point of buying the bond in the first place). Edit: As @Barmar pointed out in the comments, you may also have to pay taxes on the profits if you sell at a favorable price. In the U.S. at least, capital gains on stuff held for less than a year is taxed at your ordinary income tax rate and stuff held longer than a year is taxed at the long-term capital gains tax rate. So, if you hold the investment for less than a year, you're opening yourself up to the risks of short-term stock fluctuations as well as potential tax penalties, so if you put your emergency fund in stocks you're essentially betting that you won't have an emergency that year (which by definition you can't know). The purpose of an emergency fund is just that - to be an emergency fund. Its purpose isn't really to make money.\"", "title": "" }, { "docid": "6a3ec9b0c7870ef5eef3a926d09037f6", "text": "\"There are no risk-free high-liquidity instruments that pay a significant amount of interest. There are some money-market accounts around that pay 1%-2%, but they often have minimum balance or transaction limits. Even if you could get 3%, on a $4K balance that would be $120 per year, or $10 per month. You can do much better than that by just going to $tarbucks two less times per month (or whatever you can cut from your expenses) and putting that into the savings account. Or work a few extra hours and increase your income. I appreciate the desire to \"\"maximize\"\" the return on your money, but in reality increasing income and reducing expenses have a much greater impact until you build up significant savings and are able to absorb more risk. Emergency funds should be highly liquid and risk-free, so traditional investments aren't appropriate vehicles for them.\"", "title": "" } ]	fiqa
7962d175708d3206f9b41d907285c841	If I put a large down payment (over 50%) towards a car loan, can I reduce my interest rate and is it smart to even put that much down?	[ { "docid": "54ff7be3cbc140d26c83c4f48e2e21e1", "text": "Can you reduce your interest rate? Talk to the lender. Maybe. Probably not. The rate reflects their perception of how much of a risk they're taking with the loan. But if all you're borrowing is $2000, the savings that you might get out of any adjustment to the rate is not going to be all that significant. Sure, it would be nice, but it's not going to be enough to make or break your decision to buy this car. The big savings will be that you're paying interest on a much smaller loan, which means you can reduce your payments and/or pay it off more quickly. REMINDER: NEVER TALK TO AN AUTO DEALER ABOUT FINANCING UNTIL AFTER THE PRICE OF THE CAR HAS BEEN NAILED DOWN -- otherwise they will raise the purchase price to cover the cost of offering you an apparently cheap loan.", "title": "" }, { "docid": "1722872e0efc515582b9b58d050917c5", "text": "\"Talk to your bank first but shop around a bit as well with other reputable lenders in your area. Another option, if you're willing to put down ~84% of the purchase price would be to talk to several dealerships BEFORE you set foot on a single lot. Tell them that you are interested in buying a Versa and that you are willing to pay cash but you are not willing to pay more than $10,200. They won't agree (trust me on that) but they will come down from $13,000. Say \"\"Thanks, I'll call you back.\"\" and call one of the other dealerships on your list and tell them \"\"I just spoke with this dealership and they are willing to sell me the car for [whatever number they gave you].\"\" One of two things will happen, either the dealership will come back with a lower price or they will tell you to go buy the car there. Continue this process until you have one dealership left. I did this with 3 dealerships in 2011 and bought a truck with a $27,000 sticker price for just over $19,000. It took about a week to make all of the calls and I ended up going to a dealership 3 hours away but it was worth it for $8,000.\"", "title": "" }, { "docid": "9585785ed2ce840499d494b8ba25ad0f", "text": "\"With that credit rating you should have no trouble getting a rate in that range. I have a similar credit score and my credit union gave me a car loan at 1.59%. No haggling required. In regards to your question, I think you have it backwards. They are more likely to give you a good rate on a high balance than a low one. Think about it from the bank's perspective... \"\"If I give you a small sale, will you give me a discount?\"\" This is the question you are asking. Their profit is a factor of how much you borrow and the interest rate. Low rate=less profit, low financing amount = less profit. The deal you proposed is a lose-lose for them.\"", "title": "" }, { "docid": "0a058923a7cf55d57d637fa978f815cf", "text": "I had a strange experience buying a new car. They were offering a deal of 0.9% interest on the loan but only if the loan was above a certain amount. Below that amount, the interest rate was something like 3%. Given the amount I was willing to put down, it was cheaper to put less down and get the lower interest rate. So, once you agree to the purchase price, you need to discuss what finance options they offer. You might also check in advance with other loan providers (e.g. your bank) to see what offers they have.", "title": "" }, { "docid": "a8749a180a0d266d8ec2a05865e9af19", "text": "\"The real answer is to talk to the bank. In the case of the last car loan I got, the answer is \"\"no\"\". When I asked them about rates, they gave me a printed sheet that listed the loan rates they offered based on how old the car was, period. I forget the exact numbers but it was like: New car: 4%, 1 year old: 4.5%, 2-3 years old 5%, etc. I suspect that at most banks these days, it's not up to the loan officer to come up with what he considers reasonable terms for a loan based on whatever factors you may bring up and he agrees are relevant. The bank is going to have a set policy, under these conditions, this is the rate, and that's what you get. So if the bank includes the size of the down payment in their calculations, then yes, it will be relevant. If they don't, than it won't. The thing to do would be to ask your bank. If you're only borrowing $2000, and you've managed to save up $11,000, I'd guess you can pay off the $2,000 pretty quickly. So as Keshlam says, the interest rate probably isn't all that important. If you can pay it off in a year, then the difference between 5% and 1% is only $80. If you're buying a $13,000 car, I can't imagine you're going to agonize over $80. BTW I've bought two cars in the last few years with about half the cost in cash and putting the rest on my credit card. (One for me and one for my daughter.) Then I paid off the credit card in a couple of months. Sure, the interest rate on a credit card is much higher than a car loan, but as it was only for a few months, it made very little real difference, and it took zero effort to arrange the loan and gave me total flexibility in the repayment schedule. Credit card companies often offer convenience checks where you pay like 3% or so transaction fee and then 0% interest for a year or more, so it would just cost the 3% up front fee.\"", "title": "" }, { "docid": "2c3c9dfc4a6e45b5e7a3e12ce501b0c6", "text": "As others have already pointed out, the bank isn't getting your money upfront - the cash goes to the dealer and the bank will be financing you a much smaller amount. They really don't have any incentive to give you a better interest rate, but it never hurts to ask. The more important (and unasked) question is should you do this? Keeping in mind that a loan with good credit could be in the 1.8% range. Average long-term returns in the market are over 3x that, so by paying upfront you're trading the opportunity for 6%+ returns for the ability to save -2% fees.", "title": "" } ]	[ { "docid": "97ee126f81b81e9394033cbffba6ed84", "text": "Since I have 10k in my account after down-payment, will I get a good interest rate on the loan? When the bank considers your loan, they will see $70K. Regardless, they will want to see certain amount of savings that would allow you to continue paying your loan in case of an emergency, and $10K might not be enough. I was planning to put down 15%, but I have been told that I should buy something called PMI to satisfy the rest 5% and if I take that my interest will be more and sometimes, bank will not go for anybody who pays less than 20%. Is that true? Yes. After downpayment + closing costs, how much money in the savings accounts, is the bank looking for to say that I am a good buyer? Depends on the bank, my wild guess would be they're looking for several months' worth of loan payments (you should have ~6 months worth of savings for emergencies, regardless of loans).", "title": "" }, { "docid": "e9703e6b79e864d9119a16aa219fdc1d", "text": "In the United States a Jumbo Loan is one in which the loan amounts exceeds a set value. For much of the US it is currently $417,000 but it is higher in some areas. It is set by the US government and is adjusted each year. If you are trying to avoid the Jumbo designation then putting more down makes that possible. Generally the Jumbo loans have a higher rate. My credit union does allow jumbo loans with less than 20% down, but I am not sure if they are in the majority or the minority regarding down payment requirements. Keep in Mind that once the house price goes above Jumbo/0.8 or $521,250 you will be putting down more than 20% to avoid the Jumbo designation.", "title": "" }, { "docid": "042b71b15063e51189ae00318215f078", "text": "If it's possible in your case to get such a loan, then sure, providing the loan fees aren't in excess of the interest rate difference. Auto loans don't have the fees mortgages do, but check the specific loan you're looking at - it may have some fees, and they'd need to be lower than the interest rate savings. Car loans can be tricky to refinance, because of the value of a used car being less than that of a new car. How much better your credit is likely determines how hard this would be to get. Also, how much down payment you put down. Cars devalue 20% or so instantly (a used car with 5 miles on it tends to be worth around 80% of a new car's cost), so if you put less than 20% down, you may be underwater - meaning the principal left on the loan exceeds the value of the car (and so you wouldn't be getting a fully secured loan at that point). However, if your loan amount isn't too high relative to the value of the car, it should be possible. Check out various lenders in advance; also check out non-lender sites for advice. Edmunds.com has some of this laid out, for example (though they're an industry-based site so they're not truly unbiased). I'd also recommend using this to help you pay off the loan faster. If you do refinance to a lower rate, consider taking the savings and sending it to the lender - i.e., keeping your payment the same, just lowering the interest charge. That way you pay it off faster.", "title": "" }, { "docid": "dc69d3f6e641e3921c55c1180b6158e7", "text": "\"Following up on @petebelford's answer: If you can find a less expensive loan, you can refinance the car and reduce the total interest you pay that way. Or, if your loan permits it (not all do; talk to the bank which holds the loan and,/or read the paperwork you didn't look at), you may be able to make additional payments to reduce the principal of the loan, which will reduce the amount and duration of the loan and could significantly reduce the total interest paid ... at the cost of requiring you pay more each month, or pay an additional sum up front. Returning the car is not an option. A new car loses a large portion of its value the moment you drive it off the dealer's lot and it ceases to be a \"\"new\"\" car. You can't return it. You can sell it as a recent model used car, but you will lose money on the deal so even if you use that to pay down the loan you will still owe the bank money. Given the pain involved that way, you might as well keep the car and just try to refinance or pay it off. Next time, read and understand all the paperwork before signing. (If you had decided this was a mistake within 3 days of buying, you might have been able to take advantage of \"\"cooling down period\"\" laws to cancel the contract, if such laws exist in your area. A month later is much too late.)\"", "title": "" }, { "docid": "f1e46d12e93066f7662e0e1845a8b09c", "text": "The simple answer is yes - put 20% (or more) down. In the past I have paid PMI and used a combination first and second mortgage to get around it. I recommend avoiding both of those situations. I am much more comfortable now with just a regular mortgage payment. The more equity you have in your home the more options you will have in the future.", "title": "" }, { "docid": "7e06c59eea8e3f8455252689538847b3", "text": "\"For the mortgage, you're confusing cause and effect. Loans like mortgages generally have a very simple principle behind them: at any given time, the interest charged at that time is the product of the amount still owing and the interest rate. So for example on a mortgage of $100,000, at an interest rate of 5%, the interest charged for the first year would be $5,000. If you pay the interest plus another $20,000 after the first year, then in the second year the interest charge would be $4,000. This view is a bit of an over-simplification, but it gets the basic point across. [In practice you would actually make payments through the year so the actual balance that interest is charged on would vary. Different mortgages would also treat compounding slightly differently, e.g. the interest might be added to the mortgage balance daily or monthly.] So, it's natural that the interest charged on a mortgage reduces year-by-year as you pay off some of the mortgage. Mortgages are typically setup to have constant payments over the life of the mortgage (an \"\"amortisation schedule\"\"), calculated so that by the end of the planned mortgage term, you'll have paid off all of the principal. It's a straightforward effect of the way that interest works in general that these schedules incorporate higher interest payments early on in the mortgage, because that's the time when you owe more money. If you go for a 15-year mortgage, each payment will involve you paying off significantly more principal each time than with a 30-year mortgage for the same balance - because with a 15-year mortgage, you need to hit 0 after 15 years, not 30. So since you pay off the principal faster, you naturally pay less interest even when you just compare the first 15 years. In your case what you're talking about is paying off the mortgage using the 30-year payments for the first 15 years, and then suddenly paying off the remaining principal with a lump sum. But when you do that, overall you're still paying off principal later than if it had been a 15-year mortgage to begin with, so you should be charged more interest, because what you've done is not the same as having a 15-year mortgage. You still will save the rest of the interest on the remaining 15 years of the term, unless there are pre-payment penalties. For the car loan I'm not sure what is happening. Perhaps it's the same situation and you just misunderstood how it was explained. Or maybe it's setup with significant pre-payment penalties so you genuinely don't save anything by paying early.\"", "title": "" }, { "docid": "13f8f990eb2701f4c3ca892e40f200d7", "text": "A loan that does not begin with at least a 20% deposit and run through a term of no longer than 48 months is the world's way of telling you that you can't afford this vehicle. Consumer-driven cars are rapidly depreciating assets. Attenuating the loan to 70 months or longer means that payments will not keep up with normal depreciation, thus trapping the buyer in an upside down loan for the entire term.", "title": "" }, { "docid": "f2d1c0c043e6c0d127ce9c0d8d2b9b31", "text": "Any way you look at it, this is a terrible idea. Cars lose value. They are a disposable item that gets used up. The more expensive the car, the more value they lose. If you spend $100,000 on a new car, in four years it will be worth less than $50,000.* That is a lot of money to lose in four years. In addition to the loss of value, you will need to buy insurance, which, for a $100,000 car, is incredible. If your heart is set on this kind of car, you should definitely save up the cash and wait to buy the car. Do not get a loan. Here is why: Your plan has you saving $1,300 a month ($16,000 a year) for 6.5 years before you will be able to buy this car. That is a lot of money for a long range goal. If you faithfully save this money that long, and at the end of the 6.5 years you still want this car, it is your money to spend as you want. You will have had a long time to reconsider your course of action, but you will have sacrificed for a long time, and you will have the money to lose. However, you may find out a year into this process that you are spending too much money saving for this car, and reconsider. If, instead, you take out a loan for this car, then by the time you decide the car was too much of a stretch financially, it will be too late. You will be upside down on the loan, and it will cost you thousands to sell the car. So go ahead and start saving. If you haven't given up before you reach your goal, you may find that in 6.5 years when it is time to write that check, you will look back at the sacrifices you have made and decide that you don't want to simply blow that money on a car. Consider a different goal. If you invest this $1300 a month and achieve 8% growth, you will be a millionaire in 23 years. * You don't need to take my word for it. Look at the car you are interested in, go to kbb.com, select the 2012 version of the car, and look up the private sale value. You'll most likely see a price that is about half of what a new one costs.", "title": "" }, { "docid": "2a4e4589e77150edb6090a7c725d0b86", "text": "I am going to give advice that is slightly differently based on my own experiences. First, regarding the financing, I have found that the dealers do in fact have access to the best interest rates, but only after negotiating with a better financing offer from a bank. When I bought my current car, the dealer was offering somewhere around 3.3%, which I knew was way above the current industry standard and I knew I had good credit. So, like I did with my previous car and my wife's car, I went to local and national banks, came back with deals around 2.5 or 2.6%. When I told the dealer, they were able to offer 2.19%. So it's ok to go with the dealer's financing, just never take them at face value. Whatever they offer you and no matter how much they insist it's the best deal, never believe it! They can do better! With my first car, I had little credit history, similar to your situation, and interest rates were much higher then, like 6 - 8%. The dealer offered me 10%. I almost walked out the door laughing. I went to my own bank and they offered me 8%, which was still high, but better than 10%. Suddenly, the dealer could do 7.5% with a 0.25% discount if I auto-pay through my checking account. Down-payment wise, there is nothing wrong with a 35% down payment. When I purchased my current car, I put 50% down. All else being equal, the more cash down, the better off you'll be. The only issue is to weigh that down payment and interest rate against the cost of other debts you may have. If you have a 7% student loan and the car loan is only 3%, you're better off paying the minimum on the car and using your cash to pay down your student loan. Unless your student loan balance is significantly more than the 8k you need to finance (like a 20k or 30k loan). Also remember that a car is a depreciating asset. I pay off cars as fast as I can. They are terrible debt to have. A home can rise in value, offsetting a mortgage. Your education keeps you employed and employable and will certainly not make you dumber, so that is a win. But a car? You pay $15k for a car that will be worth $14k the next day and $10k a year from now. It's easy to get underwater with a car loan if the down payment is small, interest rate high, and the car loses value quickly. To make sure I answer your questions: Do you guys think it's a good idea to put that much down on the car? If you can afford it and it will not interfere with repayment of much higher interest debts, then yes. A car loan is a major liability, so if you can minimize the debt, you'll be better off. What interest rate is reasonable based on my credit score? I am not a banker, loan officer, or dealer, so I cannot answer this with much credibility. But given today's market, 2.5 - 4% seems reasonable. Do you think I'll get approved? Probably, but only one way to find out!", "title": "" }, { "docid": "4ba0904c027d73e4cfead5e90c27a3d6", "text": "In addition to the other answers, also consider this: Federal bond interest rates are nowhere near the rates you mentioned for short term bonds. They are less than 1% unless you're talking about terms of 5-10 years, and the rates you mentioned are for 10 to 30-years terms. Dealer financed car loans are usually 2-5 years (the shorter the term - the lower the rate). In addition, as said by others, you pay more than just the interest if you take a car loan from the dealer directly. But your question is also valid for banks.", "title": "" }, { "docid": "1e3057c1fc6c4cd285ff605bf4f2e8ef", "text": "Yes. I've spoken to mortgage officers from various banks who will do conventional loans with anything as low as 3.5% down, however there are many more restrictions (e.g., normally you can borrow funds from a parent or relative for a down payment, in this case that was prohibited). If you are already pre-approved, then your approval letter should state the specifics you need to adhere to. If you would like to modify that (e.g. put a smaller amount down), then you could still get the loan, but your pre-approval won't be valid. I would recommend speaking with your lender (and perhaps with a few others as well) about the new home you are looking at.", "title": "" }, { "docid": "8a9db923f5454f64bb4e44d06c74908f", "text": "\"The loan is the loan, the down payment is not part of the loan. The principle amount owed on the loan at the beginning of the loan is the amount of the loan. If your loan amount is $390,000 then that's below the \"\"jumbo\"\" classification. Your down payment is irrelevant. Lenders may want or require 20% (or any other amount) down so the loan will meet certain \"\"loan to value\"\" ratio requirements. In the case of real estate the lenders in general want a 20% down side cushion before you're \"\"upside down\"\" (owe more than the home is worth). This is not unique to homes and is common in many secured lending instruments; like cars for example.\"", "title": "" }, { "docid": "fe42f4891bb8abe1c35dea12d56d0e78", "text": "Save up a bigger downpayment. The lender's requirement is going to be based on how much you finance, not the price of the house.", "title": "" }, { "docid": "11692d59ac54be45ba7425bb06463446", "text": "The only reason to lend the money in this scenario is cashflow. But considering you buy a $15000 car, your lifestyle is not super luxurious, so $15000 spare cash is enough.", "title": "" }, { "docid": "18eb4f81e1dbd0e3f013cffe592b5586", "text": "You are planning on buying a car that is 50% of your salary. Add your student debt to that and your total debt is >50% of your salary. I would suggest getting a few credit cards to build up credit, but can you manage that? Buying a 25k car with 55k salary is overspending. Get a second-hand car for 7k or so. Plus, buying a new car is not smart either, from a pricing standpoint, if you really want a new car, buy one that is 1 to 2 years old.", "title": "" } ]	fiqa
bef2ce109170939d8ff508a22c47237c	Why would refinancing my mortgage increase my PMI, even though rates are lower?	[ { "docid": "18b06f43d9097e00fa8c79640f545c5d", "text": "Is that an FHA loan you have? And you're wanting to do one of those low cost FHA re-fi's, right? The answer is that in between when you first got that loan and now, the government's changed the rules on PMI for FHA loans. It more than doubled the amount of monthly PMI you have to pay. The new rates, efective April 18th, 2011, as as follows: It used to be 0.50% per year for the 30 year. So that's why the PMI would go up. There is another rule in play too, specific to that no-cost FHA refi -- the government requires that the combined (principal+interest+pmi) monthly payment after the refi is at least 4% lower than the current payment. Note that the no-cost refi does not require a new appraisal. Some options present themselves, but only if you can show some equity in a appraisal: 1) if an appraisal shows at least 10% equity, you can go refi to a standard mortgage. You might even be able to find one that doesn't require PMI at that level. If you have 20% equity, you're golden -- no pmi. 2) See what the monthly payment will be if you refi to the 15 year FHA mortgage. Between the much lower PMI, and the much lower interest rates (15 year is usually about 0.75% less than a 30 year), it might not be much more than what you're paying now. And you'd save a huge amount of money over time, and get out from that PMI much earlier (it stops when your principal drops below 80% of the loan amount). This would require that reappraisal.", "title": "" }, { "docid": "13fa1c989dd678763aa97e221da8e5f0", "text": "The PMI rate is calculated at the time your mortgage is underwritten to be terminated at the point where you have 20% equity in your home. It is calculated based off of default risks based on your current equity value at the time of the loan. So if you got your mortgage before the banking crisis those risk charts have changed dramatically and not in your favor. So lets say you have a 100k home which you put 10k down so you have a mortgage of 90k. Since you have accumulated an additional 5k equity so payoff value is now 85k. If you refinance your mortgage and the home values in your area have dropped 15% you now are borrowing 100% of the value of your home. So you have higher risk from being at 100% as opposed to 90%. And the PMI is for the 20% of equity you do not have that the bank can not expect to recover. So when you originally bought the house your PMI pay out was 10k. At 85K value and 100% borrowed the PMI payout will be closer to 18k. While you may still be able to sell your home for the original value when they do the refinance calculations they use what your area has trended. If that is the case you maybe be able get an actual appraisal to use but that will come out of your pocket. Disclaimer: These are simplifications of how the whole complex process works if you call the banker they can explain exactly why, show you the numbers, and help you understand your specific circumstances. ", "title": "" }, { "docid": "a061666241d769f1cccdb66eeef12bf9", "text": "There are deals out there which allow refinancing up to 125% of appraised value so long as you have a solid payment history. You need to research banks in your area working with HARP funded mortgages. An alternate method is to find a bank that will finance 80% of the current value at 4% and the rest as a HELOC. The rate will be higher on the equity line, but the average rate will be better and you can pay the line off faster.", "title": "" } ]	[ { "docid": "580a99928ac197a0f28d77e7f3786d50", "text": "That's why they're taking the deal. But it's not like they completely stole all that money. I don't have any stats, but I'd assume most of those people who got their loans are still in their homes. (Sorry, I could be way off. Please correct) But they still are bastards for not letting me refinance. Could have just been because they saw this penalty coming.", "title": "" }, { "docid": "dc5d2f7ab87c363b8359dcfbff796599", "text": "The key word you are looking for is that you want to refinance the loan at a lower rate. Tell banks that and ask what they can offer you.", "title": "" }, { "docid": "54b70047a1441f552c304ac3674a6f53", "text": "\"It can be a good thing for the bank to refinance your loan for you - since you will be keeping the loan at that particular institution. This gives them more time to enjoy the free money you pay them in interest for the remaining life of the loan. Banks that offer \"\"No closing costs\"\" are betting that mortgage payers will move their mortgage to get the lower interest rates - and whomever holds the loan, gets the interest payments.\"", "title": "" }, { "docid": "c660aa77d34da2bf069924c305d831ea", "text": "\"I am going to respond to a very thin sliver of what's going on. Skip ahead 4 years. When buying that house, is it better to have $48K in the bank but a $48K student loan, or to have neither? That $48K may very well be what it would take to put you over the 20% down payment threshhold thus avoiding PMI. Banks let you have a certain amount of non-mortgage debt before impacting your ability to borrow. It's the difference between the 28% for the mortgage, insurance and property tax, and the total 38% debt service. What I offer above is a bit counter-intuitive, and I only mention it as you said the house is a priority. I'm answering as if you asked \"\"how do I maximize my purchasing power if I wish to buy a house in the next few years?\"\"\"", "title": "" }, { "docid": "d9f61c3c251be6934c53b4e584cac7d1", "text": "\"This doesn't say the whole story (like the length of the HELOC). if you have 15 years left on a mortgage and \"\"refinance\"\" into a 30 year HELOC then yes, your payments maybe 20% lower, but you add 15 years to pay it off. Just remember that interest occurs daily on what you owe. If you move 100K of debt from 5% mortgage to 6% HELOC you'll be paying more to the banks no matter how you slice it.\"", "title": "" }, { "docid": "1231694b43f21676f8c9d19c660b1fc9", "text": "The primary reason to put 20% down on your home is to avoid paying PMI (private mortgage insurance). Anyone who buys a house with a down-payment of under 20% is required to pay for this insurance (which protects the lender in case you default on your loan). PMI is what enables people to buy homes with as little as 3-5% down. I would recommend against paying more than 20%, because having liquidity for emergency funds, or other investments will give you the sort of flexibility that's good to have when the economy isn't so great. Depending on whether the house you purchase is move-in ready or a fixer-upper, having funds set aside for repairs is a good idea as well.", "title": "" }, { "docid": "3b5300c8ffa3ace3ae49d6d1404e6652", "text": "\"A re-financing, or re-fi, is when a debtor takes out a new loan for the express purpose of paying off an old one. This can be done for several reasons; usually the primary reason is that the terms of the new loan will result in a lower monthly payment. Debt consolidation (taking out one big loan at a relatively low interest rate to pay off the smaller, higher-interest loans that rack up, like credit card debt, medical bills, etc) is a form of refinancing, but you most commonly hear the term when referring to refinancing a home mortgage, as in your example. To answer your questions, most of the money comes from a new bank. That bank understands up front that this is a re-fi and not \"\"new debt\"\"; the homeowner isn't asking for any additional money, but instead the money they get will pay off outstanding debt. Therefore, the net amount of outstanding debt remains roughly equal. Even then, a re-fi can be difficult for a homeowner to get (at least on terms he'd be willing to take). First off, if the homeowner owes more than the home's worth, a re-fi may not cover the full principal of the existing loan. The bank may reject the homeowner outright as not creditworthy (a new house is a HUGE ding on your credit score, trust me), or the market and the homeowner's credit may prevent the bank offering loan terms that are worth it to the homeowner. The homeowner must often pony up cash up front for the closing costs of this new mortgage, which is money the homeowner hopes to recoup in reduced interest; however, the homeowner may not recover all the closing costs for many years, or ever. To answer the question of why a bank would do this, there are several reasons: The bank offering the re-fi is usually not the bank getting payments for the current mortgage. This new bank wants to take your business away from your current bank, and receive the substantial amount of interest involved over the remaining life of the loan. If you've ever seen a mortgage summary statement, the interest paid over the life of a 30-year loan can easily equal the principal, and often it's more like twice or three times the original amount borrowed. That's attractive to rival banks. It's in your current bank's best interest to try to keep your business if they know you are shopping for a re-fi, even if that means offering you better terms on your existing loan. Often, the bank is itself \"\"on the hook\"\" to its own investors for the money they lent you, and if you pay off early without any penalty, they no longer have your interest payments to cover their own, and they usually can't pay off early (bonds, which are shares of corporate debt, don't really work that way). The better option is to keep those scheduled payments coming to them, even if they lose a little off the top. Often if a homeowner is working with their current bank for a lower payment, no new loan is created, but the terms of the current loan are renegotiated; this is called a \"\"loan modification\"\" (especially when the Government is requiring the bank to sit down at the bargaining table), or in some cases a \"\"streamlining\"\" (if the bank and borrower are meeting in more amicable circumstances without the Government forcing either one to be there). Historically, the idea of giving a homeowner a break on their contractual obligations would be comical to the bank. In recent times, though, the threat of foreclosure (the bank's primary weapon) doesn't have the same teeth it used to; someone facing 30 years of budget-busting payments, on a house that will never again be worth what he paid for it, would look at foreclosure and even bankruptcy as the better option, as it's theoretically all over and done with in only 7-10 years. With the Government having a vested interest in keeping people in their homes, making whatever payments they can, to keep some measure of confidence in the entire financial system, loan modifications have become much more common, and the banks are usually amicable as they've found very quickly that they're not getting anywhere near the purchase price for these \"\"toxic assets\"\". Sometimes, a re-fi actually results in a higher APR, but it's still a better deal for the homeowner because the loan doesn't have other associated costs lumped in, such as mortgage insurance (money the guarantor wants in return for underwriting the loan, which is in turn required by the FDIC to protect the bank in case you default). The homeowner pays less, the bank gets more, everyone's happy (including the guarantor; they don't really want to be underwriting a loan that requires PMI in the first place as it's a significant risk). The U.S. Government is spending a lot of money and putting a lot of pressure on FDIC-insured institutions (including virtually all mortgage lenders) to cut the average Joe a break. Banks get tax breaks when they do loan modifications. The Fed's buying at-risk bond packages backed by distressed mortgages, and where the homeowner hasn't walked away completely they're negotiating mortgage mods directly. All of this can result in the homeowner facing a lienholder that is willing to work with them, if they've held up their end of the contract to date.\"", "title": "" }, { "docid": "997ffcf0eb3fb67c5b69f9379e46ed51", "text": "If you can get a mortgage with 10% downpayment and the seller will accept (some may want at least 20% downpayment for whatever reasons) and with PMI it still lower than your rent, sounds like it's a good idea to buy now. Of course this assumes that the money you'd be otherwise saving for 20% downpayment will be used to pay off a mortgage faster.", "title": "" }, { "docid": "2cf27b4fe4e03d82a028792557e651f9", "text": "FHA insured loans must 'go hand in hand' with PMI, because the FHA element is the insurance itself. The FHA isn't actually giving you a loan, that's coming from a lender; instead, the FHA is insuring the loan, at some cost to you - but allowing a loan to folks who may not be able to afford it normally (lower down payment requirements and a somewhat cheaper PMI). FHA-insured loans may be lower rates in some cases than non-FHA insured loans because of this backing; that's because they make it easier for people of poorer credit histories with smaller down payments to get a house in the first place. Those people would tend to have a harder time getting a loan, and be charged sometimes usurious rates to get it. Low down payment and mediocre credit history (think 580-620) mean higher risk, even beyond the risk directly coming from the poor loan to value ratio. Comparing this table of Freddie Mac rates to this table of FHA-backed loan rates, the loan rates seem comparable (though somewhat lagging in changes in some cases). FHA loans are not nearly the size or complexity of loan population as Freddie Mac, so be wary of making direct comparisons. Looking into this in more detail, pre-collapse (before 12/07), FHA rates were a bit lower - average rate was about .5 points lower - but starting with 12/07, FHA average rates were usually higher than Freddie Mac rates for 30 year fixed loans: in 1/2009 for example they were almost a point higher. As of the last data I see (5/13) the rates were within 0.1 points most months. This may be in part because Freddie Mac had looser requirements to get a loan pre-collapse, then tightened significantly, then started to loosen some (also around June 2013, rates climbed significantly due to some signals from the Fed, although they're almost back to their lows thanks to the Fed again). These are averages across all loans, so you get some noise as a result. Loan interest rates are very personal, in general: they depend on your credit, your house and down payment, and your bank (which varies by your location). The best thing to do is to shop around yourself and just see what you get, and ask your lender any questions you have: if you pick a local lender with a good service history and who is willing to talk to you in person (ie, has a direct phone number), you'll have no trouble getting answers.", "title": "" }, { "docid": "5866224a35f6fa88ea495093b70dd815", "text": "In a lot of cases, the bank has already made their money. Shortly after you get your mortgage is sold to investors though the bank is still servicing it for a fee. Therefore, if you refinance, they get to sell it again.", "title": "" }, { "docid": "57c58694a385478f8c9d3468f56d00bd", "text": "Yes, PMI is what the lender requires to loan you more than 8O% of the home's value. I could easily present scenarios where it's exactly the right decision to use PMI and get the purchase done. A 100K mortgage at 90% LTV will cost you $521/year in PMI. If you are renting and struggling to get a higher downpayment, it can take quite a long time to save the additional $11K to put down. Only the buyer can know if the house is such s bargain, or if rates have bottomed, but the decision isn't so clear cut.", "title": "" }, { "docid": "38413685a913d396683d3bb707bbf71e", "text": "PMI (Private Mortgage Insurace) is not part of foreclosure. It is part of the MORTGAGE process. Say a bank wants a 20% down payment, for a mortgage and you can only put up 5%. You can take out PMI for the 15% difference. The bank will force you to do this every year (usually for lesser amounts) until your house has risen enough in value so that you have 20% equity. That's because banks want a maximum loan to value (LTV) ratio of 80% (sometimes less, nowadays). OK, by allowing you to buy a house with skimpy equity, PMI increases the chance of foreclosure.", "title": "" }, { "docid": "26d1fa0919c5d0cd9e23e44fd94ee05e", "text": "yeah, i get that it's not optional. just sucks that nothing has changed substantially since i closed on the loan 11 months ago (same PMI, same HO, essentially the same property taxes) and now i have to pay more. seems like the closing docs could have taken into account timing of those payments so that i primed the pump with enough from the beginning.", "title": "" }, { "docid": "67a2ae48c781807568889aa87614e451", "text": "It doesn't matter. You will just renew your mortgage at the prevailing rates. That's part of the mortgage contract. The problem that happens is if you want to move your mortgage to another bank for a better rate, they may not accept you. Your re-negotiating position is limited. Most mortgages have a portability option where you can even transfer the mortgage to another property, but you'd have to buy a cheaper house.", "title": "" }, { "docid": "dae81c7ab53e9b7f0d2472613c19cd5c", "text": "Streamline refinance is the way to go. You don't have to stay with the same bank to do so either. The big advantage of the streamline is the original appraisal is used for the refinance, so as long as you didn't have negative amortization(impossible in FHA anyways), you're good to go. It will be much less paperwork and looser credit standards. The ONLY downside is that upfront and monthly FHA mortgage insurance ticked up from where it was 2 years ago. If you're under a 80% LTV however you won't have to worry about it.", "title": "" } ]	fiqa
c2253526e974a4631ed90a56eda608bf	want to refinance FHA loan, may move out unexpectedly and would like to keep as investment property, what are my options?	[ { "docid": "51e684733652e1ce79d2d467174c3c3d", "text": "Most likely no. Just make sure to read the fine print. I'm in exactly the same boat, I have a house with an FHA loan and will be refinancing to conventional then using it as an investment. To refinance, you usually have to own 25% of your property before you can refinance, or buy another property with FHA financing. If you are planning on refinancing with FHA, then things might not work. The only way around this is if you move like you said you might. Take a look at this article section (A) for Relocations, good stuff: http://portal.hud.gov/FHAFAQ/controllerServlet?method=showPopup&faqId=1-6KT-879", "title": "" }, { "docid": "dae81c7ab53e9b7f0d2472613c19cd5c", "text": "Streamline refinance is the way to go. You don't have to stay with the same bank to do so either. The big advantage of the streamline is the original appraisal is used for the refinance, so as long as you didn't have negative amortization(impossible in FHA anyways), you're good to go. It will be much less paperwork and looser credit standards. The ONLY downside is that upfront and monthly FHA mortgage insurance ticked up from where it was 2 years ago. If you're under a 80% LTV however you won't have to worry about it.", "title": "" } ]	[ { "docid": "3bc46add7bfe3ee10ee4eb7f944b698a", "text": "It sounds like you plan to sell sooner or later. If your opinion is that there is still room for the housing market to grow, make your bet and sell later. The real estate market is much less liquid than other markets you might be invested in, so if you do end up seeing trouble (another housing crash) you may be stuck with your investment for longer than you hoped. I see more risk renting the house out, but I don't see significantly more reward. If you are comfortable with the risk, by all means proceed with your plan to rent. My opinion is contrary to many others here who think real estate investments are more desirable because the returns are less abstract (you can collect the rent directly from your tenants) but all investments are fraught with their own risks. If you like putting in a little sweat equity (doing your own repairs when things break at your rental) renting may be a good match for you. I prefer investments that don't require as much attention, and index funds certainly fit that bill for me.", "title": "" }, { "docid": "62434a140f0cfd64e57c57b6ba1b6a0a", "text": "\"I have a friend who had went on a seminar with FortuneBuilders (the company that has Than Merrill as CEO). He told me that one of the things taught in that seminar was how to find funding for the property that you want to flip. One of the things he mentioned was that there are so-called \"\"hard money\"\" lenders who are willing to lend you the money for the property in exchange for getting their name on the property title. Last time I checked it looked like here in Florida we had at least Bridgewell Capital and Fairview Commercial Lending that were in that business. These hard money lenders get their investment back when the house is sold. So there is some underlying expectation that the house can be sold with some profit (to reimburse both the lender and you for your work). That friend of mine did tell me that he had flipped a house once but that he did not receive the funding to that from a lender but from an in-law, however it was through a similar arrangement.\"", "title": "" }, { "docid": "a409e9ac055ad2bcb8612e19efcef9a2", "text": "It sounds like you are in great shape, congratulations! Things I would think about in your position: Consider putting 20% down instead of 30% and find a great house that has a key missing modernization, like a kitchen. Then replace the kitchen, which if done right can instantly add that 10% (or more) right back in equity... or stick to your plan... You have earned the luxury of taking your time and doing what's right for you. Think real carefully about location. Here are some ideas based on my experience.", "title": "" }, { "docid": "6c71772824094fe9bf7f68024218d142", "text": "There are programs out there which will let you refinance even when underwater, under the Government's HARP program. You are overpaying by nearly $7,000 per year compared to a refinance to 4.5%. A classic example of how the bubble hurt people who overextended themselves a bit as housing shot up. The bank risks a $50K loss if you default or short sell this property. I'd go in and sit down with a branch manager and ask what they can do to recast the loan to a lower rate as you are ready, wiling and able to keep the house and make your payments. Good luck.", "title": "" }, { "docid": "331c6c280e5a0c64549ac6d0212cb618", "text": "\"One additional penalty is you will be put on the CAIVRS (\"\"cavers\"\") for your default on the FHA mortgage which will preclude you from FHA financing in the future. When purchasing the multifamily unit it is an FHA requirement that you occupy one of the units. Lastly, I would advise against FHA due to elevated costs. Conventional options have 95% financing options, and don't have mortgage insurance that lasts forever, like FHA does.\"", "title": "" }, { "docid": "ea86135aefc19f735f834aa9cfa4eac0", "text": "\"Pre-edit, Pete mentioned that he feels real estate agents would (a) like you to buy as much house as you afford, and (b) would love to show you three houses and have you choose one. As a real estate agent myself, I believe his warnings were understated. As with any industry, there are good and bad people. Agents are paid to move houses. If the median US home is under $200K, and commissions average say 5%, the $10,000 to be gained is split between the buyer brokerage and selling agent. The $5000 to each is then shared with 'the house.' So, this sale would net me $2500, gross. Move one a week, and the income is great, one per month, not so much. Tire kickers will waste an agent's time for a potential decision to wait another year and continue renting. Their obligation is to tell you the truth, but not to offer financial advice. Remember the mortgage crisis? It seems the banks and brokers aren't watching out for you either. They will tell you what they'll lend you, but not what you can afford. These numbers are worlds apart. I strongly recommend a 20% downpayment. The FHA PMI calculator shows that a 90% LTV (i.e. a 10% downpayment) for a $100K house will cost you $1200/yr in PMI. Think about this. For the $10,000 that you didn't put down, you are paying an extra $1200 each year. This is on top of the interest, so even at 5%, that last $10,000 is costing nearly 17%. If you can't raise that $10K (or whatever 10% is on that house) in cheaper funds, you should hold off. Using the 401(k) loan for this purpose is appropriate, yet emotionally charged. As if suck loans are written by the devil himself. \"\"Buy the biggest house you can\"\"? No. I have a better idea. Buy the smallest place you can tolerate. I have a living room (in addition to family room) that has been used 3 times in 20 years. A dining room we actually use. Twice per year. When your house is 50% too big, you pay 50% more property tax, more utility bills, and more maintenance. Closing costs, commission, etc, isn't cheap, but the lifetime cost of living in a too-big house is a money pit.\"", "title": "" }, { "docid": "0e11ca85524b85f798be8af25214f87d", "text": "Over the last ten years you have reaped the benefits of a good financial decision. (Presumably your low mortgage has freed up money for other financial priorities.) There would be no harm in making a clean break by selling as is. On the other hand, the resale value would probably be rather low considering the condition and the neighborhood. I don't want to assume too much here, but if a potential buyer is interested in the house by virtue of not being able to afford a house in a better neighborhood or better condition, their finances and credit history may make it difficult for them to be approved for a mortgage. That would reduce the potential buyer pool and further reduce the sale price. If you can pull more in rent than the mortgage, you definitely have an opportunity to come ahead. Maybe window A/C units and a repaired chimney are enough if you're renting. Your rental income would pay for that in less than a year even while paying your mortgage for you. (Of course you don't want to become a sleazy slumlord either.)", "title": "" }, { "docid": "9f8bbe2d727be025e04e2f370bc0c887", "text": "\"If you're losing money or breaking even, you own a bad investment. The problem you have is that you are emotionally invested in your tenant. That isn't a bad thing in general but it's costing you money and, unless interest rates fall enough to justify a refi or property taxes go down in your area, that's kind of unlikely to change. Option #1 - Tell your wife that you are willing to accept a loss up to a certain level because of your long term relationship with your tenant. In a perfect world, the two of you would then discuss what the \"\"magic number\"\" would be where you got out and come to a compromise. For example, if you are comfortable losing up to $3,000 per year and she is unhappy with any loss, you may agree on selling the house when your losses climb to $1,500. In a less perfect world, it would cause an argument as she has already told you what she wants you to do. Option #2 - Raise the rent to the break even point. From what you've said, this will likely result in the loss of your tenant but you could then rent to someone else for significantly more. Option #3 - Sell the house. It's an investment property which means it's supposed to make money for you. It can do that very quickly by way of a sale and then it's no longer your problem. Option #4 - Sell the house to your tenant. You bought it for $50,000 and it's currently worth $150,000 (roughly). The problem you face is that property taxes have gone up and caused your mortgage to increase past your tenants ability to pay. My guess is, after 15 years, your payoff is somewhere in the high $20's to mid 30's assuming you got a 30 year loan and haven't refinanced. If you sell to her for say $75,000 (or even up to $90,000) you will still make a profit (wife is happy), she will get a mortgage she can afford and be able to stay in the house (you and the tenant are happy). Added bonus is that her property taxes would be lower (assuming a different rate for investment property in your area). I would discuss this at length with your wife as well before making such an offer. Option #5 - Get a property management company. As mentioned above, they will keep a percentage but will remove your emotions from the equation altogether and turn the situation into a winner. I don't know if your wife is right in saying you don't have the stomach for this, but I do think your heart is getting in the way in this particular situation. I get the feeling that if your tenant was 25 years old and had only been renting from you since last October, you would have no problem raising the rent to market levels at every renewal.\"", "title": "" }, { "docid": "6fdbaa546d48da1f36f5208584e65bb5", "text": "For insight on what will happen, I suggest looking at the situation from the lender's perspective: If your setbacks are temporary, and you are likely to get back on your feet again, they will protect their investment by making accommodations, and probably charging you extra fees along the way. If your financial hardship seems irredeemable, they probably try to squeeze you for as much as possible, and then eventually take your house, protecting their investment as best they can. If they are going to foreclose, they may be reluctant to do it quickly, as foreclosure is expensive, takes man power, and looks bad on their books. So it may get pushed off for a Quarter, or a fiscal year. But if you are asking if they'll help you out from the goodness of their heart, well, a bank has no heart, and creditors are interested in ROI. They'll take the easiest path to profit, or failing that, the path to minimum financial losses. The personal consequences to you are not their concern. Once you realize this, it may change your thinking about your own situation. If you think you have a path to financial recovery, then you need to make that clear to them, in writing, with details. Make a business case that working with you is in their own best interests. If you cannot make such a case, recognize that they'll likely squeeze you for as much as possible in penalties, fees, interest payments, etc, before eventually foreclosing on you anyway. Don't play that game. If your home is a lost cause financially, plan how to get out from it with the smallest losses possible. Don't pay more than you need to, and don't throw good money after bad.", "title": "" }, { "docid": "ad9c8354dd526a1f94c6ca1f2ff3a52c", "text": "A bigger down payment is good, because it insulates you from the swings in the real estate market. If you get FHA loan with 3% down and end up being forced to move during a down market, you'll be in a real bind, as you'll need to scrape up some cash or borrow funds to get out of your mortgage.", "title": "" }, { "docid": "9dcde1f44c58e9694cf6dd845c37d03b", "text": "Having someone else paying you rent is always going to be the better deal financially. The question is, what does $450k buy in the neighborhood in which you want to live, vs $800k? I'm going to assume you can afford either option (buying a $450k home and not selling, or an $800k home and selling your current one) whether someone's paying you rent or not. Let's make up some numbers here; a $450k home, financed 80/20 (360k principal) at 4% for 30 years will cost you about $1720 in P&I payments per year (plus escrows such as RE taxes, PMI, and homeowners insurance where applicable). An $800k home financed 80/20 (640k principal) at 4% for 30yr will give you payments of about $3,055/mo before taxes and insurance. So, the worst case overall is that you buy a 450k home in the new neighborhood and are not, at any given time, collecting rent on the old property. That would (assuming the mortgage terms on both home loans were comparable) cost you $3440/mo and you'd be living in a $450k home in a neighborhood where 450k may not buy a home as nice as the one you moved out of. The question as I stated above is this; assuming you had a reliable tenant in your home for the entire remaining life of the loan on your current home, which is more acceptable to you: buying $450k of home (which might be a downgrade in sqft or amenities) and paying $2020 in P&I, or paying about a grand more ($3055/mo) for a much nicer home in the new location? Strictly from a money perspective, the renter is going to be the best option, IF you get reliable tenancy for the entire life of the mortgage on that house; you'll be paying $2020/mo for 30 years, which is $727,200, to end up with $950k of total home value (plus adjustments for actual home value appreciation/depreciation). That's the only way you'll come out ahead on any mortgage; have someone else pay most of it for you. If you don't rent, the $800k home will cost you $1,099,800, while two $450k homes will cost you $1,454,400. The percentage of home value over total payments for the 800k home would be 72% (you will have paid 137% of the value of the home), while you will have paid 153% of the value of two 450k homes.", "title": "" }, { "docid": "b8381f6e7afdb98bc894287b37b344a6", "text": "I've had a hard time finding out details on remortgaging Help to Buy loans myself, but found one article (http://www.thisismoney.co.uk/money/mortgageshome/article-3038831/Help-Buy-borrowers-risk-missing-best-remortgage-deals.html) which points out it IS possible. But also that there aren't many lenders offering such deals out there. The article lists a number of lenders that do offer these programs, and the extra requirements on equity you might have to have. It sounds like it's going to be critical to know how much equity you've built up. Since part of the valuation increase will be credited to Help to Buy, you won't get all the £30k increase you've mentioned. Instead, I believe you'll only get 80%, so £24k. Which would mean your total equity is £24k + £7k = £31k, plus whatever you might have already paid off. I'm going to assume there isn't much you've paid off, so will assume just over 18%. (31/170) While this is higher than most of the equity limits mentioned in the above article, keep in mind you'd only get cash out corresponding to the difference between your current equity amount and the equity required for the loan. For example, if you went with a loan requiring 15% equity to qualify, you'd only have 3% over that, and thus get £5.1k out. And that's before any fees you might have to pay! (You might have new origination fees, but you also might have early repayment fees.) Maybe you could pursue a lower money down refi and get to keep more, but the same article points out that Help to Buy might consider that too risky for you, and refuse to allow the refi. I think it's worth shopping around to get actual numbers for your exact situation, but personally it doesn't sound like you have enough equity yet to get much cash out of a refi. Perhaps you'll get lucky though. Best of luck!", "title": "" }, { "docid": "7afe1fea85b8fbd92dabd49aec409b5d", "text": "With student loans at 2%, I wouldn't pay a dime over minimum on that, and I certainly wouldn't sell an investment property to pay them off, you can get CD's that beat 2% interest. With the rentals, you could sell the one that isn't performing as well and pay no capital gains tax if you lived in it 2 of the last 5 years (counting 5 years back from sale date). That'd be a nice chunk of money for your down-payment. The risk of using proceeds to buy a different rental property is that you may find you don't like being a distance landlord, and then you'd lose money selling or be stuck doing something you don't enjoy for a while until you can sell without a loss. Like you mentioned, the risk of selling either/both rental properties is that if the Arizona housing/rental markets do well you'd have given up your position and missed out. Ultimately, I think it's about your desired timeline, if you are content to wait a while to buy in San Diego, you could have a handsome down payment, will know whether or not you like being a distance landlord, and can sell/keep the rentals accordingly. Alternatively, if you want to get a house in San Diego sooner, then selling one or both rentals gets you there faster. If I was in your position, I'd probably sell the rental that I lived in and put that toward a down-payment on a primary residence, keeping the other rental for now and trying my hand at being a distance landlord.", "title": "" }, { "docid": "3d0658033b028dc27886717f8b643785", "text": "\"There is no guarantee improvements will raise the appraised value. You also don't want your property tax appraisal to go up if you can avoid it. Since you are talking on the order of $10k I'll assume you're only a few thousand dollars more from getting to 20%. That said, any schemes you might come up with like refinancing or second line of credit will probably cost more in fees than they are worth, unless you can get a much nicer interest rate. Figure out how long you plan to stay there, Evaluate your options (do nothing, principal reduction, refinance for 30, 15, or even an ARM) and figure out your bottom line by comparing everything in a spreadsheet One more thing: if you do pay a substantial amount of extra principal, you can ask the lender to \"\"rebalance\"\" which will correct the minimum monthly payment to your remaining term. This will likely incur a fee, but could be helpful in an emergency\"", "title": "" }, { "docid": "6f663ad4ec7451b19430e6e659f58d06", "text": "\"So here are some of the risks of renting a property: Plus the \"\"normal\"\" risk of losing your job, health, etc., but those are going to be bad whether you had the rental or not, so those aren't really a factor. Can you beat the average gain of the S&P 500 over 10 years? Probably, but there's significant risk that something bad will happen that could cause the whole thing to come crashing down. How many months can you go without the rental income before you can't pay all three mortgages? Is that a risk you're willing to take for $5,000 per year or less? If the second home was paid for with cash, AND you could pay the first mortgage with your income, then you'd be in a much better situation to have a rental property. The fact that the property is significantly leveraged means that any unfortunate event could put you in a serious financial bind, and makes me say that you should sell the rental, get your first mortgage paid down as soon as possible, and start saving cash to buy rental property if that's what you want to invest in. I think we could go at least 24 months with no rental income Well that means that you have about $36k in an emergency fund, which makes me a little more comfortable with a rental, but that's still a LOT of debt spread across two houses. Another way to think about it: If you just had your main house with a $600k mortgage (and no HELOC), would you take out a $76k HELOC and buy the second house with a $200k mortgage?\"", "title": "" } ]	fiqa
4dbfce12c08f76b133760ce9508c2e59	Where to Park Proceeds from House Sale for 2-5 Years?	[ { "docid": "5dcea2a043b2b89f705cdb34fec89fe2", "text": "\"As soon as you specify FDIC you immediately eliminate what most people would call investing. The word you use in the title \"\"Parking\"\" is really appropriate. You want to preserve the value. Therefore bank or credit union deposits into either a high yield account or a Certificate of Deposit are the way to go. Because you are not planning on a lot of transactions you should also look at some of the online only banks, of course only those with FDIC coverage. The money may need to be available over the next 2-5 years to cover college tuition If needing it for college tuition is a high probability you could consider putting some of the money in your state's 529 plan. Many states give you a tax deduction for contributions. You need to check how much is the maximum you can contribute in a year. There may be a maximum for your state. Also gift tax provisions have to be considered. You will also want to understand what is the amount you will need to cover tuition and other eligible expenses. There is a big difference between living at home and going to a state school, and going out of state. The good news is that if you have gains and you use the money for permissible expenses, the gains are tax free. Most states have a plan that becomes more conservative as the child gets closer to college, therefore the chance of losses will be low. The plan is trying to avoid having a large drop in value just a the kid hits their late teens, exactly what you are looking for.\"", "title": "" }, { "docid": "e6871d8efa74a9cf17f99e55876c1270", "text": "There are some high-yield savings accounts out there that might get you close to 1 percent. Shorter term CDs might also serve you well here- rates are above 1 percent, even with 1-2 year terms: http://www.nerdwallet.com/rates/cds/best-cd-rates/", "title": "" }, { "docid": "aad7d81d0864ae51527e037701783ac4", "text": "\"Your objectives are contradictory and/or not possible. Eliminating the non-taxable objective: You could divide the $100K in 5 increments, making a \"\"CD ladder\"\" $25K in 3mo CD (or savings a/c) $25K in 6 mo CD $25K in 9mo CD $25K in 1 yr CD or similar structure (6mo also works well) Every maturing CD you are able to access cash and/or invest in another longest maturity CD, and earn a higher rate of interest. This plan also works well to plan for future interest rates hikes. If you are forced to access (sell CD's) ALL the $$$ at any time, you will only lose accrued interest, none of the principal. All FDIC guaranteed. If non-taxable is the highest priority, \"\"invest\"\" in a tax-free money market fund....see Vanguard Funds. You will not have FDIC guarantee.\"", "title": "" }, { "docid": "36d3ef6c7eb9dd90aba57b785b47ddf7", "text": "With 100K, I would dump the first 95K into something lame like a tax advantaged bond or do as the others here suggested. My alternative would be to take the remaining 5K and put into something leveraged. For instance, 5K would be more than enough to buy long term LEAPS options on the SPY ETF. @ Time of post, you could get 4 contracts on the DEC 2017 leaps at the $225 strike (roughly 10% out of the money) for under $1200 apiece. Possibly $1100 if you scalp them. 4 * $1200 = $4800 at risk. 4 * $22500 = $90,000 = amount of SPY stock you control with your $4800. If the market drops, SPY never reaches $225 in the next 3 years and you are out the $4800, but can use that to reduce capital gains and still have the $95K on the sidelines earning $950 or so per year. Basically you'd be guaranteed to have $97K in the bank after two years. If the market goes up significantly before 2018, you'll still have 95K in the bank earning a measly 1%, but you've also got 4 contracts which are equal to $90K shares of S&P 500. Almost as if every single dollar was invested. Bad news, if SPY goes up 20% or more from current levels over the next three years you'll unfortunately have earned some taxable income. Boo freaking hoo. https://money.stackexchange.com/a/48958/13043", "title": "" }, { "docid": "169a8d78dcfe31e4f612e23729aa6033", "text": "\"Individual municipal bonds (not a fund) that will come to term in 2017 from your state. This satisfies 1, 2, 4 and 5. It doesn't satisfy #2. These are not insured, and there can be details in each state about whether the municipal bonds are backed up by state general revenues in the event of a municipal bankruptcy; there are two general kinds, \"\"general obligation\"\" backed by the political will to raise taxes if needed; and \"\"revenue bonds\"\" backed by cash flow such as toll revenue, water utility bills and so forth. Municipal bankruptcies are rare but not impossible. http://www.bankrate.com/finance/investing/avoid-municipal-bonds-that-default-2.aspx\"", "title": "" } ]	[ { "docid": "c8a32bd41ce337dbffc94eb86141d43a", "text": "In response to one of the comments you might be interested in owning the new home as a rental property for a year. You could flip this thinking and make the current home into a rental property for a period of time (1 year seems to be the consensus, consult an accountant familiar with real estate). This will potentially allow for a 1031 exchange into another property -- although I believe that property can't then be a primary residence. All potentially not worth the complication for the tax savings, but figured I'd throw it out there. Also, the 1031 exchange defers taxes until some point in the future in which you finally sell the asset(s) for cash.", "title": "" }, { "docid": "584d4fc1a1307f5a2858d74f936892f4", "text": "And he has to pay for it every home repair and every month the property sets empty. His loss each month is not $250, but probably closer to $500. In generally you need to clear at least $200 ABOVE PTI (principle, taxes and interest) to cover repair and the like to property. From your post, it sounds like your dad was forced into the land-lord business by the recession. Unless he plans to hold the property until its rental value has increased by $500 a month, he should consider selling it and writing-off the loss. Losing money bit by bit on a house isn't a tax write-off event. Selling a property for less than you bought it for generally is. FYI, I got the $500/month loss by assuming that repairs/emptiness/etc will cost you about $200 a month, and added $50 for your dad's time managing the property.", "title": "" }, { "docid": "145e74fa3efcff20e658426555ae1a21", "text": "In most cases my preference would be to buy. However, if you intend to sell after just one year I would maybe lean towards renting. You haven't included buying and selling cost into your equation nor any property taxes, and as John Bensin suggests, maintenance costs. If you were looking to hold the property for at least 5 years, 10 years or more, then if the numbers stood up, I would defiantly go with the buy option. You can rent it out after you move out and if the rent is higher than your total expenses in holding the property, you could rely on some extra passive income.", "title": "" }, { "docid": "8458e6ebcc66911b291d37d15bc50a86", "text": "To start, I hope you are aware that the properties' basis gets stepped up to market value on inheritance. The new basis is the start for the depreciation that must be applied each year after being placed in service as rental units. This is not optional. Upon selling the units, depreciation is recaptured whether it's taken each year or not. There is no rule of thumb for such matters. Some owners would simply collect the rent, keep a reserve for expenses or empty units, and pocket the difference. Others would refinance to take cash out and leverage to buy more property. The banker is not your friend, by the way. He is a salesman looking to get his cut. The market has had a good recent run, doubling from its lows. Right now, I'm not rushing to prepay my 3.5% mortgage sooner than it's due, nor am I looking to pull out $500K to throw into the market. Your proposal may very well work if the market sees a return higher than the mortgage rate. On the flip side I'm compelled to ask - if the market drops 40% right after you buy in, will you lose sleep? And a fellow poster (@littleadv) is whispering to me - ask a pro if the tax on a rental mortgage is still deductible when used for other purposes, e.g. a stock purchase unrelated to the properties. Last, there are those who suggest that if you want to keep investing in real estate, leverage is fine as long as the numbers work. From the scenario you described, you plan to leverage into an already pretty high (in terms of PE10) and simply magnifying your risk.", "title": "" }, { "docid": "a9e31264f9315abe930f2a44710544f2", "text": "\"There are a few of ways to do this: Ask the seller if they will hold a Vendor Take-Back Mortgage or VTB. They essentially hold a second mortgage on the property for a shorter amortization (1 - 5 years) with a higher interest rate than the bank-held mortgage. The upside for the seller is he makes a little money on the second mortgage. The downsides for the seller are that he doesn't get the entire purchase price of the property up-front, and that if the buyer goes bankrupt, the vendor will be second in line behind the bank to get any money from the property when it's sold for amounts owing. Look for a seller that is willing to put together a lease-to-own deal. The buyer and seller agree to a purchase price set 5 years in the future. A monthly rent is calculated such that paying it for 5 years equals a 20% down payment. At the 5 year mark you decide if you want to buy or not. If you do not, the deal is nulled. If you do, the rent you paid is counted as the down payment for the property and the sale moves forward. Find a private lender for the down payment. This is known as a \"\"hard money\"\" lender for a reason: they know you can't get it anywhere else. Expect to pay higher rates than a VTB. Ask your mortgage broker and your real estate agent about these options.\"", "title": "" }, { "docid": "88d77a3dd754aefdfb72b4a009b8c5e4", "text": "\"Started to post this as a comment, but I think it's actually a legitimate answer: Running a rental property is neither speculation nor investment, but a business, just as if you were renting cars or tools or anything else. That puts it in an entirely different category. The property may gain or lose value, but you don't know which or how much until you're ready to terminate the business... so, like your own house, it really isn't a liquid asset; it's closer to being inventory. Meanwhile, like inventory, you need to \"\"restock\"\" it on a fairly regular basis by maintaining it, finding tenants, and so on. And how much it returns depends strongly on how much effort you put into it in terms of selecting the right location and product in the first place, and in how you market yourself against all the other businesses offering near-equivalent product, and how you differentiate the product, and so on. I think approaching it from that angle -- deciding whether you really want to be a business owner or keep all your money in more abstract investments, then deciding what businesses are interesting to you and running the numbers to see what they're likely to return as income, THEN making up your mind whether real estate is the winner from that group -- is likely to produce better decisions. Among other things, it helps you remember to focus on ALL the costs of the business. When doing the math, don't forget that income from the business is taxed at income rates, not investment rates. And don't forget that you're making a bet on the future of that neighborhood as well as the future of that house; changes in demographics or housing stock or business climate could all affect what rents you can charge as well as the value of the property, and not necessarily in the same direction. It may absolutely be the right place to put some of your money. It may not. Explore all the possible outcomes before making the bet, and decide whether you're willing to do the work needed to influence which ones are more likely.\"", "title": "" }, { "docid": "4cfcba5b1e6747901d30d44efc2ff52f", "text": "As weird as it seems, 5 years is not a long term investment. Furthermore investing is about accepting risk. Based on your criteria for the alternative to a down payment, I think your only choice is to make the larger down payment. If however, you were willing to invest that money for the long term (in a retirement account or an educational account for example) then I would definitely encourage you to invest. I think the chance that a long term investment in a diversified investment account will exceed 3.25% is pretty high. However, that is only my opinion, and I am not clairvoyant, so your let your personal tolerance to risk be your guide. But again, based on the way you asked it, down payment all the way. Your time frame means you are not an investor. Therefore your only option for risk free storage of money is an FDIC insured account, which might pay a little less than 1% for the next 5 years. A bigger down payment will have a 3.25% return in this case. In that order. #4 and #5 could be swapped if the interest rate on the loans is really low.", "title": "" }, { "docid": "257c70a9f954a96a7657e3761647efee", "text": "Think carefully about the added expenses. It may still make sense, but it probably won't be as cheap as you are thinking. In addition to the mortgage and property taxes, there is also insurance and building maintenance and repairs. Appliances, carpets, and roofs need to be replaced periodically. Depending on the area of the country there is lawn maintenance and now removal. You need to make sure you can cover the expenses if you are without a tenant for 6 months or longer. When tenants change, there is usually some cleaning and painting that needs to be done. You can deduct the mortgage interest and property taxes on your part of the building. You need to claim any rent as income, but can deduct the other part of the mortgage interest and taxes as an expense. You can also deduct building maintenance and repairs on the rental portion of the building. Some improvements need to be depreciated over time (5-27 years). You also need to depreciate the cost of the rental portion of the building. This basically means that you get a deduction each year, but lower the cost basis of the building so you owe more capital gains taxes when you sell. If you do this, I would get a professional to do your taxes at least the first year. Its not hard once you see it done, but there are a lot of details and complications that you want to get right.", "title": "" }, { "docid": "9e6a893421677586f657499d3a01381b", "text": "\"It sounds like you want a place to park some money that's reasonably safe and liquid, but can sustain light to moderate losses. Consider some bond funds or bond ETFs filled with medium-term corporate bonds. It looks like you can get 3-3.5% or so. (I'd skip the municipal bond market right now, but \"\"why\"\" is a matter for its own question). Avoid long-term bonds or CDs if you're worried about inflation; interest rates will rise and the immediate value of the bonds will fall until the final payout value matches those rates.\"", "title": "" }, { "docid": "8920dfc811304724fd604a06d0c91b13", "text": "Ok, have your father 'sell' you the house with a RECORDED land contract for x dollars and a gift of equity(GOE) of y. He writes of the max he can each year for the GOE (ask a tax attorney on this one), and your cousin lends him the money for his FL prop. Consult a tax attorney on the capital gains, but you can write off the actualized gains at sale if you LIVED in the prop for 2 of the last 5 or 7 years (I can't remember) and were on title. Years later, you use the recorded land contract, with the verifiable on time payments you've been making, to a conforming lender and do a R&T refi.", "title": "" }, { "docid": "4947e3208e0f0fd6a510771e77a0b9e3", "text": "If he can't manage, best is he sells it off. Its easier to manage cash. Not sure what tax you are talking about. He should have already paid tax on fair market value of the 20 flats. If the intention of Mr X is to gift to son by way of death, then yes the tax will be less. Else whenever Mr X sells there will be tax. how to manage these 20 apartments? Hire a broker. He may front run quite a few things like showing the place etc. There is a risk if he is given a free hand, he may not get good quality tenant. There are quite a few shark brokers [its unregulated] who may arm twist seeing the opportunity of an old man with 20 flats. See if you can do long term lease with companies looking for guest house etc, or certain companies who run guest house. They would like the scale, generally 3-5 years contracts are done. The rent is good and overall less hassle. The risk is most would ask to invest more in furnishing and contracts can be terminated in months notice. If the property is in large metro [Delhi/Bangalore/Chennai/etc] These places have good property management companies. Ensure that you have independent lawyer; there are certain aspects of law that may need to be studied.", "title": "" }, { "docid": "13159adef1a7b6b0dd306276c6d60960", "text": "I must say that this is a question that you should hire a professional tax adviser (EA/CPA licensed in your State) to answer. It is way above our amateurs' pay-grade. That said, I'll tell you what I personally think on the issue. I'm not a licensed tax adviser, and nothing that I write here can be used in any way as a justification for any action. Read the full disclaimer in my profile. I believe you're right to treat those as assets. You bought them as an investment, and you intend to sell them for profit. Here the good news for you end. As we decided to define the domains as an asset, we need to decide what type of asset it is. I believe you're holding a Sec. 197 asset. This is because domain is essentially akin to franchise and trademark, and as such falls under the Sec. 197 definition. That means that your amortization period is 15 years. Your expenses related to these domains should also be amortized, on the same schedule. When you sell a domain, you can deduct the portion that you have not yet deducted from the amortization schedule from your proceeds. Keep in mind passive loss limitations, since losses from assets held as investment cannot offset Schedule C income.", "title": "" }, { "docid": "2139d24685a800e9d6c9b24094764ec4", "text": "I think there are a few facets to this, namely: Overall, I wouldn't concentrate on paying off the house if I didn't have any other money parked and invested, but I'd still try to get rid of the mortgage ASAP as it'll give you more money that you can invest, too. At the end of the day, if you save out paying $20k in interest, that's almost $20k you can invest. Yes, I realise there's a time component to this as well and you might well get a better return overall if you invested the $20k now that in 5 years' time. But I'd still rather pay off the house.", "title": "" }, { "docid": "a3bc876d5188dcdeb7453975b40e5e2b", "text": "There are a number of ways you could do this. The first step is to work out what a fair price is. Either make an estimate that you both accept, possibly getting a real estate agent to give you a free evaluation, or get a professional evaluation from some you both accept. Once you have a valuation, the simplest of course is to pay your brother that value (in return for his transferring his ownership to you). Hopefully you have that much money in savings. If you don't have that money (but do have income) you may need to take a mortgage, which would put your home at risk. If the pollution you speak of hasn't been fixed a mortgage may be out of the question. An alternative, if you have income, and your brother doesn't need the money right now, is to make the money you owe him for the house a loan from him to you. He transfers his ownership of the house to you, you pay him its value, but he simultaneously loans you that exact same amount. No actual money needs to change hands. You would make him a regular payment, essentially the interest on that loan, and also make an agreement to pay off the principal of the loan (i.e. the value of the house) when the house is sold, or when you pass away. While you could do this informally if everyone agrees, it would be much better to make a legal agreement, so that everybody is exactly sure what they are expecting.", "title": "" }, { "docid": "26063f8b48952df9d44916db1b78b668", "text": "Purchase capital asset (deductible expense). Sell capital asset next year, then use the proceeds of the sale to pay your employees. Unless you buy in a quickly gentrifying area you'll have a fair amount of unrecoverable expenses like closing costs, repairs, etc that you won't make up with an increase in property value. Plus property taxes, utilities, etc. And who knows how quickly you can sell the place, might end up with a bloated useless asset and no money to pay employees. And in an audit an asset purchased with no actual use to the business will get disallowed. Either retain the earnings and take the tax hit, or make a deal with your employees to pre pay them their next year's salary. Of course if you fire someone or they quit good luck getting the overpaid portion back.", "title": "" } ]	fiqa
805406dab24e7c2ded89f41e8124f129	Can extra mortgage payments be made to lower the monthly payment amount?	[ { "docid": "b72faafa690bbfb528899a7265893f15", "text": "Some types of loans allow for reamortization (recasting) - which does exactly what you're talking about (making a big payment and then refiguring the monthly amount rather than the overall lifespan), without requiring any kind of a fee that refinancing does. Not every, or even most, mortgages, allow for recasting. And most that do offer recasting, may limit the recasting to a once-a-loan type of thing. So check beforehand, and make those big payments before you do any recasting. (Most banks and mortgage servicing companies may not advertise or even speak about recasting options unless you specifically ask your loan officer.)", "title": "" }, { "docid": "ac30b6a293c9f11f2127bb4b8f1bbd2e", "text": "That's tricky. Typically you lock in the minimum monthly payment when you close the loan. You can pay more but not less. Options:", "title": "" }, { "docid": "5539e69e711f952447c4be73612b1556", "text": "Typically, this is not an option, as the monthly payments are fixed. It depends on the willingness of your financing bank for such a change. You probably will have to refinance (with them or another lender); which is not a bad thing, as you even can get a lower interest rate potentially (as of Jan 2017 - this will change). Consider too: It could be a better solution to instead invest the 25000, and use the investment returns to fill up the difference every month. Certainly more effort, but you probably come out ahead financially.", "title": "" } ]	[ { "docid": "4f7d9c6d9bd9a85810ebab48a59bacba", "text": "Because a paying down a liability and thus gaining asset equity is not technically an expense, GnuCash will not include it in any expense reports. However, you can abuse the system a bit to do what you want. The mortgage payment should be divided into principle, interest, and escrow / tax / insurance accounts. For example: A mortgage payment will then be a split transaction that puts money into these accounts from your bank account: For completeness, the escrow account will periodically be used to pay actual expenses, which just moves the expense from escrow into insurance or tax. This is nice so that expenses for a month aren't inflated due to a tax payment being made: Now, this is all fairly typical and results in all but the principle part of the mortgage payment being included in expense reports. The trick then is to duplicate the principle portion in a way that it makes its way into your expenses. One way to do this is to create a principle expense account and also a fictional equity account that provides the funds to pay it: Every time you record a mortgage payment, add a transfer from this equity account into the Principle Payments expense account. This will mess things up at some level, since you're inventing an expense that does not truly exist, but if you're using GnuCash more to monitor monthly cash flow, it causes the Income/Expense report to finally make sense. Example transaction split:", "title": "" }, { "docid": "8dfd8f9551cb41ca84b421e899594d2c", "text": "Our mortgage provider actually took the initiative to send us a refinance package with no closing costs to us and nothing added to the note; took us from a 30-year-fixed ~6.5% note to a 15-year-fixed ~5% note, and dropped the monthly payment in the process. You might talk to your existing lender to see if they would do something like that for you; it gives them a chance to keep your business, and it cuts your costs.", "title": "" }, { "docid": "1f9a3362862b1e793b3f861d03e6f37f", "text": "Yes, you may do this at any time before signing - but to make a change like this after the official loan documents have been drawn up will cost you extra fees. The typical redraw fee is around $200 in CA. Does it make sense to do so? No, it does not. If you have an extra 1%, it would probably be better to use that money to purchase a lower interest rate. Here's an example: Let's say you're buying a $200,000 house and your offered interest rate is 4.75% (just an example). With 10% down you'd have a loan amount of $180,000 and a p&i payment of $938.97 per month. With 11% down you'd have a loan amount of $178,000 and a p&i payment of $928.53 per month. Now let's pretend you buy your interest rate down to 4.375%. With 10% down you'd still have a loan amount of $180,000 but your p&i payment would be $898.71 per month. Even though the last option gives you the best payment, if I were in your shoes I'd stick with the 10% down and save that extra cash in the bank for a rainy day. Buying a home comes with a lot of new expenses and many are unexpected. Good luck!", "title": "" }, { "docid": "3bfede66164239ad5dd23b07c12e6ca0", "text": "\"In the Netherlands specifically, there are several reasons to pay extra off on your mortgage. First, house prices have dropped significantly in the last several years. They are rising slowly now, but it's region specific and you can still borrow more than 100% of the price of the house. Under these conditions, if you choose to sell your house and the outstanding mortgage amount is greater than the value of your house, you are left with a gap (restschuld) to finance. I think the rules have changed recently around this, allowing you to finance this gap with a new mortgage, but this is not a good idea. The tax implications of this are likely to be complicated in the long run and your new house may not cover this gap for some time. Second, the less you owe on your house, the lower mortgage rates you can get. Mortgages in the Netherlands usually fall into categories based on percentage of the auction price at a foreclosure sale (executiewaarde). If you pay more of your mortgage off, you may qualify for a lower interest rate, possibly making refinancing interesting. This is especially important if interest rates continue to drop but the value of your house does not increase or even decreases. Third, if you choose to keep your house and rent it out, the banks in the Netherlands have very strict rules on this if you want to do it above board. I've read that some banks require the mortgage amount (NB not the value you may have built up in a linked savings or insurance account) to be less than 50% of the foreclosure auction price (executiewaarde). Also, related to point 2, if you have something other than a linear or annuity mortgage, you will need to refinance to do this as the tax advantages around savings mortgages ([bank]spaarhypotheken) do not apply if it is not used as your own residence. Finally, if you choose to sell and you are in the happy position of having the value of your house be greater than the value of your mortgage (you have an overwaarde), there may still be some obstacles. Any value you have accumulated in a linked savings or life insurance account is not available until after you sell your house. Extra value derived purely from the difference between mortgage value and sale price may be easier to deal with. EDIT: As a final note, I've made extra payments on both a \"\"Spaarhypotheek\"\" (linked life insurance) and a \"\"Bankspaarhypotheek\"\" (linked savings account). In one, the principal paid each month reduced and the mortgage lifetime stayed the same. In the other, the principal paid each month stayed the same and the lifetime reduced. In both cases, interest payments were less each month. I would contact your mortgage provider to understand what the expected impact of extra payments will be.\"", "title": "" }, { "docid": "0419af7058aba64b5841113e45376b6b", "text": "I found this article to clarify some of the issues. One point raised is that the concession can be thought of as getting tax exemption for the closing costs, which normally are not allow. I'm not sure I follow this logic, since you can only deduct the interest, not the principal. I asked a lender, and he verified you can only spend the concession money on closing costs. I think if your closing costs are less than 1% of the loan, its probably not worth it to go for a concession over the price reduction. With interest rates so low, its also not cost effective to buy down points on the loan. This should limit most of your closing costs.", "title": "" }, { "docid": "bfa0272d5b3a2671dfda9ee449eee319", "text": "\"littleadv's first comment - check the note - is really the answer. But your issue is twofold - Every mortgage I've had (over 10 in my lifetime) allows early principal payments. The extra principal can only be applied at the same time as the regular payment. Think of it this way - only at that moment is there no interest owed. If a week later you try to pay toward only principal, the system will not handle it. Pretty simple - extra principal with the payment due. In fact, any mortgage I've had that offered a monthly bill or coupon book will have that very line \"\"extra principal.\"\" By coincidence, I just did this for a mortgage on my rental. I make these payments through my bank's billpay service. I noted the extra principal in the 'notes' section of the virtual check. But again, the note will explicitly state if there's an issue with prepayments of principal. The larger issue is that your friend wishes to treat the mortgage like a bi-weekly. The bank expects the full amount as a payment and likely, has no obligation to accept anything less than the full amount. Given my first comment above here is the plan for your friend to do 99% of what she wishes: Tell her, there's nothing magic about bi-weekly, it's a budget-clever way to send the money, but over a year, it's simply paying 108% of the normal payment. If she wants to burn the mortgage faster, tell her to add what she wishes every month, even $10, it all adds up. Final note - There are two schools of thought to either extreme, (a) pay the mortgage off as fast as you can, no debt is the goal and (b) the mortgage is the lowest rate you'll ever have on borrowed money, pay it as slow as you can, and invest any extra money. I accept and respect both views. For your friend, and first group, I'm compelled to add - Be sure to deposit to your retirement account's matched funds to gain the entire match. $1 can pay toward your 6% mortgage or be doubled on deposit to $2 in your 401(k), if available. And pay off all high interest debt first. This should stand to reason, but I've seen people keep their 18% card debt while prepaying their mortgage.\"", "title": "" }, { "docid": "ca9cdf23b1db6fb5ca4fee410435c107", "text": "First of all, congratulations on your home purchase. The more equity you build in your house, the more of the sale price you get out of it when you move to your next house. This will enable you to consume more house in the future. Think of it as making early payments towards your next down payment. Another option is to save up a chunk of money and recast your mortgage, paying down the principal and having the resulting amount re-amortized to provide you with a lower monthly payment. You may be able to do this at least once during your time in the house, and if you do it early enough it can potentially help your savings in other areas. On the other hand, it is possible given today's low interest rates for mortgages that in other forms of investments (such as index funds) you could make more on the money you'd be putting towards your extra payments. Then you would have more money in savings when you go to sell this house and buy the next one that you would in equity if you didn't go that route. This is riskier than building equity in your home, but potentially has a bigger pay-off. You do the trade-offs.", "title": "" }, { "docid": "cabd6507f50414dfaa6ef94b564f4d3a", "text": "\"The reason to put more money down or accept a shorter maximum term is because the bank sweetens the deal (or fails to sour it in some fashion). For example, typically, if there is less than 20% down, you have to pay an premium called \"\"Private Mortgage Insurance\"\", which makes it bad deal. But I see banks offering the same rate for a 15%-year mortgage as for a 30-year one, and I think: fools and their money. Take the 30-year and, if you feel like it pay more every month. Although why you would feel like it, I don't know, since it's very difficult to get that money back if you need it.\"", "title": "" }, { "docid": "a0b313dc70955d4dd6322d735b89def0", "text": "Don't do it. I would sell one of my investment houses and use the equity to pay down your primary mortgage. Then I would refinance my primary mortgage in order to lower the payments.", "title": "" }, { "docid": "00fb37a7d033be1b653ba67e7b758935", "text": "\"The one thing that I saw in here that raised a big red flag is that you said you \"\"overpaid\"\" on your interest. ALWAYS make sure you tell them that any extra money should be applied to principal only, not to interest. You accrue interest based on your outstanding principal amount, so getting that lower reduces the overall amount of interest you end up paying. Paying the interest ahead saves you nothing. However, make sure you pay the current interest owed that month. They can capitalize past due interest - in affect, change that to be considered an addition to the loan principal amount and you end up paying interest on the interest.\"", "title": "" }, { "docid": "fb27c66a35cc55960c02af798c2cf7b9", "text": "\"You'd have to check the terms of your contract. On most installment loans, I think, they calculate interest monthly, not daily. That is, if you make 3 payments of $96 over the course of the month instead of one payment of $288 at the end of the month (but before the due date), it makes absolutely zero difference to their interest calculation. They just total up your payments for the month. That's how my mortgage works and how some past loans I've had worked. All you'd accomplish is to cost yourself some time, postage if you're mailing payments, and waste the bank's time processing multiple payments. If the loan allows you to make pre-payments -- which I think most loans today do -- then what DOES work is to make an extra payment or an overpayment. If you have a few hundred extra dollars, make an extra payment. This reduces your principle and reduces the amount of interest you pay every month for the remainder of the loan. And if you're paying $1 less in interest, then that extra dollar goes against principle, which further reduces the amount you pay in interest the next month. This snowballs and can save you a lot in the long run. Better still, instead of paying $288 each month, pay, say, $300. Then every month you're nibbling away at the principle faster and faster. For example, I calculate that if you're paying $288 per month, you'll pay the loan off in 72 months and pay a total of $6062 in interest. Pay $300 per month and you'll pay it off in 67 months with a total of $6031 interest. Okay, not a huge deal. Pay $350 per month and you pay it off in 55 months with $5449 interest. (I just did quick calculations with a spreadsheet, not accurate to the penny, but close enough for comparison.) PS This is different from \"\"revolving credit\"\", like credit cards, where interest is calculated on the \"\"average daily balance\"\". With a credit card, making multiple payments would indeed reduce your interest. But not by much. If you pay $100 every 10 days instead of $300 at the end, then you're saving the interest on 20 days x $100 + 10 days x $100, so 12.5% = 0.03% per day, so 0.03% x ($2000+$1000) = 90 cents. If you're mailing your payments, the postage is 49 cents x 2 extra payments = 98 cents. You're losing 8 cents per month by doing this.\"", "title": "" }, { "docid": "8481a2039b2bc140fa374e80e6830c32", "text": "If there's no prepayment penalty, and if the extra is applied to principal rather than just toward later payments, then paying extra saves you money. Paying more often, by itself, doesn't. Paying early within a single month (ie, paying off the loan at the same average rate) doesn't save enough you be worth considering", "title": "" }, { "docid": "44a1a8100cc0999b85472c694aaf3436", "text": "As other people have said, a few thousand dollars isn't going to make any significant difference in what you pay - if you put an extra 1% down, and redraw all the documents accordingly, your payments are going to be roughly 1% less per month. So, for example, $1800 per month would become $1780 or so per month. You're much better off keeping the money as an emergency fund: When you buy a house, there are a lot of things that can go wrong (as is the case with your car, if you have one, and with medical expenses, and helping out a relative, not to mention losing your job, and so on). It doesn't sound like you have all that much money, because if you did, you would have put 20% down and avoided Private Mortgage Insurance, saving yourself a lot more money than 1%. So having a few more thousand in the bank sounds like a good thing.", "title": "" }, { "docid": "479abd1b12a309089099462934bdfe25", "text": "When you pay monthly, you're making 12 payments / year. Assuming you have a payment of $1000/mo, that's $12,000/year that you're paying for your mortgage. When you opt for bi-weekly, they're saying that you can pay half of your mortgage ($500) bi-weekly (can be configured to align with your paycheck). Since there are ~26 bi-weekly periods in a year, you're making 26 * $500 = $13,000 in mortgage payments each year. Some of these companies charge a fee for you to utilize this service. The main concept behind this is that people are horrible at budgeting on their own, so when $500 is immediately taken from your paycheck, you'll be able to budget around what's left and be able to make that extra payment each year without thinking about it or realizing it.", "title": "" }, { "docid": "72684d4f21bf2b2b5d71ece186c61e17", "text": "\"I'll answer in general terms, since I'm not familiar with the price ranges in Florida. The LLC formation costs $125 (state fee). In addition you'll need a registered agent. Registered agent could be your CPA/EA/bookkeeper/property manager/local friend, or you can pay firms specializing in providing registration and agents services such as NorthWestern or LegalZoom (there are many others). You'll need to pay an annual fee of ~$140 in Florida. If you are using someone to do the formation, they'll charge more (usually the on-line services are cheaper than a local CPA or attorney, by $100-$300). Bookkeeping will probably be charged by the hour, but some bookkeepers charge flat fees for small accounts. Per hour would be probably in the range of $40-$80. You'll have to pay taxes - both in Florida (where the property is) and on the Federal level to the IRS. You'll be paying them as a non-Resident individual. Your CPA/EA will charge you anywhere between $150 to $500 for that (if they charge more - run away, unless there's some specific complication that requires extra costs). You will need a ITIN for that, your CPA/EA can help you get one or you can apply yourself. Be careful with all those people selling cr@p about organizing in Delaware/Wyoming/Nevada (like CQM in his answer). Organizing in a state other than where the properties are located (or off-shore) won't save you a dime, and not only that - it will add to the costs. Because you'll have to pay to the state where you organized (CQM mentioned Wyoming - $50/year), keep registered agent in the state of organization (+$99) and also do all the things I've described above about Florida - as a \"\"Foreign\"\" (out of state) entity, which may mean higher fees. It won't save you any taxes as well, because you pay taxes to the state from which you derive income, which is Florida, either way. Remember that what you call LLC in Italy may be in fact a \"\"Corporation\"\" as defined in the US, and there's a huge difference. You should probably not put a real-estate property in a Corporation in the US. You must get a legal advice from a (Florida) lawyer ($0-$500/hr consultation), and a tax advice from a (Florida) CPA/EA ($0-$200/hr consultation). Do not consider anything I write here as a legal or tax advice, because it is not. You need a professional to help you because as an Italian, you don't know how things work exactly and relying on rumours and half-truths that you may find and get over the Internet may end up costing you significantly in damages. Also, talk to a reliable real estate agent and property manager before making any purchases.\"", "title": "" } ]	fiqa
c5eec1b9edf9b61ffffcbd1ff0178476	What is the formula for determining estimated stock price when I only have an earning per share number?	[ { "docid": "f535a0d7cc0538b79c889db8e26ef801", "text": "Stock price = Earning per share * P/E Ratio. Most of the time you will see in a listing the Stock price and the P/E ration. The calculation of the EPS is left as an exercise for the student Investor.", "title": "" }, { "docid": "306e4dbc38dd9989c1d6bd8e12f8a6bc", "text": "\"What you need to do is go to yahoo finance and look at different stock's P/E ratios. You'll quickly see that the stocks can be sorted by this number. It would be an interesting exercise to get an idea of why P/E isn't a fixed number, how certain industries cluster around a certain number, but even this isn't precise. But, it will give you an idea as to why your question has no answer. \"\"Annual earnings are $1. What is the share price?\"\" \"\"Question has no answer\"\"\"", "title": "" }, { "docid": "985975023a13cbcb386766fa4e23c83d", "text": "See this link...I was also looking an answer to the same questions. This site explains with an example http://www.independent-stock-investing.com/PE-Ratio.html", "title": "" } ]	[ { "docid": "217db2ca4993d62044f857c9618dbc9f", "text": "If you are calculating: keep in mind that company A probably also sells washers, dryers, stoves, dish washers.... Each of which has their own market size. Also remember that people pay X times the value of earnings per share, so the value depends not on sales but on earnings, and expected growth.", "title": "" }, { "docid": "1dc5ad53dbebd7ef9cc8e2a028298b67", "text": "\"You are probably going to hate my answer, but... If there was an easy way to ID stocks like FB that were going to do what FB did, then those stocks wouldn't exist and do that because they would be priced higher at the IPO. The fact is there is always some doubt, no one knows the future, and sometimes value only becomes clear with time. Everyone wants to buy a stock before it rises right? It will only be worth a rise if it makes more profit though, and once it is established as making more profit the price will be already up, because why wouldn't it be? That means to buy a real winner you have to buy before it is completely obvious to everyone that it is going to make more profit in the future, and that means stock prices trade at speculative prices, based on expected future performance, not current or past performance. Now I'm not saying past and future performance has nothing in common, but there is a reason that a thousand financially oriented websites quote a disclaimer like \"\"past performance is not necessarily a guide to future performance\"\". Now maybe this is sort of obvious, but looking at your image, excluding things like market capital that you've not restricted, the PE ratio is based on CURRENT price and PAST earnings, the dividend yield is based on PAST publications of what the dividend will be and CURRENT price, the price to book is based on PAST publication of the company balance sheet and CURRENT price, the EPS is based on PAST earnings and the published number of shares, and the ROI and net profit margin in based on published PAST profits and earnings and costs and number of shares. So it must be understood that every criteria chosen is PAST data that analysts have been looking at for a lot longer than you have with a lot more additional information and experience with it. The only information that is even CURRENT is the price. Thus, my ultimate conclusive point is, you can't based your stock picks on criteria like this because it's based on past information and current stock price, and the current stock price is based on the markets opinion of relative future performance. The only way to make a good stock pick is understand the business, understand its market, and possibly understand world economics as it pertains to that market and business. You can use various criteria as an initial filter to find companies and investigate them, but which criteria you use is entirely your preference. You might invest only in profitable companies (ones that make money and probably pay regular dividends), thus excluding something like an oil exploration company, which will just lose money, and lose it, and lose some more, forever... unless it hits the jackpot, in which case you might suddenly find yourself sitting on a huge profit. It's a question of risk and preference. Regarding your concern for false data. Google defines the Return on investment (TTM) (%) as: Trailing twelve month Income after taxes divided by the average (Total Long-Term Debt + Long-Term Liabilities + Shareholders Equity), expressed as a percentage. If you really think they have it wrong you could contact them, but it's probably correct for whatever past data or last annual financial results it's based on.\"", "title": "" }, { "docid": "891ae7495fd34bd6e56b712388c08c47", "text": "\"You have to calculate the total value of all shares and then ask yourself \"\"Would I invest that amount of money in this stock?\"\" If the answer is yes, then only sell what you need to sell. Take the $3k loss against your income, if you have no other gains. If you would not invest that amount of cash in that stock, then sell it all right now and carry forward the excess loss every year. Note at any point you have capital gains you can offset all of them with your loss carryover (not just $3k).\"", "title": "" }, { "docid": "9a3567483f191bfc140d85f2fd939ab9", "text": "The PE ratio stands for the Price-Earnings ratio. The price-earnings ratio is a straightforward formula: Share Price divided by earnings per share. Earnings per share is calculated by dividing the pre-tax profit for the company by the number of shares in issue. The PE ratio is seen by some as a measure of future growth of a company. As a general rule, the higher the PE, the faster the market believes a company will grow. This question is answered on our DividendMax website: http://www.dividendmax.co.uk/help/investor-glossary/what-is-the-pe-ratio Cheers", "title": "" }, { "docid": "4a03c953af7e493438d0b7e0261d42eb", "text": "\"Everything you are doing is fine. Here are a few practical notes in performing this analysis: Find all the primary filing information on EDGAR. For NYSE:MEI, you can use https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000065270&type=10-K&dateb=&owner=exclude&count=40 This is the original 10-K. To evaluate earnings growth you need per share earnings for the past three years and 10,11,12 years ago. You do NOT need diluted earnings (because in the long term share dilution comes out anyway, just like \"\"normalized\"\" earnings). The formula is avg(Y_-1+Y_-2+Y_-3) / is avg(Y_-10+Y_-11+Y_-12) Be careful with the pricing rules you are using, the asset one gets complicated. I recommend NOT using the pricing rules #6 and #7 to select the stock. Instead you can use them to set a maximum price for the stock and then you can compare the current price to your maximum price. I am also working to understand these rules and have cited Graham's rules into a checklist and worksheet to find all companies that meet his criteria. Basically my goal is to bottom feed the deals that Warren Buffett is not interested in. If you are interested to invest time into this project, please see https://docs.google.com/document/d/1vuFmoJDktMYtS64od2HUTV9I351AxvhyjAaC0N3TXrA\"", "title": "" }, { "docid": "6d710ce4d7a4275036f7b4a3cce5a07e", "text": "\"The best place to start looking is the companies \"\"Balance Sheet\"\" (B/S). This would show you the total shares \"\"outstanding.\"\" The quarterly B/S's arent audited but a good starting point. To use in any quant method, You also need to look a growth the outstanding shares number. Company can issue shares to any employee without making a filing. Also, YOU will NEVER know exactly the total number because of stock options that are issued to employees that are out of the money arent account for. Some companies account for these, some dont. You should also explore the concepts of \"\"fully dilute\"\" shares and \"\"basis\"\" shares. These concepts will throw-off your calc if the company has convertible bonds.\"", "title": "" }, { "docid": "16b8b7de9304dbd8cc5d377e97780409", "text": "\"There are two common types of P/E ratio calculations: \"\"trailing\"\" and \"\"forward\"\" (and then there are various mixes of the two). Trailing P/E ratios are calculated as [current price] / [trailing 12-month EPS]. An alternative is the Forward P/E ratio, which is based on an estimate of earnings in the coming 12 months. The estimate used is usually called \"\"consensus\"\" and, to answer your question, is the average estimate of analysts who cover the stock. Any reputable organization will disclose how they calculate their financials. For example, Reuters uses a trailing ratio (indicated by \"\"TTM\"\") on their page for BHP. So, the first reason a PE ratio might not jump on an announcement is it might be forward looking and therefore not very sensitive to the realized earnings. The second reason is that if it is a trailing ratio, some of the annual EPS change is known prior to the annual announcement. For example, on 12/31 a company might report a large drop in annual earnings, but if the bulk of that loss was reported in a previous quarterly report, then the trailing EPS would account partially for it prior to the annual announcement. In this case, I think the first reason is the culprit. The Reuters P/E of nearly 12 is a trailing ratio, so if you see 8 I'd think it must be based on a forward-looking estimate.\"", "title": "" }, { "docid": "0dba28ff9b2908da6f4be7d5ec49557e", "text": "Let's take a step back. My fictional company 'A' is a solid, old, established company. It's in consumer staples, so people buy the products in good times and bad. It has a dividend of $1/yr. Only knowing this, you have to decide how much you would be willing to pay for one share. You might decide that $20 is fair. Why? Because that's a 5% return on your money, 1/20 = 5%, and given the current rates, you're happy for a 5% dividend. But this company doesn't give out all its earnings as a dividend. It really earns $1.50, so the P/E you are willing to pay is 20/1.5 or 13.3. Many companies offer no dividend, but of course they still might have earnings, and the P/E is one metric that used to judge whether one wishes to buy a stock. A high P/E implies the buyers think the stock will have future growth, and they are wiling to pay more today to hold it. A low P/E might be a sign the company is solid, but not growing, if such a thing is possible.", "title": "" }, { "docid": "9fbd83b14d7050adbbcb96175a40962c", "text": "Thanks to this youtube video I think I understood the required calculation. Based on following notation: then the formula to find x is: I found afterwards an example on IB site (click on the link 'How to Determine the Last Stock Price Before We Begin to Liquidate the Position') that corroborate the formula above.", "title": "" }, { "docid": "e9343d55d9c40a3883063ddba8f15f63", "text": "\"at $8.50: total profit = $120.00 basis of stock, not paid in cash, so not included in \"\"total paid\"\" at $8.50: total profit = $75.00\"", "title": "" }, { "docid": "d4c78c4740acac8a3570672723509ad4", "text": "looking over some historical data I cannot really a find a case where a stock went from $0.0005 to $1 it almost seem that once a stock crosses a minimum threshold the stock never goes back up. Is there any truth to that? That would be a 2000X (200,000%) increase in the per-share value which would be extraordinary. When looking at stock returns you have to look at percentage returns, not dollar returns. A gain of $1 would be minuscule for Berkshire-Hathaway stock but would be astronomical for this stock,. If the company is making money shouldn't the stock go up? Not necessarily. The price of a stock is a measure of expected future performance, not necessarily past performance. If the earnings had been more that the market expected, then the price might go up, but if the market sees it as an anomaly that won't continue then there may not be enough buyers to move the stock up. looking at it long term would it hurt me in anyway to buy ~100,000 shares which right now would run be about $24 (including to fee) and sit on it? If you can afford to lose all $24 then no, it won't hurt. But I wouldn't expect that $24 to turn into anything higher than about $100. At best it might be an interesting learning experience.", "title": "" }, { "docid": "7aec2e5d1480a09c5e8c8671d32c6e8d", "text": "\"A bit strange but okay. The way I would think about this is again that you need to determine for what purpose you're computing this, in much the same way you would if you were to build out the model. The IPO valuation is not going to be relevant to the accretion/dilution analysis unless you're trying to determine whether the transaction was net accretive at exit. But that's a weird analysis to do. For longer holding periods like that you're more likely to look at IRR, not EPS. EPS is something investors look at over the short to medium term to get a sense of whether the company is making good acquisition decisions. And to do that short-to-medium term analysis, they look at earnings. Damodaran would say this is a shitty way of looking at things and that you should probably be looking at some measure of ROIC instead, and I tend to agree, but I don't get paid to think like an investor, I get paid to sell shit to them (if only in indirect fashion). The short answer to your question is that no, you should not incorporate what you are calling liquidation value when determining accretion/dilution, but only because the market typically computes accretion/dilution on a 3-year basis tops. I've never put together a book or seen a press release in my admittedly short time in finance that says \"\"the transaction is estimated to be X% accretive within 4 years\"\" - that just seems like an absurd timeline. Final point is just that from an accounting perspective, a gain on a sale of an asset is not going to get booked in either EBITDA or OCF, so just mechanically there's no way for the IPO value to flow into your accretion/dilution analysis there, even if you are looking at EBITDA/shares. You could figure the gain on sale into some kind of adjusted EBITDA/shares version of EPS, but this is neither something I've ever seen nor something that really makes sense in the context of using EPS as a standardized metric across the market. Typically we take OUT non-recurring shit in EPS, we don't add it in. Adding something like this in would be much more appropriate to measuring the success of an acquisition/investing vehicle like a private equity fund, not a standalone operating company that reports operational earnings in addition to cash flow from investing. And as I suggest above, that's an analysis for which the IRR metric is more ideally situated. And just a semantic thing - we typically wouldn't call the exit value a \"\"liquidation value\"\". That term is usually reserved for dissolution of a corporate entity and selling off its physical or intangible assets in piecemeal fashion (i.e. not accounting for operational synergies across the business). IPO value is actually just going to be a measure of market value of equity.\"", "title": "" }, { "docid": "9c23a0157305f44f8188c6b44ff7c5ac", "text": "If the company reported a loss at the previous quarter when the stock what at say $20/share, and now just before the company's next quarterly report, the stock trades around $10/share. There is a misunderstanding here, the company doesn't sell stock, they sell products (or services). Stock/share traded at equity market. Here is the illustration/chronology to give you better insight: Now addressing the question What if the stock's price change? Let say, Its drop from $10 to $1 Is it affect XYZ revenue ? No why? because XYZ selling ads not their stocks the formula for revenue revenue = products (in this case: ads) quantity the equation doesn't involve capital (stock's purchasing)", "title": "" }, { "docid": "33e1168b647035deb672a2797e3a6afe", "text": "\"Your company actually will most likely use some sort of options pricing model, either a binomial tree or black-scholes to determine the value for their accounting and, subsequently, for their issuance and realization. First, market value of equity will be determined. Given you're private (although \"\"pre-IPO could mean public tomorrow,\"\"), this will likely revolve around a DCF and/or market approaches. Equity value will then be compared to a cap table to create an equity waterfall, where the different classes of stock and the different options will be valued along tranches. Keep in mind there might be liquidation preferences that would make options essentially further out of the money. As such, your formulae above do not quite work. However, as an employee, it might be difficult to determine the necessary inputs to determine value. To estimate it, however, look for three key pieces of information: 1. Current equity value 2. Option strike price 3. Maturity for Options If the strike is close to the current equity value, and the maturity is long enough, and you expect the company to grow, then it would look like the options have more value than not. Equity value can be derived from enterprise value, or by directly determining it via a DCF or guideline multiples. Reliable forecasts should come from looking at the industry, listening to what management is saying, and then your own information as an insider.\"", "title": "" }, { "docid": "cbe2602216d25f7f2f97e3625c46ea0b", "text": "\"(Value of shares+Dividends received)/(Initial investment) would be the typical formula though this is more of a percentage where 1 would indicate that you broke even, assuming no inflation to be factored. No, you don't have to estimate the share price based on revenues as I would question how well did anyone estimate what kind of revenues Facebook, Apple, or Google have had and will have. To estimate the value of shares, I'd likely consider what does my investment strategy use as metrics: Is it discounted cash flow, is it based on earnings, is it something else? There are many ways to determine what a stock \"\"should be worth\"\" that depending on what you want to believe there are more than a few ways one could go.\"", "title": "" } ]	fiqa
d56c25bd9aecf0f29bbada40bc8c73cf	Good yield vs. safer route (Checking vs. Savings)	[ { "docid": "f2f749afff95113e4b800f2888e6a707", "text": "In the US bank or credit union checking, savings, CD's are insured through FDIC or NCUA. The coverage is for $250,000. This limit can be increased by having multiple accounts. You, your spouse, and a Joint account with your spouse, are considered 3 different accounts, so you could have $750K coverage. IRA funds are considered a separate pot of money for insurance coverage. Here is an explanation from NCUA and FDIC. There is no safety difference between savings and checking. There are differences regarding minimum balances, maximum number of transactions per month, and fees. But they are equally safe.", "title": "" }, { "docid": "7fb04bb2fa978a172aa3069d185e839f", "text": "There is no difference in safety form the perspective of the bank failing, due to FDIC/NCUA insurance. However, there is a practical issue that should be considered, if you allow payments to be automatically withdrawn from your checking account In the case of an error, all of you money may be unavailable until the error is resolved, which could be days or weeks. By having two accounts, this possibility may be reduced. It isn't a difference between checking and savings, but a benefit of having two accounts. Note that if both accounts are at the same bank, hey make take money from other accounts to cover the shortfall. That said, I've done this for years and have never had a problem. Also, I have two accounts, one at a local credit union with just enough kept in it to cover any payments, and another online account that has the rest of my savings. I can easily transfer funds between the two accounts in a couple days.", "title": "" }, { "docid": "790520e6b63e68cd59f5ff1bd0bf52fa", "text": "\"In personal finance, most of your success is determined by personal habit rather than financial savvy. Getting in the habit of making regular deposits to your savings account will have a much larger effect on your situation than worrying about which account pays the highest interest rate (particularly as neither one of them matches the current inflation rate, which is over 3%). So go ahead and put your money in a savings account, but not because of the interest or safety, but because it's a \"\"savings\"\" account.\"", "title": "" } ]	[ { "docid": "b65bae7fed9652724ef5ee2590cb7cf7", "text": "This is a very good question! The biggest difference is that when you put money in a savings bank you are a lender that is protected by the government, and when you buy stocks you become an owner. As a lender, whether the bank makes or loses money on the loans it makes, they still maintain your balance and pay you interest, and your principal balance is guaranteed by the government (in the USA). The bank is the party that is primarily at risk if their business does not perform well. As an owner, you participate fully in the company's gains and losses, but you also put your money at risk, since if the company loses money, you do too. Because of this, many people prefer to buy funds made up of many stocks, so they are not at risk of one company performing very poorly or going bankrupt. When you buy stock you become a part owner and share in the profitability of the company, often through a dividend. You should also be aware that stocks often have years where they do very poorly as well as years when they do very well. However, over a long period of time (10 years or more), they have historically done better in outpacing inflation than any other type of investment. For this reason, I would recommend that you only invest in the stock market if you expect to be able to leave the money there for 10 years or more, ideally, and for 5 years at the very least. Otherwise, you may need to take the money out at a bad time. I would also recommend that you only invest in stocks if you already have an emergency fund, and don't have consumer debt. There isn't much point in putting your money at risk to get a return if you can get a risk-free return by paying off debt, or if you would have to pull your money back out if your car broke down or you lost your job.", "title": "" }, { "docid": "7cd202188772096642d33487735482d2", "text": "Banks' savings interest is ridiculous, has always been, compared to other investment options. But there's a reason for that: its safe. You will get your money back, and the interest on it, as long as you're within the FDIC insurance limits. If you want to get more returns - you've got to take more risks. For example, that a locality you're borrowing money to will default. Has happened before, a whole county defaulted. But if you understand the risks - your calculations are correct.", "title": "" }, { "docid": "99d140993e72032226919ac7ef175059", "text": "A checking account is one that permits the account holder to write demand drafts (checks), which can be given to other people as payment and processed by the banks to transfer those funds. (Think of a check as a non-electronic equivalent of a debit card transaction, if that makes more sense to you.) Outside of the ability to write checks, and the slightly lower interest rate usually offered to trade off against that convenience, there really is no significant difference between savings and checking accounts. The software needs to be designed to handle checking accounts if it's to be sold in the US, since many of us do still use checks for some transactions. Adding support for other currencies doesn't change that. If you don't need the ability to track which checks have or haven't been fully processed, I'd suggest that you either simply ignore the checking account feature, or use this category separation in whatever manner makes sense for the way you want to manage your money.", "title": "" }, { "docid": "7dec0fda4f7e40dbdf163ab81de3f0b1", "text": "\"Depends on your definition of \"\"secure\"\". The most \"\"secure\"\" investment from a preservation of principal point of view is a non-tradable, general obligation government bond. (Like a US or Canadian savings bond.) Why? There is no interest rate risk -- you can't lose money. The downside is that the rate is not so good. If you want returns and a reasonably high level of security, you need a diversified portfolio.\"", "title": "" }, { "docid": "34355b7409a90fc5e25f780b12d07c66", "text": "The yield on treasury bond indicates the amount of money anyone at can make at virtually zero risk. So lets say banks have X [say 100] amount of money. They can either invest this in treasury bonds and get Y% [say 1%] interest that is very safe, or invest into mortgage loans [i.e. lend it to people] at Y+Z% [say at 3%]. The extra Z% is to cover the servicing cost and the associated risk. (Put another way, if you wanted only Y%, why not invest into treasury bonds, rather than take the risk and hassle of getting the same Y% by lending to individuals?) In short, treasury bond rates drive the rate at which banks can invest surplus money in the market or borrow from the market. This indirectly translates into the savings & lending rates to the banks' customers.", "title": "" }, { "docid": "25576cb705e4edc9ccb7e8c1921ad71b", "text": "$23,000 Student Loans at 4% This represents guaranteed loss. Paying this off quickly is a conservative move, while your other investments may easily surpass 4% return, they are not guaranteed. Should I just keep my money in my savings account since I want to keep my money available? Or are there other options I have that are not necessarily long term may provide better returns? This all depends on your plans, if you're just trying to keep cash in anticipation of the next big dip, you might strike gold, but you could just as easily miss out on significant market gains while waiting. People have a poor track record of predicting market down-turns. If you are concerned about how exposed to market risk you are in your current positions, then you may be more comfortable with a larger cash position. Savings/CDs are low-interest, but much lower risk. If you currently have no savings (you titled the section savings, but they all look like retirement/investment accounts), then I would recommend focusing on that first, getting a healthy emergency fund saved up, and budgeting for your car/house purchases. There's no way to know if you'd be better off investing everything or piling up cash in the short-term. You have to decide how much risk you are comfortable with and act accordingly.", "title": "" }, { "docid": "8c3541c1e7024310c487cfd522ce06a5", "text": "I would go with option B. That is safer, as it would leave you with more options, in case of an unexpected job loss or an emergency.", "title": "" }, { "docid": "b86926fb12df4ed68a5d3ab136240c05", "text": "If your checking account has a card associated with it, then keeping funds in savings reduces the risk that some kind of fraud will wipe you out.", "title": "" }, { "docid": "c0043bce8331701ae765b64cd66ce4a7", "text": "Why do savings accounts for businesses offer less yield than bank accounts for individuals? The money held in savings account on a collective average substantial amount stays with the Bank. The Bank is better able to predict and thus invest this money in individual savings account in market to make more money. Money held in Business accounts are unpredictable and can get withdrawn, the Bank is thus not able to predict the behaviour and hence not able to invest this better to get good returns, hence the interest offered is low. Most Banks have special products for Businesses that would give better return but come with some kind of lock-in or minimum balances.", "title": "" }, { "docid": "3b2dea4f557792057a43a62a5cc9c0ce", "text": "I think it's only a choice of terminology. Typically with a money market account has check-writing privileges whereas a savings account does not. In terms of rates, this blog has a good list of high interest yield savings accounts. http://www.hustlermoneyblog.com/best-bank-rates/ Disclosure: I am not affiliated with this blog. I just think it is a good resource to compare the rates across different banks.", "title": "" }, { "docid": "346c33dc312a12045a763dfadf35366c", "text": "\"From a quick look at sources on the web, it looks to me like Money Market Accounts and savings accounts are both paying about the same rate today: around 1%, give or take maybe 0.4%. I suppose that's better than nothing, but it's not a whole lot better than nothing. (I saw several savings accounts advertising 0.1% interest. If they mailed you a check, the postage could be more than the returns.) Personally, I keep a modest amount of emergency cash in my checking account, and I put my \"\"savings\"\" in a very safe mutual fund. That generally gets somewhere from making maybe 3% a year to losing a small amount. Certainly nothing to sing about, but better than savings or money markets. Whether you are willing to tolerate the modest risk or the sales charges is a matter for your personal situation and feelings.\"", "title": "" }, { "docid": "93bcdd1de92eb70460547ebbf25b8db0", "text": "Yield can be thought of as the interest rate you would receive from that investment in the form of a dividend for stocks or interest payments on a bond. The yield takes into account the anticipated amount to be received per share/unit per year and the current price of the investment. Of course, the yield is not a guaranteed return like a savings account. If the investment yield is 4% when you buy, it can drop in value such that you actually lose money during your hold period, despite receiving income from the dividend or interest payments.", "title": "" }, { "docid": "f276d8ccfb139215f4493621ad208221", "text": "\"Building on the excellent explanation by \"\"Miichael Kjörling\"\": Why would you rather \"\"term deposit\"\" your money in a bank and only earn interest of certain percentage but not not invest in stocks / real state and other opportunities where you will not only earn much higher dividends / profit but will have an opportunity for capital gains, multiple times like Apple's last 4 years(AAPL) ?? This is all down to risk / reward and risk taking. More risk = More profit opportunities / More Losses ( More Headache) Less risk(Govt BONDS) = Less profit / Less Losses (peace of mind)\"", "title": "" }, { "docid": "0a84d9ac4bc17b2abe46675a8f89df9c", "text": "Cash is king. PIN-based debit transactions are cheap. In terms of credit cards, a regular (ie. not a gold card) with no rewards has the lowest rates. Bigger merchants with lots of card volume likely have better deals that make the differences less pronounced.", "title": "" }, { "docid": "04e842868aedd126c380fc327b7cea78", "text": "\"It would be incredibly unusual for the same institution to offer checking and savings accounts with exactly the same features/benefits (including interest, etc). The reason is that (in the USA, anyways) the Fed makes banks keep a certain percentage of their total assets (called the reserve requirement) \"\"in house.\"\" Checking account deposits cannot be re-loaned 100%--some of the money you put in your checking account must be held by the bank in its vaults. Savings accounts are not limited in this way. So logic dictates that if depositing into one type of account is better for the bank than the other (ie, they can use more of the money to make money), they will reward people for using the one that is more beneficial to their bottom line. I'm recalling this from college finance 101, so I may be slightly mis-remembering things, but I'm 99.99% sure that this is the primary reason you see checking accounts with lower interest rates--banks would prefer you to use savings accounts, and set up incentives so that you will. Sorry, I know this doesn't really answer your question, but I think it may help you understand your options a little better (I hope!)\"", "title": "" } ]	fiqa
8f7e2a41cf702fc351af8dd411c77490	Comparing the present value of total payment today and partial payments over 3 months	[ { "docid": "2c3d7b59ca106038b1a81c3921835bac", "text": "Its kind of a dumb question because no one believes that you can earn 8% in the short term in the market, but for arguments sake the math is painfully easy. Keep in mind I am an engineer not a finance guy. So the first payment will earn you one month at 8%, the second, two. In effect three months at 8% on 997. You can do it that way because the payments are equal: 997 * (.08 /12) 3 = earnings ~= 20 So with the second method you pay: 997 3 - 20 = 2971", "title": "" }, { "docid": "34df5ec1c05afd8af852ecb3db4b3b77", "text": "\"I got $3394.83 The first problem with this is that it is backwards. The NPV (Net Present Value) of three future payments of $997 has to be less than the nominal value. The nominal value is simple: $2991. First step, convert the 8% annual return from the stock market to a monthly return. Everyone else assumed that the 8% is a monthly return, but that is clearly absurd. The correct way to do this would be to solve for m in But we often approximate this by dividing 8% by 12, which would be .67%. Either way, you divide each payment by the number of months of compounding. Sum those up using m equal to about .64% (I left the calculated value in memory and used that rather than the rounded value) and you get about $2952.92 which is smaller than $2991. Obviously $2952.92 is much larger than $2495 and you should not do this. If the three payments were $842.39 instead, then it would about break even. Note that this neglects risk. In a three month period, the stock market is as likely to fall short of an annualized 8% return as to beat it. This would make more sense if your alternative was to pay off some of your mortgage immediately and take the payments or yp pay a lump sum now and increase future mortgage payments. Then your return would be safer. Someone noted in a comment that we would normally base the NPV on the interest rate of the payments. That's for calculating the NPV to the one making the loan. Here, we want to calculate the NPV for the borrower. So the question is what the borrower would do with the money if making payments and not the lump sum. The question assumes that the borrower would invest in the stock market, which is a risky option and not normally advisable. I suggest a mortgage based alternative. If the borrower is going to stuff the money under the mattress until needed, then the answer is simple. The nominal value of $2991 is also the NPV, as mattresses don't pay interest. Similarly, many banks don't pay interest on checking these days. So for someone facing a real decision like this, I'd almost always recommend paying the lump sum and getting it over with. Even if the payments are \"\"same as cash\"\" with no premium charged.\"", "title": "" }, { "docid": "533f04145103c4aa9832c3611300f54c", "text": "What's the present value of using the payment plan? In all common sense the present value of a loan is the value that you can pay in the present to avoid taking a loan, which in this case is the lump sum payment of $2495. That rather supposes the question is a trick, providing irrelevant information about the stock market. However, if some strange interpretation is required which ignores the lump sum and wants to know how much you need in the present to pay the loan while being able to make 8% on the stock market that can be done. I will initially assume that since the lender's APR works out about 9.6% per month that the 8% from the stock market is also per month, but will also calculate for 8% annual effective and an 8% annual nominal rate. The calculation If you have $x in hand (present value) and it is exactly enough to take the loan while investing in the stock market, the value in successive months is $x plus the market return less the loan payment. In the third month the loan is paid down so the balance is zero. I.e. So the present value of using the payment plan while investing is $2569.37. You would need $2569.37 to cover the loan while investing, which is more than the $2495 lump sum payment requires. Therefore, it would be advisable to make the lump sum payment because it is less expensive: If you have $2569.37 in hand it would be best to pay the lump sum and invest the remaining $74.37 in the stock market. Otherwise you invest $2569.37 (initially), pay the loan and end up with $0 in three months. One might ask, what rate of return would the stock market need to yield to make it worth taking the loan? The APR proposed by the loan can be calculated. The present value of a loan is equal to the sum of the payments discounted to present value. I.e. with ∴ by induction So by comparing the $2495 lump sum payment with $997 over 3 x monthly instalments the interest rate implied by the loan can be found. Solving for r If you could obtain 9.64431% per month on the stock market the $x cash in hand required would be calculated by This is equal to the lump sum payment, so the calculated interest is comparable to the stock market rate of return. If you could gain more than 9.64431% per month on the stock market it would be better to invest and take the loan. Recurrence Form Solving the recurrence form shows the calculation is equivalent to the loan formula, e.g. becomes v[m + 1] = (1 + y) v[m] - p where v[0] = pv where In the final month v[final] = 0, i.e. when m = 3 Compare with the earlier loan formula: s = (d - d (1 + r)^-n) / r They are exactly equivalent, which is quite interesting, (because it wasn't immediately obvious to me that what the lender charges is the mirror opposite of what you gain by investing). The present value can be now be calculated using the formula. Still assuming the 8% stock market return is per month. If the stock market yield is 8% per annum effective rate and if it is given as a nominal annual yield, 8% compounded monthly", "title": "" } ]	[ { "docid": "18ee590fcebd7e5ad0f366d50040e2e9", "text": "From the description, you have a post-1998 income contingent loan. The interest rate on those is currently 1.5% but it has varied quite a bit in the last few years due to the formula used to calculate it, which is either the inflation rate (RPI), or 1% + the highest base rate across a group of banks - whichever is smaller. This is indeed really cheap credit compared to any commercial loan you could get, though whether you should indeed just repay the minimum depends on making a proper comparison with the return on any spare money you could get after tax elsewhere. There is a table of previous interest rates. From your description I think you've had the loan for about 4 years - your final year of uni, one year of working without repayments and then two years of repayments. A very rough estimate is that you would have been charged about £300 of interest over that period. So there's still an apparent mismatch, though since both you and I made rough calculations it may be that a more precise check resolves it. But the other thing is that you should check what the date on the statement is. Once you start repaying, statements are sent for a period ending 5th April of each year. So you may well not be seeing the effect of several months of repayments since April on the statement. Finally, there's apparently an online facility you can use to get an up to date balance, though the administration of the loans repaid via PAYE is notoriously inefficient so there may well be a significant lag between a payment being made and it being reflected in your balance, though the effect should still be backdated to when you actually made it.", "title": "" }, { "docid": "7bd327e9066516fa1c01300257f23a07", "text": "It's easiest to get your payment from the PMT function in Excel or Google Sheets. So a $100,000 30 year mortgage at 3% looks like this: The basic calculation is pretty simple. You take the annual interest rate, say 3%, divided by 12, times the existing principal balance: The idea is that borrowers would like to have a predictable payment. The earlier payments are proportionally more interest than principal than later payments are but that's because there is much more principal outstanding on month 1 than on month 200.", "title": "" }, { "docid": "9269ac9dbe2b303176fc7b1fd4142849", "text": "Easier to copy paste than type this out. Credit: www.financeformulas.net Note that the present value would be the initial loan amount, which is likely the sale price you noted minus a down payment. The loan payment formula is used to calculate the payments on a loan. The formula used to calculate loan payments is exactly the same as the formula used to calculate payments on an ordinary annuity. A loan, by definition, is an annuity, in that it consists of a series of future periodic payments. The PV, or present value, portion of the loan payment formula uses the original loan amount. The original loan amount is essentially the present value of the future payments on the loan, much like the present value of an annuity. It is important to keep the rate per period and number of periods consistent with one another in the formula. If the loan payments are made monthly, then the rate per period needs to be adjusted to the monthly rate and the number of periods would be the number of months on the loan. If payments are quarterly, the terms of the loan payment formula would be adjusted accordingly. I like to let loan calculators do the heavy lifting for me. This particular calculator lets you choose a weekly pay back scheme. http://www.calculator.net/loan-calculator.html", "title": "" }, { "docid": "313795aa3cd7009475a761556439cee3", "text": "My theory, if you must be in debit, own it at the least expense possible. The interest you will pay by the end, combined with the future value of money. Example: The Future value of $3000 at an effective interest rate of 5% after 3 years =$3472.88 Present value of $3000 at 5% over 3 years =$2591.51 you will need more money in the future to pay for the same item", "title": "" }, { "docid": "6a7d38f2451ab0d1f6ad2b66b641b5c7", "text": "The reason it's broken out is very specific: this is showing you how much interest accrued during the month. It is the only place that's shown, typically. Each month's (minimum) payment is the sum of [the interest accrued during that month] and [some principal], say M=I+P, and B is your total loan balance. That I is fixed at the amount of interest that accrued that month - you always must pay off the accrued interest. It changes each month as some of the principal is reduced; if you have a 3% daily interest rate, you owe (0.03B31) approximately (plus a bit as the interest on the interest accrues) each month (or 30 or 28). Since B is going down constantly as principal is paid off, I is also going down. The P is most commonly calculated based on an amortization table, such that you have a fixed payment amount each month and pay the loan off after a certain period of time. That's why P changes each month - because it's easier for people to have a constant monthly payment M, than to have a fixed P and variable I for a variable M. As such, it's important to show you the I amount, both so you can verify that the loan is being correctly charged/paid, and for your tax purposes.", "title": "" }, { "docid": "305f86774618127594c649a2d814137d", "text": "Your calculations are correct. It is likely that the bank's software has a rounding error. In effect, either your bank is overstating your interest by eight cents per month, or your bank is insisting that you prepay your principal by eight cents per month. If the bank's ongoing interest calculations are correct, your final payment will be slightly smaller (because of the prepaid principal, and because of compound interest on those prepayments). I have performed similar calculations for my mortgages over the years, and except upon early payoff in the middle of the month, I have always matched my banks' calculations to the penny. Ironically, this means that my banks' formulas are a bit weird: After making these adjustments, even my calculations for the mid-month payoff matched to the penny.", "title": "" }, { "docid": "35a17764315ea36a8bfa9217ee3c244c", "text": "From here The formula is M = P * ( J / (1 - (1 + J)^ -N)). M: monthly payment RESULT = 980.441... P: principal or amount of loan 63963 (71070 - 10% down * 71070) J: monthly interest; annual interest divided by 100, then divided by 12. .00275 (3.3% / 12) N: number of months of amortization, determined by length in years of loan. 72 months See this wikipedia page for the derivation of the formula", "title": "" }, { "docid": "949551126783dc387e3ca4d8f8389f3b", "text": "What you want is the distribution yield, which is 2.65. You can see the yield on FT as well, which is listed as 2.64. The difference between the 2 values is likely to be due to different dates of updates. http://funds.ft.com/uk/Tearsheet/Summary?s=CORP:LSE:USD", "title": "" }, { "docid": "d0f013cb3f6e5e8f6175286a974da69f", "text": "\"By the sounds of things, you're not asking for a single formula but how to do the analysis... And for the record you're focusing on the wrong thing. You should be focusing on how much it costs to own your car during that time period, not your total equity. Formulas: I'm not sure how well you understand the nuts and bolts of the finance behind your question, (you may just be a pro and really want a consolidated equation to do this in one go.) So at the risk of over-specifying, I'll err on the side of starting at the very beginning. Any financial loan analysis is built on 5 items: (1) # of periods, (2) Present Value, (3) Future Value, (4) Payments, and (5) interest rate. These are usually referred to in spreadsheet software as NPER, PV, FV, PMT, and Rate. Each one has its own Excel/google docs function where you can calculate one as a function of the other 4. I'll use those going forward and spare you the 'real math' equations. Layout: If I were trying to solve your problem I would start by setting up the spreadsheet up with column A as \"\"Period\"\". I would put this label in cell A2 and then starting from cell A3 as \"\"0\"\" and going to \"\"N\"\". 5 year loans will give you the highest purchase value w lowest payments, so n=60 months... but you also said 48 months so do whatever you want. Then I would set up two tables side-by-side with 7 columns each. (Yes, seven.) Starting in C2, label the cells/columns as: \"\"Rate\"\", \"\"Car Value\"\", \"\"Loan Balance\"\", \"\"Payment\"\", \"\"Paid to Interest\"\", \"\"Principal\"\", and \"\"Accumulated Equity\"\". Then select and copy cells C2:I2 as the next set of column headers beginning in K2. (I usually skip a column to leave space because I'm OCD like that :) ) Numbers: Now you need to set up your initial set of numbers for each table. We'll do the older car in the left hand table and the newer one on the right. Let's say your rate is 5% APR. Put that in cell C1 (not C3). Then in cell C3 type =C$1/12. Car Value $12,000 in Cell D3. Then type \"\"Down Payment\"\" in cell E1 and put 10% in cell D1. And last, in cell E3 put the formula =D3(1-D$1). This should leave you with a value for the first month in the Rate, Car Value, and Loan Balance columns. Now select C1:E3 and paste those to the right hand table. The only thing you will need to change is the \"\"Car Value\"\" to $20,000. As a check, you should have .0042 / 12,000 / 10,800 on the left and then .0042 / 20,000 / 18,000 on the right. Formulas again: This is where spreadsheets become amazing. If we set up the right formulas, you can copy and paste them and do this very complicated analysis very quickly. Payment The excel formula for Payment is =PMT(Rate, NPER, PV, FV). FV is usually zero. So in cell F3, type the formula =PMT(C3, 60, E3, 0). Obviously if you're really doing a 48 month (4 year) loan then you'll need to change the 60 to 48. You should be able to copy the result from cell F3 to N3 and the formula will update itself. For the 60 months, I'm showing the 12K car/10.8K loan has a pmt of $203.81. The 20K/18K loan has a pmt of 339.68. Interest The easiest way to calculate the interest is as =E3C3. That's (Outstanding Loan Balance) x (Periodic Interest Rate). Put this in cell G4, since you don't actually owe any interest at Period 0. Principal If you pay PMT each month and X goes to interest, then the amount to principal is \"\"PMT - X\"\". So in H4 type =-F3 - G3. The 'minus' in front of F3 is because excel's PMT function returns a negative amount. If you want to, feel free to type \"\"=-PMT(...)\"\" for the formula that's actually in F3. It's your call. I get 159 for the amount to principal in period 1. Accumulated Equity As I mentioned in the comment, your \"\"Equity\"\" comes from your initial Loan-to-Value and the accumulated principal payments. So the formula in this cell should reflect that. There are a variety of ways to do this... the easiest is just to compare your car's expected value to your loan balance every time. In cell I3, type =(D3-E3). That's your initial equity in the car before making any payments. Copy that cell and paste it to I4. You'll see it updates to =(D4-E3) automatically. (Right now that is zero... those cells are empty, but we're getting there) The important thing is that as JB King pointed out, your equity is a function of accumulated principal AND equity, which depreciates. This approach handles those both. Finishing up the copy-and-paste formulas I know this is long, but we're almost done. Rate // Period 1 In cell C4 type =C3. Payment // Period 1 In cell F4 type =F3. Loan Balance // Period 1 In cell E4 type =E3-H4. Your loan balance at the end of period is reduced by the principal you paid. I get 10,641. Car Value // Period 1 This will vary depending on how you want to handle depreciation. If you ignore it, you're making a major error and it's not worth doing this entire analysis... just buy the prettiest car and move on with life. But you also don't have to get it scientifically accurate. Go to someplace like edmunds.com and look up a ballpark. I'm using 4% depreciation per year for the old (12K) car and 7% for the newer car. However, I pulled those out of my ass so figure out what's a better ballpark. In G1 type \"\"Depreciation\"\" and then put 4% in H1. In O1 type \"\"Depreciation\"\" and then 7% in P1. Now, in cell D4, put the formula =D3 * (1-(H$1/12)). Paste formulas to flesh out table As a check, your row 4 should read 1 / .0042 / 11,960 / 10,641 / 203.81 / 45 / 159 / 1,319. If so, you're great. Copy cells C4:I4 and paste them into K4:Q4. These will update to be .0042 / 19,883 / 17,735 / 339.68 / 75 / 265 / 2,148. If you've got that, then copy C4:Q4 and paste it to C5:C63. You've built a full amortization table for your two hypothetical loans. Congratulations. Making your decision I'm not going to tell you what to decide, but I'll give you a better idea of what to look at. I would personally make the decision based on total cost to own during that time period, plus a bit of \"\"x-factor\"\" for which car I really liked. Look at Period 24, in columns I and Q. These are your 'equities' in each car. If you built the sheet using my made-up numbers, then you get \"\"Old Car Equity\"\" as 4,276. \"\"New Car Equity\"\" is 6,046. If you're only looking at most equity, you might make a poor financial decision. The real value you should consider is the cost to own the car (not necessarily operate it) during that time... Total Cost = (Ending Equity) - (Payment x 24) - (Upfront Cash). For your 'old' car, that's (4,276) - (203.81 * 24) - (1,200) = -1,815.75 For the 'new' car, that's (6,046) - (339.68 * 24) - (2,000) = -4,106.07. Is one good or bad? Up to you to decide. There are excel formulas like \"\"CUMPRINC\"\" that can consolidate some of the table mechanics, but I assumed that if you're here asking you would have gotten stuck running some of those. Here's the spreadsheet: https://docs.google.com/spreadsheet/ccc?key=0Ah0weE0QX65vdHpCNVpwUzlfYjlTY2VrNllXOS1CWUE#gid=1\"", "title": "" }, { "docid": "b19485d48912744b6d9b8497f8acad0c", "text": "What you want to do is figure out how much you're paying in interest, solely (ie, the interest part of each payment), add that up over 48 months, then figure out the net value of the cash inflow/outflow for the points over 48 months (ie, 3.5% annual return on the positive or negative value). Sum those two. Then you can see your P&L, and your total cash outflow (up to you if you add a % to your negative initial outflow, and how exactly you consider your $2k closing costs; I agree with JoeTaxpayer about adding at least closing costs to the loan amount. If you have money to pay the points that would otherwise be earning money, you could alternately consider it a negative cash (ie, instead of accruing 3.5% it's a negative balance accruing that). In excel I'd do something like: Then track changes in H and I when you change columns B and C and G.", "title": "" }, { "docid": "fb27c66a35cc55960c02af798c2cf7b9", "text": "\"You'd have to check the terms of your contract. On most installment loans, I think, they calculate interest monthly, not daily. That is, if you make 3 payments of $96 over the course of the month instead of one payment of $288 at the end of the month (but before the due date), it makes absolutely zero difference to their interest calculation. They just total up your payments for the month. That's how my mortgage works and how some past loans I've had worked. All you'd accomplish is to cost yourself some time, postage if you're mailing payments, and waste the bank's time processing multiple payments. If the loan allows you to make pre-payments -- which I think most loans today do -- then what DOES work is to make an extra payment or an overpayment. If you have a few hundred extra dollars, make an extra payment. This reduces your principle and reduces the amount of interest you pay every month for the remainder of the loan. And if you're paying $1 less in interest, then that extra dollar goes against principle, which further reduces the amount you pay in interest the next month. This snowballs and can save you a lot in the long run. Better still, instead of paying $288 each month, pay, say, $300. Then every month you're nibbling away at the principle faster and faster. For example, I calculate that if you're paying $288 per month, you'll pay the loan off in 72 months and pay a total of $6062 in interest. Pay $300 per month and you'll pay it off in 67 months with a total of $6031 interest. Okay, not a huge deal. Pay $350 per month and you pay it off in 55 months with $5449 interest. (I just did quick calculations with a spreadsheet, not accurate to the penny, but close enough for comparison.) PS This is different from \"\"revolving credit\"\", like credit cards, where interest is calculated on the \"\"average daily balance\"\". With a credit card, making multiple payments would indeed reduce your interest. But not by much. If you pay $100 every 10 days instead of $300 at the end, then you're saving the interest on 20 days x $100 + 10 days x $100, so 12.5% = 0.03% per day, so 0.03% x ($2000+$1000) = 90 cents. If you're mailing your payments, the postage is 49 cents x 2 extra payments = 98 cents. You're losing 8 cents per month by doing this.\"", "title": "" }, { "docid": "d8467aae09feacb8c5a1c9b2663bd24e", "text": "The MWRR that you showed in your post is calculated incorrectly. The formula that you use... ($15,750 - $15,000 - $4,000) / ($15,000 + 0.5 x $4,000) Translates into a form of the DIETZ formula of (EMV-BMV-C)/(BMV + .5 x C) The BMV is the STARTING balance. And as a matter of fact, the starting balance was NOT 15,000. It was IN FACT 11,000. See, the starting value for a month MUST BE the ending value of the prior month. So the BMV of 11,000 would give you the correct answer. Because if you added 4,000 at the start of the month (on day 1), it would have to have been ADDED to the 11,000 of the PRIOR month's ENDING value. Make sense? That would also mean that the addition of 4000 to the 11000 would imply that you started day 1 with 11,000. Make sense? Summary: When doing the calculations, you may use the ending value on the last day of the month to get your EMV. BUT YOU MAY NOT take the ending value on day 1 to get the BMV. That simply can not make sense since you already added a bunch of money during the day. Think about it. Davie", "title": "" }, { "docid": "3a2c3ce0ee077dc612687cf11c42424f", "text": "Using the following loan equations where and With the balance b[n] in period n given by Applying the OP's figures Check & demonstration Switching to $96 payment every 10 days, with 365.2422 days per year Paying $96 every 10 days saves $326.85 and pays the loan down 2.68 months quicker.", "title": "" }, { "docid": "b73b0ea57bf9938c6d3d2aaaf99b4c1b", "text": "\"Well, the first one is based on the \"\"Pert\"\" formula for continuously-compounded present value, while the second one is the periodically-compounded variant. Typically, the continuously-compounded models represent the ideal; as the compounding period of time-valued money shrinks towards zero, and the discount rate (or interest rate if positive) stays constant over the time period examined, the periodic equation's results approach that of the continuously-compounded equation. Those two assumptions (a constant rate and continuous balance adjustment from interest) that allow simplification to the continuous form are usually incorrect in real-world finance; virtually all financial institutions accrue interest monthly, for a variety of reasons including simpler bookkeeping and less money paid or owed in interest. They also, unless prohibited by contract, accrue this interest based on a rate that can change daily or even more granularly based on what financial markets are doing. Most often, the calculation is periodic based on the \"\"average daily balance\"\" and an agreed rate that, if variable, is based on the \"\"average daily rate\"\" over the previous observed period. So, you should use the first form for fast calculation of a rough value based on estimated variables. You should use the second form when you have accurate periodic information on the variables involved. Stated alternately, use the first form to predict the future, use the second form in retrospect to the past.\"", "title": "" }, { "docid": "7565ee306de237388051aa55741792a4", "text": "\"A real simple definition or analogy of present Value would be the \"\"Principal\"\" or \"\"Loan Amount\"\" being lent and the future value as being returning the Principal along with cost of borrowing The (1+i)^n is the interest you earn on present value The (i+i)^-n is the interest you pay on future value The first one is the FVIF or future value of a $1 The second one is the PVIF or present value of a $1 Both these interest factors assume interest is paid annually, if the interest payment is made more often within the payment year then interest factors look this way m is the frequency of interest payment, the higher this frequency the more of interest you pay or earn and you pay or earn the most interest when compounding occurs on each small fraction of time This entails here e is the Euler's e Thus the interest factors turn to this The preceeding examples only considered a single repayment at future date. Now if you were obliged to make periodic loan repayments say in amount of $1 for n number of periods. Then the present value of all such periodic payment is the \"\"Principal\"\" or amount you borrowed. This is the sum of discounted periodic payments as if we replace 1/1+i with x then this turns out to be geometric series of the form This simplifies to replacing (1/1+i) for x we get which is the present value of periodic payment in amount of $1 The future value of periodic payments in amount of $1 can be arrived at multiplying the PVIFA by (1+i)^n giving Once again the interest is compounded per annum and for intra-year compounding you would have to at first find the annual effective yield AEY to use as the effect rate is the PVIFA and FVIFA calculation for continuous compounding All the calculation discussed thus far did not take inflation into consideration, if we were to adjust the amounts for a growth of g% then the present value of a $1 would be as follow Once again you would have to use AEY if compounding frequency of interest is intra-year Now assume that each loan repayment increases or decreases by an extra amount Q per period. To find the present value of series of payments P that increase or decrease per period by an amount Q we would do the following calculations Here and All of these calculations have been available in tadXL add-in for finance and incrementally being offered as JavaScript financial functions library tadJS. Please note that the tad series of the financial functions library for various environments such as Excel, JavaScript, PHP, Ruby, Microsoft.net and others are property of the author writing this post. All of these libraries except one for Excel are available for FREE for public use. And the future value of such payments with increments may be found by multiplying the PV by (1+i)^n as follows Here\"", "title": "" } ]	fiqa
0931c8b8d1d496d939e7e6726771a344	Buying a house. I have the cash for the whole thing. Should I still get a mortgage to get the homeowner tax break?	[ { "docid": "da95074b0c587333fa350554d8d1ff79", "text": "Not for the tax break, no; as others have said that still costs you money. However, with rates being low right now and brought a bit lower by the tax break, this is an opportunity for the safest form of leveraged investing you will ever find. If you invest that money, the returns on investment will probably be better than the mortgage rate, and that leaves you with a net profit. There is some risk if the market collapses, but it's less risk than any other form of borrowing to invest. That also leave you with more flexibility if you need cash in a hurry; you can draw down the investments rather than taking another loan. If the risk bothers you, you can do what I did and split the difference. I put 50% down and financed the rest. I sometimes regret not having pushed it harder, since it has worked out well for me ... but that was the level of risk I was comfortable with.", "title": "" }, { "docid": "4e2ae1307e47b1d6f0b007f2af9a1eef", "text": "\"Getting a mortgage for the interest write-off is like buying packs of baseball cards for the gum. That said, I'd refer you to The correct order of investing as much of that question really overlaps with this. This question boils down to priorities, the best use of the funds. There are those who suggest that a mortgage brings risk. Of course it does, just not for the borrower, the risk is borne by the lender. Risk comes from lack of liquidity. Say your girlfriend buys the house with cash, and leaves little reserve. She loses her job, and it's great that she has no mortgage. But she does have every other cost life brings, including a tax bill that can turn into a house getting foreclosed on. The details that you didn't disclose are those needed to look at the rest of the \"\"priorities\"\" list. A fully funded 401(k) with appropriate balance, and no other debt? And a 1 year emergency fund? I wouldn't argue against buying the house with cash. No real savings and passing on the 401(k) matched deposit? I'd think carefully about the longterm impact of the cash purchase.\"", "title": "" }, { "docid": "d18879a9c60ac596151ac4debef88018", "text": "Except for unusual tax situations your effective interest rate after taking into account the tax deduction will still be positive. It is simply reduced by your marginal rate. Therefore you will end up paying more if the house is financed than if it is bought straight out. Note this does not take into account other factors such as maintaining liquidity or the potential for earning a greater rate of return by investing the money that would otherwise be used to pay for the house", "title": "" }, { "docid": "f4337f65c2c443100a3f1bce1ce7805c", "text": "Your wealth will go up if your effective rate after taxes is less than the inflation rate. That is, if your interest rate is R and marginal tax rate is T, then you need R*(1-T) to be less than inflation to make a loan worth it. Lately inflation has been bouncing around between 1% and 1.8%. Let's assume a 25% tax rate. Is your interest rate lower than between 1.3% and 2.4%? If not, don't take out a loan. Another thing to consider: when you take out a loan you have to do a ton of extra stuff to make the lender happy (inspections, appraisals, origination charges, etc.). These really add up and are part of the closing costs as well as the time/trouble of buying a house. I recently bought my house using 100% cash. It was 2 weeks between when I agreed to a price to when the deal was sealed and my realtor said I probably saved about $10,000 in closing costs. I think she was exaggerating, but it was a lot of time and money I saved. My final closing costs were only a few hundred, not thousands, of dollars. TL;DR: Loans are for suckers. Avoid if possible.", "title": "" } ]	[ { "docid": "3eff2d19c29b1c7d18c9fb810330fac4", "text": "\"Welcome to Money.SE, and thank you for your service. In general, buying a house is wise if (a) the overall cost of ownership is less than the ongoing cost to rent in the area, and (b) you plan to stay in that area for some time, usually 7+ years. The VA loan is a unique opportunity and I'd recommend you make the most of it. In my area, I've seen bank owned properties that had an \"\"owner occupied\"\" restriction. 3 family homes that were beautiful, and when the numbers were scrubbed, the owner would see enough rent on two units to pay the mortgage, taxes, and still have money for maintenance. Each situation is unique, but some \"\"too good to be true\"\" deals are still out there.\"", "title": "" }, { "docid": "4358862e30f60df862722f91cef19815", "text": "The Homebuyers Tax Credit was unrelated to whether or not a mortgage was part of the purchase. You will have no issue with this credit if you refinance.", "title": "" }, { "docid": "8c881aed8e19835da2ab6e495d3b490d", "text": "It is normally a bad idea to cash in retirement accounts to buy a house, in your case it is a horrible idea because you are way behind on saving for retirement. Other fallacies in your reasoning: My advice, increase the amount you are saving for retirement considerably, and also put some money aside to save for a down payment on a house. Buy the house when you have enough non-retirement money to afford the down payment. If you can't wait that long, buy a house you can afford. It may help to think of it this way: Visualize yourself as a 65 year old retired person with very little income, and living on your retirement account. Would you as a 39 year old ask that person to give you $175,966 (the amount you are talking about withdrawing compounded annually at 6% interest for 25 years with no additional contributions) so that you could put a down payment on a house? Because that is what you would be doing. When you hit retirement age would you kick yourself for making such a decision? Because unless you die young, that person is sitting out there in your future needing that money to live off of. Don't take this the wrong way, but the tone of your question seems like you are looking for support to make what you already know is a bad financial decision.", "title": "" }, { "docid": "64d3ed9bdd8bc785d306c43ab39bcb18", "text": "\"No one has addressed the fact that your loan interest and property taxes are \"\"deductible\"\" on your taxes? So, for the first 2/3 years of your loan, you will should be able to deduct each year's mortgage payment off your gross income. This in turn reduces the income bracket for your tax calculation.... I have saved 1000's a year this way, while seeing my home value climb, and have never lost a down payment. I would consider trying to use 1/2 your savings to buy a property that is desirable to live in and being able to take the yearly deduction off your taxes. As far as home insurance, most people I know have renter's insurance, and homeowner's insurance is not that steep. Chances are a year from now if you change your mind and wish to sell, unless you're in a severely deflated area, you will reclaim at minimum your down payment.\"", "title": "" }, { "docid": "f86aff035b0ccc3e9a474f3878d5a5d1", "text": "\"If you are investing in a mortgage strictly to avoid taxes, the answer is \"\"pay cash now.\"\" A mortgage buys you flexibility, but at the cost of long term security, and in most cases, an overall decrease in wealth too. At a very basic level, I have to ask anyone why they would pay a bank a dollar in order to avoid paying the government 28 - 36 cents depending on your tax rate. After all, one can only deduct interest- not principal. Interest is like rent, it accrues strictly to the lender, not equity. In theory the recipient should be irrelevant. If you have a need to stiff the government, go ahead. Just realize you making a banker three times as happy. Additionally the peace of mind that comes from having a house that no banker can take away from you is, at least for me, compelling. If I have a $300,000 house with no mortgage, no payments, etc. I feel quite safe. Even if my money is tied up in equity, if a serious situation came along (say a huge doctors bill) I always have the option of a reverse mortgage later on. So, to directly counter other claims, yes, I'd rather have $300k in equity then $50k in equity and $225k in liquid assets. (Did you notice that the total net worth is $25k less? And that's even before one considers the cash flow implication of a continuing mortgage. I have no mortgage, and I'm 41. I have a lot of net worth, but the thing that I really like is that I have a roof over my head that no on e can take away from me, and sufficient savings to weather most crises). That said, a mortgage is not about total cost. It is about cash flow. To the extent that a mortgage makes your cash flow situation better, it provides a benefit- just not one that is quantifiable in dollars and cents. Rather, it is a risk/reward situation. By taking a mortgage even when you have the cash, you pay a premium (the interest rate) in order to have your funds available when you need it. A very simple strategy to calculate and/or minimize this risk would be to invest the funds in another investment. If your rate of return exceeds the interest rate minus any tax preference (e.g. 4% minus say a 25% deduction = 3%), your money is better off there, obviously. And, indeed, when interest rates are only 4%, it may may be possible to find that. That said, in most instances, a CD or an inflation protected bond or so won't give you that rate of return. There, you'd need to look at stocks- slightly more risky. When interest rates are back to normal- say 5 or 6%, it gets even harder. If you could, however, find a better return than the effective interest rate, it makes the most sense to do that investment, hold it as a hedge to pay off the mortgage (see, you get your security back if you decide not to work!), and pocket the difference. If you can't do that, your only real reason to hold the cash should be the cash flow situation.\"", "title": "" }, { "docid": "593cbd452c7286b4358b8973a7511d16", "text": "\"First off, the \"\"mortgage interest is tax deductible\"\" argument is a red herring. What \"\"tax deductible\"\" sounds like it means is \"\"if I pay $100 on X, I can pay $100 less on my taxes\"\". If that were true, you're still not saving any money overall, so it doesn't help you any in the immediate term, and it's actually a bad idea long-term because that mortgage interest compounds, but you don't pay compound interest on taxes. But that's not what it actually means. What it actually means is that you can deduct some percentage of that $100, (usually not all of it,) from your gross income, (not from the final amount of tax you pay,) which reduces your top-line \"\"income subject to taxation.\"\" Unless you're just barely over the line of a tax bracket, spending money on something \"\"tax deductible\"\" is rarely a net gain. Having gotten that out of the way, pay down the mortgage first. It's a very simple matter of numbers: Anything you pay on a long-term debt is money you would have paid anyway, but it eliminates interest on that payment (and all compoundings thereof) from the equation for the entire duration of the loan. So--ignoring for the moment the possibility of extreme situations like default and bank failure--you can consider it to be essentially a guaranteed, risk-free investment that will pay you dividends equal to the rate of interest on the loan, for the entire duration of the loan. The mortgage is 3.9%, presumably for 30 years. The car loan is 1.9% for a lot less than that. Not sure how long; let's just pull a number out of a hat and say \"\"5 years.\"\" If you were given the option to invest at a guaranteed 3.9% for 30 years, or a guaranteed 1.9% for 5 years, which would you choose? It's a no-brainer when you look at it that way.\"", "title": "" }, { "docid": "26cbf718ff59fcc3d6dcab61bda540c0", "text": "I just read through all of the answers to this question and there is an important point that no one has mentioned yet: Oftentimes, buying a house is actually cheaper than renting the identical house. I'm looking around my area (suburbs of Chicago, IL) in 2017 and seeing some houses that are both for sale and for rent, which makes for an easy comparison. If I buy the house with $0 down (you can't actually put $0 down but it makes the numerical comparison more accurate if you do), my monthly payment including mortgage (P+I), taxes, insurance, and HOA, is still $400 less than the monthly rent payment. (If I put 20% down it's an even bigger savings.) So, in addition to the the tax advantages of owning a home, the locked in price that helps you in an economy that experiences inflation, and the accumulated equity, you may even have extra cash flow too. If you were on the fence when you would have had to pay more per month in order to purchase, it should be a no-brainer to buy if your monthly cost is lower. From the original question: Get a loan and buy a house, or I can live for the rest of my life in rent and save the extra money (investing and stuff). Well, you may be able to buy a house and save even more money than if you rent. Of course, this is highly dependent on your location.", "title": "" }, { "docid": "51f771d0d68bec8d965bfb3b2a9ee24e", "text": "avoid corporation tax There aren't many avenues to save on corporation tax legally. The best option you can try is paying into a generous pension for yourself, which will save some corporation tax. Buying a house You can claim deduction for the mortgage payments, but profits on selling the house will require paying capital gains tax on the profit. You can rent it out, this will be decided between your mortgage provider and your company, but the rent will go towards as income. Buying a car Not worth it. You will have to pay Class 1A NI contribution for benefits in kind. Any sane accountant will ask you to buy the car yourself and expense the mileage. Any income generated from the cash you have is taxable. Even the interest being paid on your money is taxable.", "title": "" }, { "docid": "204d55f8c36a9b2fff3dd7a5adc210d5", "text": "Unless you have an actual hardship (bankruptcy or other emergency), you will be better off leaving that money alone. This excellent answer, gives more than enough reasons why a withdrawal or loan is not recommended. I would love some advice because I need to know if I should contribute more into my 401k or less. If your priority to purchase is high enough, it may be worth considering stopping 401k contributions for a short time to help pile up a down payment. I also encourage you to consider that if you cannot pool the money from non-retirement sources, then you cannot afford that much house at this time. This might mean looking for cheaper houses or delaying purchase for a number of years.", "title": "" }, { "docid": "7e60d0a15a835c2018ef1b5193889378", "text": "First, as others have commented, the idea that getting a mortgage to buy a house is always a good idea is false. It depends on a number of factors including the current interest rate, what you think the future interest rate will do over the life of your mortgage, the relative cost of renting vs. buying, and how long you would stay in the house that you bought. To the extent that a mortgage for a house is more often recommended than buying other goods on credit, it is for these reasons: Except for #1 above, you could and can find other situations where taking a loan makes more sense than buying in cash. This more true if you have the resources and the skill to invest money at a rate that beats the interest rate you pay to the creditor. The general advice not to try this rests in the fact that most people don't have the resources or the skill to actually make this pay off, especially on high-interest rate loans or over short time periods.", "title": "" }, { "docid": "9743f3922210ecab0091b939ba07c985", "text": "A $500K mortgage at 4.5% is $2533, right near the $2500 in your example. Interest the first year would be less than $22K, and your tax benefit (taking littleadv's answer into account, of course) would be $5500, max. The tax benefit is the least of the reasons to get a mortgage. On your hypothetical $100K income, and too-high mortgage, a $5500 benefit is nothing. If one needs this tax benefit to make the numbers work, they are budgeted too tightly. If you are considering trading a $1000 rent for a $500K mortgage with a $2500 payment, I'd look very carefully at the numbers. Search this board for the associated expenses of homeownership.", "title": "" }, { "docid": "f7401b537f198afe92983962fc9b3061", "text": "My mortgage started out with an escrow, but it seemed like they were mismanaging it. They often over-collected it and locked up my money unnecessarily or under-collected and had to catch up later to pay the tax bill. Despite what Vitalik said, I told them I would pay my own taxes and insurance and to stop the escrow and they did without argument. Keep in mind, you should only do this if you are good about saving money. The banks know that many people aren't and will have trouble at the end of the year when a multi-thousand dollar tax or insurance bill comes due, hence the reason they try to get you to do the escrow. In my case, I just had the estimated tax/escrow amount automatically deposited from my paycheck into a special interest bearing savings account that I manage.", "title": "" }, { "docid": "aabcf90498394c77e1ceb55cb3be9619", "text": "If you withdraw money, even under a hardship clause like for purchasing a house, you'll still own taxes and a penalty on it. If you are talking about a 401K loan, a loan will have no taxes/penalty, but you'll repay the loan with after-tax reduction of your salary. Max is 50k or 50% of the balance. It maybe up to the 401K administrator whether all of the funds need to go to the down payment and closing costs or whether some can go towards renovations.", "title": "" }, { "docid": "b291f8354948f68c47bf9b69785c6131", "text": "The financial reasons, beyond simply owning your home outright, are: You're no longer paying interest. Yes, the interest is tax-deductible in the U.S. (though not in Canada), but the tax savings is a percentage of a percentage; if you paid, say, $8000 in interest last year, at the 25% marginal rate you effectively save $2000 off your taxes. But, if you paid off your home and had that $8000 in your pocket, you'd pay the $2000 in taxes but you'd have $6000 left over. Which is the better deal? In Canada, the decision gets even easier; you pay taxes on the interest money either way, so you're either spending the $8000 in interest, lost forever as cost of capital, or on other things. Whatever you're earning is going into your own pocket, not the bank's. Similar to the interest, but also including principal, a home you own outright is a mortgage payment you don't have to make. You can now use that money, principal and interest, for other things. Whether these advantages outweigh those of anything else you could do with a few hundred grand depends primarily on the rate of return. If you got in at the bottom of the mortgage crisis (which is pretty much right now) and got a rate in the 3-4% range, with no MIP or other payment on top, then almost anything you can do with the amount you'd need to pay off a mortgage principal would get you a better rate of return. However, you'll need some market savvy to avoid risks. In most cases when someone has pretty much any debt and a big wad of cash they're considering how to spend, I usually recommend paying off the debt, because that is, in effect, a risk-free way to increase the net rate of return on your total wealth and income. Balancing debt with investments always carries with it the risk that the investment will fail, leaving you stuck with the debt. Paying the debt on the other hand will guarantee that you don't have to pay interest on that outstanding amount anymore, so it's no longer offsetting whatever gains you are making in the market on your savings or future investments.", "title": "" }, { "docid": "1021105f9b691a94f55193b46aa9d692", "text": "Lets do the math, using your numbers. We start off with $100K, a desire to buy a house and invest, and 30 years to do it. Scenario #1 We buy a house for $100K mortgage at 5% interest over 30 years. Monthly payment ends up being $536.82/month. We then take the $100K we still have and invest it in stocks, earning an average of 9% annually and paying 15% taxes. Scenario #2 We buy a house for our $100K cash, and then, every month, we invest the $536.82 we would have paid for the mortgage. Again, investments make 9% annually long term, and we pay 15% taxes. How would it look in 30 years? Scenario #1 Results: 30 years later we would have a paid off house and $912,895 in investments Scenario #2 Results: 30 years later we would have a paid off house and $712,745 in investments Conclusion: NOT paying off your mortgage early results in an additional $200,120 in networth after 30 years. That's 28% more. Therefore, not paying off your mortgage is the superior scenario. Caveats/Notes/Things to consider Play with the numbers yourself:", "title": "" } ]	fiqa
f6bb38a1b63cda5266a8e37025aa5406	Are online mortgage lenders as good as local brick-and-mortar ones?	[ { "docid": "1562d113a58d1be0c38e839c2068a765", "text": "I had a pretty good experience with Lending Tree, although they are a mortgage broker, not a lender themselves.", "title": "" }, { "docid": "4ed3141d1ecdbd5a18ae6b853bebb70d", "text": "At least five of my co-workers are currently re-financing through Amerisave. Four have had a wonderful experience. The fifth has been dealing with a representative who constantly misunderstands him, asks for duplicate paperwork, and is in general fairly annoying to deal with. He is willing to go through the hassle because he found the lowest rates through them. All five co-workers recommend Amerisave despite this one co-worker's difficulties. Another person I know has refinanced through mortgagefool.com twice with good results. In general I think online lenders are like brick and mortar lenders in that some will be good, some will be not-so-good.", "title": "" } ]	[ { "docid": "e24bf7a39a85a27540fd6df3267e7eb0", "text": "\"Excellent question. I'm not aware of one. I was going to say \"\"go visit some personal finance blogs\"\" but then I remembered that I write on one, and that I often get a commission if I talk about online accounts, so unless something is really bad I'm not going to post on it because I want to make money, not chase it away. This isn't to say that I'm biased by commissions, but among a bunch of online banks paying pretty much the same (crappy) interest rate and giving pretty much the same (often not crappy) service, I'm going to give air time to the ones that pay the best commissions. That, and some of the affiliate programs would kick me out if I trashed them on my blog. This also would taint any site, blog or not, that does not explicitly say that they do not have affiliate relationships with the banks they review. I suppose if you read enough blogs you can figure out the bad ones by their absence, but that takes a lot of time. Seems like you'd do all right by doing a \"\"--bank name-- sucks\"\" Google search to dig up the dirt. That, or call up / e-mail / post on their forum any questions you have about their services before sending them your money. If they're up front, they'll answer you.\"", "title": "" }, { "docid": "9d49fecd9c88546d2b3fd701e7d5f498", "text": "\"Short answer: It depends :) It should generally be cheaper to get a loan directly from a bank, but often a mortgage broker can find you deals that you might not be able to get with a local bank. If you are refinancing, the cheapest option of all is usually to go through the bank that holds your existing mortgage. As for how mortgage brokers make their money, there are two ways. The first is on the \"\"front end\"\" through fees (origination fees especially) that go directly to them. The second and less obvious is on the \"\"back end\"\". This is where they make money by giving you a loan at a slightly higher rate than the lender was willing to give you. So, let's say they find a lender that will give you a loan at 5.25%. They offer that loan to you at 5.5% and pocket the extra .25% when the bank takes it over.\"", "title": "" }, { "docid": "77509b644e1d0e4ad5a936133c0a9d39", "text": "Yes, maybe for themselves, but for you that depends on quite a number of things. But not all advisors are scum, but accept the fact that you are their cash cow and you are there for their takings. Some advisors are true to their professions and advise ethically, trying to get the best for their clients. So search for a good advisor rather than a cheap one. And regarding the mortgage you are talking about, the mortgage provider and the mortgage taker don't deal directly, but use their solicitors. Every party wants the least of legal hassles for their transactions and get the best legal help. The financial advisor maybe both rolled into one or he has legal practitioners in his firm who would do the legal job after he takes care of the financial matters. Seems a cost effective workshop.", "title": "" }, { "docid": "3d0fe3e6e7002ef41d8402ddc82e230d", "text": "\"In practical terms, these days, a credit union IS a small \"\"savings and loan\"\" bank -- the kind of bank that used to exist before bankers started making money on everything but writing loans. They aren't always going to offer higher interest and/or cheaper loans than the bank-banks, but they're almost always going to be more pleasant to deal with since they consider the depositors and borrowers their stockholders, not just customers. There are minor legal differences (different insurance fund, for example), and you aren't necessarily eligible to open an account at a randomly-chosen credit union (depending on how they've defined the community they're serving), but they will rarely affect you as an account holder. The main downside of credit unions is that, like other small local banks, they will only have a few branches, usually within a limited geographic area. However, I've been using a credit union 200 miles away (and across two state lines on that route, one if I take a large detour) for decades now, and I've found that between bank-by-mail, bank-by-internet, ATM machines, and the \"\"branch exchange\"\" program (which lets you use branches of participating credit unions as if they were branches of your own) I really haven't felt a need to get to the branch. I did find that, due to network limitations of $50K/CU/day, drawing $200,000 worth of bank checks on a single day (when I purchased the house) required running around to four separate branch-exchange credit unions. But that's a weird situation where I was having trouble beating the actual numbers out of the real estate agents until a few days before the sale. And they may have relaxed those limitations since... though if I had to do it again, I'd consider taking a scenic drive to hit an actual branch of my own credit union. If you have the opportunity to join a credit union, I recommend doing so. Even if you don't wind up using it for your \"\"main\"\" accounts, they're likely to be people you want to talk to when you're shopping for a loan.\"", "title": "" }, { "docid": "1707e391b50fb6601344bdb077f3ff93", "text": "I think it's smart. It's the same game, just stiffer regulations, so your lender will ask more from you. Buy if you... If someone has been saving for years and years and still can't put 20% down, I think they're taking a significant risk. Buy something where your mortgage payment is around one week's salary at most. Try to buy only what you can afford to live in if you lost your job and couldn't find work for 3-6 months. You might want to do a 30-yr fixed instead of a 15-yr if you're worried about cash-flow.", "title": "" }, { "docid": "48de34f089ed41e9bfb95dfaa3c87636", "text": "\"The mortgage broker makes money from the mortgage originator, and from closing fees. All the broker does is the grunt work, mostly paperwork and credit record evaluation. But there's a lot of it. They make their money by navigating the morass of regulations (federal, state, local) and finding you the best mortgage from the mortgage lender(s) they represent. They don't have any capital involved in the deal. Just sweat equity. Mortgage originator is the one who put up the capital for you to borrow. They're the ones who get most of the payments you send in. They sell the mortgage if they receive what they consider an equitable offer. Keep in mind that the mortgage, from the lender's point of view, is made up of three parts. The capital expenditure, the collateral, and the cashflow. The present value of the cashflow at the rate of the loan is greater than the capital expenditure. Any offer between those two numbers is 'in the money' for them, and the next owner, assuming no default. But the collateral makes up for the chance of default, to an extent. There's also a mortgage servicing company in many cases. This doesn't have to be the current holder of the loan. Study \"\"the time value of money\"\", and pay close attention to the parts about present value, future value, and cash flow and how to compare these.\"", "title": "" }, { "docid": "6216c82a3e886b3a0bbedc9202cbea4a", "text": "\"I experimented with Lending Club, lending a small amount of money in early 2008. (Nice timing right - the recession was December 2007 to June 2009.) I have a few loans still outstanding, but most have prepaid or defaulted by now. I did not reinvest as payments came in. Based on my experience, one \"\"catch\"\" is lack of liquidity. It's like buying individual bonds rather than a mutual fund. Your money is NOT just tied up for the 3-year loan term, because to get good returns you have to keep reinvesting as people pay off their loans. So you always have some just-reinvested money with the full 3 year term left, and that's how long it would take to get all your money back out. You can't just cash out when you feel like it. They have a trading platform (which I did not try out) if you want your money sooner, but I would guess the spreads are wide and you have to take a hit when you sell loans. Again though I did not try the trading platform. On the upside, the yields did seem fine. I got 19 eventual defaults from 81 loans, but many of the borrowers made a number of payments before defaulting so only part of the money was lost. The lower credit ratings default more often obviously, only one of 19 defaults had the top credit score. (I tried investing across a range of credit ratings.) The interest rates appear to cover the risk of default, at least on average. You can of course have varying luck. I made only a slight profit over the 3 years, but I did not reinvest after the first couple months, and it was during a recession. So the claimed yields look plausible to me if you reinvest. They do get people's credit scores, report nonpayment on people's credit reports, and even send people to collections. Seems like borrowers have a reason to pay the bill. In 2008 I think this was a difference compared to the other peer lending sites, but I don't know if that's still true. Anyway, for what it's worth the site seemed to work fine and \"\"as advertised\"\" for me. I probably will not invest more money there for a couple reasons: However as best I could tell from my experiment, it is a perfectly reasonable place to put a portion of your portfolio you might otherwise invest in something like high-yield bonds or some other sub-investment-grade fixed income. Update: here's a useful NY Times article: http://www.nytimes.com/2011/02/05/your-money/05money.html\"", "title": "" }, { "docid": "0a8e98b568067901bf114c8c52a8bf27", "text": "While it is possible, it's not a really good use of your time or theirs. Mortgage brokers have access to dozens of lenders, can assemble deals you can't even dream of, and are much more intimately acquainted with the latest lending rule changes than you are. They are paid by the lenders to bring them business, so there is no cost to you. A mortgage broker has the advantage of leverage because he can be placing 10 mortgages per day, while you will be placing one, once. Your mortgage broker is working on your behalf. Get out of his way and let him do his job so you can concentrate on other matters. If your concern is that you want the lowest rate, share that with your broker and let him find the best rate for you. If you want a deal where you can put a larger prepayment down, let him know that and he will find you what you're looking for.", "title": "" }, { "docid": "4207706b7befff87a3e630d6454003ed", "text": "\"The reason \"\"on-line\"\" savings accounts (Ally, CapitalOne, American Express, and many others) provide much higher rates than brick-and-mortar banks is because they're not brick-and-mortar. They do not need to pay for a huge amount of real estate, utilities, public-facing employees, inter-office mail, security, etc etc. All that - allows them to pay more for your money. The back office of these banks is the same as that of Chase, BOA or Wells Fargo. Its just that they don't have the enormous expense of having a branch in every neighborhood, while still reaching all the same population of depositors. So no, its not a scam, these are reputable banks. Some have physical offices (for example, I know that CapitalOne has some branches in New York), some don't (IIRC neither Ally nor American Express Federal Saving Bank have physical branches). But they're banks nonetheless, insured as required by FDIC (or NCUA, in case of credit unions), and provide all the same services for less (or all the same savings for more, if you will). IMHO, giving 0.01% APR is a scam. Not the other way around. The old-style banks want your money for free, and you're worried why would someone else treat you better... Well, that's why the US has one of the most retarded financial systems in the Western world...\"", "title": "" }, { "docid": "9f4963fce4cb631d814a5851479c5bf4", "text": "\"Small community banks are absolutely vital to our economy. Plenty of people these days talk about \"\"buying local,\"\" but you never hear them talking about banking local. My friends, for the most part, lean left of center politically, so they constantly complain about Wal-Mart and other large brick and mortar chains, but when I called them out on their banking by asking them to pull out their debit cards, they all banked with larger banks; Chase, PNC, Key; the only person (beside myself) who didn't bank with a large national/multi - national bank uses Huntington, which is still a very large regional bank with over $100 billion in assets. They said they didn't want to have to pay ATM fees, to which I responded that many community banks will reimburse the customer for those fees up to a certain amount (like my bank does.) They just shrugged and said they liked the convenience of it, so I asked them why do they think people shop at Wal-Mart? I didn't really get a good answer to that; they just said \"\"it's different.\"\" The best way to invest in your community is to bank with a local community bank. Those mom and pop shops you love so much; the plumber who lives down the street; the micro brewery that just opened up all do their banking with the local community bank.\"", "title": "" }, { "docid": "9b9b6bd0da39b12ed4ac17e04daefd67", "text": "\"Here are the issues, as I see them - It's not that I don't trust banks, but I just feel like throwing all of our money into intangible investments is unwise. Banks have virtually nothing to do with this. And intangible assets has a different meaning than you assume. You don't have to like the market, but try to understand it, and dislike it for a good reason. (Which I won't offer here). Do your 401(k) accounts offer company match? When people start with \"\"we'd like to reduce our deposits\"\" that's the first thing we need to know. Last - you plan to gain \"\"a few hundred dollars a month.\"\" I bet it's closer to zero or a loss. I'll return to edit, we have recent posts here that reviewed the expenses to consider, and I'd bet that if you review the numbers, you've ignored some of them. \"\"A few hundred\"\" - say it's $300. Or $4000/yr. It would take far less work and risk to simply save $100K in your retirement accounts to produce this sum each year. The investment may very well be excellent. I'm just offering the flip side, things you might have missed. Edit - please read the discussion at How much more than my mortgage should I charge for rent? The answers offer a good look at the list of expenses you need to consider. In my opinion, this is one of the most important things. I've seen too many new RE investors \"\"forget\"\" about so many expenses, a projected monthly income reverts to annual losses.\"", "title": "" }, { "docid": "3b46cd1cd828458b9853b605028dc8a9", "text": "\"Your headline question \"\"How do you find best mortgage without damaging credit score?\"\" has a simple answer. If you have all your ducks in a row, and know what you are doing, you will get qualified. If you are like a recent client of mine, low FICO, low downpayment, random income, you might have issues. If your self-prequalification is good, you are in control, go find the best rate/ total cost, no need to put in multiple applications. If, for some reason you do, FICO sees that you are shopping for a single loan, and you are not dinged.\"", "title": "" }, { "docid": "88c45e03f8757aab8fc52372a58788df", "text": "I had the same experience as Jeremy: made investments in both Prosper and Lending Club and got a much better returns with Lending Club, although in my cases both investments were ok: after 18 months i made 4-5% on prosper and 11-12% on Lending Club. I think they just have better underwriting standards.", "title": "" }, { "docid": "609c715b134b85f0951fb29bdb2469e5", "text": "Most of these blogs/websites that you mention above promote banks that pay a commission and hence you never realize there are better banks out there that offer a higher rate. I went through the same exercise to find the bank that paid the best rate and realized the truth I mention above. I currently bank with Alliant Credit Union, which doesn't pay a commission or have affiliate fees. If you find a bank that pays a higher rate than ACU, let me know, I'd like to switch to that bank as well! To give an example, ACU's regular savings rate is equivalent to EverBank's 2 year CD! See what I mean when I say affiliate and commissions run the show? Disclosure: BTW, I'm a customer of this bank, not an employee. I do have a blog if you wish to read my experience with ACU.", "title": "" }, { "docid": "dae929d5d91dec429b8b506947c43c09", "text": "Applying for a mortgage is a bit of paperwork, but not too bad of an experience. Rates are pretty tight, if one lender were more that 1/4% lower than another, they'd be inundated with applications. Above a certain credit score, you get the 'best' rate, a search will show you the rates offered in your area. If you are a first time buyer, there are mortgages that might benefit you. If you are a vet (for non-native English readers, a veteran who served in the US armed forces, not a veterinarian, who is an animal doctor) there are mortgages that offer low-to-no down payment with attractive rates. Yes, avoid PMI, it's a crazy penalty on your overall expense of home purchase. If banks qualify you for different amounts, it shouldn't be a huge difference, a few percent variation. But, the standard ratios are pretty liberal even today, and getting the most you'd qualify for is probably too much. Using the standard 28/36% ratios, a bank will qualify you for 4X your income as a loan. e.g you make $50K, they'll lend you $200K. This is a bit too much in my opinion. If you come up short, you are really looking to borrow too much, and should probably wait. If you owe a bit on loans, it should squeeze in between those two ratios, 28/36. But I wouldn't borrow on a credit line to add to the purchase, that's asking for trouble.", "title": "" } ]	fiqa
ffd49e20b28c14050ee8bd64e585cffb	How to determine duration of a common stock whose dividends grow in perpetuity?	[ { "docid": "df51baa716fa4162186729d8475b8167", "text": "\"The Dividend Discount Model is based on the concept that the present value of a stock is the sum of all future dividends, discounted back to the present. Since you said: dividends are expected to grow at a constant rate in perpetuity ... the Gordon Growth Model is a simple variant of the DDM, tailored for a firm in \"\"steady state\"\" mode, with dividends growing at a rate that can be sustained forever. Consider McCormick (MKC), who's last dividend was 31 cents, or $1.24 annualized. The dividend has been growing just a little over 7% annually. Let's use a discount, or hurdle rate of 10%. MKC closed today at $50.32, for what it's worth. The model is extremely sensitive to inputs. As g approaches r, the stock price rises to infinity. If g > r, stock goes negative. Be conservative with 'g' -- it must be sustainable forever. The next step up in complexity is the two-stage DDM, where the company is expected to grow at a higher, unsustainable rate in the early years (stage 1), and then settling down to the terminal rate for stage 2. Stage 1 is the present value of dividends during the high growth period. Stage 2 is the Gordon Model, starting at the end of stage 1, and discounting back to the present. Consider Abbott Labs (ABT). The current annual dividend is $1.92, the current dividend growth rate is 12%, and let's say that continues for ten years (n), after which point the growth rate is 5% in perpetuity. Again, the discount rate is 10%. Stage 1 is calculated as follows: Stage 2 is GGM, using not today's dividend, but the 11th year's dividend, since stage 1 covered the first ten years. 'gn' is the terminal growth, 5% in our case. then... The value of the stock today is 21.22 + 51.50 = 72.72 ABT closed today at $56.72, for what it's worth.\"", "title": "" }, { "docid": "7b98ebb079f0d5f8f570aa1aab78fe5b", "text": "\"The fact that dividends grow in perpetuity does not prevent one from calculating duration. In fact, many academic papers look at exactly this problem, such as Lewin and Satchell. This Wilmott thread discusses some of the pros and cons of the concept in some detail. PS: Although I was already broadly familiar with the literature and I use the duration of equities in some of my every-day work as a professional working in finance, I found the links above doing a simple google search for \"\"equity duration.\"\"\"", "title": "" } ]	[ { "docid": "743d2e65a512c9a50e965e0a1b4a80f0", "text": "\"Dividends telegraph that management has a longer term focus than just the end of quarter share price. There is a committment to at least maintain (if not periodically increase) the dividend payout year over year. Management understands that cutting or pausing dividends will cause dividend investors in market to dump shares driving down the stock price. Dividends can have preferential tax treatment in some jurisdictions, either for an individual compared to capital gains or compared to the corporation paying taxes themselves. For example, REITs (real estate investment trusts) are a type of corporation that in order to not pay corporate income tax are required to pay out 95% of income as dividends each year. These are not the only type, MLP (master limited partnerships) and other \"\"Partnership\"\" structures will always have high dividend rates by design. Dividends provide cash flow and trade market volatility for actual cash. Not every investor needs cash flow, but for certain investors, it reduces the risks of a liquidity crisis, such as in retirement. The alternative for an investor who seeks to use the sale of shares would be to maintain a sufficient cash reserve for typical market recessions.\"", "title": "" }, { "docid": "509035e481f4760683199a219b1375d9", "text": "\"If by saying you wish to invest \"\"for the long term 5-10 years\"\" I take it you mean to hold a stock for between 5-10 years. If this is the case, this is the fundamental flaw in your screening algorithm. No company stock price continues to go up without end for 5-10 years. The price of every company's stock goes down at some point. You have to decide on a company by company basis whether you want to ride out the downturn or sell and get out. This is a personal decision based on your own research. The list of screening criteria you list indicates you are looking for solid earnings companies. Try not to apply these rules rigidly because every company runs through a rough patch. At times past, GE (for example) met all of your criteria. However, in 2017, it would not and therefore would not meet your screening criteria. Would you sell GE if you owned it? Maybe, or maybe you would hold through the downturn. The same be said for MSFT in 2010 or AAPL pre-Jobs return. A rule you may want to add to your list: know the company business well; that is, don't invest in companies you have no understanding of their business model.\"", "title": "" }, { "docid": "80a85c95c7462ad01c4b710df507a311", "text": "\"Hello! I am working on a project where I am trying to determine the profit made by a vendor if they hold our funds for 5 days in order to collect the interest on those funds during that period before paying a third party. Currently I am doing \"\"Amount x(Fed Funds Rate/365)x5\"\" but my output seems too low. Any advice?\"", "title": "" }, { "docid": "b1bc62cb643f486e533c3927d4cf9cd7", "text": "The real value of a share of stock is the current cash value of all dividends the owner will receive, plus the current cash value of the final liquidation if any. Since people with different needs may judge the current cash value of an income stream differently, there would be a market basis for people to buy and sell stocks even if everyone could predict all future payouts perfectly. If shareholders knew that a company wouldn't pay any dividends until it was liquidated in the year 2066, whereupon it would pay $2000/share, then each share would in 2016 effectively be a fifty-year zero-coupon bond with a $2000 maturity value. While some investors would be willing to trade in such an instrument, the amount of money a company could charge for such an instrument would be far lower than the money it could charge for one with payouts that were more evenly distributed through time. Since the founders of most companies want their companies to be around for a long time, that would mean that shareholders would have no expectation of their shares ever yielding anything of value within any foreseeable timeframe. Even those who would be more interested in share-price appreciation than dividends wouldn't be able to see share prices rise if there wasn't any likelihood of the stock being bought by someone who wanted the dividends.", "title": "" }, { "docid": "8331c07f3c8f33cb5083b8dd9bff0e5e", "text": "The owner of a long futures contract does not receive dividends, hence this is a disadvantage compared to owning the underlying stock. If the dividend is increased, and the future price would not change, there is an arbitrage possibility. For the sake of simplicity, assume that the stock suddenly starts paying a dividend, and that the risk free rate is zero (so interest does not play a role). One can expect that the future price is (rougly) equal to the stock price before the dividend announcment. If the future price would not change, an investor could buy the stock, and short a futures contract on the stock. At expiration he has to deliver the stock for the price set in the contract, which is under the assumptions here equal to the price he bought the stock for. But because he owned the stock, he receives the announced dividend. Hence he can make a risk-free profit consisting of the divivends. If interest do play a role, the argument is similar.", "title": "" }, { "docid": "33e1168b647035deb672a2797e3a6afe", "text": "\"Your company actually will most likely use some sort of options pricing model, either a binomial tree or black-scholes to determine the value for their accounting and, subsequently, for their issuance and realization. First, market value of equity will be determined. Given you're private (although \"\"pre-IPO could mean public tomorrow,\"\"), this will likely revolve around a DCF and/or market approaches. Equity value will then be compared to a cap table to create an equity waterfall, where the different classes of stock and the different options will be valued along tranches. Keep in mind there might be liquidation preferences that would make options essentially further out of the money. As such, your formulae above do not quite work. However, as an employee, it might be difficult to determine the necessary inputs to determine value. To estimate it, however, look for three key pieces of information: 1. Current equity value 2. Option strike price 3. Maturity for Options If the strike is close to the current equity value, and the maturity is long enough, and you expect the company to grow, then it would look like the options have more value than not. Equity value can be derived from enterprise value, or by directly determining it via a DCF or guideline multiples. Reliable forecasts should come from looking at the industry, listening to what management is saying, and then your own information as an insider.\"", "title": "" }, { "docid": "818e4c0014c78e9b1e1f2d31529ae8ab", "text": "You simply add the dividend to the stock price when calculating its annual return. So for year one, instead of it would be", "title": "" }, { "docid": "47ae54c33da604d2225616426525aae9", "text": "EDIT: After reading one of the comments on the original question, I realized that there is a much more intuitive way to think about this. If you look at it as a standard PV calculation and hold each of the cashflows constant. Really what's happening is that because of inflation the discount rate isn't the full value of the interest rate. Really the discount rate is only the portion of the interest rate above the inflation rate. Hence in the standard perpetuity PV equation PV = A / r r becomes the interest rate less the inflation rate which gives you PV = A / (i - g). That seems like a much better way to get to the answer than all the machinations I was originally trying. Original Answer: I think I finally figured this out. The general term for this type of system in which the payments increase over time is a gradient series annuity. In this specific example since the payment is increasing by a percentage each period (not a constant rate) this would be considered a geometric gradient series. According to this link the formula for the present value of a geometric gradient series of payments is: Where P is the present value of this series of cashflows. A_1 is the initial payment for period 1 (i.e. the amount you want to withdraw adjusted for inflation). g is the gradient or growth rate of the periodic payment (in this case this is the inflation rate) i is the interest rate n is the number of payments This is almost exactly what I was looking for in my original question. The only problem is this is for a fixed amount of time (i.e. n periods). In order to figure out the formula for a perpetuity we need to find the limit of the right side of this equation as the number of periods (n) approaches infinity. Luckily in this equation n is already well isolated to a single term: (1 + g)^n/(1 + i)^-n}. And since we know that the interest rate, i, has to be greater than the inflation rate, g, the limit of that factor is 0. So after replacing that term with 0 our equation simplifies to the following: Note: I don't do this stuff for a living and honestly don't have a fantastic finance IQ. It's been a while since I've done any calculus or even this much algebra so I may have made an error in the math.", "title": "" }, { "docid": "0c504887992c7acc59ad707ecd200e98", "text": "I use the following method. For each stock I hold long term, I have an individual table which records dates, purchases, sales, returns of cash, dividends, and way at the bottom, current value of the holding. Since I am not taking the income, and reinvesting across the portfolio, and XIRR won't take that into account, I build an additional column where I 'gross up' the future value up to today() of that dividend by the portfolio average yield at the date the dividend is received. The grossing up formula is divi(1+portfolio average return%)^((today-dividend date-suitable delay to reinvest)/365.25) This is equivalent to a complex XMIRR computation but much simpler, and produces very accurate views of return. The 'weighted combined' XIRR calculated across all holdings then agrees very nearly with the overall portfolio XIRR. I have done this for very along time. TR1933 Yes, 1933 is my year of birth and still re investing divis!", "title": "" }, { "docid": "2ed3c177786d18301727f0854afccc2d", "text": "\"In the USA there are two ways this situation can be treated. First, if your short position was held less than 45 days. You have to (when preparing the taxes) add the amount of dividend back to the purchase price of the stock. That's called adjusting the basis. Example: short at $10, covered at $8, but during this time stock paid a $1 dividend. It is beneficial for you to add that $1 back to $8 so your stock purchase basis is $9 and your profit is also $1. Inside software (depending what you use) there are options to click on \"\"adjust the basis\"\" or if not, than do it manually specifically for those shares and add a note for tax reviewer. Second option is to have that \"\"dividednd payment in lieu paid\"\" deducted as investment expence. But that option is only available if you hold the shorts for more than 45 days and itemize your deductions. Hope that helps!\"", "title": "" }, { "docid": "0e6c1f7efce6057935896af1d891ccbe", "text": "A futures contract is based upon a particular delivery date. In the case of a stock index futures contract is a cash settled futures contract based upon the stock index value at a particular point in time (i.e. this is when the final settlement is determined). In your example, the S&P 500 (SPX) is a price return index - that is, it is not affected by dividends and therefore dividends are not incorporated into the index value. Dividends will affect the price of the constituent stocks (not necessarily by the same amount as the dividend) so they do have influence on the stock index value. Since the dividends are known ahead of time (or at least can be estimated), this has already been factored into the futures price by the market. In terms of the impact of a dividend by AAPL, AAPL is approximaetely 3.6% of the index. Apple pays out dividends 4 times a year (currently paying out $0.52 dividends). Assuming the market is otherwise steady and AAPL drops by $0.52 due to the dividend and Apple is priced at around $105, this would result in a drop in the index of 0.0178% or around 0.35 points. Interesting fact: There are some futures contracts that are based upon Total Return indexes, such as the German DAX and the above logic would need to be reversed.", "title": "" }, { "docid": "34e4ff8c31dc911644bb906c3fa47495", "text": "No - there are additional factors involved. Note that the shares on issue of a company can change for various reasons (such as conversion/redemption of convertible securities, vesting of restricted employee shares, conversion of employee options, employee stock purchase programs, share placements, buybacks, mergers, rights issues etc.) so it is always worthwhile checking SEC announcements for the company if you want an exact figure. There may also be multiple classes of shares and preferred securities that have different levels of dividends present. For PFG, they filed a 10Q on 22 April 2015 and noted they had 294,385,885 shares outstanding of their common stock. They also noted for the three months ended March 31 2014 that dividends were paid to both common stockholders and preferred stockholders and that there were Series A preferred stock (3 million) and Series B preferred stock (10 million), plus a statement: In February 2015, our Board of Directors authorized a share repurchase program of up to $150.0 million of our outstanding common stock. Shares repurchased under these programs are accounted for as treasury stock, carried at cost and reflected as a reduction to stockholders’ equity. Therefore the exact amount of dividend paid out will not be known until the next quarterly report which will state the exact amount of dividend paid out to common and preferred shareholders for the quarter.", "title": "" }, { "docid": "6102ca35a6adf578632c2b0f37dadc2f", "text": "\"Below I will try to explain two most common Binomial Option Pricing Models (BOPM) used. First of all, BOPM splits time to expiry into N equal sub-periods and assumes that in each period the underlying security price may rise or fall by a known proportion, so the value of an option in any sub-period is a function of its possible values in the following sub period. Therefore the current value of an option is found by working backwards from expiry date through sub-periods to current time. There is not enough information in the question from your textbook so we may assume that what you are asked to do is to find a value of a call option using just a Single Period BOPM. Here are two ways of doing this: First of all let's summarize your information: Current Share Price (Vs) = $70 Strike or exercise price (X) = $60 Risk-free rate (r) = 5.5% or 0.055 Time to maturity (t) = 12 months Downward movement in share price for the period (d) = $65 / $70 = 0.928571429 Upward movement in share price for the period (u) = 1/d = 1/0.928571429 = 1.076923077 \"\"u\"\" can be translated to $ multiplying by Vs => 1.076923077 $70 = $75.38 which is the maximum probable share price in 12 months time. If you need more clarification here - the minimum and maximum future share prices are calculated from stocks past volatility which is a measure of risk. But because your textbook question does not seem to be asking this - you probably don't have to bother too much about it yet. Intrinsic Value: Just in case someone reading this is unclear - the Value of an option on maturity is the difference between the exercise (strike) price and the value of a share at the time of the option maturity. This is also called an intrinsic value. Note that American Option can be exercised prior to it's maturity in this case the intrinsic value it simply the diference between strike price and the underlying share price at the time of an exercise. But the Value of an option at period 0 (also called option price) is a price you would normally pay in order to buy it. So, say, with a strike of $60 and Share Price of $70 the intrinsic value is $10, whereas if Share Price was $50 the intrinsic value would be $0. The option price or the value of a call option in both cases would be fixed. So we also need to find intrinsic option values when price falls to the lowest probable and rises to the maximum probable (Vcd and Vcu respectively) (Vcd) = $65-$60 = $5 (remember if Strike was $70 then Vcd would be $0 because nobody would exercise an option that is out of the money) (Vcu) = $75.38-$60 = $15.38 1. Setting up a hedge ratio: h = Vs(u-d)/(Vcu-Vcd) h = 70(1.076923077-0.928571429)/(15.38-5) = 1 That means we have to write (sell) 1 option for each share purchased in order to hedge the risks. You can make a simple calculation to check this, but I'm not going to go into too much detail here as the equestion is not about hedging. Because this position is risk-free in equilibrium it should pay a risk-free rate (5.5%). Then, the formula to price an option (Vc) using the hedging approach is: (Vs-hVc)(e^(rt))=(Vsu-hVcu) Where (Vc) is the value of the call option, (h) is the hedge ratio, (Vs) - Current Share Price, (Vsu) - highest probable share price, (r) - risk-free rate, (t) - time in years, (Vcu) - value of a call option on maturity at the highest probable share price. Therefore solving for (Vc): (70-1Vc)(e^(0.055(12/12))) = (75.38-115.38) => (70-Vc)1.056540615 = 60 => 70-Vc = 60/1.056540615 => Vc = 70 - (60/1.056540615) Which is similar to the formula given in your textbook, so I must assume that using 1+r would be simply a very close approximation of the formula above. Then it is easy to find that Vc = 13.2108911402 ~ $13.21 2. Risk-neutral valuation: Another way to calculate (Vc) is using a risk-neutral approach. We first introduce a variable (p) which is a risk-neutral probability of an increase in share price. p = (e^(rt)-d)/(u-d) so in your case: p = (1.056540615-0.928571429)/(1.076923077-0.928571429) = 0.862607107 Therefore using (p) the (Vc) would be equal: Vc = [pVcu+(1-p)Vcd]/(e^(rt)) => Vc = [(0.86260710715.38)+(0.1373928935)]/1.056540615 => Vc = 13.2071229185 ~ $13.21 As you can see it is very close to the hedging approach. I hope this answers your questions. Also bear in mind that there is much more to the option pricing than this. The most important topics to cover are: Multi-period BOPM Accounting for Dividends Black-Scholes-Merton Option Pricing Model\"", "title": "" }, { "docid": "7aec2e5d1480a09c5e8c8671d32c6e8d", "text": "\"A bit strange but okay. The way I would think about this is again that you need to determine for what purpose you're computing this, in much the same way you would if you were to build out the model. The IPO valuation is not going to be relevant to the accretion/dilution analysis unless you're trying to determine whether the transaction was net accretive at exit. But that's a weird analysis to do. For longer holding periods like that you're more likely to look at IRR, not EPS. EPS is something investors look at over the short to medium term to get a sense of whether the company is making good acquisition decisions. And to do that short-to-medium term analysis, they look at earnings. Damodaran would say this is a shitty way of looking at things and that you should probably be looking at some measure of ROIC instead, and I tend to agree, but I don't get paid to think like an investor, I get paid to sell shit to them (if only in indirect fashion). The short answer to your question is that no, you should not incorporate what you are calling liquidation value when determining accretion/dilution, but only because the market typically computes accretion/dilution on a 3-year basis tops. I've never put together a book or seen a press release in my admittedly short time in finance that says \"\"the transaction is estimated to be X% accretive within 4 years\"\" - that just seems like an absurd timeline. Final point is just that from an accounting perspective, a gain on a sale of an asset is not going to get booked in either EBITDA or OCF, so just mechanically there's no way for the IPO value to flow into your accretion/dilution analysis there, even if you are looking at EBITDA/shares. You could figure the gain on sale into some kind of adjusted EBITDA/shares version of EPS, but this is neither something I've ever seen nor something that really makes sense in the context of using EPS as a standardized metric across the market. Typically we take OUT non-recurring shit in EPS, we don't add it in. Adding something like this in would be much more appropriate to measuring the success of an acquisition/investing vehicle like a private equity fund, not a standalone operating company that reports operational earnings in addition to cash flow from investing. And as I suggest above, that's an analysis for which the IRR metric is more ideally situated. And just a semantic thing - we typically wouldn't call the exit value a \"\"liquidation value\"\". That term is usually reserved for dissolution of a corporate entity and selling off its physical or intangible assets in piecemeal fashion (i.e. not accounting for operational synergies across the business). IPO value is actually just going to be a measure of market value of equity.\"", "title": "" }, { "docid": "7899255b9d21c5e86212fdc9fb628c00", "text": "\"The other two folks here are right with the math and such, so I'll just throw some intuition out there for you. The basis for this valuation model is really just tacking the Gordon growth model (which is really just a form of valuing a perpetuity) onto a couple of finite discounted cash flows. So that ending part is the Gordon growth model at the future point* discounted back to the present. The Gordon growth model uses a \"\"next period\"\" dividend for the very simple reason that it's the next one you'd get if you bought the stock. Is that explanation clear enough, or were some of these points not adequately explained in your class? I'll help a bit more, if I can.\"", "title": "" } ]	fiqa
5e42f108ff1e39dfbff384c3c5c26a7e	How can one tell if a company's quarterly financial report represents a profit or loss?	[ { "docid": "339ef1f96d5656fa5394bf7a619b4c32", "text": "You have defined net profit to include all income and, presumably, expenses. Specifically, you are including income from other sources and are including finance costs and tax expense. For the quarter ended June 30, 2015, the net profit, by your definition, is 12.58. This is given on line 9 of the PDF. You ask how you can review this information. You cannot, given only the PDF you linked to. Note that the numbers have not been audited so it is the case that no trusted third party has yet reviewed it and signed off that the information is accurate.", "title": "" } ]	[ { "docid": "b9db0b7887a063e58b947c0f70c752d4", "text": "Reading and analyzing financial statements is one of the most important tasks of Equity Analysts which look at a company from a fundamental perspective. However, analyzing a company and its financial statements is much more than just reading the absolute dollar figures provided in financial statements: You need to calculate financial ratios which can be compared over multiple periods and companies to be able to gauge the development of a company over time and compare it to its competitors. For instance, for an Equity Analyst, the absolute dollar figures of a company's operating profit is less important than the ratio of the operating profit to revenue, which is called the operating margin. Another very important figure is Free Cash Flow which can be set in relation to sales (= Free Cash Flow / Sales). The following working capital related metrics can be used as a health check for a company and give you early warning signs when they deviate too much: You can either calculate those metrics yourself using a spreadsheet (e.g. Excel) or use a professional solution, e.g. Bloomberg Professional, Reuters Eikon or WorldCap.", "title": "" }, { "docid": "f30a9ec107309670216d13a57dc49a7d", "text": "Well like a lot of stuff on money.stackexchange there is not a simple answer, but generally it is not a good thing. Take a look at the wikipedia entry on Net Operating Loss. Basically the company is commenting that when they do make money they will receive preferential tax treatment on that income. So whether or not this is a positive or a negative depends on a couple of things: NOL doesn't directly impact book value other than how the actual assets of the company changed over the previous quarter. I believe there is a 1:1 correspondence to how the assets change and NOL, but I am sure someone could clarify that for me in another answer or as a comment.", "title": "" }, { "docid": "f0b2dec86cc33c2268c96a302983fdcf", "text": "Great question! It can be a confusing for sure -- but here's a great example I've adapted to your scenario: As a Day Trader, you buy 100 shares of LMNO at $100, then after a large drop the same day, you sell all 10 shares at $90 for a loss of $1,000. Later in the afternoon, you bought another 100 shares at $92 and resold them an hour later at $97 (a $500 profit), closing out your position for the day. The second trade had a profit of $500, so you had a net loss of $500 (the $1,000 loss plus the $500 profit). Here’s how this works out tax-wise: The IRS first disallows the $1,000 loss and lets you show only a profit of $500 for the first trade (since it was a wash). But it lets you add the $1,000 loss to the basis of your replacement shares. So instead of spending $9,200 (100 shares times $92), for tax purposes, you spent $10,200 ($9,200 plus $1,000), which means that the second trade is what caused you to lose the $500 that you added back (100 x $97 = $9,700 minus the 100 x $102 = $10,200, netting $500 loss). On a net basis, you get to record your loss, it just gets recorded on the second trade. The basis addition lets you work off your wash-sale losses eventually, and in your case, on Day 3 you would recognize a $500 final net loss for tax purposes since you EXITED your position. Caveat: UNLESS you re-enter LMNO within 30 days later (at which point it would be another wash and the basis would shift again). Source: http://www.dummies.com/personal-finance/investing/day-trading/understand-the-irs-wash-sale-rule-when-day-trading/", "title": "" }, { "docid": "7c5e4cc3f975021d306cac2f5730af64", "text": "It's very simple. Use USDSGD. Here's why: Presenting profits/losses in other currencies or denominations can be useful if you want to sketch out the profit/loss you made due to foreign currency exposure but depending on the audience of your app this may sometimes confuse people (like yourself).", "title": "" }, { "docid": "2f06e5113e47302d55798c67dc6474c7", "text": "I would look on http://seekingalpha.com/currents/earnings. You can also get copies of the conference calls for each company you are looking at. What you referred to is the conference call. The people who usually ask questions are professional analysts. I would recommend getting the transcript as it is easier to highlight and keep records of. I hope that helps", "title": "" }, { "docid": "052392f5d66b263d95bf4d5e2838e319", "text": "\"Equity does not represent production divisions in a company (i.e. chocolate, strawberry, and vanilla does not make sense). In Sole proprietorship, equity represents 1 owner. In Partnership, equity has at least two sub-accounts, namely Partner 1 and Partner 2. In Corporations, equity may have Common Stockholders and Preferred Stockholders, or even different class of shares for insiders and angel investors. As you can see, equity represents who owns the company. It is not what the company does or manufactures. First and foremost, define the boundary of the firm. Are your books titled \"\"The books of the family of Doe\"\", \"\"The books of Mr & Mrs Doe\"\", or \"\"The books of Mr & Mrs Doe & Sons\"\". Ask yourself, who \"\"owns\"\" this family. If you believe that a marriage is perpetual until further notice then it does not make any sense to constantly calculate which parent owns the family more. In partnership, firm profits are attributed to partner's accounts using previously agreed ratio. For example, (60%/40% because Partner 1 is more hard working and valuable to the firm. Does your child own this family? Does he/she have any rights to use the assets, to earn income from the assets, to transfer the assets to others, or to enforce private property rights? If they don't have a part of these rights, they are certainly NOT part of Equity. So what happens to the expenses of children if you follow the \"\"partnership\"\" model? There are two ways. The first way is to attribute the Loss to the parents/family since you do not expect the children to repay. It is an unrecoverable loss written off. The second way is to create a Debtor(Asset) account to aggregate all child expense, then create a separate book called \"\"The books Children 1\"\", and classify the expense in that separate book. I advise using \"\"The family of Doe\"\" as the firm's boundary, and having 1 Equity account to simplify everything. It is ultimately up to you to decide the boundaries.\"", "title": "" }, { "docid": "b06c0b97de0ebf63398fcb54dfedfbf0", "text": "https://www.google.com/search?q=quarterly+and+annual+financial+report+calendar&oq=quarterly+and+annual+financial+report+calendar&aqs=chrome..69i57.9351j0j7&sourceid=chrome&ie=UTF-8 The third result on Google is: https://www.bloomberg.com/markets/earnings-calendar/us The fourth result on Google is: https://finance.yahoo.com/calendar/earnings", "title": "" }, { "docid": "c69d058bbe81220a41eec046485970c1", "text": "\"First, the balance sheet is where assets, liabilities, & equity live. Balance Sheet Identity: Assets = Liabilities (+ Equity) The income statement is where income and expenses live. General Income Statement Identity: Income = Revenue - Expenses If you want to model yourself correctly (like a business), change your \"\"income\"\" account to \"\"revenue\"\". Recognized & Realized If you haven't yet closed the position, your gain/loss is \"\"recognized\"\". If you have closed the position, it's \"\"realized\"\". Recognized Capital Gains(Losses) Assuming no change in margin requirements: Margin interest should increase margin liabilities thus decrease equity and can be booked as an expense on the income statement. Margin requirements for shorts should not be booked under liabilities unless if you also book a contra-asset balancing out the equity. Ask a new question for details on this. Realized Capital Gains(Losses) Balance Sheet Identity Concepts One of the most fundamental things to remember when it comes to the balance sheet identity is that \"\"equity\"\" is derived. If your assets increase/decrease while liabilities remain constant, your equity increases/decreases. Double Entry Accounting The most fundamental concept of double entry accounting is that debits always equal credits. Here's the beauty: if things don't add up, make a new debit/credit account to account for the imbalance. This way, the imbalance is always accounted for and can help you chase it down later, the more specific the account label the better.\"", "title": "" }, { "docid": "39e8a4a5b4b7325c288798c4cb372f33", "text": "If you take the profit or loss next year, it counts on next year's taxes. There's no profit or loss until that happens.", "title": "" }, { "docid": "15126f103a2667dba90dba966a855cc1", "text": "\"I don't think they \"\"actually\"\" turned a profit, did they? As I understand it, this is an accounting method/trick, it's not as if they generated more income by using this system. They just made their monetary value visible rather than implicit. Which is not the same as turning a profit... or am I missing something?\"", "title": "" }, { "docid": "7fa35b3cedda44ab3cc11b982d40296e", "text": "Sedar is I guess the Canadian equivalent of EDGAR. You can find the company's filings there. Here's a picture from their filings. Can't post the link, if you go and find the filing through Sedar you'll know why (it's not as nice a site as EDGAR). The 4.8 million is from unrealized gain on biological assets. So that's what it is. The reason, I think, as to why Operating Income is a positive 2.67 even though Operating Expense and Gross Profit are both negative is because Google Finance backed into Operating Expense. Operating Income is the same between the two sources, it's just the unrealized gain that moves.", "title": "" }, { "docid": "24edd62c7ed2bda08884eda0e9dcf42b", "text": "\"In the US, and in most other countries, dividends are considered income when paid, and capital gains/losses are considered income/loss when realized. This is called, in accounting, \"\"recognition\"\". We recognize income when cash reaches our pocket, for tax purposes. So for dividends - it is when they're paid, and for gains - when you actually sell. Assuming the price of that fund never changes, you have this math do to when you sell: Of course, the capital loss/gain may change by the time you actually sell and realize it, but assuming the only price change is due to the dividends payout - it's a wash.\"", "title": "" }, { "docid": "b81c09b50251d6d8eced07aaaa835e6e", "text": "Well, kind of XD. I usually just look through Business Week for the ADRs that are on the OTC market. I don't do anything major, but why I love them is that they have a greater reach than just ADRs on the NYSE or NASDAQ. Like for instance, if I wanted to own Thai or European stocks, many of the larger, more reputable firms are listed on the OTC market. Having said that, most other sites don't have earnings reports laid out for you. Business Week does. The only fancy thing I am interested in are options and options on futures, and Bar Chart is good for the latter.", "title": "" }, { "docid": "4289ceb981b00debab6378001ff515e2", "text": "\"Share sales & purchases are accounted only on the balance sheet & cash flow statement although their effects are seen on the income statement. Remember, the balance sheet is like a snapshot in time of all accrued accounts; it's like looking at a glass of water and noting the level. The cash flow and income statements are like looking at the amount of water, \"\"actually\"\" and \"\"imaginary\"\" respectively, pumped in and out of the glass. So, when a corporation starts, it sells shares to whomever. The amount of cash received is accounted for in the investing section of the cash flow statement under the subheading \"\"issuance (retirement) of stock\"\" or the like, so when shares are sold, it is \"\"issuance\"\"; when a company buys back their shares, it's called \"\"retirement\"\", as cash inflows and outflows respectively. If you had a balance sheet before the shares were sold, you'd see under the \"\"equity\"\" heading a subheading common stock with a nominal (irrelevant) par value (this is usually something obnoxiously low like $0.01 per share used for ease of counting the shares from the Dollar amount in the account) under the subaccount almost always called \"\"common stock\"\". If you looked at the balance sheet after the sale, you'd see the number of shares in a note to the side. When shares trade publicly, the corporation usually has very little to do with it unless if they are selling or buying new shares under whatever label such as IPO, secondary offering, share repurchase, etc, but the corporation's volume from such activity would still be far below the activity of the third parties: shares are trading almost exclusively between third parties. These share sales and purchases will only be seen on the income statement under earnings per share (EPS), as EPS will rise and fall with stock repurchases and sales assuming income is held constant. While not technically part of the income statement but printed with it, the \"\"basic weighted average\"\" and \"\"diluted weighted average\"\" number of shares are also printed which are the weighted average over the reporting period of shares actually issued and expected if all promises to issue shares with employee stock options, grants, convertibles were made kept. The income statement is the accrual accounts of the operations of the company. It has little detail on investing (depreciation & appreciation) or financing (interest expenses & preferred dividends).\"", "title": "" }, { "docid": "50fa48a8fc3119c070df2336f45c69d6", "text": "This depends very much on why A is making massive losses and how big they are in relation to B. If the group has a history of successfully launching profitable brands, and A is a new brand that has high expenses (production, marketing, etc.) but not yet generating much revenue, then despite the current losses it can be seen as a source of future profits. Or A might be established but currently undergoing an expensive remodelling that promises future success. Or B might simply be a huge cash cow that funds the losses of A out of petty cash.", "title": "" } ]	fiqa
039093923f09638202d2ed4122b63f57	Is there a way to tell how many stocks have been shorted?	[ { "docid": "3c281b87286decfa69e99007af37e74c", "text": "Generally the number of shares of a U.S. exchange-listed stock which have been shorted are tracked by the exchange and reported monthly. This number is usually known as the open short interest. You may also see a short interest ratio, which is the short interest divided by the average daily volume for the stock. The short interest is available on some general stock data sites, such as Yahoo Finance (under Key Statistics) and dailyfinance.com (also on a Key Statistics subpage for the stock).", "title": "" } ]	[ { "docid": "df0f4088f7b0566b209ff366f0393d2f", "text": "Patrick Byrne (CEO of Overstock.com) ran a somewhat interesting website awhile back called 'Deep Capture' which focused heavily on naked short selling and bear raids. He was called all sorts of names and many 'serious' journalist types brushed his allegations off. His basic argument was that a cabal of hedge funds would simultaneously naked short a specific equity and then a coordinated group of journalists and message board jockeys would disparage the company as loudly and publicly as possible, driving the price down. Naked shorting is supposed to be illegal since you can hold the types of positions like in the linked article about Citigroup where the number of shares sold short actually exceeds the number of shares in existence. The group he named was essentially a who's who of hedge funds and fraudsters and included many names of prominent politically active 'reformed' criminals from the S&L days on Wall St. I can't remember how the cards fell, but the scheme allegedly involved Michael Milliken, Sam Antar (from Crazy Eddie's Fraud), Gary Weiss, Jim Cramer, etc etc. It was a fascinating story. Byrne actually followed through with several lawsuits (one of which was settled after a Rocker Partners paid Byrne $5 million dollars to settle). The 'Deep Capture' site is down, but I [found a decent article](http://www.theregister.co.uk/2008/10/01/wikipedia_and_naked_shorting/print.html) that sums up some of the shenanigans, including a journalist sock-puppeting to edit Wikipedia, repeatedly denying it, being IP-traced to inside the DTCC building (the Wall St. entity responsible for clearing trades, including naked shorts).", "title": "" }, { "docid": "c86c54bd1492322b09e5ca4a7d6c2b9e", "text": "\"You can see all the (millions) of trades per day for a US stock only if you purchase that data from the individual exchanges (NYSE, NASDAQ, ARCA, ...), from a commercial market data aggregator (Bloomberg, Axioma, ...), or from the Consolidated Tape Association. In none of that data will you ever find identifying information for the traders. What you are recalling regarding the names of \"\"people from the company\"\" trading company stock is related to SEC regulations stating that people with significant ownership of company stock and/or controlling positions on the company board of directors must publicize (most of) their trades in that stock. That information can usually be found on the company's investor relations website, or through the SEC website.\"", "title": "" }, { "docid": "c3a94f006773891cc497bc627e90dfaf", "text": "\"Yes these are the number of shareholders that are not held in \"\"street name\"\" plus the different brokerages that hold the shares in \"\"street name\"\". So the stat is pointless since it really only lists the few people who own the stocks outside of a brokerage account and a bunch of wall street brokers.\"", "title": "" }, { "docid": "5dcf7e294498674a4dcbe9ce8598061c", "text": "\"Yes, you could sell what you have and bet against others that the stock price will continue to fall within a period of time \"\"Shorting\"\". If you're right, your value goes UP even though the stock price goes down. This is a pretty darn risky bet to make. If you're wrong, there's no limit to how much money you can owe. At least with stocks they can only fall to zero! When you short, and the price goes up and up and up (before the deadline) you owe it! And just as with stocks, someone else has to agree to take the bet. If a stock is pretty obviously tanking, its unlikely that someone would oppose your bet. (It's probably pretty clear that I barely know what I'm talking about, but I was surprised not to see this listed among the answers.)\"", "title": "" }, { "docid": "795835496c8e45d42558433f2339eb59", "text": "The day trader in the article was engaging in short selling. Short selling is a technique used to profit when a stock goes down. The investor borrows shares of a stock from someone else and sells them. After the stock price goes down, the investor buys the shares back and returns them, pocketing the difference. As the day trader in the article found out, it is a dangerous practice, because there is no limit to the amount of money you can lose. The stock was trading at $2, and the day trader thought the stock was going to go down to $1. He borrowed and sold 8,400 shares at $2. He hoped to buy them back at $1 and earn $8,400 profit. Instead, the stock went up a lot, and he was forced to buy back the shares at $18.50 per share, or about $155,400. He had had $37,000 with E-Trade, which they took, and he is now over $100,000 in debt.", "title": "" }, { "docid": "0c827880aa2aea2a90fadbf4dd07ad8b", "text": "You can calculate the fully diluted shares by comparing EPS vs diluted (adjusted) EPS as reported in 10K. I don't believe they report the number directly, but it is a trivial math exercise to reach it. The do report outstanding common stock (basis for EPS).", "title": "" }, { "docid": "57fb897c059fe117bf76781c5306adb8", "text": "\"Thanks for the response. I am using WRDS database and we are currently filtering through various variables like operating income, free cash flow etc. Main issue right now is that the database seems to only go up to 2015...is there a similar database that has 2016 info? filtering out the \"\"recent equity issuance or M&A activity exceeding 10% of total assets\"\" is another story, namely, how can I identify M&A activity? I suppose we can filter it with algorithm stating if company's equity suddenly jumps 10% or more, it get's flagged\"", "title": "" }, { "docid": "803135418e7c058d42ec1a811f3671f7", "text": "No, but insider information would have tipped them off on the timings of when to time some of their actions... possibly planning shorting it ahead, all kinds of who-diggery that those financial wizards can do to make shit tons of money off stocks / companies losing money.", "title": "" }, { "docid": "8207cf44a5c260c72f91ffd0e294b3a7", "text": "Simple Schwaab does not have actually your securities they have leased them out and have to borrow them back. all assets are linked with derivatives now. They show on the balance sheet but have to be untangled. Thats why the market drops disproportionally fast to the actual number of shares sold.", "title": "" }, { "docid": "2c9f2e17555cddbca29bea86b1a14fa3", "text": "The Art of Short Selling by Kathryn Stanley providers for many case studies about what kind of opportunities to look for from a fundamental analysis perspective. Typically things you can look for are financing terms that are not very favorable (expensive interest payments) as well as other constrictions on cash flow, arbitrary decisions by management (poor management), and dilution that doesn't make sense (usually another product of poor management). From a quantitative analysis perspective, you can gain insight by looking at the credit default swap rate history, if the company is listed in that market. The things that affect a CDS spread are different than what immediately affects share prices. Some market participants trade DOOMs over Credit Default Swaps, when they are betting on a company's insolvency. But looking at large trades in the options market isn't indicative of anything on its own, but you can use that information to help confirm your opinion. You can certainly jump on a trend using bad headlines, but typically by the time it is headline news, the majority of the downward move in the share price has already happened, or the stock opened lower because the news came outside of market hours. You have to factor in the short interest of the company, if the short interest is high then it will be very easy to squeeze the shorts resulting in a rally of share prices, the opposite of what you want. A short squeeze doesn't change the fundamental or quantitative reasons you wanted to short. The technical analysis should only be used to help you decide your entry and exit price ranges amongst an otherwise random walk. The technical rules you created sound like something a very basic program or stock screener might be able to follow, but it doesn't tell you anything, you will have to do research in the company's public filings yourself.", "title": "" }, { "docid": "ac305c586c01762a2f7fedcdf4e4420e", "text": "You can use Google Finance Stock Screener for screening US stocks. Apparently it doesn't have the specific criterion (Last Price % diff from 52 week low) you are (were!) looking for. I believe using its api you can get it, although it won't exactly be a very direct solution.", "title": "" }, { "docid": "33ac39972a1a57646b9f5348a6da011c", "text": "\"The shares available to short are a portion of those shares held by the longs. This number is actually much easier to determine outside of active trading hours, but either way doesn't really impact the matter at hand since computers are pretty good at counting things. If your broker is putting up obstacles to your issuing sell short limit orders in the pre-market then there is likely some other reason (maybe they reserve that function to \"\"premium\"\" account holders?)\"", "title": "" }, { "docid": "98634ad20792e08f87659493195a9884", "text": "For a company listed on NASDAQ, the numbers are published on NASDAQ's site. The most recent settlement date was 4/30/2013, and you can see that it lists 27.5 million shares as held short. NASDAQ gets these numbers from FINRA member firms, which are required to submit them to the exchange twice a month: Each FINRA member firm is required to report its “total” short interest positions in all customer and proprietary accounts in NASDAQ-listed securities twice a month. These reports are used to calculate short interest in NASDAQ stocks. FINRA member firms are required to report their short positions as of settlement on (1) the 15th of each month, or the preceding business day if the 15th is not a business day, and (2) as of settlement on the last business day of the month.* The reports must be filed by the second business day after the reporting settlement date. FINRA compiles the short interest data and provides it for publication on the 8th business day after the reporting settlement date.", "title": "" }, { "docid": "ef18299621646b2cd361cf1313bf5a04", "text": "> A short position also loses money if the stock just appreciates more slowly than the broader market, which is one way an overvaluation can correct itself. Is there a derivative based on the literal second derivative (acceleration) of the stock price? If so, you'd be able to short those, yes?", "title": "" }, { "docid": "d6785de13ddb0dbb31dddee8e6ca16c9", "text": "Reuters has a service you can subscribe to that will give you lots of Financial information that is not readily available in common feeds. One of the things you can find is the listing/delist dates of stocks. There are tools to build custom reports. That would be a report you could write. You can probably get the data for free through their rss feeds and on their website, but the custom reports is a paid feature. FWIW re-listing(listings that have been delisted but return to a status that they can be listed again) is pretty rare. And I can not think of too many(any actually) penny stocks that have grown to be listed on a major exchange.", "title": "" } ]	fiqa
8b41c6a264e32aaa5872933fa7a8ec19	How does Value get rounded in figuring out Bonds Value?	[ { "docid": "84285f1c7b71bb6ca3ea25892aa61c50", "text": "With the formula you are using you assume that the issued bond (bond A) is a perpetual. Given the provided information, you can't really do more than this, it's only an approximation. The difference could be explained by the repayment of the principal (which is not the case with a perpetual). I guess the author has calculated the bond value with principal repayment. You can get more insight in the calculation from the excel provided at this website: http://breakingdownfinance.com/finance-topics/bond-valuation/fixed-rate-bond-valuation/", "title": "" } ]	[ { "docid": "94ccb959cb5d4196b41ce64dfad4de64", "text": "Rating agencies should be paid on accuracy, i.e. each bond issued pays x $ into a pool, and the bond companies whom are accurate over the maturity get a share of the pool. Those whom are not, must add money to the pool. (Like an accuracy market!)", "title": "" }, { "docid": "4bc4149facdd396eff188dbc9a9af5be", "text": "As I'm sure you are reading in Hull's classic, the basic valuation of bonds depends on the chance of entity defaulting on those bonds. Let's start with just looking at the US. The United States has a big advantage over corporations in issuing debt as it also prints the same currency that the debt is denominated in. This makes it much easier not to default on your debt as you can always print more money to pay it. Printing too much currency would cause inflation lowering the value of debt, but this would also lower the value of US corporate debt as well. So you can think of even the highest rated corporate bonds as having the same rate as government debt plus a little extra due to the additional default risk of the corporation. The situation with other AA rated governments is more complicated. Most of those governments have debt denominated in their local currency as well so it may seem like they should all have similar rates. However, some governments have higher and some actually have lower rates than the United States. Now, as above, some of the difference is due to the possible need of printing too much currency to cover the debt in crisis and now that we have more than one country to invest in the extra risk of international money flowing out of the country's bonds. However, the bigger difference between AA governments rates depends more on money flow, central banks and regulation. Bonds are still mostly freely traded instruments that respond to supply and demand, but this supply and demand is heavily influenced by governments. Central banks buy up large portions of the debt raising demand and lowering rates. Regulators force banks to hold a certain amount of treasuries perhaps inflating demand. Finally, to answer your question the United States has some interesting advantages partially just due to its long history of stability, controlled inflation and large economy making treasuries valuable as one of the lowest risk investments. So its rates are generally on the low end, but government manipulation can still mean that it is not necessarily the lowest.", "title": "" }, { "docid": "7be43a53ea4e13f8bec3d739b75d6b2e", "text": "A bond has a duration that can be easily calculated. It's the time weighted average of all the payments you'll receive and helpful to understand the effect a change in rates will have on that instrument. The duration of a stock, on the other hand, is a forced construct to then use in other equations to help calculate, say, the summation of a dividend stream. I can calculate the duration of a bond and come up with an answer that's not up for discussion or dispute. The duration of a stock, on the other hand, isn't such a number. Will J&J last 50 more years? Will Apple? Who knows?", "title": "" }, { "docid": "fa55bd0e31d67abbb38aa62b2b55f7e1", "text": "Investopedia has a good explanation of the term shorting which is what this is. In the simplest of terms, someone is borrowing the bond and selling it with the intent to replace the security and any dividends or coupons in the end. The idea is that if a bond is overvalued, one may be able to buy it back later for a cheaper price and pocket the difference. There are various rules about this including margin requirements to maintain since there is the risk of the security going up in price enough that someone may be forced into a buy to cover in the form of a margin call. If one can sell the bond at $960 now and then buy it back later for $952.38 then one could pocket the difference. Part of what you aren't seeing is what are other bonds doing in terms of their prices over time here. The key point here is that brokers may lend out securities and accrue interest on loaned securities for another point here.", "title": "" }, { "docid": "89f95203df501325a17cfa064856c2a8", "text": "I dont really understand how this would work. In stocks, you are buying a share in a company at a specific price that fluctuates with the value of the company. In bonds, you are lending money for a specific time period with the hopes of getting your money back plus interest. Is actual money going to be lent? Are there going to be different bond products for each company every time they issue new debt? It just doesn't seem practical to me.", "title": "" }, { "docid": "478cdde040cedfb6e01af7f6e8296744", "text": "I looked into the investopedia one (all their videos are mazing), but that detail just was not clear to me, it also makes be wonder, if a country issues bonds to finance itself, what happens at maturity when literally millions of them need to be paid? The income needs to have grown to that level or it defaults? Wouldn't all the countries default if that was the case, or are bonds being issued to being able to pay maturity of older bonds already? (I'm freaking myself out by realizing this)", "title": "" }, { "docid": "52dd0524880c77310d6b0a90912745d9", "text": "\"Bob should treat both positions as incomplete, and explore a viewpoint which does a better job of separating value from volatility. So we should start by recognizing that what Bob is really doing is trading pieces of paper (say Stocks from Fund #1 or Bonds from Fund #2, to pick historically volatile and non-volatile instruments.) for pieces of paper (Greenbacks). In the end, this is a trade, and should always be thought of as such. Does Bob value his stocks more than his bonds? Then he should probably draw from Fund #2. If he values his bonds more, he should probably draw from Fund #1. However, both Bob and his financial adviser demonstrate an assumption: that an instrument, whether stock bond or dollar bill, has some intrinsic value (which may raise over time). The issue is whether its perceived value is a good measure of its actual value or not. From this perspective, we can see the stock (Fund #1) as having an actual value that grows quickly (6.5% - 1.85% = 4.65%), and the bond (Fund #2) as having an actual value that grows slower (4.5% - 1.15$ = 3.35$). Now the perceived value of the stocks is highly volatile. The Chairman of the Fed sneezes and a high velocity trader drives a stock up or down at a rate that would give you whiplash. This perspective aligns with the broker's opinion. If the stocks are low, it means their perceived value is artificially low, and selling it would be a mistake because the market is perceiving those pieces of paper as being worth less than they actually are. In this case, Bob wins by keeping the stocks, and selling bonds, because the stocks are perceived as undervalued, and thus are worth keeping until perceptions change. On the other hand, consider the assumption we carefully slid into the argument without any fanfare: the assumption that the actual value of the stock aligns with its historical value. \"\"Past performance does not predict future results.\"\" Its entirely possible that the actual value of the stocks is actually much lower than the historical value, and that it was the perceived value that was artificially higher. It may be continuing to do so... who knows how overvalued the perceived value actually was! In this case, Bob wins by keeping the bonds. In this case, the stocks may have \"\"underperformed\"\" to drive perceptions towards their actual value, and Bob has a great chance to get out from under this market. The reality is somewhere between them. The actual values are moving, and the perceived values are moving, and the world mixes them up enough to make Scratchers lottery tickets look like a decent investment instrument. So what can we do? Bob's broker has a smart idea, he's just not fully explaining it because it is unprofessional to do so. Historically speaking, Bobs who lost a bunch of money in the stock market are poor judges of where the stock market is going next (arguably, you should be talking to the Joes who made a bunch of money. They might have more of a clue.). Humans are emotional beings, and we have an emotional instinct to cut ties when things start to go south. The market preys on emotional thinkers, happily giving them what they want in exchange for taking some of their money. Bob's broker is quoting a well recognized phrase that is a polite way of saying \"\"you are being emotional in your judgement, and here is a phrasing to suggest you should temper that judgement.\"\" Of course the broker may also not know what they're doing! (I've seen arguments that they don't!) Plenty of people listened to their brokers all the way to the great crash of 2008. Brokers are human too, they just put their emotions in different places. So now Bob has no clear voice to listen to. Sounds like a trap! However, there is a solution. Bob should think about more than just simple dollars. Bob should think about the rest of his life, and where he would like the risk to appear. If Bob draws from Fund #1 (liquidating stocks), then Bob has made a choice to realize any losses or gains early... specifically now. He may win, he may lose. However, no matter what, he will have a less volatile portfolio, and thus he can rely on it more in the long run. If Bob draws from Fund #2 (liquidating bonds) instead, then Bob has made a choice not to realize any losses or gains right away. He may win, he may lose. However, whether he wins or loses will not be clear, perhaps until retirement when he needs to draw on that money, and finds Fund #1 is still under-performing, so he has to work a few more years before retirement. There is a magical assumption that the stock market will always continue rewarding risk takers, but no one has quite been able to prove it! Once Bob includes his life perspective in the mix, and doesn't look just at the cold hard dollars on the table, Bob can make a more educated decision. Just to throw more options on the table, Bob might rationally choose to do any one of a number of other options which are not extremes, in order to find a happy medium that best fits Bob's life needs: I intentionally chose to label Fund #1 as stocks and Fund #2 as bonds, even though this is a terribly crude assumption, because I feel those words have an emotional attachment associated to them which #1 and #2 simply do not. Given that part of the argument is that emotions play a part, it seemed reasonable to dig into underlying emotional biases as part of my wording. Feel free to replace words as you see fit to remove this bias if desired.\"", "title": "" }, { "docid": "2b49a84cc6307004df52a8092a033866", "text": "\"You are asking multiple questions here, pieces of which may have been addressed in other questions. A bond (I'm using US Government bonds in this example, and making the 'zero risk of default' assumption) will be priced based on today's interest rate. This is true whether it's a 10% bond with 10 years left (say rates were 10% on the 30 yr bond 20 years ago) a 2% bond with 10 years, or a new 3% 10 year bond. The rate I use above is the 'coupon' rate, i.e. the amount the bond will pay each year in interest. What's the same for each bond is called the \"\"Yield to Maturity.\"\" The price adjusts, by the market, so the return over the next ten years is the same. A bond fund simply contains a mix of bonds, but in aggregate, has a yield as well as a duration, the time-and-interest-weighted maturity. When rates rise, the bond fund will drop in value based on this factor (duration). Does this begin to answer your question?\"", "title": "" }, { "docid": "e1609c2ac8dec0f9dfee7fde2165d057", "text": "Okay let's try this a different way. Completely forget about what the bond is with. Here is how a bond works: * You get paid interest for holding the bond (5% interest means a coupon of $50 assuming one coupon a year) * At the end of the bond term (maturity) you get paid $1000. In your scenario, you get paid the $50 as an interest payment and the $1000 final payment. If you only had the bond for one year, your total payment will be $1050. Try drawing a timeline to visualise it a bit better", "title": "" }, { "docid": "c792b0ad91138ee36099aef622b3d59c", "text": "\"The answer to almost all questions of this type is to draw a diagram. This will show you in graphical fashion the timing of all payments out and payments received. Then, if all these payments are brought to the same date and set equal to each other (using the desired rate of return), the equation to be solved is generated. In this case, taking the start of the bond's life as the point of reference, the various amounts are: Pay out = X Received = a series of 15 annual payments of $70, the first coming in 1 year. This can be brought to the reference date using the formula for the present value of an ordinary annuity. PLUS Received = A single payment of $1000, made 15 years in the future. This can be brought to the reference date using the simple interest formula. Set the pay-out equal to the present value of the payments received and solve for X I am unaware of the difference, if any, between \"\"current rate\"\" and \"\"rate to maturity\"\" Finding the rate for such a series of payments would start out the same as above, but solving the resulting equation for the interest rate would be a daunting task...\"", "title": "" }, { "docid": "7751eff7538c3741651656f32aa11030", "text": "In this case the market interest rate is the discount rate that sets equal the market price (current value) of the bond to its present value. To find the market interest rate which is also referred to as promised yield YTM you would have solve for the interest rate in the bond price formula A market price of bond is the sum of discounted coupons and the terminal value of the bond. Most spreadsheet programs and calculators have a RATE function that makes possible finding this market interest rate. First see this for finding a coupon paying bond price The coupon payments are discounted so is the par value of the bond and sum of such discounts is the market price of the bond. The TVM functions in Excel and calculators make this possible using the following equation Let us take your data, 9% $100,000 coupon with 5 years remaining to maturity with market interest rate of 10%. Bonds issued in the US mostly pay two coupons per year. Thus we are finding the present value of 10 coupons each worth $4500 and par value of $100,000. The semi-annual market interest rate is 10%/2 or 5% The negative sign indicate money going out of hand Now solving for RATE is only possible using numerical methods and the RATE function is programmed using Newton-Raphson method to find one of the roots of the bond price equation. This rate will be the periodic rate in this case semi-annual rate which you have to multiply by 2 to get the annual rate. Do remember there is a difference between annual nominal rate and an annualized effective rate. To find the market interest rate If you don't have Excel or a financial calculator then you may opt to use my version of these financial functions in this JavaScript library tadJS", "title": "" }, { "docid": "8d9ab81d5f86195c4cce1c5fd44ed92f", "text": "Bonds have multiple points of risk: This is part of the time value of money chapter in any finance course. Disclaimer - Duff's answer popped up as I was still doing the bond calculations. Similar to mine but less nerdy.", "title": "" }, { "docid": "1f0cc6bb61f9c5b56558eef57ce1ed1a", "text": "\"You ask two questions - First - the market value can drop for two reasons (that I know), the company itself may have issues, and investors don't trust they'll be paid, or a general rise in interest rates. In the latter case, there's little to worry about, but for the former, well, that's your decision, you say \"\"the company is in trouble\"\" yet you believe they'll pay. Tough call. Second - yes, when a bond matures, the money appears in your account.\"", "title": "" }, { "docid": "7b8658a97c1892504d56a0ec070df7d3", "text": "If you have two other assets whose payoffs tomorrow are known and whose prices today are known, you can value it. Let's say you can observe a risk-free bond and a stock. Using those, you can calculate the state prices/risk-neutral probabilities. NOTE: You do not need to know the true probabilities. The value of your asset is then the state-price weighted sum of future payoffs.", "title": "" }, { "docid": "9c93201d984cd5be6fbaefd0e5f237c8", "text": "\"Of course it can. This is a time value of money calculation. If I knew the maturity date, or current yield to maturity I'd be able to calculate the other number and advise how much rates need to rise to cause the value to drop from 18 to 17. For a 10 year bond, a rise today of .1% will cause the bond to drop about 1% in value. This is a back of napkin calculation, finance calculators offer precision. edit - when I calculate present value with 34 years to go, and 5.832% yield to maturity, I get $14.55. At 5.932, the value drops to $14.09, a drop of 3.1%. Edit - Geo asked me to show calculations. Here it goes - A) The simplest way to calculate present value for a zero coupon bond is to take the rate 5.832%, convert it to 1.05832 and divide into the face value, $100. I offer this as the \"\"four function calculator\"\" approach, so one enters $100 divided by 1.05832 and repeat for the number of years left. A bit of precision is lost if there's a fractional year involved, but it's close. The bid/ask will be wider than this error introduced. B) Next - If you've never read my open declaration of love for my Texas Instruments BA-35 calculator, here it is, again. One enters N=34 (for the years) FV = 100, Rate = 5.832, and then CPT PV. It will give the result, $14.56. C) Here is how to do it in Excel - The numbers in lines 1-3 are self evident, the equation in cell B4 is =-PV(B3/100,B1,0,B2) - please note there are tiny differences in the way to calculate in excel vs a calculator. Excel wants the rate to be .05832, so I divided by 100 in the equation cell. That's the best 3 ways I know to calculate present value. Geo, if you've not noticed, the time value of money is near and dear to me. It comes into play for bonds, mortgages, and many aspect of investing. The equations get more complex if there are payments each year, but both the BA-35 and excel are up to it.\"", "title": "" } ]	fiqa
a20adebe287ab07d115bb45c51f9e030	Are prepayment penalties for mortgages normal?	[ { "docid": "e6d69a6de6af68379bf6eb0bb4cade98", "text": "It used to be much more common, particularly for sub-prime loans. If you do run into someone offering a loan with a prepayment penalty, you should certainly consider other options.", "title": "" }, { "docid": "04b4ff02bbc92036b7ca504387576ca4", "text": "It's not uncommon to have a small penalty if you pre-pay the mortgage in a short time. After all, making the loan isn't free for the bank. But as Nathan says, if a bank is planning to try very hard to stop you from giving them money, there is probably a reason. Try to convince your wife: there is nothing inherently wrong with debt. Like anything, too much can be bad for you, but when debt is deployed wisely -- that is almost always, when it is used to finance a capital asset (an asset that produces value) -- it can be a very good thing.", "title": "" }, { "docid": "f34317cceef2a7d9fdee4aa5a1ab0066", "text": "\"Fannie Mae and Freddie Mac uniform loans do not have prepayment penalties, so most plain-vanilla loans from national banks and brokers shouldn't have the penalty. (Fannie Mae rules are categorical; Freddie Mac will buy loans with prepayment if the loan originator documents that a loan without prepayment was offered and the borrower made the choice for other considerations; the uniform instrument they share conforms to the more restrictive rules) \"\"Mortgage loans subject to prepayment penalties will be ineligible for sale to Fannie Mae\"\" Fascinating historical discussion of how the two GSEs negotiated the compromise uniform form back in 1975 Exotic terms, subprime, jumbo loans, ARMs, construction loans, secondary loans or really local banks where they'll hold the loan are cases where there might be a prepayment penalty.\"", "title": "" }, { "docid": "7a7a97238901b51b69c23d0c538c7d28", "text": "Mortgages with a prepayment penalty usually do not charge points as a condition of issue. The points, usually in the range 1%-3% of the amount borrowed, are paid from the buyer's funds at the settlement, and are effectively the prepayment penalty. Once upon a time (e.g. 30 years ago), in some areas, buyers had a choice of This last option usually had a higher interest rate than the first two. It was advantageous for a buyer to accept this option if the buyer was sure that the mortgage would indeed be paid off in a short time, e.g. because a windfall of some kind (huge bonus, big inheritance, a killing in the stock market, a successful IPO) was anticipated, where the higher interest charged for only a few years did not make much of a difference. Taking this third option and hanging on to the mortgage over the full 15 or 20 or 25 or 30 year term would have been a very poor choice. I do not know if all three options are still available in the current mortgage market. The IRS treats points for original morttgages and points for re-financed mortgages differently for the purposes of Schedule A deductions. Points paid on an original mortgage are deductible as mortgage interest in the year paid, whereas points paid on a refinance must be amortized over the life of the loan so that the mortgage interest deduction is the sum of the interest paid in the monthly payments plus a fraction of the points paid for the refinance. The undeducted part of the points get deducted in the year that the mortgage is paid off early (or refinanced again). Prepayment penalties are, of course, deductible as mortgage interest in the year of the prepayment.", "title": "" } ]	[ { "docid": "ab635d81d1df649f07e7120320dd0755", "text": "Forget about terms. Think about loans in terms of months. To simplify things, let's consider a $1000 loan with .3% interest per month. This looks like a ten month term, but it's equally reasonable to think about it on a month-to-month basis. In the first month, you borrowed $1000 and accrued $3 interest. With the $102 payment, that leaves $901 which you borrow for another month. So on and so forth. The payoff after five payments would by $503.54 ($502.03 principal plus $1.51 interest). You'd save $2.99 in interest after paying $13.54. The reason why most of the interest was already paid is that you already did most of the borrowing. You borrowed $502.03 for six months and about $100 each for five, four, three, two, and one month. So you borrowed about $4500 months (you borrowed $1000 for the first month, $901 for the second month, etc.). The total for a ten month $1000 loan is about $5500 months of borrowing. So you've done 9/11 of the borrowing. It's unsurprising that you've paid about 9/11 of the interest. If you did this as a six month loan instead, then the payments look different. Say You borrow $1000 for one month. Then 834 for one month. So on and so forth. Adding that together, you get about $168.50 * 21 or $3538.50 months borrowed. Since you only borrow about 7/9 as much, you should pay 7/9 the interest. And if we adding things up, we get $10.54 in interest, about 7/9 of $13.54. That's how I would expect your mortgage to work in the United States (and I'd expect it to be similar elsewhere). Mortgages are pretty straight-jacketed by federal and state regulations. I too once had a car loan that claimed that early payment didn't matter. But to get rid of the loan, I made extra payments. And they ended up crediting me with an early release. In fact, they rebated part of my last payment. I saved several hundred dollars through the early release. Perhaps your loan did not work the same way. Perhaps it did. But in any case, mortgages don't generally work like you describe.", "title": "" }, { "docid": "6fdb10d3eb915b4a852e9c5f6aee1d2e", "text": "i prepaid roughly $400 at closing into escrow. that's my minimum allowable balance. paid in all year, and now taxes and insurance are paid in december. after december, they're projecting a $200 balance, which is $200 too low. homeowners insurance hasn't changed, pmi hasn't changed, property taxes are virtually identical to estimate at closing. the difference is that the $400 initial payment didn't factor in timing of those payments out of escrow. pretty lame if you ask me.", "title": "" }, { "docid": "7e06c59eea8e3f8455252689538847b3", "text": "\"For the mortgage, you're confusing cause and effect. Loans like mortgages generally have a very simple principle behind them: at any given time, the interest charged at that time is the product of the amount still owing and the interest rate. So for example on a mortgage of $100,000, at an interest rate of 5%, the interest charged for the first year would be $5,000. If you pay the interest plus another $20,000 after the first year, then in the second year the interest charge would be $4,000. This view is a bit of an over-simplification, but it gets the basic point across. [In practice you would actually make payments through the year so the actual balance that interest is charged on would vary. Different mortgages would also treat compounding slightly differently, e.g. the interest might be added to the mortgage balance daily or monthly.] So, it's natural that the interest charged on a mortgage reduces year-by-year as you pay off some of the mortgage. Mortgages are typically setup to have constant payments over the life of the mortgage (an \"\"amortisation schedule\"\"), calculated so that by the end of the planned mortgage term, you'll have paid off all of the principal. It's a straightforward effect of the way that interest works in general that these schedules incorporate higher interest payments early on in the mortgage, because that's the time when you owe more money. If you go for a 15-year mortgage, each payment will involve you paying off significantly more principal each time than with a 30-year mortgage for the same balance - because with a 15-year mortgage, you need to hit 0 after 15 years, not 30. So since you pay off the principal faster, you naturally pay less interest even when you just compare the first 15 years. In your case what you're talking about is paying off the mortgage using the 30-year payments for the first 15 years, and then suddenly paying off the remaining principal with a lump sum. But when you do that, overall you're still paying off principal later than if it had been a 15-year mortgage to begin with, so you should be charged more interest, because what you've done is not the same as having a 15-year mortgage. You still will save the rest of the interest on the remaining 15 years of the term, unless there are pre-payment penalties. For the car loan I'm not sure what is happening. Perhaps it's the same situation and you just misunderstood how it was explained. Or maybe it's setup with significant pre-payment penalties so you genuinely don't save anything by paying early.\"", "title": "" }, { "docid": "580a99928ac197a0f28d77e7f3786d50", "text": "That's why they're taking the deal. But it's not like they completely stole all that money. I don't have any stats, but I'd assume most of those people who got their loans are still in their homes. (Sorry, I could be way off. Please correct) But they still are bastards for not letting me refinance. Could have just been because they saw this penalty coming.", "title": "" }, { "docid": "5e15299fbe06568509541ecddbe6850c", "text": "A few years ago I had a 5 year car loan. I wanted to prepay it after 2 years and I asked this question to the lender. I expected a reduction in the interest attached to the car loan since it didn't go the full 5 years. They basically told me I was crazy and the balance owed was the full amount of the 5 year car loan. This sounds like you either got a bad car loan (i.e. pay all the interest first before paying any principal), a crooked lender, or you were misunderstood. Most consumer loans (both car loans and mortgages) reduce the amount of interest you pay (not the _percentage) as you pay down principal. The amount of interest of each payment is computed by multiplying the balance owed by the periodic interest rate (e.g. if your loan is at 12% annual interest you'll pay 1% of the remaining principal each month). Although that's the most common loan structure, there are others that are more complex and less friendly to the consumer. Typically those are used when credit is an issue and the lender wants to make sure they get as much interest up front as they can, and can recover the principal through a repossession or foreclosure. It sounds like you got a precomputed interest loan. With these loans, the amount of interest you'd pay if you paid through the life of the loan is computed and added to the principal to get a total loan balance. You are required to pay back that entire amount, regardless of whether you pay early or not. You could still pay it early just to get that monkey off your back, but you may not save any interest. You are not crazy to think that you should be able to save on interest, though, as that's how normal loans work. Next time you need to borrow money, make sure you understand the terms of the loan (and if you don't, ask someone else to help you). Or just save up cash and don't borrow money ;)", "title": "" }, { "docid": "54100a57d47534dc11922682d2510962", "text": "In the prior PMI discussions here, it's been stated that the bank is not obligated to remove PMI until the mortgage's natural amortization puts the debt at 78% LTV. So, paying in advance like this will not automatically remove the PMI. Nor will a lump sum payment be certain to move the next payment ahead a year. If it's entered as a principal prepayment, the next month's payment is still due. In the world of coupon books, if you sent in a year's payments, you'd not benefit from the interest saved, in one year you'd owe what the amortization table tells you. There's no free lunch when it comes to mortgages or finance in general. This is why we usually caution that one should not be cash poor the day after buying a house. Best to save 30%, put down 20%, and have a cushion after the closing.", "title": "" }, { "docid": "9654bea102f4b7d56d91111f737d8cde", "text": "Each goes to a different agency. Yes, it is normal that the lender queries more than one agency.", "title": "" }, { "docid": "26d1fa0919c5d0cd9e23e44fd94ee05e", "text": "yeah, i get that it's not optional. just sucks that nothing has changed substantially since i closed on the loan 11 months ago (same PMI, same HO, essentially the same property taxes) and now i have to pay more. seems like the closing docs could have taken into account timing of those payments so that i primed the pump with enough from the beginning.", "title": "" }, { "docid": "5d1140864a70857fc25330faae402724", "text": "This may only apply to Canada, but I would ask if the mortgages they lend are non-transferable. Meaning if you decide in year 2 of your 5 year term that you want to sell and move you pay a penalty, rather than be able to transfer the mortgage to a new house.", "title": "" }, { "docid": "9812d64c3ece8001274f40ca58b458fb", "text": "\"Assuming you've got no significant prepayment penalty, I would think about getting a longer mortgage, but making payments like it was a shorter mortgage. This will get the mortgage paid off in a shorter time period - but if you run into financial difficulties and/or find a better use for your money, you can drop back to paying the minimum necessary to retire the loan in 30 years without needing to refinance. (If you need to reduce your payments because you're between jobs, you don't have a very good negotiating position). For the most part, there's nothing that says you can only make one payment per month, or that it must be in the amount printed on the statement. If you want to, you can make payments weekly (or biweekly, or every 4 weeks) which typically means that you'll pay more every year. If your mortgage payments are $1000/month, that's $12,000 per year. If you tell yourself that 1000/month = $250 weekly and make yourself send a payment every week (or 500 every 2 weeks), you'll end up paying 250 * 52 = $13,000 per year, without particularly feeling the difference, especially if you get paid on a weekly/biweekly schedule instead of monthly or semi-monthly. Also, by paying more often, you're borrowing a tiny bit less money over the course of the year (because the money didn't sit in your account waiting until the 1st of the month to make a payment) so you save a little in interest there, too. Think of \"\"30 years\"\" or \"\"10 years\"\" as the basis for a minimum payment schedule, not necessarily the length of time that you or the lender really intend to keep the loan.\"", "title": "" }, { "docid": "f595b1e50b0683b20aa07a69001c969c", "text": "\"One way to think of the typical fixed rate mortgage, is that you can calculate the balance at the end of the month. Add a month's interest (rate times balance, then divide by 12) then subtract your payment. The principal is now a bit less, and there's a snowball effect that continues to drop the principal more each month. Even though some might object to my use of the word \"\"compounding,\"\" a prepayment has that effect. e.g. you have a 5% mortgage, and pay $100 extra principal. If you did nothing else, 5% compounded over 28 years is about 4X. So, if you did this early on, it would reduce the last payment by about $400. Obviously, there are calculators and spreadsheets that can give the exact numbers. I don't know the rules for car loans, but one would actually expect them to work similarly, and no, you are not crazy to expect that. Just the opposite.\"", "title": "" }, { "docid": "c4b45818eefda5e3896fd0844e788727", "text": "Take some of the commentary on home buying forums with a grain of salt. I too have read some of the commentary on these forums such as myFICO, Trulia, or Zillow and rarely is the right advice given or proper followup done. Typical 401k withdrawals for home purchase would not be considered a hardship. However, most employer 401k plans will allow you to take a loan for 401k as long as you provide suitable documentation: HUD-1 statement, Real Estate Contract, Good Faith Estimate, or some other form of suitable documentation as described by the plan administrator. For instance, I just took a 401k loan to pay for closing costs and I had to provide only the real estate contract. Could I not follow through with the contract? Sure, but what if I am found out for fraud? Then the plan administrator would probably end up turning the distribution into a taxable distribution. I wouldn't go to jail in this hypothetical situation - I am only stealing from myself. But the law states that certain loan situations are not liable for tax as long as that situation still exists. In the home loan situation, my employer allows for a low interest, 10 year loan. My employer also allows for a pre-approved loan for any purpose. This would be a low interest, 5 year loan. There is also the option to not do a loan at all. But normally that is only allowed after you have exhausted all your loan options and the government makes it intentionally harsh (30% penalty at least) to discourage people from dumping their tax free haven 401k accounts. That all being said, many plans offer no prepayment penalty. So like my employer has for us, I can pay it all back in full whenever I want or make micropayments every month. Otherwise, it comes out of my pay stub biweekly. So if it were to fall through, I could just put it all back like it never happened. Though with my plan, there is a cooling off period of 7 days before I can take another loan. Keep in mind that if you leave your employer then the full amount becomes a taxable distribution unless you pay it back within a certain period of time after leaving the employer. Whether this fits your financial situation is up to you, but a loan is definitely preferred over a partial or full withdrawal since you are paying yourself back for your rightly earned retirement which is just as important.", "title": "" }, { "docid": "c656406e5832542d6366718a515013fa", "text": "Are my mortgage terms locked in? Who oversees this? Yes your terms like rate, balance, penalties, due dates, are all covered in the mortgage documents. Those will not change. If the mortgage is an adjustable or has a balloon payment those terms will be followed by the new company. That being said, mistakes can be made. Double check everything. I had a transfer get messed up once, and all the terms were wrong. It took a few months but everything was worked out. In fact because they first tried to stonewall me I was able to negotiate some additional concessions out of them. Running your own escrow account is one thing you always want to do. That makes sure that the taxes and insurance are always paid by you, even if the servicing company has a glitch. Generally you have to have enough equity to not have PMI in order to get them to agree to the self-escrow option. If you have a problem with the servicing company then contact the Consumer Finance Protection Bureau a part of the US Government. They have only been a round a few years, thus I have no experience with them. Have an issue with a financial product or service? We'll forward your complaint to the company and work to get a response from them. The last few times I applied for a mortgage or refinanced a mortgage the lender had to reveal as part of the application stage the percentage of recent mortgages they still own/service. Check those numbers the next time you apply.", "title": "" }, { "docid": "c26765078c78e8b309ff703f65207fe4", "text": "Different bonds (and securitized mortgages are bonds) that have similar average lives tend to have similar yields (or at least trade at predictable yield spreads from one another). So, why does a 30 year mortgage not trade in lock-step with 30-year Treasuries? First a little introduction: Mortgages are pooled together into bundles and securitized by the Federal Agencies: Fannie Mae, Freddie Mac, and Ginnie Mae. Investors make assumptions about the prepayments expected for the mortgages in those pools. As explained below: those assumptions show that mortgages tend to have an average life similar to 10-year Treasury Notes. 100% PSA, a so-called average rate of prepayment, means that the prepayment increases linearly from 0% to 6% over the first 30 months of the mortgage. After the first 30 months, mortgages are assumed to prepay at 6% per year. This assumption comes from the fact that people are relatively unlikely to prepay their mortgage in the first 2 1/2 years of the mortgage's life. See the graph below. The faster the repayments the shorter the average life of the mortgage. With 150% PSA a mortgage has an average life of nine years. On average your investment will be returned within 9 years. Some of it will be returned earlier, and some of it later. This return of interest and principal is shown in the graph below: The typical investor in a mortgage receives 100% of this investment back within approximately 10 years, therefore mortgages trade in step with 10 year Treasury Notes. Average life is defined here: The length of time the principal of a debt issue is expected to be outstanding. Average life is an average period before a debt is repaid through amortization or sinking fund payments. To calculate the average life, multiply the date of each payment (expressed as a fraction of years or months) by the percentage of total principal that has been paid by that date, summing the results and dividing by the total issue size.", "title": "" }, { "docid": "fc239a35be77409464db2aaa455acd86", "text": "You mentioned 15-20 years in your comment on mhoran_psprep's response. This is the most important factor to consider in the points vs. rate question. With a horizon that long it sounds like the points are probably a better option for you. There is a neat comparison tool at The Mortgage Professor's website that may help you build your spreadsheet or simply check the numbers you are getting.", "title": "" } ]	fiqa
81fe2d6171af6be5bb5db6c1d47261de	I'm 23 and was given $50k. What should I do?	[ { "docid": "7976ebac42b29cd1cffa0d98f24be429", "text": "Here are some possibilities: avoid buying a car for as long as you can; if forced to own one, buy a used dependable car like a Toyota Corolla- 4 cyl and don't abuse it. open a Roth IRA, depositing max possible, the plan on doing so until you've investing the remaining balance. A Roth IRA, while not tax deductible now (you're in a low tax bracket now) will provide for tax-free distributions when you are both older and not in a low bracket. of course, invest in low cost equity funds. Come back for more ideas once the dust settles, you've got money left over and some of the above accomplished. You've got one asset many of us don't have: time.", "title": "" }, { "docid": "605842993bf7c451b0f12c45806e8a78", "text": "First, I would point you to this question: Oversimplify it for me: the correct order of investing With the $50k that you have inherited, you have enough money to pay off all your debt ($40k), purchase a functional used car ($5k), and get a great start on an emergency fund with the rest. There are many who would tell you to wait as long as possible to pay off your student loans and invest the money instead. However, I would pay off the loans right away if I were you. Even if it is low interest right now, it is still a debt that needs to be paid back. Pay it off, and you won't have this debt hanging over your head anymore. Your grandmother has given you an incredible gift. This money can make you completely debt free and put you on a path for success. However, if you aren't careful, you could end up back in debt quickly. Learn how to make a budget, and commit to never spending money that you don't have again.", "title": "" }, { "docid": "5b740b898731a15a46298c807c24c05d", "text": "\"I'll add 2 observations regarding current answers. Jack nailed it - a 401(k) match beats all. But choose the right flavor account. You are currently in the 15% bracket (i.e. your marginal tax rate, the rate paid on the last taxed $100, and next taxed $100.) You should focus on Roth. Roth 401(k) (and if any company match, that goes into a traditional pretax 401(k). But if they permit conversions to the Roth side, do it) You have a long time before retirement to earn your way into the next tax bracket, 25%. As your income rises, use the deductible IRA/ 401(k) to take out money pretax that would otherwise be taxed at 25%. One day, you'll be so far into the 25% bracket, you'll benefit by 100% traditional. But why waste the opportunity to deposit to Roth money that's taxed at just 15%? To clarify the above, this is the single rate table for 2015: For this discussion, I am talking taxable income, the line on the tax return designating this number. If that line is $37,450 or less, you are in the 15% bracket and I recommend Roth. Say it's $40,000. In hindsight on should put $2,550 in a pretax account (Traditional 401(k) or IRA) to bring it down to the $37,450. In other words, try to keep the 15% bracket full, but not push into 25%. Last, after enough raises, say you at $60,000 taxable. That, to me is \"\"far into the 25% bracket.\"\" $20,000 or 1/3 of income into the 401(k) and IRA and you're still in the 25% bracket. One can plan to a point, and then use the IRA flavors to get it dead on in April of the following year. To Ben's point regarding paying off the Student Loan faster - A $33K income for a single person, about to have the new expense of rent, is not a huge income. I'll concede that there's a sleep factor, the long tern benefit of being debt free, and won't argue the long term market return vs the rate on the loan. But here we have the probability that OP is not investing at all. It may take $2000/yr to his 401(k) capture the match (my 401 had a dollar for dollar match up to first 6% of income). This $45K, after killing the card, may be his only source for the extra money to replace what he deposits to his 401(k). And also serve as his emergency fund along the way.\"", "title": "" }, { "docid": "e20bda2b9348c44c284bb75dc8e4a975", "text": "If your employer is matching 50 cents on the dollar then your 401(k) is a better place to put your money than paying off credit cards This. Assuming you can also get the credit cards paid off reasonably soon too (say, by next year). Otherwise, you have to look at how long before you can withdraw that money, to see if the compounded credit card debt isn't growing faster than your retirement. But a guaranteed 50% gain, your first year is a pretty hard deal to beat. And if you currently have no savings, unless all of your surplus income has been reducing your debt, you're living beyond your means. You should be earning more than you're (going to be) spending, when you start paying rent/car bills. If you don't know what this is going to be, you need to be budgeting. Get this under control, by any means necessary. New job/career? Change priorities/expectations? Cut expenses? Live to your budget? Whatever it takes. I don't think you should be in any investment that includes bonds until you're 40, and maybe not even then - equities and cash-equivalents all the way (cash is for emergency funds, and for waiting for buying opportunities). Otherwise Michael has some good ideas. I would caveat that I think you should not buy any investments in one chunk, but dollar average it over some period of time, in case the market is unnaturally high right when you decide to invest. You should also gauge possible returns and potential tax liabilities. Debt is good to get rid of, unless it is good debt (very low interest rates - ie: lower than you could borrow the money for). Good debt should still get paid off - who knows how long your job could last for - but maybe not dump all of your $50K on it. Roth is amazing. You should be maxing that contribution out every year.", "title": "" }, { "docid": "ac87ed2ce4077b4e61e5806d7671fd6f", "text": "To add to @michael's solid answer, I would suggest sitting down and analyzing what your priorities are about paying off the student loan debt versus investing that money immediately. (Regardless, the first thing you should do is, as michael suggested, pay off the credit card debt) Since it looks like you will be having some new expenses coming up soon (rent, possibly a new car), as part of that prioritization you should calculate what your rent (and associated bills) will cost you on a monthly basis (including saving a bit each month!) and see if you can afford to pay everything without incurring new debt. I'd recommend trying to come up with several scenarios to see how cheaply you can live (roommates, maybe you can figure out a way to go without a car, etc). If, for whatever reason, you find you can't afford everything, then I would suggest taking a portion of your inheritance to at least pay off enough of your student loans so that you can afford all of your costs per month, and then save or invest the rest. (You can invest all you like, but if you don't live within your means, it won't do you any good.) Finally -- be aware that you may have other factors that come into play that may override financial considerations. I found myself in a situation similar to yours, and in my case, I chose to pay off my debts, not because it necessarily made the best financial sense, but that because of those other considerations, paying off that debt meant I had a significant level of stress removed from my life, and a lot more peace of mind.", "title": "" }, { "docid": "d41d8cd98f00b204e9800998ecf8427e", "text": "", "title": "" }, { "docid": "db8106cfd7ef5fa80480e89e21f6f2c1", "text": "The best option for maximizing your money long-term is to contribute to the 401(k) offered by your employer. If you park your inheritance in a savings account you can draw on it to augment your income while you max out your contributions to the 401(k). You will get whatever the employer matches right off the bat and your gains are tax deferred. In essence you will be putting your inheritance into the 401(k) and forcing your employer to match at whatever rate they do. So if your employer matches at 50 cents on the dollar you will turn your 50 thousand into 75 thousand.", "title": "" }, { "docid": "4a911181137582e6d96fe11409fd5e1b", "text": "First of all, I am sorry for your loss. At this time, worrying about money is probably the least of your concerns. It might be tempting to try to pay off all your debts at once, and while that would be satisfying, it would be a poor investment of your inheritance. When you have debt, you have to think about how much that debt is costing you to keep open. Since you have 0%APR on your student loan, it does not make sense to pay any more than the minimum payments. You may want to look into getting a personal loan to pay off your other personal debts. The interest rates for a loan will probably be much less than what you are paying currently. This will allow you to put a payment plan together that is affordable. You can also use your inheritance as collateral for the loan. Getting a loan will most likely give you a better credit rating as well. You may also be tempted to get a brand new sports car, but that would also not be a good idea at all. You should shop for a vehicle based on your current income, and not your savings. I believe you can get the same rates for an auto loan for a car up to 3 years old as a brand new car. It would be worth your while to shop for a quality used car from a reputable dealer. If it is a certified used car, you can usually carry the rest of the new car warranty. The biggest return on investment you have now is your employer sponsored 401(k) account. Find out how long it takes for you to become fully vested. Being vested means that you can leave your job and keep all of your employer contributions. If possible, max out, or at least contribute as much as you can afford to that fund to get employee matching. You should also stick with your job until you become fully vested. The money you have in retirement accounts does you no good when you are young. There is a significant penalty for early withdrawal, and that age is currently 59 1/2. Doing the math, it would be around 2052 when you would be able to have access to that money. You should hold onto a certain amount of your money and keep it in a higher interest rate savings account, or a money market account. You say that your living situation will change in the next year as well. Take full advantage of living as cheaply as you can. Don't make any unnecessary purchases, try to brown bag it to lunch instead of eating out, etc. Save as much as you can and put it into a savings account. You can use that money to put a down payment on a house, or for the security and first month's rent. Try not to spend any money from your savings, and try to support yourself as best as you can from your income. Make a budget for yourself and figure out how much you can spend every month. Don't factor in your savings into it. Your savings should be treated as an emergency fund. Since you have just completed school, and this is your first big job out of college, your income will most likely improve with time. It might make sense to job hop a few times to find the right position. You are much more likely to get a higher salary by changing jobs and employers than you are staying in the same one for your entire career. This generally is true, even if you are promoted at the by the same employer. If you do leave your current job, you would lose what your employer contributed if you are not vested. Even if that happened, you would still keep the portion that you contributed.", "title": "" }, { "docid": "080056d630bff8fef41c2b47594e2d9a", "text": "I'd be tempted to pay off the 35k in student loans immediately, but if you have to owe money, it's hard to beat zero percent. So I don't think I would pay it all off. Maybe cut it in half to make it a more comfortable payment. Currently, you are looking at $6K a year to pay them off, which is about 20% of your income. Cut that in half and you will sleep better! Definitely pay off the medical and credit cards. You're probably paying 20% on that. Clean it up. If you need a car, buy yourself a car. You have no savings, so I would put the rest in some kind of money market savings account. You are at an age where many people go through frequent changes. Maybe you get your own place, and you'll need to furnish it. Maybe you go back to school. Maybe you get married or have kids. Maybe you take a year off and backpack through Europe or Asia. You have a nice little windfall that puts you in a nice position to enjoy being young, so I would not lock it up into a 401k or other long term situation.", "title": "" }, { "docid": "3fcd316ac05b8ae0bdeabc00453d5ab6", "text": "Wow, hard to believe not a single answer mentioned investing in one of the best asset classes for tax purposes...real estate. Now, I'm not advising you to rush out and buy an investment property. But rather than just dumping your money into mutual funds...over which you have almost 0 control...buy some books on real estate investing. There are plenty of areas to get into, rehabs, single family housing rentals, multifamily, apartments, mobile home parks...and even some of those can have their own specialties. Learn now! And yes, you do have some control over real estate...you control where you buy, so you pick your local market...you can always force appreciation by rehabbing...if you rent, you approve your renters. Compared to a mutual fund run by someone you'll never meet, buying stocks in companies you've likely never even heard of...you have far more control. No matter what area of investing you decide to go into, there is a learning curve...or you will pay a penalty. Go slow, but move forward. Also, all the advice on using your employer's matching (if available) for 401k should be the easiest first step. How do you turn down free money? Besides, the bottom line on your paycheck may not change as much as you think it might...and when weighed against what you get in return...well worth the time to get it setup and active.", "title": "" }, { "docid": "316db4223ba9dcc3fba8f86d17dd2faa", "text": "Here's what I'd do: Pay off the cards and medical. Deposit 35k in the best interest bearing accounts you can find (maybe some sort of ladder). Link your student loans payments to this account. This frees up $486 a month in income, and generates a small amount of interest at the same time. Now, set up some sort of retirement account. Put $400 a month in it. This leaves you with $86 a month to use as you please. You still have $10 000 cash, out of which you could buy an inexpensive used car, and bank some as emergency funds.", "title": "" }, { "docid": "cd09e8a1db0d28c7d37ad2059e0bdf28", "text": "\"I would advise against \"\"wasting\"\" this rare opportunity on mundane things, like by paying off debts or buying toys - You can always pay those from your wages. Plus, you'll inevitably accumulate new debts over time, so debt repayment is an ongoing concern. This large pile of cash allows you to do things you can't ordinarily do, so use the opportunity to invest. Buy a house, then rent it out. Rent an apartment for yourself. The house rent will pay most (maybe all) of the mortgage, plus the mortgage interest is tax-deductible, so you get a lower tax bill. And houses appreciate over time, so that's an added bonus. When you get married, and start a family, you'll have a house ready for you, partially paid off with other people's money.\"", "title": "" }, { "docid": "23d0cbff2e9a46f0f939a6905e11e253", "text": "I would be realistic and recognize that however you invest this money, it is unlikely to be a life-changing sum. It is not going to provide an income which significantly affects your monthly budget, nor is it going to grow to some large amount which will allow you to live rent-free or similar. Therefore my advice is quite different to every other answer so far. If I was you, I would: I reckon this might get you through half the money. Take the other $25,000 and go travelling. Plan a trip to Europe, South America, Asia or Australia. Ask your job for 3 or 6 months off, and quit it they won't give it you. Find a few places which you would really like to visit, and schedule around them a lot of time to go where you want. Book your flights in advance, or book one way, and put aside enough money for the return when you know where you'll be coming back from. Stay in hostels, a tent or cheap AirBnB. Make sure you have a chance to meet other people, especially other people who are travelling around. Figure out in advance how much it will cost you a day to live basically, and budget for a few beers/restaurants/cinema/concert tickets/drugs/whatever you do to have fun. It's really easy nowadays to go all sorts of places, and be very spontaneous about what you want to do next. You will find that everywhere in the world is different, all people have something unusual about them, and everywhere is interesting. You will meet some great people and probably become both more independent and better at making friends with strangers. Your friends in other countries could stay friends for life. The first time you see Rome, the Great Barrier Reef, the Panama canal or the Tokyo fish market will be with you forever. You have plenty of years to fill up your 401K. You won't have the energy, fearlessness and openmindedness of a 23 year old forever. Go for it.", "title": "" } ]	[ { "docid": "19a399279fa3d682c76b0f1cb8422a2e", "text": "IMO almost any sensible decision is better than parking money in a retirement account, when you are young. Some better choices: 1) Invest in yourself, your skills, your education. Grad school is one option within that. 2) Start a small business, build a customer base. 3) Travel, adventure, see the world. Meet and talk to lots of different people. Note that all my advice revolves around investing in YOURSELF, growing your skills and/or your experiences. This is worth FAR more to you than a few percent a year. Take big risks when you are young. You will need maybe $1m+ (valued at today's money) to retire comfortably. How will you get there? Most people can only achieve that by taking bigger risks, and investing in themselves.", "title": "" }, { "docid": "d530f2b6588cb43271a67fa236e2bc7c", "text": "You can put them in a 5 years CD and getting a maximum of %2.5 APY if you're lucky. If you put 15k now, in 5 years you'll have $1.971. If it sounds good then take a look at the current inflation rate (i'm in usa)... If you want to think about retirement then you should open a Roth IRA. But you won't be able to touch the money without penalties (10% of earnings) before you get 59 1/2 years old. Another option would be to open a regular investment account with an online discounted broker. Which one? Well, this should be a totally separate question... If you decide to invest (Roth IRA or regular account) and you're young and inexperienced then go for a balanced mutual fund. Still do a lot of research to determine your portfolio allocation or which fund is best suited for you. Betterment (i never used it) is a no brainer investment broker. Please don't leave them in a generic checking or low interest savings account because you'll save nothing (see inflation again)...", "title": "" }, { "docid": "ed5fb75f53cbfb9ec38c820ec74761d4", "text": "I'd suggest waiting until a bit after you are married. To Eagle1's point, even $23,000 is not a huge sum of money. You didn't make any mention of a desire to buy a home, but if that becomes part of the plan, I'd want every cent of liquidity I can get. I wrote Student Loans and Your First Mortgage to explain why your buying power for the house is lowered by paying that loan. In your case, $5000 is 20% of $25000. For a good 20% down purchase, I'd want those funds available. You also don't mention retirement accounts. Depending on the home purchase timing, I'd start to think about putting aside at least the $5500 per year IRA/Roth IRA maximum.", "title": "" }, { "docid": "cae10da6b845a9f5199d74784818981b", "text": "You probably have a UMTA/UGMA account. While the money in that account belongs to you, as long as you're a minor (which is until the age of 18, in California) - you cannot directly access it. Instead, your parent(s) or guardian(s) or any other trustee manages that account for you, with your best interests in mind. While you may want to spend that money or give it away to your boyfriend or whoever else, it is very likely not in your best interest to do that. That is why your dad refuses. He has a legal responsibility, which is called fiduciary duty, to ensure the money is spent in a way that is best for you. If the fiduciary just lets you spend the money away - you could later, when you're no longer a minor, sue that person for the breach of trust. When you're older and a bit more mature you'll be able to make your own decisions and do whatever you want with that money. But as long as your parents have the responsibility to act in your best interests, it is likely that your boyfriend will stay in Pennsylvania for a while.", "title": "" }, { "docid": "85a5d77aeba67dafed30a54c183028fe", "text": "Why not just hold that cash until you graduate from college? Why? Because it's a safety net - make sure you don't have any sudden expenses (medical, school bills, car bills, etc). Then after school you're going to need some cash for job moving, relocation, clothes, downpayment on apartment, utilities, etc. If all that cash is tied up into a 401 or IRA then you can't touch it and if something happens you'll be tempted to take a loan out. Ack! You'll have plenty of time since you're just starting to save for retirement. Keep this cash as a beginning emergency fund and hang on cause as soon as you get out of school things really move fast. :)", "title": "" }, { "docid": "ba4c40ef92b1b89622a3207dc14fd562", "text": "My god man, where do you live that is too expensive to live on your own and 7K isn't enough for emergency cash? Anyway, with your age and income I would be more worried about a long-term sustainable lifestyle. In other words, a job that nets you more than $26K/year. Someday you may want to have a wife and kids and that income sure as hell wont pay for their college. That was life advice, now for financial: I've always been a believer that if someone is not a savvy investor, their priorities before investments should be paying off debt. If you had a lot of capital or knew your way around investment vehicles and applicable returns then I would be telling you something different. But in your case, pay off that car first giving yourself more money to invest in the long-run.", "title": "" }, { "docid": "9b3bd63f5d55ca2eb550414c3182b710", "text": "Setting aside for the moment the very relevant issue of whether you need the full amount quickly, I'll just tackle comparing which option gives you to maximum amount of money (in terms of real dollars). The trick is, unless you think inflation will suddenly reverse itself or stop entirely (not likely), $50K today is worth a LOT more than $50K in 20 years. If you don't believe me, consider that just 30 years ago the average price for a mid-level new car was around $3k. When you grandfather says he got a burger for a nickel, he isn't talking about 2010 dollars. So, how do you account for this? Well, the way financial people and project managers do it to estimate how much to pay today for $1 at some point in the future is through a net present value (NPV) calculation. You can find a calculator here. In your question, you gave some numbers for the payout, but not the lump sum prize amount. Going solely on what you have provided, I calculate that you should take the lump sum if it is greater than $766,189.96 which is the net present value of 20 years of $50K Payments assuming 3% annual inflation, which is fairly a fairly reasonable number given history. However, if you think the out-of-control Gov't spending is going to send inflation through the roof (possible, but not a given), then you almost certainly would want the lump sum. I suppose in that scenario you might want the lump sum anyway because if the Govt starts filching on their obligations, doing it to a small number of lottery winners might be politically more popular than cutting other programs that affect a large number of voters.", "title": "" }, { "docid": "bd3db7ba67b69b0a6bb9b5ed64bdbf5b", "text": "I am sorry for your loss, this person blessed you greatly. For now I would put it in a savings account. I'd use a high yield account like EverBank or Personal Savings from Amex. There are others it is pretty easy to do your own research. Expect to earn around 2200 if you keep it there a year. As you grieve, I'd ask myself what this person would want me to do with the money. I'd arrive at a plan that involved me investing some, giving some, and spending some. I have a feeling, knowing that you have done pretty well for yourself financially, that this person would want you to spend some money on yourself. It is important to honor their memory. Giving is an important part of building wealth, and so is investing. Perhaps you can give/purchase a bench or part of a walkway at one of your favorite locations like a zoo. This will help you remember this person fondly. For the investing part, I would recommend contacting a company like Fidelity or Vanguard. The can guide you into mutual funds that suit your needs and will help you understand the workings of them. As far as Fidelity, they will tend to guide you toward their company funds, but they are no load. Once you learn how to use the website, it is pretty easy to pick your own funds. And always, you can come back here with more questions.", "title": "" }, { "docid": "d636f7f7ecf7b891f7c3dac59f4a737c", "text": "Congratulations! You're making enough money to invest. There are two easy places to start: I recommend against savings accounts because they will quite safely lose your money: the inflation rate is usually higher than the interest rate on a savings account. You may have twice as much money after 50 years, but if everything costs four times as much, then you've lost buying power. If, in the course of learning about investing, you'd like to try buying individual stocks, do it only with money you wouldn't mind losing. Index funds will go down slightly if one of the companies in that index fails entirely, but the stock of a failed company is worthless.", "title": "" }, { "docid": "cc68b250e142e0a89cd68aa80106d854", "text": "If it turns out that you do want to help pay the tax bill (after answering all the questions above), I say cash out those funds. You are apparently very young with a long work life ahead (lucky you). Step aside from the actual money part of it for a moment. What does your Mom want? What do you really want to do about this? Is it from love that you want to help but are afraid it's a bad financial decision? Or is it from a feeling of duty and you deep down don't really want to spend your savings on Mom's tax bill. - If you really do want to help and you have the wherewithall to do so, then do it. Otherwise don't. You can recover financially. - I myself have had my retirement savings go to nearly zero 3 times. The first time I recovered pretty easily. The second time, not so easily. I'm just starting on the recovery path for the 3rd time at age 58 and I highly doubt I ever will recover this time. I didn't cash out on purpose but the stock market was not friendly. - My main point is to figure out truly what you want.", "title": "" }, { "docid": "6b474a0d47dd8050a1213e49e01afbc4", "text": "Thanks for your service. I would avoid personal investment opportunities at this point. Reason being that you can't personally oversee them if you are deployed overseas. This would rule out rentals and small businesses. Revisit those possibilities if you get married or leave the service. If you have a definite time when you would like to purchase a car, you could buy a six or twelve month CD with the funds that you need for that. That will slightly bump up your returns without taking much risk. If you don't really need to buy the car, you could invest that money in stocks. Then if the stock market tanks, you wait until it recovers (note that that can be five to ten years) or until you build up your savings again. That increases your reward at a significant increase in your risk. The risk being that you might not be able to buy a car for several more years. Build an emergency fund. I would recommend six months of income. Reason being that your current circumstances are likely to change in an emergency. If you leave the service, your expenses increase a lot. If nothing else, the army stops providing room for you. That takes your expenses from trivial to a third of your income. So basing your emergency fund on expenses is likely to leave you short of what you need if your emergency leaves you out of the service. Army pay seems like a lot because room (and board when deployed) are provided. Without that, it's actually not that much. It's your low expenses that make you feel flush, not your income. If you made the same pay in civilian life, you'd likely feel rather poor. $30,000 sounds like a lot of money, but it really isn't. The median household income is a little over $50,000, so the median emergency fund should be something like $25,000 on the income standard. On the expenses standard, the emergency fund should be at least $15,000. The $15,000 remainder would buy a cheap new car or a good used car. The $5000 remainder from the income standard would give you a decent used car. I wouldn't recommend taking out a loan because you don't want to get stuck paying a loan on a car you can't drive because you deployed. Note that if you are out of contact, in the hospital, or captured, you may not be able to respond if there is a problem with the car or the loan. If you pay cash, you can leave the car with family and let them take care of things in case of a deployment. If you invested in a Roth IRA in January of 2016, you could have invested in either 2015 or 2016. If 2015, you can invest again for 2016. If not, you can invest for 2017 in three months. You may already know all that, but it seemed worth making explicit. The Thrift Savings Plan (TSP) allows you to invest up to $18,000 a year. If you're investing less than that, you could simply boost it to the limit. You apparently have an extra $10,000 that you could contribute. A 60% or 70% contribution is quite possible while in the army. If you max out your retirement savings now, it will give you more options when you leave the service. Or even if you just move out of base housing. If your TSP is maxed out, I would suggest automatically investing a portion of your income in a regular taxable mutual fund account. Most other investment opportunities require help to make work automatically. You essentially have to turn the money over to some individual you trust. Securities can be automated so that your investment grows automatically even when you are out of touch.", "title": "" }, { "docid": "0a4ba4f4b5384baaa01d6d1d5113b329", "text": "You're extremely fortunate to have $50k in CDs, no debt, and $3800 disposable after food and rent. Congrats. Here's how I would approach it. If you see yourself getting into a home in the next couple of years, stay safe and liquid. CDs (depending on the duration) fit that description. Because you have disposable income and you're young, you should be contributing to a Roth IRA. This will build in value and compound over your lifetime, so that when you're in your 70s you'll actually have a retirement. Financial planners love life insurance because that's how they make all their money. I have whole life insurance because its cash value will be part of my retirement. It may also cover my wife if I ever decide to get married. It may or may not make sense for you now depending on how soon you want to buy a home and home expensive they are in your zip code. Higher risk, higher reward- you can count on that. Keep the funds in the United States and don't try to get into any slick financial moves. If you have a school in town, see if you can take an Intro to Financial Planning class. It's extremely helpful for anyone with these kinds of questions.", "title": "" }, { "docid": "f28372124749da6c9627223ed8e9e488", "text": "You need to find a fiduciary advisor pronto. Yes, you are getting a large amount of money, but you'll probably have to deal with higher than average health expenses and lower earning potential for years to come. You need to make sure the $1.2 million lasts you, and for that you need professional advice, not something you read on the Internet. Finding a knowledgeable advisor who has your interests at heart at a reasonable rate is the key here. These articles are a good start on what to look for: http://www.investopedia.com/articles/financialcareers/08/fiduciary-planner.asp https://www.forbes.com/sites/janetnovack/2013/09/20/6-pointed-questions-to-ask-before-hiring-a-financial-advisor/#2e2b91c489fe http://www.investopedia.com/articles/professionaleducation/11/suitability-fiduciary-standards.asp You should also consider what your earning potential is. You rule out college but at 26, you can have a long productive career and earn way more money than the $1.2 million you are going to get.", "title": "" }, { "docid": "965faa14f779d2158cfbb2260982ea77", "text": "\"At 50 years old, and a dozen years or so from retirement, I am close to 100% in equities in my retirement accounts. Most financial planners would say this is way too risky, which sort of addresses your question. I seek high return rather than protection of principal. If I was you at 22, I would mainly look at high returns rather than protection of principal. The short answer is, that even if your investments drop by half, you have plenty of time to recover. But onto the long answer. You sort of have to imagine yourself close to retirement age, and what that would look like. If you are contributing at 22, I would say that it is likely that you end up with 3 million (in today's dollars). Will you have low or high monthly expenses? Will you have other sources of income such as rental properties? Let's say you rental income that comes close to covering your monthly expenses, but is short about 12K per year. You have a couple of options: So in the end let's say you are ready to retire with about 60K in cash above your emergency fund. You have the ability to live off that cash for 5 years. You can replenish that fund from equity investments at opportune times. Its also likely you equity investments will grow a lot more than your expenses and any emergencies. There really is no need to have a significant amount out of equities. In the case cited, real estate serves as your cash investment. Now one can fret and say \"\"how will I know I have all of that when I am ready to retire\"\"? The answer is simple: structure your life now so it looks that way in the future. You are off to a good start. Right now your job is to build your investments in your 401K (which you are doing) and get good at budgeting. The rest will follow. After that your next step is to buy your first home. Good work on looking to plan for your future.\"", "title": "" }, { "docid": "f90edbfca0952db93bd3675d5978d7c4", "text": "Why should the rich who buy more expensive homes be subisdized by those who pay less, or from those who rent? A person who buys a 500k home in a high property tax area wins twice. Once but having more tax breaks by being able to deduct more than your average working class person who buys a house at 250k and the second time when they get nicer schools, public services etc at other people's dime. SF home prices are a combination or speculation investment and poor government control. SF prices are at Tokyo levels when the population density is at 1/10. That is a failure of local government policy to build more homes, not from lack of tax breaks. If your community wants to pay higher taxes for more local services, power to you and I encourage it, but you shouldn't be subsidized by those who dont. Imo, people shouldn't be punished for not owning property or living in a state where they think sales tax is better than income or property.", "title": "" } ]	fiqa
995a7881be2e1337fe5ecd4b27e2e871	What is the p/e ratio?	[ { "docid": "2d04f9874a062efbbe276fb82e73c715", "text": "The price to earnings ratio is a measure of the company's current share price compared to the annual net earnings per share. The other way to think about this is the number of years a company would take to pay back the share price if the earnings stay constant. This ignores factors like inflation and can be used as an indicator of risk. During the internet bubble many companies had P/E above 24 and no possible means of earning back the share prices that were inflated largely due to speculation. Most tools like Google Finance will list the P/E for a particular quote.", "title": "" }, { "docid": "9a3567483f191bfc140d85f2fd939ab9", "text": "The PE ratio stands for the Price-Earnings ratio. The price-earnings ratio is a straightforward formula: Share Price divided by earnings per share. Earnings per share is calculated by dividing the pre-tax profit for the company by the number of shares in issue. The PE ratio is seen by some as a measure of future growth of a company. As a general rule, the higher the PE, the faster the market believes a company will grow. This question is answered on our DividendMax website: http://www.dividendmax.co.uk/help/investor-glossary/what-is-the-pe-ratio Cheers", "title": "" }, { "docid": "7a1af1f518ca2fda333f2639837459d9", "text": "PE ratio is the current share price divided by the prior 4 quarters earnings per share. Any stock quote site will report it. You can also compute it yourself. All you need is an income statement and a current stock quote.", "title": "" } ]	[ { "docid": "99d863578d26125199b3f9ac63a5bf4a", "text": "\"To perhaps better explain the \"\"why\"\" behind this rule of thumb, first think of what it means when the P/E ratio changes. If the P/E ratio increases, then this means the stock has become more expensive (in relative terms)--for example, an increase in the price but no change in the earnings means you are now paying more for each cent of earnings than you previously were; or, a decrease in the earnings but no change in the price means you are now paying the same for less earnings. Keeping this in mind, consider what happens to the PE ratio when earnings increase (grow)-- if the price of the stock remains the same, then the stock has actually become relatively \"\"cheaper\"\", since you are now getting more earnings for the same price. All else equal, we would not expect this to happen--instead, we would expect the price of the stock to increase as well proportionate to the earnings growth. Therefore, a stock whose PE ratio is growing at a rate that is faster than its earnings are growing is becoming more expensive (the price paid per cent of earnings is increasing). Similarly, a stock whose PE ratio is growing at a slower rate than its earnings is becoming cheaper (the price paid per cent of earnings is decreasing). Finally, a stock whose P/E ratio is growing at the same rate as its earnings are growing is retaining the same relative valuation--even though the actual price of the stock may be increasing, you are paying the same amount for each cent of the underlying company's earnings.\"", "title": "" }, { "docid": "eaa8cc9360cece43923f2b00278f1931", "text": "\"Some companies have a steady, reliable, stream of earnings. In that case, a low P/E ratio is likely to indicate a good stock. Other companies have a \"\"feast or famine\"\" pattern, great earnings one year, no earnings or losses the following year. In that case, it is misleading to use a P/E ratio for a good year, when earnings are high and the ratio is low. Instead, you have to figure out what the company's AVERAGE earnings may be for some years, and assign a P/E ratio to that.\"", "title": "" }, { "docid": "ec14f4358a06c2dbf1c8f219be066d66", "text": "It's been traded publicly for only about a month. I wouldn't put much credence in a P/E ratio just yet because it hasn't had to report anything like a grown-up publicly traded company yet.", "title": "" }, { "docid": "0dba28ff9b2908da6f4be7d5ec49557e", "text": "Let's take a step back. My fictional company 'A' is a solid, old, established company. It's in consumer staples, so people buy the products in good times and bad. It has a dividend of $1/yr. Only knowing this, you have to decide how much you would be willing to pay for one share. You might decide that $20 is fair. Why? Because that's a 5% return on your money, 1/20 = 5%, and given the current rates, you're happy for a 5% dividend. But this company doesn't give out all its earnings as a dividend. It really earns $1.50, so the P/E you are willing to pay is 20/1.5 or 13.3. Many companies offer no dividend, but of course they still might have earnings, and the P/E is one metric that used to judge whether one wishes to buy a stock. A high P/E implies the buyers think the stock will have future growth, and they are wiling to pay more today to hold it. A low P/E might be a sign the company is solid, but not growing, if such a thing is possible.", "title": "" }, { "docid": "0f3adf4b5a6d10cd96ff4f1b65cca73f", "text": "P/E can use various estimates in its calculation as one could speculate about future P/E rations and thus could determine a future valuation if one is prepared to say that the P/E should be X for a company. Course it is worth noting that if a company isn't generating positive earnings this can be a less than useful tool, e.g. Amazon in the 1990s lost money every quarter and thus would have had a N/A for a P/E. PEG would use P/E and earnings growth as a way to see if a stock is overvalued based on projected growth. If a company has a high P/E but has a high earnings growth rate then that may prove to be worth it. By using the growth rate, one can get a better idea of the context to that figure. Another way to gain context on P/E would be to look at industry averages that would often be found on Yahoo! Finance and other sites.", "title": "" }, { "docid": "6d19500998654ae4a95b5adbfe8450b8", "text": "\"P/E is price to earnings, or the price of the company divided by annual earnings. Earnings, as reported, are reported on accrual basis. Accrual basis accounting is...without going too deep, like taking a timeline, chopping it up and throwing different bits and pieces of every year into different piles. Costs from 2008 might show up in 2011, or the company might take costs in 2011 that aren't necessarily costs until 2012. Examples would include one-time charges for specific investments, like new shipping centers, servers for their hosting services, etc. Free cash flow is the amount of cash Amazon is generating from its operations. Free cash flow is almost always different from earnings because it's the amount of Earnings + adjustments for non-cash activities - capital expenditures (long-term investments.) Earnings is one thing. Cash generation is a completely different animal. There are plenty of companies that \"\"earn\"\" billions, but only have a few hundred million in cash to show for it because their earnings have to be reinvested into new stuff to grow/maintain the business. To have a free cash flow yield of 2.5% is to have a company valued at $40 for each $1 of free cash flow that the company generates each year. $1/$40 = 2.5%. SGA = Selling, General, & Administrative expenses. These are the costs of running the company - paying salaries, advertising, etc. This cost is second only to COGS, which is Cost of Goods Sold. Currently, Amazon pays $.774 for every $1 product it sells. Its operations add another ~$.20 to that total. After taxes, Amazon keeps about 2 cents of every dollar's worth of product it sells. This 2 cents is Amazon's net margin of 2%. Net margin is (net income)/(sales). If Amazon earned $3 for every $100 in sales it would have a net margin of 3%. Let me know if this makes no sense. If there's anything in particular that is especially confusing, definitely reply and I'll better clarify on specific items. Fire away with any questions, also. I love to discuss finance and accounting.\"", "title": "" }, { "docid": "cfc6a71d87f7cc84ff75401a7965d421", "text": "I look at the following ratios and how these ratios developed over time, for instance how did valuation come down in a recession, what was the trough multiple during the Lehman crisis in 2008, how did a recession or good economy affect profitability of the company. Valuation metrics: Enterprise value / EBIT (EBIT = operating income) Enterprise value / sales (for fast growing companies as their operating profit is expected to be realized later in time) and P/E Profitability: Operating margin, which is EBIT / sales Cashflow / sales Business model stability and news flow", "title": "" }, { "docid": "3219e296cb1067d1fcae387db9bd14c5", "text": "\"To calculate a sector (or index) P/E ratio you need to sum the market caps of the constituent stocks and divide it by the sum of the total earnings of the constituent stocks (including stocks that have negative earnings). There are no \"\"per share\"\" figures used in the calculation. Beware when you include an individual stock that there may be multiple issues associated with the company that are not in the index.... eg. Berkshire Hathaway BRK.B is in the S&P 500 but BRK.A is not. In contrast, Google has both GOOGL and GOOG included in the S&P 500 index but not its unlisted Class B shares. All such shares need to be included in the market cap and figuring out the different share class ratios can be tricky.\"", "title": "" }, { "docid": "8bee78018b81af59a0e3e08da5d804a6", "text": "The article is talking about relative cost. You could use the cash Schiller P/E ratio as a proxy. That's unit of price per unit of earning. The answer to your question is one time in history, during the 2000 dot com bubble. It's higher than 2008 before the downturn. You are paying more for the same earnings. That has nothing to do with the size of the economy and everything to do with interest rates being too low for too long", "title": "" }, { "docid": "db05f2598528f3968e339c5bd0d3cb29", "text": "Yeah I agree with you. I wasn't referring to Tesla though, as I'm from South Africa so I only look in to local investments and I don't really know their story in terms of financials. Was just speaking about PE ratios in general :)", "title": "" }, { "docid": "8dd14465a90edf3ad4f5450dd7ba028f", "text": "Just from my experience and observation... VC there are spikes of activity. Where many deals are closing and board meetings and issues pile up on top of each other and happen all at once. But VC there are lulls where not much is going on. PE is more consistent and predictable in general. Yes of course exceptions arise but I found PE to be more 9 to 5 ish.", "title": "" }, { "docid": "2136538e1c183dd41f933085eadd0b7f", "text": "\"The mathematics site, WolframAlpha, provides such data. Here is a link to historic p/e data for Apple. You can chart other companies simply by typing \"\"p/e code\"\" into the search box. For example, \"\"p/e XOM\"\" will give you historic p/e data for Exxon. A drop-down list box allows you to select a reporting period : 2 years, 5 years, 10 years, all data. Below the chart you can read the minimum, maximum, and average p/e for the reporting period in addition to the dates on which the minimum and maximum were applicable.\"", "title": "" }, { "docid": "7c9353f6a0cae024f3d16f95ca48999b", "text": "\"Check your math... \"\"two stocks, both with a P/E of 2 trading at $40 per share lets say, and one has an EPS of 5 whereas the other has an EPS of 10 is the latter a better purchase?\"\" If a stock has P/E of 2 and price of $40 it has an EPS of $20. Not $10. Not $5.\"", "title": "" }, { "docid": "1a5555a3e6f08c85ad4c80c424b96211", "text": "Volume-weighted average price In finance, volume-weighted average price (VWAP) is the ratio of the value traded to total volume traded over a particular time horizon (usually one day). It is a measure of the average price at which a stock is traded over the trading horizon. VWAP is often used as a trading benchmark by investors who aim to be as passive as possible in their execution. Many pension funds, and some mutual funds, fall into this category. *** ^[ [^PM](https://www.reddit.com/message/compose?to=kittens_from_space) ^\| [^Exclude ^me](https://reddit.com/message/compose?to=WikiTextBot&message=Excludeme&subject=Excludeme) ^\| [^Exclude ^from ^subreddit](https://np.reddit.com/r/finance/about/banned) ^\| [^FAQ ^/ ^Information](https://np.reddit.com/r/WikiTextBot/wiki/index) ^\| [^Source](https://github.com/kittenswolf/WikiTextBot) ^] ^Downvote ^to ^remove ^\| ^v0.24", "title": "" }, { "docid": "001e570c3a2a33bd32b83c3442ff2427", "text": "Usually their PE ratio will just be listed as 0 or blank. Though I've always wondered why they don't just list the negative PE as from a straight math standpoint it makes sense. PE while it can be a useful barometer for a company, but certainly does not tell you everything. A company could have negative earnings for a lot of reasons, some good and some bad. The company could just be a bad company and could be losing money hand over fist, or the company could have had a one time occurrence such as a big acquisition or some other event that just affected this years earnings, or they could be an awesome high growth company that is heavily investing for their future and forgoing locking in profits now for much bigger profits in the future. Generally IPO company's fall into that last category as they are going public usually because they want an influx of cash that they are going to use to grow the company much more rapidly. So they are likely already taking all incoming $$ and taking on debt to grow the company and have exceeded all of those options and that's when they turn to the stock market for the additional influx of cash, so it is very common for these companies not to have earnings. Now you just have to decide if that company is investing that money wisely and will in the future translate to actual earnings.", "title": "" } ]	fiqa
85c822184651c846c38c01f6dca9a3d5	Now that Microsoft Money is gone, what can I do? [duplicate]	[ { "docid": "90b0557ba3649538e4ef1b972e18f484", "text": "Mint.com is a fantastic free personal finance software that can assist you with managing your money, planning budgets and setting financial goals. I've found the features to be more than adequate with keeping me informed of my financial situation. The advantage with Mint over Microsoft Money is that all of your debit/credit transactions are automatically imported and categorized (imperfectly but good enough). Mint is capable of handling bank accounts, credit card accounts, loans, and assets (such as cars, houses, etc). The downsides are:", "title": "" } ]	[ { "docid": "f0caf721b73d61349849ec09fa64db2f", "text": "Uh, Quicken is virtually identical to MS Money. If you liked money and don't want to change, use that.", "title": "" }, { "docid": "4767150d12ae946f266ade3beae6a7b0", "text": "You could keep an eye on BankSimple perhaps? I think it looks interesting at least... too bad I don't live in the US... They are planning to create an API where you can do everything you can do normally. So when that is released you could probably create your own command-line interface :)", "title": "" }, { "docid": "d8bd50cfab7a7dfa28146c0fa17dbe77", "text": "Based on my experience with OpenQuant, which is a development platform for automated trading strategies (and therefore can be easily be used for backtesting your personal strategy), I can give a little insight into what you might look for in such a platform. OpenQuant is a coding environment, which reads data feeds from a variety of sources (more on that in the second point), and runs the code for your strategy on that data and gives you the results. The data could be imported from a live data feed or from historical data, either through numerous API's, CSV/Excel, etc. You can write your own strategies using the custom C# libraries included with the software, which spares you from implementing your own code for technical indicators, basic statistical functions, etc. Getting the data is another issue. You could use joe's strategy and calculate option prices yourself, although you need to exercise caution when doing this to test a strategy. However, there is no substitute for backtesting a strategy on real data. Markets change over time, and depending on how far back you're interested in testing your strategy, you may run into problems. The reason there is no substitute for using real data is that attempting to replicate the data may fail in some circumstances, and you need a method of verifying that the data you're generating is correct and realistic. Calculating a few values, comparing them to the real values, and calibrating accordingly is a good idea, but you have to decide for yourself how many checks you want to do. More is better, but it may not be enough to realistically test your strategy. Disclaimer: Lest you interpret my post as a shameless plug for the OpenQuant platform, I'll state that I found the interface awful (it looked vaguely like Office 2000 but ten years too late) and the documentation woefully incomplete. I last used the software in 2010, so it may have improved in the intervening years, but your mileage may vary. I only use it as an example to give some insight into what you might look for in a backtesting platform. When you actually begin trading, a different platform is likely in order. That being said, it responded fairly quickly and the learning curve wasn't too steep. The platform wasn't too expensive at the time (about $700 for a license with no data feeds, I think) but I was happy that the cost wasn't coming out of my pocket. It's only gotten more expensive and I'm not sure it's worth it.", "title": "" }, { "docid": "46651b3b3476d6ee2c361efaaa80b1bb", "text": "It's difficult to compile free information because the large providers are not yet permitted to provide bulk data downloads by their sources. As better advertising revenue arrangements that mimic youtube become more prevalent, this will assuredly change, based upon the trend. The data is available at money.msn.com. Here's an example for ASX:TSE. You can compare that to shares outstanding here. They've been improving the site incrementally over time and have recently added extensive non-US data. Non-US listings weren't available until about 5 years ago. I haven't used their screener for some years because I've built my own custom tools, but I will tell you that with a little PHP knowledge, you can build a custom screener with just a few pages of code; besides, it wouldn't surprise me if their screener has increased in power. It may have the filter you seek already conveniently prepared. Based upon the trend, one day bulk data downloads will be available much like how they are for US equities on finviz.com. To do your part to hasten that wonderful day, I recommend turning off your adblocker on money.msn and clicking on a worthy advertisement. With enough revenue, a data provider may finally be seduced into entering into better arrangements. I'd much rather prefer downloading in bulk unadulterated than maintain a custom screener. money.msn has been my go to site for mult-year financials for more than a decade. They even provide limited 10-year data which also has been expanded slowly over the years.", "title": "" }, { "docid": "3a19279ffae2f4db056a53ee0f972eae", "text": "\"You could buy options. I do not know what your time horizon is but it makes all the difference due to theta burn. There are weekly, monthly, quarterly, yearly and even longer duration options called leaps. You have decided how long of a time frame. You also have to see what the implied volatility is for the underlying because if you think hypothetically that the price of the spy is 100 dollars currently. Today is hypothetically a Thursday and you buy a weekly option expiring on Friday ( the next day) of strike 100.5 and the call option is priced at .55 cents and you buy it. This means that the underlying has to move .5 dollars in one day to be considered in the money but at time 0, the option should only be worth its intrinsic value which is the underlying, (Say the SPY moved 55 cents up from 100 to 100.55), (100.55) minus the strike (100.5) = 5 cents, so if you payed 55 cents and one day later at expiration its worth 5 cents ,you lost almost 91% of your money, rather with buying and holding you lose a lot less. The leverage is on a 10x scale typically. That is why timing is so important. Anyone can say x stock is going to go up in the future, but if you know **when** you can make a killing if it is not already priced into the market. Another thing you can do is figure out how much MSFT contributes to the SPX movement in terms of points. What does a 1% move in MSFT doto SPX. If you can calculate that and you think you know where MSFT is going, you can just trade the spy options synthetically as if it were microsoft. You could also buy msft stock on margin as a retail investor, but be careful. Like Rhaskett said, look into an etf that has microsoft. The nasdaq has a nasdaq-100 which microsoft is in called the triple Q. The ticker is qqq. PowerShares QQQ™, formerly known as \"\"QQQ\"\" or the \"\"NASDAQ- 100 Index Tracking Stock®\"\", is an exchange-traded fund based on the Nasdaq-100 Index®. Best of luck and always understand what you are buying before you buy it, JL\"", "title": "" }, { "docid": "f30604cdaf6d233b808313a4423f3974", "text": "I currently use Moneydance on my Mac. Before that I had used Quicken on a PC until version 2007. It is pretty good, does most simple investment stuff just fine. It can automatically download prices for regular stocks. Mutual funds I have to input by hand.", "title": "" }, { "docid": "9ebc43ac297c2c5d3bad28059236f170", "text": "Check the Financial section in this list of Open Source Software", "title": "" }, { "docid": "37bce082765fcc99df82f798839525d1", "text": "I second the vote for GnuCash. It runs on Linux, Windows, and Mac. It is double-entry accounting, so there is a little bit of a learning curve, but it sounds like you should probably have something a little more powerful than Mint for your situation.", "title": "" }, { "docid": "fd1d479b3ef0591db81ed22afc57b378", "text": "\"I'm not personally familiar with this, but I had a look at the Companies House guidance. Unfortunately, it seems you've done things in the wrong order. You should have first got the funds out, distributed them to yourself as a dividend or salary, and then closed the account, and then wound up the company. Legally speaking, the remaining funds now belong to the government (\"\"bona vacantia\"\"). It's possible you could apply to have the company restored, but I think that might be difficult; I don't think the administrative restoration procedure applies in your situation. Given the amount involved, I'd suggest just forgetting about it.\"", "title": "" }, { "docid": "5551e1d6c53d78ac4f021ce3d5c4c4b4", "text": "I traded futures for a brief period in school using the BrokersXpress platform (now part of OptionsXpress, which is in turn now part of Charles Schwab). They had a virtual trading platform, and apparently still do, and it was excellent. Since my main account was enabled for futures, this carried over to the virtual account, so I could trade a whole range of futures, options, stocks, etc. I spoke with OptionsXpress, and you don't need to fund your acount to use the virtual trading platform. However, they will cancel your account after an arbitrary period of time if you don't log in every few days. According to their customer service, there is no inactivity fee on your main account if you don't fund it and make no trades. I also used Stock-Trak for a class and despite finding the occasional bug or website performance issue, it provided a good experience. I received a discount because I used it through an educational institution, and customer service was quite good (probably for the same reason), but I don't know if those same benefits would apply to an individual signing up for it. I signed up for top10traders about seven years ago when I was in secondary school, and it's completely free. Unfortunately, you get what you pay for, and the interface was poorly designed and slow. Furthermore, at that time, there were no restrictions that limited the number of shares you could buy to the number of outstanding shares, so you could buy as many as you could afford, even if you exceeded the number that physically existed. While this isn't an issue for large companies, it meant you could earn a killing trading highly illiquid pink sheet stocks because you could purchase billions of shares of companies with only a few thousand shares actually outstanding. I don't know if these issues have been corrected or not, but at the time, I and several other users took advantage of these oversights to rack up hundreds of trillions of dollars in a matter of days, so if you want a realistic simulation, this isn't it. Investopedia also has a stock simulator that I've heard positive things about, although I haven't used it personally.", "title": "" }, { "docid": "3c3eea13c7049f014f8e43e188fed63e", "text": "Current Money users may want to take a look at this: http://sites.google.com/site/pocketsense/home/msmoneyfixp1 Pretty easy (and secure) way to continue getting online data into Money.", "title": "" }, { "docid": "b32304b701b8d58dafd682346da54418", "text": "The short answer is that there are no great personal finance programs out there any more. In the past, I found Microsoft Money to be slick and feature rich but unfortunately it has been discontinued a few years ago. Your choices now are Quicken and Mint along with the several open-source programs that have been listed by others. In the past, I found the open source programs to be both clunky and not feature-complete for my every day use. It's possible they have improved significantly since I had last looked at them. The biggest limitation I saw with them is weakness of integration with financial service providers (banks, credit card companies, brokerage accounts, etc.) Let's start with Mint. Mint is a web-based tool (owned by the same company as Quicken) whose main feature is its ability to connect to nearly every financial institution you're likely to use. Mint aggregates that data for you and presents it on the homepage. This makes it very easy to see your net worth and changes to it over time, spending trends, track your progress on budgets and long-term goals, etc. Mint allows you to do all of this with little or no data entry. It has support for your investments but does not allow for deep analysis of them. Quicken is a desktop program. It is extremely feature rich in terms of supporting different types of accounts, transactions, reports, reconciliation, etc. One could use Quicken to do everything that I just described about Mint, but the power of Quicken is in its more manual features. For example, while Mint is centred on showing you your status, Quicken allows you to enter transactions in real-time (as you're writing a check, initiating a transfer, etc) and later reconciles them with data from your financial institutions. Link Mint, Quicken has good integration with financial companies so you can generally get away with as little or as much data entry as you want. For example, you can manually enter large checks and transfers (and later match to automatically-downloaded data) but allow small entries like credit card purchases to download automatically. Bottom line, if you're just looking to keep track of where you are at, try Mint. It's very simple and free. If you need more power and want to manage your finances on a more transactional level, try Quicken (though I believe they do not have a trial version, I don't understand why). The learning curve is steep although probably gentler than that of GnuCash. Last note on why Mint.com is free: it's the usual ad-supported model, plus Mint sells aggregated consumer behaviour reports to other institutions (since Mint has everyone's transactions, it can identify consumer trends). If you're not comfortable with that, or with the idea of giving a website passwords to all your financial accounts, you will find Quicken easier to accept. Hope this helps.", "title": "" }, { "docid": "32c8ff3e40906d3d4e67dae81f44f06b", "text": "Billshrink offers some pretty neat analysis tools to help you pick a credit card. They focus more on rewards than the features you mention but it might be worth a look. If you use Mint, they offer a similar service, too. If you're not already using Mint, though, I'd look at Billshrink as Mint requires some extensive setup. MOD EDIT Looks like billshrink.com is shut down. From their site: Dear BillShrink customer, As you may have heard, BillShrink.com was shut down on July 31, 2013. While we’re sad to say goodbye, we hope we’ve been able to help you be better informed and save some money along the way! The good news is that much of the innovative award-winning BillShrink technology will still be available via our StatementRewards platform (made available to customers by our partnering financial institutions). Moreover, we expect to re-launch a new money-saving service in the future. To see more of what we’re up to, visit Truaxis.com. We have deleted your personal information as of July 31. We will retain your email address only to announce a preview of the new tool. If you do not want us to retain your email address, you can opt out in the form below. This opt out feature will be available until September 31, 2013. If you have already opted out previously, you do not need to opt out again. If you have any further questions, contact us at info@billshrink.com. Thanks, The BillShrink/Truaxis Team", "title": "" }, { "docid": "a70f3bb1503144ad1c52173d8d7638ba", "text": "I can't give you a detailed answer because I'm away from the computer where I use kMyMoney, but IIRC to add investments you have to create new transactions on the 'brokerage account' linked to your investment account.", "title": "" }, { "docid": "a471c4c58c07ed7ca866cff9414c8695", "text": "There isn't one. I haven't been very happy with anything I've tried, commercial or open source. I've used Quicken for a while and been fairly happy with the user experience, but I hate the idea of their sunset policy (forced upgrades) and using proprietary format for the data files. Note that I wouldn't mind using proprietary and/or commercial software if it used a format that allowed me to easily migrate to another application. And no, QIF/OFX/CSV doesn't count. What I've found works well for me is to use Mint.com for pulling transactions from my accounts and categorizing them. I then export the transaction history as a CSV file and convert it to QIF/OFX using csv2ofx, and then import the resulting file into GNUCash. The hardest part is using categories (Mint.com) and accounts (GnuCash) properly. Not perfect by any means, but certainly better than manually exporting transactions from each account.", "title": "" } ]	fiqa
96b21f063ef187377e03853639941a09	Buy index mutual fund or build my own?	[ { "docid": "ab3fa3b48b665dad5943843d32607325", "text": "You better buy an ETF that does the same, because it would be much cheaper than mutual fund (and probably much cheaper than doing it yourself and rebalancing to keep up with the index). Look at DIA for example. Neither buying the same amount of stocks nor buying for the same amount of money would be tracking the DJIE. The proportions are based on the market valuation of each of the companies in the index.", "title": "" }, { "docid": "3e8d3c5f6682927cfaf0ca0d951367df", "text": "\"There are only three circumstances where building your own \"\"index\"\" portfolio make sense, in my opinion.\"", "title": "" }, { "docid": "ebd2083d3c4dfd4d089cf638a06602e2", "text": "One thing I would add to @littleadv (buy an ETF instead of doing your own) answer would be ensure that the dividend yield matches. Expense ratios aren't the only thing that eat you with mutual funds: the managers can hold on to a large percentage of the dividends that the stocks normally pay (for instance, if by holding onto the same stocks, you would normally receive 3% a year in dividends, but by having a mutual fund, you only receive .75%, that's an additional cost to you). If you tried to match the DJIA on your own, you would have an advantage of receiving the dividend yields on the stocks paying dividends. The downsides: distributing your investments to match and the costs of actual purchases.", "title": "" }, { "docid": "d21030f59a9ca44c901c834329eb54ab", "text": "\"If you are a \"\"small\"\" investor (namely, not an accredited investor), then the transaction costs (commissions) for purchasing the stocks while attempting to duplicate DJIA will defeat any benefit. My personal preference is to purchase mutual funds rather than ETFs.\"", "title": "" }, { "docid": "60935e537431524f993dfcf5f2c5a13a", "text": "Go with a Vanguard ETF. I had a lengthy discussion with a successful broker who runs a firm in Chicago. He boiled all of finance down to Vanguard ETF and start saving with a roth IRA. 20 years of psychology research shows that there's a .01 correlation (that's 1/100 of 1%) of stock/mutual fund performance to prediction. That's effectively zero. You can read more about it in the book Thinking Fast and Slow. Investors have ignored this research for years. The truth is you'd be just as successful if you picked your mutual funds out of a hat. But I'll recommend you go with a broker's advice.", "title": "" } ]	[ { "docid": "9d67e11a7c3b69dc6f4b90c0aaaa9054", "text": "I don't know what you mean by 'major'. Do you mean the fund company is a Fidelity or Vanguard, or that the fund is broad, as in an s&P fund? The problem starts with a question of what your goals are. If you already know the recommended mix for your age/risk, as you stated, you should consider minimizing the expenses, and staying DIY. I am further along, and with 12 year's income saved, a 1% hit would be 12% of a year's pay, I'd be working 1-1/2 months to pay the planner? In effect, you are betting that a planner will beat whatever metric you consider valid by at least that 1% fee, else you can just do it yourself and be that far ahead of the game. I've accepted the fact that I won't beat the average (as measured by the S&P) over time, but I'll beat the average investor. By staying in low cost funds (my 401(k) S&P fund charges .05% annual expense) I'll be ahead of the investors paying planner fees, and mutual fund fees on top of that. You don't need to be a CFP to manage your money, but it would help you understand the absurdity of the system.", "title": "" }, { "docid": "6e7f88b56677a917045c41db97d6ced0", "text": "\"I'd suggest you start by looking at the mutual fund and/or ETF options available via your bank, and see if they have any low-cost funds that invest in high-risk sectors. You can increase your risk (and potential returns) by allocating your assets to riskier sectors rather than by picking individual stocks, and you'll be less likely to make an avoidable mistake. It is possible to do as you suggest and pick individual stocks, but by doing so you may be taking on more risk than you suspect, even unnecessary risk. For instance, if you decide to buy stock in Company A, you know you're taking a risk by investing in just one company. However, without a lot of work and financial expertise, you may not be able to assess how much risk you're taking by investing in Company A specifically, as opposed to Company B. Even if you know that investing in individual stocks is risky, it can be very hard to know how risky those particular individual stocks are, compared to other alternatives. This is doubly true if the investment involves actions more exotic than simply buying and holding an asset like a stock. For instance, you could definitely get plenty of risk by investing in commercial real estate development or complicated options contracts; but a certain amount of work and expertise is required to even understand how to do that, and there is a greater likelihood that you will slip up and make a costly mistake that negates any extra gain, even if the investment itself might have been sound for someone with experience in that area. In other words, you want your risk to really be the risk of the investment, not the \"\"personal\"\" risk that you'll make a mistake in a complicated scheme and lose money because you didn't know what you were doing. (If you do have some expertise in more exotic investments, then maybe you could go this route, but I think most people -- including me -- don't.) On the other hand, you can find mutual funds or ETFs that invest in large economic sectors that are high-risk, but because the investment is diversified within that sector, you need only compare the risk of the sectors. For instance, emerging markets are usually considered one of the highest-risk sectors. But if you restrict your choice to low-cost emerging-market index funds, they are unlikely to differ drastically in risk (at any rate, far less than individual companies). This eliminates the problem mentioned above: when you choose to invest in Emerging Markets Index Fund A, you don't need to worry as much about whether Emerging Markets Index Fund B might have been less risky; most of the risk is in the choice to invest in the emerging markets sector in the first place, and differences between comparable funds in that sector are small by comparison. You could do the same with other targeted sectors that can produce high returns; for instance, there are mutual funds and ETFs that invest specifically in technology stocks. So you could begin by exploring the mutual funds and ETFs available via your existing investment bank, or poke around on Morningstar. Fees will still matter no matter what sector you're in, so pay attention to those. But you can probably find a way to take an aggressive risk position without getting bogged down in the details of individual companies. Also, this will be less work than trying something more exotic, so you're less likely to make a costly mistake due to not understanding the complexities of what you're investing in.\"", "title": "" }, { "docid": "096929c687f598f5152b0d55ede808aa", "text": "\"That's great that you have saved up money. You are ahead of your peers. I would advise against investing in an index fund. The attraction of the idea is that you will get the same return as the base item. For example, an index fund of gold would supposedly give you the same return as if you bought gold. In reality this is not true. The return of an index fund is always significantly below the return of the underlying commodity. Your best strategy is to invest in something you know and understand. There are two books that can help you learn how to do this: \"\"One Up on Wall Street\"\" by Peter Lynch and \"\"The Intelligent Investor\"\" by Benjamin Graham. Buying, reading and following the guidance in these two books is your best investment of time and money.\"", "title": "" }, { "docid": "44beeea37021636a991cbd1b3be2a496", "text": "You don't say what kinds of mutual funds, or what bonds. You don't say how old you are. You seem to have enough cushion to strike out on your own comfortably. This is good. Compared with Vanguard's management fees, the fees you're paying are pretty high. The bottom line of what to invest in rests with you. If you outsource it, it's still your money. The managers get paid whether you make money or not. You have lots of other options: real estate from a distressed seller, commodities, currencies, websites, or other things where you have a knowledge advantage. For the time being, though, if you're concerned about your main income stream, I wouldn't get terribly risky with your money. Cash is just peachy in that case.", "title": "" }, { "docid": "c8f2662558e3f11e38774e226cba0f1b", "text": "If you are looking to invest for 1-2 years I would suggest you not invest in mutual funds at all. Your time horizon is too short for it to be smart to invest in the stock market. I'd suggest a high-yield savings account or CD. I know they both have crappy returns, but the stock market can swing wildly with no notice. If you are ready to buy your house and the market is down 50% (it has happened multiple times in history) are you going to have to put off buying your home for an indefinite amount of time waiting to them to recover? If you are absolutely committed to investing in a mutual fund anyway against my advise I'd suggest an indexed fund that contains mostly blue chip stocks (indexed against the DOW).", "title": "" }, { "docid": "b1551ce33e769d1897d208ca91c38a52", "text": "\"There are a few reasons why an index mutual fund may be preferable to an ETF: I looked at the iShare S&P 500 ETF and it has an expense ratio of 0.07%. The Vanguard Admiral S&P 500 index has an expense ratio of 0.05% and the Investor Shares have an expense ratio of 0.17%, do I don't necessarily agree with your statement \"\"admiral class Vanguard shares don't beat the iShares ETF\"\".\"", "title": "" }, { "docid": "74ea18e3d9909a7d8434a44d78226db5", "text": "Failing some answers to my comment, I am going to make some assumptions: Based upon a quick review of this article I'd probably be in the Russell 2000 Value Index Fund (IWN). Quite simply it gives you broad market exposure so you can be diversified by purchasing one fund. One of the key success factors is starting, not if you pick the best fund at the onset. I can recall, 20 years ago being amazed (and it was quite a feat) at someone who was able to invest $400 per month. These days that won't get you to the ROTH maximum and smart 20 somethings are doing just that.", "title": "" }, { "docid": "1b108040bd2c34ec920bd9d6ec5d7bbd", "text": "My plan is that one day I can become free of the modern day monetary burdens that most adults carry with them and I can enjoy a short life without these troubles on my mind. If your objective is to achieve financial independence, and to be able to retire early from the workforce, that's a path that has been explored before. So there's plenty of sources that you might want to check. The good news is that you don't need to be an expert on security analysis or go through dozens of text books to invest wisely and enjoy the market returns. This is the Bogleheads philosophy. It's widely accepted by people in academia, and thoroughly tested. Look into it further if you want to see the rationale behind, but, to sum it up: It doesn't matter how expert you are. The idea of beating the market, that an index fund tracks, is about 'outsmarting' the rest of investors. That would be difficult, even if it was a matter of skill, but when it comes to predicting random events we're all equally clueless. *Total Expense Ratio: It gives an idea of how expensive is a given fund in terms of fees. Actively managed funds have higher TER than indexed ones. This doesn't mean there aren't index funds with, unexplainable, high TER out there.", "title": "" }, { "docid": "1bc58bfb4b2ab498e53e1521f99132aa", "text": "I like the way you framed this question. There is no single right answer for what to do with your savings, but there are some choices that are wrong in the sense that they are dominated by other choices you could make. Of the choices you listed, there are two that fall into that category. The ones that seem like a bad idea to me are: Putting it into your Roth 401(k). You can't do this directly anyhow, but you could do it indirectly by increasing your contributions and using the growth fund to cover the hole in your budget, but that's a lot of work for a relatively small gain. You would essentially be exchanging one long-term investment for another long-term investment. You would pay capital gains taxes on the investment when you sell it today, in order to not pay taxes on its earnings when you eventually withdraw it. There is some benefit there, but it's a long way off, not that large, and probably not worth the effort. Things that might change your mind: If your 401(k) was a traditional 401(k) (paying tax at capital gains rate today to get a deduction at your normal income rate is likely to be a win). You're not contributing enough to get the full company match (always try to get that match if you can). Putting it into your emergency fund. Once again, you are likely to pay capital gains tax if you do this, and you will be putting it into an investment that is likely to get a lower return than your current one. It isn't really necessary to incur these costs, since if you encounter an emergency that you can't cover with your existing emergency fund, you could always liquidate the growth fund then, when you know you need it. Now, a growth fund is going to be more volatile than what you would normally want for an emergency fund, but the risk isn't that bad, if you think about it. Say your emergency comes up and you find that the growth fund is down 20% (which would be a pretty horrible run). That's $600 less that you have to deal with the situation. Keep in mind that you already have $2000 (and building) in your current emergency fund. Is that $600 going to make the difference between meeting the need and not? It's not likely. Better to leave the investment where it is and keep building your emergency fund week by week. Things that might change your mind: Your level of risk aversion (if having that money in a more risky investment is keeping you up at night, move it). You face significant job uncertainty (if you have reason to think your job is at risk, it might be a good idea to top off that emergency fund sooner rather than later.) Your other two choices both seem like solid options under the right circumstances. If it were me, I'd leave the investment in place rather than use it to pay off the student loan. The investment is likely (though of course not guaranteed) to earn more than the interest rate even on the highest-rate loan, especially when you consider that the interest on the student loan is probably tax deductible. Moreover, the size of the investment isn't enough to fully repay the loan, so putting it toward the loan won't even improve your cash flow for some time to come. However, there is always a chance that the investment will perform poorly and some people prefer the guaranteed return from paying off the loan. It depends on your personal risk tolerance. The one thing I would recommend is to think of putting the money toward the loan not as a debt repayment, but as a fixed-income investment with a yield equal to your loan's interest rate. If you would still consider buying it then, then go ahead. If not, then stick with what you've got. In my experience people get way too emotional about debt; try to take that emotion out of your decision making if you can.", "title": "" }, { "docid": "6733d9bb2f5cf453abc85a901eb8cb9f", "text": "It's a good question, I am amazed how few people ask this. To summarise: is it really worth paying substantial fees to arrange a generic investment though your high street bank? Almost certainly not. However, one caveat: You didn't mention what kind of fund(s) you want to invest in, or for how long. You also mention an “advice fee”. Are you actually getting financial advice – i.e. a personal recommendation relating to one or more specific investments, based on the investments' suitability for your circumstances – and are you content with the quality of that advice? If you are, it may be worth it. If they've advised you to choose this fund that has the potential to achieve your desired returns while matching the amount of risk you are willing to take, then the advice could be worth paying for. It entirely depends how much guidance you need. Or are you choosing your own fund anyway? It sounds to me like you have done some research on your own, you believe the building society adviser is “trying to sell” a fund and you aren't entirely convinced by their recommendation. If you are happy making your own investment decisions and are merely looking for a place to execute that trade, the deal you have described via your bank would almost certainly be poor value – and you're looking in the right places for an alternative. ~ ~ ~ On to the active-vs-passive fund debate: That AMC of 1.43% you mention would not be unreasonable for an actively managed fund that you strongly feel will outperform the market. However, you also mention ETFs (a passive type of fund) and believe that after charges they might offer at least as good net performance as many actively managed funds. Good point – although please note that many comparisons of this nature compare passives to all actively managed funds (the good and bad, including e.g. poorly managed life company funds). A better comparison would be to compare the fund managers you're considering vs. the benchmark – although obviously this is past performance and won't necessarily be repeated. At the crux of the matter is cost, of course. So if you're looking for low-cost funds, the cost of the platform is also significant. Therefore if you are comfortable going with a passive investment strategy, let's look at how much that might cost you on the platform you mentioned, Hargreaves Lansdown. Two of the most popular FTSE All-Share tracker funds among Hargreaves Lansdown clients are: (You'll notice they have slightly different performance btw. That's a funny thing with trackers. They all aim to track but have a slightly different way of trading to achieve it.) To hold either of these funds in a Hargreaves Lansdown account you'll also pay the 0.45% platform charge (this percentage tapers off for portolio values higher than £250,000 if you get that far). So in total to track the FTSE All Share with these funds through an HL account you would be paying: This gives you an indication of how much less you could pay to run a DIY portfolio based on passive funds. NB. Both the above are a 100% equities allocation with a large UK companies weighting, so won't suit a lower risk approach. You'll also end up invested indiscriminately in eg. mining, tobacco, oil companies, whoever's in the index – perhaps you'd prefer to be more selective. If you feel you need financial advice (with Nationwide) or portfolio management (with Nutmeg) you have to judge whether these services are worth the added charges. It sounds like you're not convinced! In which case, all the best with a low-cost passive funds strategy.", "title": "" }, { "docid": "421ea4a568804f3e64424e2e49d631bf", "text": "Maxing out an IRA would probably be step 1, if you exceed that probably just aim for saving in a taxable brokerage account. Just try and stick to ETFs if you're gonna index since they're slightly more tax efficient than a mutual fund", "title": "" }, { "docid": "12af5a0013c778afa9b7314dc89d6493", "text": "ETFs are a type of investment, not a specific choice. In other words, there are good ETFs and bad. What you see is the general statement that ETFs are preferable to most mutual funds, if only for the fact that they are low cost. An index ETF such as SPY (which reflects the S&P 500 index) has a .09% annual expense, vs a mutual fund which average a full percent or more. sheegaon isn't wrong, I just have a different spin to offer you. Given a long term return of say even 8% (note - this question is not a debate of the long term return, and I purposely chose a low number compared to the long term average, closer to 10%) and the current CD rate of <1%, a 1% hit for the commission on the buy side doesn't bother me. The sell won't occur for a long time, and $8 on a $10K sale is no big deal. I'd not expect you to save $1K/yr in cash/CDs for the years it would take to make that $8 fee look tiny. Not when over time the growth will overshaddow this. One day you will be in a position where the swings in the market will produce the random increase or decrease to your net worth in the $10s of thousands. Do you know why you won't lose a night's sleep over this? Because when you invested your first $1K, and started to pay attention to the market, you saw how some days had swings of 3 or 4%, and you built up an immunity to the day to day noise. You stayed invested and as you gained wealth, you stuck to the right rebalancing each year, so a market crash which took others down by 30%, only impacted you by 15-20, and you were ready for the next move to the upside. And you also saw that since mutual funds with their 1% fees never beat the index over time, you were happy to say you lagged the S&P by .09%, or 1% over 11 year's time vs those whose funds had some great years, but lost it all in the bad years. And by the way, right until you are in the 25% bracket, Roth is the way to go. When you are at 25%, that's the time to use pre-tax accounts to get just below the cuttoff. Last, welcome to SE. Edit - see sheegaon's answer below. I agree, I missed the cost of the bid/ask spread. Going with the lowest cost (index) funds may make better sense for you. To clarify, Sheehan points out that ETFs trade like a stock, a commission, and a bid/ask, both add to transaction cost. So, agreeing this is the case, an indexed-based mutual fund can provide the best of possible options. Reflecting the S&P (for example) less a small anual expense, .1% or less.", "title": "" }, { "docid": "247dfb2dc3b33e6a52abd129f07abd93", "text": "The volatility of an index fund should usually be a lot lower than that of an individual stock. However even with a broad index fund you should consider the fact that being down by 10% in the time frame you refer to is quite possible! So is being up by 10% of course. A corporate bond might be a better choice if you can find one you trust.", "title": "" }, { "docid": "d493286b95b5f0f8bf735278f8ab2b40", "text": "For index funds to be a poor investment, they would have to perform worse than your alternative investments. In this case, we'll assume the alternative to be the individual stocks. Obviously, it must be possible to pick just the winning stocks and avoid the losing stocks, raising your rate of return... however, several studies have shown that individuals are horrible at picking winners. We let our emotions, are biases, and are suppositions get in the way. You could literally throw a dart, but then you either win big or lose big. Picking the fund evens that out for you, so you don't win or lose big, but just get a consistently boring (yet consistently good) return. If you have a lot of time to put into the research, and are confident in your ability to pick winning stocks, then you can do better than the index funds. Otherwise, sticking with the index fund is probably a smart choice.", "title": "" }, { "docid": "94ca39ebe5195ff60e6057e66b8c62a6", "text": "Since you seem to be interested in investing in individual stocks, this answer will address that. As for the general question of investing, the answer that @johnfx gave is just about as good as it gets. Investing in individual stocks is extremely risky and takes a LOT of work to do right. On top of the fairly obvious need to research a stock before you buy, there is the matter of keeping up with the stocks to know when you need to sell as well as myriad other facets of investing. Paid professionals spend all day, every day, doing this and they have a hard time beating an index fund. Unless you take the time to educate yourself and are willing to continually put in a good bit of effort, I would advise you to stay away from individual stocks and rely on mutual funds.", "title": "" } ]	fiqa
79d5c1599e4e9788fc724e8989858f01	Relocating and buying a house simultaneously - How to handle pre-approval on fluctuating yearly income?	[ { "docid": "3e2d5e66e86a5fbcc1fbb7874344dc99", "text": "\"Assuming the numbers you gave are forecasted 2013 annual income, you should really use an average and give the lender 1 number, as long as you can provide documentation to back it up. Lenders aren't as sophisticated as considering your monthly income fluctuations into their underwriting algorithm. If you're not tied down to your existing lender, I highly recommend you to shop around. There isn't an \"\"universal lending requirement\"\". You'll be surprised at how flexible they are. Not as a recommendation to get around the rules, but just finding a lender that'll work with your situation. Try personal finance forums such as FatWallet or Slickdeal to find low-cost lenders: http://goo.gl/vIojT\"", "title": "" } ]	[ { "docid": "c6305c9801b75feeff406e17941e530b", "text": "I would advise against this. My main reason for saying so is that you are in a time of major transition, and transition equals uncertainty. What if the new job turns out to be a bad one, and at the same time the house is more difficult to rent out than you expect? That seems like a situation that would be worse than the sum of its parts. Some other things to consider: first, if you want to buy a house where your new job is located, you will not be able to borrow as much for that house. This is especially important if you are moving to a city with a very high Cost of Living. Second, your margin on the rental doesn't sound like it would leave much room for profit. A $100 difference between your mortgage and your rent amount will be eaten up very quickly through property management fees and maintenance. If the value of the house does not rise like you expect, that could mean you put in a lot of effort for very little or no gain. Finally, this will require a good deal of time management. Between relocating, closing on this house, and beginning a new job, it sounds like you'll have a lot going on. This may not concern you much, but it's still worth considering.", "title": "" }, { "docid": "8aa1956100046afa1ddbd28e63077008", "text": "\"Johnny. I recently bought my first home as well, and I have worked in the credit business (not mortgage), so I think I can answer some of your questions. Disclaimer first that I'm in NY, and home buying does vary from state to state. In my experience, pre-qual is not too different from pre-approval. Neither represents any real committment on the part of the bank (i.e. they can still deny approval at any point), and both are based on pulling your credit bureau and calculating ratios based on your stated (probably not documented) financial information. It's theoretically possible that a seller would choose a pre-approved buyer over a pre-qualified buyer, all other things being equal, but all other things are seldom equal. Remember also that you don't need to ultimately get a mortgage from the same bank that you use for the pre-qual. The pre-qual just shows that you are probably credit-worthy and serves to give you some credibility with sellers. Once you have an accepted offer and need to find a real mortgage, you can shop around for the best rate and best loan structure. Banks don't need to have pulled your credit to quote rates, but they will need to have a general idea of your FICO range. Once you find the bank you like with the best rate and actually apply for the loan, they will pull a hard bureau, and if your scores are different from what you said before, the rate may change, but within the same range, you'll generally be ok. Also, banks do not necessarily pull all 3 bureaus; they may only pull 1, as it costs them for each pull. 2 potential downsides to this approach: Also, make sure you have a mortgage/funding clause in your contract, as banks are unpredictable, and make sure you have a great real estate lawyer, not a legal \"\"factory\"\" - the extra few hundred $ are worth it. Don't overthink this credit stuff too much. Find a good house for a good price, and get a no-nonsense mortgage that you fully understand - no exotic stuff. Good luck!\"", "title": "" }, { "docid": "6a811ba05b575681ba2d20adffe6a2fc", "text": "This is something you are going to have to work out with the leasing company because your goal is to get them to make an exception to their normal rules. I'm a little surprised they wouldn't take 6 months pre-payment, plus documentation of your savings. One option might be to cash in the bonds (since you said they are mature), deposit them in a savings account, and show them your account balance. That documentation of enough to pay for the year, plus an offer to pay 6 months in advance would be pretty compelling. Ask the property manage if that's sufficient. And if the lease is for one year and you're willing to pay the entire year in advance, I can't see how they would possibly object. If your employment prospects are good (show them your resume and explain why you are moving and what jobs you are seeking) a smart property manager would realize you'll be an excellent, low-risk tenant and will make an effort to convince the parent company that you should live there.", "title": "" }, { "docid": "dea708a4a3ed2acf96b85950993dd8b2", "text": "\"It certainly seems like you are focusing on the emotional factors. That's your blind spot, and it's the surest path to a situation where your husband gets to say \"\"I told you so\"\". I recommend you steer straight into that blind spot, and focus your studies on the business aspects of buying and owning homes. You should be able to do spreadsheets 6 ways from Sunday, be able to recite every tax deduction you'll get as a homeowner, know the resale impacts of 1 bathroom vs 2, tell a dirty house from a broken house, etc. Everybody's got their favorites, mine are a bit dated but I like Robert Irwin and Robert Allen's books. For instance: a philosophy of Allen's that I really like: never sell. This avoids several problems, like the considerable costs of money, time and nerves of actually selling a house, stress about house prices, mistaking your house's equity for an ATM machine, and byzantine rules for capital gains tax mainly if you rent out the house, which vary dramatically by nation. In fact the whole area of taxes needs careful study. There's another side to the business of home ownership, and that's renting to others. There's a whole set of economics there - and that is a factor in what you buy. Now AirBNB adds a new wrinkle because there's some real money there. Come to understand that market well enough to gauge whether a duplex or triplex will be a money maker. Many regular folk like you have retired early and live off the rental income from their properties. JoeTaxpayer has an interesting way of looking at the finances of housing: if a house doesn't make sense as a a rental unit, maybe it doesn't make sense as a live-in either. So learn how to identify those fundamentals - the numbers. And get in the habit of evaluating houses. Work it regularly until it's second nature. Then, yes, you'll see houses you fall in love with, partly because the numbers work. It also helps to be handy. It really, really changes the economics if you can do your own quality work, because you don't need to spend any money on labor to convert a dirty house into a clean house. And lots of people do, and there's a whole SE just for that. There is a huge difference between going down to the local building supply and getting the water pipe you need, vs. having to call a plumber. And please deal with local businesses, please don't go to the Big Box stores, their service is abominable, they will cheerfully sell you a gadget salad of junk that doesn't work together, and I can't imagine a colder and less inviting scene to come up as a handy person.\"", "title": "" }, { "docid": "638bd4fa6dd303bacc352bbf00a7f5bc", "text": "\"Let's start with income $80K. $6,667/mo. The 28/36 rule suggests you can pay up to $1867 for the mortgage payment, and $2400/mo total debt load. Payment on the full $260K is $1337, well within the numbers. The 401(k) loan for $12,500 will cost about $126/mo (I used 4% for 10 years, the limit for the loan to buy a house) but that will also take the mortgage number down a bit. The condo fee is low, and the numbers leave my only concern with the down payment. Have you talked to the bank? Most loans charge PMI if more than 80% loan to value (LTV). An important point here - the 28/36 rule allows for 8% (or more ) to be \"\"other than house debt\"\" so in this case a $533 student loan payment wouldn't have impacted the ability to borrow. When looking for a mortgage, you really want to be free of most debt, but not to the point where you have no down payment. PMI can be expensive when viewed that it's an expense to carry the top 15% or so of the mortgage. Try to avoid it, the idea of a split mortgage, 80% + 15% makes sense, even if the 15% portion is at a higher rate. Let us know what the bank is offering. I like the idea of the roommate, if $700 is reasonable it makes the numbers even better. Does the roommate have access to a lump sum of money? $700*24 is $16,800. Tell him you'll discount the 2yrs rent to $15000 if he gives you it in advance. This is 10% which is a great return with rates so low. To you it's an extra 5% down. By the way, the ratio of mortgage to income isn't fixed. Of the 28%, let's knock off 4% for tax/insurance, so a $100K earner will have $2167/mo for just the mortgage. At 6%, it will fund $361K, at 5%, $404K, at 4.5%, $427K. So, the range varies but is within your 3-5. Your ratio is below the low end, so again, I'd say the concern should be the payments, but the downpayment being so low. By the way, taxes - If I recall correctly, Utah's state income tax is 5%, right? So about $4000 for you. Since the standard deduction on Federal taxes is $5800 this year, you probably don't itemize (unless you donate over $2K/yr, in which case, you do). This means that your mortgage interest and property tax are nearly all deductible. The combined interest and property tax will be about $17K, which in effect, will come off the top of your income. You'll start as if you made $63K or so. Can you live on that?\"", "title": "" }, { "docid": "4219f1b4c9bc79997ce785361da41a1c", "text": "I'd pile up as much cash as you can in a savings account - you will need money for the move (even if it's just gas money) and it's going to be hard to predict where house prices are going so you might or might not be underwater when it comes time to sell the house. Or you might be so deep underwater by then that the extra money doesn't make much of a difference anymore anyway. Once you're actually in the process of selling the house, you can figure out if you can (or need to) use the savings to cover the shortfall, closing costs or if you just built up a little wealth during the time you put the money aside.", "title": "" }, { "docid": "dfe28ac207fb5729bfd3a25165f99c42", "text": "You earn $75,000 yearly and saved $30,000 while living at home, for two years, rent-free. I am assuming you have been making good money for at least 2 years. How is it possible you only put away $30,000 on $150,000 of income? Were you giving something to your parents each week as rent, so they don't lose their home? Second, if you're not sure if you will be relocated in a year or two it makes no sense to buy. House prices won't spike like they have in the past any time soon. In one year, you can save another $30,000 without suffering since you live rent free. Many couples don't even make $75,000 and they got a mortgage, 2 kids and car payments.", "title": "" }, { "docid": "4616153314fb15cd204383d13153425b", "text": "To littleadv's comment, walking away may be the best option. If your numbers are as described, any ideas we could offer on earning or raising cash would be best to use as money to live on, not to pay down a loan on an under water house. the double wide you propose to buy will like cost less than your HELOC balance. I'd see if you could buy that home first, renting the house, and only default after you're in the new place.", "title": "" }, { "docid": "b74742b32b99f9bd32cd60cc84d3206f", "text": "\"Often the counter-party has obligations with respect to timelines as well -- if your buying a house, the seller probably is too, and may have a time-sensitive obligation to close on the deal. I'm that scenario, carrying the second mortgage may be enough to make that deal fall through or result in some other negative impact. Note that \"\"pre-approval\"\" means very little, banks can and do pass on deals, even if the buyer has a good payment history. That's especially true when the economy is not so hot -- bankers in 2011 are worried about not losing money... In 2006, they were worried about not making enough!\"", "title": "" }, { "docid": "ce454d430bb2b09d8cd5bf04a2243067", "text": "This is of course a perfectly normal thing to happen. People trade up to a bigger house every day. When you've found a bigger house you want to move to and a buyer for your existing one, you arrange 'closing dates' for both i.e. the date on which the sale actually happens. Usually you make them very close, either on the same day or with an overlap of a few weeks. You use the equity (i.e. the difference between the house value and the mortgage) in the old house as the down payment on the new house. You can't of course use the part of the old house that is mortgaged. If the day you buy the new and sell the old is the same, your banks and lawyers do everything for you on that day. If there is an overlap then you need something called 'bridge financing' to cover the period when you own two houses. Banks are used to doing this, and it's not really that expensive when you take into account all the other costs of moving house. Talk to them for details. As a side note, it is generally reckoned not to be worth buying a house if you only intended to live there one or two years. The costs involved in the process of buying, selling and moving usually outweigh any gains in house value. You may find yourself with a higher down payment if you rent for a year or two and save up a down payment for your 'bigger' house instead.", "title": "" }, { "docid": "2685452838e1d128cad349012ca35d57", "text": "\"As mentioned before - you're over-thinking the hard-pull issue. But do try to make the preapproval as close to the actual bidding as possible - because it costs money. At least from my experience, you'll get charged the application fee for preapproval, while \"\"pre-qualification\"\" is usually free. If you're seriously shopping, I find it hard to believe that you can't find a house within 3 months. If you're already in the process and your offer has been accepted and you opened the escrow - I believe the preapproval will be extended if it expires before closing. I've just had a similar case from the other side, as a buyer, and the seller had a short-sale approval that expired before closing. It was extended to make the deal happen, and that's when the bank is actually loosing money. So don't worry about that. If you haven't even started the process and the preapproval expired, you might have to start it all over again from scratch, including all the fees. The credit score is a minor issue (unless you do it every 2-3 months).\"", "title": "" }, { "docid": "5544fdca206f4e03ede8bb80dc6724ce", "text": "The new payment on $172,500 3.5% 15yr would be $1233/mo compared to $1614/mo now (26 bi-weekly payments, but 12 months.) Assuming the difference is nearly all interest, the savings is closer to $285/mo than 381. Note, actual savings are different, the actual savings is based on the difference in interest over the year. Since the term will be changing, I'm looking at cash flow, which is the larger concern, in my opinion. $17,000/285 is 60 months. This is your break even time to payoff the $17000, higher actually since the $17K will be accruing interest. I didn't see any mention of closing costs or other expenses. Obviously, that has to be factored in as well. I think the trade off isn't worth it. As the other answers suggest, the rental is too close to break-even now. The cost of repairs on two houses is an issue. In my opinion, it's less about the expenses being huge than being random. You don't get billed $35/mo to paint the house. You wake up, see too many spots showing wear, and get a $3000 bill. Same for all high cost items, Roof, HVAC, etc. You are permitted to borrow 50% of your 401(k) balance, so you have $64K in the account. I don't know your age, this might be great or a bit low. I'd keep saving, not putting any extra toward either mortgage until I had an emergency fund that was more than sufficient. The fund needs to handle the unexpected expenses as well as the months of unemployment. In general, 6-9 months of these expenses is recommended. To be clear, there are times a 401(k) loan can make sense. I just don't see that it does now. (Disclaimer - when analyzing refis there are two approaches. The first is to look at interest saved. After all, interest is the expense, principal payments go right to your balance sheet. The second is purely cash flow, in which case one might justify a higher rate, and going from 15 to 30 years, but freeing up cash that can be better deployed. Even though the rate goes up say 1/2%, the payment drops due to the term. Take that savings and deposit to a matched 401(k) and the numbers may work out very well. I offer this to explain why the math above may not be consistent with other answers of mine.)", "title": "" }, { "docid": "795d24a614da96627f16836ace377f4d", "text": "From your profile, I see you are in Israel. The process is probably different from in the US. In the US, an agent is usually happy to work with a buyer. After all, When I list a house, there are potential buyers all over my state and elsewhere. The best thing you can do is first, have your financing in order. A bank will be able to tell you how much you can afford and how much they'll lend you. If you approach an agent and tell them the exact range of price, area you're interested in, and other specifics such as number of bedrooms, etc, that agent should be happy to find houses to fit your request. Obviously, an agent listing million dollar homes, busy with those all day, is not going to want to handle a buyer looking for a $200K home. But in the end, the real estate agents aren't all listing high end, and someone is moving the smaller houses as well. Often, an office will have a call center where agents who are less busy will answer the phone hoping to get a client that will bring a sale. That's one way to go. The other is word of mouth. Just ask others who you work with or socialize with if they know a good agent. In my case, I'd be happy to get such a referral.", "title": "" }, { "docid": "e4afa45e3f9c7762c55cd7b3460f6b61", "text": "In the situation you describe, I would strongly consider purchasing. Before purchasing, I would do the following: Think about your goals. Work with good people. Set a budget. Be able to handle surprises. If buying a home makes sense, you can do the following after buying:", "title": "" }, { "docid": "7ad87a90c0c9695b48710dafc42e7a3b", "text": "I recognize you are probably somewhere in the middle of various steps here... but I'd start and go through one-by-one in a disciplined way. That helps to cut through the overwhelming torrent of information that's out there. Here is my start at a general checklist: others can feel free to edit it or add their input. How 'much' house would you like to buy in terms of $$$ and bedrooms/sq ft. You can start pretty general here, but the idea is to figure out if you can actually afford a brand new 4bd/3ba 2,500 sq ft house (upwards of $500K in your neck of the woods according to trulia.com). Or maybe with your current resources you'll be looking at something like a townhome that is more entry-level but still yours. Some might recommend that this is a good time to talk to any significant others/whomevers and understand/manage expectations. My wife usually cares a lot about schools at this stage, but I think it's too early. Just ballpark whether you're looking at a $500K house, a $300K house, or a $200K townhome. How much house can you afford in terms of monthly payments only... (not considering other costs like utilities yet). Looking around at calculators like this one from bankrate.com can help you figure this out. Set the interest rate @ 5%, 30-year loan, and change the 'mortgage amount' until you have something that is about 80%-90% of what you currently pay in rent each month. I'll get to 'why' to undershoot your rent payment later. Crap... can't afford my dream house... If you don't have the down payment to make the numbers work (remember that this doesn't even include closing costs yet), there are other loan options like FHA loans that can go as low as about 5% down payment. The math would be the same but you replace 0.8 with 0.95. Then, look at your personal budget. Come up with general estimates of what you currently bring in and spend each month overall. Just ballpark it... Next, figure what you currently spend towards housing in particular. Whether you are paying for it or your landlord is paying for it, someone pays for a lot of different things for housing. For now, my list would include (1) Rent, (2) Mortgage Payment, (3) Electricity, (4) Gas, (5) Sewer, (6) Water, (7) Trash, (8) Other utilities... TV/Internet/Phone, (9) Property Insurance, (10) Renter's Insurance, and (11) Property Taxes. I would put it into a table in Excel somewhere that has 3 columns... The first has the labels, the second will have what you spend now, and the third will have what you might spend on each one as a homeowner. If you pay it now, put it in the second column. If your landlord pays it right now, leave it out as that's included in your rent payment. Obviously each cell won't be filled in. Fill in the rest of the third column. You won't pay rent anymore, but you will have a mortgage payment. You probably have a good estimate of any electricity bills, etc that you currently pay, but those may be slightly higher in a house vs. a condo or an apartment. As for things like sewer, water, trash or other 'community' utilities, my bet would be that your landlord pays for those. If you need a good estimate ask around with some co-workers or friends that own their own places. They would also be a good resource for property insurance estimates... shooting from the hip I would say about $100/month based on this website. (I'm not affiliated). The real 'ouch' is going to be property tax rates. Based on the data from this website, your county is about 9% of property value. So add that into the third column as well. Can you really afford a house? round 2 Now... add up the third column and see how that monthly expense amount on housing compares against your current monthly budget. If it's over, you don't have to give up, but you should just understand how much your decision to purchase a house will strain your budget. Also, you should use this information to look again at 'how much house can you afford.' Now, do some more research. If you need to get a revised loan amount based on the FHA loan decision, then use the bankrate calculator to find out what the monthly payment is for a 95% loan against your target price. But remember that an FHA loan will also carry PMI that is extra on top of your monthly payment. Or, if you need to revise your mortgage payment downwards (or upwards) change the loan amount accordingly. Once you've got the numbers set, look for properties that fit. This way you can have a meaningful discussion with yourself or other stakeholders about what you can afford. As far as arranging financing... a realtor will be able and willing to point you in the right direction for obtaining funding, etc. And at that point you can just check anything you're offered by shopping interest rates, etc against what the internet has to say. Feel free to ask us, too... it's hard to give much better direction without more specifics.", "title": "" } ]	fiqa
f8243cef45fd15623928450e6011cb6b	What happens to an Earnest Money Deposit if underwriting falls through?	[ { "docid": "171a3d331d00d5af144f8d995f0e1090", "text": "Your Purchase and Sale agreement should have a financing contingency. If it doesn't, your money may be at risk, and the agent did you no favor. Edit - I answered when away from computer. This is a snapshot of the standard clause from the Greater Boston Real Estate Board. Each state has its own standard documents. The normal process is to have some level of prequalification, showing a high probability of final approval, make offer, then after it's accepted, this form is part of the purchase and sale process.", "title": "" } ]	[ { "docid": "63d4ae49051ee9037c47e3161cb81f3a", "text": "I am sorry for your troubles, but impressed with your problem solving skills. Keep going, things will get better. Your best hope is to find a place that does manual underwriting. If they do computer generated stuff, then you will be kicked for sure. If you can show 20% down, and have some savings, and have some history of paying bills, then you might be approved. Here in Florida, RP Funding still does manual underwriting. Another one that is mentioned is Church Hill mortgage. Also you might check with local credit unions. Of course your best bet to be approved is to be open and state upfront the challenges. You have to find someone that has the ability to think, has the ability to see passed the challenges, and has the authority to do so.", "title": "" }, { "docid": "77f89971a7a2ffed46917caca5dd0e33", "text": "\"a lot of companies will \"\"class\"\" their shares and the founders will hold on to the A class shares so that they can distribute more than 50% but still retain the majority of control over company decisions. A lot of this stuff is set out in the underwriting.\"", "title": "" }, { "docid": "651f98220897b2a34830fade5ce229dc", "text": "\"Probably the most significant difference is the Damocles Sword hanging over your head, the Margin Call. In a nutshell, the lender (your broker) is going to require you to have a certain amount of assets in your account relative to your outstanding loan balance. The minimum ratio of liquid funds in the account to the loan is regulated in the US at 50% for the initial margin and 25% for maintenance margins. So here's where it gets sticky. If this ratio gets on the wrong side of the limits, the broker will force you to either add more assets/cash to your account t or immediately liquidate some of your holdings to remedy the situation. Assuming you don't have any/enough cash to fix the problem it can effectively force you to sell while your investments are in the tank and lock in a big loss. In fact, most margin agreements give the brokerage the right to sell your investments without your express consent in these situations. In this situation you might not even have the chance to pick which stock they sell. Source: Investopedia article, \"\"The Dreaded Margin Call\"\" Here's an example from the article: Let's say you purchase $20,000 worth of securities by borrowing $10,000 from your brokerage and paying $10,000 yourself. If the market value of the securities drops to $15,000, the equity in your account falls to $5,000 ($15,000 - $10,000 = $5,000). Assuming a maintenance requirement of 25%, you must have $3,750 in equity in your account (25% of $15,000 = $3,750). Thus, you're fine in this situation as the $5,000 worth of equity in your account is greater than the maintenance margin of $3,750. But let's assume the maintenance requirement of your brokerage is 40% instead of 25%. In this case, your equity of $5,000 is less than the maintenance margin of $6,000 (40% of $15,000 = $6,000). As a result, the brokerage may issue you a margin call. Read more: http://www.investopedia.com/university/margin/margin2.asp#ixzz1RUitwcYg\"", "title": "" }, { "docid": "11a8b1846732e89701241ae8364596c8", "text": "Then we should create a derivative that allows people to bet on the bond failing, and package tons of them into securities, which you can swap for cash. You're swapping a bet on someone defaulting on their credit... Swapping a credit default... Hmm... I don't see this going wrong in any way.", "title": "" }, { "docid": "ceb0169d967e05a1d9e2cb1df64a3729", "text": "It depends on the broker. The one I use (Fidelity) will allow me to buy then sell or sell then buy within 3 days even though the cash isn't settled from the first transaction. But they won't let me buy then sell then buy again with unsettled cash. Of course not waiting for cash to settle makes you vulnerable to a good faith violation.", "title": "" }, { "docid": "4e4484a8a8bd588064a53448f9a8491b", "text": "Wow the collateral totally eliminates the purpose of the swap for B, to have a consistent steady cash flow and stable expenses. It probably wouldn't be worth a broker's time unless it was in the millions. They should invent interest rate swaps for the mass market. I'm patenting that!", "title": "" }, { "docid": "70e04ae623489ace987557576c29b943", "text": "Banks can't simply make loans in the void. This is how the cash flow works, generally: 1. Depositers add cash into the bank. The Bank now has cash. 10% of that cash is held on reserve per law. This cash is held on the balance sheet as an asset (cash) and a liability (demand deposits). 2. Someone requests a loan. The loan is funded from the non-reserved cash of these deposits. This results in a lessening of an asset (cash), and the creation of a new asset (loan). 3. Traditionally, as the debtor pays back the loan, the interest is distributed in some sort of split between the bank and the depositors. This means cash in from the loan and interest, and a liability (deposits) also go up. 4. Alternatively, while the above still happens, the bank can securitize the loan and sell that to investors. Investors then get access to the loan and its income, and the bank collects a fee. However, this means more cash on hand for the bank to originate additional loans without going near the reserve requirement. If a bank extends too many loans and its reserve is threatened, it must borrow either from the fed or from other banks. These loans must be paid back.", "title": "" }, { "docid": "80f838543eaf6f980d2a080503d08b1e", "text": "\"The earnest money deposit generally is not delivered with the offer. This generally isn't done because you may find out that your offer is going to be rejected immediately. You may have decided to make an offer under their stated selling price, you may have added a condition they are unwilling to meet. There is also the situation where other parties have already made an offer and their offering price has exceed yours; so your offer is rejected or at least slowed down while the continue negotiations with the other potential buyer. In these cases getting a cashiers check before making the offer delays the offer, complicates the movement of money within your accounts, and delays your ability to make an offer on a another house. If the offer on the first house is rejected on Friday, and the bank is closed on Saturday, and you have to wait until Monday to redeposit the check; then you have to delay an offer on the perfect house you see on Sunday. Of the three options you present the second one, \"\"I can put a rider on the P&S which warrants that the check will be delivered in a set amount of time like three days.\"\" You may also find similar language in the local version of the standard real estate contract. This delay in writing the check makes sense for another reason, the manner of the deposit and how it is to be made, how it is to be held, and under what terms it can be released should also be a part of the negotiation. You want to make sure it is being kept by a third party, you both have to trust that 3rd party, you need to know what are the exact conditions regarding that money. The purpose of the deposit is to convince the seller that you are serious, and that the knowledge that you will lose the deposit makes you likely to go through your required parts of the transaction. Also more and more of these deposits are being done electronically, there is no check involved.\"", "title": "" }, { "docid": "0abf2d4619c289bdab3c1e7ba705521d", "text": "\"A repossessed automobile will have lost some value from sale price, but it's not valueless. They market \"\"title loans\"\" to people without good credit on this basis so its a reasonably well understood risk pool.\"", "title": "" }, { "docid": "0ee6c73b0deba35ce0e6b077e959d1b4", "text": "That sucks. If BofA is taking responsibility for the insurance payment, then they should..., well, take responsibilty - full responsibility. I hope these people get reimbursed fairly. Didn't their insurance company contact them about the policy? If not, I'd certainly be shopping for a new insurance company, and possibly I'd include them in a lawsuit. The insurance company should be contacting the bank and their customer. Mine sent me a couple of letters, saying a copy was sent to the bank (although I think they still had the original bank, not BofA). But BofA had recently paid the premium, so they ignored it - basically dropped the ball. When I got the 2nd letter from the insurance company, I called again, and the guy at BofA got right on the ball, checked it out, and fixed it very quickly, then helped me cancel my escrow so I could handle it directly in the future. Perhaps I was lucky to get someone who cared about their job enough to follow through. But I also jumped in to make sure it got taken care of, so if he hadn't, I would have been bothering them until they did.", "title": "" }, { "docid": "c8573a8d7fb74832b7b1cc1f8d917b10", "text": "You are asking about what happens when an ETF/mutual fund company goes bankrupt. If you were asking about a bank account you would be asking about FDIC coverage. Investment funds are different, the closest thing to FDIC protection is provided by Securities Investors Protection Corporation (SIPC) SIPC was created under the Securities Investor Protection Act as a non-profit membership corporation. SIPC oversees the liquidation of member broker-dealers that close when the broker-dealer is bankrupt or in financial trouble, and customer assets are missing. In a liquidation under the Securities Investor Protection Act, SIPC and the court-appointed Trustee work to return customers’ securities and cash as quickly as possible. Within limits, SIPC expedites the return of missing customer property by protecting each customer up to $500,000 for securities and cash (including a $250,000 limit for cash only). SIPC is an important part of the overall system of investor protection in the United States. While a number of federal and state securities agencies and self-regulatory organizations deal with cases of investment fraud, SIPC's focus is both different and narrow: restoring customer cash and securities left in the hands of bankrupt or otherwise financially troubled brokerage firms. SIPC was not chartered by Congress to combat fraud. Although created under a federal law, SIPC is not an agency or establishment of the United States Government, and it has no authority to investigate or regulate its member broker-dealers. It is important to understand that SIPC is not the securities world equivalent of the Federal Deposit Insurance Corporation (FDIC), which insures depositors of insured banks.", "title": "" }, { "docid": "7864caf1005857e3ed49413804612b26", "text": "One possible route is to try to have no credit. This is different than bad credit. If you build up a good downpayment (20%), a number of banks would do manual underwriting for you.", "title": "" }, { "docid": "81321e54f9387eaf0cf434ad54384e54", "text": "Not going to happen for Facebook since there will be too much demand and the order will go to the top clients of the underwriting investment banks. In general though, if you wanted a piece of a smaller IPO you'd just have to get in touch with a broker whose investment banking department is on the underwriting syndicate (say Merrill Lynch or Smith Barney) since IPOs often have a percentage that they allocate to retail clients (i.e. you) as well as institutional (i.e. hedge funds, pension funds, mutual funds etc.). The more in demand the IPO the harder it is to get a piece.", "title": "" }, { "docid": "bd64c87faa96597dfbb6006d1240e239", "text": "I think what ended up happening with this is the canadian banks issued some high risk debt that is in line with the bail-in requirements. So the interest payments are more, but they could lose it all in a bail-in situation. There was actually some debate about the sale of the debt not being fairly handled, but from the sounds of it the notes sold pretty quickly. So there doesn't seem to be much risk to depositors and investors don't seem to be worried about the additional risk. Also at the time of the banks becoming compliant with the Basel regulation I think most of them jacked their service fees to help with raising the additional capital requirements. http://business.financialpost.com/2014/07/21/rbc-responds-to-complaints-about-issue-of-nvcc-subordinated-debt/", "title": "" }, { "docid": "861fda21c9e80d4f5aa817e7f1191ab8", "text": "Out of curiosity I went through a couple of prospectuses and all contained various clauses for the event where LIBOR is not published although the language suggests more of anticipation of brief technical difficulties. Some are rather vague and prone to manipulation.", "title": "" } ]	fiqa
3c40760a3a299f19737dff780ca5b262	Are there any banks with a command-line style user interface?	[ { "docid": "c22d700fbd117eef17a7c1ab81b51933", "text": "There are API libraries available to various banks in various programming languages. For example, in Perl there are many libraries in the Finance::Bank:: namespace. Some of these use screen-scraping libraries and talk to the GUI underneath, so they are vulnerable to any changes the bank makes to their interface, but some of the better banks do seem to provide back-end interfaces, which can then be used directly. In either case, you should still be sure that the transactions are secure. Some bank sites have appallingly bad security. :( A good place to start is to call your bank and ask if they offer any programming APIs for accessing their back end.", "title": "" }, { "docid": "1f54884ae32eefec916c3d43e722d841", "text": "At one point you could log into your HSBC account from the command line, but gosh, I've never heard of a bank that has a command line interface!", "title": "" }, { "docid": "8623e6b3e12ca9478225e18df7e0e06a", "text": "Some banks would allow you to export your transactions as CSV (they call it Excel export, but in many cases it's actually just CSV). However, I would not expect any bank to bother with creating anything like command-line access - return on such investment would be too low. There are other ways to get information out of the banks, I'm sure - providers like Yodelee must be using something to fetch financial data - but those usually not for general public access. Also, you can use something like mint.com to aggregate you banking data if you bank doesn't do good export and then export it from there. They have CSV export too. If you need to do any actions though, I don't think there's anything like you are looking for.", "title": "" }, { "docid": "9b1a6b86eaca734d1f2275ac71100bf2", "text": "A bank is unlikely to provide a 'command line' interface because typical users consider a graphical interface easier to use than a command line interface. The extra effort in providing a command line interface for the remaining handful of people isn't worth it. It's the same reason that everything else in the world has a point and click interface. Command line-like features, such as easy repetition and keystroke shortcuts are also unlikely to implemented for the same reasons. They are hard to implement in a web interface, and most people aren't interested in them. Most people have only a few accounts and don't need to download multiple files on a frequent basis. They do typically provide link shortcuts to commonly used features. However all online banking works by implementing the HTTP protocol in some way. You should be able to deduce the HTTP transactions necessary to get the information you want, and implement your own 'command-line'style' interface, or any other interface you want. That won't be easy, especially since you will almost certainly have to implement the security protocols too, but it should be possible.", "title": "" }, { "docid": "e8c29c93d82fdf59cf24fb8f006740e1", "text": "I think I get your question, but your wording is throwing a lot of us off. If what you want is a clean, effective and efficient interface over port 80, then USAA.com has done some great usability work. Additionally, they have really done some pioneering work with web services and mobile applications. On top of that, they have excellent document archiving. I can navigate their site more quickly than any of the other I've used.", "title": "" }, { "docid": "e84656355fdeb0de76a9d80dcb3f9fb5", "text": "You should definitively check boobank. It's not a bank !, but a framework that helps people to create quick interface modules to any bank so you don't have to use your web browser anymore with them. Actually, there is already an honest list of modules to access a few banks (I guess these banks are all french banks for now), but contributing a module seems easy and reading other contributed modules should constitute a good start. So boobank can work with any bank provided the interface with the bank is written.", "title": "" }, { "docid": "4767150d12ae946f266ade3beae6a7b0", "text": "You could keep an eye on BankSimple perhaps? I think it looks interesting at least... too bad I don't live in the US... They are planning to create an API where you can do everything you can do normally. So when that is released you could probably create your own command-line interface :)", "title": "" } ]	[ { "docid": "1581182a845bc22f273501fd9e8568c0", "text": "API wise there's just one at the retail level: Interactive Brokers (India). Brokerage is high though - 3.5 bps for F&O and 5 bps for cash. I've used Sharekhan (good, can get to 2 bps brokerage, trading client software, no API). Also used multiple other brokerages, and am advising a new one, Zerodha http://www.zerodha.com. API wise the brokers don't provide it easily to retail, though I've worked with direct access APIs at an institutional level.", "title": "" }, { "docid": "830598775e637c5f87e5ecf2bbbf7e59", "text": "I don't know that. I know mine has a great mobile app where I can deposit a check online. And all the smaller banks I've seen dont build their own sites or apps, they white label generic ones from common vendors.", "title": "" }, { "docid": "7c30e030994a0056aa4467e006942217", "text": "You might check out Thrive. They're almost a carbon copy of Mint from the last I checked, but with some additional and (I think) more useful metrics. For instance, they seemed to help more to plan for future expenses in addition to keeping tabs on individual budgets the way Mint does. Everything is automated in the same way as Mint, though I'm not sure their breadth is as far-reaching now since Mint was bought out by Intuit. Nevertheless, whenever I've had a question on Thrive, I shoot it to the devs and I get a very personal and courteous response within the day. So it depends on what you're looking for: Mint can almost guarantee any US bank will be accessible through their site, however Thrive will work much harder to gain your favor.", "title": "" }, { "docid": "c6ec4c6e33b1f072622f1c14cf686071", "text": "Paytrust seems to be the only game in town. We've changed banks several times over the last 15 years and I can tell you that using a bank's bill pay service locks you in, big time. I loved paytrust because I could make one change if we changed banks. If you're using a bank directly for your bills, the ides of recreating your payee list is daunting.", "title": "" }, { "docid": "c5acafc129ddd9f53bcfcca2fc88678d", "text": "If you would like to use linux I suggest you to use KMyMoney http://kmymoney2.sourceforge.net/ It is based on gnucash but it is easier to use IMO", "title": "" }, { "docid": "268cd755684c231e913f38fbc07eafd4", "text": "Long time Quicken user, but I have Bootcamp on my Mac, and one reason is so I can run Quicken Windows. That's one solution. You didn't mention what version of the Mac OS you're running, but Bootcamp is one alternative if you have (or can purchase) a Windows license. Be advised, Bootcamp 4, which is available with OS 10.7 (Lion) and OS 10.8 (Mountain Lion), officially supports Windows 7 only. Quicken running under Bootcamp isn't perfect, but it's better than any Mac version, and Quicken 2013 has a mobile app that allows you to view your data & enter transactions via your mobile. The Mac Version of Quicken has been panned by users. I do use Windows for work-related stuff, so I have a reason for running Windows besides using Quicken. I've read that Intuit has a market share of more than 70% in the personal finance software sector, and at this point it seems pretty clear that they are not interested in pursuing a larger share via Mac users. So if we ever see a highly functional version of Quicken for the Mac OS, it won't be any time soon. I've not used other products, but there are many reviews out there which rank them, and some consistently come to the front. Top 10 Reviews Mac Personal Finance Software 2013; WeRockYourWeb Personal Finance Software Rankings includes many Web-based alternatives; Personally, I'm not real enthusiastic about posting my personal financial data on someone's Web site. I have nothing to hide, but I just can't get comfortable with cloud-based personal finance software providers that are combing through my data, Google-like, to generate revenue. Too, it seems an unnecessary risk giving a third party a list of all my account numbers, user names, and passwords. I know that information is out there, if one has the right sort of access, but to my way of thinking, using a cloud-based personal finance software application makes it more out there.", "title": "" }, { "docid": "fe16e2d3273140828bbb106290fdf062", "text": "\"HypoVereinsbank (member of UniCredit group), a few savings banks (\"\"Sparkasse\"\") and VR Banks offer cash (bill) deposit machines. However, it can take a few business days until the deposit is credited to your checking account, which has to be with the same bank. Google for \"\"Bargeldeinzahlungsautomat\"\" (=cash deposit machine). As Duffbeer stated correctly, HSBC Trinkaus which is the German arm of the HSBC group does not operate any ATMs in Germany. In addition they do not share the same bank accounts. So I would recommend going with the classic banks mentioned above.\"", "title": "" }, { "docid": "82556cf6dd6ff545b2163acfa5412108", "text": "\"An accounting general ledger is based on tracking your actual assets, liabilities, expenses, and income, and Gnucash is first and foremost a general ledger program. While it has some simple \"\"budgeting\"\" capabilities, they're primarily based around reporting how close your actual expenses were to a planned budget, not around forecasting eventual cash flow or \"\"saving\"\" a portion of assets for particular purposes. I think the closest concept to what you're trying to do is that you want to take your \"\"real\"\" Checking account, and segment it into portions. You could use something like this as an Account Hierarchy: The total in the \"\"Checking Account\"\" parent represents your actual amount of money that you might reconcile with your bank, but you have it allocated in your accounting in various ways. You may have deposits usually go into the \"\"Available funds\"\" subaccount, but when you want to save some money you transfer from that into a Savings subaccount. You could include that transfer as an additional split when you buy something, such as transferring $50 from Assets:Checking Account:Available Funds sending $45 to Expenses:Groceries and $5 to Assets:Checking Account:Long-term Savings. This can make it a little more annoying to reconcile your accounts (you need to use the \"\"Include Subaccounts\"\" checkbox), and I'm not sure how well it'd work if you ever imported transaction files from your bank. Another option may be to track your budgeting (which answers \"\"How much am I allowed to spend on X right now?\"\") separately from your accounting (which only answers \"\"How much have I spent on X in the past?\"\" and \"\"How much do I own right now?\"\"), using a different application or spreadsheet. Using Gnucash to track \"\"budget envelopes\"\" is kind of twisting it in a way it's not really designed for, though it may work well enough for what you're looking for.\"", "title": "" }, { "docid": "668cecf9dd78bc8eeb8ac981a1655342", "text": "Take a look at http://en.wikipedia.org/wiki/Comparison_of_accounting_software, in particular the rows with a market focus of 'personal'. This is probably one of the more complete lists available, and shows if they are web-based (like Mint) or standalone (like Quicken or Microsoft Money).", "title": "" }, { "docid": "7f27667221cca30f0a98511cc22f04d9", "text": "I'm always hesitant to use local credit unions because I love accessing all atms fee free, having services available 24/7, having robust, safe and audited online services, and having a big enough bank that all major third party tools interface with it. Joe Schmo Local Credit Union has a lot of good services, but audited and secure online banking? No fee nationwide ATMs? Native interfacing to major tools? I just don't see it often. I shudder to think of the security at small bank websites, frankly.", "title": "" }, { "docid": "3bbda03f837541c501058d5c2e9831a5", "text": "Given your needs, GNUcash will do swimmingly. I've used it for the past 3 years and while it's a gradual learning process, it's been able to resolve most stuff I've thrown at it. Schedule bills and deposits in the calendar view so I can keep an eye on cash flow. GNUcash has scheduled payments and receipts and reconcilation, should you need them. I prefer to keep enough float to cover monthly expenses in accounts rather than monitor potential shortfalls. Track all my stock and mutual fund investments across numerous accounts. It pulls stock, mutual and bond quotes from lots of places, domestic and foreign. It can also pull transaction data from your brokers, if they support that. I manually enter all my transactions so I can keep control of them. I just reconcile what I entered into Quicken based on the statements sent to me. I do not use Quicken's bill pay There's a reconciliation mode, but I don't use it personally. The purpose of reconcilation is less about catching bank errors and more about agreeing on the truth so that you don't incur bank fees. When I was doing this by hand I found I had a terrible data entry error rate, but on the other hand, the bayesian importer likes to mark gasoline purchases from the local grocery store as groceries rather than gas. I categorize all my expenditures for help come tax time. GNUcash has accounts, and you can mark expense accounts as tax related. It also generates certain tax forms for you if you need that. Not sure what all you're categorizing that's helpful at tax time though. I use numerous reports including. Net Worth tracking, Cash not is retirement funds and total retirement savings. Tons of reports, and the newest version supports SQL backends if you prefer that vs their reports.", "title": "" }, { "docid": "82b9b92a9cd236b37a2eb01f8a3d5dfb", "text": "The best way to answer this question is to try. GnuCash is free, so setting it up and giving it a go shouldn't be too hard. After all, what really matters is how helpful the program is for your purposes. One aspect of personal finance that stops me from jumping to GnuCash/KMyMoney/MoneyDance is the ability to download transactions from my financial institutions. Last time I checked, the process was somewhat involved and support was limited for a handful of banks. Because of that, I decided to stick with MS Money (and once Microsoft dropped the ball, with Quicken). I am sure things are better these days, but I am still not comfortable with trusting my finances to something new and unproven. I still remember how painful it was several years ago, when some bug in MS Money caused occasional mess-up of the reconciliation state for the American Express credit cards.", "title": "" }, { "docid": "49296d9f0888a89e4fa9bd5cfa66cf71", "text": "I started my business about 4 years ago. I heard bad things about Quickbooks for Mac so I steered clear. I used an open source program called GnuCash and it does a good job. It's free and fairly easy to set up.", "title": "" }, { "docid": "ad9394be1f239ad6444fe6793dd0dcaa", "text": "\"We're in much the same boat as you. We do make use of the transaction download feature of our software, but we don't let it auto-enter the amounts. We use the downloaded transactions to make entering our receipts easier. We each take responsibility for entering our own transactions, and then I go through and download bills, reconcile statements and such. I'm the numbers person in our house, so it's easier for me to take care of this stuff. We have all of our bills on auto-pay so that we don't have to worry about payments not getting made if we don't have time to get to our banking tasks on time. I try to set aside time on Saturday afternoon while my kids have their \"\"screen time\"\", or I'll do it in the evening after the kids are in bed. This year, my wife has been much busier and hasn't had as much time to keep up with her data entry, so we've been doing less well at keeping up with things. Something we're considering (and this might work for you as well) is to use the envelope system for the categories where we're most in danger of over-spending. This way. we would have an easy way to see if we'd overspent a category even if we were behind on our data entry. If you're not familiar with the envelope system, respond here and I'll explain it further.\"", "title": "" }, { "docid": "ee8fccbcca3d7618962273ff5df1d43a", "text": "The model itself is fairly common for serving particular niche markets. A few other organizations which operate in similar setups: prepaid card providers such as NetSpend, GreenDot, AccountNow, etc; startups such as SmartyPig, PerkStreet, WePay, and HigherOne. Still, nobody else seems to be providing full-service online banking to mainstream customers the way we plan to. We plan to have much better security than most banks, which isn't hard given the current sorry state of online banking in the US. And having an intermediary who's looking out for your interests can be a good thing. David, my co-founder Josh lays out our launch plans and why we are invite-only in his latest post. In short, we made a decision to build our own call center rather than outsource it, and that limits how quickly we can bring people on.", "title": "" } ]	fiqa
1de03907e93868219303d45fac5b4482	Debit card for minor (< 8 y.o.)	[ { "docid": "1be6876f632d31894a916aae7e12588b", "text": "It seems the age restriction for the Capital One MONEY account has been removed; I just read the entire terms and conditions and there's no minimum age requirement. I just finished opening Capital One MONEY accounts for a child who is <5 and a child <8. Both now have activated debit cards and online access. Their accounts are accessible via their card, but also appear under my online banking login, as they are joint accounts. It is possible to deposit cheques, but no cheques are issued for writing. Debit card access is provided for ATM withdrawals and purchases. And the design on the card is really nice; my son said it looks like the $100 bill.", "title": "" }, { "docid": "fd5bb9b316408af3a5034fcd70921458", "text": "In the UK, the Osper card would do the trick exactly. The closest thing I can find in the US is the USAA Youth accounts which appear to be what you need but have some restrictions on mobile access until the youth is 13.", "title": "" }, { "docid": "7acd276799b0918e4bef112537c9789d", "text": "You might consider a Green Dot card. You can personalize the name on the card. There is no risk of over-drafting. There are some fees when you fill the card in stores, but it is free to open and manage online. Check out their site and see if it will work for you. It could be a great pair with a joint bank account for you and your kids. https://www.greendot.com/greendot/ Rock on for teaching personal finance and responsibility to your kids!", "title": "" }, { "docid": "61b0685c3c238b673e542d11a009bcaf", "text": "I'm not certain if you can get a debit card with it, but if you have a PNC in your area, they have a special kind of account designed around teaching financial literacy to children: https://www1.pnc.com/sisforsavings/tour.html . I'm not sure if you can get a debit card for the child or not, but the custodian gets one I believe, and the child gets a special online login to manage the money, so if you don't mind the name issue, it might be worth looking into. If you don't have PNC, maybe one of the banks in your area have a similar program?", "title": "" }, { "docid": "0276920227cc0ceab7fc64798c89867b", "text": "\"GreenLight offers a paid service for $5 per month that requires an adult primary account holder, and then unlimited accounts, including minors, as part of that service. I saw no minimum age requirement (see section \"\"Minors as Sub-Account Cardholders\"\"). https://www.greenlightcard.com/index.html Disclaimer: I haven't tried this service\"", "title": "" } ]	[ { "docid": "6e84cfcffad37fb6dea2ee57562fe20c", "text": "yes you can open bank account you should have a address in us and personally visit bank to deposite $1500 only to get you a debit card.you are required to maintain min balance of $1500 only. I have done it", "title": "" }, { "docid": "0a84d9ac4bc17b2abe46675a8f89df9c", "text": "Cash is king. PIN-based debit transactions are cheap. In terms of credit cards, a regular (ie. not a gold card) with no rewards has the lowest rates. Bigger merchants with lots of card volume likely have better deals that make the differences less pronounced.", "title": "" }, { "docid": "0758355d344165dedfb84f9bc539cca1", "text": "This sounds more like a behavioral than a debit card issue to me TBH. Did you put the money you're putting away into a separate savings account that you (mentally) labelled 'for investment'? That's pretty much what I do (and I have a couple of savings accounts for exactly that reason) and even though I know I've got $x in the savings accounts, the debit card I carry only lets me spend money from my main bank account. By the time I've transferred the money, the urge to spend has usually gone away, even though it often only takes seconds to make the transfer.", "title": "" }, { "docid": "c5f3a1695022c098d71e4d8b6cc024a0", "text": "Why not get her a credit card of her own, while she is still in the US? My experience with Canadian banks is that they were delighted to issue credit cards to I-turned-18-yesterday with no income. We did not cosign these applications. You can then give her a budget and pay up to that amount of her credit card bill each month (you should be able to do this online.) Should she overspend, she may have to scrimp for a while until your payments bring the balance back to zero. Don't delay on this though: I doubt any UK bank will issue her a card with no credit history and having only just moved to the country. And get a chip and pin if you can, they work everywhere in Europe.", "title": "" }, { "docid": "83f758c9b6e7d0361a0f2e31ea2af083", "text": "\"Just to add about using debit card as \"\"credit\"\" vs \"\"debit\"\" way: In addition to the difference of having to enter the PIN when using \"\"debit\"\" mode (vs having to sign in \"\"credit\"\" mode), for stores that offer cash back (i.e. get cash out of your account at the same time as paying), you can only get cash back when using \"\"debit\"\" mode.\"", "title": "" }, { "docid": "cb64b9cb7a7d5e5c50146c99df93de65", "text": "Assuming I only use it to buy things I can afford (which I trust myself to do), essentially treating it as a debit card, is this a good idea? This is definitely a good idea. From my own experience, before I got my first credit card through my local bank (age 18), I tired to apply for a card that has cash back rewards and was rejected because I didn't have any credit history. After I had the card from my bank for 6 months, I applied for this Capital One card that I've had ever since.", "title": "" }, { "docid": "f3989fde6b80584738b3cc00351aa6b8", "text": "A search quickly led to http://www.cardfellow.com/blog/debit-card-credit-card-difference-charges/ which shows the difference in merchant fees charged. A $200 charge costs $3.50-$3.60, a debit charge, $2.34-$2.39 but a PIN Debit, $1.87. The debit cards are a full percent less cost to the merchant, so the money collected is less to use for rewards. (I can't help but wonder how my card gives me 2% cash back, no fee, when I never pay interest.)", "title": "" }, { "docid": "0116423d2196dd8dbb33c99be0f57609", "text": "You don't have to do the prepaid PP card, just get him his own PP account and then order him the PP debit MC. It will act as a debit on his PP account just like the Student Account card.", "title": "" }, { "docid": "04f81083600e6efd66a27ac1fd14ac8a", "text": "In my experience, this choice is entirely up to the bank itself. There was a time when, given my mothers ATM card I could go to the bank and pull money for her, but the bank has since changed their rules and now they only will allow people listed on the account to access it, card or no card. If the bank is aware of who you are and knows that your friend is not you, they may be skeptical of allowing your friend to withdraw any money, or they might not care, it's at their discretion. If they do not know who either of you are, if your friend has the card and information needed, that will likely be sufficient, unless they ask for identification.", "title": "" }, { "docid": "8c64396bb5c2c08864a7a9b1276fab0b", "text": "\"If psychologically there is no difference to you between cash and debit (you should test this over a couple of months on yourself and spouse to make sure), then I suggest two debit cards (one for you and spouse) on your main or separate checking account. If you use Mint you can set budgets for each category (envelope) and when a purchase is made Mint will automatically categorize that transaction and deduct that amount from the correct budget. For example: If you have a \"\"Fast Food\"\" budget set at $100 per month and you use the debit at McDonalds, Mint should automatically categorize it as \"\"Fast Food\"\" and deduct the amount from the \"\"Fast Food\"\" budget that you set. If it can't determine a category or gets it wrong, you can just select the proper category. Mint has an iPhone (also Android and Windows phone) app that I find very easy to use. Many people state that they don't have this psychologically difference between spending cash and debit/credit, but I would say that most actually do, especially with small purchases. It doesn't have anything to do with intellect or knowing that you are actually spending money. It has more to do with tangibility, and the physical act of handing over cash. You may not add that soda and candy bar to your purchase if you have visible cash in your wallet that will disappear more quickly. I lived in Germany for 2 years before debit cards were around or common. I'm a sharp guy and even though I knew that I paid $100 for the 152 DM, it still kind of felt like spending Monopoly money, especially considering that in the US we are used to coins normally being 25 cents or less and in Germany coins are up to 10 DM (almost $10) and are used more frequently than paper.\"", "title": "" }, { "docid": "6aa022f401826c82028f3335f5cd8c4d", "text": "I'm going to give the checkmark to Joe, but I wanted to convey my personal experience. I bank with TD in New Jersey and was informed by the teller that I simply needed to endorse the check myself and indicate Parent of Minor. I cannot attest if other banks will accept this, but it at least works for TD and my situation in particular.", "title": "" }, { "docid": "2508632487b5768d88c1afb9cfeeac40", "text": "I recommend that you first try to use your card at a store in your home country, just to make sure that the point-of-sale features are enabled. After you've verified that, you need to contact your bank and ask them if the card will work in both ATMs and in stores in the U.S. They may need to enable it to work in another country. If you are going to be living in the U.S. for a while, you should consider opening an American bank account after you get there. If you don't want a credit card, you should be able to get a debit card here.", "title": "" }, { "docid": "682209f6ba59e15bd6f81429a8c54d8a", "text": "The T&C that comes with the card would usually tell you whether the card allows ATM withdrawal, though my experience with prepaid debit cards is that it usually does not. If that's the case, you have two options -", "title": "" }, { "docid": "2b86054b64552ea49b6624ba834740af", "text": "You can simply use them to pay in a supermarket or anywhere else. Just give them the card and say ‘put 1.23$ on this one please, and the rest I pay cash‘ or whatever. They might be annoyed when you have really many, but you can use up one every time you shop easily. For some cards, you do not even have to know the remaining amount, just say use it up. Note that supermarkets are preferable because they are typically used to that, and know how to handle it.", "title": "" }, { "docid": "19bde1702c8c2197120ccd74d527b835", "text": "While you're asking about a particular bank, I'll give my opinion of this in general. I think a $12,000 household income is pretty low to be given credit. The risk to the bank is certainly higher than if the income were at that $35,000 level. They can use this to differentiate what they offer for perks, and if they ever collateralize the debt of these cards, it's a clearly defined demographic.", "title": "" } ]	fiqa
340760059fd864208a32806bf1648136	Are car buying services worth it?	[ { "docid": "40b2b3a47d011c6b8410fc6fae9440ff", "text": "I have used car buying services through Costco and USAA. Twice with a Ford, and once with a Honda. In all instances I was directed to sales people that were uncommonly friendly and pleasant to work with. I was given a deep discount without any negotiation. In two of the three cases I did not have a trade. In one case I had a trade, and negotiated a deeper discount then was originally offered. Did I get a good deal? Eh, who knows? Really it depends what your goal is. If your goal is to avoid negotiation, avoid idiot salesmen, and receive a good discount then a quality car buying service may be for you. My research, a few years old, indicated Costco's program was better then the USAA one. If your goal is get a deep as a discount as possible on a new car, well then you have some work cut out for you. Keep some hand sanitizer handy when you meet one of the slime ball salesmen. Keep in mind that not everyone understand the difference between the words value and cheap. If your goal is to pay as little as possible for quality transportation. Avoid most dealers and new cars. But I don't think that is what you are looking for.", "title": "" }, { "docid": "1495c43f88e687ac41a3febea399f557", "text": "I haven't heard of these before! (And I'm on the board of a Credit Union.) The 0.99% on loans is great. It's especially great on a used car: the steep part of the depreciation curve was paid by the first owner. The network probably have a business relationship with the credit union. Credit unions do indirect lending -- approval of loans that happens at the point of sale, which then the credit union gets as assets. Depending on the cost of that program, it probably won't hurt. Your credit union wants to keep your business, because they know that you have a lot of options for where you bank and where you get loans.", "title": "" }, { "docid": "4ab468d6c909b04f3f51271c324bf202", "text": "The buying service your credit union uses is similar to the one my credit union uses. I have used their service several times. There is no direct cost to use the service, though the credit union as a whole might have a fee to join the service. I have used it 4 times over the decades. If you know what make and model you want to purchase, or at least have it narrowed down to just a few choices, you can get an exact price for that make, model, and options. You do this before negotiating a price. You are then issued a certificate. You have to go to a specific salesman at a specific dealership, but near a large city there will be several dealers to pick from. There is no negotiating at the dealership. You still have to deal with a trade in, and the financing option: dealer, credit union, or cash. But it is nice to not have to negotiate on the price. Of course there is nobody to stop you from using the price from the buying service as a goal when visiting a more conveniently located dealership, that is what I did last time. The first couple of times I used the standard credit union financing, and the last time I didn't need a loan. Even if you don't use the buying service, one way to pay for the car is to get the loan from the credit union, but get the rebate from the dealer. Many times if you get the low dealer financing you can't get the rebate. Doing it this way actually saves money. Speaking of rebates see how the buying service addresses them. The big national rebates were still honored during at least one of my purchases. So it turned out to be the buying service price minus $1,000. If your service worked like my experience, the cost to you was a little time to get the price, and a little time in a different dealer to verify that the price was good.", "title": "" }, { "docid": "a4ba5e51fd8922bc9ec409eb2d8bcf44", "text": "Depends on how you value your time. These programs do not say they will get you the lowest basement price; they say you get a reasonable price without negotiation. This is true. Use a service. Pick out the car you want and spend less than an afternoon picking up your vehicle. You don't have to fret or do all of the price research or comparison shopping because that is what the service does for you. Since you have to pick a make and model before you begin AND because you need to arrange your financing at a credit union before you being (regardless of a buying service) I don't think they actually work out financially for most folks. My anecdote: Because we were buying an already inexpensive new car, the Costco pre-negotiated discount was just a few hundred bucks. The discount is different for each car (naturally). Our base model was terrific in consumer reports, but the sticker price doesn't leave dealerships a lot of room for profit to start with. We ended up saving a couple thousand dollars by skipping the Costco program and following these tips from JohnFX: What are some tips for getting the upper hand in car price negotiations? But we did it all over email. We emailed any dealership we could find online that was in driving distance. (There were literally dozens of dealerships to choose from.) We made a new, throw away email address and starting to ask for a lower price. Whenever we got a lower price, we simply asked the others to beat it. All over email. It only took a few days, we know we got a low price and the stress really wasn't a factor. (A couple of the salespeople got a little rude, but it was over the email so we didn't care or fret.) I had time to kill, and the extra hassle and effort saved me much more money.", "title": "" }, { "docid": "8ee017962181beff587327afbd07a4c6", "text": "\"I went through the Costco program for the so-called \"\"no-hassle\"\" bargain price when I bought my Prius. According to other Prius owners that I've met on forums and TrueCar's web site, I paid \"\"average.\"\" Lots of people in my area managed to negotiate a better price by $1-2k. So much for getting a deal. I do not plan to use Costco to buy another vehicle again.\"", "title": "" } ]	[ { "docid": "168704f710afdf153cf1d910d90c06eb", "text": "\"You can greatly reduce the risk if you can line up a buyer prior to purchasing the car. That kind of thing is common in business, one example is drop shipping. Also there are sales companies that specialize in these kinds of things bringing manufacturers of goods together with customers. The sales companies never take delivery of the product, just a commission on the sales. From this the manufacturers are served as they have gained a customer for their goods. The buying company is served as they can make a \"\"better\"\" end product. The two parties may have not been brought together had it not been for the sales company so on some level both are happy to pay for the service. Can you find market inequalities and profit from them? Sure. I missed a great opportunity recently. I purchased a name brand shirt from a discount store for $20. Those shirts typically sell on ebay for $80. I should have cleaned out that store's inventory, and I bet someone else did as by the time I went back they were gone. That kind of thing was almost risk-less because if the shirts did not sell, I could simply return them for the full purchase price. That and I can afford to buy a few hundred dollars worth of shirts. Can you afford to float 45K CDN? What if it takes a year to sell the car? What if the economy goes sour and you are left \"\"holding the bag\"\"? Why are not car dealers doing exactly what you propose? Here in the US this type of thing is called \"\"horse trading\"\" and is very common. I've both lost and made money on these kind of deals. I would never put a significant amount of my net worth at risk.\"", "title": "" }, { "docid": "5493c7944b022ecf3075500fc2deeafc", "text": "Yes, maybe. Sometimes the mother company (that makes the car) covers a bit of the loss that comes from the super-offer loan, so the dealer loses a bit less. But generally, you are right. you should be able to talk them into some rebate that gets you around the given number, depending on how good you are a negotiator (and how urgently they need to sell a car)", "title": "" }, { "docid": "1d1b257f29aaef270074323d88d51d45", "text": "The good debt/bad debt paradigm only applies if you are considering this as a pure investment situation and not factoring in: A house is something you live in and a car is something you use for transportation. These are not substitutes for each other! While you can live in your car in a pinch, you can't take your house to the shops. Looking at the car, I will simplify it to 3 options: You can now make a list of pros and cons for each one and decide the value you place on each of them. E.g. public transport will add 5h travel time per week @ $X per hour (how much you value your leisure time), an expensive car will make me feel good and I value that at $Y. For each option, put all the benefits together - this is the value of that option to you. Then put all of the costs together - this is what the option costs you. Then make a decision on which is the best value for you. Once you have decided which option is best for you then you can consider how you will fund it.", "title": "" }, { "docid": "f3f2aad762151eb6ec61c7d1dc1e7383", "text": "If it costs more to fix the car than the car is worth, then those repairs are not worth it. Hit craigslist and look for another junker that runs, but is in your cash price range. Pay to get it looked at by a mechanic as a condition of sale. Use consumer reports to try and find a good model. Somebody in your position does not need a $15K car. You need a series of $2K or $4K cars that you will replace more often, but pay cash for. Car buying, especially from a dealer financed, place isn't how I would recommend building your credit back up. EDIT in response to your updates: Build your credit the smart way, by not paying interest charges. Use your lower limit card, and annually apply for more credit, which you use and pay off each and every month. Borrowing is not going to help you. Just because you can afford to make payments, doesn't automatically make payments a wise decision. You have to examine the value of the loan, not what the payments are. Shop for a good price, shop for a good rate, then purchase. The amount you can pay every month should only be a factor than can kill the deal, not allow it. Pay cash for your vehicle until you can qualify for a low cost loan from a credit union or a bank. It is a waste of money and time to pay a penalty interest rate because you want to build your credit. Time is what will heal your credit score. If you really must borrow for the purchase, you must secure a loan prior to shopping for a car. Visit a few credit unions and get pre-qualified. Once you have a pre-approved loan in place, you can let the deal try and beat your loan for a better deal. Don't make the mistake of letting the dealer do all the financing first.", "title": "" }, { "docid": "57f6a21321eb433657690b4ba5c04fef", "text": "A lot of articles about this kind of thing ask you to do the simple math: $5k < $15k. If you've got a trustworthy mechanic, and you're looking to save money, it's simple, you're looking at $10k in savings, not even counting interest, higher insurance, etc. On the other hand, if you're just lusting after a new car, and don't mind spending the extra money, then why not? As you mentioned, however, if you think you'll get at least the value of your repair back, you might as well get the car repaired for $5k, so you'll be able to get around town. If you still decide you want a new car, then you'll have a trade-in worth $6500 instead of $1500.", "title": "" }, { "docid": "2a4035dd53cf08a9a1e6622434653193", "text": "As someone who was just recently a salesman at Honda, I'd recommend buying a Honda instead :). If you really prefer your Toyota, I always found quote-aggregation services (Truecar, I'm blanking on others) very competitive in their pricing. Alternatively, you could email several dealerships requesting a final sale price inclusive of taxes and tags with the make, model, and accessories you'd wish to purchase, and buy the vehicle from them if your local dealership won't match that price. Please keep in mind this is only persuasive to your local dealership if said competitors are in the same market area (nobody will care if you have a quote from out-of-state). As many other commenters noted, you should arrange your own financing. A staple of the sales process is switching a customer to in-house financing, but this occurs when the dealership offers you better terms than you are getting on your own. So allow them the chance to earn the financing, but don't feel obligated to take it if it doesn't make sense fiscally.", "title": "" }, { "docid": "d9c0885f99984679d899289342d7c883", "text": "\"Uh, you want to lease a car through a dealer? That is the worst possible way to obtain a car. Dealers love leases because it allows them to sell a car for an unnegotiated price and to hide additional fees. It's the most profitable kind of sale for them. The best option would be to buy a used car off of Craigslist or eBay, then sell it again the same way when you leave. If you sell the car for what you paid, then you get the car for a year for free. If you are determined to go through with the expensive, risky and annoying plan of leasing a car, then you should use a leasing agent. I recommend reading some car buying guides before going out into the wilderness with the tigers and bears. Comment on Leasing Tricks Don't get tricked by the \"\"interest rate\"\" game. The whole interest thing is just a distraction to trick you into think you are getting some kind of reasonable deal. The leasing company makes most of their money from fees. For example, if you get into an accident it is a big payday for them. The average person thinks they will never get into an accident, but the reality is that most people get into an accident sooner or later. They also collect big penalties for \"\"maintenance failures\"\". Forget to change the oil? BOOM! money. Forget to comply with manufacture recall? BOOM! more money. Forget to do the annual service? BOOM! more money. Scratch the car? BOOM! more money. The original car mats are missing? BOOM! you just paid $400 for a set of mats that cost the leasing company $25 bucks. The leasing company is counting on the fact that 99% of people will not maintain the car correctly or will damage it in some way. They also usually have all kinds of other bogus fees, so-called \"\"walk-away fees\"\", \"\"disposition fees\"\", \"\"initiation fees\"\". Whatever they think they can get away with. The whole system is calculated to screw you.\"", "title": "" }, { "docid": "833192fa2624bd4fca23f6210fe60398", "text": "It is almost never going to be more economical to buy a new car versus repairing your current car. If you want a new car, that is justification enough.", "title": "" }, { "docid": "d4fcfcb0038f0f3aa19f98a535bdf044", "text": "The .9% looks great, but it's not as relevant as the cost of the car itself. There are those who believe that one should never own a new car, that the first X years/miles of a car's life are the most expensive. The real question is how your budget is allocated. Is the car payment a small sliver or a large slice? How big is the housing wedge?", "title": "" }, { "docid": "ab573c1f875dcbc6bc45473c81083849", "text": "\"A while back I sold cars for a living. Over the course of 4 years I worked for 3 different dealerships. I sold new cars at 2 and used at the last one. When selling new cars I found that the majority of people buying the higher end cars honestly shouldn't have been - 80%+. They almost always came in owing more on their trades then they were worth, put down very little cash and were close to being financially strapped. From a financial perspective these deals were hard to close, not because the buyer was picky but rather because their finances were a mess. Fully half, and probably more, we had to switch from the car they initially wanted down to a much cheaper version or try to convert to a lease because it was the only way the bank would loan the money. We called them \"\"$30,000 millionaires\"\" because they didn't make a whole lot but tried to look like they did. As a salesman you knew you were in serious trouble when they didn't even try to negotiate. Around 2% of the deals I did were actual cash deals - meaning honest cash, not those who came in with a pre-approved loan from a bank. These were invariably for used cars about 3 to 4 years old and they never had a trade in. The people doing this always looked comfortable but never dressed up, you wouldn't even look at them twice. The negotiations were hard because they knew exactly how much that car should go for and wouldn't even pay that. It was obvious they knew the value of money. That said, I've been in the top 3% of wage earners for about 20 years and at no point have I considered myself in a position to \"\"afford\"\" a new \"\"luxury\"\" car. IMHO, there are far more important things you can do with that kind of money.\"", "title": "" }, { "docid": "c5778c02b5f7bc25fa3180e5e555eb28", "text": "It depends completely on the car. Some cars retain their value much better, and others drop in value like a rock (no pun intended). The mileage and condition on a car also has a huge impact on value. According to this site, cars on average lose 46% of their value in three years, so seeing one that drops 62% in roughly 3 years does not seem impossible. That value could also have been trade-in value, which is significantly lower than what you could get with a private party sale (or what you'd pay to get that same car from a dealer) One example: a new Ford Taurus (lowest model) has a Kelly Blue Book value of $28,000. A 2014 Taurus (lowest model) with average mileage and in fair condition has a private party value of about $12,000, for a 57% drop in value. Note: I picked Taurus because it's a car that should not have exceptional resale value (unlike BMW, trucks, SUVs), not to make any kind of judgement of the quality or resellability of the car)", "title": "" }, { "docid": "0023829af08e1f223028c03a4ed6db45", "text": "You are really showing some wisdom here, and congratulations on finishing college. Its a lot about likelihoods. If you buy a new car, there is something like a 99.5% chance you will get a car that will not need repairs. If you buy a car for $1200 there is probably a 20% chance that the car will only need minimal repairs. So the answer is there is no real guarantee that spending any amount of money you will end up with a car with no repairs. You also can't assume that with buying a car it will immediately need repairs. Its possible, that you could spend 1200 on a car and it will need an oil change. In three months it might need brakes and in 6 months tires. If that is the case, you could save up the money for repairs. Have you looked for a car? It will take some work, but you might be able to find something in good condition for your budget. If you shop for a loan, go with a good credit union or local bank. Mostly you are looking for a low rate. However, I would advise against it. You worked so hard on getting out of school without debt, why start now? Be weird and buy a car for cash. Heck someone may be able to loan you a car for a short time while you save some money.", "title": "" }, { "docid": "2919c190f77c6fcd8ce36391a3349eb2", "text": "It is the best company of business valuation services. This expert has been working in the Automotive dealership expert witness industry for long years. The Kirk Kleckner offers an exceptional form of the fee, which includes enterprise valuation, car valuation, and professional Automotive dealership expert witness. Deals happening at automobile dealerships can be inspired via the monetary matters of the auto commercial enterprise and in addition singular automobile examinations.", "title": "" }, { "docid": "f95bc581a3d4e6fe834469a1a551bbe3", "text": "\"It is a legitimate practice. The dealers do get the loan money \"\"up front\"\" because they're not holding the loan themselves; they promptly sell it to someone else or (more commonly) just act as salesmen for a lending institution and take their profit as commission or origination fees. The combined deal is often not a good choice for the consumer, though. Remember that the dealer's goal is to close a sale with maximum profit. If they're offering to drop the price $2k, they either didn't expect to actually get that price in the first place, or expect at least $2k of profit from the loan, or some combination of these. Standard advice is to negotiate price, loan, and trade-in separately. First get the dealer's best price on the car, compare it to other dealer and other cars, and walk away if you don't like their offer. Repeat for the loan, checking the dealer's offer against banks/credit unions available to you. If you have an older car to unload, get quotes for it and consider whether you might do better selling it yourself. ========= Standard unsolicited plug for Consumef Reports' \"\"car facts\"\" service, if you're buying a new car (which isn't usually the best option; late-model used is generally a better value). For a small fee, they can tell you what the dealer's real cost of a car is, after all the hidden incentives and rebates. That lets you negotiate directly on how much profit they need on this sale... and focuses their attention on the fact that the time they spend haggling with you is time they could be using to sell the next one. Simply walking into the dealer with this printout in your hand cuts out a lot of nonsense. The one time I bought new, I basically walked in and said \"\"It's the end of the model year. I'll give you $500 profit to take one of those off your hands before the new ones come in, if you've got one configured the way I want it.\"\" Closed the deal on the spot; the only concession I had to make was on color. It doesn't always work; some salesmen are idiots. In that case you walk away and try another dealer. (I am not affiliated in any way with CU or the automotive or lending industries, except as customer. And, yes, this touch keyboard is typo-prone.)\"", "title": "" }, { "docid": "0758355d344165dedfb84f9bc539cca1", "text": "This sounds more like a behavioral than a debit card issue to me TBH. Did you put the money you're putting away into a separate savings account that you (mentally) labelled 'for investment'? That's pretty much what I do (and I have a couple of savings accounts for exactly that reason) and even though I know I've got $x in the savings accounts, the debit card I carry only lets me spend money from my main bank account. By the time I've transferred the money, the urge to spend has usually gone away, even though it often only takes seconds to make the transfer.", "title": "" } ]	fiqa
a16f2bdad3a189b0a53218b5a4567a9f	Is avoiding fees commonly found with CFD trading possible?	[ { "docid": "d0cc13ef145f91201aedca65af758d3a", "text": "The fees with trading CFDs are usually lower than standard share trading. There is usually no joining fee to join a broker and start trading with them, you must be talking about the minimum required to fund your account to trade with. What country are you in? Because if you are in the USA I believe CFD trading is not allowed there. Also there is no margin fee associated with trading CFDs. The margin is what you put in to buy or sell the CFD when you open a position. For example if you were to open a position in a share CFD where the underlying share had a price of $10 and you were looking to buy 1000 units. To buy the shares outright your outlay would be $10000 plus brokerage. If the CFD provider had a 10% margin on these share, then your initial margin to open a CFD position would be 10% of $10000 or $1000. If the price of the shares went up to $11 and you sold the shares you would get $11000 ($1000 profit), if you sold the CFDs you would get $2000 ($1000 profit). If on the other hand the shares went down to $9 and you sold the shares you would get $9000 ($1000 loss), if you sold the CFDs you would get $0 ($1000 loss). You have to be careful with margin, it is a two edged sword - it can multiply your gains as well as multiply your losses. The only fees you should be charged with CFDs is brokerage (which should be less than for share trading), and overnight financing costs. This is charged for everyday you hold a long position overnight. You should not be charge any overnight financing cost for holding short positions overnight, and if interest rates were higher you might actually get paid an overnight financing for holding short positions overnight. You may have been closed out of your bitcoin position because you didn't have enough funds in your trading account to open the size trade that you opened. From your question it seems like you are not ready to trade CFDs, you should really learn more about CFDs and the trading platform/s you plan to use before trading with your valuable money. You could probably open up a simulation account whilst you are learning the ropes and become more familiar with the trading platform and with CFDs. And if you are not sure about something ask your broker, they usually have training videos and seminars.", "title": "" } ]	[ { "docid": "9a2fb8987853dd7bb42da0a18d64dd5a", "text": "The ETF price quoted on the stock exchange is in principle not referenced to NAV. The fund administrator will calculate and publish the NAV net of all fees, but the ETF price you see is determined by the market just like for any other security. Having said that, the market will not normally deviate greatly from the NAV of the fund, so you can safely assume that ETF quoted price is net of relevant fees.", "title": "" }, { "docid": "9adf292a5fb58e5fed098aa9bcd6d516", "text": "Retail brokers and are generally not members of exchanges and would generally not be members of exchanges unless they are directly routing orders to those exchanges. Most retail brokers charging $7 are considered discount brokers and such brokers route order to Market Makers (who are members of the exchanges). All brokers and market makers must be members of FINRA and must pay FINRA registration and licensing fees. Discount brokers also have operational costs which include the cost of their facilities, technology, clearing fees, regulation and human capital. Market makers will have the same costs but the cost of technology is probably much higher. Discount brokers will also have market data fees which they will have to pay to the exchanges for the right to show customer real time quotes. Some of their fees can be offset through payment for order flow (POF) where market makers pay routing brokers a small fee for sending orders to them for execution. The practice of POF has actually allowed retail brokers to keep their costs lower but to to shrinking margins and spread market makers POF has significantly declined over the years. Markets makers generally do not pass along Exchange access fees which are capped at $.003 (not .0035) to routing brokers. Also note that The SEC and FINRA charges transactions fees. SEC fee for sales are generally passed along to customers and noted on trade confirms. FINRA TAF is born by the market makers and often subtracted from POF paid to routing firms. Other (full service brokers) charging higher commissions are charging for the added value of their brokers providing advice and expertise in helping investors with investment strategies. They will generally also have the same fees associated with membership of all the exchanges as they are also market makers subject to some of the list of cost mentioned above. One point of note is that Market Making technology is quite sophisticates and very expensive. It has driven most of wholesale market makers of the 90s into consolidation. Retail routing firm's save a significant amount of money for not having to operate such a system (as well as worry about the regulatory headaches associated with running such a system). This allows them to provide much lower commissions that the (full service) or bulge bracket brokers.", "title": "" }, { "docid": "1d78a5b716489ff3fa60038e90e411c1", "text": "\"Don't put money in things that you don't understand. ETFs won't kill you, ignorance will. The leveraged ultra long/short ETFs hold swaps that are essentially bets on the daily performance of the market. There is no guarantee that they will perform as designed at all, and they frequently do not. IIRC, in most cases, you shouldn't even be holding these things overnight. There aren't any hidden fees, but derivative risk can wipe out portions of the portfolio, and since the main \"\"asset\"\" in an ultra long/short ETF are swaps, you're also subject to counterparty risk -- if the investment bank the fund made its bet with cannot meet it's obligation, you're may lost alot of money. You need to read the prospectus carefully. The propectus re: strategy. The Fund seeks daily investment results, before fees and expenses, that correspond to twice the inverse (-2x) of the daily performance of the Index. The Fund does not seek to achieve its stated investment objective over a period of time greater than a single day. The prospectus re: risk. Because of daily rebalancing and the compounding of each day’s return over time, the return of the Fund for periods longer than a single day will be the result of each day’s returns compounded over the period, which will very likely differ from twice the inverse (-2x) of the return of the Index over the same period. A Fund will lose money if the Index performance is flat over time, and it is possible that the Fund will lose money over time even if the Index’s performance decreases, as a result of daily rebalancing, the Index’s volatility and the effects of compounding. See “Principal Risks” If you want to hedge your investments over a longer period of time, you should look at more traditional strategies, like options. If you don't have the money to make an option strategy work, you probably can't afford to speculate with leveraged ETFs either.\"", "title": "" }, { "docid": "618a3e2994080b42870518e5c9ec136c", "text": "\"This answer is somewhat incomplete as I don't have definitive conclusions about some parts of your question. Your question includes some very specific subquestions that may best be answered by contacting the investment companies you're considering. I don't see any explicit statement of fees for TIAA-CREF either. I suggest you contact them and ask. There is mention on the site of no-transaction-fee funds (NTF), but I wasn't able to find a list of such funds. Again, you might have to ask. Vanguard also offers some non-Vanguard funds without transaction fees. If you go the Vanguard page on other mutual funds you can use the dropdown on the right to select other fund companies. Those with \"\"NTF\"\" by the name have no transaction fees. Scottrade also offers NTF funds. You can use their screener and select \"\"no load\"\" and \"\"no transaction fee\"\" as some of your filters. You are correct that you want to choose an option that will offer a good lineup of funds that you can buy without transaction fees. However, as the links above show, Vanguard and TIAA-CREF are not the only such options. My impression is that almost any firm that has their own funds will sell them (or at least some of them) to you without a transaction fee. Also, as shown above, many places will sell you other companies' funds for free too. You have plenty of options as far as free trades, so it really depends on what funds you like. If you google for IRA providers you will find more than you can shake a stick at. If you're interested in low-cost index funds, Vanguard is pretty clearly the leader in that area as their entire business is built around that concept. TIAA-CREF is another option, as is Fideltiy (which you didn't mention), and innumerable others. Realistically, though, you probably don't need a gigantic lineup of funds. If you're juggling money between more than a handful of funds, your investment scheme is probably needlessly complex. The standard advice is to decide on a broad allocation of money into different asset classes (e.g., US stocks, US bonds, international stocks, international bonds), find a place that offers funds in those areas with low fees and forget about all the other funds.\"", "title": "" }, { "docid": "7e5ef408b369bd0e58561c847ea9d703", "text": "\"Other than the brokerage fee you should also consider the following: Some brokerages provide extra protection against the these and as you guessed it for a fee. However, there could be a small bonus associated with your trading at scale: You are probably qualified for rebates from the exchanges for generating liquidity. \"\"Fees and Credits applicable to Designated Market Makers (“DMMs”)\"\" https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf All in all, I will say that it will be really hard for you to avoid paying brokerage fee and yes, even Buffet pays it.\"", "title": "" }, { "docid": "707b7a5a7259093c1d03ce2ee737eda1", "text": "CFDs should not be used as a buy and hold strategy (which is risky enough doing with shares directly). However, with proper money and risk management and the proper use of stop losses, a medium term strategy is very plausible. I was using CFDs in the past over a short time period of usually between a couple of days to a couple is weeks, trying to catch small swings with very tight stops. I kept getting wipsawed due to my stops being too tight so had too many small loses for my few bigger wins. And yes I lost some money, almost $5k in one year. I have recently started a more medium term strategy with wider stops trying to catch trending stocks. I have only recently started this strategy and so far have 2 loses and 3 wins. Just remember that you do get charged a financing fee for holding long position overnight, buy for short position you actually get paid the funding fee for overnight positions. My broker charges the official interest rate + 2.5% for long positions and pays the official rate - 2.5% for short positions. So yes CFDs can be used for the longer term as long as you are implementing proper money and risk management and use stop losses. Just be aware of the implications of using margin and all the costs involved.", "title": "" }, { "docid": "f05e7457666194747ad2a2fffb8275aa", "text": "Now the question: is advisable for a beginner to speculate in CfDs? No. If not, is there a better way to invest with a small amount of money? In the US, and I'm sure this carries to the UK, most (if not all) big brokerages (Schwab, TD Ameritrade, Fidelity, Vanguard, etc) have a set of funds that are zero load and zero commission though the fund will still have an expense ratio. This is the Barclay's UK page related to zero cost investing in the Barclay's funds. Barclay's might not be the right fit for a beginner as it seems there is a hefty account minimum, but the same zero commission concept exists in the UK. Again, most of these brokerages will also have an extremely low expense ratio S&P index (or some other market index) fund. As a beginner that's where you should start. This is not meant to patronize beginners, it's just math. Assume your trade commission is £7. If your investment is £100, you'll lose £7 right up front to the buy commission, then another £7 when you sell. Lets say your position raises 10%, you'll be at a net loss of 4.7%. Meanwhile if you put your £100 in to a 0.1% expense fee mutual fund with no transaction commissions and no load fees, after a 10% gain you'd owe £0.11 due to the expense ratio at the of the year. You'd have £109.89. Beginners get crushed by fees and commission. It is not advisable, by any stretch of the imagination, to attempt to day trade or actively manage a portfolio of any sort of security; and commodities and currency are the WORST place to start.", "title": "" }, { "docid": "0a7ace8f106dc0b13a9d2fc529f507e6", "text": "I doubt you're going to find anywhere that will give you free outgoing wires unless you're depositing a huge amount of money like $500K or more. An alternative would be to find a bank that offers everything else you want and use XETrade for very low cost online wires. I've used them in the past and can recommend their services. Most banks won't charge for incoming wires. I have accounts at ETrade Bank that don't charge any fees and I can do everything online. You might want to check them out. ETrade also offers global trading accounts which allow you to have accounts denominated in a few foreign currencies (EUR, JPY, GBP, CAD and HKD I think). I don't think there is a fee for moving money between the different currencies. If your goal is simply to diversify your money into different currencies, you could deposit money there instead of wiring it to other banks.", "title": "" }, { "docid": "11c296332c95a014ec99e1c7587390cc", "text": "I've worked at a bank, and even the best prop traders have low Sharpe ratios and large swings. I would advise that the average person without access to flow information does not a chance, and will end up losing eventually.", "title": "" }, { "docid": "c38fdb9c7f76677a4614faf0eaf2598a", "text": "\"You avoid pattern day trader status by trading e-mini futures through a futures broker. The PDT rules do not apply in the futures markets. Some of the markets that are available include representatives covering the major indices i.e the YM (DJIA), ES (S&P 500) and NQ (Nasdaq 100) and many more markets. You can take as many round-turn trades as you care to...as many or as few times a day as you like. E-mini futures contracts trade in sessions with \"\"transition\"\" times between sessions. -- Sessions begin Sunday evenings at 6 PM EST and are open through Monday evening at 5 PM EST...The next session begins at 6 pm Monday night running through Tuesday at 5 PM EST...etc...until Friday's session close at 5 PM EST. Just as with stocks, you can either buy first then sell (open and close a position) or short-sell (sell first then cover by buying). You profit (or lose) on a round turn trade in the same manor as you would if trading stocks, options, ETFs etc. The e-mini futures are different than the main futures markets that you may have seen traders working in the \"\"pits\"\" in Chicago...E-mini futures are totally electronic (no floor traders) and do not involve any potential delivery of the 'product'...They just require the closing of positions to end a transaction. A main difference is you need to maintain very little cash in your account in order to trade...$1000 or less per trade, per e-mini contract...You can trade just 1 contract at a time or as many contracts as you have the cash in your account to cover. \"\"Settlement\"\" is immediate upon closing out any position that you may have put on...No waiting for clearing before your next trade. If you want to hold an e-mini contract position over 2 or more sessions, you need to have about $5000 per contract in your account to cover the minimum margin requirement that comes into play during the transition between sessions... With the e-minis you are speculating on gaining from the difference between when you 'put-on' and \"\"close-out\"\" a position in order to profit. For example, if you think the DJIA is about to rise 20 points, you can buy 1 contract. If you were correct in your assessment and sold your contract after the e-mini rose 20 points, you profited $100. (For the DJIA e-mini, each 1 point 'tick' is valued at $5.00)\"", "title": "" }, { "docid": "1fec42beb84e2821dd90cd035446ea8d", "text": "Something like cost = a × avg_spreadb + c × volatilityd × (order_size/avg_volume)e. Different brokers have different formulas, and different trading patterns will have different coefficients.", "title": "" }, { "docid": "66dbe5aa78abf16b575a49b7483f9b3b", "text": "Yes it is viable but uncommon. As with everything to do with investment, you have to know what you are doing and must have a plan. I have been successful with long term trading of CFDs for about 4 years now. It is true that the cost of financing to hold positions long term cuts into profits but so do the spreads when you trade frequently. What I have found works well for me is maintaining a portfolio that is low volatility, (e.g. picking a mix of positions that are negatively correlated) has a good sharpe ratio, sound fundamentals (i.e. co-integrated assets - or at least fairly stable correlations) then leveraging a modest amount.", "title": "" }, { "docid": "4edef748c56d2e79148d229cce28d705", "text": "\"The issues of trading with unsettled funds are usually restricted to cash accounts. With margin, I've never personally heard of a rule that will catch you in this scenario. You won't be able to withdraw funds that are tied up in unsettled positions until the positions settle. You should be able to trade those funds. I've never heard of a broker charging margin interest on unsettled funds, but that doesn't mean there isn't a broker somewhere that does. Brokers are allowed to impose their own restrictions, however, since margin is basically offering you a line of credit. You should check to see if your broker has more restrictive rules. I'd guess that you may have heard about restrictions that apply to cash accounts and think they may also apply to margin accounts. If that's the case and you want to learn more about the rules generally, try searching for these terms: You should be able to find a lot of clear resources on those terms. Here's one that's current and provides examples: https://www.fidelity.com/learning-center/trading-investing/trading/avoiding-cash-trading-violations On a margin account you avoid these issue because the margin (essentially a loan from your broker) provides a cushion / additional funds that avoid the issues. It is possible that if you over-extend yourself that you'll get a \"\"margin call,\"\" but that seems to be different than what you're asking and maybe worth a new question if you want to know about that.\"", "title": "" }, { "docid": "e604008e0fef242d90c196819044e530", "text": "Powers makes a good point: trading costs may eat up a significant portion of your ROI. A fee as little as 2% can consume more than 50% of your long-term ROI! A rule of thumb is keep your fees to less than 1%. One way to do that is to buy stock in companies that have a DRIP with a Share Purchase Plan (SPP). Often the SPP allows investors to purchase shares for low fees or free. Once you have the ability to purchase shares for (virtually) free, you can use InvestMete. Roughly, you send more money to the companies whose share prices are near their 52-week low, and less money to those who are near their 52-week high. Getting back to your original question...", "title": "" }, { "docid": "3f8322c9d7eca2e486c8147430074bb7", "text": "One implication is the added fees if you are investing in something with a trading cost or commission, such as your stock purchase. If you pay low costs to trade (e.g. with a discount broker) and don't switch your investments often, then costs overall should remain reasonable .. but always be aware of your costs and seek to minimize them.", "title": "" } ]	fiqa
483393d3021bad825407b16caf080164	How to decide which private student loan is right for me?	[ { "docid": "b43743e858132b99004d6b4fb30a5151", "text": "\"I speak from a position of experience, My BS and MS are both in Comp Sci. I know very little about loans or finances. That is very unfortunate as you are obviously an intelligent human being. Perhaps this is a good time to pause your formal education and get educated in personal finance. To me, it is that important. I study computer science, and am thus confident that I will be able to find work after I finish school. This kind of attitude can lead to trouble. You will likely have a high salary, but that does not always translate into prosperity. Personal finance is more about behavior then mathematics. I currently work with people that have high salaries in a low cost of living area. Some have lost homes due to foreclosure some are very limited in their options because of high student loan balances. Some are millionaires without hitting the IPO/startup lotto. The difference is behavior. It's possible that someone in my family will be able to cosign and help me out with this loan. This is indicative of lack of knowledge and poor financial behavior. This kind of thing can lead to strained relationships to the point where people don't talk to each other. Never co-sign for anyone, and if you value the relationship with a person never ask them to co-sign. I'll be working as a TA again for a $1000 stipend. Yikes! Why in the world would you work for 1K when you need 4K? You should find a way to earn 6K this semester so you can save some and put some toward the loans you already acquired. Accepting this kind of situation \"\"raises red flags\"\" on your attitude towards personal finance. And yes it is possible, you can earn that waiting tables and if you can find a part time programming gig you can make a lot more then that. Consider working as a TA and wait tables until you find that first programming gig. I am just about done with my undergraduate degree, and will be starting graduate school at the same university next semester. To me this is a recipe for failure in most cases. You have expended all your financing options to date and are planning to go backwards even more. Why not get out of school with your BS, and go to work? You can save up some of your MS tuition and most companies will provide tuition reimbursement. Computer Science/Software Engineering can be a fickle market. Right now things are going crazy and times are really good. However that was not always the case during my career and unlikely for yours. For example, Just this year I bypassed my highest rate of pay that occurred in 2003. I was out of work most of 2004, and for part of 2005 I actually made less then when I was working while in college. In 2009 my company cut our salaries by 5%, but the net cost to me was more like a 27% cut. In 2001 I worked as a contractor for a company that had a 10% reduction in full time employees, yet they kept us contractors working. Recently I talked with a recruiter about a position doing J2EE, which is what I am doing now. It required a high level security clearance which is not an easy thing to get. The rub was that it was located in a higher cost of living area and only paid about 70% of what I am making now. They required more and paid less, but such is the market. You need to learn about these things! Good luck.\"", "title": "" } ]	[ { "docid": "c9c3931d827a94de24d9b700f3424857", "text": "I'm 40 and been carrying student debt for nearly 20 years. Because of life events and various circumstances I've had to defer several times. This means my balance history looks like a rollercoaster. At this point I just consider the Department of Education to be akin to heroin addiction. I feed it as regularly as I can. It starts to get painful when I can't. It requires an ever increasing amount to get that fix. I'm financially fucked and it's my fault. And one day it'll probably kill me. But I just keep trying. What choice do I have?", "title": "" }, { "docid": "6236c533a709b202a826720071e1f5a7", "text": "\"Although there is no single best answer to your situation, several other people have already suggest it in some form: always pay off your highest after-tax (!) interest loan first! That being said, you probably also have heard about the differentiation for good debt vs. bad debt. Good debt is considered a mortgage for buying your primary home or, as is the case here, debt for education. As far as I am concerned, those are pretty much the only two types of debt I'd ever tolerate. (There may be exceptions for health/medical reasons.) Everything else is consumer debt and my personal rule is, don't buy it if you don't have the money for it! Meaning, don't take on consumer debt. One other thing you may consider before accelerating paying off your student debt, the interest paid on it may be tax deductible. So you should look at what the true interest is on your student loan after taxes. If it is in the (very) low single digits, meaning between 1-3%, you may consider using the extra money towards an automatic investment plan into an ETF index fund. But that would be a question you should discuss with your tax accountant or financial adviser. It is also critical in that case that you don't view the money invested as \"\"found\"\" money later on, unless you have paid off all your debt. (This part is the most difficult for most people so be very cautious and conscious if you decide to go this route!) At any rate, congratulations on making so much progress paying off your debt! Keep it going.\"", "title": "" }, { "docid": "79e105694a0a1cf5b65b66b9141c856d", "text": "In my opinion, it generally makes sense to focus all of your debt-reduction energy and funds on one loan at a time. There are two reasons for this: It will allow you to more quickly move from 4 loans to 3 loans, and then 2, and then 1, providing you with a sense of progress and motivation. As you reduce the number of loans that you have, your monthly minimum payment obligations will be reduced. Then, if you have a month with an emergency expense, you will have more income available to you for your emergency without getting behind on your loans. There is debate about whether to pay loans in order of the loan balance or in order of interest rate (you can read about this here and here), but in your case, your highest interest loans also have the lowest balance, so either method would have you picking the same loans first. You have already chosen, wisely, to start with the $1500, 6.8% loans. Send all of your $1000 to one of these loans, and continue to work aggressively to knock out all four as quickly as possible.", "title": "" }, { "docid": "5979df35b8e180bdb36a688c8a683794", "text": "You might try to refinance some of those loans. It sounds like you are serious about minimizing interest expense, if you think you will be able to pay those loans in full within five years you might also try a loan that is fixed for five years before becoming variable. If you do not think you can repay the loans in full before that time, you should probably stick with the fixed rates that you have. It may even be profitable to refinance those loans through another lender at the exact same fixed rate because it gets around their repayment tricks that effectively increase your interest on those two smaller loans.", "title": "" }, { "docid": "506f090761968559e27081091a070e64", "text": "I am a bit unsure of why the interest rate is relevant. Are you intending on borrowing the money to go to school? If you cannot pay cash, then it is very likely a bad idea. Many people are overcome by events when seeking higher education and such a loan on a such a salary could devastate you financially. So I find the cost of the program as a total of 76.6K counting a loss in salary during the program and the first year grant. That is a lot of money, do you intend to borrow that much? Especially when you consider that your salary, after you graduate, will be about equal to where you are now. For that reason I am leaning toward a no, even if you had the cash in hand to do so. There is nothing to say that you will enjoy teaching. Furthermore teaching in low income school is more challenging. All that said, is there a way you can raise your income without going back to school? Washington state can be a very expensive place to live and is one of the reason why I left. I am a WWU alumni (Go Vikings!). Could you cash flow a part time program instead? I would give this a sound no, YMMV.", "title": "" }, { "docid": "2a4e4589e77150edb6090a7c725d0b86", "text": "I am going to give advice that is slightly differently based on my own experiences. First, regarding the financing, I have found that the dealers do in fact have access to the best interest rates, but only after negotiating with a better financing offer from a bank. When I bought my current car, the dealer was offering somewhere around 3.3%, which I knew was way above the current industry standard and I knew I had good credit. So, like I did with my previous car and my wife's car, I went to local and national banks, came back with deals around 2.5 or 2.6%. When I told the dealer, they were able to offer 2.19%. So it's ok to go with the dealer's financing, just never take them at face value. Whatever they offer you and no matter how much they insist it's the best deal, never believe it! They can do better! With my first car, I had little credit history, similar to your situation, and interest rates were much higher then, like 6 - 8%. The dealer offered me 10%. I almost walked out the door laughing. I went to my own bank and they offered me 8%, which was still high, but better than 10%. Suddenly, the dealer could do 7.5% with a 0.25% discount if I auto-pay through my checking account. Down-payment wise, there is nothing wrong with a 35% down payment. When I purchased my current car, I put 50% down. All else being equal, the more cash down, the better off you'll be. The only issue is to weigh that down payment and interest rate against the cost of other debts you may have. If you have a 7% student loan and the car loan is only 3%, you're better off paying the minimum on the car and using your cash to pay down your student loan. Unless your student loan balance is significantly more than the 8k you need to finance (like a 20k or 30k loan). Also remember that a car is a depreciating asset. I pay off cars as fast as I can. They are terrible debt to have. A home can rise in value, offsetting a mortgage. Your education keeps you employed and employable and will certainly not make you dumber, so that is a win. But a car? You pay $15k for a car that will be worth $14k the next day and $10k a year from now. It's easy to get underwater with a car loan if the down payment is small, interest rate high, and the car loses value quickly. To make sure I answer your questions: Do you guys think it's a good idea to put that much down on the car? If you can afford it and it will not interfere with repayment of much higher interest debts, then yes. A car loan is a major liability, so if you can minimize the debt, you'll be better off. What interest rate is reasonable based on my credit score? I am not a banker, loan officer, or dealer, so I cannot answer this with much credibility. But given today's market, 2.5 - 4% seems reasonable. Do you think I'll get approved? Probably, but only one way to find out!", "title": "" }, { "docid": "d1b2f77f6f2746a5125e75319fd7a577", "text": "3 years ago I wrote Student Loans and Your First Mortgage in response to this exact question by a fellow blogger in my state. What I focused on was the way banks qualify you for a loan, a percentage for the housing cost, and a higher number that also comprises all other debt. If the goal is speed-to-purchase, you make minimum payments on the student loan, and save for the $100K downpayment as fast as you can. The question back to you is whether the purchase is your priority, and how debt averse you are. I'd caution, if you work for a company with a matched 401(k), I'd still deposit to the match, but no more. Personal finance is just that, personal. We don't know your entire situation, your current rental expenses vs your total condo cost when you buy. If you are in a location where renting costs far more than your cost of ownership, Ben might change his mind a bit. If the reverse is true, you're living a college student's lifestyle with a room costing $400/mo sharing a house with friends, I'll back off and say to pay the loan and save until you can't tolerate the situation. You'll find there are few situations that have a perfect answer without having all the details.", "title": "" }, { "docid": "d5fccfee4794940e96ad9d71100be6ab", "text": "\"Several student loans are backed by government guarantee and this will allow you to get attractive rates. This may require them to consolidate the three classes of loans separately. Many commercial banks offer consolidation services, one example is Wachovia discussed at https://www.wellsfargo.com/student/private-loan-consolidation/ Other methods of \"\"consolidation\"\" are of course anything that pays off the original loan. If available, using a parent's home equity line of credit to pay of the loans and then paying back the parents can save money. An additional benefit of HELOC-style loans is that they are very flexible in their payment terms. For example you may pay $25 per year to keep the account open and then only be required to make interest payments. Links: https://origin.bankrate.com/finance/college-finance/faqs-on-student-loan-consolidation-1.aspx\"", "title": "" }, { "docid": "dbb1a5aaa7bc8c7f62db10fa77815473", "text": "Based on your numbers, it sounds like you've got 12 years left in the private student loan, which just seems to be an annoyance to me. You have the cash to pay it off, but that may not be the optimal solution. You've got $85k in cash! That's way too much. So your options are: -Invest 40k -Pay 2.25% loan off -Prepay mortgage 40k Play around with this link: mortgage calculator Paying the student loan, and applying the $315 to the monthly mortgage reduces your mortgage by 8 years. It also reduces the nag factor of the student loan. Prepaying the mortgage (one time) reduces it by 6 years. (But, that reduces the total cost of the mortgage over it's lifetime the most) Prepaying the mortgage and re-amortizing it over thirty years (at the same rate) reduces your mortgage payment by $210, which you could apply to the student loan, but you'd need to come up with an extra $105 a month.", "title": "" }, { "docid": "b49c1e70130f64a08cadd1ff68d20b93", "text": "So one approach would be purely mathematical: look at whichever has the higher interest rate and pay it first. Another approach is to ignore the math (since the interest savings difference between a mortgage and student loan is likely small anyways) and think about what your goals are. Do you like having a student loan payment? Would you prefer to get rid of it as quickly as possible? How would it feel to cut the balance in HALF in one shot? If it were me, I would pay the student loan as fast as possible. Student loans are not cancellable or bankruptable, and once you get it paid off you can put that payment amount toward your house to get it paid off.", "title": "" }, { "docid": "da02720a8b9ffe0e17799b5fe72029d6", "text": "Here's another way to look at this that might make the decision easier: Looking at it this way you can turn this into a financial arbitrage opportunity, returning 2.5% compared to paying cash for the vehicle and carrying the student loan. Of course you need to take other factors into account as well, such as your need for liquidity and credit. I hope this helps!", "title": "" }, { "docid": "c5b6570980cee300b2970bed11b976d2", "text": "It's definitely NOT a good idea to pay off one of the smaller loans in your case - a $4k payment split across all the loans would be better than repaying the 5% / $4k loan completely, as it's the most beneficial of your loans and thus is last priority for repayment. A payment that splits across all the loans equally is, in effect, a partial repayment on a loan with an interest rate of 6.82% (weighed average rate of all your loans). It's not as good as repaying a 7% loan, but almost as good. It might be an option to save up until you can repay one of your 7% loans, but it depends - if it takes a lot of time, then you would've paid unneccessary interest during that time.", "title": "" }, { "docid": "4cc449161a017138e7d63961ad07a965", "text": "Should I use the money to pay off student loans and future grad expenses for me? Yes. The main drawback to student loans is that they cannot be gotten rid of except by paying them off (other than extreme circumstances such as death or complete disability). A mortgage, car loan, or other collateralized loans can be dealt with by selling the underlying collateral. Credit card loans can be discharged in bankruptcy. Stop borrowing for college, pay for it in cash, then decide what to do with the rest. Make sure you have a comfortable amount saved for emergencies in a completely liquid account (not a retirement account or CDs), and continue to pay off with the rest. You might also consider putting some away for your kids' college, so I want to get my older son into a private middle school for 2 years. They have a hardy endowment and may offer us a decent need based scholarship if we look worthy on paper I have a hard time getting behind this plan with a 238K mortgage. If you want to apply for scholarships that's great - but don't finagle your finances to look like you're poor when you have a quarter-million-dollar house. If you want to save some for private school then do that out of what you have. Otherwise either rearrange your priorities so you can afford it or private school might not be in the cards for you. That said- while it was a blessing to be able to pay off the second mortgage and credit cards, your hesitancy to pay off the student loans makes me wonder if you will start living within your means after the loans are paid off. My concern is that your current spending levels that got you in this much debt in the first place will put you back in debt in the near future, and you won't have another inheritance to help pull you out. I know that wasn't your question, but I felt like I needed to add that to my answer as well.", "title": "" }, { "docid": "6c55e69f31ac00b6f887ca455e189fdf", "text": "The definitive answer is: It Depends. What are your goals? First and foremost, you need to have at least 3 months expenses in cash or equivalent. (i.e. an investment that you can withdraw from quickly, and without penalty). The good news is that you don't have to come up with it instantly. Set a time frame - one year - for creating this safety net, and pay towards that goal. This is the single most important piece of financial advice you will receive. Now determine what you need to do. For example, you may need a car. Compare interest rates on your student loan and the car loan. Put your cash towards whichever is higher. If you don't need a car or other big ticket item, then you may consider sticking your surplus into the student loans. 50k at $1650 a month will be paid down in about 3 years, which might be a bit long to live the monastic lifestyle. I'd look at paying down the smallest loan first (assuming relatively similar rates), and freeing up that payment for yourself. So if you can pay off 1650 a month, and free up $100 of that in six months, then you can reward yourself with half that surplus, and apply the other half to the next loan. (This is different than some would suggest because you're talking about entering severe spartan mode, which is not sustainable.) Remember that life happens. You'll meet someone. You'll have an accident, your brother will get sick and you'll give him some money to help out. You've got to be prepared for these events, and for these reasons, I don't recommend living that close to the edge. Remember, you're not in default, and you do have the option of continuing to pay the minimum for a long time.", "title": "" }, { "docid": "22cca4bfe30f9fcfa88a8c97b373dea8", "text": "If you need a new roof because your house is full of buckets that fill up every rain :) then that's most likely the item at the top of the list. If you need a new roof because you don't like the color, I'd do something else with it. If you are in the US and the 'education loan' has the same caveats attached as your average student loan, I would eye that one with intent if the roof can soldier on for a few years as is. The simple reason for this is that a student loan would be the one debt that you list that you can never get rid off unless you actually pay it off, no matter what happens (IOW student loans aren't bankruptable). Disregard this if the caveats in the first sentence don't apply...", "title": "" } ]	fiqa
babeedf19b0afd6885df0538c3f619c9	What are some tips for getting the upper hand in car price negotiations?	[ { "docid": "52e40fd08cb30cf52d054148af711b47", "text": "\"I read a really good tract that my credit union gave me years ago written by a former car salesman about negotiation tactics with car dealers. Wish I could find it again, but I remember a few of the main points. 1) Never negotiate based on the monthly payment amount. Car salesmen love to get you into thinking about the monthly loan payment and often start out by asking what you can afford for a payment. They know that they can essentially charge you whatever they want for the car and make the payments hit your budget by tweaking the loan terms (length, down payment, etc.) 2) (New cars only) Don't negotiate on the price directly. It is extremely hard to compare prices between dealerships because it is very hard to find exactly the same combination of options. Instead negotiate the markup amount over dealer invoice. 3) Negotiate one thing at a time A favorite shell game of car dealers is to get you to negotiate the car price, trade-in price, and financing all at one time. Unless you are a rain-man mathematical genius, don't do it. Doing this makes it easy for them to make concessions on one thing and take them right back somewhere else. (Minus $500 on the new car, plus $200 through an extra half point on financing, etc). 4) Handling the Trade-In 5) 99.9999% of the time the \"\"I forgot to mention\"\" extra items are a ripoff They make huge bonuses for selling this extremely overpriced junk you don't need. 6) Scrutinize everything on the sticker price I've seen car dealers have the balls to add a line item for \"\"Marketing Costs\"\" at around $500, then claim with a straight face that unlike OTHER dealers they are just being upfront about their expenses instead of hiding them in the price of the car. Pure bunk. If you negotiate based on an offset from the invoice instead of sticker price it helps you avoid all this nonsense since the manufacturer most assuredly did not include \"\"Marketing costs\"\" on the dealer invoice. 7) Call Around before closing the deal Car dealers can be a little cranky about this, but they often have an \"\"Internet sales person\"\" assigned to handle this type of deal. Once you know what you want, but before you buy, get the model number and all the codes for the options then call 2-3 dealers and try to get a quote over the phone or e-mail on that exact car. Again, get the quote in terms of markup from dealer invoice price, not sticker price. Going through the Internet sales guy doesn't at all mean you have to buy on the Internet, I still suggest going down to the dealership with the best price and test driving the car in person. The Internet guy is just a sales guy like all the rest of them and will be happy to meet with you and talk through the deal in-person. Update: After recently going through this process again and talking to a bunch of dealers, I have a few things to add: 7a) The price posted on the Internet is often the dealer's bottom line number. Because of sites like AutoTrader and other car marketplaces that let you shop the car across dealerships, they have a lot of incentive to put their rock-bottom prices online where they know people aggressively comparison shop. 7b) Get the price of the car using the stock number from multiple sources (Autotrader, dealer web site, eBay Motors, etc.) and find the lowest price advertised. Then either print or take a screenshot of that price. Dealers sometimes change their prices (up or down) between the time you see it online and when you get to the dealership. I just bought a car where the price went up $1,000 overnight. The sales guy brought up the website and tried to convince me that I was confused. I just pulled up the screenshot on my iPhone and he stopped arguing. I'm not certain, but I got the feeling that there is some kind of bait-switch law that says if you can prove they posted a price they have to honor it. In at least two dealerships they got very contrite and backed away slowly from their bargaining position when I offered proof that they had posted the car at a lower price. 8) The sales guy has ultimate authority on the deal and doesn't need approval Inevitably they will leave the room to \"\"run the deal by my boss/financing guy/mom\"\" This is just a game and negotiating trick to serve two purposes: - To keep you in the dealership longer not shopping at competitors. - So they can good-cop/bad-cop you in the negotiations on price. That is, insult your offer without making you upset at the guy in front of you. - To make it harder for you to walk out of the negotiation and compromise more readily. Let me clarify that last point. They are using a psychological sales trick to make you feel like an ass for wasting the guy's time if you walk out on the deal after sitting in his office all afternoon, especially since he gave you free coffee and sodas. Also, if you have personally invested a lot of time in the deal so far, it makes you feel like you wasted your own time if you don't cross the goal line. As soon as one side of a negotiation forfeits the option to walk away from the deal, the power shifts significantly to the other side. Bottom line: Don't feel guilty about walking out if you can't get the deal you want. Remember, the sales guy is the one that dragged this thing out by playing hide-and-seek with you all day. He wasted your time, not the reverse.\"", "title": "" }, { "docid": "6d5910124726284e0e65d9ed7ffacf81", "text": "\"I love John's answer, but I just can't help myself from adding my 2 cents, even though it's over 5 years later. I sold cars for a while in the late 90s, and I mostly agree with John's answer. Where I disagree though, is that where I worked, the salesperson did not have ANY authority to make a sale. A sales manager was required to sign off on every sale. That doesn't mean that the manager had to interact with the buyer, that could all be handled behind the scenes, but the pricing and even much of the negotiating strategies were dictated by the sales managers. Some of the seasoned salespeople would estimate numbers on their own, but occasionally you'd hear the managers still chew them out with \"\"I wish you wouldn't have said that\"\". Of course, every dealership is different. Additional purchase advice: There is a strategy that can work well for the buyer, but only in scenarios where the salesperson is trying to prevent you from leaving. They may start interrupting you as you are packing up, or blocking your path to the door, or even begging. If this happens, they are obviously desperate for whatever reason. In this case, if you came prepared with research on a good price that you are comfortable with, then shoot lower and hold firm to the point of near exhaustion. Not so low that that they realize you're too far away- they will let you leave at that point. It needs to be within a reasonable amount, perhaps at most 1-2% of the purchase price. Once you detect the salesperson is desperate, you finally move up to your goal number or possibly a little lower. Typically the salesperson will be so happy to have gotten you to move at all that they'll accept. And if the managers are fed up too (like 45 minutes after close), they'll accept too. I saw this happen multiple times in a high pressure scenario. I also used it once myself as a buyer. If you are planning to purchase options that can be added at the dealer rather than from the factory, keep them up your sleeve at first. Get your negotiations down to where you are a little further apart than the invoice price of the option, then make your move. For example, suppose the option you want retails for $350 with an invoice of $300. Get within about $400 of the dealer. Then offer to pay their price, but only if they throw in the option you want. This will throw them completely off guard because they didn't expect it and all of their calculations were based on without it. If they say yes, you effectively moved $100 and they moved $300. It's much more likely that they'll agree to this than taking $300 off the price of the car. (I'm guessing the reason for this is partially due to how their accounting works with sticker price vs aftermarket price, and partially psychological.) Note, this works best with new cars, and make sure you only do this if it's for items they can add after the fact. Even if they don't have the part in stock it's ok, they can give you an IOU. But if the option requires a car change to something they don't have on the lot, it will probably just make them mad.\"", "title": "" }, { "docid": "c7577a8c25ed9cc6e1deef21bd12ed1a", "text": "One point I don't see above: Consumer's Union (the nonprofit which publishes Consumer Reports) has a service where, for a small fee, they'll send you information about how much the car and each option cost the dealer, how much the dealer is getting back in incentive money from the manufacturer, and some advice about which features are worthwhile, which aren't, and which you should purchase somewhere other than the dealer. Armed with that info, you can discuss the price on an equal footing, negotiating the dealer's necessary profit rather than hiding it behind bogus pricing schemes. Last time I bought a new car, I got this data, walked into the dealer with it visible on my clipboard, offered them $500 over their cost, and basically had the purchase nailed down immediately. It helped that I as willing to accept last year's model and a non-preferred color; that helped him clear inventory and encouraged him to accept the offer. ($500 for 10 minutes' work selling to me, or more after an hour of playing games with someone else plus waiting for that person to walk in the door -- a good salesman will recognize that I'm offering them a good deal. These days I might need to adjust that fair-profit number up a bit; this was about 20 years ago on an $8000 car... but I'm sure CU's paperwork suggests a current starting number.) It isn't quite shelf pricing. But at least it means any haggling is based on near-equal knowledge, so it's much closer to being a fair game.", "title": "" }, { "docid": "34e832e1a799ca7ec15ddc54e6c37cef", "text": "\"JohnFX and TTT provide excellent answers. Researching prices others have paid, being up front that you'll go buy a junker car to hold you over if they won't meet your price, and playing a few dealerships off of each other are all great tactics. In addition, I've got a few points about timing your purchase. If you're not desperate for a car, these can really help give you the upper hand in negotiations: Wait until the end of the month. Dealerships and individual salespeople usually have quotas that they're trying to clear, and the month is usually the standard cutoff. The last time I bought a car, the salesman made the mistake of mentioning, \"\"I don't usually work Thursdays, but I'll be in this Thursday.\"\" Thursday was the 31st - I inferred from this information that he hadn't made his quota for the month yet. So I came back on the 31st to negotiate, and managed to hammer out a pretty good deal. Wait until about an hour before the dealership closes to show up and shop. This gives you enough time to not be obvious about the tactic, but you'll definitely be holding them past their normal quitting time if you do much negotiating. The salesman will be a little more inclined to make a deal so he can get home and have dinner. Bonus points if you can wait until a month that ends on a Friday!\"", "title": "" } ]	[ { "docid": "9e750f0e4742820944816ee5fc7cc817", "text": "Break the transactions into parts. Go to your bank or credit union and get a loan commitment. When applying for loan get the maximum amount they will let you borrow assuming that you will no longer own the first car. Take the car to a dealer and get a written estimate for selling the car. Pick one that gives you an estimate that is good for a week or ten days. You now know a data point for the trade-in value. Finally go to the dealer where you will buy the replacement car. Negotiate the price, tell them you don't need financing and you will not be trading in the car. Get all you can regarding rebates and other special incentives. Once you have a solid in writing commitment, then ask about financing and trade in. If they beat the numbers you have regarding interest rate and trade-in value accept those parts of the deal. But don't let them change anything else. If you keep the bank financing the dealer will usually give you a couple of days to get a check. If you decide to ell the car to the first dealer do so as soon as you pick up the replacement car. If you try to start with the dealer you are buying the car from they will keep adjusting the rate, length of loan, trade-in value, and price until you have no idea if you are getting a good deal.", "title": "" }, { "docid": "acb6347e5d3d910611bd8d83452fe9dc", "text": "\"He sounds like a very bad salesman and I should know, because I was a sales manager at a bike shop which sold bikes from $200 to $10k. Now I had a clear goal, which is to sell as many bikes at the highest price possible, but I didn't do that by making customers uncomfortable. Each customer received different treatment depending on what they were looking for. For example, the $200 beach cruiser buyer was going to be told \"\"You look great on that bike... can I ring you up?\"\", whereas the racer interested in saving grams will receive a detailed discussion about his bike options. The $200 bike customer won't have very sophisticated questions (although I could give a lecture on cruisers), so giving out too much info complicates a likely quick impulse buy. On the other hand, we are building a relationship with the racer which will include detailed fitting sessions and time-consuming mechanical service. While I also want to close a high priced sale, it will take several visits to prove both I have the right bike and this is the best shop. But no matter what you were buying, I was always pleasant and unhurried, and my customers left happy. Specifically with this situation of high pressure tactics, the problem is the competition with internet sales. Often customers will have only 2 criteria, the model and the price, and if a shop does not meet both, the customer walks right out. Possibly this sales guy is a bit cynical with his tactics, but the reality is that if you have no relationship with that shop, you fall into the category of internet buyer. One thing the sales guy could have done was not tell you we wasn't going to honor this price if you came back. Occasionally there would be an internet buyer, and I showed no unpleasantness even though internet sellers could crush our brick and mortar shop. I would mention a competitive price and if he bought it, great, and if not, that's just business. As for the buyer, I would treat these tactics with a certain detachment. I would personally chuckle at his treatment and ask if I could kick the tires, an user car saying. I suppose the bottom line is if you are ready to buy this specific model, and if the price is right (and the shop is ethical so you won't get ripped off with garbage), then you have to be ready to buy on the spot. I will point out one horrible experience I had at a car dealership. I came in 15 minutes before closing and a sales person gave me a price almost a third cheaper than list. I wasn't ready to buy on my first visit ever to a dealership and of course, buying a car has all kinds of hidden fees. I asked will this be the price tomorrow, and he said absolutely not. I told him, \"\"so if I come in tomorrow morning, your dealer clock has only gone 15 minutes\"\" but that logic did not register with him. Maybe he thought I was going to spend 15k on the spot and pressure tactics would work on me. I never came back, but I did go another dealership and bought a car after a reasonable negotiation.\"", "title": "" }, { "docid": "37049d5b4651ff2d2b07af518e8d9f81", "text": "You already got good answers on why you can't buy a Toyota from the factory, but my answer is regarding to the implied second part of your question: how to avoid haggling. I found a good way to avoid the haggling at a car dealership can be simply to not haggle. Go in with a different attitude. The main reason car dealers list inflated prices and then haggle is that they expect the customers to haggle. It is fundamentally based on distrust on both sides. Treat the sales person as your advisor, your business partner, as somebody you trust as an expert in his field, and you'll be surprised how the experience changes. Of course, make sure that the trust is justified. Sales reps have a fine line to walk. Of course they like to sell a car for more money, but they also do not want a reputation of overcharging customers. They'd rather you recommend them to your friends and post good reviews on Yelp. In the end, all reputable dealers effectively have a fixed-price policy, or close to it, even those who don't advertise it, and even for used cars. Haggling just prolongs the process to get there. And sales reps are people. Often people who hate the haggling part of their job as much as you do. I was in the market for a new (used) car a few months ago. In the end, it was between two cars (one of them a Toyota), both from the brand-name dealer's respective used car lots. In both cases, I went in knowing in advance what the car's fair market value was and what I was willing to pay (as well as details about the car, mileage, condition etc. - thanks to the Internet). Both cars were marked significantly higher. As soon as the sales rep realized that I wasn't even trying to haggle - the price dropped to the fair value. I didn't even have to ask for it. The rep even offered some extras thrown into the deal, things I hadn't even asked for (things like towing my old car to the junk yard).", "title": "" }, { "docid": "2bb4e06785887fbf93def08101666f95", "text": "\"For the future: NEVER buy a car based on the payment. When dealers start negotiating, they always try to have you focus on the monthly payment. This allows them to change the numbers for your trade, the price they are selling the car for, etc so that they maximize the amount of money they can get. To combat this you need to educate yourself on how much total money you are willing to spend for the vehicle, then, if you need financing, figure out what that actually works out to on a monthly basis. NEVER take out a 6 year loan. Especially on a used car. If you can't afford a used car with at most a 3 year note (paying cash is much better) then you can't really afford that car. The longer the note term, the more money you are throwing away in interest. You could have simply bought a much cheaper car, drove it for a couple years, then paid CASH for a new(er) one with the money you saved. Now, as to the amount you are \"\"upside down\"\" and that you are looking at new cars. $1400 isn't really that bad. (note: Yes you were taken to the cleaners.) Someone mentioned that banks will sometimes loan up to 20% above MSRP. This is true depending on your credit, but it's a very bad idea because you are purposely putting yourself in the exact same position (worse actually). However, you shouldn't need to worry about that. It is trivial to negotiate such that you pay less than sticker for a new car while trading yours in, even with that deficit. Markup on vehicles is pretty insane. When I sold, it was usually around 20% for foreign and up to 30% for domestic: that leaves a lot of wiggle room. When buying a used car, most dealers ask for at least $3k more than what they bought them for... Sometimes much more than that depending on blue book (loan) value or what they managed to talk the previous owner out of. Either way, a purchase can swallow that $1400 without making it worse. Buy accordingly.\"", "title": "" }, { "docid": "2a44e8cbf7e4a965cdc2a692b9e07023", "text": "\"As others have said, if the dealer accepted payment and signed over ownership of the vehicle, that's a completed transaction. While there may or may not be a \"\"cooling-off period\"\" in your local laws, those protect the purchaser, not (as far as I know) the seller. The auto dealer could have avoided this by selling for a fixed price. Instead, they chose to negotiate every sale. Having done so, it's entirely their responsibility to check that they are happy with their final agreement. Failing to do so is going to cost someone their commission on the sale, but that's not the buyer's responsibility. They certainly wouldn't let you off the hook if the final price was higher than you had previously agreed to. He who lives by the fine print shall die by the fine print. This is one of the reasons there is huge turnover in auto sales staff; few of them are really good at the job. If you want to be kind to the guy you could give him the chance to sell you something else. Or perhaps even offer him a $100 tip. But assuming the description is correct, and assuming local law doesn't say otherwise (if in any doubt, ask a lawyer!!!), I don't think you have any remaining obligation toward them On the other hand, depending on how they react to this statement, you might want to avoid their service department, just in case someone is unreasonably stupid and tries to make up the difference that was.\"", "title": "" }, { "docid": "504089feb4bd30384b327605e231255a", "text": "First step is determine how much equity is in the car (positive or negative). Then for your car payments has that been paid out of money that has already been split or is it from a pool that is still to be slit. If the later, then it is irrelevant to this discussion since it was from a joint pool. If the money has already been split then adjust her half of the equity in the car by what you have been paying an make her that offer for her half of the car. I recommend showing her the calculations so as to explain how you came with what she is owed and then let her make a counter offer.", "title": "" }, { "docid": "945d9dd753ff1d61c83f1f76913805a1", "text": "The best thing to do is pay off the car. Adding more variables to a negotiation with a car dealer (in this case, a trade in), is always going to go in their favor. This is why people recommend negotiating a price down first, before ever mentioning to the dealer you want to do a trade in or financing.", "title": "" }, { "docid": "ca02d79a218a5da56b3ad28ddecc2d10", "text": "\"I have a very simple rule. For anything other than trivial purchases (a small fraction of my monthly income), the only final decision I will make in the presence of a salesperson is \"\"No\"\". After I have the terms nailed down, and still feel that I am likely to buy the item, I leave the store, car dealership etc., and think about it by myself. Often, I go to a mall coffee shop to do the thinking. If it is really big, I sleep on it and make my decision the next day. Once I have made my decision, I inform the salesperson. If the decision is \"\"No\"\" I do not discuss my reasons - that gives them an overcome-the-objection lever. I just tell them I have decided not to buy the item, which is all they need to know.\"", "title": "" }, { "docid": "438bad75d87d85c9b5fcb2144e7da298", "text": "Ideally you would negotiate a car price without ever mentioning: And other factors that affect the price. You and the dealer would then negotiate a true price for the car, followed by the application of rebates, followed by negotiating for the loan if there is to be one. In practice this rarely happens. The sales rep asks point blank what rebates you qualify for (by asking get-to-know-you questions like where you work or if you served in the armed forces - you may not realize that these are do-you-qualify-for-a-rebate questions) before you've even chosen a model. They take that into account right from the beginning, along with whether they'll make a profit lending you money, or have to spend something to subsidize your zero percent loan. However unlike your veteran's status, your loan intentions are changeable. So when you get to the end you can ask if the price could be improved by paying cash. Or you could try putting the negotiated price on a credit card, and when they don't like that, ask for a further discount to stop you from using the credit card and paying cash.", "title": "" }, { "docid": "de1822f204fe741200c71c1426fb9d90", "text": "I used to do the opposite when I needed to rent a car locally. I would request the bottom of the line and tell them that I will pick up at one of our expensive resorts. They never had any Kia Sorentos, but they had nice Lincolns and other high end vehicles for Kia prices. I'm sorry, we don't have the Ford Escort you reserved, so I'll give you a Towncar for the Escort price.", "title": "" }, { "docid": "1998aad62501d90096f94e435b798ef6", "text": "The advice given at this site is to get approved for a loan from your bank or credit union before visiting the dealer. That way you have one data point in hand. You know that your bank will loan w dollars at x rate for y months with a monthly payment of Z. You know what level you have to negotiate to in order to get a better deal from the dealer. The dealership you have visited has said Excludes tax, tag, registration and dealer fees. Must finance through Southeast Toyota Finance with approved credit. The first part is true. Most ads you will see exclude tax, tag, registration. Those amounts are set by the state or local government, and will be added by all dealers after the final price has been negotiated. They will be exactly the same if you make a deal with the dealer across the street. The phrase Must finance through company x is done because they want to make sure the interest and fees for the deal stay in the family. My fear is that the loan will also not be a great deal. They may have a higher rate, or longer term, or hit you with many fee and penalties if you want to pay it off early. Many dealers want to nudge you into financing with them, but the unwillingness to negotiate on price may mean that there is a short term pressure on the dealership to do more deals through Toyota finance. Of course the risk for them is that potential buyers just take their business a few miles down the road to somebody else. If they won't budge from the cash price, you probably want to pick another dealer. If the spread between the two was smaller, it is possible that the loan from your bank at the cash price might still save more money compared to the dealer loan at their quoted price. We can't tell exactly because we don't know the interest rates of the two offers. A couple of notes regarding other dealers. If you are willing to drive a little farther when buying the vehicle, you can still go to the closer dealer for warranty work. If you don't need a new car, you can sometimes find a deal on a car that is only a year or two old at a dealership that sells other types of cars. They got the used car as a trade-in.", "title": "" }, { "docid": "51efadd821f1bda70945d48d468a2950", "text": "I don't buy new cars anymore, but I've helped family members negotiate prices on new cars recently. There are various online services to see the average price paid, as well as the low outliers. I've looked at truecar.com for instance to see what others have paid within 50 miles of my zip-code. I think the only way for you to know you're being offered a good deal is to see if any of the other dealers that have not responded are willing to talk when you offer them $22,300 which the dealer above suggested was break-even point. If none of them respond, then you know you're really at the bottom of the negotiating window. If one of them does respond, then you can go back to that internet sales manager and ask why another dealership (do not disclose which one) is willing to sell it to you for less than $22,400 (do not disclose how much lower they offered to sell it for). In my experience, most dealers will sell at or just below the break-even price at the end of the quarter so that they can beat other dealerships out for the quota. That gives you a week and a half to find the bottom price before going in on New Years Eve to seal the deal.", "title": "" }, { "docid": "168704f710afdf153cf1d910d90c06eb", "text": "\"You can greatly reduce the risk if you can line up a buyer prior to purchasing the car. That kind of thing is common in business, one example is drop shipping. Also there are sales companies that specialize in these kinds of things bringing manufacturers of goods together with customers. The sales companies never take delivery of the product, just a commission on the sales. From this the manufacturers are served as they have gained a customer for their goods. The buying company is served as they can make a \"\"better\"\" end product. The two parties may have not been brought together had it not been for the sales company so on some level both are happy to pay for the service. Can you find market inequalities and profit from them? Sure. I missed a great opportunity recently. I purchased a name brand shirt from a discount store for $20. Those shirts typically sell on ebay for $80. I should have cleaned out that store's inventory, and I bet someone else did as by the time I went back they were gone. That kind of thing was almost risk-less because if the shirts did not sell, I could simply return them for the full purchase price. That and I can afford to buy a few hundred dollars worth of shirts. Can you afford to float 45K CDN? What if it takes a year to sell the car? What if the economy goes sour and you are left \"\"holding the bag\"\"? Why are not car dealers doing exactly what you propose? Here in the US this type of thing is called \"\"horse trading\"\" and is very common. I've both lost and made money on these kind of deals. I would never put a significant amount of my net worth at risk.\"", "title": "" }, { "docid": "d3131fea694d5ac842c532e951554e55", "text": "\"I'm sorry to hear you've made a mistake. Having read the contract of sale we signed, I do not see any remedy to your current situation. However, I'm interested in making sure I do not take advantage of you. As such, I'll return the vehicle, you can return my money plus the bank fees I paid for the cashiers check, tax, title, and registration, and I will look at buying a vehicle from another dealership. This seems to be the most fair resolution. If I were to pay for your mistake at a price I did not agree to, it would not be fair to me. If you were to allow this vehicle to go to me at the price we agreed to, it wouldn't be fair to you. If I were to return the car and begin negotiations again, or find a different car in your lot, it would be difficult for us to know that you were not going to make a similar mistake again. At this point I consider the sale final, but if you'd prefer to have the vehicle back as-is, returning to us the money we gave you as well as the additional costs incurred by the sale, then we will do so in order to set things right. Chances are good you will see them back down. Perhaps they will just cut the additional payment in half, and say, \"\"Well, it's our mistake, so we will eat half the cost,\"\" or similar, but this is merely another way to get you to pay more money. Stand firm. \"\"I appreciate the thought, but I cannot accept that offer. When will you have payment ready so we can return the car?\"\" If you are firm that the only two solutions is to keep the car, or return it for a full refund plus associated costs, I'd guess they'd rather you keep the car - trust me, they still made a profit - but if they decide to have it returned, do so and make sure they pay you in full plus other costs. Bring all your receipts, etc and don't hand over the keys until you have the check in hand. Then go, gladly, to another dealership that doesn't abuse its customers so badly. If you do end up keeping the car, don't plan on going back to that dealership. Use another dealership for warranty work, and find a good mechanic for non-warranty work. Note that this solution isn't legally required in most jurisdictions. Read your contract and all documentation they provided at the time of sale to be sure, but it's unlikely that you are legally required to make another payment for a vehicle after the sale is finalized. Even if they haven't cashed the check, the sale has already been finalized. What this solution does, though, is put you back in the driver's seat in negotiating. Right now they are treating it as though you owe them something, and thus you might feel an obligation toward them. Re-asserting your relationship with them as a customer rather than a debtor is very important regardless of how you proceed. You aren't legally culpable, and so making sure they understand you aren't will ultimately help you. Further, dealerships operate on negotiation. The primary power the customer has in the dealership is the power to walk away from a deal. They've set the situation up as though you no longer have the power to walk away. They didn't threaten with re-possession because they can't - the sale is final. They presented as a one-path situation - you pay. Period. You do have many options, though, and they are very familiar with the \"\"walk away\"\" option. Present that as your chosen option - either they stick with the original deal, or you walk away - and they will have to look at getting another car off the lot (which is often more important than making a profit for a dealership) or selling a slightly used car. If they've correctly pushed the title transfer through (or you, if that's your task in your state) then your brief ownership will show up on carfax and similar reports, and instantly reduces the car's worth. Having the title transfer immediately back to the dealership doesn't look good to future buyers. So the dealership doesn't want the car back. They are just trying to extract more money, and probably illegally, depending on the laws in your jurisdiction. Reassert your position as customer, and decide now that you'll be fine if you have to return it and walk away. Then when you communicate that to them, chances are good they'll simply cave and let the sale stand as-is.\"", "title": "" }, { "docid": "101bd8af9cec549d6f124020231f8ebe", "text": "\"These sort of issues in structuring your personal finances relative to expenses can get complicated quickly, as your example demonstrates. I would recommend a solution that reduces duplication as much as possible- and depending on what information you're interested in tracking you could set it up in very different ways. One solution would be to create virtual sub accounts of your assets, and to record the source of money rather than the destination. Thus, when you do an expense report, you can limit on the \"\"his\"\" or \"\"hers\"\" asset accounts, and see only the expenses which pertain to those accounts (likewise for liabilities/credit cards). If, on the other hand, you're more interested in a running sum of expenses- rather than create \"\"Me\"\" and \"\"Spouse\"\" accounts at every leaf of the expense tree, it would make much more sense to create top level accounts for Expenses:His:etc and Expenses:Hers:etc. Using this model, you could create only the sub expense accounts that apply for each of your spending (with matching account structures for common accounts).\"", "title": "" } ]	fiqa
f1fe9ba9a6fbcd36ed52195e87472103	Mortgage refinancing	[ { "docid": "5694e32c676d48aaca4d8e2f863eaf4d", "text": "If you selected a mortgage that allows additional payments to be credited against the principal rather than as early payment of normal installments, them yes, doing so will reduce the actual cost of the loan. You may have to explicitly instruct the bank to use the money this way each time, if prepay is their default assumption. Check with your lender, and/or read the terms of your mortgage, to find out if this is allowed and how to do it. If your mortgage doesn't allow additional payments against the principal, you may want to consider refinancing into a mortgage which does, or into a mortgage with shorter term and higher monthly payments, to obtain the same lower cost (modulo closing costs on the new mortgage; run the numbers.)", "title": "" }, { "docid": "359f122d6d4d0d34ad6b2e80ef5a9e87", "text": "First, check with your lender to see if the terms of the loan allow early payoff. If you are able to payoff early without penalty, with the numbers you are posting, I would hesitate to refinance. This is simply because if you actually do pay 5k/month on this loan you will have it paid off so quickly that refinancing will probably not save you much money. Back-of-the-napkin math at 5k/month has you paying 60k pounds a year, which will payoff in about 5 years. Even if you can afford 5k/month, I would recommend not paying extra on this debt ahead of other high-interest debt or saving in a tax-advantaged retirement account. If these other things are being taken care of, and you have liquid assets (cash) for emergencies, I would recommend paying off the mortgage without refinancing.", "title": "" }, { "docid": "186044b21f18c79fd86c4cd0ab142730", "text": "\"Check the terms of your mortgage. If you are in a fixed-term mortgage, you can likely \"\"over-pay\"\" a fixed amount of the capital each year: typically 10%. Eg if you owe £300,000 on the mortgage, you can pay off an additional £30,000 this year. Next year you'd owe something like £260,000 so could pay off £26,000. You'd need to check the terms of your mortgage to see what this limit is. You can actually pay off more than this, but would become liable to pay an \"\"early repayment fee\"\" or similar, which is usually something like 3-5% of the mortgage amount. Note that this usually means you would need to re-finance the mortgage anyway If you are not on a fixed-term mortgage than, in the UK at least, you are pretty much free to over-pay as much as you would like or refinance the mortgage. If you are in a fixed-term mortgage, it is usually better to simply over-pay by that maximum allowed amount until the fixed period ends, at which point you can re-finance onto a mortgage that allows higher overpayments. This isn't always the case, though, depending on your interest rate, how high the early repayment charge is, and how much you are able to over-pay. At the very least, you're going to need to do some sums! If you do choose to over-pay up to the limit, then you'd want to over-pay as much as you can at the start of the year (ie don't divide the over-payment by 12, pay it all as early as you can) to reduce interest payments. Then once you hit the limit, put the rest into a savings account: once you are out of the fixed term you can then pay the rest as a lump sum when refinancing.\"", "title": "" } ]	[ { "docid": "1bea3d52dd8f05cf5b4cfdeeec0e3641", "text": "\"We payed off our Mortgage early...at first in small extra payments to principal, and finally a lump sum. Each extra payment to principal reduced the balance, and reduced every payment going forward. I have, somewhere, an excel spreadsheet where I tracked this... - =CUMIPMT((interestRate/12),term,pymtNumber,balance,balance,0) computed the interest payment due - =currentPrincipal + CUMIPRINTresultAbove computed the monthly principal payment Occasionally I would update the month-ending Principal balance against what the mortgage company told me. It was usually off by a little. My mortgage company required me to specifically contact them for a payoff amount before I wrote the final check. I've never heard of a mortgage where prepayment of all expected interest following the original schedule is required. I would guess it is against federal (US) law. Lets think about that for a moment... out of \"\"interest\"\", I recently computed that for our 30 year loan at 6-5/8% on about 145, we payed a total of 106000 in interest. That include a refi to 4-7/8 10-years in to a 15-year loan, and paying it off 20 years after the original loan was granted. As far as not paying all the theoretical interest due... - If they get a fixed dollar amount of service interest back, there's no incentive to me to pay on-time. I owe the same amount if I pay it today or if I pay it 6 months late, after I gambled the mortgage money and finally won. (yea, I know they could write the mortgage to penalize me for paying late, but I'm ignoring that) - if you were requried to pay off all the interest that might accrue, how could you ever sell your home, or refinance, for that matter? When I refi'd, the new holder payed the old holder 98,000. If the original holder had required prepayment of all the interest that would be accrued to the original schedule, the new mortgage would've been 200k. It would just never be a good deal to buy a home if mortgages worked under that term. I have had a car loan that worked differently -- they pre-computed the total interest due and then divided it over the term of the loan equally. I could pay off early and they stopped collecting interest.\"", "title": "" }, { "docid": "36972b22967fcffdfc75b52853522acf", "text": "Too expand on /u/stoneeus, mortgage rates were/are also heavily influenced by the FED QE program, which holds about $4.5T in mortgage-backed securities and treasuries on the FED's balance sheet. The FED has been holding this balance steady since it ended the QE program a couple years ago, purchasing new securities as old ones mature. However, the FED has started signalling that they are going to end these purchases and let their portfolio wind down. Once that happens, you'll start to see mortgage rates rise.", "title": "" }, { "docid": "9bc64707f88aaa78053413758a34ecec", "text": "First, you are reading that document correctly, but it's not 78% of original mortgage. It is actually 78% of original home value. For example, if the home was valued at $100K when you bought it and you received a $90K loan, PMI must be removed when you owe $78K, not 78% of $90K. To make matters worse for the bank, they missed the required timing to drop PMI. I would print the document you referenced, cite the applicable portion, and tell them if they do not comply, you will report them for failure to comply. For example, I'm sure I am not the only one in this situation, and the FDIC will be eager to assess the huge fines they can collect from a bank that isn't operating within the law. Something like that.", "title": "" }, { "docid": "871d6e76ecc2a5e80485fd4dc9f7ee9e", "text": "Two reasons are typically cited (I've heard these from Dave Ramsey): So I wouldn't refinance to a 15-year loan just for item 2, but would definitely look at it for the better interest rates.", "title": "" }, { "docid": "9085c4e3c21f25d9f04ca8a5e0b7254b", "text": "The particular Virginia improve the look of refinance is certainly one the most effective options for all those those who have Virtual assistant financial loans on his or her homes. These kind of Veterans administration remortgage assists them gain a large amount of rewards that could ease the load of coughing up up the financial products they've taken on their properties. The Virtual assistant financial products as opposed to some other mortgage loans don't require any complicated processes just like house appraisal to find out the present appreciated of your ex house or any other processes just like looking at if the man or woman satisfies the financing conditions or any other treatments. These loans help it become extremely comfy for on support men to obtain their house refinanced which has a far better rate of interest.", "title": "" }, { "docid": "a0c3d25d1fe8e8f3be0bb9695ace06f9", "text": "Add a few more cells to your header that list the interest paid in in the next 3 to 4 years on your current mortgage. Use the cumulative interest function from your spreadsheet program. In the main body of your spreadsheet, add columns that summarize the total cost over 3-4 years for each loan. Add columns that list the interest cost, total cost of interest + refi cost, and the difference between that approach and the interest costs from your current loan. Add 6 columns total: a set for 3 years and a set for 4. Something like this: Repeat that 3 year block off to the right and plug in the 4 year numbers. You requested that we factor in a 3.5% penalty against the money that goes to the discount fee. You could do that by adding a column that calculates this, like Joe described in his answer. Add that 3.5% accrual into the total calculation above, which in turn will knock down the amount of savings for each refi loan. PS: How are you going to earn 3.5% over 48 months?", "title": "" }, { "docid": "638bd4fa6dd303bacc352bbf00a7f5bc", "text": "\"Let's start with income $80K. $6,667/mo. The 28/36 rule suggests you can pay up to $1867 for the mortgage payment, and $2400/mo total debt load. Payment on the full $260K is $1337, well within the numbers. The 401(k) loan for $12,500 will cost about $126/mo (I used 4% for 10 years, the limit for the loan to buy a house) but that will also take the mortgage number down a bit. The condo fee is low, and the numbers leave my only concern with the down payment. Have you talked to the bank? Most loans charge PMI if more than 80% loan to value (LTV). An important point here - the 28/36 rule allows for 8% (or more ) to be \"\"other than house debt\"\" so in this case a $533 student loan payment wouldn't have impacted the ability to borrow. When looking for a mortgage, you really want to be free of most debt, but not to the point where you have no down payment. PMI can be expensive when viewed that it's an expense to carry the top 15% or so of the mortgage. Try to avoid it, the idea of a split mortgage, 80% + 15% makes sense, even if the 15% portion is at a higher rate. Let us know what the bank is offering. I like the idea of the roommate, if $700 is reasonable it makes the numbers even better. Does the roommate have access to a lump sum of money? $700*24 is $16,800. Tell him you'll discount the 2yrs rent to $15000 if he gives you it in advance. This is 10% which is a great return with rates so low. To you it's an extra 5% down. By the way, the ratio of mortgage to income isn't fixed. Of the 28%, let's knock off 4% for tax/insurance, so a $100K earner will have $2167/mo for just the mortgage. At 6%, it will fund $361K, at 5%, $404K, at 4.5%, $427K. So, the range varies but is within your 3-5. Your ratio is below the low end, so again, I'd say the concern should be the payments, but the downpayment being so low. By the way, taxes - If I recall correctly, Utah's state income tax is 5%, right? So about $4000 for you. Since the standard deduction on Federal taxes is $5800 this year, you probably don't itemize (unless you donate over $2K/yr, in which case, you do). This means that your mortgage interest and property tax are nearly all deductible. The combined interest and property tax will be about $17K, which in effect, will come off the top of your income. You'll start as if you made $63K or so. Can you live on that?\"", "title": "" }, { "docid": "54b70047a1441f552c304ac3674a6f53", "text": "\"It can be a good thing for the bank to refinance your loan for you - since you will be keeping the loan at that particular institution. This gives them more time to enjoy the free money you pay them in interest for the remaining life of the loan. Banks that offer \"\"No closing costs\"\" are betting that mortgage payers will move their mortgage to get the lower interest rates - and whomever holds the loan, gets the interest payments.\"", "title": "" }, { "docid": "56c4c354211b4ab4306a24e52b94bb21", "text": "If you're refinancing a conforming (Fannie Mae or Freddie Mac) mortgage, don't go with an FHA. Try a HARP refinance, which won't increase your mortgage insurance even if your home has lost value. HARP also limits the risk-based pricing adjustments that can be charged, so your rate should be very competitive. With an FHA mortgage, even once you get the loan-to-value ratio down to 80 percent, you still have mortgage insurance for several years, plus the upfront costs. In your case, I think it's a bad deal.", "title": "" }, { "docid": "1827ae9d7531f5c95ec90dbe4cc78465", "text": "It will take a bit of sacrifice. First, I'd review spending. Between you and all your family, try to separate the 'needs' from the 'wants' and cut out 75% of the 'wants.' Second, there's almost always part time work that can help raise extra money. Even if it's a small fraction of your current hourly pay, every bit you and your family can throw at that 30% debt will help get rid of it and help you get to the point when you can refinance the mortgage.", "title": "" }, { "docid": "1e6372bb007a7316716de34aa3fe6a50", "text": "Your mortgage represents a negative cash flow of $X for N months. The typical mortgage prepayment doesn't reduce your next payment, but does reduce the length of the mortgage. If you look at the amortization table of a 30 year loan, you might see a payment of $1000 but only $50 going to principal. So if on day one you send an extra $51 or so to the bank, you find that in 30 years you just saved that $1000 payment. In effect, it was a long term bond or CD, yielding the post tax rate of the mortgage. Say your loan were 7%. At 7%, money doubles every 10 years or so. 30 years is 3 doubles or 8X. If I were to offer you $1000 and ask for $7500 in 30 years, you might accept it, with an agreement to buy me out if you refinanced. For me, that would be an investment. Just like buying a bond. In fact, there is a real return, as you see the cash flow at the end. The payments 'not made' are your payback. Those who insist it's not an investment are correct in the strict sense of the word's definition, but pedantic for the fact in practice, the prepayment is a choice to be considered alongside other investment choices. When I have a mortgage, I am the mortgagor, the bank, the mortgagee. Same as a company issuing a bond, the Bank holds my bond and I'm making payments to them. They hold my bond as an investment. There is no question of that. In fact, they package these and sell them as CMOs, groups of mortgages. A pre-payment is me buying back the last coupon on my mortgage. I fail to see the distinction between me 'buying back' $10K in future coupons on my own loan or me investing $10K in someone else's loans. The real question for me is whether this makes sense when rates are so low. At 4%, I'd say it's a matter of prioritizing any high rate debt and any other investments that might yield more. But even so, it's an investment yielding 4%. Over the years, I've developed the priorities of where to put new money - The priorities are debatable. I have my opinion, and my reasons to back them up. In general, it's a balance between risk and return. In my opinion, there's something wrong with ignoring a dollar for dollar match on the 401(k) in most circumstances. Others seem to prefer being 100% debt free before saving at all. There's a balance that might be different for each individual. As I started, the mortgage is a fixed return, with no chance to just get it back if needed. If your cash savings is pretty high, and the choice is a .001% CD or prepay a 4% mortgage, I'd use some funds to pay it down. But not to the point you have no liquid reserves.", "title": "" }, { "docid": "acd54039a93a99e6a45bd56d41b1e0a7", "text": "\"tl;dr: Your best course of action is probably to do a soft pull (check your own credit) and provide that to the lender for an unofficial pre-approval to get the ball rolling. The long of it: The loan officer is mostly correct, and I have recent personal evidence that corroborates that. A few months ago I looked into refinancing a mortgage on a rental property, and I allowed 3 different lenders to do a hard inquiry within 1 week of each other. I saw all 3 inquires appear on reports from each of the 3 credit bureaus (EQ/TU/EX), but it was only counted as a single inquiry in my score factors. But as you have suggested, this breaks down when you know that you won't be purchasing right away, because then you will have multiple hard inquiries at least a few months apart which could possibly have a (minor) negative impact on your score. However minor it is, you might as well try to avoid it if you can. I have played around with the simulator on myfico.com, and have found inquiries to have the following effect on your credit score using the FICO Score 8 model: With one inquiry, your scores will adjust as such: Two inquiries: Three inquiries: Here's a helpful quote from the simulator notes: \"\"Credit inquiries remain on your credit report for 2 years, but FICO Scores only consider credit inquiries from the past 12 months.\"\" Of course, take that with a grain of salt, as myfico provides the following disclaimer: The Simulator is provided for informational purposes only and should not be expected to provide accurate predictions in all situations. Consequently, we make no promise or guarantee with regard to the Simulator. Having said all that, in your situation, if you know with certainty that you will not be purchasing right away, then I would recommend doing a soft pull to get your scores now (check your credit yourself), and see if the lender will use those numbers to estimate your pre-approval. One possible downside of this is the lender may not be able to give you an official pre-approval letter based on your soft pull. I wouldn't worry too much about that though since if you are suddenly ready to purchase you could just tell them to go ahead with the hard pull so they can furnish an official pre-approval letter. Interesting Side Note: Last month I applied for a new mortgage and my score was about 40 points lower than it was 3 months ago. At first I thought this was due to my recent refinancing of property and the credit inquiries that came along with it, but then I noticed that one of my business credit cards had recently accrued a high balance. It just so happens that this particular business CC reports to my personal credit report (most likely in error but I never bothered to do anything about it). I immediately paid that CC off in full, and checked my credit 20 days later after it had reported, and my score shot back up by over 30 points. I called my lender and instructed them to re-pull my credit (hard inquiry), which they did, and this pushed me back up into the best mortgage rate category. Yes, I purposely requested another hard pull, but it shouldn't affect my score since it was within 45 days, and that maneuver will save me thousands in the long run.\"", "title": "" }, { "docid": "b3666af20f9bb3570574b277a7faccb3", "text": "Unless you are getting the loan from a loan shark, it is the most common case that each payment is applied to the interest accrued to date and the rest is applied towards reducing the principal. So, assuming that fortnightly means 26 equally-spaced payments during the year, the interest accrued at the end of the first fortnight is $660,000 x (0.0575/26) = $1459.62 and so the principal is reduced by $2299.61 - $1459.62 = $839.99 For the next payment, the principal still owing at the beginning of that fortnight will be $660,000-$839.99 = $659,160.01 and the interest accrued will be $659,160.01 x (0.0575/26) = $1457.76 and so slightly more of the principal will be reduced than the $839.99 of the previous payment. Lather, rinse, repeat until the loan is paid off which should occur at the end of 17.5 years (or after 455 biweekly payments). If the loan rate changes during this time (since you say that this is a variable-rate loan), the numbers quoted above will change too. And no, it is not the case that just %5.75 of the $2300 is interest, and the rest comes off the principle (sic)? Interest is computed on the principal amount still owed ($660,000 for starters and then decreasing fortnightly). not the loan payment amount. Edit After playing around with a spreadsheet a bit, I found that if payments are made every two weeks (14 days apart) rather than 26 equally spaced payments in one year as I used above, interest accrues at the rate of 5.75 x (14/365)% for the 14 days rather than at the rate of (5.75/26)% for the time between payments as I used above each 14 days, $2299.56 is paid as the biweekly mortgage payment instead of the $2299.61 stated by the OP, then 455 payments (slightly less than 17.5 calendar years when leap years are taken into account) will pay off the loan. In fact, that 455-th payment should be reduced by 65 cents. In view of rounding of fractional cents and the like, I doubt that it would be possible to have the last equal payment reduce the balance to exactly 0.", "title": "" }, { "docid": "2c81cded03e56b49760d6e19fd22bb8b", "text": "You have the 2 properties, and even though the value of property B is less than the amount you owe on it hopefully you have some equity in propery A. So if you do have enough equity in property A, why don't you just go to the one lender and get both property A and B refinanced under the same mortgage. This way hopefully the combined equity in both properties would be enough to cover the full amount of the loan, and you have the opportunity to refinance at favourable rate and terms. Sounds like you are in the USA with an interest rate of 3.25%, I am in Australia and my mortgage rates are currently between 6.3% to 6.6%.", "title": "" }, { "docid": "c9d3f1bead17de6945a64498d5259afc", "text": "When evaluating a refinance, it all comes down to the payback. Refinancing costs money in closing costs. There are different reasons for refinancing, and they all have different methods for calculating payback. One reason to finance is to get a lower interest rate. When determining the payback time, you calculate how long it would take to recover your closing costs with the amount you save in interest. For example, if the closing costs are $2,000, your payback time is 2 years if it takes 2 years to save that amount in interest with the new interest rate vs. the old one. The longer you hold the mortgage after you refinance, the more money you save in interest with the new rate. Generally, it doesn't pay to refinance to a lower rate right before you sell, because you aren't holding the mortgage long enough to see the interest savings. You seem to be 3 years away from selling, so you might be able to see some savings here in the next three years. A second reason people refinance is to lower their monthly payment if they are having trouble paying it. I see you are considering switching from a 15 year to a 30 year; is one of your goals to reduce your monthly payment? By refinancing to a 30 year, you'll be paying a lot of interest in your first few years of payments, extending the payback time of your lower interest rate. A third reason people refinance is to pull cash out of their equity. This applies to you as well. Since you are planning on using it to remodel the home you are trying to sell, you have to ask yourself if the renovations you are planning will payoff in the increased sale price of your home. Often, renovations don't increase the value of their home as much as they cost. You do renovations because you will enjoy living in the renovated home, and you get some of your money back when you sell. But sometimes you can increase the value of your home by enough to cover the cost of the renovation. Talk to a real estate agent in your area to get their advice on how much the renovations you are talking about will increase the value of your home.", "title": "" } ]	fiqa
816f9b63e7bcdcbb582461a10905e7bf	I bought a new car for a month and wanted to return it	[ { "docid": "538680ffbeda237b411a08ebf7cd17fd", "text": "My assumption here is that you paid nearly 32K, but also financed about 2500 in taxes/fees. At 13.5% the numbers come out pretty close. Close enough for discussion. On the positive side, you see the foolishness of your decision however you probably signed a paper that stated the true cost of the car loan. The truth in lending documents clearly state, in bold numbers, that you would pay nearly 15K in interest. If you pay the loan back early, or make larger principle payments that number can be greatly reduced. On top of the interest charge you will also suffer depreciation of the car. If someone offered you 31K for the car, you be pretty lucky to get it. If you keep it for 4 years you will probably lose about 40% of the value, about 13K. This is why it is foolish for most people to purchase a new vehicle. Not many have enough wealth to absorb a loss of this size. In the book A Millionaire Next Door the author debunks the assumption that most millionaires drive new cars. They tend to drive cars that are pretty standard and a couple of years old. They pay cash for their cars. The bottom line is you singed documents indicating that you knew exactly what you were getting into. Failing any other circumstances the car is yours. Talking to a lawyer would probably confirm this. You can attempt to sell it and minimize your losses, or you can pay off the loan early so you are not suffering from finance charges.", "title": "" }, { "docid": "dc69d3f6e641e3921c55c1180b6158e7", "text": "\"Following up on @petebelford's answer: If you can find a less expensive loan, you can refinance the car and reduce the total interest you pay that way. Or, if your loan permits it (not all do; talk to the bank which holds the loan and,/or read the paperwork you didn't look at), you may be able to make additional payments to reduce the principal of the loan, which will reduce the amount and duration of the loan and could significantly reduce the total interest paid ... at the cost of requiring you pay more each month, or pay an additional sum up front. Returning the car is not an option. A new car loses a large portion of its value the moment you drive it off the dealer's lot and it ceases to be a \"\"new\"\" car. You can't return it. You can sell it as a recent model used car, but you will lose money on the deal so even if you use that to pay down the loan you will still owe the bank money. Given the pain involved that way, you might as well keep the car and just try to refinance or pay it off. Next time, read and understand all the paperwork before signing. (If you had decided this was a mistake within 3 days of buying, you might have been able to take advantage of \"\"cooling down period\"\" laws to cancel the contract, if such laws exist in your area. A month later is much too late.)\"", "title": "" } ]	[ { "docid": "7665543f728d53114d0388a6ea8c214e", "text": "Dealerships make a lot of money in the finance department. One of the thing they play upon is your emotional reaction of purchasing a new vehicle (new to you in this case). They perform all sorts of shenanigans, like adding undercoat, selling gap insurance, or extended warranties. They entice you with a promise of a lower interest rate, but really what they are trying to do is back you into a payment. So if you can fiance 20,000, but the car you are buying is 16,000, then they will try to move that figure up to the 20K mark. In your case it sounded like some borderline (at the least) illegal activity they used to fool you into paying more. It sounds like you regret this decision which puts you a step ahead of most. How many people brag about the extended warranty or gap insurance they got included in the sale? As mentioned in another answer the best bet is to go into the dealership with financing in place. Say you were able to get a 3% loan on 16K. The total interest would be ~1600. If you avoid the finance room, you might avoid their dubious add ons that would probably cost you more then the 1600 even if you can get 0%. If you are going to buy a car on time, my advice would be to not fill out a credit app at the dealership. The dealership people through a conniption fit, but hold your ground. If need be get up and walk out. They won't let you leave. One thing I must mention, is that one feels very wealthy without that monthly pain in the a$$ payment for a car. You may want to try and envision yourself without a car payment, and make steps to making that a reality for the rest of your life.", "title": "" }, { "docid": "4f9f5b030ba22a07c5635bb76abf7cda", "text": "The dealership is getting a kickback for having you use a particular bank to finance through. The bank assumes you will take the full term of the loan to pay back, and will hopefully be a repeat customer. This tactic isn't new, and although it maybe doesn't make sense to you, the consumer, in the long run it benefits the bank and the dealership. (They wouldn't do it otherwise. These guys have a lot of smart people running #s for them). Be sure to read the specifics of the loan contract. There may be a penalty for paying it off early. Most customers won't be able to pay that much in cash, so the bank makes a deal with the dealership to send clients their way. They will lose money on a small percentage of clients, but make more off of the rest of the clients. If there's no penalty for paying it off early, you may just want to take the financing offer and pay it off ASAP. If you truly can only finance $2500 for 6 mos, and get the full discount, then that might work as well. The bank had to set a minimum for the dealership in order to qualify as a loan that earns the discount. Sounds like that's it. Bonus Info: Here's a screenshot of Kelley Blue Book for that car. Car dealers get me riled up, always have, always will, so I like doing this kind of research for people to make sure they get the right price. Fair price range is $27,578 - $28,551. First time car buyers are a dealers dream come true. Don't let them beat you down! And here's more specific data about the Florida area relating to recent purchases:", "title": "" }, { "docid": "83f722d2f398117aafd522e4bfb3384e", "text": "I think you are making this more complicated that it has to be. In the end you will end up with a car that you paid X, and is worth Y. Your numbers are a bit hard to follow. Hopefully I got this right. I am no accountant, this is how I would figure the deal: The payments made are irrelevant. The downpayment is irrelevant as it is still a reduction in net worth. Your current car has a asset value of <29,500>. That should make anyone pause a bit. In order to get into this new car you will have to finance the shortfall on the current car (29,500), the price of the vehicle (45,300), the immediate depreciation (say 7,000). In the end you will have a car worth 38K and owe 82K. So you will have a asset value of <44,000>. Obviously a much worse situation. To do this car deal it would cost the person 14,500 of net worth the day the deal was done. As time marched on, it would be more as the reduction in debt is unlikely to keep up with the depreciation. Additionally the new car purchase screen shows a payment of $609/month if you bought the car with zero down. Except you don't have zero down, you have -29,500 down. Making the car payment higher, I estamate 1005/month with 3.5%@84 months. So rather than having a hit to your cash flow of $567 for 69 more months, you would have a payment of about $1000 for 84 months if you could obtain the interest rate of 3.5%. Those are the two things I would focus on is the reduction in net worth and the cash flow liability. I understand you are trying to get a feel for things, but there are two things that make this very unrealistic. The first is financing. It is unlikely that financing could be obtained with this deal and if it could this would be considered a sub-prime loan. However, perhaps a relative could finance the deal. Secondly, there is no way even a moderately financially responsible spouse would approve this deal. That is provided there were not sigificant assets, like a few million. If that is the case why not just write a check?", "title": "" }, { "docid": "e2f4400348bb1a1d6a1cb9b5ac1b47e0", "text": "\"The \"\"guaranteed minimum future value\"\" isn't really a guarantee so much as the amount they will charge you at the end of the agreement if you want to keep the car. In this sense it might better be considered a \"\"guaranteed maximum future cost\"\". If the car has fallen below that value at that point, then you can just hand back the car and you won't owe anything extra. If it turns out to be worth more, you end up in profit - though only if you either actually pay for the car, or if you roll over into a new PCP deal. So the finance company has an incentive to set it at a sensible value, otherwise they'll end up losing money. Most new cars lose a lot of value quickly initially, and then the rate of loss slows down. But given that it's lost £14k in 2 years, it seems pretty likely it'll lose much more than another £1k in the next 2 years. So it does sound like that in this case, they estimated the value badly at the start of the deal and will end up taking a loss on the deal when you hand it back at the end. It appears you also have the legal right to \"\"voluntary termination\"\" once you have paid off half the \"\"Total Amount Payable\"\". This should be documented in the PCP agreement and if you're half way into the deal then I'd expect you'll be about there. If that doesn't apply, you can try to negotiate to get out of the deal early anyway. If they look at it rationally, they should think about the value of your payments over the next two years minus the loss they will end up with at the end of those two years. But there's no guarantee they will. Disclaimer: Despite living in the UK, I hadn't heard of these contracts until I read this question, so my answer is based entirely on web searches and some inferences. The two most useful sources I found on the general subject were this one and this one.\"", "title": "" }, { "docid": "f195506e5ad64e7c9534b745b99e9442", "text": "You cannot do a like-kind (Sec. 1031) exchange for personal property, only for business/investment property. Since you said that you traded in your personal car - no like-kind exchange is possible. Also, since the new car doesn't belong to you - you didn't actually perform any exchange. You sold your old car, but you didn't buy a new one. If Turbo-Tax suggests you to fill the exchange form - you must have entered something wrong to make it think there was an exchange. Check your entries again, specifically - check if you entered that you purchased a new car instead of the old one, since you didn't. See an example of where to start looking here.", "title": "" }, { "docid": "2bcff75efa64863edad934ea3a368296", "text": "\"You say \"\"it's expensive\"\". I'm going to interpret this as \"\"the monthly payments are too high\"\". Basically, you need to get your old loan paid off, presumably by selling the car you have now. This is the tough part. If you sold the car now, how much would you get for it? You can use Kelley Blue Book to figure out what the car is roughly worth. That's not a guarantee that it will actually sell for that much. Look in your local classifieds to see what similar cars are selling for. (Keep in mind that you will usually get less for your old car if you trade it in versus sell it yourself.) Now, if you owe more than your car is worth, you're in a really tight spot. If you don't get enough money when you sell it, you are still stuck with the remainder of the loan. In that case, it is usually best to just stick with the car you have, and be more cautious about payments and loan length the next time you finance a car. Penalties: Most car loans don't have any kind of early repayment penalty. However, you should check your loan paperwork just to make sure.\"", "title": "" }, { "docid": "8498e88cc71c1bc5daaee26a39da5f90", "text": "Good news: the car is so heavily reserved you won't be able to buy it for 2 or 3 years. The Beta should be over then. And did the X get terrible reviews by Consumer reports? Yes. Is it because of crazy shit like it's Gull Wing doors? Does the M3 have that? Not at all.", "title": "" }, { "docid": "13f8f990eb2701f4c3ca892e40f200d7", "text": "A loan that does not begin with at least a 20% deposit and run through a term of no longer than 48 months is the world's way of telling you that you can't afford this vehicle. Consumer-driven cars are rapidly depreciating assets. Attenuating the loan to 70 months or longer means that payments will not keep up with normal depreciation, thus trapping the buyer in an upside down loan for the entire term.", "title": "" }, { "docid": "f78e13b5fa08fd74fc0c5257c84d2820", "text": "\"Evaluating the total cost of operation and warranty period are indeed important considerations, but the article is specifically about buyers making an expensive car \"\"feel\"\" more affordable to their budget by having smaller payments over a longer term. >“Stretching out loan terms to secure a monthly payment they’re comfortable with is becoming buyers’ go-to way to get the cars they want, equipped the way they want them,” said Jessica Caldwell, Edmunds executive director of industry analysis.\"", "title": "" }, { "docid": "d2e39b40e4732a73b9ab6c2fd60624b1", "text": "Unusual. Most dealers pay interest on their inventory, so they don't like having so much around so long. But they dislike taking a loss on a car, so if the market is weak for a few months, they may choose to wait for an upturn rather than cut prices enough to move the cars.", "title": "" }, { "docid": "3e6d01e0013c0462160dddf726125ad0", "text": "If you had an agreement with your friend such that you could bring back a substantially similar car, you could sell the car and return a different one to him. The nature of shares of stock is that, within the specified class, they are the same. It's a fungible commodity like one pound of sand or a dollar bill. The owner doesn't care which share is returned as long as a share is returned. I'm sure there's a paragraph in your brokerage account terms of service eluding to the possibility of your shares being included in short sale transactions.", "title": "" }, { "docid": "7d981886fcd3d12405655510fc4a88ff", "text": "There are many reasons for buying new versus used vehicles. Price is not the only factor. This is an individual decision. Although interesting to examine from a macro perspective, each vehicle purchase is made by an individual, weighing many factors that vary in importance by that individual, based upon their specific needs and values. I have purchased both new and used cars, and I have weighted each of these factors as part of each decision (and the relative weightings have varied based upon my individual situation). Read Freakonomics to gain a better understanding of the reasons why you cannot find a good used car. The summary is the imbalance of knowledge between the buyer and seller, and the lack of trust. Although much of economics assumes perfect market information, margin (profit) comes from uncertainty, or an imbalance of knowledge. Buying a used car requires a certain amount of faith in people, and you cannot always trust the trading partner to be honest. Price - The price, or more precisely, the value proposition of the vehicle is a large concern for many of us (larger than we might prefer that it be). Selection - A buyer has the largest selection of vehicles when they shop for a new vehicle. Finding the color, features, and upgrades that you want on your vehicle can be much harder, even impossible, for the used buyer. And once you have found the exact vehicle you want, now you have to determine whether the vehicle has problems, and can be purchased at your price. Preference - A buyer may simply prefer to have a vehicle that looks new, smells new, is clean, and does not have all the imperfections that even a gently used vehicle would exhibit. This may include issues of pride, image, and status, where the buyer may have strong emotional or psychological needs to statisfy through ownership of a particular vehicle with particular features. Reviews - New vehicles have mountains of information available to buyers, who can read about safety and reliability ratings, learn about problems from the trade press, and even price shop and compare between brands and models. Contrasted with the minimal information available to used vehicle shoppers. Unbalanced Knowledge - The seller of a used car has much greater knowledge of the vehicle, and thus much greater power in the negotiation process. Buying a used car is going to cost you more money than the value of the car, unless the seller has poor knowledge of the market. And since many used cars are sold by dealers (who have often taken advantage of the less knowledgeable sellers in their transaction), you are unlikely to purchase the vehicle at a good price. Fear/Risk - Many people want transportation, and buying a used car comes with risk. And that risk includes both the direct cost of repairs, and the inconvenience of both the repair and the loss of work that accompanies problems. Knowing that the car has not been abused, that there are no hidden or lurking problems waiting to leave you stranded is valuable. Placing a price on the risk of a used car is hard, especially for those who only want a reliable vehicle to drive. Placing an estimate on the risk cost of a used car is one area where the seller has a distinct advantage. Warranties - New vehicles come with substantial warranties, and this is another aspect of the Fear/Risk point above. A new vehicle does not have unknown risk associated with the purchase, and also comes with peace of mind through a manufacturer warranty. You can purchase a used car warranty, but they are expensive, and often come with (different) problems. Finance Terms - A buyer can purchase a new vehicle with lower financing rate than a used vehicle. And you get nothing of value from the additional finance charges, so the difference between a new and used car also includes higher finance costs. Own versus Rent - You are assuming that people actually want to 'own' their cars. And I would suggest that people want to 'own' their car until it begins to present problems (repair and maintenance issues), and then they want a new vehicle to replace it. But renting or leasing a vehicle is an even more expensive, and less flexible means to obtain transportation. Expense Allocation - A vehicle is an expense. As the owner of a vehicle, you are willing to pay for that expense, to fill your need for transportation. Paying for the product as you use the product makes sense, and financing is one way to align the payment with the consumption of the product, and to pay for the expense of the vehicle as you enjoy the benefit of the vehicle. Capital Allocation - A buyer may need a vehicle (either to commute to work, school, doctor, or for work or business), but either lack the capital or be unwilling to commit the capital to the vehicle purchase. Vehicle financing is one area banks have been willing to lend, so buying a new vehicle may free capital to use to pay down other debts (credit cards, loans). The buyer may not have savings, but be able to obtain financing to solve that need. Remember, people need transportation. And they are willing to pay to fill their need. But they also have varying needs for all of the above factors, and each of those factors may offer value to different individuals.", "title": "" }, { "docid": "5b5a8ab3129653aeba03d641f4caf4ed", "text": "The article made it seem like a lot of these were frivolous purchases, but I doubt there's any clear data on the percent that were someone's primary vehicle, etc. Usually if you default on a new-car loan you can still get a high-interest loan for a used car that will still be a lot less than your old payment.", "title": "" }, { "docid": "d548dfab650da351f25dd51212badb2e", "text": "Sounds like 'up-selling'. You can harden yourself into being a 'tough sell' but it takes time and a lot of shopping. The quickest way to put up a defense is to never ever make a purchase over $100 without 'sleeping on it'. Just walk away, tell them you'll think it over, and go do some more research. Don't go back into a dealership or store that has hit you with guilt or pressure or a crazy price or whatever. Find a no-haggle or no-frills source, or even a source to buy a used version of the item you want.", "title": "" }, { "docid": "4b7cd157197402aa1a8b2a3dc933137c", "text": "\"This question and your other one indicate you're a bit unclear on how capital gains taxes work, so here's the deal: you buy an asset (like shares of stock or a mutual fund). You later sell it for more than you bought it for. You pay taxes on your profit: the difference between what you sold it for and what you bought it for. What matters is not the amount of money you \"\"withdraw\"\", but the prices at which assets are bought and sold. In fact, often you will be able to choose which individual shares you sell, which means you have some control over the tax you pay. For a simple example, suppose you buy 10 shares of stock for $100 each in January (an investment of $1000); we'll call these the \"\"early\"\" shares. The stock goes up to $200 in July, and you buy 10 more shares (investing an additional $2000); we'll call these the \"\"late\"\" shares. Then the stock drops to $150. Suppose you want $1500 in cash, so you are going to sell 10 shares. The 10 early shares you bought have increased in value, because you bought then for $100 but can now sell them for $150. The 10 late shares have decreased in value, because you bought them for $200 but can now only sell them for $150. If you choose to sell the early shares, you will have a capital gain of $500 ($1500 sale price minus $1000 purchase price), on which you may owe taxes. If you sell the late shares, you will have a capital loss of $500 ($1500 sale price minus $2000 purchase price is -$500), which you can potentially use to reduce your taxes. Or you could sell 5 of each and have no gain or loss (selling five early shares for $150 gives you a gain of $250, but selling five late shares for $150 gives you a loss of $250, and they cancel out). The point of all this is to say that the tax is not determined by the amount of cash you get, but by the difference between the sale price and the price you purchased for (known as the \"\"cost basis\"\"), and this in turn depends on which specific assets you sell. It is not enough to know the total amount you invested and the total gain. You need to know the specific cost basis (i.e., original purchase price) of the specific shares you're selling. (This is also the answer to your question about long-term versus short-term gains. It doesn't matter how much money you make on the sale. What matters is how long you hold the asset before selling it.) That said, many brokers will automatically sell your shares in a certain order unless you tell them otherwise (and some won't let you tell them otherwise). Often they will use the \"\"first in, first out\"\" rule, which means they will always sell the earliest-purchased shares first. To finally get to your specific question about Betterment, they have a page here that says they use a different method. Essentially, they try to sell your shares in a way that minimizes taxes. They do this by first selling shares that have a loss, and only then selling shares that have a gain. This basically means that if you want to cash out $X, and it is possible to do it in a way that incurs no tax liability, they will do that. What gets me very confused is if I continue to invest random amounts of money each month using Betterment, then I need to withdraw some cash, what are the tax implications. As my long answer above should indicate, there is no simple answer to this. The answer is \"\"it depends\"\". It depends on exactly when you bought the shares, exactly how much you paid for them, exactly when and how much the price rose or fell, and exactly how much you sell them for. Betterment is more or less saying \"\"Don't worry about any of this, trust us, we will handle everything so that your tax is minimized.\"\" A final note: if you really do want to track the details of your cost basis, Betterment may not be for you, because it is an automated platform that may do a lot of individual trades that a human wouldn't do, and that can make tracking the cost basis yourself very difficult. Almost the whole point of something like Betterment is that you are supposed to give them your money and forget about these details.\"", "title": "" } ]	fiqa
0c479c743b38d9eddb2e1eb9630045f1	APR for a Loan Paid Off Monthly	[ { "docid": "eeaaa8a25d877e0bee9104edeae47c39", "text": "The periodic rate (here, the interest charged per month), as you would enter into a finance calculator is 9.05%. Multiply by 12 to get 108.6% or calculate APR at 182.8%. Either way it's far more than 68%. If the $1680 were paid after 365 days, it would be simple interest of 68%. For the fact that payment are made along the way, the numbers change. Edit - A finance calculator has 5 buttons to cover the calculations: N = number of periods or payments %i = the interest per period PV = present value PMT = Payment per period FV= Future value In your example, you've given us the number of periods, 12, present value, $1000, future value, 0, and payment, $140. The calculator tells me this is a monthly rate of 9%. As Dilip noted, you can compound as you wish, depending on what you are looking for, but the 9% isn't an opinion, it's the math. TI BA-35 Solar. Discontinued, but available on eBay. Worth every cent. Per mhoran's comment, I'll add the spreadsheet version. I literally copied and pasted his text into a open cell, and after entering the cell shows, which I rounded to 9.05%. Note, the $1000 is negative, it starts as an amount owed. And for Dilip - 1.0905^12 = 2.8281 or 182.8% effective rate. If I am the loanshark lending this money, charging 9% per month, my $1000 investment returns $2828 by the end of the year, assuming, of course, that the payment is reinvested immediately. The 108 >> 182 seems disturbing, but for lower numbers, even 12% per year, the monthly compounding only results in 12.68%", "title": "" }, { "docid": "4c6b9eb7fd9126ff2aad03854b5e0e6e", "text": "If your APR is quoted as nominal rate compounded monthly, the APR is 108.6 %. Here is the calculation, (done in Mathematica ). The sum of the discounted future payments (p) are set equal to the present value (pv) of the loan, and solved for the periodic interest rate (r). Details of the effective interest rate calculation can be found here. http://en.wikipedia.org/wiki/Effective_interest_rate#Calculation", "title": "" } ]	[ { "docid": "2948912ab138ec2aeae9dace2c07d281", "text": "You're looking for the amortization calculation. This calculation is essentially solving for the series of cash flows that will yield a zero balance after the specified term, at the given rate for a loan amount. Once you have solved for the payment amount, you can add additional principal amount to each payment period and see the interest payments and time to zero balance drop.", "title": "" }, { "docid": "b5ce0e715bbecbe660d6f410a6281b97", "text": "There is a way to get a reasonable estimate of what you still owe, and then the way to get the exact value. When the loan started they should have given you amortization table that laid out each payment including the principal, interest and balance for each payment. If there are any other fees included in the payment those also should have been detailed. Determine how may payments you have maid: did you make the first payment on day one, or the start of the next month? Was the last payment the 24th, or the next one? The table will then tell you what you owe after your most recent payment. To get the exact value call the lender. The amount grows between payment due to the interest that is accumulating. They will need to know when the payment will arrive so they can give you the correct value. To calculate how much you will save do the following calculation: payment = monthly payment for principal and interest paymentsmade =Number of payments made = 24 paymentsremaining = Number of payments remaining = 60 - paymentsmade = 60-24 = 36 instantpayoff = number from loan company savings = (payment * paymentsremaining ) - instantpayoff", "title": "" }, { "docid": "3a2c3ce0ee077dc612687cf11c42424f", "text": "Using the following loan equations where and With the balance b[n] in period n given by Applying the OP's figures Check & demonstration Switching to $96 payment every 10 days, with 365.2422 days per year Paying $96 every 10 days saves $326.85 and pays the loan down 2.68 months quicker.", "title": "" }, { "docid": "0b79e739abfa7b6baaacb30fcb6c8a82", "text": "Just to add: the 20% APR is the annualized interest rate, but applied monthly. So you'd be charged $0.50 of interest on your $30 balance, which gets capitalized on the next month. So if you were to miss the next payment for some reason, your new interest charge would be on $30.50 instead of $30 (actually, it'd be much more since there would be a fee for the late payment, but discounting that to illustrate the point).", "title": "" }, { "docid": "354869e879f074d72e1abac7d1351121", "text": "A payment of $224 at 7.2% interest will pay off a $33000 mortgage in 30 years. Unfortunately, I'm on cold medicine so guessing was the only way I got to the answer, but I guessed right on the first try :). However, if you like algebra: The following formula is used to calculate the fixed monthly payment (P) required to fully amortize a loan of L dollars over a term of n months at a monthly interest rate of c. [If the quoted rate is 6%, for example, c is .06/12 or .005]. P = L[c(1 + c)n]/[(1 + c)n - 1]", "title": "" }, { "docid": "6a32ab6bf72d834302a6fca7bae388b3", "text": "\"So with any debt, be it a loan or a bond or anything else, you have two parts, the principal and the interest. The interest payment is calculated by applying the interest % to the principal. Most bonds are \"\"bullet bonds\"\" which means that the principle remains completely outstanding for the life of the bond and thus your interest payments are constant throughout the life of the bond (usually paid semi-annually). Typically part of the purpose of these is to be indefinitely refinanced, so you never really pay the principal back, though it is theoretically due at expiration. What you are thinking of when you say a loan from a bank is an amortizing loan. With these you pay an increasing amount of the principal each period calculated such that your payments are all exactly the same (including the final payment). Bonds, just like bank loans, can be bullet, partially amortizing (you pay some of the principle but still have a smaller lump sum at the end) and fully amortizing. One really common bullet structure is \"\"5 non-call 3,\"\" which means you aren't allowed to pay the principle down for the first three years even if you want to! This is to protect investors who spend time and resources investing in you!\"", "title": "" }, { "docid": "dec94b132f82bc2e4ffeb06c3e1b34f1", "text": "\"Loan officer here. Yes. You pay the per diem. I'd recommend not paying it off for like 6 months. You can pay it down to basically nothing and then hold it for six months and pay it off. Better for credit. If it's a simple interest rate, most car loans are, multiply the current principal balance by the interest rate and divide it by 365. That's the per diem or daily interest. For example, \"\"10,000 dollar auto loan at 3%. 100000.03= 300. 300/365= 0.82. So each day the balance is 10k the loan cost 82 cents. So in a month, your first payment is 100 dollars, 24.65 goes to interest 75.35 goes to principal. Then the new principal is 9924.65. So the next month, another 30 days with the new per diem of 0.815, the 100 payment is 75.50 in principal 24.50 in interest and so on.\"", "title": "" }, { "docid": "91d7641faa256507c857e5aca1d56be4", "text": "\"What you are looking for is the \"\"debt maturity profile\"\" (to make it easier to google. Most countries continuously roll over their debt, in effect just paying interest forever. So when your debt is due, you issue another loan for the same amount and use the new loan to pay off the old one.\"", "title": "" }, { "docid": "35a17764315ea36a8bfa9217ee3c244c", "text": "From here The formula is M = P ( J / (1 - (1 + J)^ -N)). M: monthly payment RESULT = 980.441... P: principal or amount of loan 63963 (71070 - 10% down * 71070) J: monthly interest; annual interest divided by 100, then divided by 12. .00275 (3.3% / 12) N: number of months of amortization, determined by length in years of loan. 72 months See this wikipedia page for the derivation of the formula", "title": "" }, { "docid": "151cb4b3a1d1eebe302685ca1a4fa112", "text": "Lower risk of having to fight to get their money back, obviously. That's what credit rating is supposed to predict. Paying your bills on time, and paying off the balance in full every month, are different questions. They want to know that you will make the minimum payments at least, and that you will eventually pay back the loan. Compare that with subprime and/or loan sharks, where the assumption is that being late or defaulting is more common, and interest rates are truly obscene in order to make a profit despite that.", "title": "" }, { "docid": "8b43f330c145b3509335301b690bd3eb", "text": "There is no interest outstanding, per se. There is only principal outstanding. Initially, principal outstanding is simply your initial loan amount. The first two sections discuss the math needed - just some arithmetic. The interest that you owe is typically calculated on a monthly basis. The interested owed formula is simply (pI)/12, where p is the principal outstanding, I is your annual interest, and you're dividing by 12 to turn annual to monthly. With a monthly payment, take out interest owed. What you have left gets applied into lowering your principal outstanding. If your actual monthly payment is less than the interest owed, then you have negative amortization where your principal outstanding goes up instead of down. Regardless of how the monthly payment comes about (eg prepay, underpay, no payment), you just apply these two calculations above and you're set. The sections below will discuss these cases in differing payments in detail. For a standard 30 year fixed rate loan, the monthly payment is calculated to pay-off the entire loan in 30 years. If you pay exactly this amount every month, your loan will be paid off, including the principal, in 30 years. The breakdown of the initial payment will be almost all interest, as you have noticed. Of course, there is a little bit of principal in that payment or your principal outstanding would not decrease and you would never pay off the loan. If you pay any amount less than the monthly payment, you extend the duration of your loan to longer than 30 years. How much less than the monthly payment will determine how much longer you extend your loan. If it's a little less, you may extend your loan to 40 years. It's possible to extend the loan to any duration you like by paying less. Mathematically, this makes sense, but legally, the loan department will say you're in breach of your contract. Let's pay a little less and see what happens. If you pay exactly the interest owed = (pI)/12, you would have an infinite duration loan where your principal outstanding would always be the same as your initial principal or the initial amount of your loan. If you pay less than the interest owed, you will actually owe more every month. In other words, your principal outstanding will increase every month!!! This is called negative amortization. Of course, this includes the case where you make zero payment. You will owe more money every month. Of course, for most loans, you cannot pay less than the required monthly payments. If you do, you are in default of the loan terms. If you pay more than the required monthly payment, you shorten the duration of your loan. Your principal outstanding will be less by the amount that you overpaid the required monthly payment by. For example, if your required monthly payment is $200 and you paid $300, $100 will go into reducing your principal outstanding (in addition to the bit in the $200 used to pay down your principal outstanding). Of course, if you hit the lottery and overpay by the entire principal outstanding amount, then you will have paid off the entire loan in one shot! When you get to non-standard contracts, a loan can be structured to have any kind of required monthly payments. They don't have to be fixed. For example, there are Balloon Loans where you have small monthly payments in the beginning and large monthly payments in the last year. Is the math any different? Not really - you still apply the one important formula, interest owed = (pI)/12, on a monthly basis. Then you break down the amount you paid for the month into the interest owed you just calculated and principal. You apply that principal amount to lowering your principal outstanding for the next month. Supposing that what you have posted is accurate, the most likely scenario is that you have a structured 5 year car loan where your monthly payments are smaller than the required fixed monthly payment for a 5 year loan, so even after 2 years, you owe as much or more than you did in the beginning! That means you have some large balloon payments towards the end of your loan. All of this is just part of the contract and has nothing to do with your prepay. Maybe I'm incorrect in my thinking, but I have a question about prepaying a loan. When you take out a mortgage on a home or a car loan, it is my understanding that for the first years of payment you are paying mostly interest. Correct. So, let's take a mortgage loan that allows prepayment without penalty. If I have a 30 year mortgage and I have paid it for 15 years, by the 16th year almost all the interest on the 30 year loan has been paid to the bank and I'm only paying primarily principle for the remainder of the loan. Incorrect. It seems counter-intuitive, but even in year 16, about 53% of your monthly payment still goes to interest!!! It is hard to see this unless you try to do the calculations yourself in a spreadsheet. If suddenly I come into a large sum of money and decide I want to pay off the mortgage in the 16th year, but the bank has already received all the interest computed for 30 years, shouldn't the bank recompute the interest for 16 years and then recalculate what's actually owed in effect on a 16 year loan not a 30 year loan? It is my understanding that the bank doesn't do this. What they do is just tell you the balance owed under the 30 year agreement and that's your payoff amount. Your last sentence is correct. The payoff amount is simply the principal outstanding plus any interest from (pI)/12 that you owe. In your example of trying to payoff the rest of your 30 year loan in year 16, you will owe around 68% of your original loan amount. That seems unfair. Shouldn't the loan be recalculated as a 16 year loan, which it actually has become? In fact, you do have the equivalent of a 15 year loan (30-15=15) at about 68% of your initial loan amount. If you refinanced, that's exactly what you would see. In other words, for a 30y loan at 5% for $10,000, you have monthly payments of $53.68, which is exactly the same as a 15y loan at 5% for $6,788.39 (your principal outstanding after 15 years of payments), which would also have monthly payments of $53.68. A few years ago I had a 5 year car loan. I wanted to prepay it after 2 years and I asked this question to the lender. I expected a reduction in the interest attached to the car loan since it didn't go the full 5 years. They basically told me I was crazy and the balance owed was the full amount of the 5 year car loan. I didn't prepay it because of this. That is the wrong reason for not prepaying. I suspect you have misunderstood the terms of the loan - look at the Variable Monthly Payments section above for a discussion. The best thing to do with all loans is to read the terms carefully and do the calculations yourself in a spreadsheet. If you are able to get the cashflows spelled out in the contract, then you have understood the loan.", "title": "" }, { "docid": "aa2964de81eca81d7599394cdb34f979", "text": "First of all any loan will have the last payment be slightly different than the rest. Even if the interest rate is zero it is hard to have a perfect monthly payment amount. By perfect I mean the amount of the loan divided by the number of months would be $ddd.cc0000... When looking at the amortization table the last payment will either be slightly higher or lower to adjust for the rounding that was done. My suspicion is that the rounding would have resulted in a left over 12 cents. It is also possible that you are paying it off slightly early and the computer is simply taking the leftover amount an spreading it over the remaining period of the loan. You could be paying it early because for the main part of the loan was paid to a company that rounds all payments to the higher dollar, or has a minimum monthly payment amount. I looked at the company you mentioned in the question, and searched the site for an amortization tool. I found it, and used the pre-filled in example. https://www.edfinancial.com/amortizationschedule?pmts=120&intr=6.8&prin=25000 If that last payment is not adjusted the borrower will still owe $0.12. The fact it equals your situation is a coincidence. But is does show what can happen.", "title": "" }, { "docid": "73162211768d136f87031dc72838e3b7", "text": "If you have a 20,000 balance and a 8.75% interest rate, you should be paying between $145 and $150 in interest each month, with the balance going to principal. (0.0875/12=0.007292, and that times 20,000 is 145.83; as interest is compounded daily, it'll be a little higher than that.) If the minimum is below $145, then you are not covering the interest; I suspect that is what is happening here, and they're reporting interest paid that wasn't covered in a prior month (assuming you have some months where you only pay the statement minimum, which is less than the total accrued interest). Assuming you're in the US (or most other western countries), your loan servicer should be explaining the exact amount each payment that goes to principal and interest. I recommend calling them up and finding out exactly why it's not consistent; what should be happening, assuming you pay more than the amount of interest each month, is the interest should go down (very) slowly each month and the amount paying off principal should go up (also slowly). EG: Etc., until eventually the interest is zero and your loan is paid off. It probably won't go this quickly for this size of loan - you're only paying off a tiny percentage of principal each month, $50/$20000 or 1/400th - so you won't make too much headway at this rate. Even adding another $25 would make a huge difference to the length of the loan and the amount of interest paid, but that's another story. You will eventually at this rate pay off the loan (at $200 a month for all 12 months); this isn't dissimilar to a 30 year mortgage in terms of percent interest to principal (in fact, it's better!). $50 a month times twelve is $600; 400 payments would take care of it (so a bit over 30 years). However, as you go you pay more principal and less interest, so you will actually pay it off in 15 years if you continue paying $200 a month exactly. What you may be seeing in your case is a combination of things: In months you pay less (ie, $100, say), the extra $45 in interest needs to go somewhere. It effectively becomes part of the principal, but from what I've seen that doesn't always happen directly - ie, they account it differently at least for a short time (up to a year, in my experience). This is because of tax laws, if I understand correctly - the amount you pay in interest is tax-deductible, but not the amount of the principal - so it's important for you to have as much called 'interest' as possible. Thus, if you pay $100 this month and $200 next month, that total of $300 is paying ~$290 of interest and $10 of principal, just as if you'd paid it $150 each month. If you had any penalties, such as for late payments, those come out off the top before interest; they may sometimes take that out as well. All in all, I strongly suggest having an enforced minimum (on your end) of the interest amount at least; that prevents you from being in a situation where your loan grows. If you can't always hit $200, that's fine; but at least hit $150 every single month. Otherwise you have a never ending cycle of student loan debt that you really don't want to be in. Separately, on the $1000 payment: As long as you make sure it's not assigned in such a way that the lender only accepts a month's worth at a time (which shouldn't happen, but there are shady lenders), it shouldn't matter what is called 'principal' and what is called 'interest'. The interest won't go up just because you're making a separate payment (it'll go down!). The portion that goes to interest will go to paying off the amount of interest you owe from the time of your last payment, plus any accrued but unpaid interest, plus principal. You won't have the option of not paying that interest, and it doesn't really matter anyway - it's all something you owe and all accruing interest, it only really matters for accounting and taxes. Double check with your lender (on the phone AND on their website, if possible) that overpayments are not penalized and are applied to principal immediately (or within a few days anyway) and you should be fine.", "title": "" }, { "docid": "47fb00c8ef165134dc0c437bddc54ebf", "text": "Ditto to Victor. The simple rule is: Pay the minimums on all so you don't get any late fees, etc, then pay off the highest interest rate loan first. A couple of special cases do come to mind: If one or more of these are credit cards, then, here in the U.S. at least, credit cards charge you interest on the average daily balance, unless you pay off the balance entirely, in which case you pay zero interest. So for example say you had two credit cards, both with 1% per month interest, with debt of $2000 and $1000. You have $1500 available. Ignoring minimum payments for the moment, if you put that $1500 against the larger balance, you would still pay interest on the full amount for the current month, or $30. But if you paid off the smaller and put the difference against the larger, then your interest for the current month would be only $15. (Either way, your interest for NEXT month would be the same -- 1% of the $1500 remaining balance or $15 -- assuming you couldn't pay off the other card.) If one or more of the loans are mortgage loans on which you are paying mortgage insurance, then when you get the balance below a certain point -- usually 80% of the original loan amount -- you no longer have to pay mortgage insurance premiums. Thus the amount you are paying on such premiums needs to be factored into the calculation. There may be other special cases. Those are the ones that I've run into.", "title": "" }, { "docid": "456a77712eae11ec6b49bbee70981064", "text": "Yes, by paying double the amount each month you would have in effect paid the loan off in less than half the time. For $13000 at 3% over 60 months your monthly repayments would be $233.59. If you double your monthly repayments to $467.18 you would end up paying the loan off by the end of the 29th months, more than halving your loan term, as long as there are no penalties for paying the loan off early.", "title": "" } ]	fiqa
3583fde5ca5babace6c41150f8fc6ee7	Which graduate student loans are preferable?	[ { "docid": "6a29ceaf87d00765a91c3425175ea0ed", "text": "Of course, the situation for each student will vary widely so you'll have to dig deep on your own to know what is the best choice for your situation. Now that the disclaimer is out of the way, the best choice would be to use the Unsubsidized Stafford loan to finance graduate school if you need to resort to loans. The major benefits to the Unsubsidized Stafford are the following: You'll be forced to consider other loan types due to the Unsubsidized Stafford loan's established limits on how much you can borrow per year and in aggregate. The borrowing limits are also adjustable down by your institution. The PLUS loan is a fallback loan program designed to be your last resort. The program was created as a way for parents to borrow money for their college attending children when all other forms of financing have been exhausted. As a result you have the following major disadvantages to using the PLUS loan: You do have the bonus of being able to borrow up to 100% of your educational costs without any limits per year or in aggregate. The major benefit of keeping your loans in the Direct Loan program is predictability. Many private student loans are variable interest rate loans which can result in higher payments during the course of the loan. Private loans are also not eligible for government loan forgiveness programs, such as for working in a non-profit for 10 years.", "title": "" }, { "docid": "e85be5a6b0ff548c3f80c7cfe3fa1679", "text": "All new loans must be originated from the direct loan program. In most cases, the Stafford loan is better, as the rate is lower (6.8% vs. 7.9% for the PLUS loan). There aren't many viable alternatives for most people. Private student loans exist, but carry significantly higher rates and worse payment terms. The exceptions are programs that exist for professions like medicine and dentistry. Credit cards usually carry higher rates and limited credit lines, but you have the option of negotiating the balance down or declaring bankruptcy to discharge the debt if you are unable to repay.", "title": "" } ]	[ { "docid": "3da0811f483a5b0aff267157daf9fc73", "text": "My graduate stipend was wage income so I could make Roth IRA contributions. Don't lose the year; you can withdraw nominal contributions if needed. What you choose is less important than making the contribution.", "title": "" }, { "docid": "f0662076b1674fa6b76dfec12a25d62e", "text": "\"Which option will save you the most money in the long run? That is tough. Assuming you stay healthy, don't lose your job, don't experience a pay cut or any major emergency that drains your savings, then applying the $6000 to the higher interest loan will save you more money in the long run. However, the difference in savings is a few hundred dollars. Not much really. So, in this case, I'd put the $6k towards the smaller loan. Why? Because then you'd pay it off faster. Once that's done, you open up your cash flow by the minimum monthly payment you would have had on that loan. Assuming they both have the same or similar number of months left, by paying the smaller loan off sooner, you'd open up $X month, where $X is your minimum monthly payment. This could be useful to you if you want to take on some other debt (like buying a house) because it lowers your debt to income ratio. If you put that money towards the higher loan, your DTI won't change until the normal time you would have paid off the smaller loan. Even if you are not looking to purchase anything that requires you to have a lower DTI, paying the smaller loan off sooner increases your cash flow sooner (because your monthly payment on the higher loan doesn't change just because you lowered the balance by $6k). So you'd be more robust to emergencies if your current income doesn't allow for much savings. A major emergency could wipe out all savings from paying down the bigger balance. So, I'd suggest: Edit: TripeHound asked a question, pretty much requesting more details for why I was biased towards paying off the smaller loan first. What follows is my response, with a bit of reorganization: Typically, people asking these questions don't have so much wealth that \"\"which loan to pay first?\"\" is an academic question. They need to make smart financial decisions. While paying the highest interest loan saves the most money in interest - that only occurs under the assumption that nothing bad will ever happen to you until the loans are paid off. In reality, other things happen. Tires blow out, children get sick, you get laid off and so the \"\"best\"\" thing to do is the one that maximizes your long term financial health, even if it comes at the expense of a few $k more interest. Each loan has a minimum monthly payment. Let's assume, barring any windfalls of additional cash, you will just make the minimum payments each month towards a loan. If you pay off the smaller loan first, that increases your available monthly cash flow. At that point, you can put extra towards the other loan. However, if an emergency should come up, or you need to save for a vacation, you can do that, without negatively impacting the second loan, because you'd just drop back to its minimum payment. Putting the money towards the higher balance loan would mean it takes you longer to reach this point as the time to reach payoff on the first loan will not change ($6k only reduces the $25.6k loan to $19.6k) so you never gain the flexibility of additional cash flow until the time you would have paid off the $13.5k originally. I'd rather have a few hundred dollars each month that I can choose to use to make additional loan payments, eat out, pay for car repairs, pay for emergencies than be forced to dip into credit or worse, pay day loans, should an emergency happen.\"", "title": "" }, { "docid": "ab0b002019998dadfd61f5d5231a3e07", "text": "Excellent question and it is a debate that is often raised. Mathematically you are probably best off using option #1. Any money that is above and beyond minimum payments earns a pretty high interest rate, about 6.82% in the form of saved interest payments. The problem is you are likely to get discouraged. Personal finance is a lot about behavior, and after working at this for a year, and still having 5 loans, albeit a lower balance, might take a bit of fight out of you. Paying off such a large balance, in a reasonable time, will take a lot of fight. With the debt snowball, you pay the minimum to the student loan, save in an outside account, and when it is large enough, you execute option #2. So a year from now you might only have three loans instead of five. If you behaved exactly the same your balance would be higher after that year then using the previous method. However often one does not behave the same. Because the goals are shorter and more attainable it is easier to delay some gratification. The 8 dollars you are saving in your weekly gas budget, because of low prices, is meaningful when saving for a 4K goal, where it is meaningless when looking at it as a 74K goal. With the 4K goal you are more apt to put that money in your savings, where the 74K goal you might spend it on a latte. For me, the debt snowball worked really well. With either option make sure that excess payments actually go to a reduction in principle not a prepayment of interest. Given this you may be left with no option. For example if method #1 you only prepay interest, you are forced to use option #2.", "title": "" }, { "docid": "c7257b70993a96303922867a164e6e8e", "text": "\"It is typically best to pay minimum payments to 2 of the loans and pay aggressively on the third loan. Some will tell you to pay the highest interest rate loan off first because \"\"personal finance\"\" is about \"\"finance\"\" and mathematically that saves you the most interest. Some will tell you to pay the smallest balance loan off first because \"\"personal finance\"\" is \"\"personal\"\" and the psychological \"\"win\"\" of paying off a loan is more valuable than the small amount of interest difference between this strategy and paying off the loan with the highest interest rate first.\"", "title": "" }, { "docid": "8c4d1c29aaa5949c44d7160199b21ac1", "text": "\"First, excellent choice to say no to non-subsidized loans! But I'd say you are cutting things very close either way, and you need to face up to that now. $35/mo extra at the end of the month is \"\"within the noise\"\" of financial life, meaning you should think of it as essentially $0 each month or even negative money, since one vet bill/school books/unforeseen problem could remove it for the entire year, easily. You are leaving yourself no buffer. But by taking the loan, unless you are (as Joe said) socking away savings to pay for it upon graduation, you are guaranteeing you'll leave college with debt, which I think should be avoided if you can. Could you do a hybrid plan in which you worked hard to do the following?: If you do these things or something along these lines, the loan is probably OK; if not, I'd be concerned about taking it. [Probably unnecessary, but: Keep in mind that student loans are not excusable by bankruptcy, so one is on the hook for them no matter what]. Also consider whether you can take a semester off now and then to catch up financially. The key is to really stay far from the edge of any financial cliffs.\"", "title": "" }, { "docid": "dc7fda7d3c5fb49456dd9db0fe564a1b", "text": "I was in a similar (but not quite as bad situation) a couple years ago, and I had a stroke of luck that helped me, but your friend might be able to force a similar situation. My parents refused to take out the huge parent loan (understandably so), but my dad made enough money that I wasn't eligible for much aid. My stroke of luck came when they got divorced; I could refile my FAFSA with only one parent (using my mom with very little income), my aid shot through the roof and nearly covered my undergrad (this happened in California, I don't know if this works in other states). My advice for your friend would be to take the 6 units/part time job option, but do what she can to earn enough to pay her own rent/food/other bills. I think the requirement for filing as an independent is that you supply >50% of your own income. It won't kick in right away, but for next school year this would end up getting her a lot more money from the state/federal governments. For me it was enough to cover my school, food, rent, gas, car payment, and still have a little left over. (I don't know if this is still possible, and I know it doesn't work for graduate school, or if it applies to every state. It might be an option worth pursuing though)", "title": "" }, { "docid": "54df40bf61e056d37576ccc99111fa4c", "text": "So many answers here are missing the mark. I have a $100k mortgage--because that isn't paid off, I can't buy a car? That's really misguided logic. You have a reasonably large amount of college debt and didn't mention any other debt-- It's a really big deal what kind of debt this is. Is it unsecured debt through a private lender? Is it a federal loan from the Department of Education? Let's assume the worst possible (reasonable) situation. You lose your job and spend the next year plus looking for work. This is the boat numerous people out of college are in (far far far FAR more than the unemployment rates indicate). Federal loans have somewhat reasonable (indentured servitude, but I digress) repayment strategies; you can base the payment on your current income through income-based and income-continent repayment plans. If you're through a private lender, they still expect payment. In both cases--because the US hit students with ridiculous lending practices, your interest rates are likely 5-10% or even higher. Given your take-home income is quite large and I don't know exactly the cost of living where you live--you have to make some reasonable decisions. You can afford a car note for basically any car you want. What's the worst that happens if you can't afford the car? They take it back. If you can afford to feed yourself, house yourself, pay your other monthly bills...you make so much more than the median income in the US that I really don't see any issues. What you should do is write out all your monthly costs and figure out how much unallocated money you have, but I'd imagine you have enough money coming in to finance any reasonable new or used car. Keep in mind new will have much higher insurance and costs, but if you pick a good car your headaches besides that will be minimal.", "title": "" }, { "docid": "5979df35b8e180bdb36a688c8a683794", "text": "You might try to refinance some of those loans. It sounds like you are serious about minimizing interest expense, if you think you will be able to pay those loans in full within five years you might also try a loan that is fixed for five years before becoming variable. If you do not think you can repay the loans in full before that time, you should probably stick with the fixed rates that you have. It may even be profitable to refinance those loans through another lender at the exact same fixed rate because it gets around their repayment tricks that effectively increase your interest on those two smaller loans.", "title": "" }, { "docid": "ad0028567b8dc2822bbcb30238ef587a", "text": "\"Concise answers to your questions: Depends on the loan and the bank; when you \"\"accelerate\"\" repayment of a loan by applying a pre-payment balance to the principal, your monthly payment may be reduced. However, standard practice for most loan types is that the repayment schedule will be accelerated; you'll pay no less each month, but you'll pay it off sooner. I can neither confirm nor deny that an internship counts as job experience in the field for the purpose of mortgage lending. It sounds logical, especially if it were a paid internship (in which case you'd just call it a \"\"job\"\"), but I can't be sure as I don't know of anyone who got a mortgage without accruing the necessary job experience post-graduation. A loan officer will be happy to talk to you and answer specific questions, but if you go in today, with no credit history (the student loan probably hasn't even entered repayment) and a lot of unknowns (an offer can be rescinded, for instance), you are virtually certain to be denied a mortgage. The bank is going to want evidence that you will make good on the debt you have over time. One $10,000 payment on the loan, though significant, is just one payment as far as your credit history (and credit score) is concerned. Now, a few more reality checks: $70k/yr is not what you'll be bringing home. As a single person without dependents, you'll be taxed at the highest possible withholdings rate. Your effective tax rate on $70k, depending on the state in which you live, can be as high as 30% (including all payroll/SS taxes, for a 1099 earner and/or an employee in a state with an income tax), so you're actually only bringing home 42k/yr, or about $1,600/paycheck if you're paid biweekly. To that, add a decent chunk for your group healthcare plan (which, as of 2014, you will be required to buy, or else pay another $2500 - effectively another 3% of gross earnings - in taxes). And even now with your first job, you should be at least trying to save up a decent chunk o' change in a 401k or IRA as a retirement nest egg. That student loan, beginning about 6 months after you leave school, will cost you about $555/mo in monthly payments for the next 10 years (if it's all Stafford loans with a 50/50 split between sub/unsub; that could be as much as $600/mo for all-unsub Stafford, or $700 or more for private loans). If you were going to pay all that back in two years, you're looking at paying a ballpark of $2500/mo leaving just $700 to pay all your bills and expenses each month. With a 3-year payoff plan, you're turning around one of your two paychecks every month to the student loan servicer, which for a bachelor is doable but still rather tight. Your mortgage payment isn't the only payment you will make on your house. If you get an FHA loan with 3.5% down, the lender will demand PMI. The city/county will likely levy a property tax on the assessed value of land and building. The lender may require that you purchase home insurance with minimum acceptable coverage limits and deductibles. All of these will be paid into escrow accounts, managed by your lending bank, from a single check you send them monthly. I pay all of these, in a state (Texas) that gets its primary income from sales and property tax instead of income, and my monthly payment isn't quite double the simple P&I. Once you have the house, you'll want to fill the house. Nice bed: probably $1500 between mattress and frame for a nice big queen you can stretch out on (and have lady friends over). Nice couch: $1000. TV: call it $500. That's probably the bare minimum you'll want to buy to replace what you lived through college with (you'll have somewhere to eat and sleep other than the floor of your new home), and we're already talking almost a month's salary, or payments of up to 10% of your monthly take-home pay over a year on a couple of store credit cards. Plates, cookware, etc just keeps bumping this up. Yes, they're (theoretically) all one-time costs, but they're things you need, and things you may not have if you've been living in dorms and eating in dining halls all through college. The house you buy now is likely to be a \"\"starter\"\", maybe 3bed/2bath and 1600 sqft at the upper end (they sell em as small as 2bd/1bt 1100sqft). It will support a spouse and 2 kids, but by that point you'll be bursting at the seams. What happens if your future spouse had the same idea of buying a house early while rates were low? The cost of buying a house may be as little as 3.5% down and a few hundred more in advance escrow and a couple other fees the seller can't pay for you. The cost of selling the same house is likely to include all the costs you made the seller pay when you bought it, because you'll be selling to someone in the same position you're in now. I didn't know it at the time I bought my house, but I paid about $5,000 to get into it (3.5% down and 6 months' escrow up front), while the sellers paid over $10,000 to get out (the owner got married to another homeowner, and they ended up selling both houses to move out of town; I don't even know what kind of bath they took on the house we weren't involved with). I graduated in 2005. I didn't buy my first house until I was married and pretty much well-settled, in 2011 (and yes, we were looking because mortgage rates were at rock bottom). We really lucked out in terms of a home that, if we want to or have to, we can live in for the rest of our lives (only 1700sqft, but it's officially a 4/2 with a spare room, and a downstairs master suite and nursery/office, so when we're old and decrepit we can pretty much live downstairs). I would seriously recommend that you do the same, even if by doing so you miss out on the absolute best interest rates. Last example: let's say, hypothetically, that you bite at current interest rates, and lock in a rate just above prime at 4%, 3.5% down, seller pays closing, but then in two years you get married, change jobs and have to move. Let's further suppose an alternate reality in which, after two years of living in an apartment, all the same life changes happen and you are now shopping for your first house having been pre-approved at 5%. That one percentage point savings by buying now, on a house in the $200k range, is worth about $120/mo or about $1440/yr off of your P&I payment ($921.42 on a $200,000 home with a 30-year term). Not chump change (over 30 years if you had been that lucky, it's $43000), but it's less than 5% of your take-home pay (month-to-month or annually). However, when you move in two years, the buyer's probably going to want the same deal you got - seller pays closing - because that's the market level you bought in to (low-priced starters for first-time homebuyers). That's a 3% commission for both agents, 1% origination, 0.5%-1% guarantor, and various fixed fees (title etc). Assuming the value of the house hasn't changed, let's call total selling costs 8% of the house value of $200k (which is probably low); that's $16,000 in seller's costs. Again, assuming home value didn't change and that you got an FHA loan requiring only 3.5% down, your down payment ($7k) plus principal paid (about another $7k; 6936.27 to be exact) only covers $14k of those costs. You're now in the hole $2,000, and you still have to come up with your next home's down payment. With all other things being equal, in order to get back to where you were in net worth terms before you bought the house (meaning $7,000 cash in the bank after selling it), you would need to stay in the house for 4 and a half years to accumulate the $16,000 in equity through principal payments. That leaves you with your original $7,000 down payment returned to you in cash, and you're even in accounting terms (which means in finance terms you're behind; that $7,000 invested at 3% historical average rate of inflation would have earned you about $800 in those four years, meaning you need to stick around about 5.5 years before you \"\"break even\"\" in TVM terms). For this reason, I would say that you should be very cautious when buying your first home; it may very well be the last one you'll ever buy. Whether that's because you made good choices or bad is up to you.\"", "title": "" }, { "docid": "461cbeb237df221165acd1ecf9aae11d", "text": "if your end game is corporate, a PhD might be a bit overkill (source: phd holder who works in banking). if you want to be very technical (coding, analytics, quant finance), then the PhD might make sense. if that isn’t you and you don’t want academia, don’t do it. the phd is a really long haul. MFin gives you a stronger theoretical framework than an MBA, however for recruitment, MBAs tend to fare better and more easily getting into finance. the CFA in theory could fill in the finance gaps missing in the MBA. at any rate, if you’re dedicated and persevere, you’ll get wherever you want to be in due time with any of these choices.", "title": "" }, { "docid": "35098b5ce93726a14fd8c18945d5f1f7", "text": "Why bother with the MFE then? You'd have to spend your own money to get it when any legit PhD program will support you throughout your masters and beyond. If you want to go to academia go straight to a PhD program. If in the end you decide you want to go into the finance industry, very little is lost as they will still hire you.", "title": "" }, { "docid": "a6538981686b2af921afea0fb21d7b9c", "text": "\"Fool's 13 steps to invest is a good starting point. Specifically, IFF all your credit cards are paid, and you made sure you've got no outstanding liabilities (that also accrues interest), stock indexes might be a good place for 5-10 years timeframes. For grad school, I'd probably look into cash ISA (or local equivalent thereof) -the rate of return is going to be lower, but having it in a separate account at least makes it mentally \"\"out of sight - out of mind\"\", so you can make sure the money's there WHEN you need it.\"", "title": "" }, { "docid": "506f090761968559e27081091a070e64", "text": "I am a bit unsure of why the interest rate is relevant. Are you intending on borrowing the money to go to school? If you cannot pay cash, then it is very likely a bad idea. Many people are overcome by events when seeking higher education and such a loan on a such a salary could devastate you financially. So I find the cost of the program as a total of 76.6K counting a loss in salary during the program and the first year grant. That is a lot of money, do you intend to borrow that much? Especially when you consider that your salary, after you graduate, will be about equal to where you are now. For that reason I am leaning toward a no, even if you had the cash in hand to do so. There is nothing to say that you will enjoy teaching. Furthermore teaching in low income school is more challenging. All that said, is there a way you can raise your income without going back to school? Washington state can be a very expensive place to live and is one of the reason why I left. I am a WWU alumni (Go Vikings!). Could you cash flow a part time program instead? I would give this a sound no, YMMV.", "title": "" }, { "docid": "cd9975db6f2080cc549346f2364327a3", "text": "\"When considering such a major life decision, with such high potential costs and high potential rewards, I encourage you to consider multiple different potential options. Even if loans were available, they might not be the best option. Less debt and an engineering degree is better than more debt and an engineering degree, both of which are likely better than your current debt and no engineering degree. I encourage you to consider: revisit your aid (which is not just loans), cut expenses, consider alternative aid sources, use your engineering student status to get a better paying job (including more profitable summer employment), check for methods to cut down the cost of your degree, and double-check your plans to make sure you have a long-term plan that makes sense. The first issue, raised in the comments, is whether or not you are getting appropriate financial aid. This does not just mean loans, it includes grants and other forms of assistance. You should be getting in-state tuition, and by searching the tuition of UNC I believe you are. But for future readers, you should make sure you are getting in-state rates, and it not there are options to return to a state where you would get in-state tuition rates, or look into the possibility of pausing your study for one year until you meet in-state funding requirements. You should also ensure your FAFSA information is correct, including your income, family situation (whether or not you are an independent study, as it sounds like you probably are), etc. This effects how many grants you get, and if you are independent this changes maximum federal loan amounts (see website for details). While you don't say what your pay is, the fact that you are working two jobs and having trouble making ends-meet suggests either that you have a spending issue, or that your jobs pay sucks, and possibly both. I've been in both situations, and there are methods for dealing with both. If your spending is not very carefully controlled, that's a big issue. I won't try to rehash all the personal finance advice about this, but I will just warn that when you are desperate and you know there isn't enough money even if you spend perfectly, there is a strong tendency to just give up and not even try because what's the point? Learned helplessness is hell, but it can be overcome with effort and tightly holding on to any glimmer of hope you find to do better each day. If you are in a field like engineering or computing (and some other fields, though I am less personally familiar with the current employment climate in those), there are usually companies who want to hire you as a paid intern or part-time employee in the hopes of getting you when you graduate. Those last two semesters of undergrad are a technicality to employers, they know it doesn't really change your skill set much. Many companies are actually more interesting in hiring someone on who hasn't finished the degree yet than getting someone recently post-degree, because they can get you cheaper and learn if this is a good match before they have to take the big risk of full-time hiring. You need to use this system to your advantage. Its hard when you feel destitute, but talk with career councilors in your school, your department advisor, and/or main administrative staff in your main academic department. Make sure you are on the right mailing lists to see the job offers (many schools require you to subscribe to one because at a school like UNC it easily gets way too much traffic each day). You need field-relevant experience, not just to finish the degree, but to be able to really open up your job opportunities and earning potential. Do not be shy about directly calling/emailing a contact who reaches out to your school looking for \"\"recent graduates\"\", and especially any mention of flexibility on early start for those who are almost finished. You can say you are in your final year (you are), and even ask if they are open to working around a light school schedule while you finish up. Most can end up to be \"\"no\"\", but it doesn't matter - the recruiting contacts want to hire people, so just reaching out early means you can follow up later once you get your degree and finances sorted out and you will have an even easier time getting that opportunity. In technology and engineering, the importance of summer internships cannot be understated, especially as you are now technically at the end of your degree. In engineering and tech fields, internships pay - often very well. Don't worry about it being the job of your dreams. Depending on your set of skills, apply to insurance companies, IT departments in hospitals and banks (even if you thought your coding skills in engineering were minimal), and of course any paying position that might be more directly in your field of interest. Consider ones outside your immediate area or even the more national internships from the bigger name companies, where possible. It is not at all uncommon for tech and engineering internships for undergraduate students to pay $15-$25+ per hour, even where most non-degree jobs might only pay $8 (and I've seen as high as $40 per hour+ in the high cost of living markets, depending on your skill set). I know many people who were paid more as a student intern than they were previously paid as a full-time professional employee. Many schools - including UNC - charge different tuition for distance learning and satellite campuses, and often also offer University-approved online classes. While this is not always a possibility for every student, you should consider the options. It could be that one of the final classes you need towards your degree can be taken at one of these other options, with reduced tuition. This is not always possible with all courses, but is certainly true if you have any of those general education requirements to knock out. Also consider if any of those final requirements have test-out options, such as CLEP test alternatives. Again, not always available, but sometimes you can get class credit for a general education class for Finally, make sure you aren't paying unnecessarily for text books, once you do get the money for tuition. You can sometimes get hand-me-down copies, rent ebooks or physical books from online companies, creative searches for PDF copies, get your book from off-campus local stores, etc. It isn't tuition, but money is money. Attend Part-Time While Working Look into the option of being a half-time student, which is usually 6-8 credit hours, if you can't afford full-time tuition. There is generally a greatly reduced rate, you still qualify for aid programs, and you are still working towards the degree - so you still get access to student resources like internships and job listings that may not be publicly posted. Inquire About Scholarships and School Emergency Assistance While this varies hugely by institution, make sure you check into scholarships you can apply to (even if they are just a few hundred bucks, it helps a lot) in your school (I don't believe the big online searches help, ask the school - but YMMV). Also inquire about any sort of possible help the school provides to students who've had life emergencies, such as your medical issues. Many have programs that are not advertised, designed to help students finish their degree and recover from personal hard times. It's worth the inquiry if you are willing to ask. Any little bit of assistance can help. Don't be afraid to talk with an institution's mental health councilors either, who can help you deal with the psychological difficulty of your situation as well as often being able to connect you to other potential support resources. The pressure can take its tole, and you'll have better long-term opportunities if you build up your support network and options. Student Loan Forbearance While In School If you are trying to save up every last dollar for tuition to finish the degree, but you have to pay loans now, call up the provider to ask about temporary delays on your student loan payments. Many have time-limited hardship allowances, and between the medical bills, low income, and returning to school, they may be willing to give you a few months break until you get back to school and the in-school provisions kick in. Skip a Semester If Necessary To Save Money If you can only raise enough for one semester, then need to skip a semester to build up more funds, that happens, it's OK. Be strategic, and check on loan forbearance. Usually being out for one semester is allowed by student loan companies before you owe them payment, and if you re-enroll you don't have to start making payments yet. Double-check on Credit Expiration and Degree Requirements Make sure you talk to someone who knows what they are talking about, especially in terms of credit expiration. Policies vary, and sometimes an advisor is able to put in a special request to waive you through some of these issues. Academia is heavily, heavily reliant on developing a good relationship and clear communication with an advisor who is willing to work with you to achieve your goals. Written policies are sometimes very firm, and sometimes all you have to do is ask the right person and poof, suddenly the rules change. It's a weird system, but don't be afraid to explain your situation and ask what can be done. Don't assume a written policy is 100% ironclad - sometimes it is, but it often isn't. Inquire About Other Government and Community-based Assistance Being destitute is awful, and having to ask for help can feel terrible in it's own way, but doing what you have to do to have a better future can mean pushing through and being willing to ask for help. This can mean asking parents and close family if they can contribute to help you finish your degree, but this also means checking with your local community programs to see if you qualify for anything. Many communities have food pantries and related programs that will help you even if you don't qualify for something like SNAP (aka food stamps), because they know times can get hard for anyone and they want you to spend what little money you have on building a better life. Your university may even run a food pantry for students in need - use it. Get what assistance you can, minimize spending in any way you can manage, put all the money towards doing what you need to do to get to a better place. It's even nicely reciprocal - once you work through your hard times and get things on track, you can return the favor and help give back to programs like the ones that helped you. Make Sure Your Long-Term Goal Makes Sense Finally, this is all predicated on pulling out all the stops to finish your degree. But this assumes that this is a good plan. Not all degrees are helpful for all people in all areas of the country. Do your own research to make sure you aren't throwing good money after bad, and are pursuing a goal that will make sense for you and what you want. The cost of a degree keeps going up, but it remains true that many sets of skills and degree-holding candidates are in demand and can command high salaries that blow away the cost of college in comparison. If you actually have a good chance of going from struggling to make $8/hour to making $50k-90k a year, based on your developed skills, experience, and professional network, then reasonable student loan debt is a worthy investment. If, on the other hand, you wrack up tens of thousands of more dollars in debt just to say you did and still have to work the same kinds of jobs, that's not really much of an investment at all. Good luck on your journey, and best wishes towards better days - regardless of what path you choose. Finally, make sure you aren't paying unnecessarily for text books, once you do get the money for tuition. You can sometimes get hand-me-down copies, rent ebooks or physical books from online companies, creative searches for PDF copies, get your book from off-campus local stores, etc. It isn't tuition, but money is money. Look into the option of being a half-time student, which is usually 6-8 credit hours, if you can't afford full-time tuition. There is generally a greatly reduced rate, you still qualify for aid programs, and you are still working towards the degree - so you still get access to student resources like internships and job listings that may not be publicly posted. While this varies hugely by institution, make sure you check into scholarships you can apply to (even if they are just a few hundred bucks, it helps a lot) in your school (I don't believe the big online searches help, ask the school - but YMMV). Also inquire about any sort of possible help the school provides to students who've had life emergencies, such as your medical issues. Many have programs that are not advertised, designed to help students finish their degree and recover from personal hard times. It's worth the inquiry if you are willing to ask. Any little bit of assistance can help. Don't be afraid to talk with an institution's mental health councilors either, who can help you deal with the psychological difficulty of your situation as well as often being able to connect you to other potential support resources. The pressure can take its tole, and you'll have better long-term opportunities if you build up your support network and options. If you are trying to save up every last dollar for tuition to finish the degree, but you have to pay loans now, call up the provider to ask about temporary delays on your student loan payments. Many have time-limited hardship allowances, and between the medical bills, low income, and returning to school, they may be willing to give you a few months break until you get back to school and the in-school provisions kick in. If you can only raise enough for one semester, then need to skip a semester to build up more funds, that happens, it's OK. Be strategic, and check on loan forbearance. Usually being out for one semester is allowed by student loan companies before you owe them payment, and if you re-enroll you don't have to start making payments yet. Make sure you talk to someone who knows what they are talking about, especially in terms of credit expiration. Policies vary, and sometimes an advisor is able to put in a special request to waive you through some of these issues. Academia is heavily, heavily reliant on developing a good relationship and clear communication with an advisor who is willing to work with you to achieve your goals. Written policies are sometimes very firm, and sometimes all you have to do is ask the right person and poof, suddenly the rules change. It's a weird system, but don't be afraid to explain your situation and ask what can be done. Don't assume a written policy is 100% ironclad - sometimes it is, but it often isn't. Being destitute is awful, and having to ask for help can feel terrible in it's own way, but doing what you have to do to have a better future can mean pushing through and being willing to ask for help. This can mean asking parents and close family if they can contribute to help you finish your degree, but this also means checking with your local community programs to see if you qualify for anything. Many communities have food pantries and related programs that will help you even if you don't qualify for something like SNAP (aka food stamps), because they know times can get hard for anyone and they want you to spend what little money you have on building a better life. Your university may even run a food pantry for students in need - use it. Get what assistance you can, minimize spending in any way you can manage, put all the money towards doing what you need to do to get to a better place. It's even nicely reciprocal - once you work through your hard times and get things on track, you can return the favor and help give back to programs like the ones that helped you. Finally, this is all predicated on pulling out all the stops to finish your degree. But this assumes that this is a good plan. Not all degrees are helpful for all people in all areas of the country. Do your own research to make sure you aren't throwing good money after bad, and are pursuing a goal that will make sense for you and what you want. The cost of a degree keeps going up, but it remains true that many sets of skills and degree-holding candidates are in demand and can command high salaries that blow away the cost of college in comparison. If you actually have a good chance of going from struggling to make $8/hour to making $50k-90k a year, based on your developed skills, experience, and professional network, then reasonable student loan debt is a worthy investment. If, on the other hand, you wrack up tens of thousands of more dollars in debt just to say you did and still have to work the same kinds of jobs, that's not really much of an investment at all. Good luck on your journey, and best wishes towards better days - regardless of what path you choose.\"", "title": "" }, { "docid": "aaaa8fcea2cbfa583bb92f4848b54efa", "text": "I would strongly suggest you select an answer: all the above two cover everything I can possibly recommend, but perhaps my perspective as a person who was exactly in your shoes a year ago might appeal to you more. My first bank was Chase, and they usually give out a free checking account to students that come with leaves of 100 checks. Unfortunately, I was 24 at that time, and the max possible age to qualify was 23 or 21. Paying $25 for any number of checks was a big deal for me as I had no job, and transportation and rent was costing me $1k/month anyways. I came here and asked questions: lots of them. MrChrister, God bless his soul, recommended credit unions to me. I never knew they existed. A year later, I am a proud member of 3 CUs: I recommend Alliant, DCU and SchoolsFirst: I am their member and very proud of it!", "title": "" } ]	fiqa
5cd04230bdd47c21010891e1b8c87715	Asset allocation when retirement is already secure	[ { "docid": "1cc1cbf238b28b58a628df8b2952238f", "text": "he general advice I get is that the younger you are the more higher risk investments you should include in your portfolio. I will be frank. This is a rule of thumb given out by many lay people and low-level financial advisors, but not by true experts in finance. It is little more than an old wive's tale and does not come from solid theory nor empirical work. Finance theory says the following: the riskiness of your portfolio should (inversely) correspond to your risk aversion. Period. It says nothing about your age. Some people become more risk-averse as they get older, but not everyone. In fact, for many people it probably makes sense to increase the riskiness of their portfolio as they age because the uncertainty about both wealth (social security, the value of your house, the value of your human capital) and costs (how many kids you will have, the rate of inflation, where you will live) go down as you age so your overall level of risk falls over time without a corresponding mechanical increase in risk aversion. In fact, if you start from the assumption that people's aversion is to not having enough money at retirement, you get the result that people should invest in relatively safe securities until the probability of not having enough to cover their minimum needs gets small, then they invest in highly risky securities with any money above this threshold. This latter result sounds reasonable in your case. At this point it appears unlikely that you will be unable to meet your minimum needs--I'm assuming here that you are able to appreciate the warnings about underfunded pensions in other answers and still feel comfortable. With any money above and beyond what you consider to be prudent preparation for retirement, you should hold a risky (but still fully diversified) portfolio. Don't reduce the risk of that portion of your portfolio as you age unless you find your personal risk aversion increasing.", "title": "" }, { "docid": "927ea2518401bc61d9560f1f7bd8e97f", "text": "\"As others are saying, you want to be a bit wary of completely counting on a defined benefit pension plan to be fulfilling exactly the same promises during your retirement that it's making right now. But, if in fact you've \"\"won the game\"\" (for lack of a better term) and are sure you have enough to live comfortably in retirement for whatever definition of \"\"comfortably\"\" you choose, there are basically two reasonable approaches: Those are all reasonable approaches, and so it really comes down to what your risk tolerance is (a.k.a. \"\"Can I sleep comfortably at night without staying up worrying about my portfolio?\"\"), what your goals for your money are (Just taking care of yourself? Trying to \"\"leave a legacy\"\" via charity or heirs or the like? Wanting a \"\"dream\"\" retirement traveling the world if possible but content to stay home if it's not?), and how confident you are in being able to calculate your \"\"needs\"\" in retirement and what your assets will truly be by then. You ask \"\"if it would be unwise at this stage of my life to create a portfolio that's too conservative\"\", but of course if it's \"\"too conservative\"\" then it would have been unwise. But I don't think it's unwise, at any stage of life, to create a portfolio that's \"\"conservative enough\"\". Only take risks if you have the need, ability, and willingness to do so.\"", "title": "" }, { "docid": "8beb6d3d4196ac9e6139b6c54c753cf5", "text": "\"You will hear a lot about diversifying your portfolio, which typically means having a good mix of investment types, areas of investments, etc. I'd like to suggest that you should also diversify your sources. Sad to say but the defined benefit pension is not a rock solid, sure fire source of security in your retirement planning. Companies go bankrupt, government agencies are reorganized, and those hitherto-untouchable assets are destroyed overnight. So, treat your new investment strategy as if you were starting over, and invest accordingly, for example, aggressively for a few years, then progressively safer as you get older. There are other strategies too, depending on factors like your taste for risk: you might prefer to be conservative until you reach some safety threshold to reach \"\"certain safety\"\" and then start making riskier investments. You may also consider different investment vehicles and techniques such as index funds, dollar cost averaging, and so on.\"", "title": "" } ]	[ { "docid": "a8136e0b36283542987257724559274e", "text": "\"The standard interpretation of \"\"can I afford to retire\"\" is \"\"can I live on just the income from my savings, never touching the principal.\"\" To estimate that, you need to make reasonable guesses about the return you expect, the rate of inflation, your real costs -- remember to allow for medical emergencies, major house repairs, and the like when determining you average needs, not to mention taxes if this isn't all tax-sheltered! -- and then build in a safety factor. You said liquid assets, and that's correct; you don't want to be forced into a reverse mortgage by anything short of a disaster. An old rule of thumb was that -- properly invested -- you could expect about 4% real return after subtracting inflation. That may or may not still be correct, but it makes an easy starting point. If we take your number of $50k/year (today's dollars) and assume you've included all the tax and contingency amounts, that means your nest egg needs to be 50k/.04, or $1,250,000. (I'm figuring I need at least $1.8M liquid assets to retire.) The $1.5M you gave would, under this set of assumptions, allow drawing up to $60k/year, which gives you some hope that your holdings would mot just maintain themselves but grow, giving you additional buffer against emergencies later. Having said that: some folks have suggested that, given what the market is currently doing, it might be wiser to assume smaller average returns. Or you may make different assumptions about inflation, or want a larger emergency buffer. That's all judgement calls, based on your best guesses about the economy in general and your investments in particular. A good financial advisor (not a broker) will have access to better tools for exploring this, using techniques like monte-carlo simulation to try to estimate both best and worst cases, and can thus give you a somewhat more reliable answer than this rule-of-thumb approach. But that's still probabilities, not promises. Another way to test it: Find out how much an insurance company would want as the price of an open-ended inflation-adjusted $50k-a-year annuity. Making these estimates is their business; if they can't make a good guess, nobody can. Admittedly they're also factoring the odds of your dying early into the mix, but on the other hand they're also planning on making a profit from the deal, so their number might be a reasonable one for \"\"self-insuring\"\" too. Or might not. Or you might decide that it's worth buying an annuity for part or all of this, paying them to absorb the risk. In the end, \"\"ya pays yer money and takes yer cherce.\"\"\"", "title": "" }, { "docid": "825b37e57e118707124a3e76177bfcb3", "text": "Since you already have twice your target in that emergency fund, putting that overage to work is a good idea. The impression that I get is that you'd still like to stay on the safe side. What you're looking for is a Balanced Fund. In a balanced fund the managers invest in both stocks and bonds (and cash). Since you have that diversification between those two asset classes, their returns tend to be much less volatile than other funds. Also, because of their intended audience and the traditions from that class of funds' long history, they tend to invest somewhat more conservatively in both asset classes. There are two general types of balanced funds: Conservative Allocation funds and Moderate Allocation funds. Conservative allocation funds invest in more fixed income than equity (the classic mix is 60% bonds, 40% stocks). Moderate allocation funds invest in more equity than fixed income (classic mix: 40% bonds, 60% stocks). A good pair of funds that are similar but exemplify the difference between conservative allocation and moderate allocation are Vanguard's Wellesley Income Fund (VWINX) for the former and Vanguard's Wellington Fund (VWELX) for the latter. (Disclaimer: though both funds are broadly considered excellent, this is not a recommendation.) Good luck sorting this out!", "title": "" }, { "docid": "306f3a6fe8fd8857a8f456e4e684ea13", "text": "\"To expand a bit on @MSalters's answer ... When I read your question title I assumed that by \"\"retirement funds\"\" you meant target-date funds that are close to their target dates (say, the 2015 target fund). When I saw that you were referring to all target-date funds, it occurred to me that examining how such funds modify their portfolios over time would actually help answer your question. If you look at a near-term target fund you can see that a smaller percent is invested internationally, the same way a smaller percent is invested in stocks. It's because of risk. Since it's more likely that you will need some of the money soon, and since you'll be cashing out said money in US Dollars, it's risky to have too much invested in foreign currencies. If you need money that's currently invested in a foreign currency and that currency happens to be doing poorly against USD at the moment, then you'll lose money simply because you need it now. This is the same rationale that goes into target-date funds' moving from stocks to bonds over time. Since the value of a stock portfolio has a lot more natural volatility than the value of a bond portfolio, if you're heavily invested in stocks when you need to withdraw money, there's a higher probability that you'll need to cash out just when stocks happen to be doing relatively poorly. Being invested more in bonds around when you'll need your money is less risky. Similarly, being more invested in US dollars than in foreign currencies around when you'll need your money is also less risky.\"", "title": "" }, { "docid": "7dec0fda4f7e40dbdf163ab81de3f0b1", "text": "\"Depends on your definition of \"\"secure\"\". The most \"\"secure\"\" investment from a preservation of principal point of view is a non-tradable, general obligation government bond. (Like a US or Canadian savings bond.) Why? There is no interest rate risk -- you can't lose money. The downside is that the rate is not so good. If you want returns and a reasonably high level of security, you need a diversified portfolio.\"", "title": "" }, { "docid": "aa90a5bbfd6d0baf7ace26b24986c434", "text": "\"The topic you are apparently describing is \"\"safe withdrawal rates\"\", more here. Please, note that the asset allocation is crucial decision with your rates. If you continue to keep a lot in cash, you cannot withdraw too much money \"\"to live and to travel\"\" because the expected return from cash is too low in the long run. In contrast, if you moved to more sensible decision like 30% bonds and 70% world portfolio -- the rates will me a lot different. As you are 30 years old, you could pessimist suppose to live next 100 years -- then your possible withdrawal rates would be much lower than let say over 50 years. Anyway besides deciding asset allocation, you need to estimate the time over which you need your assets. You have currently 24% in liquid cash and 12% in bonds but wait you use the word \"\"variety of funds\"\" with about 150k USD, what are they? Do you have any short-term bonds or TIPS as inflation hedge? Do you miss small and value? What is your sector allocation between small-med-large and value-blend-growth? If you are risk-averse, you could add some value small. Read the site, it does much better job than any question-answer site can do (the link above).\"", "title": "" }, { "docid": "8439491878fa8722c81dcce170268652", "text": "Your approach sounds solid to me. Alternatively, if (as appears to be the case) then you might want to consider devoting your tax-advantaged accounts to tax-inefficient investments, such as REITs and high-yield bond funds. That way your investments that generate non-capital-gain (i.e. tax-expensive) income are safe from the IRS until retirement (or forever). And your investments that generate only capital gains income are safe until you sell them (and then they're tax-cheap anyway). Of course, since there aren't really that many tax-expensive investment vehicles (especially not for a young person), you may still have room in your retirement accounts after allocating all the money you feel comfortable putting into REITs and junk bonds. In that case, the article I linked above ranks investment types by tax-efficiency so you can figure out the next best thing to put into your IRA, then the next, etc.", "title": "" }, { "docid": "ebd84c7417699857eeabae80db0a9d6e", "text": "This article completely misses a big part of his portfolio. He's a congressmen entitled to a full pension. He's guaranteed a 100k+ salary for the rest of his life. He's completely insured against deflation! So if you've got a full pension that's insuring you against deflation than you want the majority of your other assets protecting you against inflation. It's a sound decision.", "title": "" }, { "docid": "bd1c2de074d2347fc982182af0792e6e", "text": "\"It depends what you mean. Finance Independence and Retirement Early (FI/RE) are two overlapping ideas. If you plan to retire early and spend the same amount of money every year (adjusted for inflation), then you need to save twenty-times your yearly spending to satisfy the 4% Safe Withdrawal rule of thumb. Carefully notice I say \"\"yearly spending\"\" and not income. I'm unaware how it is in Pakistan, but in America, people who retire in their sixties tend to reduce their spending by 30%. This is for a host of reasons like not eating out as much, not driving to work, paid off mortgages, and their children being adults now. In this type of profile, a person needs to save 17.5x yearly spending. This numbers presume a person will only use their built assets as an income source. Any programs like a government pension acting as a safety net. If you factor those in, the estimates above become smaller.\"", "title": "" }, { "docid": "438545110087a3379434531a7350b942", "text": "\"To be honest, I think a lot of people on this site are doing you a disservice by taking your idea as seriously as they are. Not only is this a horrible idea, but I think you have some alarming misunderstandings about what it means to save for retirement. First off, precious metals are not an \"\"investment\"\"; they are store of value. The old saying that a gold coin would buy a suit 300 years ago and will still buy a suit today is pretty accurate. Buying precious metals and expecting them to \"\"appreciate\"\" in the future because they are \"\"undervalued\"\" is just flat-out speculation and really doesn't belong in a well-planned retirement account, unless it's a very small part for the purposes of diversification. So the upshot to all of this is the most likely outcome is you get zero return after inflation (maybe you'll get lucky or maybe you'll be very unlucky). Next you would say that sure, you're giving up some expected return for a reduction in risk. But, you've done away with diversification which is the most effective way to minimize risk... And I'm not sure what scenario you're imagining that the stock market or any other reasonable investment doesn't make any returns. If you invest in a market wide index fund, then the expected return is going to be roughly in proportion with productivity gains. To say that there will be no appreciation of the stock market over the next 40 years is to say that technological progress will stop and/or we will have large-scale economic disruptions that will wipe out 40 years of progress. If that happens, I would say it's highly questionable whether silver will actually be worth anything at all. I'd rather have food, property, and firearms. So, to answer your question, practically any other retirement savings plan would be better than the one that you currently outlined, but the best plan is just to put your money in a very low-cost index fund at Vanguard and let it sit until you retire. The expense ratios are so stupidly small, that it's not going to meaningfully affect your return.\"", "title": "" }, { "docid": "69e661b4e1154b9542f9d63bc5d62bbb", "text": "So I did some queries on Google Scholar, and the term of art academics seem to use is target date fund. I notice divided opinions among academics on the matter. W. Pfau gave a nice set of citations of papers with which he disagrees, so I'll start with them. In 1969, Paul Sameulson published the paper Lifetime Portfolio Selection By Dynamic Stochaistic Programming, which found that there's no mathematical foundation for an age based risk tolerance. There seems to be a fundamental quibble relating to present value of future wages; if they are stable and uncorrelated with the market, one analysis suggests the optimal lifecycle investment should start at roughly 300 percent of your portfolio in stocks (via crazy borrowing). Other people point out that if your wages are correlated with stock returns, allocations to stock as low as 20 percent might be optimal. So theory isn't helping much. Perhaps with the advent of computers we can find some kind of empirical data. Robert Shiller authored a study on lifecycle funds when they were proposed for personal Social Security accounts. Lifecycle strategies fare poorly in his historical simulation: Moreover, with these life cycle portfolios, relatively little is contributed when the allocation to stocks is high, since earnings are relatively low in the younger years. Workers contribute only a little to stocks, and do not enjoy a strong effect of compounding, since the proceeds of the early investments are taken out of the stock market as time goes on. Basu and Drew follow up on that assertion with a set of lifecycle strategies and their contrarian counterparts: whereas a the lifecycle plan starts high stock exposure and trails off near retirement, the contrarian ones will invest in bonds and cash early in life and move to stocks after a few years. They show that contrarian strategies have higher average returns, even at the low 25th percentile of returns. It's only at the bottom 5 or 10 percent where this is reversed. One problem with these empirical studies is isolating the effect of the glide path from rebalancing. It could be that a simple fixed allocation works plenty fine, and that selling winners and doubling down on losers is the fundamental driver of returns. Schleef and Eisinger compare lifecycle strategy with a number of fixed asset allocation schemes in Monte Carlo simulations and conclude that a 70% equity, 30% long term corp bonds does as well as all of the lifecycle funds. Finally, the earlier W Pfau paper offers a Monte Carlo simulation similar to Schleef and Eisinger, and runs final portfolio values through a utility function designed to calculate diminishing returns to more money. This seems like a good point, as the risk of your portfolio isn't all or nothing, but your first dollar is more valuable than your millionth. Pfau finds that for some risk-aversion coefficients, lifecycles offer greater utility than portfolios with fixed allocations. And Pfau does note that applying their strategies to the historical record makes a strong recommendation for 100 percent stocks in all but 5 years from 1940-2011. So maybe the best retirement allocation is good old low cost S&P index funds!", "title": "" }, { "docid": "f7d9c4bf2b61eb3db9597a0ec295392c", "text": "\"Here is the \"\"investing for retirement\"\" theoretical background you should have. You should base your investment decisions not simply on the historical return of the fund, but on its potential for future returns and its risk. Past performance does not indicate future results: the past performance is frequently at its best the moment before the bubble pops. While no one knows the specifics of future returns, there are a few types of assets that it's (relatively) safe to make blanket statements about: The future returns of your portfolio will primarily be determined by your asset allocation . The general rules look like: There are a variety of guides out there to help decide your asset allocation and tell you specifically what to do. The other thing that you should consider is the cost of your funds. While it's easy to get lucky enough to make a mutual fund outperform the market in the short term, it's very hard to keep that up for decades on end. Moreover, chasing performance is risky, and expensive. So look at your fund information and locate the expense ratio. If the fund's expense ratio is 1%, that's super-expensive (the stock market's annualized real rate of return is about 4%, so that could be a quarter of your returns). All else being equal, choose the cheap index fund (with an expense ratio closer to 0.1%). Many 401(k) providers only have expensive mutual funds. This is because you're trapped and can't switch to a cheaper fund, so they're free to take lots of your money. If this is the case, deal with it in the short term for the tax benefits, then open a specific type of account called a \"\"rollover IRA\"\" when you change jobs, and move your assets there. Or, if your savings are small enough, just open an IRA (a \"\"traditional IRA\"\" or \"\"Roth IRA\"\") and use those instead. (Or, yell at your HR department, in the event that you think that'll actually accomplish anything.)\"", "title": "" }, { "docid": "8e0cc6474e82e1d2d036cd295fc54b37", "text": "\"You're right, the asset allocation is one fundamental thing you want to get right in your portfolio. I agree 110%. If you really want to understand asset allocation, I suggest any and all of the following three books, all by the same author, William J. Bernstein. They are excellent – and yes I've read each. From a theory perspective, and being about asset allocation specifically, the Intelligent Asset Allocator is a good choice. Whereas, the next two books are more accessible and more complete, covering topics including investor psychology, history, financial products you can use to implement a strategy, etc. Got the time? Read them all. I finished reading his latest book, The Investor's Manifesto, two weeks ago. Here are some choice quotes from Chapter 3, \"\"The Nature of the Portfolio\"\", that address some of the points you've asked about. All emphasis below is mine. Page 74: The good news is [the asset allocation process] is not really that hard: The investor only makes two important decisions: Page 76: Rather, younger investors should own a higher portion of stocks because they have the ability to apply their regular savings to the markets at depressed prices. More precisely, young investors possess more \"\"human capital\"\" than financial capital; that is, their total future earnings dwarf their savings and investments. From a financial perspective, human capital looks like a bond whose coupons escalate with inflation. Page 78: The most important asset allocation decision is the overall stock/bind mix; start with age = bond allocation rule of thumb. [i.e. because the younger you are, you already have bond-like income from anticipated employment earnings; the older you get, the less bond-like income you have in your future, so buy more bonds in your portfolio.] He also mentions adjusting that with respect to one's risk tolerance. If you can't take the ups-and-downs of the market, adjust the stock portion down (up to 20% less); if you can stomach the risk without a problem, adjust the stock portion up (up to 20% more). Page 86: [in reference to a specific example where two assets that zig and zag are purchased in a 50/50 split and adjusted back to targets] This process, called \"\"rebalancing,\"\" provides the investor with an automatic buy-low/sell-high bias that over the long run usually – but not always – improves returns. Page 87: The essence of portfolio construction is the combination of asset classes that move in different directions at least some of the time. Finally, this gem on pages 88 and 89: Is there a way of scientifically picking the very best future allocation, which offers the maximum return for the minimum risk? No, but people still try. [... continues with description of Markowitz's \"\"mean-variance analysis\"\" technique...] It took investment professionals quite a while to realize that limitation of mean-variance analysis, and other \"\"black box\"\" techniques for allocating assets. I could go on quoting relevant pieces ... he even goes into much detail on constructing an asset allocation suitable for a large portfolio containing a variety of different stock asset classes, but I suggest you read the book :-)\"", "title": "" }, { "docid": "e155a7538f8822b59bcea7d7e2f5090d", "text": "In addition to what others have said, I think it is important to consider that government retirement assistance (whatever it is called in each instance) is basically a promise that can be revoked. I talked to a retired friend of mine just yesterday and we got onto that subject; she mentioned that when she was young, the promise was for 90% of one's pay, paid by the government after retiring. It is very different today. Yes, you can gamble that you won't need the saved money, and thus decide not to save anything. What then if you do end up needing the money you did not set aside, but rather spent? You are just now graduating college, and assuming of course that you get a decently-paying job, are likely going to have loads more money than you are used to. If you make an agreement with yourself to set aside even just 10-15% of the difference in income right from the start, that is going to grow into a pretty sizable nest egg by the time you approach retirement age. Then, you will have the option of continuing to work (maybe part-time) or quitting in a way you would not have had otherwise. Now I'm going to pull numbers out of thin air, but suppose that you currently have $1000/month net, before expenses, and can get a job that pays $1800/month net starting out. 10-15% of the difference means you'll be saving around $100/month for retirement. In 35 years, assuming no return on investment (pessimistic, but works if returns match inflation) and no pay rises, that will still be over $40K. That's somewhere on the order of $150/month added to your retirement income for 25 years. Multiply with whatever inflation rate you think is likely if you prefer nominal values. It becomes even more noticable if you save a significant fraction of the additional pay; if you save 1/3 of the additional money (note that you still effectively get a 50% raise compared to what you have been living on before), that gives you a net income of $1500/month instead of $1800 ($500/month more rather than $800/month more) which grows into about $110K in 35 years assuming no return on investment. Nearly $400 per month for 25 years. $100 per week is hardly chump change in retirement, and it is still quite realistic for most people to save 30% of the money they did not have before.", "title": "" }, { "docid": "d5e1bde29d805bce6086b8598a343c8b", "text": "This depends completely on your investing goals. Typically when saving for retirement younger investors aim for a more volatile and aggressive portfolio but diversify their portfolio with more cautious stocks/bonds as they near retirement. In other words, the volatility that owning a single stock brings may be in line with your goals if you can shoulder the risk.", "title": "" }, { "docid": "883e13003661c691b6adae423ffef8b1", "text": "\"A diversified portfolio (such as a 60% stocks / 40% bonds balanced fund) is much more predictable and reliable than an all-stocks portfolio, and the returns are perfectly adequate. The extra returns on 100% stocks vs. 60% are 1.2% per year (historically) according to https://personal.vanguard.com/us/insights/saving-investing/model-portfolio-allocations To get those average higher stock returns, you need to be thinking 20-30 years (even 10 years is too short-term). Over the 20-30 years, you must never panic and go to cash, or you will destroy the higher returns. You must never get discouraged and stop saving, or you will destroy the higher returns. You have to avoid the panic and discouragement despite the likelihood that some 10-year period in your 20-30 years the stock market will go nowhere. You also must never have an emergency or other reason to withdraw money early. If you look at \"\"dry periods\"\" in stocks, like 2000 to 2011, a 60/40 portfolio made significant money and stocks went nowhere. A diversified portfolio means that price volatility makes you money (due to rebalancing) while a 100% stocks portfolio means that price volatility is just a lot of stress with no benefit. It's somewhat possible, probably, to predict dry periods in stocks; if I remember the statistics, about 50% of the variability in the market price 10 years out can be explained by normalized market valuation (normalized = adjusted for business cycle and abnormal profit margins). Some funds such as http://hussmanfunds.com/ are completely based on this, though a lot of money managers consider it. With a balanced portfolio and rebalancing, though, you don't have to worry about it very much. In my view, the proper goal is not to beat the market, nor match the market, nor is it to earn the absolute highest possible returns. Instead, the goal is to have the highest chance of financing your non-financial goals (such as retirement, or buying a house). To maximize your chances of supporting your life goals with your financial decisions, predictability is more important than maximized returns. Your results are primarily determined by your savings rate - which realistic investment returns will never compensate for if it's too low. You can certainly make a 40-year projection in which 1.2% difference in returns makes a big difference. But you have to remember that a projection in which value steadily and predictably compounds is not the same as real life, where you could have emergency or emotional factors, where the market will move erratically and might have a big plunge at just the wrong time (end of the 40 years), and so on. If your plan \"\"relies\"\" on the extra 1.2% returns then it's not a reasonable plan anyhow, in my opinion, since you can't count on them. So why suffer the stress and extra risk created by an all-stocks portfolio?\"", "title": "" } ]	fiqa
7e73ce35226ae612fa715812d1265602	How much should a new graduate with new job put towards a car?	[ { "docid": "f1ebfd79bc9d4bef340a0a0db7ad909b", "text": "You are currently $30k in debt. I realize it is tempting to purchase a new car with your new job, but increasing your debt right now is heading in the wrong direction. Adding a new monthly payment into your budget would be a mistake, in my opinion. Here is what I would suggest. Since you have $7k in the bank, spend up to $6k on a nice used car. This will keep $1k in the bank for emergencies, and give you transportation without adding debt and a monthly payment. Then you can focus on knocking out the student loans. Won't it be nice when those student loans are gone? By not going further into debt, you will be much closer to that day. New cars are a luxury that you aren't in a position to splurge on yet.", "title": "" }, { "docid": "60107ac23bd15c65c2221bab687a1a2b", "text": "What are your goals in life? If one of them is to appear wealthy then buying a high price import is a great place to start. You certainly have the salary for it (congratulations BTW). If one of your goals is to build wealth, then why not buy a ~5000 to ~6000 car and have a goal to zero out that student loan by the end of the year? You can still contribute to your 401k, and have a nice life style living on ~60K (sending 30 to the student loan). Edit: I graduated with a CS degree in '96 and have been working in the industry since '93. When I started, demand was like it is now, rather insane. It probably won't always be like that and I would prepare for some ups and downs in the industry. One of the things that encouraged me to lead a debt free lifestyle happened in 2008. My employer cut salaries by 5%...no big deal they said. Except they also cut support pay, bonuses, and 401K matching. When the dust cleared my salary was cut 22%, and I was lucky as others were laid off. If you are in debt a 22% pay cut hurts bad.", "title": "" }, { "docid": "bfe9787224f701c084ffe7dbc2c998eb", "text": "\"As someone who has a very similar debt amount and environment (new grad, nice new paying job, want a car, etc), I'd like to share something with you. Life has unexpected costs. Luckily I didn't buy that new car the first few months out of college like I had planned to; I'm glad that I didn't because, as a fledgling \"\"adult\"\", despite having lived on my own while in college while working part-to-full time there are some things you just don't realize until it either happens or it happens to someone else. Here are some of those things: I could go on but I won't. $95K is good money and I would definitely recommend spending it a bit to enjoy yourself. But I would honestly tell you that taking your monthly expenses, adding a few hundred on top of that and then multiplying that sum by 3 would be a smart savings amount before picking up a car loan. Maybe that's an excessive savings but I've seen way too many people burn out over their cost-of-living and their failure to adjust appropriately when shit hits the fan. So instead of having to deal with the stab at your pride when having to lower the cost/quality of living that you'll probably grow accustomed to at a $95K salary, just prepare for the worst. Oh, and did I mention... A NEW JOB IS NOT A SECURE JOB Consider yourself to likely be the first asset dropped from the company if even the tiniest thing goes wrong. I know way too many people who were fresh hires at Intel, Boeing, and a few other big tech companies that pay around what you make and, despite being bad asses in college, they were dropped like a bad habit when their employers hit rough patches. To those even more experienced than me, please feel free to add to the list. I'd personally love to know them myself.\"", "title": "" }, { "docid": "4466ba3f24ae490ee0031707112d0bdb", "text": "In a very similar situation as yours, I bought a used motorcycle for $3000. It was still reasonably new, very reliable, and with California weather, you can use it year-round. It reduced my time in traffic, and it had very low fuel and maintenance costs. The biggest expense was tires. The biggest pitfall in buying a motorcycle is auto-insurance. Do your research and ask for quotes from your broker before even considering a particular model of bike. When I decided that my finances justified a new motorcycle, I was surprised that full collision coverage cost about $3000/year on a lower powered bike that had a bad accident record because it appealed to new riders. I got a much more powerful bike that appealed to more experienced riders and the premium was only $500/year. Is this answer not what you were looking for? Spend as little as you can on a 4-6 year old car. Drive it until you can save enough cash to buy the one you really want. I'm currently driving a 2007 Corolla, and I'm waiting until I can get a new civic turbo with a manual transmission to replace it. (They currently only offer them with a CVT, but next fall they'll have them with the MT, so I'm probably 2 1/2 years out from buying one used.)", "title": "" }, { "docid": "fe73ab1c09979528e333f386a0bfffa7", "text": "most of the people who lurk in money.se will probably tell you to spend as little as possible on a car, but that is a really personal decision. since you live with your parents, you can probably afford to waste a lot of money on a car. on the other hand, you already have a large income so you don't really have the normal graduate excuses for deferring student loans and retirement savings. for the sake of other people in a less comfortable position, here is a more general algorithm for making the decision:", "title": "" }, { "docid": "ce8676528e1a2a117a0179043c2db82d", "text": "\"Money is a token that you can trade to other people for favors. Debt is a tool that allows you to ask for favors earlier than you might otherwise. What you have currently is: If the very worst were to happen, such as: You would owe $23,000 favors, and your \"\"salary\"\" wouldn't make a difference. What is a responsible amount to put toward a car? This is a tricky question to answer. Statistically speaking the very worst isn't worth your consideration. Only the \"\"very bad\"\", or \"\"kinda annoying\"\" circumstances are worth worrying about. The things that have a >5% chance of actually happening to you. Some of the \"\"very bad\"\" things that could happen (10k+ favors): Some of the \"\"kinda annoying\"\" things that could happen (~5k favors): So now that these issues are identified, we can settle on a time frame. This is very important. Your $30,000 in favors owed are not due in the next year. If your student loans have a typical 10-year payoff, then your risk management strategy only requires that you keep $3,000 in favors (approx) because that's how many are due in the next year. Except you have more than student loans for favors owed to others. You have rent. You eat food. You need to socialize. You need to meet your various needs. Each of these things will cost a certain number of favors in the next year. Add all of them up. Pretending that this data was correct (it obviously isn't) you'd owe $27,500 in favors if you made no money. Up until this point, I've been treating the data as though there's no income. So how does your income work with all of this? Simple, until you've saved 6-12 months of your expenses (not salary) in an FDIC or NCUSIF insured savings account, you have no free income. If you don't have savings to save yourself when bad things happen, you will start having more stress (what if something breaks? how will I survive till my next paycheck? etc.). Stress reduces your life expectancy. If you have no free income, and you need to buy a car, you need to buy the cheapest car that will meet your most basic needs. Consider carpooling. Consider walking or biking or public transit. You listed your salary at \"\"$95k\"\", but that isn't really $95k. It's more like $63k after taxes have been taken out. If you only needed to save ~$35k in favors, and the previous data was accurate (it isn't, do your own math): Per month you owe $2,875 in favors (34,500 / 12) Per month you gain $5,250 in favors (63,000 / 12) You have $7,000 in initial capital--I mean--favors You net $2,375 each month (5,250 - 2,875) To get $34,500 in favors will take you 12 months ( ⌈(34,500 - 7,000) / 2,375⌉ ) After 12 months you will have $2,375 in free income each month. You no longer need to save all of it (Although you may still need to save some of it. Be sure recalculate your expenses regularly to reevaluate if you need additional savings). What you do with your free income is up to you. You've got a safety net in saved earnings to get you through rough times, so if you want to buy a $100,000 sports car, all you have to do is account for it in your savings and expenses in all further calculations as you pay it off. To come up with a reasonable number, decide on how much you want to spend per month on a car. $500 is a nice round number that's less than $2,375. How many years do you want to save for the car? OR How many years do you want to pay off a car loan? 4 is a nice even number. $500 * 12 * 4 = $24,000 Now reduce that number 10% for taxes and fees $24,000 * 0.9 = $21,600 If you're getting a loan, deduct the cost of interest (using 5% as a ballpark here) $21,600 * 0.95 = $20,520 So according to my napkin math you can afford a car that costs ~$20k if you're willing to save/owe $500/month, but only after you've saved enough to be financially secure.\"", "title": "" }, { "docid": "33471b338e365b742e7811253db3b8f5", "text": "\"I have a slightly different take on this, compared to the other answers. In general, I think your emergency fund should always be at least 3K, especially if you own a used car that is out of warranty. Any number of unlucky auto repairs could easily cost over 2K. So, if you have 7K in savings, I would personally buy a car that is 4K or less or finance any amount of the car over 4K (if you can get a relatively low interest rate). Then I would pay down the financed portion of the car as quickly as possible while maintaining at least a 3K emergency fund. That being said, notice I mentioned \"\"In general\"\". Your situation may actually be quite different. If you don't have much debt, with your income you might be able to build up a couple of thousand in savings in a single month, and if so the above doesn't really apply. Even if you spent the entire 7K on a car, you'd likely have at least 3K in your emergency fund within 60-90 days. As for what's responsible, there are too many factors to dictate that. If you don't have many other expenses, you could possibly afford a $40K car, and I don't think anyone here could fairly call that \"\"irresponsible\"\" if you spent that much, though surely no one would call it \"\"responsible\"\" either. Perhaps the best advice is to buy the least expensive car you will be happy with. Many people regret overspending on a vehicle, but few regret underspending (unless they got a lemon that requires lots of repairs). Finally, you could also consider another option. You could get a very cheap car for 1K or less and drive it for a year. By then you may have closer to 20K saved up for a much nicer car than you can afford today.\"", "title": "" }, { "docid": "6cd61dc0b24ddb05e5df77719c29cbd3", "text": "Regardless of your circumstances, the amount of money you should put into a car is about $6000-8000 or the amount of cash you actually have, whichever is less. You can get a very reliable gently-used car in that price range, and a car that's plenty good to drive for basically whatever your budget is, down to about $1500-2000 or so. Spending more is never a financially sound decision; it's purely a luxury expenditure. Buying a car with a loan is always a financially bad decision.", "title": "" }, { "docid": "7601cecbda1474c13eb1d0a1744be4a7", "text": "\"As an absolute basic in life you always need 1 month's salary free and clear sitting in the bank. You do not have this. You don't even get to count that. It's what Napoleon would refer to as an \"\"iron reserve\"\": you have to have this. You actually won't even have this for some two or three months. Note that you have a staggering amount of debt. You have absolutely no assets. You own nothing. You have no savings. So at this point we can say \"\"Could your situation be any worse?\"\" and the answer is \"\"It could not be any worse.\"\" On the \"\"good things in your outlook\"\" side you have the idea that you probably have a job (it's unfortunate how you refer to it as \"\"will pay\"\" when you mean \"\"might pay\"\") but you're in perhaps the highest-expense, most-flakey economic zone on Earth. Recall that i) every company eventually closes and ii) every job eventually ends. The next incredible problem you face is that I'm guessing you just have no clue how expensive it is to insure and run a car. Any ideas of buying anything more than a junker is a non-starter, but on top of that you're not realizing how expensive it is going to be for you to run a car. Disturbingly, you have a very poor idea of even how far it is you have to drive each day. The only realistic solution for you is to bike each day to work (buy the cheapest possible bike); become the \"\"eccentric guy\"\" who really focusses on health. Bike in for an hour, shower at the office or a nearby gym, enjoy your day and bike home. You'll need a backpack to carry your pack lunch, buy the cheapest backpack. Since it's LA, it may be impractical. You may literally need a car. In that case, your only solution is That's the only thing you can do. Plain lean on your parents or relatives to borrow some old car and use that. (It will still cost you an awful lot of money to do so - repairs, tires, insurance, and everything else.) A reminder, You do not have your one-month \"\"iron reserve\"\". You have a staggering amount of debt. You have absolutely no assets. You own nothing. You have no savings. Additionally you live with the parents; you have a dream of a job (in one the highest-priced, most flakey regions) and \"\"job\"\" is another word for no security - jobs evaporate all the time for many reasons. Please be careful. Regarding a car, find a way to borrow one; offer to make a repair on it, say. Don't spend one cent on anything your first six months at work, concentrate only on your job. See where you are after six months.\"", "title": "" }, { "docid": "54df40bf61e056d37576ccc99111fa4c", "text": "So many answers here are missing the mark. I have a $100k mortgage--because that isn't paid off, I can't buy a car? That's really misguided logic. You have a reasonably large amount of college debt and didn't mention any other debt-- It's a really big deal what kind of debt this is. Is it unsecured debt through a private lender? Is it a federal loan from the Department of Education? Let's assume the worst possible (reasonable) situation. You lose your job and spend the next year plus looking for work. This is the boat numerous people out of college are in (far far far FAR more than the unemployment rates indicate). Federal loans have somewhat reasonable (indentured servitude, but I digress) repayment strategies; you can base the payment on your current income through income-based and income-continent repayment plans. If you're through a private lender, they still expect payment. In both cases--because the US hit students with ridiculous lending practices, your interest rates are likely 5-10% or even higher. Given your take-home income is quite large and I don't know exactly the cost of living where you live--you have to make some reasonable decisions. You can afford a car note for basically any car you want. What's the worst that happens if you can't afford the car? They take it back. If you can afford to feed yourself, house yourself, pay your other monthly bills...you make so much more than the median income in the US that I really don't see any issues. What you should do is write out all your monthly costs and figure out how much unallocated money you have, but I'd imagine you have enough money coming in to finance any reasonable new or used car. Keep in mind new will have much higher insurance and costs, but if you pick a good car your headaches besides that will be minimal.", "title": "" }, { "docid": "ac4094c5932096f13faf9926cfb1373a", "text": "\"I think the answer to how much you \"\"should\"\" spend depends on a few more questions: Once you answer these questions I think you'll have a better idea of what you should spend. If you have no financial goals then what kind of car you buy doesn't really matter. But if your goals are to build and accumulate wealth both in the short and long term then you should know that, by the numbers, a car is terrible financial investment. A new car loses thousands of dollars in value the moment you drive it off the lot. Buy the cheapest, reliable commuter you can ($5k or less) and use the extra money to pay off your debts. Then once your debts are paid off start investing that money. If you continue this frugal mindset with your other purchases (what house to buy, what food to eat, what indulgences to indulge in, etc...) and invest a bit, I think you'll find it pretty easy to create a giant amount of wealth.\"", "title": "" } ]	[ { "docid": "78b7e7d1ebadbacbc9ae26e90af8340f", "text": "The first thing that strikes me is: Is this a time-limited offer? Because if you can expect the offer to still be valid in a few weeks, why not just wait that month (which will earn you the money) and buy the car then? The second thing you need to consider is obviously the risk that in the interim, there will be an actual emergency which would require the money that you no longer have. The third thing to consider is whether you need the car now. Do you require a car to get around and your current one is breaking down, perhaps even to the point that repairing it would cost you more than buying a new car and it is currently not safe to drive? If so, compare the cost of repairing to the cost of buying; if the difference is small, and the new car would be more likely to be reliable than the old car after spending the money, then it can make sense to buy a new car and perhaps sell the old one in its current condition to someone who likes to tinker. (Even if you only recover a few hundreds of dollars, that's still money that perhaps you wouldn't otherwise have.) The fourth thing I would consider, especially given the time frame involved, is: Can you get a loan to buy the new car? Even if the interest rate is high, one month's worth of interest expense won't set you back very far, and it will keep the money in your emergency fund for if there is an actual emergency in the weeks ahead. Doing so might be a better choice than to take the money out of the emergency fund, if you have the opportunity; save the emergency fund for when that opportunity does not exist. And of course, without knowing how much you earn, take care to not end up with a car that is no more reliable than what you have now. Without knowing how much you earn and what the car you have in mind would cost, it's hard to say anything for certain, but if the car you have in mind costs less than a month's worth of net pay for you, consider whether it's likely to be reliable. Maybe you are making an absolutely stellar pay and the car will be perfectly fine; but there's that risk. Running the car by a mechanic to have it briefly checked out before buying it may be a wise move, just to make sure that you don't end up with a large car repair expense in a few months when the transmission gives up, for example.", "title": "" }, { "docid": "593ddbf35037a9785c3b2d77afd8a566", "text": "There needs to be more numbers with your choices, without those any answer is purely speculation. Assuming that India is much like the US, you are almost always better to go with a company leased car. That is if you are not responsible for the lease if your employment ends with the company. Here in the US companies typically reimburse, so tax free, their employees for about 50 cents per mile, or about 31 cents per kilometer. This barely covers the gas and insurance and falls way short when one includes deprecation and maintenance. So it is better to have the company to pick up all those costs. Borrowing money on a car is just plain dumb no matter what the interest rate. So I would stick with choice number 1 or 3 depending on the arrangement for the company leased car. The next question becomes how much you should spend for a car? I would say enough to keep you happy and safe, but not much more than that until you are wealthy.", "title": "" }, { "docid": "18eb4f81e1dbd0e3f013cffe592b5586", "text": "You are planning on buying a car that is 50% of your salary. Add your student debt to that and your total debt is >50% of your salary. I would suggest getting a few credit cards to build up credit, but can you manage that? Buying a 25k car with 55k salary is overspending. Get a second-hand car for 7k or so. Plus, buying a new car is not smart either, from a pricing standpoint, if you really want a new car, buy one that is 1 to 2 years old.", "title": "" }, { "docid": "3c1c88898b926b485388cd6fc43042dc", "text": "Question (which you need to ask yourself): How well are your friends paid for their work? What would happen if you just took your money and bought a garage, and hired two car mechanics? How would that be different from what you are doing? The money that you put into the company, is that paid in capital, or is it a loan to the company that will be repaid?", "title": "" }, { "docid": "76f84e708a51517019013542f87d9de6", "text": "On paper the whole 6 months living costs sounds (and is) great, but in real life there are a lot of things that you need to consider. For example, my first car was constantly falling apart and was an SUV that got 16MPG. I have to travel for work (about 300 miles per week) so getting a sedan that averages close to 40MPG saves me more in gas and maintenance than the monthly payment for the new car costs. When our apartment lease was up, the new monthly rent would have been $1685 per month, we got a 30 year mortgage with a monthly payment of $1372. So buying a house actually let us put aside more each month. We have just under 3 months of living expenses set aside (1 month in liquid assets, 2 months in a brokerage account) and I worry about it. I wish we had a better buffer, but in our case the house and car made more sense as an early investment compared to just squirreling away all our savings. Also, do you have any debt? Paying off debt (student loans, credit card debt, etc.) should often take top priority. Have some rainy day funds, of course, but pay down debts, and then create a personal financial plan for what works best in your situation. That would be my suggestion.", "title": "" }, { "docid": "64f9212da3a1b059f5771311c5862c51", "text": "Get rid of the lease and buy a used car. A good buy is an Audi because they are popular, high-quality cars. A 2007 Audi A4 costs about $7000. You will save a lot of money by dumping the lease and owning. Go for quality. Stay away from fad cars and SUVs which are overpriced for their value. Full sized sedans are the safest cars. The maintenance on a high-quality old car is way cheaper than the costs of a newer car. Sell the overseas property. It is a strong real estate market now, good time to sell. It is never good to have property far away from where you are. You need to have a timeline to plan investments. Are you going to medical school in one year, three years, five years? You need to make a plan. Every investment is a BUY and a SELL and you should plan for both. If your business is software, look for a revenue-generating asset in that area. An example of a revenue-generating asset is a license. For example, some software like ANSYS has license costs in the region of $30,000 annually. If you broker the license, or buy and re-sell the license you can make a good profit. This is just one example. Use your expertise to find the right vehicle. Make sure it is a REVENUE-GENERATING ASSET.", "title": "" }, { "docid": "98befa696835ac9629bee772926ca11a", "text": "I don't have a reference, but I think it depends on when you entered the workforce: If you finished school at age 24, your primary goals are to pay down expensive debt and to save up enough for a down payment. So essentially not much. Maybe $5k to $10k at the most. On the other hand if you entered the workforce at age 20, with no debts and no significant expenses, it should have been easy to sock away 20% of your income for 6 years, so $40k to $50k would be reasonable. The difference is that the first person's income earning potential should be higher, so eventually they'd be able to make up the difference and pass them.", "title": "" }, { "docid": "23fd7f9dc7b35a42c2e519670245b8b1", "text": "I've read online that 20% is a reasonable amount to pay for a car each month - Don't believe everything you read on the internet. But, let me ask, does your current car have zero expense? No fuel, no oil change, no repairs, no insurance? If the 20% is true, you are already spending a good chunk of it each month. My car just celebrated her 8th birthday. And at 125,000 miles, needed $3000 worth of maintenance repairs. The issue isn't with buying the expensive car, you can buy whatever you can afford, that's a personal preference. It's how you propose to budget for it that seems to be bad math. Other members here have already pointed out that this financial decision might not be so wise.", "title": "" }, { "docid": "336aa42c53d72c72b5139be22607f652", "text": "You may not have a good choice until you start that job. $2,000 is awfully low for a car, so it could be very risky. But you may not be able to get a loan until you start the new job. I would talk to a bank or credit union to get an idea of how much, if anything, you could borrow at this time. If you have a letter offering you the job that might help to get a loan. There are dealers who will finance a very cheap used car for anybody, but that kind of deal is likely to be at a very high interest rate and should be avoided. You could wind up with a debt and no car. One other possibility is to have a co-signer, such as a parent or other relative. That could make getting a car loan easy.", "title": "" }, { "docid": "80a3dfcc280d42c75783d1b8681fd3b8", "text": "If you want the new car, pay cash for it. Here's why: By paying cash for the car, you immediately save $2,500 off the price of the car. That is not insignificant, it's 8.3% off. By paying cash, you'll never be upside down on the car, and you can sell the car anytime you want. You said that all you need to do is beat the 0.9% interest rate with your investment to come out ahead. That doesn't take into account the discount you would have gotten by paying cash. $30,000 invested for 5 years at 1.6% (rough estimate) would get you $2,500 (the discount), so the rate you need to beat to come out ahead is actually 2.5%. Still doable, but it is much less of a sure thing on a 5 year investment, and much less worth the trouble. New cars are an expensive luxury. If you are wealthy enough, a new car certainly can be appropriate for you. However, if you don't like the idea of paying $30k in cash all at once, that is a strong indication that perhaps the new car is a luxury you aren't in a position to buy at this time. Borrowing the money and paying for it over time makes it psychologically easier to over spend on transportation.", "title": "" }, { "docid": "3a88dcc503cff3f8fa55827f93411082", "text": "Liquidity. That's the issue. You rent, and that's not bad. No new roof, boiler, etc. But, you have a car? Your savings is a guarantee that you'll not have to charge a $2000 transmission on an 18% credit card. You job may be secure, but employment (aside from self employment) is never 100% guaranteed. With $3000 income per month, I'd not prepay the student loan until I had at least $9000 in savings. We don't know your country, although we don't have fortnights in the US, so if you are in the US, you have a non-US background. Either way, if your employer offers any kind of matching retirement deposits, I'd prioritize that. Never leave that matched money on the table. You are off to a great start, this relatively low student loan debt shouldn't keep you awake at night.", "title": "" }, { "docid": "83f722d2f398117aafd522e4bfb3384e", "text": "I think you are making this more complicated that it has to be. In the end you will end up with a car that you paid X, and is worth Y. Your numbers are a bit hard to follow. Hopefully I got this right. I am no accountant, this is how I would figure the deal: The payments made are irrelevant. The downpayment is irrelevant as it is still a reduction in net worth. Your current car has a asset value of <29,500>. That should make anyone pause a bit. In order to get into this new car you will have to finance the shortfall on the current car (29,500), the price of the vehicle (45,300), the immediate depreciation (say 7,000). In the end you will have a car worth 38K and owe 82K. So you will have a asset value of <44,000>. Obviously a much worse situation. To do this car deal it would cost the person 14,500 of net worth the day the deal was done. As time marched on, it would be more as the reduction in debt is unlikely to keep up with the depreciation. Additionally the new car purchase screen shows a payment of $609/month if you bought the car with zero down. Except you don't have zero down, you have -29,500 down. Making the car payment higher, I estamate 1005/month with 3.5%@84 months. So rather than having a hit to your cash flow of $567 for 69 more months, you would have a payment of about $1000 for 84 months if you could obtain the interest rate of 3.5%. Those are the two things I would focus on is the reduction in net worth and the cash flow liability. I understand you are trying to get a feel for things, but there are two things that make this very unrealistic. The first is financing. It is unlikely that financing could be obtained with this deal and if it could this would be considered a sub-prime loan. However, perhaps a relative could finance the deal. Secondly, there is no way even a moderately financially responsible spouse would approve this deal. That is provided there were not sigificant assets, like a few million. If that is the case why not just write a check?", "title": "" }, { "docid": "8d280f9654cc7e6f9132494b19bc1d4f", "text": "Not long after college in my new job I bought a used car with payments, I have never done that since. I just don't like having a car payment. I have bought every car since then with cash. You should never borrow money to buy a car There are several things that come into play when buying a car. When you are shopping with cash you tend to be more conservative with your purchases look at this Study on Credit card purchases. A Dunn & Bradstreet study found that people spend 12-18% more when using credit cards than when using cash. And McDonald's found that the average transaction rose from $4.50 to $7.00 when customers used plastic instead of cash. I would bet you if you had $27,000 dollars cash in your hand you wouldn't buy that car. You'd find a better deal, and or a cheaper car. When you finance it, it just doesn't seem to hurt as bad. Even though it's worse because now you are paying interest. A new car is just insanity unless you have a high net worth, at least seven figures. Your $27,000 car in 5 years will be worth about $6500. That's like striking a match to $340 dollars a month, you can't afford to lose that much money. Pay Cash If you lose your job, get hurt, or any number of things that can cost you money or reduce your income, it's no problem with a paid for car. They don't repo paid for cars. You have so much more flexibility when you don't have payments. You mention you have 10k in cash, and a $2000 a month positive cash flow. I would find a deal on a 8000 - 9000 car I would not buy from a dealer. Sell the car you have put that money with the positive cash flow and every other dime you can get at your student loans and any other debt you have, keep renting cheap keep the college lifestyle (broke) until you are completely out of debt. Then I would save for a house. Finally I would read this Dave Ramsey book, if I would have read this at your age, I would literally be a millionaire by now, I'm 37. Don't buy from a dealer Find a private sale car that you can get a deal on, pay less than Kelly Blue Book. Pay a little money $50 - 75 to have an automotive technician to check it out for you and get a car fax, to make sure there are no major problems. I have worked in the automotive industry for 20 + years and you rarely get a good deal from a dealer. “Everything popular is wrong.” Oscar Wilde", "title": "" }, { "docid": "f53e7860ba48e7461c301a161d1047e8", "text": "\"You have a job \"\"lined up\"\". What if it falls through? Then you have to sell your fancy car, and you are back to scare, apart from the dough you owe your dad. For consumption items, live within your means. A cheap first car is just fine. Spend cash where it brings you more cash.\"", "title": "" }, { "docid": "9c7b4c73d0cfa05f6db8ec14315332e2", "text": "Suppose you're a European Company, selling say a software product to a US company. As much as you might want the US company to pay you in Euros they might insist (or you'll lose the contract) that you agree pricing in USD. The software is licensed on a yearly recurring amount, say 100K USD per year payable on the 1st January every year. In this example, you know that on the 1st Jan that 100K USD will arrive in your USD bank account. You will want to convert that to Euros and to remove uncertainty from your business you might take out an FX Forward today to remove your currency risk. If in the next 9 months the dollar strengthens against the Euro then notionally you'll have lost out by taking out the forward. Similarly, you've notionally gained if the USD weakens against the EURO. The forward gives you the certainty you need to plan your business.", "title": "" } ]	fiqa
6fde189b8da3b231b6e38a19b7d76aec	401k Rollover - on my own or through my financial advisor?	[ { "docid": "5067249e6b8ae4300dbac7cb050b5742", "text": "Call up vanguard and tell them you want to do a rollover. They walk you through the process. Spend some time on reading up on asset allocation and benefits of indexing. 1.5% every year is steep and what do you have in return? The advisor's word that he'll make it up. How much did he manage to return during the last lost decade? It's a lose-win situation. He'll get his 1.5% no matter how the market does but that's not the deal you are getting. Go with Vanguard. You are already thinking correctly - diversification, rebalancing, low cost!", "title": "" }, { "docid": "bfaf62c8bc19cfba37be8427c94ef8fc", "text": "I thought the Finance Buff made a pretty solid argument for a financial advisor the other day: http://thefinancebuff.com/the-average-investor-should-use-an-investment-advisor-how-to-find-one.html But 1.5% is too expensive. The blog post at Finance Buff suggests several alternatives. He also has the great suggestion to use Vanguard's cheap financial planning service if you go with Vanguard. A lot of investing advice fails to consider the human factor. Sure it'd be great to rebalance exactly every 6 months and take precisely the amount of risk to theoretically maximize returns. But, yeah right. It's well-known that in the aggregate individual investors go to cash near market bottoms and then buy near market tops. It's not that they don't know the right thing to do necessarily, it's just that the emotional aspect is stronger than any of us expect. You shouldn't rely on sticking to your investments any more than you rely on sticking to your diet and exercise program ;-) the theoretically optimal solution is not the real-world-people-are-involved optimal solution. My own blog post on this suggests a balanced fund rather than a financial advisor, but I think the right financial advisor could well be a better approach: http://blog.ometer.com/2010/11/10/take-risks-in-life-for-savings-choose-a-balanced-fund/ Anyway, I think people are too quick to think of the main risk as volatility, and to think of investing as simple. Sure in theory it is simple. But the main risk is yourself. Fear at market bottoms, greed at market tops, laziness the rest of the time... so there's potential value in taking yourself out of the picture. The human part is the part that isn't simple. On whether to get a financial advisor in general (not just for investments), see also: What exactly can a financial advisor do for me, and is it worth the money?", "title": "" } ]	[ { "docid": "124a7aaba16ed6cd0c91b1f1520512a8", "text": "Every plan administrator has their own procedures for rollovers. In any case, you would start by browsing their website or calling them seeking information on rollover. You will need to arrange it with both your current and prior administrators. Usually the administrator will send the money directly to your current plan provider, keeping you out of the chain and minimizing any risks of tax complications. It may happen, though, that they have to send the check to you. In that case you will have a limited amount of time to provide it to your current plan.", "title": "" }, { "docid": "aac3d7275a71c19714675cdce0db0350", "text": "Most individuals do not need a personal financial advisor. If you are soon entering the world of work, your discretionary investments should be focused on index funds that you commit to over the long run. Indeed, the best advice I would give to anyone just starting out would be: For most average young workers, a financial advisor will just give you some version of the information above, but will change you for it. I would not recommend a financial advisor as a necessity until you have seriously complicated taxes. Your taxes will not be complicated. Save your money.", "title": "" }, { "docid": "2889ad9fd541beb4dccf1c5c25b0dfaa", "text": "You have many options, and there is no one-size-fits-all recommendation. You can contribute to your IRA in addition to your 401(k), but because you have that 401(k), it is not tax-deductable. So there is little advantage in putting money in the IRA compared to saving it in a personal investment account, where you keep full control over it. It does, however, open the option to do a backdoor-rollover from that IRA to a Roth IRA, which is a good idea to have; you will not pay any taxes if you do that conversion, if the money in the IRA was not tax deducted (which it isn't as you have the 401(k)). You can also contribute to a Roth IRA directly, if you are under the income limits for that (193k$ for married, I think, not sure for single). If this is the case, you don't need to take the detour through the IRA with the backdoor-rollover. Main advantage for Roth is that gains are tax free. There are many other answers here that give details on where to save if you have more money to save. In a nutshell, In between is 'pay off all high-interest debt', I think right after 1. - if you have any. 'High-Interest' means anything that costs more interest than you can expect when investing.", "title": "" }, { "docid": "351446dcbdc3994c898077f317fdcd20", "text": "I'm in a similar situation as I have a consulting business in addition to my regular IT job. I called the company who has my IRA to ask about setting up the Individual 401k and also mentioned that I contribute to my employer's 401k plan. The rep was glad I brought this up because he said the IRS has a limit on how much you can contribute to BOTH plans. For me it would be $24K max (myAge >= 50; If you are younger than 50, then the limit might be lower). He said the IRS penalties can be steep if you exceed the limit. I don't know if this is an issue for you, but it's something you need to consider. Be sure to ask your brokerage firm before you start the process.", "title": "" }, { "docid": "a49a54204023c175881cedcd8f91556f", "text": "What is my best bet with the 401K? I know very little about retirement plans and don't plan to ever touch this money until I retire but could this money be of better use somewhere else? You can roll over a 401k into an IRA. This lets you invest in other funds and stocks that were not available with your 401k plan. Fidelity and Vanguard are 2 huge companies that offer a number of investment opportunities. When I left an employer that had the 401k plan with Fidelity, I was able to rollover the investments and leave them in the existing mutual funds (several of the funds have been closed to new investors for years). Usually, when leaving an employer, I have the funds transferred directly to the place my IRA is at - this avoids tax penalties and potential pitfalls. The student loans.... pay them off in one shot? If the interest is higher than you could earn in a savings account, then it is smarter to pay them off at once. My student loans are 1.8%, so I can earn more money in my mutual funds. I'm suspicious and think something hinky is going to happen with the fiscal cliff negotiations, so I'm going to be paying off my student loans in early 2013. Disclaimer: I have IRA accounts with both Fidelity and Vanguard. My current 401k plan is with Vanguard.", "title": "" }, { "docid": "c4ad19a1aa1e2fad7c881aed5cfa4a44", "text": "For the rollover, you should probably talk to the recipient manager. This would be your broker or whomever (your new employer if rolling into another 401k). They should be able to update you on progress and let you know if you need to do anything. In a comment, you say I could be putting in money but instead im lossing. There is no requirement that an IRA have 401k money in it. Just put the money in without the existing money. Eventually the rollover will complete and add that money to whatever you contribute to the IRA. The rollover should not affect your future contributions in any way.", "title": "" }, { "docid": "290c7fe6754d823f4f4597f866625b86", "text": "It is typically very easy to roll a 401(k) into an IRA. Companies that provide IRA's are very experienced with it, and I would expect that they will take your calls from overseas. You will likely be able to do it over the internet without using a phone at all. Just open an IRA with any brokerage company (Scottrade, Vanguard, Fidelity, Schwab, Ameritrade, etc.) and follow instructions to roll your 401(k) into it. Most likely they will need your signature, but usually a scan of a form you have filled out will do. Be sure to have information on your 401(k) provider, including your account number there, on hand. These companies are all very reputable and this is not a difficult transaction. There's really no downside to rolling into an IRA. 401(k) plans usually have more limited options and/or worse fee structures and are frequently harder to work with, as you have observed.", "title": "" }, { "docid": "71408d135b125205a2c4d55ef593748f", "text": "Direct roll-overs / trustee to trustee transfers are typically initiated by the receiving institution. Therefore you need to work with Vanguard. They will have a form in which you provide them with your fidelity account info and they will then contact Fidelity and initiate the transfer. Do not take the option of being sent a check made out to you by Fidelity (an indirect rollover). There are too many ways to muck up and get hit with penalties if you are the middleman in the process. I believe in most, if not all, cases the IRS now requires a 20% withholding on indirect 401k rollovers. This is because too many times people would initiate a roll over but not complete it either at all or within the allowed 60 day window and then come tax time be unable to pay the tax and penalty on the distribution. The tricky part of that withholding is that you still have to deposit that amount into the new account otherwise it becomes a distribution subject to tax and penalties (and that means coming up with the money from other accounts). So in summary talk to Vanguard and set up an institution to institution transfer. They souls make this very easy as they want your money. And do not do any kind of rollover where you come into personal possession of the money. If the check is made out to Vanguard but sent to you to resend to Vanguard that should not be an issue as that is still a trustee to trustee transfer. Fidelity may have a minor account closer fee that will be deducted from the value of the account before it is sent.", "title": "" }, { "docid": "568cdc8bc1ffceb1b886706a7fa2092e", "text": "The first question is essentially asking for specific investment advice which is off-topic per the FAQ, but I'll take a stab at #2 and #3 (2) If my 401k doesn't change before I leave my job (not planned in the near future), I should roll it over into my Roth IRA after I leave due to these high expense ratios, correct? My advice is that you should roll over a 401K into an IRA the first chance you get (usually when you leave the job). 401K plans are NOTORIOUS for high expense ratios and why leave your money in a plan where you have a limited choice of investments anyway versus a self-directed IRA where you can invest in anything you want? (3) Should I still max contribute with these horrible expense ratios? If they are providing a match, yes. Even with the expense ratios it is hard to beat the immediate return of an employer match. If they aren't matching, the answer is still probably yes for a few reasons: You already are maxing out your ability to contribute to sheltered accounts, so assuming you still want to sock away that money for retirement, the tax benefits are still valuable and probably offset the expense ratios. Although you seem to be an exception, it is hard for most people to be disciplined enough to put money in a retirement account after they have it in their hands (versus auto-deduction from paychecks).", "title": "" }, { "docid": "d368f5253c474f6a544beca62849f647", "text": "I agree with harmanjd – best to roll it over to an IRA. Not only does that afford you better control of your money as pointed out already, but: If you choose your IRA provider wisely, you can get an account that provides you with a much wider array of investing choices, including funds and ETFs that charge much lower fees than what you would have had access to in an employer 401(k) plan. But here's one thing to consider first: Do you hold any of your previous employer's stock in your old 401(k)? There are special rules you might want to be aware of. See this article at Marketwatch: If your 401(k) includes your company's stock, a rollover may be a bad move. Additional Resource:", "title": "" }, { "docid": "2164e8c58b0d0fb51e5b3005e5e0fb0b", "text": "Okay thanks, let's hope it's a relatively painless process to correct my mistake! Really odd that my 401(k)s are traditional, I was so sure they weren't. Maybe it's better then to open up a traditional IRA alongside the Roth, use that for rollovers, and just kick a few bucks into the Roth on occasion?", "title": "" }, { "docid": "2741b649a785a6198c671195a4e0a652", "text": "You can't rollover a 401k directly into a Roth IRA. What you can do is rollover a 401k into a traditional IRA, and then convert some or all of the money to a Roth IRA. This is independent of any contributions made to a traditional or Roth IRA.", "title": "" }, { "docid": "bafeb59bf5ba1c14558200300f70f0b3", "text": "Another option to a human advisor is FutureAdvisor, a web service that (if it supports your 401k plan) gives personalized algorithmic advice on what you should hold in your 401(k) and other retirement accounts. If it doesn't support your 401(k) plan just yet you can sign up to be emailed when your plan is added. [Disclosure: I work here, but I believe in the product and it's designed to solve this exact problem so I'm mentioning it here] Note from JoeTaxpayer - bolu's disclosure is much appreciated. The fee is $39/yr, with a free trial. Consider that a commissions based advisor won't even take on a $10K level account, and at $100K, you'd be hard pressed to gain by more than his 1% fee. So while I've not dug deeper into this site, a rules-based methodology is likely to be worth the cost if over time it gains you even a fraction of a percent compared to what you'd have done blindly.", "title": "" }, { "docid": "9c9a51e5fc757203e1ef1b4fef08b15b", "text": "\"You can definitely open an IRA and roll the money over. I suggest instead of trying opening online calling the institution and asking what would be the procedure in your specific case. If not, I will have to cash out my 401K. Who do I contact to find out if my country has some sort of deal with the US in regards to taxes? I would of course prefer to not pay the penalty (20 % federal + 10 % state tax), and instead reinvest the money in a retirement fund in my country. US embassies some times have listings of tax advisers who work with US expats in the countries they cover. You can check for such a list on the website of your local US embassy. These people will be able to answer this question. However it is highly unlikely that you'll be able to avoid the tax and penalty in the US in this scenario. It is not likely that you could \"\"roll-over\"\" into a foreign retirement fund (from your country's laws perspective), but maybe your country has some solution for this.\"", "title": "" }, { "docid": "d2d0ad1b83d45313a4dadac2270bbb42", "text": "\"no, good questions my friend. when did you do this rollover? if it was this year, your firm should have forms that you can fill out to \"\"undo\"\" the roth conversion - only earnings on your investments will be taxed, and everything gets rolled over to a traditional IRA. not fun for tax filing but... you can also leave them as is and pay the taxes (usually only a good option if it's a low income year for the filer). i would consult your tax advisor regardless in this situation.\"", "title": "" } ]	fiqa
254729110ced405123636f653ec359a7	How are mortgage payments decided? [duplicate]	[ { "docid": "7bd327e9066516fa1c01300257f23a07", "text": "It's easiest to get your payment from the PMT function in Excel or Google Sheets. So a $100,000 30 year mortgage at 3% looks like this: The basic calculation is pretty simple. You take the annual interest rate, say 3%, divided by 12, times the existing principal balance: The idea is that borrowers would like to have a predictable payment. The earlier payments are proportionally more interest than principal than later payments are but that's because there is much more principal outstanding on month 1 than on month 200.", "title": "" }, { "docid": "c5d854e67e9fba192599f0a95bde7d7e", "text": "It's so that your total mortgage payment stays the same every month. Obviously, the interest due each month decreases over time, as part of the principal is paid off each month, and so if the proportion of interest and principal repayments were to stay the same then your first payment would be very large and your last payment would be almost nothing.", "title": "" }, { "docid": "f99d5803d0555f64153b6619bd5014cd", "text": "It has nothing to do with forcing people to pay off their debt; in that case it would make better sense to have people pay off debt rather than interest. It is because you want to have your actual payment stay the same each month, which is easier for the vast majority of people to comprehend and put into their budget. It is called an annuity in Finance terms. In theory you could use another method - eg. pay of the same amount of debt each month - then your interest payments will decrease over time. But in that case your monthly payment (debt + interest) will not be stable - It will start of high and decrease a little bit each month. With an annuity you have a constant cashflow. In Finance you generally operate with three methods of debt repayment: Annuity: Fixed cashflow. High interest payment in the beginning with small debt payments - later it will be reversed. Serial loan: Fixed debt payments. Debt payments are equally spread out accross the period - interst is paid on the remaining debt. Cash flow will decrease over time, because interest payments become smaller for each period. Standing loan: You only pay interest on the loan, no debt payments during the period. All debt is payed back in the end of the loan. In Europe it is common practise to combine a 30 year annuity with a 10 year standing loan, so that you only pay interest on the loan for the first 10 years, thereafter you start paying back the debt and interest, the fixed amount each month (the annuity). This is especially common for first-time buyers, since they usually have smaller salaries early in life than later and therefore need the additional free cash in the beginning of their adult life.", "title": "" } ]	[ { "docid": "47f8e35a332893bfa08992edee775499", "text": "\"Mortgage agreements usually have a clause in which the mortgagor warrants that all the statements and information which they have provided to the mortgagee are correct. In your case, this probably included your credit score. Since your \"\"statement\"\" concerning your credit score is no longer accurate, they want you to update the agreement with the new information before the final version is prepared. Credit scores change for many random reasons. The agencies re-calibrate formulas constantly. It is unlikely that your mortgage negotiations affected your credit score. The bank will only start reporting the facts of mortgage to a credit agency when you start paying (or not paying) the loan. Credit agencies don't care whether you have a loan or not. They only care whether you have paid your debts, or not paid them.\"", "title": "" }, { "docid": "0393146a0a1c3a59cc1edfcb2566ed1b", "text": "Unfortunately there is no universal answer to this question. Each mortgage servicing company will handle it differently according to their own policies. The best way to handle this problem is to talk to your mortgage servicing company and specify that you want all of your over-payments to be applied to principle (assuming that is indeed what you want). Most companies will be willing to work according to your stated preferences, but there may be some companies that have a specific procedure for how to make sure that preference is applied. Unfortunately there is very little you can do about it if you ended up with one of the less friendly mortgage servicing companies out there. Maybe threaten a lawsuit. Good luck.", "title": "" }, { "docid": "f595b1e50b0683b20aa07a69001c969c", "text": "\"One way to think of the typical fixed rate mortgage, is that you can calculate the balance at the end of the month. Add a month's interest (rate times balance, then divide by 12) then subtract your payment. The principal is now a bit less, and there's a snowball effect that continues to drop the principal more each month. Even though some might object to my use of the word \"\"compounding,\"\" a prepayment has that effect. e.g. you have a 5% mortgage, and pay $100 extra principal. If you did nothing else, 5% compounded over 28 years is about 4X. So, if you did this early on, it would reduce the last payment by about $400. Obviously, there are calculators and spreadsheets that can give the exact numbers. I don't know the rules for car loans, but one would actually expect them to work similarly, and no, you are not crazy to expect that. Just the opposite.\"", "title": "" }, { "docid": "2091e876d65d16a2472976058dc08912", "text": "A security is a class of financial instrument you can trade on the market. A share of stock is a kind of security, for example, as is a bond. In the case of your mortgage, what happens: You take out a loan for $180k. The loan has two components. a. The payment stream (meaning the principal and the interest) from the loan b. The servicing of the loan, meaning the company who is responsible for accepting payments, giving the resulting income to whomever owns it. Many originating banks, such as my initial lender, do neither of these things - they sell the payment stream to a large bank or consortium (often Fannie Mae) and they also sell the servicing of the loan to another company. The payment stream is the primary value here (the servicing is worth essentially a tip off the top). The originating bank lends $180k of their own money. Then they have something that is worth some amount - say $450k total value, $15k per year for 30 years - and they sell it for however much they can get for it. The actual value of $15k/year for 30 years is somewhere in between - less than $450k more than $180k - since there is risk involved, and the present value is far less. The originating bank has the benefit of selling that they can then originate more mortgages (and make money off the fees) plus they can reduce their risk exposure. Then a security is created by the bigger bank, where they take a bunch of mortgages of different risk levels and group them together to make something with a very predictable risk quotient. Very similar to insurance, really, except the other way around. One mortage will either default or not at some % chance, but it's a one off thing - any good statistician will tell you that you don't do statistics on n=1. One hundred mortgages, each with some risk level, will very consistently return a particular amount, within a certain error, and thus you have something that people are willing to pay money on the market for.", "title": "" }, { "docid": "354869e879f074d72e1abac7d1351121", "text": "A payment of $224 at 7.2% interest will pay off a $33000 mortgage in 30 years. Unfortunately, I'm on cold medicine so guessing was the only way I got to the answer, but I guessed right on the first try :). However, if you like algebra: The following formula is used to calculate the fixed monthly payment (P) required to fully amortize a loan of L dollars over a term of n months at a monthly interest rate of c. [If the quoted rate is 6%, for example, c is .06/12 or .005]. P = L[c(1 + c)n]/[(1 + c)n - 1]", "title": "" }, { "docid": "e0e285f0529a2bacb91251da9f608fff", "text": "What sounddude said, mortgage servicing companies do not get to unilaterally change the terms of a mortgage. Although I'm inclined to guess it was a simple coding error on BOA's part (wrong processing box got checked when mortgage was acquired) that was never caught, in which case BOA should be falling all over themselves to fix the situation (on their dime). If they don't fix it in a hurry, then I'd hope they get their head handed to them in court in a hurry.", "title": "" }, { "docid": "b03915b188d6fcb35d4155487adbc78c", "text": "In the US, our standard fixed rate mortgages would show no difference. My payment is calculated to be due on the 1st of each month. When I first got a mortgage, I was intrigued by this question, and experimented. I paid early, on the 15th, 2 weeks early, and looked at my next statement. It matched the amortization, exactly. Mortgages at the time were over 12%, so I'd imagine having seen the benefit of that 1/2% for the early payment. Next I paid on the last day before penalty, in effect, 2 weeks late. I expected to see extra interest accrue, again, just a bit, but enough to see when compared to the amortization table. Again, no difference, the next statement showed the same value to the penny.", "title": "" }, { "docid": "b3666af20f9bb3570574b277a7faccb3", "text": "Unless you are getting the loan from a loan shark, it is the most common case that each payment is applied to the interest accrued to date and the rest is applied towards reducing the principal. So, assuming that fortnightly means 26 equally-spaced payments during the year, the interest accrued at the end of the first fortnight is $660,000 x (0.0575/26) = $1459.62 and so the principal is reduced by $2299.61 - $1459.62 = $839.99 For the next payment, the principal still owing at the beginning of that fortnight will be $660,000-$839.99 = $659,160.01 and the interest accrued will be $659,160.01 x (0.0575/26) = $1457.76 and so slightly more of the principal will be reduced than the $839.99 of the previous payment. Lather, rinse, repeat until the loan is paid off which should occur at the end of 17.5 years (or after 455 biweekly payments). If the loan rate changes during this time (since you say that this is a variable-rate loan), the numbers quoted above will change too. And no, it is not the case that just %5.75 of the $2300 is interest, and the rest comes off the principle (sic)? Interest is computed on the principal amount still owed ($660,000 for starters and then decreasing fortnightly). not the loan payment amount. Edit After playing around with a spreadsheet a bit, I found that if payments are made every two weeks (14 days apart) rather than 26 equally spaced payments in one year as I used above, interest accrues at the rate of 5.75 x (14/365)% for the 14 days rather than at the rate of (5.75/26)% for the time between payments as I used above each 14 days, $2299.56 is paid as the biweekly mortgage payment instead of the $2299.61 stated by the OP, then 455 payments (slightly less than 17.5 calendar years when leap years are taken into account) will pay off the loan. In fact, that 455-th payment should be reduced by 65 cents. In view of rounding of fractional cents and the like, I doubt that it would be possible to have the last equal payment reduce the balance to exactly 0.", "title": "" }, { "docid": "ba18ba31775842e53398358765bef09d", "text": "Construction loans have an entirely set of rules and factors than mortgages and that's hard to reconcile into one instrument. Also, I'm guessing the bank would be a bit shy about giving a commitment to a home loan before they have any information about how the construction process is going. There would have to be a ton of contingencies put into mortgage and they probably can't account for everything.", "title": "" }, { "docid": "434ddac0691afed3d7251b9e052a3917", "text": "There is one basic principle to apply here: to compare money paid at different times, all the amounts must be compounded or discounted to the same point in time. In this case, the moment of the initial $225,000 loan is convenient. At that moment, you get $225,000 You then make 30 payments on the 40% mortgage. The amount of these payments has to be calculated; they're paying off a $90,000 mortgage with 30 monthly payments at a monthly rate of 0.5% Finally, you make 30 payments of an amount X, starting one month after the 40% mortgage ends. So far we've just listed the amount and time of all the payments back and forth. A time-line type diagram is a huge help here. Finally, use compound interest and annuity formulas to bring all the payments to the starting point, using an interest rate of 1% a month! Equate money in with money out and solve for X", "title": "" }, { "docid": "9269ac9dbe2b303176fc7b1fd4142849", "text": "Easier to copy paste than type this out. Credit: www.financeformulas.net Note that the present value would be the initial loan amount, which is likely the sale price you noted minus a down payment. The loan payment formula is used to calculate the payments on a loan. The formula used to calculate loan payments is exactly the same as the formula used to calculate payments on an ordinary annuity. A loan, by definition, is an annuity, in that it consists of a series of future periodic payments. The PV, or present value, portion of the loan payment formula uses the original loan amount. The original loan amount is essentially the present value of the future payments on the loan, much like the present value of an annuity. It is important to keep the rate per period and number of periods consistent with one another in the formula. If the loan payments are made monthly, then the rate per period needs to be adjusted to the monthly rate and the number of periods would be the number of months on the loan. If payments are quarterly, the terms of the loan payment formula would be adjusted accordingly. I like to let loan calculators do the heavy lifting for me. This particular calculator lets you choose a weekly pay back scheme. http://www.calculator.net/loan-calculator.html", "title": "" }, { "docid": "b3415a1c53a9d79df08c7fa642104a2f", "text": "Simply put, for a mortgage, interest is charged only on the balance as well. Think of it this way - on a $100K 6% loan, on day one, 1/2% is $500, and the payment is just under $600, so barely $100 goes to principal. But the last payment of $600 is nearly all principal. By the way, you are welcome to make extra principal payments along with the payment due each month. An extra $244 in this example, paid each and every month, will drop the term to just 15 years. Think about that, 40% higher payment, all attacking the principal, and you cut the term by 1/2 the time.", "title": "" }, { "docid": "9bcc0c9036c690555368b96512ef7ed8", "text": "\"A Tweep friend asked me a similar question. In her case it was in the larger context of a marriage and house purchase. In reply I wrote a detail article Student Loans and Your First Mortgage. The loan payment easily fit between the generally accepted qualifying debt ratios, 28% for house/36 for all debt. If the loan payment has no effect on the mortgage one qualifies for, that's one thing, but taking say $20K to pay it off will impact the house you can buy. For a 20% down purchase, this multiplies up to $100k less house. Or worse, a lower down payment percent then requiring PMI. Clearly, I had a specific situation to address, which ultimately becomes part of the list for \"\"pay off student loan? Pro / Con\"\" Absent the scenario I offered, I'd line up debt, highest to lowest rate (tax adjusted of course) and hack away at it all. It's part of the big picture like any other debt, save for the cases where it can be cancelled. Personal finance is exactly that, personal. Advisors (the good ones) make their money by looking carefully at the big picture and not offering a cookie-cutter approach.\"", "title": "" }, { "docid": "4f7d9c6d9bd9a85810ebab48a59bacba", "text": "Because a paying down a liability and thus gaining asset equity is not technically an expense, GnuCash will not include it in any expense reports. However, you can abuse the system a bit to do what you want. The mortgage payment should be divided into principle, interest, and escrow / tax / insurance accounts. For example: A mortgage payment will then be a split transaction that puts money into these accounts from your bank account: For completeness, the escrow account will periodically be used to pay actual expenses, which just moves the expense from escrow into insurance or tax. This is nice so that expenses for a month aren't inflated due to a tax payment being made: Now, this is all fairly typical and results in all but the principle part of the mortgage payment being included in expense reports. The trick then is to duplicate the principle portion in a way that it makes its way into your expenses. One way to do this is to create a principle expense account and also a fictional equity account that provides the funds to pay it: Every time you record a mortgage payment, add a transfer from this equity account into the Principle Payments expense account. This will mess things up at some level, since you're inventing an expense that does not truly exist, but if you're using GnuCash more to monitor monthly cash flow, it causes the Income/Expense report to finally make sense. Example transaction split:", "title": "" }, { "docid": "b74742b32b99f9bd32cd60cc84d3206f", "text": "\"Often the counter-party has obligations with respect to timelines as well -- if your buying a house, the seller probably is too, and may have a time-sensitive obligation to close on the deal. I'm that scenario, carrying the second mortgage may be enough to make that deal fall through or result in some other negative impact. Note that \"\"pre-approval\"\" means very little, banks can and do pass on deals, even if the buyer has a good payment history. That's especially true when the economy is not so hot -- bankers in 2011 are worried about not losing money... In 2006, they were worried about not making enough!\"", "title": "" } ]	fiqa
794bcb251607501ec6e8e485e988bc20	Impact on Credit Worthiness (Getting A Loan with a Co-signer vs without)	[ { "docid": "0870e523982036c36e03fbd0f90bfa45", "text": "It doesn't matter to the credit agencies if there is a co-signer or not. However, your family member will need to take into consideration if they are willing to be responsible for the loan in the event you are unable to make payments. Being a co-signer means they are agreeing to pay the loan amount. It will also impact their credit score/report, either improve it if all goes well, or destroy it if neither one of you are able to pay the loan. So to you, assuming you can pay all the payments and not default, it makes no difference. But to the co-signer, it could create a huge impact. https://www.thebalance.com/does-co-signing-affect-credit-315368", "title": "" } ]	[ { "docid": "858ecaea2a495ca143b96c3c61491e17", "text": "\"The risk is that you will owe the bank the principal amount of the mortgage. Based on your question it would be foolish for you to sign. Anyone who describes a mortgage as \"\"something\"\" obviously has no idea what they are doing and should never sign a mortgage which is a promise to pay hundreds of thousands of dollars. You would be doubly foolish to sign the mortgage because if you are guaranteeing the loan, you own nothing. So, for example, if your friend sold the house, pocketed the money, then left the country you would owe the full amount of the mortgage. Since you are not on the deed there is no way you can prevent this from happening. He does not need your approval to sell the house. So, essentially what your \"\"friend\"\" is doing is asking you to assume all the risk of the mortgage with none of the benefits, since he gets the house, not you. If a \"\"girlfriend\"\" is involved, that just increases the risk you will have a problem. Also, although it is not clear, it appears this is a second house for him. If so, that disqualifies him from any mortgage assistance or relief, so the risk is even higher. Basically, it would foolish in the extreme to co-sign the loan.\"", "title": "" }, { "docid": "ea5ed56378c9936a96de6c4b4b832dca", "text": "Never co-sign a loan for someone, especially family Taking out a loan for yourself is bad enough, but co-signing a loan is just plain stupid. Think about it, if the bank is asking for a co-signer its because they are not very confident that the applicant is going to be paying back the loan. So why would you then step up and say I'll pay back the loan if they don't, make me a co-signer please. Here is a list of things that people never think about when they cosign a loan for somebody. Now if you absolutely must co-sign a loan here is how I would do it. I, the co-signer would be the one who makes the payments to ensure that the loan was paid on time and I would be the one collecting the payment from the person who is getting the loan. Its a very simple way of preventing some of the worst situations that can arise and you should be willing to make the payments anyway after all thats what it means to cosign a loan. Your just turning things around and paying the loan upfront instead of paying after the applicant defaults and ruins every ones credit. (Source: user's own blog post Never co-sign a loan for someone, especially family)", "title": "" }, { "docid": "fefd8a210ced706b82098af84e1c8d3b", "text": "Considering I'm putting 30% down and having my father cosign is there any chance I would be turned down for a loan on a $100k car? According to BankRate, the average credit score needed to buy a new car is 714, but they also show average interest rates at 6.39% for new-car loans to people with credit scores in the 601-660 range. High income certainly helps offset credit score to some extent. Not every bank/dealership does things the same way. Being self-employed you'd most likely be required to show 2 years of tax returns, and they'd use those as a basis for your income rather than whatever you have made recently. If using a co-signer, their income matters. Another key factor is debt to income ratio, if too much of someone's income is already spoken for by other debts a lender will shy away. So, yes, there's a chance, given all the information we don't know and the variability with lender policies, that you could be turned down for a car loan. How should I go about this? If you're set on pursuing the car loan, just go talk to some lenders. You'll want to shop around for a good rate anyway, so no need to speculate just go find out. Include the dealership as a potential financing option, they can have great rates. Personally, I'd get a much cheaper car. Your insurance premium on a 100k car will be quite high due to your age. You might be rightly confident in your earning potential, but nothing is guaranteed, situations can change wildly in short order. A new car is not a good investment or a value-retaining asset, so why bother going into debt for one if you don't have to? If you buy something in cash now, you could upgrade in a few years without financing if your earning prediction holds and would save quite a bit in car insurance and interest over the years between.", "title": "" }, { "docid": "f701d2150bdb4cf1031c23205676031e", "text": "Note that this kind of entry on your credit record may also affect your ability to get a job. Basically, you're going on record as not honoring your commitments... and unless you have a darned good reason for having gotten into that situation and being completely unable to get back out, it's going to reflect on your general trustworthiness.", "title": "" }, { "docid": "370cf6f6f40a025e10e27035d077e45b", "text": "In this example you are providing 4x more collateral than you are borrowing. Credit score shouldn't matter, regardless of how risky a borrower you are. Sure it costs time and money to go to auction, but this can be factored into your interest rate / fees. I don't see how the bank can lose.", "title": "" }, { "docid": "7f2df010c429e9e77f625177d0a9d392", "text": "\"US based so I don't know how closely this translates to the UK, but generally speaking there are three things that contribute to a strong credit score. Length/volume of credit history. This is a combination of how many accounts appear in your history along with how long they have been open. Having a series of accounts that were maintained in good standing looks better than only having one. Maintaining an account in good standing for a prolonged period (3+ years) is better than a bunch of short term items. \"\"Ideally\"\" your credit history should contain a mix of term loans that were paid per contract and a few (1?) revolving account that shows ongoing use. The goal is to show that you can handle ongoing obligations responsibly, and manage multiple things at the same time. Utilization. Or how much you currently owe vs how much people have agreed to lend you. Being close to your limits raises questions about whether or not you can really handle the additional debt. Having large availability raises questions about whether you would be able to handle it if you suddenly maxed things out. Finding the correct middle point can be challenging, the numbers I have seen thrown around most by the \"\"experts\"\" is 20-30% utilization. Recent Activity. Or how much new debt have you taken on? If someone is opening lots of new accounts it raises red flags. Shopping around for a deal on a auto loan or mortgage before settling on one is fine. Opening 5 new credit lines in the past 6 months, probably going to knock you down a bit. One of the concerns here is have you had the accounts long enough to demonstrate that you will be able to handle them in the long term. One route that was suggested to me in my early years was to go take out a 6mo loan from a bank, and just place the money in a CD while I made the payments. Then repeat with a longer term. Worst case, you can cash out the CD to pay off the loan in an emergency, but otherwise it helps show the type of history they are looking for. All that said, I have to agree with Pete B's answer. Don't play the credit game if you don't really need to. Or play it just enough to stay in the game and plan your finances to avoid relying on it. (Advice I wish I had taken long ago.)\"", "title": "" }, { "docid": "1e3c9a845584e08ecfa215e7bd63a708", "text": "Also - the more credit facilities you have, the risikier you get. Say Company A lends you $8.000 for a down-payment - let's say you then go out and max out your other 100k facilities - you now have debt of 108k. What guarantee does the Company A have of repayment? Fewer credit facilities = better chance of getting a new loan.", "title": "" }, { "docid": "c266d9796adb77a13575342646c77fc7", "text": "This very much depends how you use that second line of credit and what your current credit is. There are of course many more combinations buy you can probably infer the impact based on these cases. Your credit score is based on your likely hood of being profitable to a creditor should they issue you credit. This is based on your history of your ability to manage your credit. Having more credit and managing it well shows that you have a history of being responsible with greater sums of money available. If you use the card responsibly now then you are more likely to continue that trend than someone with a history of irresponsibility. Having a line but not using it is not a good thing. It costs the creditor money for you to have an account. If you never use that account then you are not showing that you can use the account responsibly so if you are just going to throw the card in a safe and never access it then you are better off not getting the card in the first place.", "title": "" }, { "docid": "4ca1cf69abe98d80c2924f3666f41462", "text": "That is an opinion. I don't think so. Here are some differences: If you use credit responsibly and take the time to make sure the reporting agencies are being accurate, a good report can benefit you. So that isn't like a criminal record. What is also important to know is that in the United States, a credit report is about you, not for you. You are the product being sold. This is, in my opinion, and unfortunate situation but it is what it is. You will more than likely benefit for keeping a good report, even if you never use credit. There are many credit scores that can be calculated from your report; the score is just a number used to compare and evaluate you on a common set of criteria. If you think about it, that doesn't make sense. The score is a reflection of how you use credit. Having and using credit is a commitment. Your are committing to the lender that you will repay them as agreed. Your choice is who you decide to make agreements with. I personally find the business practices of my local credit union to be more palatable than the business practices of the national bank I was with. I chose to use credit provided by the credit union rather than by the bank. I am careful about where I take auto loans from, and to what extent I can control it, where I take home loans from. Since it is absolutely a commitment, you are personally responsible for making sure that you like who you are making commitments with.", "title": "" }, { "docid": "e24b171d757ef9cc138878484923fbde", "text": "\"You promised to pay the loan if he didn't. That was a commitment, and I recommend \"\"owning\"\" your choice and following it through to its conclusion, even if you never do that again. TLDR: You made a mistake: own it, keep your word, and embrace the lesson. Why? Because you keep your promises. (Nevermind that this is a rare time where your answer will be directly recorded, in your credit report.) This isn't moralism. I see this as a \"\"defining moment\"\" in a long game: 10 years down the road I'd like you to be wise, confident and unafraid in financial matters, with a healthy (if distant) relationship with our somewhat corrupt financial system. I know austerity stinks, but having a strong financial life will bring you a lot more money in the long run. Many are leaping to the conclusions that this is an \"\"EX-friend\"\" who did this deliberately. Don't assume this. For instance, it's quite possible your friend sold the (car?) at a dealer, who failed to pay off this note, or did and the lender botched the paperwork. And when the collector called, he told them that, thinking the collector would fix it, which they don't do. The point is, you don't know: your friend may be an innocent party here. Creditors generally don't report late payments to the credit bureaus until they're 30 days late. But as a co-signer, you're in a bad spot: you're liable for the payments, but they don't send you a bill. So when you hear about it, it's already nearly 30 days late. You don't get any extra grace period as a co-signer. So you need to make a payment right away to keep that from going 30 late, or if it's already 30 late, to keep it from going any later. If it is later determined that it was not necessary for you to make those payments, the lender should give them back to you. A less reputable lender may resist, and you may have to threaten small claims court, which is a great expense to them. Cheaper to pay you. They say France is the nation of love. They say America is the nation of commerce. So it's not surprising that here, people are quick to burn a lasting friendship over a temporary financial issue. Just saying, that isn't necessarily the right answer. I don't know about you, but my friends all have warts. Nobody's perfect. Financial issues are just another kind of wart. And financial life in America is hard, because we let commerce run amok. And because our obsession with it makes it a \"\"loaded\"\" issue and thus hard to talk about. Perhaps your friend is in trouble but the actual villain is a predatory lender. Point is, the friendship may be more important than this temporary adversity. The right answer may be to come together and figure out how to make it work. Yes, it's also possible he's a human leech who hops from person to person, charming them into cosigning for him. But to assume that right out of the gate is a bit silly. The first question I'd ask is \"\"where's the car?\"\" (If it's a car). Many lenders, especially those who loan to poor credit risks, put trackers in the car. They can tell you where it is, or at least, where it was last seen when the tracker stopped working. If that is a car dealer's lot, for instance, that would be very informative. Simply reaching out to the lender may get things moving, if there's just a paperwork issue behind this. Many people deal with life troubles by fleeing: they dread picking up the phone, they fearfully throw summons in the trash. This is a terrifying and miserable way to deal with such a situation. They learn nothing, and it's pure suffering. I prefer and recommend the opposite: turn into it, deal with it head-on, get ahead of it. Ask questions, google things, read, become an expert on the thing. Be the one calling the lender, not the other way round. This way it becomes a technical learning experience that's interesting and fun for you, and the lender is dreading your calls instead of the other way 'round. I've been sued. It sucked. But I took it on boldly, and and actually led the fight and strategy (albeit with counsel). And turned it around so he wound up paying my legal bills. HA! With that precious experience, I know exactly what to do... I don't fear being sued, or if absolutely necessary, suing. You might as well get the best financial education. You're paying the tuition!\"", "title": "" }, { "docid": "fe4dfb6aee2e80172a6ada4b541093e6", "text": "\"If you are the type of person that gets drawn in to \"\"suspect\"\" offers, then it is conceivable that if you are not signing the services offered your credit would be improved as your long term credit strengthens and the number of new lines of credit are reduced. But if you just throw it all away anyway then it is unlikely to help improve your score. But there is no direct impact on your credit score.\"", "title": "" }, { "docid": "b86c2b9dda3a99e37f02df0eeb65d867", "text": "I believe that your son will need to get a new loan for the car in his name only and use the proceeds of that loan to pay off the one you co-signed on. The only way that will happen is if he can find a lender willing to loan him the money based on his credit only. From the current lender's perspective, if your son isn't a good credit risk, then why would they let someone out of the loan who might be able to pay if your son defaults? If he is a good credit risk, then they, or someone else, should be willing to lend to him without you as co-signer. Also, as Dilip Sarwate mentioned, you might have to do something with the title, depending on whose name it is in.", "title": "" }, { "docid": "56b3f2e8678f37a2950221facf30df56", "text": "Is it difficult to ask the credit card issuer for two cards, even if the account belongs to one person? You can most definitely get two cards for one account. People do it all the time. You just have to add her on as an authorized user. Would it be better for me to apply for the card on my own, or would there be an advantage to having her co-sign? It depends. If she co-signed, then that means she is also responsible for the credit card payments - which can help her credit score. If its is just you applying, then you are the only one responsible. If you don't want her lower credit score to impact what you could be approved for, then only you should apply. However, if you are the sole account holder, then you are responsible for the payments, which means, if in the event you guys break up and she maxes out the card before you cancel it, then you are on the hook for what she spend. As for improving her credit score, I do know that some banks report to the credit bureaus for the authorized user as well, so that could help her out too.", "title": "" }, { "docid": "ae66c980c607a24baad826a1aaa2be90", "text": "The point of co-signing for a friend is that they're your friend. You signed for them in the belief that your friendship would ensure they didn't burn you. If your friend has hung you out to dry, basically they aren't your friend any more. Before you lawyer up, how's about talking to your friend as a friend? Sure he may have moved away from the area, but Facebook is still a thing, right? It's possible he doesn't even realise you're taking the fall for him. And presumably you have mutual friends too. If he's blanking you then he does know you're taking the fall and doesn't care. So call/message them too and let them know the situation. Chances are he doesn't want all his other friends cutting him off because they can see he'd treat them the same way he's treating you. And chances are they'll give you his number and new address, because they don't want to be in the middle. If this fails, look at the loan. If it's a loan secured against something of his (e.g. a car), let it go. The bank will repossess it, and that's job done. Of course it will look bad on your credit for a while, but you're basically stuck with that.", "title": "" }, { "docid": "3947df28145e5a9a6a9d373f1b1e549c", "text": "The article states their reasons pretty clearly, and indicates that some people won't qualify under the new requirements that would have previously, they're not courting people with bad credit, they're just looking beyond credit score at other factors. They aren't opening floodgates for anyone with a pulse to get a car loan, just shifting things a bit to cast a slightly wider net. This is not new in the world of secured debt, the FHA has methodology for establishing a non-traditional credit report based on things like rental history, utility payments, auto-insurance payments, a person can't be declined an FHA loan for lack for lack of traditional credit history. I look beyond credit score as a landlord, a tenant with poor credit but a stellar rental history is more appealing than someone with great credit but a bad rental history. Vehicles and housing are very important to people, so they are likely to prioritize them above credit card payments or hospital bills. Time will tell, but it seems like a solid move in my view, they can refine their model over time and likely find a solid customer base among those who wouldn't qualify on credit score alone.", "title": "" } ]	fiqa
7980388bf7b8fbf713b7c9af0102d060	What is the true value, i.e. advantages or benefits, of building up equity in your home?	[ { "docid": "5fe52d5fef8c9d41f4507ecd15372d83", "text": "\"Taking out your equity when refinancing means that you take out a new loan for the full value of your house (perhaps less 20% as a down payment on the new mortgage, otherwise you'll be paying insurance), pay off your old lender, and keep the rest for yourself. The result is much the same as using as a HELOC or home equity loan (or a second mortgage), except it's all rolled into a single new mortgage. The advantage is that the interest rate on a first mortgage is going to be lower than on HELOC or equivalent, and the equity requirements may be lower (e.g. a HELOC may only let you borrow against the amount of equity that exceeds 25% or 30%, while a new mortgage will require you only to have 20% equity). This is especially attractive to those whose homes have appreciated significantly since they bought them, especially if they have a lot of high-interest debt (e.g. credit cards) they want to pay off. Of course, rolling credit card debt into a 30-year mortgage isn't actually paying it off, but the monthly payments will be a lot lower, and if you're lucky and your home appreciates further, you can pay it off fully when you sell the property and still have paid a lot less interest. The downside is that you have turned unsecured debt into secured debt, which puts your home at risk if you find yourself unable to pay. In your case, you don't yet have even 20% equity in your home, so I wouldn't recommend this. :-) Equity is simply the difference between the amount you still owe on your home and the amount you'd get if you were to sell it. Until you do sell it, this amount is tentative, based on the original purchase price and, perhaps, an intervening appraisal that shows that the property has appreciated. That is really all that it is and there's nothing magic about it, except that since you own your home, you have equity in it, while as a renter, you would not. It used to be (decades ago, when you needed 20% down to get a mortgage) that selling was the only time you'd be able to do anything with the equity in your home. Now you can \"\"take it out\"\" as described above (or borrow against it) thanks to various financial products. It is sometimes tempting to consider equity roughly equivalent to \"\"profit.\"\" But some of it is your own money, contributed through the down payment, your monthly principal payment, and improvements you have made -- so \"\"cashing out\"\" isn't all profit, it's partly just you getting your own money back. And there are many additional expenses involved in owning a home, such as interest, property taxes, maintenance, utilities, and various fees, not to mention the commissions when you buy or sell, which the equity calculation doesn't consider. Increasing equity reflects that you own a desirable property in a desirable location, that you have maintained and maybe even improved it, that you are financially responsible (i.e., paying your mortgage, taxes, etc.), and that your financial interests are aligned with your neighbors. All those things feel pretty good, and they should. Otherwise, it is just a number that the banks will sometimes let you borrow against. :-)\"", "title": "" }, { "docid": "fe638c47505fa844419fd4a4523d8fb8", "text": "\"A person can finance housing expenses in one of two ways. You can pay rent to a landlord. Or you can buy a house with a mortgage. In essence, you become your own landlord. That is, insta the \"\"renter\"\" pays an amount equal to the mortgage to insta the \"\"landlord,\"\" who pays it to the bank to reduce the mortgage. Ideally, your monthly debt servicing payments (minus tax saving on interest) should approximate the rent on the house. If they are a \"\"lot\"\" more, you may have overpaid for the house and mortgage. The advantage is that your \"\"rent\"\" is applied to building up equity (by reducing the mortgage) in your house. (And mortgage payments are tax deductible to the extent of interest expense.) At the end of 30 years, or whatever the mortgage term, you have \"\"portable equity\"\" in the form a fully paid house, that you can sell to move another house in Florida, or wherever you want to retire. Sometimes, you will \"\"get lucky\"\" if the value of the house skyrockets in a short time. Then you can borrow against your appreciation. But be careful, because \"\"sky rockets\"\" (in housing and elsewhere) often fall to earth. But this does represent another way to build up equity by owning a house.\"", "title": "" }, { "docid": "f22e594c021241f4b17a7979fa3d07c4", "text": "The equity you have is an asset. Locked away until you sell, and sometimes pledged as a loan if you wish. The idea that it's dead money is nonsense, it's a pretty illiquid asset that has the potential for growth (at the rate of inflation or slightly higher, long term) and provides you an annual dividend in the form of free rent. In this country, most people who own homes have a disproportionate amount of their wealth in their house. This is more a testament to the poor saving rate than anything else. For me, a high equity position means that I can sell my home and buy a lesser sized house for cash. I am older and my own goal (with the mrs) is to have the house paid and college for the kid fully funded before we think of retiring. For others, it's cash they can use to rent after they retire. I hope that helped, there's nothing magic about this, just a lot of opinions.", "title": "" } ]	[ { "docid": "0574b5b0f9213013d170ade61b82d319", "text": "Thinking of personal residence as investment is how we got the bubble and crash in housing prices, and the Great Recession. There is no guarantee that a house will appreciate, or even retain value. It's also an extremely illiquid item; selling it, especially if you're seeking a profit, can take a year or more. ' Housing is not guaranteed to appreciate constantly, or at all. Tastes change and renovations rarely pay for themselves. Things wear out and have costs. Neighborhoods change in popularity. Without rental income and the ability to write off some of the costs as business expense, it isn't clear the tax advantage closes that gap, especislly as the advantage is limited to the taxes upon your mortgage interest (by deducting that from AGI). If this is the flavor of speculation you want to engage in, fine, but I've seen people screw themselves over this way and wind up forced to sell a house for a loss. By all means hope your home will be profitable, count it as part of your net wealth... but generally Lynch is wrong here, or at best oversimplified. A house can be an investment (or perhaps more accurately a business), or your home, but -- unless you're renting out the other half of a duplex,which splits the difference -- trying to treat it as both is dangerous accounting.", "title": "" }, { "docid": "ef642c033a2f012d4e8c46a4ce66ec31", "text": "\"You've laid out several workable options. You might try going to mortgage broker and looking at what offers you get each way. I can say that it sounds like your partner will have a difficult time qualifying for a mortgage. That puts you on the first and third options. Forget about \"\"building equity.\"\" You cannot rely on the house you're living in to provide a return on investment. Housing is an expense, even if you own it outright. Keep that in mind when you consider taking from the stream of money contributing to your retirement. This link is to a blog which really clarifies the \"\"rent vs. own, which is better?\"\" question. The answer is, it depends on the individual and the location, and the blogger in the link explains how to answer that question for your situation. One of the key advantages of ownership is that it gives you freedom to modify the interior, exterior, and grounds (limited by local building codes of course.)\"", "title": "" }, { "docid": "6278cee56a5973aae9cec2d8328fb568", "text": "\"Generally, when you own something - you can give it as a collateral for a secured loan. That's how car loans work and that's how mortgages work. Your \"\"equity\"\" in the asset is the current fair value of the asset minus all your obligations secured by it. So if you own a property free and clear, you have 100% of its fair market value as your equity. When you mortgage your property, banks will usually use some percentage loan-to-value to ensure they're not giving you more than your equity now or in a foreseeable future. Depending on the type and length of the loan, the LTV percentage varies between 65% and 95%. Before the market crash in 2008 you could even get more than 100% LTV, but not anymore. For investment the LTV will typically be lower than for primary residence, and the rates higher. I don't want to confuse you with down-payments and deposits as it doesn't matter (unless you're in Australia, apparently). So, as an example, assume you have an apartment you rent out, which you own free and clear. Lets assume its current FMV is $100K. You go to a bank and mortgage the apartment for a loan (get a loan secured by that apartment) at 65% LTV (typical for condos for investment). You got yourself $65K to buy another unit free and clear. You now have 2 apartments with FMV $165K, your equity $100K and your liability $65K. Mortgaging the new unit at the same 65% LTV will yield you another $42K loan - you may buy a third unit with this money. Your equity remains constant when you take the loan and invest it in the new purchase, but the FMV of your assets grows, as does the liability secured by them. But while the mortgage has fixed interest rate (usually, not always), the assets appreciate at different rates. Now, lets be optimistic and assume, for the sake of simplicity of the example, that in 2 years, your $100K condo is worth $200K. Voila, you can take another $65K loan on it. The cycle goes on. That's how your grandfather did it.\"", "title": "" }, { "docid": "bb90855308bded6bdcea451a5624a0fe", "text": "\"There are a number of reasons I'm in agreement with \"\"A house that is worth $300,000, or $50,000 of equity in a house and $225,000 in the bank.\"\" So, the update to the first comment should be \"\"A paid off house worth $300K, or a house with $150K equity and $275K in the retirement account.\"\" Edit - On reflection, an interesting question, but I wonder how many actually have this choice. When a family budgets for housing, and uses a 25% target, this number isn't much different for rent vs for the mortgage cost. So how, exactly do the numbers work out for a couple trying to save the next 80% of the home cost? A normal qualifying ration allows a house that costs about 3X one's income. A pay-in-full couple might agree to be conservative and drop to 2X. Are they on an austerity plan, saving 20% of their income in addition to paying the rent? Since the money must be invested conservatively, is it keeping up with house prices? After 10 years, inflation would be pushing the house cost up 30% or so, so is this a 12-15 year plan? I'm happy to ignore the tax considerations. But I question the math of the whole process. It would seem there's a point where the mortgage (plus expenses) add up to less than the rent. And I'd suggest that's the point to buy the house.\"", "title": "" }, { "docid": "990df5d54f35fc76dac95ac6c32c752c", "text": "\"Another problem with this plan (assuming you get past Rocky's answer somehow) is that you assume that $50K in construction costs will translate to $50K in increased value. That's not always true; the ROI on home improvements is usually a lot less than 100%. You'd also owe more property taxes on your improvements, which would cut into your plan somewhat. But you also can't keep doing this forever. Soon enough, you'd run out of physical and/or legal space to keep adding additions to the house (zoning tends to limit how much you can build, unless you're in the middle of nowhere, and eventually you'd fill the lot), even if you did manage to keep obtaining more and more loans. And you'd quickly reach the point of diminishing returns on your expansions. Many homebuyers might be prepared to pay more for a third or fourth bedroom, but vanishingly few in most markets will pay substantially more for a second billiards room or a third home theater. At some point, your house isn't a mansion, it's \"\"that ridiculous castle\"\" only an eccentric would want, and the pool of potential buyers (and the price they'll pay for it) diminishes. And the lender, not being stupid, isn't going to go on financing your creation of a monstrosity, because they are the ones who will be stuck with the place if you default.\"", "title": "" }, { "docid": "a409e9ac055ad2bcb8612e19efcef9a2", "text": "It sounds like you are in great shape, congratulations! Things I would think about in your position: Consider putting 20% down instead of 30% and find a great house that has a key missing modernization, like a kitchen. Then replace the kitchen, which if done right can instantly add that 10% (or more) right back in equity... or stick to your plan... You have earned the luxury of taking your time and doing what's right for you. Think real carefully about location. Here are some ideas based on my experience.", "title": "" }, { "docid": "e918d6079515b710674ee738486d37a6", "text": "\"What if there were no mortgage, and you gave the friend the house? They are getting the house' value. In your case the discount from market value is their instant profit. We often think of our house in terms of the equity we have, plus the mortgage. Equity therefore is what's left after the mortgage is paid off, if you sell the house. In your question, you are, in effect, \"\"giving all equity to your friend. Where else would you imagine it goes?\"", "title": "" }, { "docid": "aae6aa95ca158a1d7d4a9e369456150d", "text": "\"You are a \"\"strategic\"\" investor, which is to say that you are in the best position to evaluate the deal because you already live there. Others don't have this advantage going in, which is why they might not be inclined to do what you're doing. Your biggest advantage is that you know at least one tenant. In essence, you are your own \"\"tenant\"\" for the top floor You also presumably have a pretty good idea of the neighborhood. These are arguments for owning your own home, although it does get a bit trickier with a second tenant, whom you may not know. Do check credit and references, etc. You might ask the landlord why he wants to sell. Presumably it's because he wants to retire or move, and not a problem with the property. But it does no harm to ask.\"", "title": "" }, { "docid": "b4c4472436470581adf08370392e7add", "text": "\"The obvious advantage is turning your biggest liability into an income-generating asset. The downside are: (1), you have to find tenants (postings, time to show the place, credit/background check, and etc) (2), you have to deal with tenants (collection of rent, repairs of things that broke by itself, complaints from neighbors, termination, and etc) (3), you have to deal with the repairs In many ways, it's no different from running another (small) business, so it all boils down to how much time you are willing to invest and how handy you are in doing reno's and/or small repairs around the house. For profitability/ROI analysis, you want to assume collection of 11 months of rent per year (i.e. assume tenant doesn't renew after year, so you have the worst case scenario) and factor in all the associated expense (be honest). Renting out a second property is a bit tricky as you often have to deal with a large operating expense (i.e. mortgage), and renting a basement apartment is not bad financially and you will have to get used to have \"\"strangers\"\" downstairs.\"", "title": "" }, { "docid": "f598ab2f6fbf16a9948e513ffbee3307", "text": "Lets consider what would happen if you invested $1500/mo plus $10k down in a property, or did the same in a low-cost index fund over the 30 year term that most mortgages take. The returns of either scenarios cannot be guaranteed, but there are long term analyses that shows the stock market can be expected to return about 7%, compounded yearly. This doesn't mean each year will return 7%, some years will be negative, and some will be much higher, but that over a long span, the average will reach 7%. Using a Time-Value-of-Money calculator, that down payment, monthly additions of $1,500, and a 7% annual return would be worth about $1.8M in 30 years. If 1.8M were invested, you could safely withdraw $6000/mo for the rest of your life. Do consider 30years of inflation makes this less than today's dollar. There are long term analyses that show real estate more-or-less keeps track with inflation at 2-4% annual returns. This doesn't consider real estate taxes, maintenance, insurance and the very individual and localized issues with your market and your particular house. Is land limited where you are, increasing your price? Will new development drive down your price? In 30 years, you'll own the house outright. You'll still need to pay property tax and insurance on it, and you'll be getting rental income. Over those 30 years, you can expect to replace a roof, 2-3 hot water heaters, concrete work, several trees, decades of snow shoveling, mowing grass and weeding, your HVAC system, windows and doors, and probably a kitchen and bathroom overhauls. You will have paid about 1.5x the initial price of the mortgage in interest along the way. So you'll have whatever the rental price for your house, monthly (probably almost impossible to predict for a single-family home) plus the market price of your house. (again, very difficult to predict, but could safely say it keeps pace with inflation) minus your expenses. There are scenarios where you could beat the stock market. There are ways to reduce the lifestyle burden of being a landlord. Along the way, should you want to purchase a house for yourself to live in, you'll have to prove the rental income is steady, to qualify for a loan. Having equity in a mortgage gives you something to borrow against, in a HELOC. Of course, you could easily end up owing more than your house is worth in that situation. Personally, I'd stick to investing that money in low-fee index funds.", "title": "" }, { "docid": "6cdc0588d6d9eead92d49ddb549ec3d1", "text": "\"I would strongly consider renting; as homes are often viewed by people as \"\"investments\"\" but in reality they are costs, just like renting. The time-frame for return is so long, the interest rate structure in terms of your mortgage payments; if you buy, you must be prepared to and willing to stay at minimum 7-10 years; because anything can happen. Hot markets turn cold. Or stale, and just the closing costs will cause it be less advantageous to renting. Before buying a property, ask yourself does it meet these 5 criteria: IDEAL I - Income; the property will provide positive cash flow through renters. D - Depreciation; tax savings. E - Equity; building equity in the property- the best way is through interest only loans. There is NO reason to pay any principle on any property purchase. You do 5 year interest only loans; keep your payments low; and build equity over time as the property price rises. Look how much \"\"principle\"\" you actually pay down over the first 7 years on a 30 year mortgage. Virtually Nil. A - Appreciation - The property will over time go up in value. Period. There is no need to pay any principle. Your Equity will come from this... time. L - Leverage; As the property becomes more valuable; you will have equity stake, enabling you to get higher credit lines, lines of equity credit, to purchase more properties that are IDEA. When you are RICH, MARRIED, and getting ready for a FAMILY, then buy your home and build it. Until then, rent, it will keep your options open. It will keep your costs low. It will protect you from market downturns as leases are typically only 1 year at most. You will have freedom. You will not have to deal with repairs. A new Water Heater, AC unit, the list goes on and on. Focus on making money, and when you want to buy your first house. Buy a duplex; rent it out to two tenants, and make sure it's IDEAL.\"", "title": "" }, { "docid": "26cbf718ff59fcc3d6dcab61bda540c0", "text": "I just read through all of the answers to this question and there is an important point that no one has mentioned yet: Oftentimes, buying a house is actually cheaper than renting the identical house. I'm looking around my area (suburbs of Chicago, IL) in 2017 and seeing some houses that are both for sale and for rent, which makes for an easy comparison. If I buy the house with $0 down (you can't actually put $0 down but it makes the numerical comparison more accurate if you do), my monthly payment including mortgage (P+I), taxes, insurance, and HOA, is still $400 less than the monthly rent payment. (If I put 20% down it's an even bigger savings.) So, in addition to the the tax advantages of owning a home, the locked in price that helps you in an economy that experiences inflation, and the accumulated equity, you may even have extra cash flow too. If you were on the fence when you would have had to pay more per month in order to purchase, it should be a no-brainer to buy if your monthly cost is lower. From the original question: Get a loan and buy a house, or I can live for the rest of my life in rent and save the extra money (investing and stuff). Well, you may be able to buy a house and save even more money than if you rent. Of course, this is highly dependent on your location.", "title": "" }, { "docid": "ba60d9fa0ce32b27088a0dd282504573", "text": "Another factor: When you sell this house and buy the next one, the more equity you have the easier the loan process tends to be. We rolled prior equity into this house and had a downpayment over 50%--and the lender actually apologized for a technicality I had to deal with--they perfectly well knew it was a basically zero-risk loan.", "title": "" }, { "docid": "edf24e95f908e380d0097dee27484ac3", "text": "\"The homeowner gets all the profit from the price rise, because it's their asset. The bank will charge early repayment fees, but these are often a small fraction of the profits. This is why homeownership in rising markets is so popular: it offers the benefits of \"\"gearing\"\" a financial investment so that you can make profits that are a very large fraction of your principal (initial equity).\"", "title": "" }, { "docid": "d4f69ccdb76cbda9b9628b622c45fcca", "text": "There are two ways that an asset can generate value. One is that the asset generates some revenue (e.g. you buy a house for $100,000 and rent it out for $1,000 per month) and the second way is that the asset appreciates (e.g you buy a house for $100,000, you don't rent it out and 5 years later you sell it for $200,000). Stocks are the same.", "title": "" } ]	fiqa
50b0907e9b3d258acfdd468b64507915	When does it make sense for the money paid for equity to go to the corporation?	[ { "docid": "23f2a228c3c25affe0b9da5c43a3fc75", "text": "\"BigCo is selling new shares and receives the money from Venturo. If Venturo is offering $250k for 25% of the company, then the valuation that they are agreeing on is a value of $1m for the company after the new investment is made. If Jack is the sole owner of one million shares before the new investment, then BigCo sells 333,333 shares to Venturo for $250k. The new total number of shares of BigCo is 1,333,333; Venturo holds 25%, and Jack holds 75%. The amount that Jack originally invested in the company is irrelevant. At the moment of the sale, the Venturo and Jack agree that Jack's stake is worth $750k. The value of Jack's stake may have gone up, but he owes no capital gains tax, because he hasn't realized any of his gains yet. Jack hasn't sold any of his stake. You might think that he has, because he used to hold 100% and now he holds 75%. However, the difference is that the company is worth more than was before the sale. So the value of his stake was unchanged immediately before and after the sale. Jack agrees to this because the company needs this additional capital in order to meet its potential. (See \"\"Why is stock dilution legal?\"\") For further explanation and another example of this, see the question \"\"If a startup receives investment money, does the startup founder/owner actually gain anything?\"\" Your other scenario, where Venturo purchases existing shares directly from Jack, is not practical in this situation. If Jack sells his existing shares, you are correct that the company does not gain any additional capital. An investor would not want to invest in the company this way, because the company is struggling and needs new capital.\"", "title": "" }, { "docid": "3b9c7aa733b9742d673dfddee1e6eb12", "text": "The check is written to BigCo. Jack is being diluted, corporation issues more shares. There's no gain, no change in Jack's equity value. Jack didn't lose or win anything. BigCo was worth $1M before the additional money, it is worth $1.25M after the additional money, with Jack owning the same $1M, but the cake is now bigger (obviously the numbers are wrong in your example, but you get the point).", "title": "" }, { "docid": "8592a563001667b5d7ee8dc2edd53b11", "text": "If Jack owns all of the one million founding shares (which I assume you meant), and wants to transfer 250,000 shares to Venturo, then he is just personally selling shares to Venturo and the corporation gains nothing. If Jack does not own all of the founding shares, and the corporation had retained some, then the corporate shares could be sold to raise cash for the corporation. Usually in situations like this, the corporation will create more shares, diluting existing shareholders, and then sell the new shares on the open market to raise cash.", "title": "" }, { "docid": "fead8f98ed7a8b1a30d538c22cbaed24", "text": "If the check is written as a check to BigCo, it is less clear how Jack can compensate himself for the equity sale. It is as if the equity was owned by the corporation, not by Jack. This is correct. If the check is written to BigCo, then it is BigCo issuing new shares. Jack doesn't compensate himself for the equity sale, as he didn't sell anything. The company traded shares for money which it uses for expansion. In the long term, the capital gain from expansion may exceed the value of a $200,000 no-interest loan to the company. If the value of the company before investing $250,000 is $1 million, then the value after investing is $1.25 million. So $250,000 is 20% of the value of the company. BigCo should not give the buyer 25% of BigCo but only 20% in that example. If it does give 25%, the buyer is getting a $312,500 stake for only $250,000. With the other example, Jack sells 25% of the company for $250,000 from his personal shares. This doesn't change the assessed value of the company, just Jack's stake. Jack then loans the company $200,000. This also doesn't change the assessed value of the company (at least in theory). It gains $200,000 but has an offsetting debt of $200,000. In net, that's no change. Assets and liabilities balance the same. So if you know that the assessed value of the company is $1 million and that the buyer is paying $250,000 for a 25% stake at that same valuation, then you know that the check is being written to Jack. If the check is written to BigCo, then one or more of those numbers is incorrect. The buyer could be getting a 20% stake. The new value of the company after the investment is $1.25 million. Or paying $333,333.33. The new value of the company after the investment is $1,333,333.33. Or BigCo could only be worth $750,000 before the investment. The new value of the company after the investment is $1 million. Or Jack is getting screwed, selling $312,500 in stock (25%) for only $250,000. Jack's shares drop from being worth $1 million to only $937,500. The value of the company is $1.25 million. Or some combination of smaller changes that balances.", "title": "" } ]	[ { "docid": "36546d11d900062f0daed28ba6f6186a", "text": "I was merely trying to be helpful - Conceptually, you have dump this idea that something is skewed. It isn't. Firm A sold for $500 (equity value aka purchase price to shareholders) + debt (zero) - cash (50) for 450. Enterprise value is the cash free, debt free sale price. The implied ev multiple is 4.5x on A - that is the answer. The other business sold for a higher multiple of 5x. If you would pile on more cash onto A, the purchase price would increase, but the EV wouldn't. The idea is to think hard about the difference between equity value and enterprise value when examining a transaction.", "title": "" }, { "docid": "e52bf1749687a26ac564b1945ae7f73f", "text": "I believe that article provides some good reasons, though it may be a bit light on technical details and there are likely other reasons a company would do it. So, if they can finance for less then they would lose to taxes by bringing the money home and they do not take on too much debt, this will likely work just fine and increase share holder value. Hopefully, someone else can provide some other reasonable scenarios. The bottom line is that it does not matter how they finance the share buybacks and/or dividend payments as long as they do not shoot themselves in the foot while doing it.", "title": "" }, { "docid": "518b52c68869a5db8e185a64c74529c7", "text": "\"The basic theoretical reason for a company to return money to shareholders is that the company doesn't need the money for its own purposes (e.g. investment or working capital). So instead of the company just keeping it in the bank, it hands it back so that shareholders can do what they think fit, e.g. investing it elsewhere. In some cases, particularly \"\"private equity\"\" deals, you see companies actively borrowing money to payout to shareholders, on the grounds that they can do so cheaply enough that it will improve overall shareholder returns. The trade-off with this kind of \"\"leveraging up\"\" is that it usually makes the business more risky and every so often you see it go wrong, e.g. after an economic downturn. It may still be a rational thing to do, but I'd look at that kind of proposal very carefully. In this case I think things are quite different: the company has sold a valuable asset and has spare cash. It's already going to use some of the money to reduce debt so it doesn't seem like the company is becoming more risky. Overall if the management is recommending it, I would support it. As you say, the share consolidation seems like just a technical measure and you might as well also support that. I think they want to make their share price seem stable over time to people who are looking at it casually and won't be aware of the payout - otherwise it'd suddenly drop by 60p and might give the impression the company had some bad news. The plan is to essentially cancel one share worth ~960p for every payout they make on 16 shares - since 16x60p = 960p payout this should leave the share price broadly unchanged.\"", "title": "" }, { "docid": "67678b24e00d599afb2ad4f0fb52c905", "text": "\"First, note that a share represents a % of ownership of a company. In addition to the right to vote in the management of the company [by voting on the board of directors, who hires the CEO, who hires the VPs, etc...], this gives you the right to all future value of the company after paying off expenses and debts. You will receive this money in two forms: dividends approved by the board of directors, and the final liquidation value if the company closes shop. There are many ways to attempt to determine the value of a company, but the basic theory is that the company is worth a cashflow stream equal to all future dividends + the liquidation value. So, the market's \"\"goal\"\" is to attempt to determine what that future cash flow stream is, and what the risk related to it is. Depending on who you talk to, a typical stock market has some degree of 'market efficiency'. Market efficiency is basically a comment about how quickly the market reacts to news. In a regulated marketplace with a high degree of information available, market efficiency should be quite high. This basically means that stock markets in developed countries have enough traders and enough news reporting that as soon as something public is known about a company, there are many, many people who take that information and attempt to predict the impact on future earnings of the company. For example, if Starbucks announces earnings that were 10% less than estimated previously, the market will quickly respond with people buying Starbucks shares lowering their price on the assumption that the total value of the Starbucks company has decreased. Most of this trading analysis is done by institutional investors. It isn't simply office workers selling shares on their break in the coffee room, it's mostly people in the finance industry who specialize in various areas for their firms, and work to quickly react to news like this. Is the market perfectly efficient? No. The psychology of trading [ie: people panicking, or reacting based on emotion instead of logic], as well as any inadequacy of information, means that not all news is perfectly acted upon immediately. However, my personal opinion is that for large markets, the market is roughly efficient enough that you can assume that you won't be able to read the newspaper and analyze stock news in a way better than the institutional investors. If a market is generally efficient, then it would be very difficult for a group of people to manipulate it, because someone else would quickly take advantage of that. For example, you suggest that some people might collectively 'short AMZN' [a company worth half a trillion dollars, so your nefarious group would need to have $5 Billion of capital just to trade 1% of the company]. If someone did that, the rest of the market would happily buy up AMZN at reduced prices, and the people who shorted it would be left holding the bag. However, when you deal with smaller items, some more likely market manipulation can occur. For example, when trading penny stocks, there are people who attempt to manipulate the stock price and then make a profitable trade afterwards. This takes advantage of the low amount of information available for tiny companies, as well as the limited number of institutional investors who pay attention to them. Effectively it attempts to manipulate people who are not very sophisticated. So, some manipulation can occur in markets with limited information, but for the most part prices are determined by the 'market consensus' on what the future profits of a company will be. Additional example of what a share really is: Imagine your neighbor has a treasure chest on his driveway: He gathers the neighborhood together, and asks if anyone wants to buy a % of the value he will get from opening the treasure chest. Perhaps it's a glass treasure chest, and you can mostly see inside it. You see that it is mostly gold and silver, and you weigh the chest and can see that it's about 100 lbs all together. So in your head, you take the price of gold and silver, and estimate how much gold is in the chest, and how much silver is there. You estimate that the chest has roughly $1,000,000 of value inside. So, you offer to buy 10% of the chest, for $90k [you don't want to pay exactly 10% of the value of the company, because you aren't completely sure of the value; you are taking on some risk, so you want to be compensated for that risk]. Now assume all your neighbors value the chest themselves, and they come up with the same approximate value as you. So your neighbor hands out little certificates to 10 of you, and they each say \"\"this person has a right to 10% of the value of the treasure chest\"\". He then calls for a vote from all the new 'shareholders', and asks if you want to get the money back as soon as he sells the chest, or if you want him to buy a ship and try and find more chests. It seems you're all impatient, because you all vote to fully pay out the money as soon as he has it. So your neighbor collects his $900k [$90k for each 10% share, * 10], and heads to the goldsmith to sell the chest. But before he gets there, a news report comes out that the price of gold has gone up. Because you own a share of something based on the price of gold, you know that your 10% treasure chest investment has increased in value. You now believe that your 10% is worth $105k. You put a flyer up around the neighborhood, saying you will sell your share for $105k. Because other flyers are going up to sell for about $103-$106k, it seems your valuation was mostly consistent with the market. Eventually someone driving by sees your flyer, and offers you $104k for your shares. You agree, because you want the cash now and don't want to wait for the treasure chest to be sold. Now, when the treasure chest gets sold to the goldsmith, assume it sells for $1,060,000 [turns out you underestimated the value of the company]. The person who bought your 10% share will get $106k [he gained $2k]. Your neighbor who found the chest got $900k [because he sold the shares earlier, when the value of the chest was less clear], and you got $104k, which for you was a gain of $14k above what you paid for it. This is basically what happens with shares. Buy owning a portion of the company, you have a right to get a dividend of future earnings. But, it could take a long time for you to get those earnings, and they might not be exactly what you expect. So some people do buy and sell shares to try and earn money, but the reason they are able to do that is because the shares are inherently worth something - they are worth a small % of the company and its earnings.\"", "title": "" }, { "docid": "c8ea35706b4e844f515d4c3bf0cadab8", "text": "\"From Wikipedia - Stock: The stock (also capital stock) of a corporation constitutes the equity stake of its owners. It represents the residual assets of the company that would be due to stockholders after discharge of all senior claims such as secured and unsecured debt. Stockholders' equity cannot be withdrawn from the company in a way that is intended to be detrimental to the company's creditors Wikipedia - Dividend: A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits. When a corporation earns a profit or surplus, it can re-invest it in the business (called retained earnings), and pay a fraction of this reinvestment as a dividend to shareholders. Distribution to shareholders can be in cash (usually a deposit into a bank account) or, if the corporation has a dividend reinvestment plan, the amount can be paid by the issue of further shares or share repurchase. Wikipedia - Bond: In finance, a bond is an instrument of indebtedness of the bond issuer to the holders. It is a debt security, under which the issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay them interest (the coupon) and/or to repay the principal at a later date, termed the maturity date. Interest is usually payable at fixed intervals (semiannual, annual, sometimes monthly). Very often the bond is negotiable, i.e. the ownership of the instrument can be transferred in the secondary market. This means that once the transfer agents at the bank medallion stamp the bond, it is highly liquid on the second market. Thus, stock is about ownership in the company, dividends are the payments those owners receive, which may be additional shares or cash usually, and bonds are about lending money. Stocks are usually bought through brokers on various stock exchanges generally. An exception can be made under \"\"Employee Stock Purchase Plans\"\" and other special cases where an employee may be given stock or options that allow the purchase of shares in the company through various plans. This would apply for Canada and the US where I have experience just as a parting note. This is without getting into Convertible Bond that also exists: In finance, a convertible bond or convertible note or convertible debt (or a convertible debenture if it has a maturity of greater than 10 years) is a type of bond that the holder can convert into a specified number of shares of common stock in the issuing company or cash of equal value. It is a hybrid security with debt- and equity-like features. It originated in the mid-19th century, and was used by early speculators such as Jacob Little and Daniel Drew to counter market cornering. Convertible bonds are most often issued by companies with a low credit rating and high growth potential.\"", "title": "" }, { "docid": "0c8190665ca7c86417f05ab163d11144", "text": "To follow up on Quid's comment, the share classes themselves will define what level of dividends are expected. Note that the terms 'common shares' and 'preferred shares' are generally understood terms, but are not as precise as you might believe. There are dozens/hundreds of different characteristics that could be written into share classes in the company's articles of incorporation [as long as those characteristics are legal in corporate law in the company's jurisdiction]. So in answering your question there's a bit of an assumption that things are working 'as usual'. Note that private companies often have odd quirks to their share classes, things like weird small classes of shares that have most of the voting rights, or shares with 'shotgun buyback clauses'. As long as they are legal clauses, they can be used to help control how the business is run between various shareholders with competing interests. Things like parents anticipating future family infighting and trying to prevent familial struggle. You are unlikely to see such weird quirks in public companies, where the company will have additional regulatory requirements and where the public won't want any shock at unexpected share clauses. In your case, you suggested having a non-cumulative preferred share [with no voting rights, but that doesn't impact dividend payment]: There are two salient points left related to payout that the articles of incorporation will need to define for the share classes: (1) What is the redemption value for the shares? [This is usually equal to the cost of subscribing for the shares in the first place; it represents how much the business will need to pay the shareholder in the event of redemption / recall] (2) What is the stated dividend amount? This is usually defined at a rate that's at or a little above a reasonable interest rate at the time the shares are created, but defined as $ / share. For example, the shares could have $1 / share dividend payment, where the shares originally cost $50 each to subscribe [this would reflect a rate of payment of about 2%]. Typically by corporate law, dividends must be paid to preferred shares, to the extent required based on the characteristics of the share class [some preferred shares may not have any required dividends at all], before any dividends can be paid to common shares. So if $10k in dividends is to be paid, and total preferred shares require $15k of non-cumulative dividends each year, then $0 will be paid to the common shares. The following year, $15k of dividends will once again need to be paid to the preferred shares, before any can be paid to the common shares.", "title": "" }, { "docid": "a25b57209b7b65d9120b4099816dbf27", "text": "Generally, the answer is as follows: If there is a legal obligation to pay cash flow (including the possibility of court determined restructuring), then it is debt. If the asset owner is not guaranteed any cash flow, but instead owns the residual cash flow from the operations of the business (I.e. the cash flow left-over), then it is equity.", "title": "" }, { "docid": "df674298eca5e6a1981d5655c6ff77a5", "text": "Shareholders provide their capital to the company via buying issued stock from said company. In a way they are owning the company through that transaction by a percentage. Ownership is now in question depending on how big the company is. Apple? You have a snowballs chance in Hell trying to assert your 'ownership' of your one share of their stock. So in theory yes they technically own part of the company but the decision making is up the board. Though the shareholders can voice their opinion and give up their vote via proxy voting. I'm a little rusty please correct me if you must.", "title": "" }, { "docid": "f3efe3ae43a81233cc493fe7893ce776", "text": "My answer is not specific, or even maybe applicable, to Microsoft. Companies don't want to cut dividends. So they have a fixed expense, but the cashflow that funds it might be quite lumpy, or cyclical, depending on the industry. Another, more general, issue is that taking on debt to retire shares is a capital allocation decision. A company needs capital to operate. This is why they went public in the first place, to raise capital. Debt is a cheaper form of capital than equity. Equity holders are last in line in a bankruptcy. Bondholders are at the front of the line. To compensate for this, equity holders require a larger return -- often called a hurdle rate. So why doesn't a company just use cheaper equity, and no debt? Some do. But consider that equity holders participate in the earnings, where bondholders just get the interest, nothing more. And because lenders don't participate in the potential upside, they introduce conditions (debt covenants) to help control their downside exposure. For a company, it's a balance, very much the same as personal finances. A reasonable amount of debt provides low-cost capital, which can be used to produce greater returns. But too much debt, and the covenants are breached, the debt is called due immediately, there's no cash to cover, and wham! bankruptcy. A useful measure, if a bit difficult to calculate, is a company's cost of capital, and the return on that capital. Cost of capital is a blended number taking both equity and debt into account. Good companies earn a return that is greater than their cost of capital. Seems obvious, but many companies don't succeed at this. In cases where this is persistent, the best move for shareholders would be for the company to dissolve and return all the capital. Unfortunately, as in the Railroad Tycoon example above, managers' incentives aren't always well aligned with shareholders, and they allocate capital in ways advantageous to themselves, and not the company.", "title": "" }, { "docid": "909417d8d10021a49861245cd34381e3", "text": "\"Not to detract from the other answers at all (which are each excellent and useful in their own right), but here's my interpretation of the ideas: Equity is the answer to the question \"\"Where is the value of the company coming from?\"\" This might include owner stakes, shareholder stock investments, or outside investments. In the current moment, it can also be defined as \"\"Equity = X + Current Income - Current Expenses\"\" (I'll come back to X). This fits into the standard accounting model of \"\"Assets - Liabilities = Value (Equity)\"\", where Assets includes not only bank accounts, but also warehouse inventory, raw materials, etc.; Liabilities are debts, loans, shortfalls in inventory, etc. Both are abstract categories, whereas Income and Expense are hard dollar amounts. At the end of the year when the books balance, they should all equal out. Equity up until this point has been an abstract concept, and it's not an account in the traditional (gnucash) sense. However, it's common practice for businesses to close the books once a year, and to consolidate outstanding balances. When this happens, Equity ceases to be abstract and becomes a hard value: \"\"How much is the company worth at this moment?\"\", which has a definite, numeric value. When the books are opened fresh for a new business year, the Current Income and Current Expense amounts are zeroed out. In this situation, in order for the big equation to equal out: Assets - Liabilities = X + Income - Expeneses the previous net value of the company must be accounted for. This is where X comes in, the starting (previous year's) equity. This allows the Assets and Liabilities to be non-zero, while the (current) Income and Expenses are both still zeroed out. The account which represents X in gnucash is called \"\"Equity\"\", and encompasses not only initial investments, but also the net increase & decreases from previous years. While the name would more accurately be called \"\"Starting Equity\"\", the only problem caused by the naming convention is the confusion of the concept Equity (X + Income - Expenses) with the account X, named \"\"Equity\"\".\"", "title": "" }, { "docid": "0c0799dfc1e51a71540e0aa8aa6cb460", "text": "Some qualitative factors to consider when deciding whether to finance with equity vs debt (for a publicly traded company): 1) The case for equity: Is the stock trading high relative to what management believes is its intrinsic value? If so, raising equity may be attractive since management would be raising a lot of $$$, but the downside is you give up future earnings since you are diluting current ownership 2) The case for debt: What is the expected return for the project in which the raised capital will be utilized for? Is its expected return higher than the interest payments (in % terms)? If so raising debt would be more attractive than raising equity since current ownership would not be diluted That's all I can think of off the top of my head right now, I'm sure there are a few more qualitative factors to consider but I think these two are the most intuitive", "title": "" }, { "docid": "d9396749268a659ce313b7b2c78795b7", "text": "The most obvious example would be a situation where a Company is growth constrained, but cash flow positive. It may have enough cash flow to service $10 million of debt, but it needs to build a new facility that will cost $20 million. There is the option to raise debt and equity or just raise equity and move quicker to getting that facility up and running. There are also situations where debt is used to replace equity (i.e. dividend recapitalization or leveraged share redemption).", "title": "" }, { "docid": "fa8e0c64174269d2bd8ace9c51271d15", "text": "The upvoted answers fail to note that dividends are the only benefit that investors collectively receive from the companies they invest in. If you purchase a share for $100, and then later sell it for $150, you should note that there is always someone that purchases the same share for $150. So, you get $150 immediately, but somebody else has to pay $150 immediately. So, investors collectively did not receive any money from the transaction. (Yes, share repurchase can be used instead of dividends, but it can be considered really another form of paying dividends.) The fair value of a stock is the discounted value of all future dividends the stock pays. It is so simple! This shows why dividends are important. Somebody might argue that many successful companies like Berkshire Hathaway do not pay dividend. Yes, it is true that they don't pay dividend now but they will eventually have to start paying dividend. If they reinvest potential dividends continuously, they will run out of things to invest in after several hundred years has passed. So, even in this case the value of the stock is still the discounted value of all future dividends. The only difference is that the dividends are not paid now; the companies will start to pay the dividends later when they run out of things to invest in. It is true that in theory a stock could pay an unsustainable amount of dividend that requires financing it with debt. This is obviously not a good solution. If you see a company that pays dividend while at the same time obtaining more cash from taking more debt or from share issues, think twice whether you want to invest in such a company. What you need to do to valuate companies fairly is to estimate the amount of dividend that can sustain the expected growth rate. It is typically about 60% of the earnings, because a part of the earnings needs to be invested in future growth, but the exact figure may vary depending on the company. Furthermore, to valuate a company, you need the expected growth rate of dividends and the discount rate. You simply discount all future dividends, correcting them up by the expected dividend growth rate and correcting them down by the discount rate.", "title": "" }, { "docid": "79f388d2574f818e5c8512003c48d607", "text": "This really comes down to tax structuring (which I am not an expert on), for public companies the acquiror almost always pays for the cash to prevent any taxable drawdown of overseas accounts, dividend taxes suck, etc. For a private company, first the debt gets swept, then special dividend out - dividends received by the selling corporate entity benefit from a tax credit plus it reduces the selling price of the equity, reducing capital gains taxes.", "title": "" }, { "docid": "f647dec432cc64c784b8e4707e83ead2", "text": "I was wondering why equity is reflecting ownership of the issuing entity? That is the definition of equity in this regard. My understanding is that for a stock/equity, its issuing entity is a company/firm that sells the stock/equity, while its receiving entity is an investor that buys the stock/equity Correct. equity reflects ownership of the receiving entity i.e. investor Incorrect. Equity reflects ownership by the receiving entity of the issuing entity. That is, when you buy stock in a company (taking an equity stake in the company) you buy a piece of the company. It would be rather odd for the company to own a piece of you when you buy their stock.", "title": "" } ]	fiqa
370ac353ce847e382015a1d5915b5674	4 months into a 30 month car loan, need new engine, can't sell any body parts	[ { "docid": "132988cfee7571ec7007c1abf1738e69", "text": "\"Without knowing the details of your financial situation, I can only offer general advice. It might be worth having a financial counselor look at your finances and offer some custom advice. You might be able to find someone that will do this for free by asking at your local church. I would advise you not to try to get another loan, and certainly not to start charging things to a credit card. You are correct when you called it a \"\"nightmare.\"\" You are currently struggling with your finances, and getting further into debt will not help. It would only be a very short-term fix and have long-lasting consequences. What you need to do is look at the income that you have and prioritize your spending. For example, your list of basic needs includes: If you have other things that you are spending money on, such as medical debt or other old debt that you are trying to pay off, those are not as important as funding your basic needs above. If there is anything you can do to reduce the cost of the basic needs, do it. For example, finding a cheaper place to live or a place closer to your job might save you money. Perhaps accepting nutrition assistance from a local food bank or the Salvation Army is an option for you. Now, about your car: Your transportation to your job is very much one of your basic needs, as it will enable you to pay for your other needs. If you can use public transportation until you can get a working car again, or you can find someone that will give you a ride, that will solve this problem. If not, you'll need to get a working car. You definitely don't want to take out another loan for a car, as you are already having trouble paying the first loan. I'm guessing that it will be less expensive to get the engine repaired than it will be to buy a new car at this point. But that is just a guess. You'll need to find out how much it will cost to fix the car, and see if you can swing it by perhaps eliminating expenses that aren't necessary, even for a short time. For example, if you are paying installments on medical debt, you might have to skip a payment to fix your car. It's not ideal, but if you are short on cash, it is a better option than losing your job or taking out even more debt for your car. Alternatively, buying another, functional car, if it costs less than fixing your current car, is an option. If you don't have the money to pay your current car loan payments, you'll lose your current car. Just to be clear, many of these options will mess up your credit score. However, borrowing more, in an attempt to save your credit score, will probably only put off the inevitable, as it will make paying everything off that much harder. If you don't have enough income to pay your debts, you might be better off to just take the credit score ding, get back on your feet, and then work to eliminate the debt once you've got your basic needs covered. Sorry to hear about your situation. Again, this advice is just general, and might not all apply to your financial details. I recommend talking to the pastor of a local church and see if they have someone that can sit down with you and discuss your options.\"", "title": "" } ]	[ { "docid": "0b2ff24c4725b56cdb4063cb717b2ed1", "text": "Right! He actually plans on selling it and getting a car to save on fuel and cut down the payment a few hundred a month. The problem is, he bought it last June and we still like nearly a year before we are allowed to trade it in. But we are more than ready for that day to come! Lol", "title": "" }, { "docid": "4c0ad5c834bc207b3f756d7ce3c6ed65", "text": "\"You won't be able to sell the car with a lien outstanding on it, and whoever the lender is, they're almost certain to have a lien on the car. You would have to pay the car off first and obtain a clear title, then you could sell it. When you took out the loan, did you not receive a copy of the finance contract? I can't imagine you would have taken on a loan without signing paperwork and receiving your own copy at the time. If the company you're dealing with is the lender, they are obligated by law to furnish you with a copy of the finance contract (all part of \"\"truth in lending\"\" laws) upon request. It sounds to me like they know they're charging you an illegally high (called \"\"usury\"\") interest rate, and if you have a copy of the contract then you would have proof of it. They'll do everything they can to prevent you from obtaining it, unless you have some help. I would start by filing a complaint with the Better Business Bureau, because if they want to keep their reputation intact then they'll have to respond to your complaint. I would also contact the state consumer protection bureau (and/or the attorney general's office) in your state and ask them to look into the matter, and I would see if there are any local consumer watchdogs (local television stations are a good source for this) who can contact the lender on your behalf. Knowing they have so many people looking into this could bring enough pressure for them to give you what you're asking for and be more cooperative with you. As has been pointed out, keep a good, detailed written record of all your contacts with the lender and, as also pointed out, start limiting your contacts to written letters (certified, return receipt requested) so that you have documentation of your efforts. Companies like this succeed only because they prey on the fact many people either don't know their rights or are too intimidated to assert them. Don't let these guys bully you, and don't take \"\"no\"\" for an answer until you get what you're after. Another option might be to talk to a credit union or a bank (if you have decent credit) about taking out a loan with them to pay off the car so you can get this finance company out of your life.\"", "title": "" }, { "docid": "46e0fd4a0513b1e04e20f5ec1819ed82", "text": "Sometimes I think it helps to think of the scenario in reverse. If you had a completely paid off car, would you take out a title loan (even at 0%) for a few months to put the cash in a low-interest savings account? For me, I think the risk of losing the car due to non-payment outweighs the tens of dollars I might earn.", "title": "" }, { "docid": "1c4d36d1c862dd9d2cccce47377bcd2c", "text": "Fair enough. I was just trying to save them money. If it were me, I'd call up the dealer first and threaten to contact local media if they didn't void the contract. In the end though a lawyer is probably the best bet. Even just having them write a letter to send over would probably get them to nullify it.", "title": "" }, { "docid": "795e112ad3c0a82dbbb6c2ad2b694d40", "text": "It's her car. Unlike what Ross said in the comments she can't sign it over to you--she doesn't own it yet. The best you'll be able to do is have her leave it to you in her will--but beware that you very well might need to refinance the loan at that point.", "title": "" }, { "docid": "be2775a7348a4342d1577d40a0478832", "text": "Sounds like you need to contact your ex and sort it out. If you have co-signed the loan, changes are you are equally responsible even if on party chooses not to pay, then the bank will come after the other one. If you no longer wish to be part of the arrangement and your ex still wants the car, she will have to buy you out of the car and become fully responsible for the liability.", "title": "" }, { "docid": "887b6da259f747c3ebaa6117d49b4758", "text": "Not sure if it is the same in the States as it is here in the UK (or possibly even depends on the lender) but if you have any amount outstanding on the loan then you wouldn't own the vehicle, the loan company would. This often offers extra protection if something goes wrong with the vehicle - a loan company talking to the manufacturer to get it resolved carries more weight than an individual. The laon company will have an army of lawyers (should it get that far) and a lot more resources to deal with anything, they may also throw in a courtesy car etc.", "title": "" }, { "docid": "b10a6a9f11ddd5e980624a5df4c0c0f8", "text": "Car dealers as well as boat dealers, RV dealers, maybe farm vehicle dealers and other asset types make deals with banks and finance companies to they can make loans to buyers. They may be paying the interest to the finance companies so they can offer a 0% loan to the retail customer for all or part of the loan term. Neither the finance company nor the dealer wants to make such loans to people who are likely to default. Such customers will not be offered this kind of financing. But remember too that these loans are secured by the asset - the car - which is also insured. But the dealer or the finance company holds that asset as collateral that they can seize to repay the loan. So the finance company gets paid off and the dealer keeps the profit he made selling the car. So these loans are designed to ensure the dealer nor the finance company looses much. These are called asset finance loans because there is always an asset (the car) to use as collateral.", "title": "" }, { "docid": "2ef47bc6e77a08529092f461b85d993b", "text": "\"The lead story here is you owe $12,000 on a car worth $6000!! That is an appalling situation and worth a lot to get out of it. ($6000, or a great deal more if the car is out of warranty and you are at risk of a major repair too.) I'm sorry if it feels like the payments you've made so far are wasted; often the numbers do work out like this, and you did get use of the car for that time period. Now comes an \"\"adversary\"\", who is threatening to snatch the car away from you. I have to imagine they are emotionally motivated. How convenient :) Let them take it. But it's important to fully understand their motivations here. Because financially speaking, the smart play is to manage the situation so they take the car. Preferably unbeknownst that the car is upside down. Whatever their motivation is, give them enough of a fight; keep them wrapped up in emotions while your eye is on the numbers. Let them win the battle; you win the war: make sure the legal details put you in the clear of it. Ideally, do this with consent with the grandfather \"\"in response to his direct family's wishes\"\", but keep up the theater of being really mad about it. Don't tell anyone for 7 years, until the statute of limitations has passed and you can't be sued for it. Eventually they'll figure out they took a $6000 loss taking the car from you, and want to talk with you about that. Stay with blind rage at how they took my car. If they try to explain what \"\"upside down\"\" is, feign ignorance and get even madder, say they're lying and they won, why don't they let it go? If they ask for money, say they're swindling. \"\"You forced me, I didn't have a choice\"\". (which happens to be a good defense. They wanted it so bad; they shoulda done their homework. Since they were coercive it's not your job to disclose, nor your job to even know.) If they want you to take the car back, say \"\"can't, you forced me to buy another and I have to make payments on that one now.\"\"\"", "title": "" }, { "docid": "f88dded301c180c38ceda078c73a1813", "text": "California bankruptcy law requires disclosure of any gift made by the person declaring bankruptcy in the past 12 months, and any asset transfers in the past 2 years (with a couple of minor exceptions). This would most certainly include the car, if it is regifted back to you. Such a claim would likely be considered fraudulent, though this would be a matter for the lawyers and bankruptcy trustee in question. There's a blog which you may wish to check out, the California Bankruptcy Blog, which has a specific entry on gifts. Now, there is a specific exemption for automobiles, but only up to a total of $2725. Legally, I believe there's nothing you can do here. If the $10K was a loan, it will be discharged in bankruptcy. If it was a gift, it'll have to be declared and the car will have to be sold. If regifted or transferred, it must be declared and will likely (but not definitely) be determined as an invalid disposal of assets. Either you or your family member will have to discuss this with a bankruptcy lawyer. I'm sorry your generous act is likely to get tangled up here. :(", "title": "" }, { "docid": "e3a794578c9ef2130d3f3bb40b9b97aa", "text": "Everybody on the car title will need to participate in the selling process. The person who is buying the car will need everybody to sign the paperwork so that nobody months later tries to say they never agreed to sell the car. The money will have to be sent to the lender to pay off the rest of the loan. If the money isn't enough to pay off the loan everybody will have to decide how the extra money will be sent to the lender. This will have to be done as part of the selling process because the lender doesn't want you to sell the car and keep the cash. Once the car is gone so is the collateral and they can't take it back if you miss payments. If the cousin is too far away to participate in the selling of the car, you may need the buyer and the lender to tell you how to proceeded. If you are selling at a dealership they will know what documents and signatures will be needed, the bank will also know what to do. If the loan is almost paid off it may be easier to pay the loan first, and then get the title without the lenders name before trying to sell it.", "title": "" }, { "docid": "775bc1a59adf005fc27e647115a69a72", "text": "I recently drove past Winslow, Arizona and knocked out the fuel pump in my truck. It cost $500 to repair, and the tow would have been another several hundred if I hadn't had a Good Samaritan's club card, since it was the weekend. 2-3 days would not be acceptable in this sort of scenario. And that was just the fuel pump!", "title": "" }, { "docid": "bd5930583bb29a301015383439a583da", "text": "If You use the car regulary, I don't think that driving on the bald tires for 3 years is a reasonable option. Have You considered buying used tires? Those will be cheaper and will last till You get to replace the car.", "title": "" }, { "docid": "5439557d04ffe4abc076ed38d0fb9d80", "text": "On the off chance that I am not wrong, at that point you should be included money and you are proposing to get it by offering your garbage auto. This is genuinely a smart thought, as there are a large number of auto merchants who demonstrate their enthusiasm for old autos. Your auto specialist needs to have disclosed to you the money for garbage autos Tampa which couldn't be more than two or three hundred dollars.", "title": "" }, { "docid": "83ee753bf0e789e557df6966e4cfcbc9", "text": "You could take these definitions from MSCI as an example of how to proceed. They calculate price indices (PR) and total return indices (including dividends). For performance benchmarks the net total return (NR) indices are usually the most relevant. In your example the gross total return (TR) is 25%. From the MSCI Index Defintions page :- The MSCI Price Indexes measure the price performance of markets without including dividends. On any given day, the price return of an index captures the sum of its constituents’ free float-weighted market capitalization returns. The MSCI Total Return Indexes measure the price performance of markets with the income from constituent dividend payments. The MSCI Daily Total Return (DTR) Methodology reinvests an index constituent’s dividends at the close of trading on the day the security is quoted ex-dividend (the ex-date). Two variants of MSCI Total Return Indices are calculated: With Gross Dividends: Gross total return indexes reinvest as much as possible of a company’s dividend distributions. The reinvested amount is equal to the total dividend amount distributed to persons residing in the country of the dividend-paying company. Gross total return indexes do not, however, include any tax credits. With Net Dividends: Net total return indexes reinvest dividends after the deduction of withholding taxes, using (for international indexes) a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties.", "title": "" } ]	fiqa
4cff8b5dcfa29d576e2b65c831dd1242	Can I invest in the USA or EU from an Asian 3rd-world country, over the Internet?	[ { "docid": "2e04d8fce524207578d6965de2095c43", "text": "Absolutely. It does highly depend on your country, as US brokerages are stricter with or even closed to residents of countries that produce drugs, launder money, finance terror, have traditional difficulty with the US, etc. It also depends on your country's laws. Some countries have currency controls, restrictions on buying foreign/US securities, etc. That said, some brokerages have offices world-wide, so there might be one near you. If your legal situation as described above is fortunate, some brokers will simply allow you to setup online using a procedure not too different from US residents: provide identification, sign tons of documents. You'll have to have a method to deliver your documentation in the ways you'd expect: mail, fax, email. E*Trade is the best starter broker, right now, imo. Just see how far you can go in the sign-up process.", "title": "" } ]	[ { "docid": "746fadc47e6606d3a1730a15c59391f2", "text": "I just finished a high frequency trading project. Individuals can do it, but you need a lot of capital. You can get a managed server in Times Square for $1500/month, giving you access to 90% of the US exchanges that matter, their data farms are within 3 milliseconds of distance (latency). You can also get more servers in the same building as the exchanges, if you know where to look ;) thats all I can divulge good luck", "title": "" }, { "docid": "40f4b295402b38de190ba9198138eea9", "text": "\"Currency, like gold and other commodities, isn't really much of an investment at all. It doesn't actually generate any return. Its value might fluctuate at a different rate than that of the US dollar or Euro, but that's about it. It might have a place as a very small slice of a basket of global currencies, but most US / European households don't actually need that sort of basket; it's really more of a risk-management strategy than an investment strategy and it doesn't really reflect the risks faced by an ordinary family in the US (or Europe or similar). Investments shouldn't generally be particularly \"\"exciting\"\". Generally, \"\"exciting\"\" opportunities mean that you're speculating on the market, not really investing in it. If you have a few thousand dollars you don't need and don't mind losing, you can make some good money speculating some of the time, but you can also just lose it all too. (Maybe there's a little room for excitement if you find amazing deals on ordinary investments at the very bottom of a stock market crash when decent, solid companies are on sale much cheaper than they ordinarily are.)\"", "title": "" }, { "docid": "bdf650532eeac544396f3ee828af637c", "text": "No, it's not. This could be a great question, but with no background, not so much. Do you live there now? For how long, and how much longer? You say investment, are you looking to live in it or rent it out? I have nothing against China, but I'd not buy anywhere unless the price, location, and timing all were right.", "title": "" }, { "docid": "55094532cddaab9387ee3ea1019fb387", "text": "First thing to consider is that getting your hands on an IPO is very difficult unless you have some serious clout. This might help a bit in that department (http://www.sec.gov/answers/ipoelig.htm) However, assuming you accept all that risk and requirements, YES - you can buy stocks of any kind in the US even if you are a foreigner. There are no laws prohibiting investment/buying in the US stock market. What you need is to get an online trading account from a registered brokerage house in the US. Once you are registered, you can buy whatever that is offered.", "title": "" }, { "docid": "3aeef25d59c01d9382647746f9d7cada", "text": "\"I would make this a comment but I am not allowed apparently. Unless your continent blows up, you'll never lost all your money. Google \"\"EUR USD\"\" if you want news stories or graphs on this topic. If you're rooting for your 10k USD (but not your neighbors), you want that graph to trend downward.\"", "title": "" }, { "docid": "15404acf93f7162857cc0bc696e09b11", "text": "\"There are firms that let you do this. I believe that Saxo Bank is one such firm (note that I'm not endorsing the company at all, and have no experience with it) Keep in mind that the reason that these currencies are \"\"exotic\"\" is because the markets for trading are small. Small markets are generally really bad for retail/non-professional investors. (Also note: I'm not trying to insult Brazil or Thailand, which are major economies. In this context, I'm specifically concerned with currency trading volume.)\"", "title": "" }, { "docid": "74b29da71765c7cbe5d01f3f964e4834", "text": "That's a broad question, but I can throw some thoughts at you from personal experience. I'm actually an Australian who has worked in a couple of companies but across multiple countries and I've found out first hand that you have a wealth of opportunities that other people don't have, but you also have a lot of problems that other people won't have. First up, asset classes. Real estate is a popular asset class, but unless you plan on being in each of these countries for a minimum of one to two years, it would be seriously risky to invest in rental residential or commercial real estate. This is because it takes a long time to figure out each country's particular set of laws around real estate, plus it will take a long time to get credit from the local bank institutions and to understand the local markets well enough to select a good location. This leaves you with the classics of stocks and bonds. You can buy stocks and bonds in any country typically. So you could have some stocks in a German company, a bond fund in France and maybe a mutual fund in Japan. This makes for interesting diversification, so if one country tanks, you can potentially be hedged in another. You also get to both benefit and be punished by foreign exchange movements. You might have made a killing on that stock you bought in Tokyo, but it turns out the Yen just fell by 15%. Doh. And to top this off, you are almost certainly going to end up filling out tax returns in each country you have made money in. This can get horribly complicated, very quickly. As a person who has been dealing with the US tax system, I can tell you that this is painful and the US in particular tries to get a cut of your worldwide income. That said, keep in mind each country has different tax rates, so you could potentially benefit from that as well. My advice? Choose one country you suspect you'll spend most of your life in and keep most of your assets there. Make a few purchases in other places, but minimize it. Ultimately most ex-pats move back to their country of origin as friends, family and shared culture bring them home.", "title": "" }, { "docid": "a8d2b79642f69b96d682fd6049896ed9", "text": "I won't think so. Too much trouble for the compliance and internal audit team. Unless you are moving money from Russia, Iran or those non-FATCA countries.", "title": "" }, { "docid": "f3932cc2002b359f9b9105bc0e28a203", "text": "You can invest upto $200K per year abroad, and yes, you can buy Google as a stock. Consider opening an international account with a broker like interactive brokers (www.interactivebrokers.co.in) which allows you to fund the account from your local Indian account, and then on, buy shares of companies listed abroad.", "title": "" }, { "docid": "775ac18eb809a9fb312b7dc550e92aa8", "text": "For question #1, at least some US-based online brokers do permit direct purchases of stocks on foreign exchanges. Depending on your circumstances, this might be more cost effective than purchasing US-listed ADRs. One such broker is Interactive Brokers, which allows US citizens to directly purchase shares on many different foreign exchanges using their online platform (including in France). For France, I believe their costs are currently 0.1% of the total trade value with a 4€ minimum. I should warn you that the IB platform is not particularly user-friendly, since they market themselves to traders and the learning curve is steep (although accounts are available to individual investors). IB also won't automatically convert currencies for you, so you also need to use their foreign exchange trading interface to acquire the foreign currency used to purchase a foreign stock, which has plusses and minuses. On the plus side, their F/X spread is very competitive, but the interface is, shall we say, not very intuitive. I can't answer question #2 with specific regards to US/France. At least in the case of IB, though, I believe any dividends from a EUR-denominated stock would continue to accumulate in your account in Euros until you decide to convert them to dollars (or you could reinvest in EUR if you so choose).", "title": "" }, { "docid": "dcf69b9f8e93239ee0c989a9ae988837", "text": "This is finance, just because your from India doesn't mean much (And I was born and spent a good part of my youth in Kerala). I pretty actively invest in emerging markets and while India has a large number of problems, it is still looking like a good investment in this global environment.", "title": "" }, { "docid": "6cc39d91d4ee180fe587330a6019f814", "text": "You can try paper trading to sharpen your investing skills(identifying stocks to invest, how much money to allocate and stuff) but nothing compares to getting beaten black and blue in the real world. When virtual money is involved you mayn't care, because you don't loose anything, but when your hard earned money disappears or grows, no paper trading can incite those feelings in you. So there is no guarantee that doing paper trading will make you a better investor, but can help you a lot in terms of learning. Secondly educate yourself on the ways of investing. It is hard work and realize that there is no substitute for hard work. India is a growing economy and your friends maybe safe in the short term but take it from any INVESTOR, not in the long run. And moreover as all economies are recovering from the recession there are ample opportunities to invest money in India both good and bad. Calculate your returns and compare it with your friends maybe a year or two down the lane to compare the returns generated from both sides. Maybe they would come trumps but remember selecting a good investment from a bad investment will surely pay out in the long run. Not sure what you do not understand what Buffet says. It cannot get more simpler than that. If you can drill those rules into your blood, you mayn't become a billionaire but surely you will make a killing, but in the long run. Read and read as much as you can. Buy books, browse the net. This might help. One more guy like you.", "title": "" }, { "docid": "a2835b6174f6b3e73ae2a2cdda2658eb", "text": "Quite a few stock broker in India offer to trade in US markets via tie-up brokers in US. As an Indian citizen, there are limits as to how much FX you can buy, generally very large, should be an issue. The profits will be taxed in US as well as India [you can claim relief under DTAA]", "title": "" }, { "docid": "6a43868c11cef3decde5fc0f457434ab", "text": "Hi there. I think China is recommended for premanufactured products given their GDP output. The specific products may exist in the US too. The key is networking. Starting online retail, you are essentially ecommerce and or sales. There may be people seeking sales reps for their products. You should have a specific business plan targetting the niche you plan to sell and cater to. Thomasnet has US manufacturers. You may have to get clever and work out deals selling manufactured goods but with work it can be done. I personally have seen way too many issues result of dealing with imports and know of many rookie mistakes in business where people have gone this route due to price. Sources: MBA, marketing apprentice for multi millionaire, business apprentice working with manufacturing operations director with civil and military experience; former freelance design, project management and product manufacturing experience.", "title": "" }, { "docid": "66b6d7651ba92fdc726761af5e89c6f9", "text": "\"I made an investing mistake many (eight?) years ago. Specifically, I invested a very large sum of money in a certain triple leveraged ETF (the asset has not yet been sold, but the value has decreased to maybe one 8th or 5th of the original amount). I thought the risk involved was the volatility--I didn't realize that due to the nature of the asset the value would be constantly decreasing towards zero! Anyhow, my question is what to do next? I would advise you to sell it ASAP. You didn't mention what ETF it is, but chances are you will continue to lose money. The complicating factor is that I have since moved out of the United States and am living abroad (i.e. Japan). I am permanent resident of my host country, I have a steady salary that is paid by a company incorporated in my host country, and pay taxes to the host government. I file a tax return to the U.S. Government each year, but all my income is excluded so I do not pay any taxes. In this way, I do not think that I can write anything off on my U.S. tax return. Also, I have absolutely no idea if I would be able to write off any losses on my Japanese tax return (I've entrusted all the family tax issues to my wife). Would this be possible? I can't answer this question but you seem to be looking for information on \"\"cross-border tax harvesting\"\". If Google doesn't yield useful results, I'd suggest you talk to an accountant who is familiar with the relevant tax codes. Are there any other available options (that would not involve having to tell my wife about the loss, which would be inevitable if I were to go the tax write-off route in Japan)? This is off topic but you should probably have an honest conversation with your wife regardless. If I continue to hold onto this asset the value will decrease lower and lower. Any suggestions as to what to do? See above: close your position ASAP For more information on the pitfalls of leveraged ETFs (FINRA) What happens if I hold longer than one trading day? While there may be trading and hedging strategies that justify holding these investments longer than a day, buy-and-hold investors with an intermediate or long-term time horizon should carefully consider whether these ETFs are appropriate for their portfolio. As discussed above, because leveraged and inverse ETFs reset each day, their performance can quickly diverge from the performance of the underlying index or benchmark. In other words, it is possible that you could suffer significant losses even if the long-term performance of the index showed a gain.\"", "title": "" } ]	fiqa
884cd94df9a70408aa3c4ae41d727350	Does a budget comprise expenses, and/or revenue?	[ { "docid": "127afca02f53cf42f86207b7eb1559a6", "text": "Budget means both expenses and revenue. In quite a few cases, say personal finance, typically one refers to budget more from expenses point of view as the revenue is typically fixed/known [mostly salary]. The Operating budget and capital budget are laid out separately as Operating budget gives out day to day expenses that are typically essential, employee salaries, routine maintenance of infrastructure etc. The revenue is also tied in to match this. These are done within the same year. Where as capital budget is to build new infrastructure say a new bridge or other major expense that are done over period of years. The revenues to this are typically tied up differently and can even be linked to getting more funding from other agencies or loans.", "title": "" } ]	[ { "docid": "126fd13c67264c54eded0b947f3c655d", "text": "It's the same result either way. Say the bills are $600, and you are reimbursed $400. You'd be able to write off $400 as part of the utilities that are common expenses, but then claim the $400 as income. I'd stick with that, and have contemporaneous records supporting all cash flow. You also can take 2/3 of any other maintenance costs that most homeowners can't. Like snow removal, lawn care, etc.", "title": "" }, { "docid": "47b2a64e7796e4c757219e9bdb8bbe0c", "text": "So the budget is just a guess and the IT manager can ultimately spend whatever he wants? Are you really arguing that he should treat the spending constraints given to him by the heads of the company as mere suggestions? Do you actually work in an accounting department? I have to ask because you seem to have a fundemental misunderstanding about their role in all this. They are just score keepers, they don't get to decide how much money is allocated to each department. So the way they track the money has no bearing on this issue.", "title": "" }, { "docid": "133464c876056ea6f006d3b68d5352cd", "text": "In the US there is no set date. If all goes well there are multiple dates of importance. If it doesn't go well the budget process also may include continuing resolutions, shutdowns, and sequestrations.", "title": "" }, { "docid": "e1e8de1e86545e7b11ad859682abc36d", "text": "\"What you are describing is a Chart of Accounts. It's a structure used by accountants to categorise accounts into sub-categories below the standard Asset/Liability/Income/Expense structure. The actual categories used will vary widely between different people and different companies. Every person and company is different, whilst you may be happy to have a single expense account called \"\"Lunch\"\", I may want lots of expense accounts to distinguish between all the different restaurants I eat at regularly. Companies will often change their chart of accounts over time as they decide they want to capture more (or less) detail on where a particular type of Expense is really being spent. All of this makes any attempt to create a standard (in the strict sense) rather futile. I have worked at a few places where discussions about how to structure the chart of accounts and what referencing scheme to use can be surprisingly heated! You'll have to come up with your own system, but I can provide a few common recommendations: If you're looking for some simple examples to get started with, most personal finance software (e.g. GnuCash) will offer to create an example chart of accounts when you first start a session.\"", "title": "" }, { "docid": "6f001f812032181c7036b08d9fa31e68", "text": "Well, if you were a business, and your food and rent and travel expenses were business expenses, and you paid out less money than you earned, you would get a refund. If you can prove that an expense is tax deductible, then that's just what it is. For businesses, a net operating loss is tax deductible.", "title": "" }, { "docid": "666921359e4699c451b11eee438b8f6d", "text": "Your chart and your claim don't match. You're looking at one marginal tax rate and saying that its historical change doesn't impact overall federal revenues. This is true on the surface, but you're only looking at one aspect of the overall picture. Saying that federal revenue doesn't correlate with tax rates is disingenuous. An across the board cut or an across the board increase will both have significant effect. Likewise an increase to the top marginal tax rate by itself would have an impact as long as there were no corresponding cuts or increased expenditures to wipe out the impact. A budget is a budget whether it's a great big one like the federal government's or a small one like a household budget. Revenues and expenses need to match in order for the budget to balance. Increasing tax rates increases revenue from everyone within the affected tax bracket. It makes an impact.", "title": "" }, { "docid": "a02042a8eb168692455334226a2f2b69", "text": "This chart is full of shit. Iraq War costs barely register a blip. [From NYT article](http://www.nytimes.com/2009/02/20/us/politics/20budget.html) WASHINGTON — For his first annual budget next week, President Obama has banned four accounting gimmicks that President George W. Bush used to make deficit projections look smaller. The price of more honest bookkeeping: A budget that is $2.7 trillion deeper in the red over the next decade than it would otherwise appear, according to administration officials.", "title": "" }, { "docid": "61de18f1f7c5f12ef51739de5e6f5d9a", "text": "Expenses are where the catch is found. Not all expenditures are considered expenses for tax purposes. Good CPAs make a comfortable living untangling this sort of thing. Advice for both of your family members' businesses...consult with a CPA before making big purchases. They may need to adjust the way they buy, or the timing of it, or simply to set aside capital to pay the taxes for the profit used to purchase those items. CPA can help find the best path. That 10k in unallocated income can be used to redecorate your office, but there's still 3k in taxes due on it. Bottom Line: Can't label business income as profit until the taxes have been paid.", "title": "" }, { "docid": "973cb5be67f212b096e1480696eac5df", "text": "Fuck managerial accounting to death. Anywho, I'm not sure what they mean by the variance being higher or lower in the budget. Variance in principle is the discrepancy from a budget and actual. I'll try to answer this from what I can see. The budget variance in this problem is unfavorable for Busy Community Support, mostly caused by a significant underestimating of your salaries expense in the budget.", "title": "" }, { "docid": "4015a67ac8479112a93c6116fbb474bf", "text": "However, we would also like to include on our budget the actual cost of the furniture when we buy it. That would be double-counting. When it's time to buy the new kit, just pay for it directly from savings and then deduct that amount from the Furniture Cash asset that you'd been adding to every month.", "title": "" }, { "docid": "0f8bff4246bf5e8c9e8ded7affa5caa8", "text": "\"Gnucash is first and foremost just a general ledger system. It tracks money in accounts, and lets you make transactions to transfer money between the accounts, but it has no inherent concept of things like taxes. This gives you a large amount of flexibility to organize your account hierarchy the way you want, but also means that it sometimes can take a while to figure out what account hierarchy you want. The idea is that you keep track of where you get money from (the Income accounts), what you have as a result (the Asset accounts), and then track what you spent the money on (the Expense accounts). It sounds like you primarily think of expenses as each being for a particular property, so I think you want to use that as the basis of your hierarchy. You probably want something like this (obviously I'm making up the specifics): Now, when running transaction reports or income/expense reports, you can filter to the accounts (and subaccounts) of each property to get a report specific to that property. You mention that you also sometimes want to run a report on \"\"all gas expenses, regardless of property\"\", and that's a bit more annoying to do. You can run the report, and when selecting accounts you have to select all the Gas accounts individually. It sounds like you're really looking for a way to have each transaction classified in some kind of two-axis system, but the way a general ledger works is that it's just a tree, so you need to pick just one \"\"primary\"\" axis to organize your accounts by.\"", "title": "" }, { "docid": "d8b78f45c8342b28a922582638a4e9e4", "text": "\"Gail Vaz-Oxlade from the television show Til Debt Do Us Part has a great interactive budget worksheet that helps you set up a \"\"jar\"\" or envelope system for each month based on your income and fixed expenses. We have used this successfully in the past. What we found most useful was, as others have said, writing everything down, keeping receipts, and thus being accountable and aware of our spending.\"", "title": "" }, { "docid": "aa256573e6b5414fab97b4d43a17224c", "text": "Revenue does not equal income. Income is, more or less, synonymous with profit. It is the amount of money earned after expenses. A corporation is taxed on its revenue after its deductible expenses have been removed, the same as a person is. It's kind of double taxation, but it's kind of the same argument as saying that payroll taxes in addition to income taxes are double taxation. Also of note: taxes on dividends are lower than normal taxes because of this double taxation.", "title": "" }, { "docid": "08ce38aafaf9fbec87735e5eb5c28727", "text": "\"I'm reminded of a conversation I had regarding food. I used the word 'diet' and got pushback, as I meant it in sense of 'what one eats'. That's what a diet is, what you eat in an average week, month, year. That list has no hidden agenda unless you want it to. If your finances are in good shape, debt under control, savings growing, etc, a budget is more of an observation than a constraint. In the same way that my bookshelf tells you a lot about who I am, books on finance, math, my religion, along with some on English and humor, my budget will also tell you what my values are. Edit - In a recent speech, regarding Joe Biden, Hillary Clinton said \"\"He has a saying: ‘Don’t tell me what you value. Show me your budget and I will tell you what you value.’ \"\" - nearly exactly my thoughts on this. For the average person, a budget helps to reign in the areas where spending is too high. $500/mo eating out? For the couple hacking away at $30k in credit card debt, that would be an obvious place to cut back. If this brings you happiness, there's little reason to cut back. The budget becomes a reflection of your priorities, and if, at some point in the future, you need to cut back, you'll have a good understanding of where the money is going.\"", "title": "" }, { "docid": "7ea1758db9e303c44c12f3fd0ebcf923", "text": "\"I pay taxes on revenue. You do have the ability to deduct expenses, though it's not as comprehensive as what companies can do: These figures apply to everybody, so those that earn more get taxed more on thee additional income in each bracket (meaning the first $100,000 of taxable income is taxed the same for everybody at one rate, the next $100,000 at a different rate, etc.) So you do get to deduct personal expenses and get taxed on \"\"profit\"\" - but since the vast majority of people don't keep detailed records of what they spend, it's much simpler just to use blanket deduction amounts for everyone. Companies have much more detailed systems in place to track and categorize expenses, so it's easier to just tax on net profit. Plus, the corporate tax rate is much higher than the average individual tax rate - would you trade more deductions for a higher tax rate?\"", "title": "" } ]	fiqa
7d206e91814df4accff7b90aead5f0f4	Personal Loan: How to define loan purpose	[ { "docid": "69100a1275675a01cd3378b1156f262a", "text": "Does that justify the purpose? That is for individual Banks to decide. No bank would pay for daily expenditure if you are saying primary salary you are spending on eduction. So your declaration is right. You are looking at funding your eduction via loan and you are earning enough for living and paying of the loan. I noticed that a lot of lenders do not lend to applicants whose purpose is to finance the tuition for post-secondary education This could be because the lenders have seen larger percentage defaults when people opt for such loans. It could be due to mix of factors like the the drag this would cause to an individual who may not benefit enough in terms of higher salary to repay the loan, or moves out of country getting a better job. If it is education loan, have you looked at getting scholarships or student loans.", "title": "" }, { "docid": "a33a298c461feeb358bfaea7dbff871d", "text": "I would imagine that it goes beyond purpose and also addresses the demographic as a poor credit risk. Those seeking a post secondary education are a poor credit risk. They are at the beginning of their careers so tend to have low income, a short credit history, and a very short time of managing money on their own. Also many don't know how to work. This later fact, to me, is a great predictor of financial success. Reading into the financial data surrounding student loans, it pretty easy to see that this demographic makes poor money decisions. I live near a state university. A large percentage of students drive late model luxury cars, frequent expensive bars and restaurants, and wear pretty nice clothes. They also graduate with, on average 60K in student loans. Keep in mind a 4 year degree could be had for about 30K and could be paid for working a part time job. And that, to me, is the wisdom in bank's decision. Sure they will loan you all the money you want with a government guarantee. However, once that disappears they will not you money for unnecessary purposes.", "title": "" } ]	[ { "docid": "8d9a776d08c206dacd7cec3133072133", "text": "\"With (1), it's rather confusing as to where \"\"interest\"\" refers to what you're paying and where it refers to what you're being paid, and it's confusing what you expect the numbers to work out to be. If you have to pay normal interest on top of sharing the interest you receive, then you're losing money. If the lending bank is receiving less interest than the going market rate, then they're losing money. If the bank you've deposited the money with is paying more than the going market rate, they're losing money. I don't see how you imagine a scenario where someone isn't losing money. For (2) and (3), you're buying stocks on margin, which certainly is something that happens, but you'll have to get an account that is specifically for margin trading. It's a specific type of credit with specific rules, and you if you want to engage in this sort of trading, you should go through established channels rather than trying to convert a regular loan into margin trading. If you get a personal loan that isn't specifically for margin trading, and buy stocks with the money, and the stocks tank, you can be in serious trouble. (If you do it through margin trading, it's still very risky, but not nearly as risky as trying to game the system. In some cases, doing this makes you not only civilly but criminally liable.) The lending bank absolutely can lose if your stocks tank, since then there will be nothing backing up the loan.\"", "title": "" }, { "docid": "826e4f8be008fa2732fe046f77af39f1", "text": "Student loan is a class of unsecured loan. The characteristics that define a student loan are, primarily, that it is a loan that is intended to be used by someone who is currently a student. Beyond that, though, there are many variations. The different kinds of requirements usually have to do with who is eligible for the loan, and with what the loan is allowed to be used to pay. Some loans have other limitations, such as only being allowed to be directly paid to the institution. Some student loans are federally guaranteed (meaning the Federal Government will repay the bank if you default). Those have a lower interest rate, typically, and often have more stringent requirements, such as only full-time students being eligible, being need-based, and limitations on what the loan's funds can be used for. See studentaid.ed.gov for more information. Many private student loans have quite lax limitations. Some for example have nearly no limitation as to what they can fund; many are allowed to be taken out by part-time students and even non-degree-seeking students in some cases. Private loans usually have somewhat higher rates (as they're entirely unsecured) to go along with the lower restrictions and higher borrowing limits. You'd have to see the specific details of any particular loan to know what it's allowed to pay for, so if you choose this route, know what you plan to use it to pay for before you go looking.", "title": "" }, { "docid": "01f84dfb9ac0438003575fe35c16a1ed", "text": "Well, it is a negative point of view, but nobody in the history of money has ever loaned money because they like you. I suppose you could paint it as an honest point of view. All money lending is for profit. If you have a high score, you are very likely to repay your loan because you are lower risk. We always hear lower risk... but the risk is that they won't make money off of you. I think that just like we buy previously owned vehicles cars instead of used cars, and we banks call them service fees instead of junk fees, our credit score discusses our credit worthiness instead of profitability But none of that means you can't benefit from it. It isn't a fear tactic, it is a way to judge each other. You probably pay interest and fees to keep it high, but that is price of lending. I think the questioner has a negative view of credit (which I suppose is fine and is their right, I will defend their right to an opinion) but the way we do and judge credit is neither evil or benevolent. I could certainly agree that more transparency would be good, but only for honest folks. If the credit bureaus made it public how they judged us, there would be a new industry for people who want to game the system. Update Since it always will cost to use credit, and using credit is the only way to prove your a low credit risk, it will therefore always cost money to raise your credit score. However the return on investment is exemplified in this question: a person with no credit was able to get a loan, but at serious out of pocket cost. Later, after establishing credit at a price of real money, he was able to secure a nearly identical loan for considerably less cost (in terms of interest paid) because he had proven himself worthy. When I say proven, I mean paid interest. There is nothing wrong with questioning the system, change only occurs when people question the status quo. And for sure our current system is not perfect, but like many employed systems while it is terrible but there is nothing better.", "title": "" }, { "docid": "e1e8de1e86545e7b11ad859682abc36d", "text": "\"What you are describing is a Chart of Accounts. It's a structure used by accountants to categorise accounts into sub-categories below the standard Asset/Liability/Income/Expense structure. The actual categories used will vary widely between different people and different companies. Every person and company is different, whilst you may be happy to have a single expense account called \"\"Lunch\"\", I may want lots of expense accounts to distinguish between all the different restaurants I eat at regularly. Companies will often change their chart of accounts over time as they decide they want to capture more (or less) detail on where a particular type of Expense is really being spent. All of this makes any attempt to create a standard (in the strict sense) rather futile. I have worked at a few places where discussions about how to structure the chart of accounts and what referencing scheme to use can be surprisingly heated! You'll have to come up with your own system, but I can provide a few common recommendations: If you're looking for some simple examples to get started with, most personal finance software (e.g. GnuCash) will offer to create an example chart of accounts when you first start a session.\"", "title": "" }, { "docid": "20da17c1d234ab04d7163b51a80bab93", "text": "Generally loan goes against an asset, in your case though it appear that you don't have any fixed assets related to this loan. So it seems like you got a cash loan (current asset/checking account?) which you spent (expenses). Since you're doing it retroactively, you'll probably just put totals in the expenses without detailing them.", "title": "" }, { "docid": "ff1f01787f1d9d15e2d74966d279c124", "text": "When you borrow money - you create a liability to yourself (you credit your Liabilities:Loans account and debit your Asset:Bank account). When you lend money - you create an asset to yourself (you debit your Asset:Loan account and credit your Asset:Bank account).", "title": "" }, { "docid": "2c0081f11b746bf57c7e9a1076671560", "text": "Basically, what you describe exists in many countries - not in the USA though. In Europe, people have checking accounts with allowed overdraft, typically three month net salaries. You can just this money any day as you like, and pay it back - completely or partially - any day as you like. Interest is calculated for each day on the amount used that day; and the collateral is 'future income', predicted / expected from previous income. In the USA, credit cards have taken its place, with stricter different rules and limitations. In addition, many of the extra rules in loans were invented to take advantage of the ignorance or situation of the borrower to make even more money. For example, applying extra payments to future due payments instead of to the principal makes that principal produce more interest while the extra payments just sit around.", "title": "" }, { "docid": "661a4eac7c078a020740d3c5e30bed82", "text": "\"Just to go against the grain here. Sometimes, loaning money to friends is the right thing to do. For example, they had a loved one die, and need the money to cover funeral expenses until the life insurance pays out. Here, you may consider it your ethical duty to loan the money (or you may not). It does not make sense from a financial point of view (you are unlikely to charge interest and you are taking all the risk), but sometimes you put your financial prudence aside because \"\"being a good person and a great friend\"\" is more important. It is true that the general rule should be not to loan money to friends, and particularly never loan money you cannot afford to lose. But there are exceptions to every rule. I'll note that you may be best off with a plain-english, non-lawyery contract. Make it absolutely as simple as possible. As others have pointed out, specify a repayment date or schedule. Note what happens if they miss the deadline. Specify interest, if appropriate. Get it signed by you and the other person. And make sure you consider what happens if your friend doesn't honour the agreement. For that kind of money, it is also worth considering collateral.\"", "title": "" }, { "docid": "e25c53b47f5600ad2fef4d5a83062748", "text": "I have been in this situation and I essentially went for the truthful answer. I first explained that co-signing for a loan wasn't just vouching for the person, which I certainly would do, but it was putting my name on the loan and making me the person they loan company would go after if a payment was ever missed. Then I explained that even within married couples, money can be a major source of strife and fights, it would be even worse for someone not quite as close like a family member or friend. Essentially I wouldn't want to risk my relationship with a good friend or family member over some financial matter.", "title": "" }, { "docid": "d8793d06c2f638210aad99902e013eb1", "text": "Banks worry that the large gift might be a loan that is ultimately expected to be repaid. If so, that affects the cash flow of the recipient, and makes it more difficult to make the mortgage payments to the bank. In some cases, of course, it is an informal loan: Dad advances a large $X to son to use as a downpayent, but does not charge interest and the expectation is that the money will be returned in smaller chunks as and when the son can afford to repay Dad. In some cases, Dad truly means it as a gift, but son feels an obligation to repay the money, if not explicitly, then by paying for the first few months of Dad's nursing home stay, etc. So, banks like to have an explicit document such as a copy of a letter from Dad saying that this money is a gift, and some assurance that this is on the up and up. If the amount is larger than the maximum gift that can be given each year without having to file a gift tax return, then some assurance that a gift tax return will be filed is helpful. Mentioning this in the letter is good: it indicates that there are no secret handshakes or secret agreements to the effect that this is in fact a loan, with or without regular repayments.", "title": "" }, { "docid": "8fabd662cde5b0f83b0bc7e8c8080564", "text": "\"Aside of \"\"don't lend money to friends\"\" a good idea is to have a written contract that states the sum, the due date, the interest (if any). Having the loan on paper makes it more real and harder to \"\"forget\"\". The third party is not necessary - anyone can have a bank loan for more than $10K by signing a contract with a bank without any third party.\"", "title": "" }, { "docid": "d98fbc6f95845296f3b6efb947d9d778", "text": "If it is a business loan, the borrower would be able to claim a deduction for any interest paid on the loan and the lender would include the interest earned as part of their taxable income. You need to be careful on what you do and don't include as income. If the repayments made to you by the borrower in a year is $10,000 but only $8,000 of that is interest and the other $2,000 is part of the principal being returned to the lender, then you would only claim $8,000 as your income and the borrower would only claim $8,000 as a business deduction. Of course if it is interest only, then you and the borrower would use the full $10,000.", "title": "" }, { "docid": "7d627858b3f08553dc6d4e5c00344bda", "text": "Best Personal Loan Provider in Delhi. Our wide expertise in this array allows us to offer our clients the helping hand with immediate effect right from your request. Our personal loans are available for a range of different amounts and have different repayment terms in Delhi.", "title": "" }, { "docid": "1ea12d08b27c305c365845315d008efb", "text": "This is called a fraudulent conveyance because its purpose is to prevent a creditor from getting repaid. It is subject to claw back under US law, which is a fancy way of saying that your friend will have to pay the bank back. Most jurisdictions have similar laws. It is probably a crime as well, but that varies by jurisdiction.", "title": "" }, { "docid": "531b1aba2b2c8be716305089b22240a9", "text": "\"There are basically two approaches, based on how detailed you want to be in your own personal accounting: Obviously the more like a business or like \"\"real\"\" accounting you want to be, the more complex you can make it, but in general I find that the purpose of personal accounting is (1) to track what I own, and (2) to ensure I have documented anything I need to for tax purposes, and as long as you're meeting those goals any reasonable approach is workable.\"", "title": "" } ]	fiqa
263ab34423c54ee1594419eba6d7836f	Is there a debit card that earns miles (1 mile per $1 spent) and doesn't have an annual fee?	[ { "docid": "28aca8fc12242a63427a0c031f083621", "text": "I don't know of any that are comparable to credit cards. There's a reason for that. Debit cards, being newer, have a much lower interchange rate. Since collecting on debt is risky and less predictable, rewards / miles are paid from those interchange fees. This means with a debit card there's less money to pay you with. So what can you do? Assuming your credit isn't terrible, you can just open a credit card account and pay in full for purchases by the grace period. I don't know how all cards work, but my grace period allows me to pay in full by the billing date (roughly a month from purchase) and incur no finance charges. In effect, I get a small 30 day loan with no interest, and a cash back incentive (I dislike miles). You're also less liable for fraud via CC than debit.", "title": "" }, { "docid": "0e93cbdabff605d2c1fe070739704a26", "text": "I have an American Airlines VISA with miles that has no annual fee, but only because I request that they waive the fee each year. Word to the wise - they've never refused.", "title": "" } ]	[ { "docid": "9986ea75e33396169977ca008189726c", "text": "A lot of big companies offer credit cards. And it makes total sense. For example, if you have a Macy's card, you get access to special discounts that you wouldn't normally get. It saves the consumer money and builds loyalty to the brand. Same for Southwest credit cards. It's a completely normal move. EDIT: Also, Uber doesn't actually have to do much - it's the issuing bank that manages the program. Most of the branded credit cards you see are Chase, BTW. Amazon and Southwest are both run by Chase.", "title": "" }, { "docid": "278dfae26b43adafbd6cf6655c324295", "text": "I got a Capital One credit card because they don't charge a fee for transactions in foreign currencies. So I only use it when I travel abroad. At home, I use 3 different credit cards, each offering different types of rewards (cash back on gas, movies, restaurants, online shopping etc).", "title": "" }, { "docid": "5964e038b78de817efa3fe3d15bc7e0b", "text": "You can use the debit card for practically any purchase that you make. You'll have to take the usual precautions and then a few additional ones. Cards make your life really easy and convenient with some basic precautions. All the best for your travel and stay in the USA. My two cents.", "title": "" }, { "docid": "809f3ea330e08069532bab097793e5ca", "text": "\"I'd like to know if there is any reliable research on the subject. Intuitively, this must be true, no? Is it? First, is it even possible to discover the correlation, if one exists? Dave Ramsey is a proponent of \"\"Proven study that shows you will spend 10% more on a credit card than with cash.\"\" Of course, he suggests that the study came from an otherwise reliable source, Dun & Bradstreet. A fellow blogger at Get Rich Slowly researched and found - Nobody I know has been able to track down this mythical Dun and Bradstreet study. Even Dun and Bradstreet themselves have been unable to locate it. GRS reader Nicole (with the assistance of her trusty librarian Wendi) contacted the company and received this response: “After doing some research with D&B, it turns out that someone made up the statement, and also made up the part where D&B actually said that.” In other words, the most cited study is a Myth. In fact, there are studies which do conclude that card users spend more. I think that any study (on anything, not just this topic. Cigarette companies buy studies to show they don't cause cancer, Big Oil pays to disprove global warming, etc.) needs to be viewed with a critical eye. The studies I've seen nearly all contain one of 2 major flaws - My own observation - when I reviewed our budget over the course of a year, some of the largest charges include - I list the above, as these are items whose cost is pretty well fixed. We are not in the habit of \"\"going for a drive,\"\" gas is bought when we need it. All other items I consider fixed, in that the real choice is to pay with the card or check, unlike the items some claim can be inflated. These add to about 80% of the annual card use. I don't see it possible for card use to impact these items, and therefore the \"\"10% more\"\" warning is overreaching. To conclude, I'll concede that even the pay-in-full group might not adhere to the food budget, and grab the $5 brownie near the checkout, or over tip on a restaurant meal. But those situations are not sufficient to assume that a responsible card user comes out behind over the year for having done so. A selection of the Studies I am referencing -\"", "title": "" }, { "docid": "ff658878eb559cffbb618b78cfe1ff60", "text": "http://www.andrewsfcu.org/ is one of the only US financial institutions to issue a low or no annual fee chip and pin visa or mastercard.. Andrews is primarily for civilian employees of the Andrews Air Force Base but is available to members of the American Consumer Council, which offers free membership, see http://www.andrewsfcu.org/page.php?page=330 . The chip and pin card is a visa with $0 annual fee and charges a 1% foreign transaction fee. Getting one is modestly difficult because you have to first join the credit union then apply for the card, then go through underwriting as if it were a personal loan rather than a revolving credit account. Still, for travelers, it is probably worth it.", "title": "" }, { "docid": "b454bdd66734e04e3cd3b92bb4779f8f", "text": "I'm an Australian who just got back from a trip to Malaysia for two weeks over the New Year, so this feels a bit like dejavu! I set up a 28 Degrees credit card (my first ever!) because of their low exchange rate and lack of fees on credit card transactions. People say it's the best card for travel and I was ready for it. However, since Malaysia is largely a cash economy (especially in the non-city areas), I found myself mostly just withdrawing money from my credit card and thus getting hit with a cash advance fee ($4) and instant application of the high interest rate (22%) on the money. Since I was there already and had no other alternatives, I made five withdrawals over the two weeks and ended up paying about $21 in fees. Not great! But last time I travelled I had a Commonwealth Bank Travel Money Card (not a great idea), and if I'd used that instead on this trip and given up fees for a higher exchange rate, I would have been charged an extra $60! Presumably my Commonwealth debit card would have been the same. This isn't even including mandatory ATM fees. If I've learned anything from this experience and these envelope calculations I'm doing now, it's these:", "title": "" }, { "docid": "fe8cec63df9636d261bc60e06280cf6d", "text": "This only indirectly answer your question, but Schwab investor checking account has no fee, no minimum balance, and will reimburse all ATM fee (inside and outside the US)", "title": "" }, { "docid": "1bff0436c8c540881ce5addcb08ee967", "text": "I don't know of any and it is unlikely that you will be able to find one. Most credit card processors charge a flat fee plus percentage. The flat fee is typically in the 35 cent range making the cost of doing business, in the manner you are suggesting, astronomical. Also what you are suggesting is contrary to best practices as hosting services, and many other industries, offer deep discounts when making a single payment for an extended period of time. This is not very helpful, but I think it is unrealistic to find what you are suggesting.", "title": "" }, { "docid": "6c6e91792fbbfd98238e6a5d560df128", "text": "\"While I think this is generally inadvisable, there are sites and communities dedicated to \"\"points churning\"\" credit card reward programs. In general, no there is no easy way to get cash from a credit card, and receive the spending rewards, and not pay fees well in excess of your rewards value. However, there are people who figure out ways to do this kind of thing. Like buying prepaid Visa cards $500 at a time from drug stores on a 5% bonus rewards month. Or buying rolls of $1 coins from the US treasury with free shipping. The issue is the source of the fees. When you spend money on your card the merchant pays a fee. When you get cash from an ATM not only is there no merchant remitting a fee there is an ATM operator and a network both charging fees.\"", "title": "" }, { "docid": "397050bf496379d0b5e27f6d329f1278", "text": "\"you could get a discover card and then just \"\"freeze\"\" it. you might need to unfreeze it for a few minutes when you sign up for a new service, but it is unlikely an ongoing subscription would process a charge in that window. i believe merchants are charged a small fee for a transaction even if it is declined, so they won't try constantly forever. discover account freeze faq capitalone offers this freeze feature on their \"\"360\"\" debit cards. you can even freeze and unfreeze your card from their mobile app. this feature is becoming more common at small banks and credit unions too. i know of 2 small local banks that offer it. in fact, almost any bank can give you a debit card, then set the daily POS limit to 0$, effectively making it an atm-only card. but you may need to call the bank to get that limit temporarily lifted whenever you want to sign up for a new service. alternatively, jejorda2's suggestion of virtual account numbers is a good idea. several banks (including discover) have discontinued that feature, but i believe citi, and boa still offer them. side notes:\"", "title": "" }, { "docid": "ac33a013f04167de2998295a5bd240ca", "text": "If the card has no annual fee, you can keep it for as long as you like and you will never get charged. I advise you to GoPaperless so you stop getting the $0 bills every month. Many cards have the fee waived for the first year. If you have such a card, you should make sure to cancel it when you stop using it, or when the fee waiver expires.", "title": "" }, { "docid": "d8adc7d4160959f688ae4e377b73b715", "text": "In the case of reward cards, different cards may offer different rewards for different kind of purchases. For example, in the UK, one of the Amex cards offers 1.25% cashback on all purchases, whereas one of the Santander cards offers 3% on fuel, 2% or 1% on certain other transactions, and nothing on others. Of course, you then have to remember to use the right card! Another reason is that a person may use a card for a while, build up a good credit limit, and then move to a different card (perhaps because it has better rewards, or a lower interest rate, etc) without cancelling the first. If it costs nothing to keep the first card, then it can be useful to have it as a spare.", "title": "" }, { "docid": "8d8d1ca1f1ac2f7f965dc501cd5c996e", "text": "My bank charges me on my statement for debit transactions, but rewards me with bogo points when I run transactions as credit. AFAIK, retailers are prevented by contract with VISA et all from recouping the merchant fee from you (instead they can mark up all prices and offer a 'cash discount'), not that you'll be able to convince your vietnamese grocer of this. The difference between debit and credit fees is large enough that even these small tricks by the bank can mean a lot of money for them. Since most retailers accept either, they recruit me into their profit game with carrots and sticks. I've since moved to an actual cash back credit card and haven't regretted it yet.", "title": "" }, { "docid": "ecad50d0648a674b4523a69676b615e9", "text": "credit cards are almost never closed for inactivity. i have had dozens of cards innactive for years on end, and only one was ever closed on me for inactivity. i would bet a single 1$ transaction per calendar year would keep all your cards open. as such, you could forget automating the process and just spend 20 minutes a year making manual 1$ payments (e.g. to your isp, utility company, google play, etc.). alternatively, many charities will let you set up an automatic monthly donation for any amount (e.g. 1$ to wikipedia). or perhaps you could treat yourself to an mp3 once a month (arguably a charitable donation in the age of file sharing). side note: i use both of these strategies to get the 12 debit card transactions per month required by my kasasa checking account.", "title": "" }, { "docid": "6bd0a65a9d93ed7e39c9ce553050c13f", "text": "\"It's more the opposite...using a credit card as a debit card may be treated as a \"\"cash advance,\"\" since money is debited on the spot...so you could be charged a cash advance fee. If you used your debit card as a credit card, there may simply be a balance on the account that needs to be paid off before it begins accruing interest.\"", "title": "" } ]	fiqa
1b89f0124bf5e18f1d028fab75bab340	When shorting a stock, do you pay current market price or the best (lowest) available ask price?	[ { "docid": "0b33e6fb5f82ac062270bcef7e605f84", "text": "When you want to short a stock, you are trying to sell shares (that you are borrowing from your broker), therefore you need buyers for the shares you are selling. The ask prices represent people who are trying to sell shares, and the bid prices represent people who are trying to buy shares. Using your example, you could put in a limit order to short (sell) 1000 shares at $3.01, meaning that your order would become the ask price at $3.01. There is an ask price ahead of you for 500 shares at $3.00. So people would have to buy those 500 shares at $3.00 before anyone could buy your 1000 shares at $3.01. But it's possible that your order to sell 1000 shares at $3.01 never gets filled, if the buyers don't buy all the shares ahead of you. The price could drop to $1.00 without hitting $3.01 and you will have missed out on the trade. If you really wanted to short 1000 shares, you could use a market order. Let's say there's a bid for 750 shares at $2.50, and another bid for 250 shares at $2.49. If you entered a market order to sell 1000 shares, your order would get filled at the best bid prices, so first you would sell 750 shares at $2.50 and then you would sell 250 shares at $2.49. I was just using your example to explain things. In reality there won't be such a wide spread between the bid and ask prices. A stock might have a bid price of $10.50 and an ask price of $10.51, so there would only be a 1 cent difference between putting in a limit order to sell 1000 shares at $10.51 and just using a market order to sell 1000 shares and getting them filled at $10.50. Also, your example probably wouldn't work in real life, because brokers typically don't allow people to short stocks that are trading under $5 per share. As for your question about how often you are unable to make a short sale, it can sometimes happen with stocks that are heavily shorted and your broker may not be able to find any more shares to borrow. Also remember that you can only short stocks with a margin account, you cannot short stocks with a cash account.", "title": "" }, { "docid": "b54bc28354a6cbbc8ecf92e5333beb93", "text": "In terms of pricing the asset, this functions in exactly the same way as a regular sell, so bids will have to be hit to fill the trade. When shorting an equity, currency is not borrowed; the equity is, so the value of per share liability is equal to it's last traded price or the ask if the equity is illiquid. Thus when opening a short position, the asks offer nothing to the process except competition for your order getting filled. Part of managing the trade is the interest rate risk. If the asks are as illiquid as detailed in the question, it may be difficult even to locate the shares for borrowing. As a general rule, only illiquid equities or those in free fall may be temporarily unable for shorting. Interactive Brokers posts their securities financing availabilities and could be used as a proxy guide for your broker.", "title": "" }, { "docid": "3f6f3f71774ac169feb4886d60a10ac1", "text": "I would never use a market order. Some brokerages have an approval process your short-sale goes through before going to market. This can take some time. So the market prices may well be quite different later. Some brokerages use a separate account for short sales, so you must get their approval for the account before you can do the trade. I like the listing of shares available for shorting the Interactive Brokers has but I have experienced orders simply going into dead-air and sitting there on the screen, not being rejected, not going to market, not doing anything --- even though the shares are on the list.", "title": "" } ]	[ { "docid": "85d58a18e68588f99c66ec5f8a8d3e2f", "text": "Adding to the answers above, there is another source of risk: if one of the companies you are short receives a bid to be purchased by another company, the price will most probably rocket...", "title": "" }, { "docid": "a87a785ece5786dd7c3b3761d25d5e96", "text": "\"And what exactly do I profit from the short? I understand it is the difference in the value of the stock. So if my initial investment was $4000 (200 * $20) and I bought it at $3800 (200 * $19) I profit from the difference, which is $200. Do I also receive back the extra $2000 I gave the bank to perform the trade? Either this is extremely poorly worded or you misunderstand the mechanics of a short position. When you open a short position, your are expecting that the stock will decline from here. In a short position you are borrowing shares you don't own and selling them. If the price goes down you get to buy the same shares back for less money and return them to the person you borrowed from. Your profit is the delta between the original sell price and the new lower buy price (less commissions and fees/interest). Opening and closing a short position is two trades, a sell then a buy. Just like a long trade there is no maximum holding period. If you place your order to sell (short) 200 shares at $19, your initial investment is $3,800. In order to open your $3,800 short position your broker may require your account to have at least $5,700 (according to the 1.5 ratio in your question). It's not advisable to open a short position this close to the ratio requirement. Most brokers require a buffer in your account in case the stock goes up, because in a short trade if the stock goes up you're losing money. If the stock goes up such that you've exhausted your buffer you'll receive what's known as a \"\"margin call\"\" where your broker either requires you to wire in more money or sell part or all of your position at a loss to avoid further losses. And remember, you may be charged interest on the value of the shares you're borrowing. When you hold a position long your maximum loss is the money you put in; a position can only fall to zero (though you may owe interest or other fees if you're trading on margin). When you hold a position short your maximum loss is unlimited; there's no limit to how high the value of something can go. There are less risky ways to make short trades by using put options, but you should ensure that you have a firm grasp on what's happening before you use real money. The timing of the trades and execution of the trades is no different than when you take a plain vanilla long position. You place your order, either market or limit or whatever, and it executes when your trade criteria occurs.\"", "title": "" }, { "docid": "351caceff65bf83be90d557d5c8a94f5", "text": "I stock is only worth what someone will pay for it. If you want to sell it you will get market price which is the bid.", "title": "" }, { "docid": "04df881344f4003c31ca6fb7b9d516fe", "text": "This is a gross simplification as there are a few different ways to do this. The principle overall is the same though. To short a stock, you borrow X shares from a third party and sell them at the current price. You now owe the lender X shares but have the proceeds from the sale. If the share price falls you can buy back those shares at the new lower price, return them to the lender and pocket the difference. The risk comes when the share price goes the other way, you now owe the lender the new value of the shares, so have to find some way to cover the difference. This happened a while back when Porsche made a fortune buying shares in Volkswagen from short sellers, and the price unexpectedly rose.", "title": "" }, { "docid": "f1b5142849e2c528894402a9530e22ee", "text": "\"When you place a limit sell order of $10.00 (for a stock on an option) you are adding your order to the book. Anyone who places a buy at-the-market or with a limit price over $10.00 will have that order immediately fulfilled through the offer you have placed on the book. On the other hand, if that other person places a buy for $8.00, then the spread will now be \"\"$8.00 bid, $10.00 ask\"\". Priority is based on first the price (all $9.99 asks will clear before $10.00) and within each bucket this is based on the time your order was submitted. This is why in bidding markets (including eBay) buying at $x.01 is way better than $x.00 and selling at $x.99 is better than $(x+1).00. Source: https://en.wikipedia.org/wiki/Order_(exchange) under \"\"first-come-first-served\"\"\"", "title": "" }, { "docid": "0aa67a8122c8c9b6ca199dc1eaa11ae2", "text": "\"First, you are not exactly \"\"giving\"\" the brokerage $2000. That money is the margin requirement to protect them in the case the stock price rises. If you short 200 shares as in your example and they are holding $6000 from you then they are protected in the event of the stock price increasing to $30/share. Sometime before it gets there the brokerage will require you to deposit more money or they will cover your position by repurchasing the shares for your account. The way you make money on the short sale is if the stock price declines. It is a buy low sell high idea but in reverse. If you believe that prices are going to drop then you could sell now when it is high and buy back later when it is lower. In your example, you are selling 200 shares at $20 and later, buying those at $19. Thus, your profit is $200, not counting any interest or fees you have paid. It's a bit confusing because you are selling something you'll buy in the future. Selling short is usually considered quite risky as your gain is limited to the amount that you sold at initially (if I sell at $20/share the most I can make is if the stock declines to $0). Your potential to lose is unlimited in theory. There is no limit to how high the stock could go in theory so I could end up buying it back at an infinitely high price. Neither of these extremes are likely but they do show the limits of your potential gain and loss. I used $20/share for simplicity assuming you are shorting with a market order vs a limit order. If you are shorting it would be better for you to sell at 20 instead of 19 anyway. If someone says I would like to give you $20 for that item you are selling you aren't likely to tell them \"\"no, I'd really only like $19 for it\"\"\"", "title": "" }, { "docid": "dc97090be3ab27139fd98f9ac08e954b", "text": "\"You are likely making an assumption that the \"\"Short call\"\" part of the article you refer to isn't making: that you own the underlying stock in the first place. Rather, selling short a call has two primary cases with considerably different risk profiles. When you short-sell (or \"\"write\"\") a call option on a stock, your position can either be: covered, which means you already own the underlying stock and will simply need to deliver it if you are assigned, or else uncovered (or naked), which means you do not own the underlying stock. Writing a covered call can be a relatively conservative trade, while writing a naked call (if your broker were to permit such) can be extremely risky. Consider: With an uncovered position, should you be assigned you will be required to buy the underlying at the prevailing price. This is a very real cost — certainly not an opportunity cost. Look a little further in the article you linked, to the Option strategies section, and you will see the covered call mentioned there. That's the kind of trade you describe in your example.\"", "title": "" }, { "docid": "fcd9990896be0b5c627ec5da25a4af72", "text": "I think George's answer explains fairly well why the brokerages don't allow this - it's not an exchange rule, it's just that the brokerage has to have the shares to lend, and normally those shares come from people's margin, which is impossible on a non-marginable stock. To address the question of what the alternatives are, on popular stocks like SIRI, a deep In-The-Money put is a fairly accurate emulation of an actual short interest. If you look at the options on SIRI you will see that a $3 (or higher) put has a delta of -$1, which is the same delta as an actual short share. You also don't have to worry about problems like margin calls when buying options. The only thing you have to worry about is the expiration date, which isn't generally a major issue if you're buying in-the-money options... unless you're very wrong about the direction of the stock, in which case you could lose everything, but that's always a risk with penny stocks no matter how you trade them. At least with a put option, the maximum amount you can lose is whatever you spent on the contract. With a short sale, a bull rush on the stock could potentially wipe out your entire margin. That's why, when betting on downward motion in a microcap or penny stock, I actually prefer to use options. Just be aware that option contracts can generally only move in increments of $0.05, and that your brokerage will probably impose a bid-ask spread of up to $0.10, so the share price has to move down at least 10 cents (or 10% on a roughly $1 stock like SIRI) for you to just break even; definitely don't attempt to use this as a day-trading tool and go for longer expirations if you can.", "title": "" }, { "docid": "061794d07974822a5fc96e9755dfbc51", "text": "\"Why would people sell below the current price, and not within the range of the bid/ask? There are many scenarios where this is deliberate but all of them boil down to the fact that the top level's bid doesn't support the quantity you're trying to sell (or is otherwise bogus[1]). One scenario as an example: You're day-trading both sides but at the end of the day you accumulated a rather substantial long position in a stock. You don't want to (or aren't allowed to[2]) be exposed overnight, however. What do you do? You place an order that is highly likely to go through altogether. There's several ways to achieve that but a very simple one is to look at the minimum bid level for which the bid side is willing to take all of your shares, then place a limit order for the total quantity at that price. If your position doesn't fit into the top level bid that price will well be lower than the \"\"current\"\" bid. Footnotes: [1] Keyword: quote stuffing [2] Keyword: overnight margin (aka positional margin, as opposed to intraday margin), this is highly broker dependent, exchanges don't usually distinguish between intraday and overnight margins, instead they use the collective term maintenance margin\"", "title": "" }, { "docid": "454a5c06786a997b1d75a3403e550763", "text": "The whole point of buying puts is cheaper cost and lower downside risk. If you short the box, you are assuming he already holds gold holdings to short against. It's not the same as short selling where you borrow shares. Either way, you are far more vulnerable to downside risk if you are short the stock (whether you borrowed or shorted already owned shares). If Gold suddenly has a 20% pop over the next year, which could be possible given the volatility and uncertainty in the marketplace, you have big trouble. Whereas, if you buy puts, you only lose your costs for the contracts. The amount that you miss by in your bet isn't going to factor into anything.", "title": "" }, { "docid": "e9ff81339f4419ca37158c942331a99e", "text": "\"A market sell order will be filled at the highest current \"\"bid\"\" price. For a reasonably liquid stock, there will be several buy orders in line, and the highest bid must be filled first, so there should a very short time between when you place the order and when it is filled. What could happen is what's called front running. That's when the broker places their own order in front of yours to fulfill the current bid, selling their own stock at the slightly higher price, causing your sale to be filled at a lower price. This is not only unethical but illegal as well. It is not something you should be concerned about with a large broker. You should only place a market order when you don't care about minute differences between the current ask and your execution price, but want to guarantee order execution. If you absolutely have to sell at a minimum price, then a limit order is more appropriate, but you run the risk that your limit will not be reached and your order will not be filled. So the risk is a tradeoff between a guaranteed price and a guaranteed execution.\"", "title": "" }, { "docid": "5736909215adf5d1d035a59be1b91867", "text": "\"As others have noted, your definition of \"\"market price\"\" is a bit loose. Really whatever price you get becomes the current market price. What you usually get quoted are the current best bid and ask with the last transaction price. For stocks that don't trade much, the last transaction price may not be representative of the current market value. Your question included regulation (\"\"standards bureau\"\"), and I don't think the current answers are addressing that. In the US, the Securities and Exchange Commission (SEC) provides some regulation regarding execution price. It goes by the designation Regulation NMS, and, very roughly, it says that each transaction has to take the best available price at the time that it is executed. There are some subtleties, but that's the gist of it. No regulation ensures that there will be a counterparty to any transaction that you want to make. It could happen, for example, that you have shares of some company that you're never able to sell because no one wants them. (BitCoin is the same in this regard. There is a currently a market for BitCoin, but there's no regulation that ensures there will be a market for it tomorrow.) Outside of the US, I don't know what regulation, if any, exists.\"", "title": "" }, { "docid": "4b24f69f03b345cf34ce1a673683d9fb", "text": "If you are buying your order will be placed in Bid list. If you are selling your order will be placed in the Ask list. The highest Bid price will be placed at the top of the Bid list and the lowest Ask price will be placed at the top of the Ask list. When a Bid and Ask price are matched a transaction will take place and it will the last traded price. If you are looking to buy at a lower price, say $155.01, your Bid price will be placed 3rd in the Bid list, and unless the Ask prices fall to that level, your order will remain in the list until it trades, it expires or you cancel it. If prices don't fall to you Bid price you will not get a trade. If you wanted your trade to go through you could either place a limit buy order closer to the lowest Ask price (however this is still not a certainty), or to be certain place a market buy order which will trade at the lowest Ask price.", "title": "" }, { "docid": "eea50bac643f16c661a5f92a666659a4", "text": "The 'normal' series of events when trading a stock is to buy it, time passes, then you sell it. If you believe the stock will drop in price, you can reverse the order, selling shares, waiting for the price drop, then buying them back. During that time you own say, -100 shares, and are 'short' those shares.", "title": "" }, { "docid": "de3d48ff93b1a5a9f562486f4699bead", "text": "Yes in order for you to short a stock, some one has to be willing to lend it to you to short, the more people that want to short this stock, the higher the borrowing rate is to short it. in some instances such as groupon so many people are shorting it that there are practically no shares left to short and if you do end up getting some it would be at a very high borrowing cost.", "title": "" } ]	fiqa
da74c8802aca9af42fb893790a3dbd72	Empirical performance data of ETFs and Mutual Funds tracking identical Indexes?	[ { "docid": "bd36cc84ea10cfdc1920099d015b5085", "text": "Why don't you look at the actual funds and etfs in question rather than seeking a general conclusion about all pairs of funds and etfs? For example, Vanguard's total stock market index fund (VTSAX) and ETF (VTI). Comparing the two on yahoo finance I find no difference over the last 5 years visually. For a different pair of funds you may find something very slightly different. In many cases the index fund and ETF will not have the same benchmark and fees so comparisons get a little more cloudy. I recall a while ago there was an article that was pointing out that at the time emerging market ETF's had higher fees than corresponding index funds. For this reason I think you should examine your question on a case-by-case basis. Index fund and ETF returns are all publicly available so you don't have to guess.", "title": "" } ]	[ { "docid": "76e622fc225406dbd70fb144752364dc", "text": "\"You could use any of various financial APIs (e.g., Yahoo finance) to get prices of some reference stock and bond index funds. That would be a reasonable approximation to market performance over a given time span. As for inflation data, just googling \"\"monthly inflation data\"\" gave me two pages with numbers that seem to agree and go back to 1914. If you want to double-check their numbers you could go to the source at the BLS. As for whether any existing analysis exists, I'm not sure exactly what you mean. I don't think you need to do much analysis to show that stock returns are different over different time periods.\"", "title": "" }, { "docid": "39039f0f18b9a5f0ebc766f87a502934", "text": "In the past 10 years there have been mutual funds that would act as a single bucket of stocks and bonds. A good example is Fidelity's Four In One. The trade off was a management fee for the fund in exchange for having to manage the portfolio itself and pay separate commissions and fees. These days though it is very simple and pretty cheap to put together a basket of 5-6 ETFs that would represent a balanced portfolio. Whats even more interesting is that large online brokerage houses are starting to offer commission free trading of a number of ETFs, as long as they are not day traded and are held for a period similar to NTF mutual funds. I think you could easily put together a basket of 5-6 ETFs to trade on Fidelity or TD Ameritrade commission free, and one that would represent a nice diversified portfolio. The main advantage is that you are not giving money to the fund manager but rather paying the minimal cost of investing in an index ETF. Overall this can save you an extra .5-1% annually on your portfolio, just in fees. Here are links to commission free ETF trading on Fidelity and TD Ameritrade.", "title": "" }, { "docid": "c0ae68ed525f07cf53970454159f26a8", "text": "More importantly, index funds are denominated in specific currencies. You can't buy or sell an index, so it can be dimensionless. Anything you actually do to track the index involves real amounts of real money.", "title": "" }, { "docid": "13804378135ed6bfb6d6e7517aac9d40", "text": "index ETF tracks indented index (if fund manager spend all money on Premium Pokemon Trading Cards someone must cover resulting losses) Most Index ETF are passively managed. ie a computer algorithm would do automatic trades. The role of fund manager is limited. There are controls adopted by the institution that generally do allow such wide deviations, it would quickly be flagged and reported. Most financial institutions have keyman fraud insurance. fees are not higher that specified in prospectus Most countries have regulation where fees need to be reported and cannot exceed the guideline specified. at least theoretically possible to end with ETF shares that for weeks cannot be sold Yes some ETF's can be illiquid at difficult to sell. Hence its important to invest in ETF that are very liquid.", "title": "" }, { "docid": "12dfd7a4c63537325923b5f65bab573a", "text": "Exchange-traded funds are bought and sold like stocks so you'd be able to place stop orders on them just like you could for individual stocks. For example, SPY would be the ticker for an S & P 500 ETF known as a SPDR. Open-end mutual funds don't have stop orders because of how the buying and selling is done which is on unknown prices and often in fractional shares. For example, the Vanguard 500 Index Investor shares(VFINX) would be an example of an S & P 500 tracker here.", "title": "" }, { "docid": "be31b0d0a6d96cd68b06fdd5cbdf2958", "text": "This is great. Thanks! So, just assuming a fund happened to average out to libor plus 50 for a given year, would applying that rate to the notional value of the index swaps provide a reasonable estimate of the drag an ETF investor would experience due to the cost associated with the index swaps? For instance, applying this to the hypothetical I linked to in the original question, they assumed fund assets of $100M with 2x leverage achieved through $85M of S&P500 stocks, $25M of S&P500 futures, and a notional value of the S&P500 swaps at $90M. So the true costs to an ETF investor would be: expense ratio + commissions on the $85M of S&P500 holdings + costs associated with $25M of futures contracts + costs associated with the $90M of swaps? And the costs associated with the $90M of swaps might be roughly libor plus 50?", "title": "" }, { "docid": "1d233b4aaff599f1666c92147468e89e", "text": "The mutual fund will price at day's end, while the ETF trades during the day, like a stock. If you decide at 10am, that some event will occur during the day that will send the market up, the ETF is preferable. Aside from that, the expenses are identical, a low .14%. No real difference especially in a Roth.", "title": "" }, { "docid": "a5c828411013510f191bb0f58be880db", "text": "I'm not 100% familiar with the index they're using to measure hedge fund performance, but based on the name alone, comparing market returns to market neutral hedge fund returns seems a bit disingenuous. That doesn't mean the article is wrong, and they have a point about the democratization of data, but still.", "title": "" }, { "docid": "91ac8519ecdfef7fe122c4fde90a549d", "text": "\"Note that an index fund may not be able to precisely mirror the index it's tracking. If enough many people invest enough money into funds based on that index, there may not always be sufficient shares available of every stock included in the index for the fund to both accept additional investment and track the index precisely. This is one of the places where the details of one index fund may differ from another even when they're following the same index. IDEALLY they ought to deliver the same returns, but in practical terms they're going to diverge a bit. (Personally, as long as I'm getting \"\"market rate of return\"\" or better on average across all my funds, at a risk I'm comfortable with, I honestly don't care enough to try to optimize it further. Pick a distribution based on some stochastic modelling tools, rebalance periodically to maintain that distribution, and otherwise ignore it. That's very much to the taste of someone like me who wants the savings to work for him rather than vice versa.)\"", "title": "" }, { "docid": "afdd5a936be2a9b0e538321fa88b1cd4", "text": "There are multiple ETFs which inversely track the common indices, though many of these are leveraged. For example, SDS tracks approximately -200% of the S&P 500. (Note: due to how these are structured, they are only suitable for very short term investments) You can also consider using Put options for the various indices as well. For example, you could buy a Put for the SPY out a year or so to give you some fairly cheap insurance (assuming it's a small part of your portfolio). One other option is to invest against the market volatility. As the market makes sudden swings, the volatility goes up; this tends to be true more when it falls than when it rises. One way of invesing in market volatility is to trade options against the VIX.", "title": "" }, { "docid": "e3ad56de12a1e57eee094f285039e940", "text": "\"I hope a wall of text with citations qualifies as \"\"relatively easy.\"\" Many of these studies are worth quoting at length. Long story short, a great deal of research has found that actively-managed funds underperform market indexes and passively-managed funds because of their high turnover and higher fees, among other factors. Longer answer: Chris is right in stating that survivorship bias presents a problem for such research; however, there are several academic papers that address the survivorship problem, as well as the wider subject of active vs. passive performance. I'll try to provide a brief summary of some of the relevant literature. The seminal paper that started the debate is Michael Jensen's 1968 paper titled \"\"The Performance of Mutual Funds in the Period 1945-1964\"\". This is the paper where Jensen's alpha, the ubiquitous measure of the performance of mutual fund managers, was first defined. Using a dataset of 115 mutual fund managers, Jensen finds that The evidence on mutual fund performance indicates not only that these 115 mutual funds were on average not able to predict security prices well enough to outperform a buy-the-market-and-hold policy, but also that there is very little evidence that any individual fund was able to do significantly better than that which we expected from mere random chance. Although this paper doesn't address problems of survivorship, it's notable because, among other points, it found that managers who actively picked stocks performed worse even when fund expenses were ignored. Since actively-managed funds tend to have higher expenses than passive funds, the actual picture looks even worse for actively managed funds. A more recent paper on the subject, which draws similar conclusions, is Martin Gruber's 1996 paper \"\"Another puzzle: The growth in actively managed mutual funds\"\". Gruber calls it \"\"a puzzle\"\" that investors still invest in actively-managed funds, given that their performance on average has been inferior to that of index funds. He addresses survivorship bias by tracking funds across the entire sample, including through mergers. Since most mutual funds that disappear are merged into existing funds, he assumes that investors in a fund that disappear choose to continue investing their money in the fund that resulted from the merger. Using this assumption and standard measures of mutual fund performance, Gruber finds that mutual funds underperform an appropriately weighted average of the indices by about 65 basis points per year. Expense ratios for my sample averaged 113 basis points a year. These numbers suggest that active management adds value, but that mutual funds charge the investor more than the value added. Another nice paper is Mark Carhart's 1997 paper \"\"On persistence in mutual fund performance\"\" uses a sample free of survivorship bias because it includes \"\"all known equity funds over this period.\"\" It's worth quoting parts of this paper in full: I demonstrate that expenses have at least a one-for-one negative impact on fund performance, and that turnover also negatively impacts performance. ... Trading reduces performance by approximately 0.95% of the trade's market value. In reference to expense ratios and other fees, Carhart finds that The investment costs of expense ratios, transaction costs, and load fees all have a direct, negative impact on performance. The study also finds that funds with abnormally high returns last year usually have higher-than-expected returns next year, but not in the following years, because of momentum effects. Lest you think the news is all bad, Russ Wermer's 2000 study \"\"Mutual fund performance: An empirical decomposition into stock‐picking talent, style, transactions costs, and expenses\"\" provides an interesting result. He finds that many actively-managed mutual funds hold stocks that outperform the market, even though the net return of the funds themselves underperforms passive funds and the market itself. On a net-return level, the funds underperform broad market indexes by one percent a year. Of the 2.3% difference between the returns on stock holdings and the net returns of the funds, 0.7% per year is due to the lower average returns of the nonstock holdings of the funds during the period (relative to stocks). The remaining 1.6% per year is split almost evenly between the expense ratios and the transaction costs of the funds. The final paper I'll cite is a 2008 paper by Fama and French (of the Fama-French model covered in business schools) titled, appropriately, \"\"Mutual Fund Performance\"\". The paper is pretty technical, and somewhat above my level at this time of night, but the authors state one of their conclusions bluntly quite early on: After costs (that is, in terms of net returns to investors) active investment is a negative sum game. Emphasis mine. In short, expense ratios, transaction costs, and other fees quickly diminish the returns to active investment. They find that The [value-weight] portfolio of mutual funds that invest primarily in U.S. equities is close to the market portfolio, and estimated before fees and expenses, its alpha is close to zero. Since the [value-weight] portfolio of funds produces an α close to zero in gross returns, the alpha estimated on the net returns to investors is negative by about the amount of fees and expenses. This implies that the higher the fees, the farther alpha decreases below zero. Since actively-managed mutual funds tend to have higher expense ratios than passively-managed index funds, it's safe to say that their net return to the investor is worse than a market index itself. I don't know of any free datasets that would allow you to research this, but one highly-regarded commercial dataset is the CRSP Survivor-Bias-Free US Mutual Fund Database from the Center for Research in Security Prices at the University of Chicago. In financial research, CRSP is one of the \"\"gold standards\"\" for historical market data, so if you can access that data (perhaps for a firm or academic institution, if you're affiliated with one that has access), it's one way you could run some numbers yourself.\"", "title": "" }, { "docid": "35889a5546d6239548ae4eb8634a8426", "text": "The way it is handled with ETF's is that someone has to gather a block of units and redeem them with the fund. So, with the mutual fund you redeem your unit directly with the fund, always, you never sell to another player. With the ETF - its the opposite, you sell to another player. Once a player has a large chunk of units - he can go to the fund and redeem them. These are very specific players (investment banks), not individual investors.", "title": "" }, { "docid": "950291af0e37e82b04cc1de7e2483eec", "text": "\"Sure the LBTA has outperformed LVOL recently but they are very similar (Just look at their underlying indices going back to 2007) - they underperform in good markets and tend to outperform more than they underperformed in down markets. The article should be saying something more like: \"\"Recent outperformance of LBTA is due to sector specific bets of the ETF\"\" And the article fails to point out that LBTA is so low volume that it even has trouble tracking its underlying index on a day to day basis. (LVOL is also very low volume, but it's still significantly better than LBTA).\"", "title": "" }, { "docid": "642b86f98a538677ffa13426a8d71943", "text": "Is it POSSIBLE? Of course. I don't even need to do any research to prove that. Just some mathematical reasoning: Take the S&P 500. Find the performance of each stock in that list over whatever time period you want to use for your experiment. Now select some number of the best-performing stocks from the list -- any number less than 500. By definition, the X best must be better than or equal to the average. Assuming all the stocks on the S&P did not have EXACTLY the same performance, these 10 must be better than average. You now have a diversified portfolio that performed better than the S&P 500 index fund. Of course as they always say in a prospectus, past performance is not a guarantee of future performance. It's certainly possible to do. The question is, if YOU selected the stocks making up a diversified portfolio, would your selections do better than an index fund?", "title": "" }, { "docid": "ea024c1c19d8d8a040dd4a8b2cba45b4", "text": "The Japanese stock market offers a wide selection of popular ETFs tracking the various indices and sub-indices of the Tokyo Stock Exchange. See this page from the Japan Exchange Group site for a detailed listing of the ETFs being offered on the Tokyo exchange. As you have suggested, one would expect that Japanese investors would be reluctant to track the local market indices because of the relatively poor performance of the Japanese markets over the last couple of decades. However, this does not appear to be the case. In fact, there seems to be a heavy bias towards Tokyo indices as measured by the NAV/Market Cap of listed ETFs. The main Tokyo indices - the broad TOPIX and the large cap Nikkei - dominate investor choice. The big five ETFs tracking the Nikkei 225 have a total net asset value of 8.5Trillion Yen (72Billion USD), while the big four ETFs tracking the TOPIX have a total net asset value of 8.0Trillion Yen (68Billion USD). Compare this to the small net asset values of those Tokyo listed ETFs tracking the S&P500 or the EURO STOXX 50. For example, the largest S&P500 tracker is the Nikko Asset Management S&P500 ETF with net asset value of just 67Million USD and almost zero liquidity. If I remember my stereotypes correctly, it is the Japanese housewife that controls the household budget and investment decisions, and the Japanese housewife is famously conservative and patriotic with their investment choices. Japanese government bonds have yielded next to nothing for as long as I can remember, yet they remain the first choice amongst housewives. The 1.3% yield on a Nikkei 225 ETF looks positively generous by comparison and so will carry some temptations.", "title": "" } ]	fiqa
3b735abd3c9f0301f7cb3003890bfca8	How can I save on closing costs when buying a home?	[ { "docid": "6ae94110f133d0d5af7ba097cc0a9c03", "text": "For example: do I need a realtor, or can I do their job myself? In general in the United States the real estate agent fee is paid by the seller of the property. Their agent will be more than happy keep the entire fee if they don't have to split it with your agent. If you don't have an agent you will be missing somebody who can help you find the property that meets your needs. They can also help explain what the different parts of the contract mean and give you advice regarding making an offer. Do I need to pay for an inspection, or am I likely to save enough money from skipping it to cover potential problems that they would have caught? Inspections are optional. Though the amount you are risking is the entire value of the purchase. If the property has a problem in the foundation, or the septic system, or the plumbing or electrical the cost to fix the issue could render the purchase not worth doing. If you discover the problem a year later and you have to repair the house and have to find temporary housing for a few months, you will regret skipping the inspection. What are some of the ways I can cut expenses on closing costs? Is there any low-hanging fruit? You need to do your homework. When you are ready to purchase a property take good look at the good faith estimate and look at each item. Ask them what the expense covers. Push back against those that seem optional or excessive. Keep in mind that moving the closing date from the end of a month to the start of the next month only changes the timing those charges, it doesn't really save you money. Rolling the costs into the loan sound easy but you have to think about. It means that you will be paying interest on those charges for the life of the loan. It is good that you are starting to think about all the costs.", "title": "" }, { "docid": "47025bcaee3e5881e3bd444360e7573b", "text": "\"According to Realtor.com, there are a variety of options to save on closing costs: A general Google search on \"\"how to reduce closing costs\"\" will return a lot of results on other people's experiences, as well as tips and tricks.\"", "title": "" }, { "docid": "cfaf98cb6c96e32e33bf542645c6db6b", "text": "\"As a buyer, one of the easiest ways to save on closing costs is to avoid title insurance. This will only apply if you are a cash buyer, as a mortgage writer will typically require title insurance. It is also one of the most ill-advised ways to save money. You need title insurance. For the most part, there is really no way to truly save on closing costs. Wrapping costs into a loan, saving on interest or taxes through timing don't truly save money. Sometimes you can obtain discounts on closing by using an targeted lender, but that may cost you in higher interest rates. By paying points on your loan, you may increase your costs at closing in order to save money on interest paid. Certainly you can't discount required, government imposed fees (like doc stamps). You may be able to shop around and find a bit lower fees for appraisal, credit reports, title company fees, and title insurance. However, that is a lot of work for not a lot of return. Title companies seem to be pretty tight lipped about their fees. The best yield of your time is to get the other party in the transaction to pay your costs. The market or local tradition may not allow this. An additional way to lower your costs is to ask the realtors involved to discount their commissions. However, they could always say \"\"no\"\". The bottom line is transacting real estate is very expensive.\"", "title": "" }, { "docid": "42442f9973e05b1d9fd1ad2642895ca2", "text": "Good answers here. I would like to add one more (less obvious) way to save - look for houses that are For Sale By Owner (FSBO). Owner's who are selling without an agent do not have to pay a seller's agent fee. The closing cost savings here are actually on the seller's side of the transaction. However, since you know the seller is saving money, you may be able to negotiate a lower overall selling price with them (or it may be priced lower than comps already) because of this factor. FSBO houses maybe trickier to find than those listed by an agent, because they will not appear on the national MLS used by realtors to find/advertise houses that aren't being sold by their own clients. You may need to physically walk the streets of the neighborhood you're interested in moving to, to look for FSBO yard signs. FSBO sellers may also advertise in local newspapers.", "title": "" }, { "docid": "ff2d23ecd386b03b4cfd965881900adf", "text": "Do I need to pay for an inspection, or am I likely to save enough money from skipping it to cover potential problems that they would have caught? A home inspection costs hundreds of dollars. The average is $315. Inspections regularly catch things that cost tens of thousands of dollars to fix, e.g. a new roof or a cracked foundation. You also might find that a home inspection is required for your mortgage. do I need a realtor, or can I do their job myself? Unless you are a licensed realtor or you buy directly from a seller without a realtor, the fee (charged to the seller) will be the same regardless of whether you have a realtor. The seller's realtor will share the fee with your realtor if you have one. So you can do the work yourself (perhaps not as well), but you won't save money by doing so. If you have a lot of flexibility in when you purchase, you could look for especially cheap properties with motivated sellers. Arrange financing ahead of time (before you find a house), so you can close quickly. Some sellers will give you a discounted price to finish the sale quickly. Even small savings on the price of a house will outweigh most savings on closing costs.", "title": "" }, { "docid": "0cad1f3f96c5c63e9bef9ab0fbd7150b", "text": "Mostly ditto Pete B's answer. There's little you can do about closing costs. Some closing costs are government fees. There's nothing you can do about this. Sad and unfair as it is, taxes are not optional and not generally negotiable. Title insurance and fire insurance are required by the lender. Even if you're paying cash, you don't really want to skip on these. If your house burns down and you have no insurance ... well, if you're worried about saving a few hundred on your closing costs, I assume that losing $200,000 because your house burned down and you have no insurance would be a pretty bad thing. Title insurance protects you against the possibility that the seller doesn't really legally own the property, maybe a scam, more likely a mistake or a technicality. You can, and certainly should, shop around for a better deal on insurance. Last couple of housing transactions I made, title insurance was a one-time fee of around $200. (I'm sure this depends on the cost of the house, where you live, maybe other factors.) Maybe by shopping around I could have saved $10 or $20, but I doubt there's someone out there charging $50 when everyone else is charging $200. Fire insurance you're probably paying a couple of thousand a year, more opportunity for savings. Typically the buyer and the seller each have a realtor and they split the fee. If you go without a realtor but the seller hires one, she'll keep the entire fee. So the only way to avoid this expense is if neither of you has a realtor. I've never done that. Realtors cost a ton of money but they provide a useful service: not only helping you find a house but also knowing how to deal with all the paperwork. Plenty of people do it, though. I presume they get the title agency or the bank or somebody to help with the paperwork. There are also discount realtors out there who don't show your home, do little or nothing to market it, basically just help you with the paperwork, and then charge a very low fee. Timing closing for a certain day of the month can reduce what you owe at closing time -- by reducing the amount of interest you pay on the first month's loan payment -- but it doesn't save you any money. You'll make it up over the course of the loan. You might possibly save some money by timing closing around when property taxes are due. Theoretically this shouldn't matter: the theory is that they pro-rate property taxes between buyer and seller so each pays the taxes for the time when they own the house. So again, you might need less cash at closing but you'll make it up the next time property taxes are due. But the formulas the banks use on this are often goofy. Maybe if you live some place with high property taxes this is worth investigating. You could skip the inspection. But inspections I've had done generally cost about $500. If they found something that was a major issue, they might save you from buying a house that would cost tens of thousands in repairs. Or less dramatically, you can use the inspection report for leverage with the seller to get repairs done at the seller's expense. I once had an inspector report problems with the roof and so I negotiated with the seller that they would pay for a percentage of roof repair. I suppose if you're buying a house that you know is run down and will require major work, an inspection might be superfluous. Or if you know enough about construction that you can do an inspection yourself. Otherwise, it's like not buying insurance: sure, you save a little up front, but you're taking a huge risk. So what can you control? (a) Shop around for fire insurance. Maybe save hundreds of dollars. (b) Find a seller who's not using a realtor and then you don't use a realtor either. Save big bucks, 6 to 7% in my area, but you then have to figure out how to do all the paperwork yourself and you severely limit your buying options as most sellers DO use a realtor. Besides that, there's not much you can do.", "title": "" } ]	[ { "docid": "9dbafaba1e866e9f43f3a6ce0e416426", "text": "Although it may be a little late for you, the real answer is this: When you close on a mortgage for a primary residence you are affirming (in an affidavit), two intents: Now, these are affirming intentions — not guarantees; so if a homeowner has a change of circumstance, and cannot meet these affirmed intentions, there is almost always no penalty. Frankly, the mortgage holder's primary concern is you make payments on time, and they likely won't bother with any inquiry. That being said, should a homeowner have a pattern of buying primary residences, and in less than 1 year converting that primary to a rental, and purchasing a new primary; there will likely be a grounds for prosecution for mortgage fraud. In your specific situation, you cannot legally sign the owner-occupancy affidavit with the intention of not staying for 1 year. A solution would be to purchase the condo as a second home, or investment; both of which you can still typically get 80% financing. A second home is tricky, I would ask your lender what their requirements are for 2nd home classification. Outside that, you could buy the condo as a primary, stay in it for a year, then convert. If you absolutely had to purchase the 2nd property before 1 year, you could buy it as a primary with a 2 month rent back once you reach 10 months. Should you need it earlier, just buy the 2nd house as an investment, then once you move in, refinance it as a primary. This last strategy requires some planning ahead and you should explain your intention to the loan officer ahead of time so they can properly price the non-owner occupied loan.", "title": "" }, { "docid": "7ad87a90c0c9695b48710dafc42e7a3b", "text": "I recognize you are probably somewhere in the middle of various steps here... but I'd start and go through one-by-one in a disciplined way. That helps to cut through the overwhelming torrent of information that's out there. Here is my start at a general checklist: others can feel free to edit it or add their input. How 'much' house would you like to buy in terms of $$$ and bedrooms/sq ft. You can start pretty general here, but the idea is to figure out if you can actually afford a brand new 4bd/3ba 2,500 sq ft house (upwards of $500K in your neck of the woods according to trulia.com). Or maybe with your current resources you'll be looking at something like a townhome that is more entry-level but still yours. Some might recommend that this is a good time to talk to any significant others/whomevers and understand/manage expectations. My wife usually cares a lot about schools at this stage, but I think it's too early. Just ballpark whether you're looking at a $500K house, a $300K house, or a $200K townhome. How much house can you afford in terms of monthly payments only... (not considering other costs like utilities yet). Looking around at calculators like this one from bankrate.com can help you figure this out. Set the interest rate @ 5%, 30-year loan, and change the 'mortgage amount' until you have something that is about 80%-90% of what you currently pay in rent each month. I'll get to 'why' to undershoot your rent payment later. Crap... can't afford my dream house... If you don't have the down payment to make the numbers work (remember that this doesn't even include closing costs yet), there are other loan options like FHA loans that can go as low as about 5% down payment. The math would be the same but you replace 0.8 with 0.95. Then, look at your personal budget. Come up with general estimates of what you currently bring in and spend each month overall. Just ballpark it... Next, figure what you currently spend towards housing in particular. Whether you are paying for it or your landlord is paying for it, someone pays for a lot of different things for housing. For now, my list would include (1) Rent, (2) Mortgage Payment, (3) Electricity, (4) Gas, (5) Sewer, (6) Water, (7) Trash, (8) Other utilities... TV/Internet/Phone, (9) Property Insurance, (10) Renter's Insurance, and (11) Property Taxes. I would put it into a table in Excel somewhere that has 3 columns... The first has the labels, the second will have what you spend now, and the third will have what you might spend on each one as a homeowner. If you pay it now, put it in the second column. If your landlord pays it right now, leave it out as that's included in your rent payment. Obviously each cell won't be filled in. Fill in the rest of the third column. You won't pay rent anymore, but you will have a mortgage payment. You probably have a good estimate of any electricity bills, etc that you currently pay, but those may be slightly higher in a house vs. a condo or an apartment. As for things like sewer, water, trash or other 'community' utilities, my bet would be that your landlord pays for those. If you need a good estimate ask around with some co-workers or friends that own their own places. They would also be a good resource for property insurance estimates... shooting from the hip I would say about $100/month based on this website. (I'm not affiliated). The real 'ouch' is going to be property tax rates. Based on the data from this website, your county is about 9% of property value. So add that into the third column as well. Can you really afford a house? round 2 Now... add up the third column and see how that monthly expense amount on housing compares against your current monthly budget. If it's over, you don't have to give up, but you should just understand how much your decision to purchase a house will strain your budget. Also, you should use this information to look again at 'how much house can you afford.' Now, do some more research. If you need to get a revised loan amount based on the FHA loan decision, then use the bankrate calculator to find out what the monthly payment is for a 95% loan against your target price. But remember that an FHA loan will also carry PMI that is extra on top of your monthly payment. Or, if you need to revise your mortgage payment downwards (or upwards) change the loan amount accordingly. Once you've got the numbers set, look for properties that fit. This way you can have a meaningful discussion with yourself or other stakeholders about what you can afford. As far as arranging financing... a realtor will be able and willing to point you in the right direction for obtaining funding, etc. And at that point you can just check anything you're offered by shopping interest rates, etc against what the internet has to say. Feel free to ask us, too... it's hard to give much better direction without more specifics.", "title": "" }, { "docid": "241f4865e904c4cb490fc953274884e1", "text": "\"First off; I don't know of the nature of the interpersonal relationship between you and your roommate, and I don't really care, but I will say that your use of that term was a red flag to me, and it will be so to a bank; buying a home is a big deal that you normally do not undertake with just a \"\"friend\"\" or \"\"roommate\"\". \"\"Spouses\"\", \"\"business partners\"\", \"\"domestic partners\"\" etc are the types of people that go in together on a home purchase, not \"\"roommates\"\". Going \"\"halvsies\"\" on a house is not something that's easily contracted; you can't take out two primary mortgages for half the house's value each, because you can't split the house in half, so if one of you defaults that bank takes the house leaving both the other person and their bank in the lurch. Co-signing on one mortgage is possible but then you tie your credit histories together; if one of you can't make their half of the mortgage, both of you can be pursued for the full amount and both of you will see your credit tank. That's not as big a problem for two people joined in some other way (marriage/family ties) but for two \"\"friends\"\" there's just way too much risk involved. Second, I don't know what it's like in your market, but when I was buying my first house I learned very quickly that extended haggling is not really tolerated in the housing market. You're not bidding on some trade good the guy bought wholesale for fifty cents and is charging you $10 for; the seller MIGHT be breaking even on this thing. An offer that comes in low is more likely to be rejected outright as frivolous than to be countered. It's a fine line; if you offer a few hundred less than list the seller will think you're nitpicking and stay firm, while if you offer significantly less, the seller may be unable to accept that price because it means he no longer has the cash to close on his new home. REOs and bank-owned properties are often sold at a concrete asking price; the bank will not even respond to anything less, and usually will not even agree to eat closing costs. Even if it's for sale by owner, the owner may be in trouble on their own mortgage, and if they agree to a short sale and the bank gets wind (it's trivial to match a list of distressed mortgaged properties with the MLS listings), the bank can swoop in, foreclose the mortgage, take the property and kill the deal (they're the primary lienholder; you don't \"\"own\"\" your house until it's paid for), and then everybody loses. Third, housing prices in this economy, depending on market, are pretty depressed and have been for years; if you're selling right now, you are almost certainly losing thousands of dollars in cash and/or equity. Despite that, sellers, in listing their home, must offer an attractive price for the market, and so they are in the unenviable position of pricing based on what they can afford to lose. That again often means that even a seller who isn't a bank and isn't in mortgage trouble may still be losing thousands on the deal and is firm on the asking price to staunch the bleeding. Your agent can see the signs of a seller backed against a wall, and again in order for your offer to be considered in such a situation it has to be damn close to list. As far as your agent trying to talk you into offering the asking price, there's honestly not much in it for him to tell you to bid higher vs lower. A $10,000 change in price (which can easily make or break a deal) is only worth $300 to him either way. There is, on the other hand, a huge incentive for him to close the deal at any price that's in the ballpark: whether it's $365k or $375k, he's taking home around $11k in commission, so he's going to recommend an offer that will be seriously considered (from the previous points, that's going to be the asking price right now). The agent's exact motivations for advising you to offer list depend on the exact circumstances, typically centering around the time the house has been on the market and the offer history, which he has access to via his fellow agents and the MLS. The house may have just had a price drop that brings it below comparables, meaning the asking price is a great deal and will attract other offers, meaning you need to move fast. The house may have been offered on at a lower price which the seller is considering (not accepted not rejected), meaning an offer at list price will get you the house, again if you move fast. Or, the house may have been on the market for a while without a price drop, meaning the seller can go no lower but is desperate, again meaning an offer at list will get you the house. Here's a tip: virtually all offers include a \"\"buyer's option\"\". For a negotiated price (typically very small, like $100), from the moment the offer is accepted until a particular time thereafter (one week, two weeks, etc) you can say no at any time, for any reason. During this time period, you get a home inspection, and have a guy you trust look at the bones of the house, check the basic systems, and look for things that are wrong that will be expensive to fix. Never make an offer without this option written in. If your agent says to forego the option, fire him. If the seller wants you to strike the option clause, refuse, and that should be a HUGE red flag that you should rescind the offer entirely; the seller is likely trying to get rid of a house with serious issues and doesn't want a competent inspector telling you to lace up your running shoes. Another tip: depending on the pricepoint, the seller may be expecting to pay closing costs. Those are traditionally the buyer's responsibility along with the buyer's agent commission, but in the current economy, in the pricepoint for your market that attracts \"\"first-time homebuyers\"\", sellers are virtually expected to pay both of those buyer costs, because they're attracting buyers who can just barely scrape the down payment together. $375k in my home region (DFW) is a bit high to expect such a concession for that reason (usually those types of offers come in for homes at around the $100-$150k range here), but in the overall market conditions, you have a good chance of getting the seller to accept that concession if you pay list. But, that is usually an offer made up front, not a weapon kept in reserve, so I would have expected your agent to recommend that combined offer up front; list price and seller pays closing. If you offer at list you don't expect a counter, so you wouldn't keep closing costs as a card to play in that situation.\"", "title": "" }, { "docid": "627ecc6e25777cda79292ab0b54b71c0", "text": "To get the factors you want, start with a complete amortization calculator and a tax deduction calculator, filling in values for your down payment, purchase price, tax rates, and mortgage rate. If you are talking about a specific property, you should be able to get taxes for the current year, and perhaps using historical values estimate taxes going out. Some calculators will include PMI (which you should avoid like the plague in an actual purchase). Given some preliminary data, you can calculate your insurance. So once you have your PITI (principal, interest, tax, and insurance) monthly payment and tax deduction, you can calculate how much you spend a month on the house minus the deduction. To estimate maintenance costs, you could either figure out about what you'd need to replace in the given time you plan to stay put and use a rough estimate on what it is. You can also use some rough estimates like this (1% of the property value yearly!) or this (moving the number up to a whopping 2%). Don't forget closing costs as a buyer and seller. You can find estimates for these as well, and they are a function of the purchase price (usually around 2%). So to figure out how much it costs you to live in a house for X months, you can do So your total cost is Total Return Is: You can adjust that total return for inflation using this calculator to get your total return adjusted for inflation. If projecting into the future, you can try a formula found here. To figure out the return on your investment, use So to figure out the total return adjusted you need for a given ROI, find", "title": "" }, { "docid": "30c592d44c947ee13ed8d67dc292d154", "text": "\"Here are some important things to think about. Alan and Denise Fields discuss them in more detail in Your New House. Permanent work. Where do you want to live? Are there suitable jobs nearby? How much do they pay? Emergency fund. Banks care that you have \"\"reserves\"\" (and/or an unsecured line of credit) in case you have a run of bad luck. This also helps with float the large expenses when closing a loan. Personal line of credit. Who are you building for? If you are not married, then you should consider whether building a home makes that easier, or harder. If you hope to have kids, you should consider whether your home will make it easier to have kids, or harder. If you are married (or seriously considering it), make sure that your spouse helps with the shopping, and is in agreement on the priorities and choices. If you are not married, then what will you do if/when you get married? Will you sell? expand? build another house on the same lot? rent the home out? Total budget. How much can the lot, utilities, permits, taxes, financing charges, building costs, and contingency allowance come to? Talk with a banker about how much you can afford. Talk with a build-on-your-lot builder about how much house you can get for that budget. Consider a new mobile or manufactured home. But if you do choose one, ask your banker how that affects what you can borrow, and how it affects your rates and terms. Talk with a good real estate agent about how much the resale value might be. Finished lot budget. How much can you budget for the lot, utilities, permits required to get zoning approval, fees, interest, and taxes before you start construction? Down payment. It sounds like you have a plan for this. Loan underwriting. Talk with a good bank loan officer about what their expectations are. Ask about the \"\"front-end\"\" and \"\"back-end\"\" Debt-To-Income ratios. In Oregon, I recommend Washington Federal for lot loans and construction loans. They keep all of their loans, and service the loans themselves. They use appraisers who are specially trained in evaluating new home construction. Their appraisers tend to appraise a bit low, but not ridiculously low like the incompetent appraisers used by some other banks in the area. (I know two banks with lots of Oregon branches that use an appraiser who ignores 40% of the finished, heated area of some to-be-built homes.) Avoid any institution (including USAA and NavyFed) that outsources their lending to PHH. Lot loan. In Oregon, Washington Federal offers lot loans with 30% down payments, 20-year amortization, and one point, on approved credit. The interest rate can be a fixed rate, but is typically a few percentage points per year higher than for a mortgage secured by a permanent house. If you have the financial wherewithal to start building within two years, Washington Federal also offers short-term lot loans. Ask about the costs of appraisals, points, and recording fees. Rent. How much will it cost to rent a place to live, between when you move back to Oregon, and when your new home is ready to move into? Commute. How much time will it take to get from your new home to work? How much will it cost? (E.g., car ownership, depreciation, maintenance, insurance, taxes, fuel? If public transportation is an option, how much will it cost?) Lot availability. How many are there to choose from? Can you talk a farmer into selling off a chunk of land? Can you homestead government land? How much does a lot cost? Is it worth getting a double lot (or an extra large lot)? Utilities. Do you want to live off the grid? Are you willing to make the choices needed to do that? (E.g., well, generator, septic system, satellite TV and telephony, fuel storage) If not, how much will it cost to connect to such systems? (For practical purposes, subtract twice the value of these installation costs from the cost of a finished lot, when comparing lot deals.) Easements. These provide access to your property, access for others through your property, and affect your rights. Utility companies often ask for far more rights than they need. Until you sign on the dotted line, you can negotiate them down to just what they need. Talk to a good real estate attorney. Zoning. How much will you be allowed to build? (In terms of home square footage, garage square footage, roof area, and impermeable surfaces.) How can the home be used? (As a business, as a farm, how many unrelated people can live there, etc.) What setbacks are required? How tall can the building(s) be? Are there setbacks from streams, swamps, ponds, wetlands, or steep slopes? Choosing a builder. For construction loans, banks want builders who will build what is agreed upon, in a timely fashion. If you want to build your own house, talk to your loan officer about what the bank expects in a builder. Plansets and permits. The construction loan process. If you hire a general contractor, and if you have difficulties with the contractor, you might be forced to refuse to accept some work as being complete. A good bank will back you up. Ask about points, appraisal charges, and inspection fees. Insurance during construction. Some companies have good plans -- if the construction takes 12 months or less. Some (but not all) auto insurance companies also offer good homeowners' insurance for homes under construction. Choose your auto insurance company accordingly. Property taxes. Don't forget to include them in your post-construction budget. Homeowners' insurance. Avoid properties that need flood insurance. Apply a sanity check to flood maps -- some of them are unrealistic. Strongly consider earthquake insurance. Don't forget to include these costs in your post-construction budget. Energy costs. Some jurisdictions require you to calculate how large a heating system you need. Do not trust their design temperatures -- they may not allow for enough heating during a cold snap, especially if you have a heat pump. (Some heat pumps work at -10°F -- but most lose their effectiveness between 10°F and 25°F.) You can use these calculations, in combination with the number of \"\"heating degree days\"\" and \"\"cooling degree days\"\" at your site, to accurately estimate your energy bills. If you choose a mobile or manufactured home, calculate how much extra its energy bills will be. Home design. Here are some good sources of ideas: A Pattern Language, by Christopher Alexander. Alexander emphasizes building homes and neighborhoods that can grow, and that have niches within niches within niches. The Not-So-Big House, by Sarah Susanka. This book applies many Alexander's design patterns to medium and large new houses. Before the Architect. The late Ralph Pressel emphasized the importance of plywood sheathing, flashing, pocket doors, wide hallways, wide stairways, attic trusses, and open-truss or I-joist floor systems. Lots of outlets and incandescent lighting are good too. (It is possible to have too much detail in a house plan, and too much room in a house. For examples, see any of his plans.) Tim Garrison, \"\"the builder's engineer\"\". Since Oregon is in earthquake country -- and the building codes do not fully reflect that risk -- emphasize that you want a building that would meet San Jose, California's earthquake code.\"", "title": "" }, { "docid": "baf6bf103513a003d4de7541b9132592", "text": "To answer your question, you need to ask yourself Common transaction costs can be really hard to compensate in a single year. It can include house inspections, closing costs, agents commissions, etc---all together, it can be up to 6-10% of the value of your house. This is a difficult goal to beat in a year, and your margin for miscalculations and market fluctuations is very low. In brief, you can be screwed big time. To make a profit in a year, you need to reduce transaction costs to the minimum: Avoid agents, inspectors, mortgage brokers, etc, which can pay you back with an interesting surprise. Bottom line, it can make sense to buy a house for a year, only if you can reduce all the related transaction costs by doing them yourself. If there are many houses in the market for sale, I would try to convince someone to lease the house for a year in the best terms possible (and maybe even try to sub-lease some of the rooms), or also rent-to-own the house. That way you avoid the transaction costs upfront, and would make more financial sense for a non real estate guru.", "title": "" }, { "docid": "3ac70ed17cfdc60ff11e6a25d73afdc1", "text": "The typical process is to look at the savings and see how many months it will take to break even on the closing costs. Since you've stated there are no costs, even 1/8% drop in rates is going to save you money. A savings of over 1.5% even on a sub 100K loan is nothing to ignore. You first year interest savings will exceed $1200. How many hours does it take you to earn that much money? (this is a rhetorical question, if that wasn't obvious)", "title": "" }, { "docid": "00155b67fc1e919484a70eadd7488566", "text": "It would help if we had numbers to walk you through the analysis. Current balance, rate, remaining term, and the new mortgage details. To echo and elaborate on part of Ben's response, the most important thing is to not confuse cash flow with savings. If you have 15 years to go, and refinance to 30 years, at the rate rate, your payment drops by 1/3. Yet your rate is identical in this example. The correct method is to take the new rate, plug it into a mortgage calculator or spreadsheet using the remaining months on the current mortgage, and see the change in payment. This savings is what you should divide into closing costs to calculate the breakeven. It's up to you whether to adjust your payments to keep the term the same after you close. With respect to keshlam, rules of thumb often fail. There are mortgages that build the closing costs into the rate. Not the amount loaned, the rate. This means that as rates dropped, moving from 5.25% to 5% made sense even though with closing costs there were 4.5% mortgages out there. Because rates were still falling, and I finally moved to a 3.5% loan. At the time I was serial refinancing, the bank said I could return to them after a year if rates were still lower. In my opinion, we are at a bottom, and the biggest question you need to answer is whether you'll remain in the house past your own breakeven time. Last - with personal finance focusing on personal, the analysis shouldn't ignore the rest of your balance sheet. Say you are paying $1500/mo with 15 years to go. Your budget is tight enough that you've chosen not to deposit to your 401(k). (assuming you are in the US or country with pretax retirement account options) In this case, holding rates constant, a shift to 30 years frees up about $500/mo. In a matched 401(k), your $6000/yr is doubled to $12K/year. Of course, if the money would just go in the market unmatched, members here would correctly admonish me for suggesting a dangerous game, in effect borrowing via mortgage to invest in the market. The matched funds, however are tough to argue against.", "title": "" }, { "docid": "f541367e5b705190aa955065d5e9950e", "text": "You are saving around 2.41% over the Car Loan for a duration of 35 months. Check out if the fees for redrawing on home loan and fees for closing the matches the money saved. Edit: If you are making your current car payments as additional monthy payments to your mortgage then you are in effect paying less interest than current car loan.", "title": "" }, { "docid": "1d2e1ba2c661ab34f0ee4e3746eb5cc6", "text": "In the US you can get a home warranty when you buy a house that will cover major repairs for the first few years of owning a home. The costs vary based on age and the results of the home inspection. Ours cost ~$250 a year. This was put into our closing costs. Unfortunately this market does have some disreputable companies that come im with prices that seem too good to be true. As is usually the case they are. Do research on the company you are getting the home warrenty from to make sure you are dealing with a reputable company that will honor its commitments. By having 20% down you will avoid needing Mortgage insurance which will save you a considerable amout. My PMI cost me about $70 a month. However once you get to 20% equity in your home the pmi drops off. So if you can put down 15% you should be able to get out from under your pmi in a few years if you want to keep that 5% cushion while making extra payments. The question is how much do you feel you need. So far owning a 70 year old home my extra maintence costs have been around 2500 a year. But they seem to be in 1k chunks every 4 or 5 months.", "title": "" }, { "docid": "ca9cdf23b1db6fb5ca4fee410435c107", "text": "First of all, congratulations on your home purchase. The more equity you build in your house, the more of the sale price you get out of it when you move to your next house. This will enable you to consume more house in the future. Think of it as making early payments towards your next down payment. Another option is to save up a chunk of money and recast your mortgage, paying down the principal and having the resulting amount re-amortized to provide you with a lower monthly payment. You may be able to do this at least once during your time in the house, and if you do it early enough it can potentially help your savings in other areas. On the other hand, it is possible given today's low interest rates for mortgages that in other forms of investments (such as index funds) you could make more on the money you'd be putting towards your extra payments. Then you would have more money in savings when you go to sell this house and buy the next one that you would in equity if you didn't go that route. This is riskier than building equity in your home, but potentially has a bigger pay-off. You do the trade-offs.", "title": "" }, { "docid": "fe42f4891bb8abe1c35dea12d56d0e78", "text": "Save up a bigger downpayment. The lender's requirement is going to be based on how much you finance, not the price of the house.", "title": "" }, { "docid": "de2a52a96bc2cc98117b5ae5ccf55134", "text": "An addition to the other answers more than a real answer I suspect. Note that fees are not the only way that you pay for foreign exchange; where no foreign exchange fee is charged the issuer makes it back by giving an appalling spread on the rate. Be very careful not to go for a card that has no fees but an exorbitant spread. I personally would open a CAD denominated account in Canada and convert a larger amount into that account when CAD is historically weak. The spreads will be better that way but don't attempt to use it to mitigate exchange rate risk or to trade the two currencies for profit as that way madness and penury lie.", "title": "" }, { "docid": "31edf85d0253e45a86d4bf8992add560", "text": "Tim Ferris has some pretty good finance related episodes with hedge fund managers or personal finance authors (for e.g. the one with Ray Dalio or Tony Robbins). They are not exclusively finance related but include some pretty in-depth conversations. 20-Minute VC is also great if you're interested in Venture Capital.", "title": "" } ]	fiqa
d5f7178561ef54ecc3f67384dc484339	How can a person with really bad credit history rent decent housing?	[ { "docid": "ffb8bd6bf8c66369463193f0e40c7f18", "text": "This tale makes me sad the more I learn of it. I am impressed with your dedication and caring for your ex-wife and particularly your kids; you seem like a good person from your questions. But you are tired and exasperated too. You have every right to be. The problem isn't how this woman can rent a new apartment (which there isn't a good way that won't screw over some unsuspecting landlord) but how to get this woman into conseling on a regular basis. Not just money, but personal or group therapy. She honestly needs help and must face this problem herself otherwise these questions will never stop. I know you mentioned this doesn't appear to be an option, anf maybe it isn't your job, but I. See your questions are much deeper than personal finance. I wish you the best and I really do admire your resolve to take care of your kids.", "title": "" }, { "docid": "7f50b7eb81cea05336eed2222ab9bb91", "text": "She can find a landlord that doesn't do credit checks. Maybe on Craigslist? She may end up paying more, have a bigger security deposit, etc. She can get someone else (not you) to sit her down and explain to her frankly that she's messing things up for herself and her children by being a poor manager of her finances. As her credit score improves, more opportunities will open up for her. Co-signing the loan is an option, but I do think you're wise not to do that.", "title": "" }, { "docid": "81cf56f84bb6073408c3075f0c5e99e4", "text": "Having been recently evicted she is unlikely to find any one willing to rent to her at anything close to reasonable terms. Any landlord that would consider it is likely to require a huge deposit. Her best solution may be a hotel/motel with weekly/monthly rates. It is generally much easier to get someone out of a hotel/motel for non payment than it is an actual apartment with a lease and landlord-tenant laws. But when you pay they take care of all utilities, and you can receive mail and register them as your permanent address for finding employment. Any other place that is willing to take someone who they know is a high risk for nonpayment/eviction is probably not going to be the type of place you want your children.", "title": "" }, { "docid": "4d24058715dbda6f51062738f68df521", "text": "\"I saw where you said \"\"I thought of co-signing is if a portion of child/spousal support goes directly to the landlord. I asked the Child Support Services (who deduct money from my paycheck monthly to pay support to my ex) and they told me that they are not authorized to do this.\"\" I know going back to court isn't a pleasant thought, but from the looks of things, your suggestion is the only way to accomplish this. It's ridiculous for anyone to suggest you keep up your payments and cosign, yet the ex has no obligation to use that income to actually pay her rent. From what you've said, she sounds irresponsible and self-destructive. As someone who has had bad tenants, I'd not go near her, even with a cosigner. It's just not worth the risk.\"", "title": "" }, { "docid": "aef57fa4cc3eff2eaebc63a3feb09561", "text": "\"I don't think you've mentioned which State you're in. Here in Ontario, a person who is financially incapable can have their financial responsibility and authority removed, and assigned to a trustee. The trustee might be a responsible next of kin (as her ex, you would appear unsuitable: that being a potential conflict of interest); otherwise, it can be the Public Guardian and Trustee. It that happens, then the trustee handles the money; and handles/makes any contracts on behalf of (in the name of) the incapable person. The incapable person might have income (e.g. spousal support payments) and money (e.g. bank accounts), which the trustee can document in order to demonstrate credit-worthiness (or at least solvency). For the time being, the kids see it as an adventure, but I suspect, it will get old very fast. I hope you have a counsellor to talk with about your personal relationships (I've had or tried several and at least one has been extraordinarily helpful). You're not actually expressing a worry about the children being abused or neglected. :/ Is your motive (for asking) that you want her to have a place, so that the children will like it (being there) better? As long as your kids see it as an adventure, perhaps you can be happy for them. Perhaps (I don't know: depending on the people) too it's a good (or at least a better) thing that they are visiting with friends and relatives; and, a better conversational topic with those people might be how they show your children a good time (instead of your ex's money). One possible way I thought of co-signing is if a portion of child/spousal support goes directly to the landlord. I asked the Child Support Services (who deduct money from my paycheck monthly to pay support to my ex) and they told me that they are not authorized to do this. Perhaps (I don't know) there is some way to do that, if you have your ex's cooperation and a lawyer (and perhaps a judge). You haven't said what portions of your payments are for Child support, versus Spousal support (nor, who has custody, etc). If a large part of the support is for the children, then perhaps the children can rent the place. (/wild idea) Note that, in Ontario, there are two trusteeship decisions to make: 1) financial; and 2) personal care, which includes housing and medical. Someone can retain their own 'self-care' authority even if they're judged financially incapable (or vice versa if there's a personal-care or medical decision which they cannot understand). The technical language is, \"\"Mentally Incapable of Managing Property\"\" This term applies to a person who is unable to understand information that is relevant to making a decision or is unable to appreciate the reasonably foreseeable consequences of a decision or lack of decision about his or her property. Processes for certifying an individual as being mentally incapable of managing property are prescribed in the SDA (Substitute Decisions Act), and in the Mental Health Act.\"\" The Mental Heath Act is for medical emergencies (only); but Ontario has a Substitute Decisions Act as well. An intent of the law is to protect vulnerable people. People may also acquire and/or name their own trustee and/or guardian voluntarily: via a power of attorney, a living will, etc. I don't know: how about offering the landlord a year's rent in advance, or in trust? I guess that 1) a court order can determine/override/guarantee the way in which the child support payments are directed 2) it's easier to get that order/agreement if you and your ex cooperate 3) there are housing specialists in your neighborhood: They can buy housing instead of renting it. Or be given (gifted) housing to live in.\"", "title": "" }, { "docid": "1af82ecd5c9fe20d9396c3553107d157", "text": "Explain the situation to a landlord and offer to prepay a few months of rent in advance as a guarantee. This may or may not work, but being honest and committed may just be the answer.", "title": "" }, { "docid": "47e6d730dfcd7668dd5232bcb8d02edc", "text": "Here's some ideas: Hope that helps.", "title": "" } ]	[ { "docid": "7dde74392ae43418f5636c60a710d5c6", "text": "\"I'm not aware that any US bank has any way to access your credit rating in France (especially as you basically don't have one!). In the US, banks are not the only way to get finance for a home. In many regions, there are plenty of \"\"owner financed\"\" or \"\"Owner will carry\"\" homes. For these, the previous owner will provide a private mortgage for the balance if you have a large (25%+) downpayment. No strict lending rules, no fancy credit scoring systems, just a large enough downpayment so they know they'll get their money back if they have to foreclose. For the seller, it's a way to shift a house that is hard to sell plus get a regular income. Often this mortgage is for only 3-10 years, but that gives you the time to establish more credit and then refinance. Maybe the interest rate is a little higher also, but again it's just until you can refinance to something better (or sell other assets then pay the loan off quick). For new homes, the builders/developers may offer similar finance. For both owner-will-carry and developer finance, a large deposit will trump any credit rating concerns. There is usually a simplified foreclosure process, so they're not really taking much of a risk, so can afford to be flexible. Make sure the owner mortgage is via a title company, trust company, or escrow company, so that there's a third party involved to ensure each party lives up to their obligations.\"", "title": "" }, { "docid": "ea8d8ca2cbfd0d49d51c3f29710d3c41", "text": "A landlord or any creditor can still put negative information in your credit report without your social security number - it just takes a bit more sleuthing on their part. If you want perfect credit, either 1. don't break your lease; 2. break it with the written permission of the landlord (by paying some compensation, for example); or 3. break it with legal permission by asking a court to vacate the terms of the lease.", "title": "" }, { "docid": "2dd5be2dd8fe231b5ca85513873d09ec", "text": "I would like to post a followup after almost a quarter. littleadv's advice was very good, and in retrospect exactly what I should have done to begin with. Qualifying for a secured credit card is no issue for people with blank credit history, or perhaps for anyone without any negative entries in their credit history. Perhaps, cash secured loans are only useful for those who really have so bad a credit history that they do not qualify for any other secured credit, but I am not sure. Right now, I have four cash secured credit cards and planning to maintain a 20% utilization ratio across all of them. Perhaps I should update this answer in 1.5 years!", "title": "" }, { "docid": "106ebc74dbde7657d49f9512ee46cacc", "text": "THIS. That's why I'm fortunate enough to work a remote job where I live 3 hours north of NYC and have traveled 30 years back in time when it comes to prices of homes. I feel like even with shit credit, the hope of a dream home is much more attainable now that the cost/income ratio is where it should be.", "title": "" }, { "docid": "8b35e3d4c7fd82ef6e3ecfe25533e072", "text": "I am a realtor. For our rental business, we use a service that offers a background check. It costs us about $25, and it is passed along in the form of an application fee. I suggest you contact a local real estate agent who you know does rentals. Have a conversation about what you are doing, and see if they will help process the application for you, for a fee of course. If you are truly concerned about your safety (The text you wrote can either read as true concern or sarcasm. Maybe we are really in a wild country?) It's worth even a couple hundred bucks to screen out a potential bad roommate.", "title": "" }, { "docid": "450c8ae1359a23cf337b1a1817dd9c03", "text": "What options do I have? Realistically? Get a regular full time job. Work at it for a year or so and then see about buying a house. That said, I recently purchased a decent home. I am self-employed and my income is highly erratic. Due to how my clients pay me, my business might go a couple months with absolutely no deposits. However, I've been at this for quite a few years. So, even though my business income is erratic, I pay myself regularly once a month. In order to close the deal with the mortgage company I had to provide 5 years worth of statements on my business AND my personal bank accounts. Also I had about a 30% down payment. This gave the bank enough info to realize that I could absolutely make the payments and we closed the deal. I'd say that if you have little to no actual financial history, don't have a solid personal income and don't have much of a down payment then you probably have no business buying a house at this point. The first time something goes wrong (water heater, ac, etc) you'll be in a world of trouble.", "title": "" }, { "docid": "d33cfed182d3f8615b0308ee695e4067", "text": "As a landlord for 14 years with 10 properties, I can give a few pointers: be able and skilled enough to perform the majority of maintenance because this is your biggest expense otherwise. it will shock you how much maintenance rental units require. don't invest in real estate where the locality/state favors the tenant (e.g., New York City) in disputes. A great state is Florida where you can have someone evicted very quickly. require a minimum credit score of 620 for all tenants over 21. This seems to be the magic number that keeps most of the nightmare tenants out makes sure they have a job nearby that pays at least three times their annual rent every renewal, adjust your tenant's rent to be approximately 5% less than going rates in your area. Use Zillow as a guide. Keeping just below market rates keeps tenants from moving to cheaper options. do not rent to anyone under 30 and single. Trust me trust me trust me. you can't legally do this officially, but do it while offering another acceptable reason for rejection; there's always something you could say that's legitimate (bad credit, or chose another tenant, etc.) charge a 5% late fee starting 10 days after the rent is due. 20 days late, file for eviction to let the tenant know you mean business. Don't sink yourself too much in debt, put enough money down so that you start profitable. I made the mistake of burying myself and I haven't barely been able to breathe for the entire 14 years. It's just now finally coming into profitability. Don't get adjustable rate or balloon loans under any circumstances. Fixed 30 only. You can pay it down in 20 years and get the same benefits as if you got a fixed 20, but you will want the option of paying less some months so get the 30 and treat it like a 20. don't even try to find your own tenants. Use a realtor and take the 10% cost hit. They actually save you money because they can show your place to a lot more prospective tenants and it will be rented much sooner. Empty place = empty wallet. Also, block out the part of the realtor's agreement-to-lease where it states they keep getting the 10% every year thereafter. Most realtors will go along with this just to get the first year, but if they don't, find another realtor. buy all in the same community if you can, then you can use the same vendor list, the same lease agreement, the same realtor, the same documentation, spreadsheets, etc. Much much easier to have everything a clone. They say don't put all your eggs in one basket, but the reality is, running a bunch of properties is a lot of work, and the more similar they are, the more you can duplicate your work for free. That's worth a lot more day-to-day than the remote chance your entire community goes up in flames", "title": "" }, { "docid": "42105dd1d738a2743dd56cf9ac1ca628", "text": "No, I really do. Things break at least once a month, and never get fixed. The worst one was the bathroom window that broke from opening it...3 weeks later, and several pieces of cardboard and duct tape later, it finally got replaced. And the slumlords I rent from now are no where near the neighborhood that I moved out of when I could no longer afford my house. The cost of living went up, and our pay went down. That is not the specific lending bank's fault, indeed. But the economy is crap, and crap runs downhill. I didn't know how bad the schools were in the place we lived formerly until she'd been there for a couple years. The schools here...despite the neighborhood...are excellent. Tldr: We were making more when we bought the house. But it was a 50,000 house that someone stuck a 100,000 price tag on. Lots of hidden problems that got glossed over in the home inspection.", "title": "" }, { "docid": "90957f9feffb976c60372bb12c704a74", "text": "\"MY recommendation is simple. RENT The fact that you have to ask the question is a clear sign that you have no business buying a home. That's not to say that it's a bad question to ask though. Far more important then rather it's finically wise for you to buy a home, is the more important question of \"\"are you emotionally ready for the responsibility and permanence\"\" of a home. At best, you are tying your self to the same number of rooms, same location, and same set of circumstances for the next 5-7 years. In that time it will be very unlikely that you will be able to sell the house for a profit, get your minor equity back, or even get a second loan for any reason. You mentioned getting married soon, that means the possibility of more children, divorce, and who knows what else. You are in an emotionally and financially turblunt time in your life. Now is not the right time to buy anything large. Instead rent, and focus on improving your credit rating. In 5 years time you will have a much better credit rating, get much better rates and fees, and have a much better handle on where you want to be with your home/family situation. Buying a house is not something you do on a weekend. For most people it's the culmination of years of work, searching, researching, and preparation. Often times people that buy before they are ready, will end up in foreclosure, and generally have a crappy next 15 years, as they try to work themselves out of the issue.\"", "title": "" }, { "docid": "6304a3dc84ceff4bac44f3ef2c9f8b4f", "text": "Take the long term view. Build up the cash. Once you have enough cash in the bank, you don't need a credit score. With 6 months living expenses in the bank after paying 20% down on a small house, he should have no issues getting a reasonably priced mortgage. However, if he waited just a bit longer he might buy the same house outright with cash. When I ran the computations for myself many years ago, it would have taken me half as long to save the money and pay cash for my home as it did for me to take a mortgage and pay it off.", "title": "" }, { "docid": "e0b589d58e89dc2487eaf6e429674240", "text": "\"Americans are snapping, like crazy. And not only Americans, I know a lot of people from out of country are snapping as well, similarly to your Australian friend. The market is crazy hot. I'm not familiar with Cleveland, but I am familiar with Phoenix - the prices are up at least 20-30% from what they were a couple of years ago, and the trend is not changing. However, these are not something \"\"everyone\"\" can buy. It is very hard to get these properties financed. I found it impossible (as mentioned, I bought in Phoenix). That means you have to pay cash. Not everyone has tens or hundreds of thousands of dollars in cash available for a real estate investment. For many Americans, 30-60K needed to buy a property in these markets is an amount they cannot afford to invest, even if they have it at hand. Also, keep in mind that investing in rental property requires being able to support it - pay taxes and expenses even if it is not rented, pay to property managers, utility bills, gardeners and plumbers, insurance and property taxes - all these can amount to quite a lot. So its not just the initial investment. Many times \"\"advertised\"\" rents are not the actual rents paid. If he indeed has it rented at $900 - then its good. But if he was told \"\"hey, buy it and you'll be able to rent it out at $900\"\" - wouldn't count on that. I know many foreigners who fell in these traps. Do your market research and see what the costs are at these neighborhoods. Keep in mind, that these are distressed neighborhoods, with a lot of foreclosed houses and a lot of unemployment. It is likely that there are houses empty as people are moving out being out of job. It may be tough to find a renter, and the renters you find may not be able to pay the rent. But all that said - yes, those who can - are snapping.\"", "title": "" }, { "docid": "60f197fcd24ac4a0004f929ef51fa4a2", "text": "This strategy will have long lasting effects since negative items can persist for many years, making financing a home difficult, the primary source of household credit. It is also very risky. You can play hard, but then the creditor may choose you to be the one that they make an example out of by suing you for a judgement that allows them to empty your accounts and garnish your wages. If you have no record of late payments, or they are old and/or few, your credit score will quickly shoot up if you pay down to 10% of the balance, keep the cards, and maintain that balance rate. This strategy will have them begging you to take on more credit with offers of lower interest rates. The less credit you take on, the more they'll throw at you, and when it comes time to purchase a home, more home can be bought because your interest rates will be lower.", "title": "" }, { "docid": "d0e118ffaf13ca5af91fa2d8b6b964a1", "text": "\"It's a decision that only you can make. What are the chances that you'll want to take another loan (any loan - car, credit card, installment plan for new fridge, whatever else)? What are the chances that with the bad credit you'll find it hard to rent a place (and in Cali it's hard to rent a place right now, believe me, I bought a place just to save on the rent)? What are the chances that the prices will bounce and your \"\"on-paper\"\" loss will be recovered by the time you actually need/want to sell the house? You have to check all these and make a wise decision considering all the pros and cons in your personal case.\"", "title": "" }, { "docid": "faf1c125c044fb894968a194b24f552e", "text": "Talk to the property manager and explain your situation. They may be more willing to work with you than you think. At the very least they will tell you if you should even bother filling out the application. In most cases they are obligated to do a background and credit check so you will have to provide them with the required information one way or another. What they are really looking for is your ability to pay the rent. Property managers take a lot more things into consideration than a mortgage company would for a loan. If you have a history of paying on time in the past (a reference from a previous landlord perhaps) and if you show proof of the ability to pay now and in the future they will usually take that into consideration regardless of what the credit check says. It all depends on how motivated they are to fill the rental and how willing they are to take on a potential risk. Keep in mind property managers don't make money on empty rentals.", "title": "" }, { "docid": "a137feafa12e8c55808779a1912728fd", "text": "\"It's probably important to understand what a credit score is. A credit score is your history of accruing debt and paying it back. It is supplemented by your age, time at current residence, time at previous residences, time at your job, etc. A person with zero debt history can still have a decent score - provided they are well established, a little older and have a good job. The top scores are reserved for those that manage what creditors consider an \"\"appropriate\"\" amount of debt and are well established. In other words, you're good with money and likely have long term roots in the community. After all, creditors don't normally like being the first one you try out... Being young and having recently moved you are basically a \"\"flight risk\"\". Meaning someone who is more likely to just pick up and move when the debt becomes too much. So, you have a couple options. The first is to simply wait. Keep going to work, keep living where you are, etc. As you establish yourself you become less of a risk. The second is to start incurring debt. Personally, I am not a fan of this one. Some people do well by getting a small credit card, using some portion of it each month and paying it off immediately. Others don't know how to control that very well and end up having a few months where they roll balances over etc which becomes a trap that costs them far more than before. If I were in your position, I'd likely do one of two things. Either buy the phone outright and sign up for a regular mobile plan OR take the cheaper phone for a couple years.\"", "title": "" } ]	fiqa
fd2ca0360f770cb9e5d099b2c58a4974	Paid off oldest CC keep it open or close it?	[ { "docid": "d9ad3bad94c76aa6ab2e013dcbfa0c3e", "text": "Close the account. The age doesn't outweigh the fact that you have to pay for the card. It would be one thing if the credit line was a couple thousand but showing the credit bureaus that you are staying away from the $425.00 doesn't really make them think you are any more trustworthy with your available credit. Utilization matters when you are staying away from much larger chunks of your available credit (across all cards).", "title": "" }, { "docid": "63d342f0ad89564e38df7ece1bc661f8", "text": "First off, congratulations on taking care of your finances and paying off your cards! Takes a lot of discipline. If your next oldest card is just a year apart, you can safely close this card.", "title": "" } ]	[ { "docid": "9eaff63f830b003937885bd38a7490d3", "text": "The other responses are correct in that financially, you should pay off the highest-interest-rate debt first, while paying the minimum on any lower-interest-rate debt to avoid any fees or penalties. However, there is one more trick you might consider: Unless you have the $20k available to pay the Discover debt immediately (and you say you have $9.5k so far), you could roll over your private debt over to a new card with a lower interest rate. It's pretty common to find balance transfers deals that charge a 3% transfer fee to have 0% APY for 1 year. If you are an organized person and are sure you won't forget to balance transfer again in the future, this would bring your private debt down to ~3%/year, and make your highest effective interest rate the $7.5k debt at 6%, and you could pay that down first. That's the extreme version, and requires you to set a calendar alert 10-11 months in the future. A less-extreme tactic would be to try to switch your private debt once to a lower rate - you probably could find a card with 0% APY for 1 year and then 7-8% afterwards, without continuing to balance transfer in the future. Then it would be closer to negligible which debt you chose to pay down first (between private and Perkins), and in that case I'd advocate finishing off the smaller debt entirely (because it would be the highest rate at that moment, and to feel good about knocking one off, and to reduce the number of fees and credit score hits if you ever took a vacation and was late on a monthly payment).", "title": "" }, { "docid": "4fa9a958bcecfdec736a47e992d6ebfd", "text": "\"Bank of America has been selling off their local branches to smaller banks in recent years. Here are a few news stories related to this: Along with the branch buildings, the local customers' savings and checking accounts are sold to the new bank. It is interesting that you were told that your savings account is being sold, but that your checking account will remain with BofA. I guess it depends on the terms of the particular sale. Here are your options, as I see it: Let the savings account move to the new bank, and see what the new terms are like. You might actually like the new bank. If you don't, you can shop around and close your account at the new bank after it has been created. Close your account now, before the move. If you have a different bank you'd like to move to, there is no need to wait. Since your checking account is apparently staying with BofA, you could move all your money from your savings account to your checking account, closing your savings account. Then after \"\"mid August\"\" when the local branch switches to the new bank and everyone else's savings account has moved, you can call up BofA and tell them you want to move some of the money from your checking account into a new savings account. If you really have your heart set on staying with BofA, option 3 looks like a good, easy choice. To address your other concerns: Bank of America is a big credit card company, so I doubt that your credit card is being sold off. Your credit card account should stay as-is. Even if your savings account and checking account are at a different bank, there is no need to switch credit cards. Your savings and checking accounts have nothing to do with your credit report or score, so there is no concern there. If you end up wanting to switch to a new credit card with a different bank, there are minor hits to your credit score involved with applying for a new card and closing your current card, but if I were you I would not worry about your credit score in this. Switch credit cards if you want a change, and keep your credit card if you don't.\"", "title": "" }, { "docid": "4142c7bf9ec3e4683f0f750222804f95", "text": "I am super sorry about your divorce and nod to you for taking care of your kids and spouse. This may sound super snarky, although not my intention, but you have an income problem. Despite making almost double the national average, you are supporting two households, and live in a high cost of living area. (BTW been there, done that and also in IT.) The best way to avoid paying CC interest is to pay them off, and cut them up. Some might poo-poo the idea as you can earn some $ by getting CC rebates, but you are not in that mode right now. Consolidations, and balance transfers are a losing game as you can probably feel the November deadline looming. If I was you, I would get a second job, even if it was something like pumping gas. Making an extra $500/month increases your balance reduction by 650%. Sell stuff. Recently an older version of Visual Studio, that was sitting unused on my shelf, went for $400 on Ebay. The best way to solve this problem is through sweat equity. There are no easy answers. It sucks, but putting your big boy pants on and being prepared to work 20 hours of the day is the easiest way out of this. If you do this you will learn a lesson about CC utilization that most don't learn.", "title": "" }, { "docid": "3d7b532f1cf18e099eae0322258779ea", "text": "Take the consolidation loan and pay it off. Don't close the card. Opening a new account will have no bearing on your mortgage a year or two down the road. Keep paying on time -- that will make a big difference! JohnFX's suggestion to open a new card and do a transfer is a great idea if you have good credit. Just read the fine print -- most cards charge a 3-5% transfer fee and some cards accrue interest if you don't pay within the promotional period.", "title": "" }, { "docid": "fc8424217a86294ba50e8a485dea0f79", "text": "\"Pay cash. You have the cash to pay for it now, but God forbid something happen to you or your wife that requires you to dip into that cash in the future. In such an event, you could end up paying a lot more for your home theater than you planned. The best way to keep your consumer credit card debt at zero (and protect your already-excellent credit) is to not add to the number of credit cards you already have. At least in the U.S., interest rates on saving accounts of any sort are so low, I don't think it's worthwhile to include as a deciding factor in whether not you \"\"borrow\"\" at 0% instead of buying in cash.\"", "title": "" }, { "docid": "39b81eac18f0945c5eef39e28d5894c2", "text": "I'm going to give the succinct, plain language version of the answers: 1. Your oldest active credit agreement is not very old You don't have much experience or history for me to base my analysis on -- how do I know I can trust you to pay back the money? 2. You have no active credit card accounts Other people haven't trusted you with credit or you haven't trusted yourself with credit and there's no active good behavior of paying credit cards on time -- you want me to be the first one to go out on a limb and loan you money? How do I know I can trust you to pay back the money?", "title": "" }, { "docid": "d06b5d094fb26c4d5a57c6b5ad747a35", "text": "I feel this is best. Credit card is an immediate debt and you has the finds to wipe it out. the Student loans are a longer term debt and you have the money to pay it all off. So yes, pay cc, and keep loan on scheduled payments. Plus it helps your credit", "title": "" }, { "docid": "5ae6030c0973f904173c87926a641503", "text": "\"Not only does the interest get charged from Day 1 on new purchases as long as you have a revolving balance, but the credit card agreement often says something to the effect that any partial payment is applied first to the interest to date, and then transfer balances on which no interest is being charged and so the bank is losing money on it, then to other transfer balances and cash advances (and no refund of that 3% fee that was collected up front on the cash advance) and finally to the purchases starting from the most recent back to the oldest one. Even the FAQ on my card site says in simple language \"\"We apply payments and credits at our discretion, including in a manner most favorable or convenient for us.\"\" (see mhoran_psprep's answer). The moral is indeed what Dheer has already told you: do not carry a revolving balance on a credit card and if you have a revolving balance, pay it off as soon as possible, Do not wait for the end of the grace period; if possible, pay it off the day the statement is issued, or if you can make only a partial payment, make it as soon as possible. Make multiple partial payments each month if you have cash flow problems, or improve your cash flow by forgoing one or more of the many Grande Vente Mocharino Espresso Lattes you consume each day. Credit card debt is close to the worst kind of debt that you can have, and it is best to get out from under as soon as possible. Remember, there is effectively no grace period as long as you have a revolving balance on your credit card. You are paying interest for every one of those days.\"", "title": "" }, { "docid": "4515ff7c68751854ae690a9c5f902ff0", "text": "If you hadn't done it already cut up the cards. Don't close the accounts because it could hurt your credit score even more. Switching some or all of the CC debt onto low rate cards, or a debt consolidation loan is a way that some people use to reduce their credit card payments. The biggest risk is that you become less aggressive with the loan payback. If you were planning on paying $800 in minimum payments,plus $200 extra each month; then still pay $1000 with the new loan and remaining credit cards. Another risk is that you start overusing the credit card again, because you have available credit on the card that was paid off with the loan. The third risk, which you haven't proposed, occurs when people switch unsecured credit card dept, to a secured 2nd mortgage debt. This then puts the family home at risk.", "title": "" }, { "docid": "e6bd283ae14426681300812f8a828066", "text": "\"This answer is an attempt to answer the actual question posed. Please keep in mind that this applies specifically to the Equifax credit model that Mint uses as mentioned in the accepted answer, and that different models may react in different ways (or not at all). As mentioned in the comments, the number of total accounts you have does not have much bearing on your overall credit score. If you click on Mint's \"\"About Total Accounts\"\" link, you get the following statement: Total Accounts has a low impact on your score. Second, the way the Total Accounts score is represented is misleading. This is not a count of the total number of accounts you have open, but rather how many accounts you have in your total history. Mint's header under this metric is flat out wrong: Try to have a good mix of credit lines open. To back up the assertion that this is looking at total accounts in your credit history rather than just those that are open, my Mint report shows 2 open accounts and 7 closed accounts, for a total of 9. Under the Total Accounts metric, I am plotted smack dab in the middle of the \"\"Not Bad\"\" range, right where people with 9 would be plotted. So the proper advice here is to just let it be and only open new accounts as you need them. As you amass credit history, this metric will continue to grow naturally - it should never decrease. You may ask, then, why did your overall score decrease when you paid off your student loans? Most likely because your average age of credit dropped when you closed your loan account. If you're like most people I know, your student loan is one of your oldest accounts, so closing that account will hurt your score - credit age is measured only on your open accounts.\"", "title": "" }, { "docid": "6eeebb604046b2dd9274a55dbadbaf4f", "text": "Your credit score is definitely affected by the age of your credit accounts, so if you frequently close one card and open another new one, you're adversely affecting the overall average age of accounts. This is something to consider and whether it is worth what you're trying to achieve. Sometimes, if you're a good customer and are insistent enough, you can simply call your credit card company and use the threat of closing your account in favor of another card that offers something attractive to get your current bank to sweeten its incentives to keep your business. I know many people who've done this with real success, and they spare themselves the hassle of obtaining a new card and suffering the short term consequences on their credit report. This might be an avenue worth trying before you just close the account and move on. I hope this helps. Good luck!", "title": "" }, { "docid": "69972764b24f7e26ef9ebfed92a062e7", "text": "You want to have 2-4 credit cards, with a credit utilization ratio below 30%. If you only have 2 cards, closing 1 would reduce your credit diversity and thus lower your credit score. You also want at least 2 years credit history, so closing an older credit card may shorten your credit history, again lowering your credit score. You want to keep around at least 1-2 older cards, even if they are not the best. You have 4 cards: But having 2-4 cards (you have 4) means you can add a 5th, and then cancel one down to 4, or cancel one down to 3 and then add a 4th, for little net effect. Still, there will be effect, as you have decreased the age of your credit, and you have opened new credit (always a ding to your score). Do you have installment loans (cars), you mention a new mortgage, so you need to wait about 3 months after the most recent credit activity to let the effects of that change settle. You want both spouses to have separate credit cards, and that will increase the total available to 4-8. That would allow you to increase the number of benefits available.", "title": "" }, { "docid": "da564dd13fca6cf6e6d0f42a1f8533ce", "text": "I used a large portion of my 401k to pay off my credit card. My intentions were to then use my extra cash flow to build up the 401k again. Unfortunately I didn't learn my lesson and now I'm back to where I started, minus my 401k savings. If I could do it again, I would have cut up the card, kept the 401k and pay it down slowly. Good luck to you. I hope you do better than I did.", "title": "" }, { "docid": "dd9aa0e20ca04d30ead7fc398af8e1ab", "text": "\"Several events will always result in a reduction of your score, including: These will show up in the short term, but I don't think it's worth $40 per year in perpetuity to avoid this. These aren't serious \"\"black marks\"\" in the same category as missing payments, carrying too much debt, or foreclosures/evictions, etc. These effects are designed to signal issuers when someone acquires a large amount of credit in a very short period of time, which may indicate a greater risk. If your credit is good and you are using your other cards responsibly, closing the card (given the annual fee) would not cause me great concern if it were me. Since you are so much better of a risk than you likely were in college, you can also call Capital One, ask to speak with a supervisor, and ask them to drop the fee and increase your credit limit. They should be able to easily verify that you meet the requirements for other types of preferred cards they offer, and they should be willing to offer you improved terms rather than losing your business. It is very possible they simply haven't re-evaluated your risk since you initially applied. Also, remember that these types of effects determine only a portion of your overall score. Activity is also a major component. Rather than leaving an unused card open for history and debt-to-limit purposes only, I would also recommend having some minimum level of activity, such as an automatic bill payment, on each card you carry. The effect of using your cards over time will have a significant positive effect on your score. Best of luck!\"", "title": "" }, { "docid": "90551d5a7418b1256a4f05b3fd51e286", "text": "\"Whoops, responded to the wrong person. Reposting for you in case you didn't see it. Here's a source for the $3.7 trillion number. http://www.bloomberg.com/news/2011-12-08/u-s-municipal-bond-market-28-larger-than-estimated-federal-reserve-says.html It's not 'incorrect data'. EDIT: Furthermore, in order to know the \"\"extent\"\" of the crime (your own admission) we NEED to know the size of the entire market otherwise you can't have any perspective or determine extent. So there's no reason it shouldn't be mentioned in the article.\"", "title": "" } ]	fiqa
ca13c4db6eb1733982d923d5d31b1f51	Should I take out a loan vs pay off with mother's help?	[ { "docid": "0e6096c9a5cc9f93021f8cfe6fc43667", "text": "Is it a gift or a loan? Either way, ask the same lawyer who will do the closing to record a mortgage on the property, your mother holds it. You are required to pay her market interest, 4% or so should pass IRS scrutiny. If it's truly a loan, decide on the payoff time and calculate the payments, she'll have a bit of interest income which will be taxable to her, and you might have a write-off if you itemize, which is unlikely. If it's a gift, since you mentioned gift concerns, she can forgive the interest, and principal each year to total $13K, or file the popular Form 709 to declare the whole gift against her $1M unified lifetime gift exclusion (which negates the whole mortgage/lien thing)", "title": "" } ]	[ { "docid": "1dd3cca05f204f8c44dab143bea54633", "text": "Transfer of Money from you to Your Mother is Tax Free. i.e. This will not be considered as income for your mother as there is NO work done. This would be considered as Gift and would fall under Gift Tax. As per Gift Tax you can give unlimited amounts to close relative. Mother is considered as close relative. The tax rule is same whichever option you follow. You would need to maintain proper paperwork, should there be any query from Income Tax department. Any interest / income your mother generates on this will be her taxable income. You have also mentioned that you are repaying some loan for your relative, again the paper work should be very clear when your mother is transfering the money to your relative. The interest you pay back maybe taxable to your relative depending on paperwork. Edit: Elobrate OP's edit to question From your point of view, once you have given the funds to your Mother and call it gift; it ends. What your mother does with the money invests, spends, etc is not your liability. However if your mother is tranferring money to person's who are not defined as relatives under Gift Law or the interest your relatives get are all taxable events to them.", "title": "" }, { "docid": "086c40bd3fcff9179d9481f38223059b", "text": "The crucial question not addressed by other answers is your ability to repay the debt. Borrowing is always about leverage, and leverage is always about risk. In the home improvement loan case, default comes with dire consequences-- to extinguish the debt you might have to sell your home. With a stable job, reliable income, and sufficient cash flow (and, of course, comfort that the project will yield benefits you're happy to pay for), then the clear answer is, go ahead and borrow. But if you work in a highly cyclical industry, have very little cash saved, or for whatever other reason are uncertain about your future ability to pay, then don't borrow. Save until you are more comfortable you can handle the loan. That doesn't necessarily mean save ALL the money; just save enough that you are highly confident in your ability to pay whatever you borrow.", "title": "" }, { "docid": "8a3ebfa6c633c4958363319222831edb", "text": "\"Consider the \"\"opportunity cost\"\" of the extra repayment on a 15 year loan. If you owe money at 30% p.a. and money at 4% p.a. then it is a no brainer that the 30% loan gets paid down first. Consider too that if the mortgage is not tax deductable and you pay income tax, that you do not pay tax on money you \"\"save\"\". (i.e. in the extreme $1 saved is $2 earned). Forward thinking is key, if you are paying for someone's college now, then you would want to pay out of an education plan for which contributions are tax deductable, money in, money out. In my country most mortgages, be they 15,25,30 years tend to last 6-8 years for the lender. People move or flip or re-finance. I would take the 15 for the interest rate but only if I could sustain the payments without hardship. Maybe a more modest home ? If you cannot afford the higher repayments you are probably sailing a bit close to the wind anyway. Another thing to consider is that tax benefits can be altered with the stroke of a pen, but you may still have to meet repayments.\"", "title": "" }, { "docid": "f9ba2fbf8bc4ade401666b89c7123cbf", "text": "\"First of all, I'm happy that the medical treatments were successful. I can't even imagine what you were going through. However, you are now faced with a not-so-uncommon reality that many households face. Here's some other options you might not have thought of: I would avoid adding more debt if at all possible. I would first focus on the the cost side. With a good income you can also squeeze every last dollar out of your budget to send them to school. I agree with your dislike of parent loans for the same reasons, plus they don't encourage cost savings and there's no asset to \"\"give back\"\" if school doesn't work out (roughly half of all students that start college don't graduate) I would also avoid borrowing more than 80% of your home's value to avoid PMI or higher loan rates. You also say that you can pay off the HELOC in 5 years - why can you do that but not cash flow the college? Also note that a second mortgage may be worse that a HELOC - the fees will be higher, and you still won't be able to borrow more that what the house is worth.\"", "title": "" }, { "docid": "183c98ad45a853091bb8f205000035a3", "text": "You should pay for school with cash. If you take out a loan, you are not really saving money; you are borrowing money. I do not think you will come out ahead borrowing a down payment at student loan rates.", "title": "" }, { "docid": "40c0761122d6cbae95253fc418b16bb6", "text": "It is pretty easy to setup a spreadsheet for calculating interest payments and remaining balance. Do a quick search online. You may want to put it in something like Google Docs, where brother can view the status, but only you can edit it. When you get a payment, a portion goes to interest and another to principle. The formulas will do the work for you. However, I feel that there is a bigger issue. The math may seem like a good deal for the both of you, but I would be very hesitant to loan a family member money. What if he does not pay? What if he is late with a payment and goes on a vacation himself? What if his significant other resents the payment that you collect which precludes her from buying a new TV, etc... People come to hate/resent big corporations that they have to make payments. How much more so one that has a face....that comes over and eats? While this loan is outstanding holidays may never be the same. Is the loan a real need? Are you in a position to give them the money? You may want to consider the latter. Is there a reason he can't just borrow the money from the bank?", "title": "" }, { "docid": "9182607a4ada87e464e537e88a5480b0", "text": "Forgive me as I do not know much about your fine country, but I do know one thing. You can make 5% risk free guaranteed. How, from your link: If you make a voluntary repayment of $500 or more, you will receive a bonus of 5 per cent. This means your account will be credited with an additional 5 per cent of the value of your payment. I'd take 20.900 of that amount saved and pay off her loan tomorrow and increase my net worth by 22.000. I'd also do the same thing for your loan. In fact in someways it is more important to pay off your loan first. As I understand it, you will eventually have to pay your loan back once your income rises above a threshold. Psychologically you make attempt to retard your future income in order to avoid payback. Those decisions may not be made overtly but it is likely they will be made. So by the end of the day (or as soon as possible), I'd have a bank balance of 113,900 and no student loan debt. This amounts to a net increase in net worth of 1900. It is a great, safe, first investment.", "title": "" }, { "docid": "d9398427d81cedd786daf86c52a4d027", "text": "The only time borrowing instead of paying from cash would make sense is if you have (or think you might run into) opportunities to put that cash to work for you earning more than the interest you're paying. For instance, you might run into investment opportunities where having the cash to jump in would let you get into them. Beyond something like this, it'd be foolish to pay interest just so you can have a bigger bank balance and feel like you're somehow better off! I hope this helps. Good luck!", "title": "" }, { "docid": "9c74fb51ad148293159d665e83931a00", "text": "\"He's paying the interest and you're paying the principal. If you're making minimum monthly payments, you'll still be doing the same thing 25-30 years from now. I think Parker's advice was very, very good, but I'd like to add to it a little of my own. Whatever dollar amount your son is sending to you as payment, encourage him to continue doing that. Only instead of paying you, have him put that money into a savings plan of some kind. You mentioned that he's struggling now, yet able to come up with approximately (my best guess) $200/mo. I guarantee you that if he puts that $200/mo back into his pocket, he'll still be struggling every month yet have nothing to show for it. My suggestion changes nothing in his daily life, yet gives him $2400 at the end of every year. I was in a somewhat similiar situation as your son, only to the tune of $13,000. About 20 years ago, I got a loan and bought a new truck in which to use to go back and forth to work every day. The first 5 months the payments to the bank went as planned. Then my wife announces that \"\"we're\"\" pregnant. So my parents figured it would be best to just pay off my loan to the bank, avoiding any further interest charges, and take that truck payment and put it away for a rainy day. At 33 y/o, with my first child on the way, I finally started saving some of my money. It was good advice on their part because the rainy days came! They never asked me to pay them back, however I did offer. I've been tucking away $300-400/mo in the bank every month since then because I just got into the habit. Good thing I did too. In the past 10 years I've had to bury both of my parents, one sister and two wives and I'll tell ya, one thing that was comforting was the fact that I had the money. The little truck I bought 20 years ago is now my son's. It has around 260,000 miles on it now. When he trades it in for a newer vehicle, I will probably loan him the money and have him make payments to me rather than the bank. I, too, am not one to pay interest if I can help it. If he defaults, he's my son. I just won't buy him another vehicle! Or maybe he'll get into the same habit of saving money the same way I did. Like JohnFx said, money loaned to family should be regarded as a gift, otherwise you'll end up losing your money AND your family member! Hope some of this helps you make your decision.\"", "title": "" }, { "docid": "2ca37ccaeb56e7276aa66a6183d66820", "text": "\"I really don't feel co-signing this loan is in the best interests of either of us. Lets talk about the amount of money you need and perhaps I can assist you in another way. I would be honest and tell them it isn't a good deal for anybody, especially not me. I would then offer an alternative \"\"loan\"\" of some amount of money to help them get financing on their own. The key here is the \"\"loan\"\" I offer is really a gift and should it ever be returned I would be floored and overjoyed. I wouldn't give more than I can afford to not have. Part of why I'd be honest to spread the good word about responsible money handling. Co-signed loans (and many loans themselves) probably aren't good financial policy if not a life & death or emergency situation. If they get mad at me it won't matter too much because they are family and that won't change.\"", "title": "" }, { "docid": "a83a30574625b35fba23c608b1b6053c", "text": "I concur with the other answers about not mixing family and money: the one whose loans are paid off second will be taking the credit risk of the other not paying/being able to pay. There may also be tax implications. That said, if you do still want to do this, I think there's a fairly straightforward way to account for the payments. With your scenario, your brother should make you a personal loan at some interest rate inbetween 5% and 10%. That loan would be tracked independently of the actual student loans. Any money that your brother transfers to you to pay off your loans, add to that personal loan, and later on once your loans are paid off you start repaying the loan to him and he uses the proceeds for his own loans. The interest rate will determine how the benefit of paying off the 10% loans is shared: if the rate is set at 10% then your brother will get all the benefit, if 5% you will get all the benefit, and 7.5% would roughly share it out. This means that you can still manage your own student loans separately. Your brother can choose how little or much to commit to the snowball rather than his own loans (of course he should first make the minimum payments on his own loans). Anything he does loan you benefits you both if we ignore the credit and tax issues - he gets more than the 5% interest on his own loans, and you pay less than the 10% interest on your loans. You'll need to track the payments each way on this personal loan and apply interest to it every so often, I'd suggest monthly (beware that the monthly equivalent of 5% annual interest is not 5%/12, because of compounding).", "title": "" }, { "docid": "de786917a9584835bf7c24d2ad3ed4be", "text": "\"I did a rough model and in terms of total $$ paid (interest + penalty - alternative investment income) both options are almost the same with the \"\"paying it all upfront\"\" being perhaps a $300 or so better ($9200 vs $8900) However, that doesn't factor in inflation or tax considerations. Personally I'd go with the \"\"no-penalty\"\" scenario since you have more flexibility and can adjust along the way if anything else comes up in the meantime.\"", "title": "" }, { "docid": "f70d9d96adc30664e67e40812f60cbfd", "text": "I would suggest talking to your parents about potentially co-signing on the loan with you. Just make sure that you are the primary holder of the loan. Sure, there is some risk for your parents, but they know you better than anyone so let them make the decision if they want to help you or not. If for some reason they can't help you, such as they've declared bankruptcy, then following the other answers' advice is the way to go.", "title": "" }, { "docid": "b49c1e70130f64a08cadd1ff68d20b93", "text": "So one approach would be purely mathematical: look at whichever has the higher interest rate and pay it first. Another approach is to ignore the math (since the interest savings difference between a mortgage and student loan is likely small anyways) and think about what your goals are. Do you like having a student loan payment? Would you prefer to get rid of it as quickly as possible? How would it feel to cut the balance in HALF in one shot? If it were me, I would pay the student loan as fast as possible. Student loans are not cancellable or bankruptable, and once you get it paid off you can put that payment amount toward your house to get it paid off.", "title": "" }, { "docid": "b2e2719f1083db1bd241372fc8bb8636", "text": "First off, this is a post for /r/personalfinance. Second off, if you want to think of this like an accountant/financier, those are the bank's 10233 dollars, not your's, and you are paying them 6% to keep that money. If you are confident that you are going to make more than 6% interest on any investments you make with that money, it makes sense to do so, although your return will be 6% less in reality. You also assume the risk of losing money on the investment and not having enough money to repay your loans. tl;dr Pay off the loan.", "title": "" } ]	fiqa
c215b171164bf24e628c77ca23f843c4	Pay down the student loan, or buy the car with cash?	[ { "docid": "da02720a8b9ffe0e17799b5fe72029d6", "text": "Here's another way to look at this that might make the decision easier: Looking at it this way you can turn this into a financial arbitrage opportunity, returning 2.5% compared to paying cash for the vehicle and carrying the student loan. Of course you need to take other factors into account as well, such as your need for liquidity and credit. I hope this helps!", "title": "" }, { "docid": "907ebd1d1b30cca0aff5ac675d24d1cd", "text": "To directly answer your question, the best choice is to pay cash and place the rest on your student loan. This is saving you from paying more interest. To offer some advise, consider purchasing a cheaper car to place more money towards your student loan debt. This will be the best financial decision in the long-term. I suspect the reason you are considering financing this vehicle is that the cash payment feels like a lot. Trust your instinct here. This vehicle sounds like large splurge considering your current debt, and your gut is telling you as much. Be patient. Use your liquid funds to get a more affordable vehicle and attack the debt. That is setting yourself up for financial success.", "title": "" } ]	[ { "docid": "7d7947f59d989822b8d8222238a55e55", "text": "Without knowing the terms of the company leased car, it's hard to know if that would be preferable to purchasing a car yourself. So I'll concentrate on the two purchase options - getting a loan or paying in full from savings. If the goal is simply to minimize the amount paid for this car, then paying the full cost up-front is best, because it avoids the financing and interest charges associated with a loan. However, the money you would pay for this car would come out of somewhere (your savings). If your savings were in an investment earning a risk-adjusted return rate of, say, 5% APY and the loan cost 1% APY, you'd have more money in the long run by keeping as much money in your savings as possible, and paying the loan as slowly as possible, because the return rate on your savings is higher. Those numbers are theoretical, of course. You have to make a decision based on your expectation of the performance of your investments, and on the cost of the loan. But depending on your risk tolerance and the loan terms available to you, a loan may well make sense. This is especially true when loans costs are subsidized by manufacturers, who often offer favorable financing on new cars to drive demand. But even bank loans on cars can be pretty inexpensive because the car is a form of collateral with predictable future value. And finally, you should consider tax treatment -- not usually a consideration in purchases of cars by consumers in the US, but can vary due to business use and certainly may be different in India. See also: How smart is it to really be 100% debt free?", "title": "" }, { "docid": "22f8bcf663f42ed5f126b1e447b84980", "text": "\"There are a lot of things that go into your credit score, but the following steps are core to building it: Now, in your case, you obviously have some flexibility in your monthly budget since you're considering paying down your college loan faster. You have to weigh whether it would be better to pay off the loan that much faster, or just save the money towards buying the car. If you can pile up enough cash to buy the car (and still leave yourself an emergency fund) it would be better to buy the car than add another interest payment. As other answers have noted, you don't want to get in a situation where you have no cash for \"\"unexpected events\"\". Some links of interest:\"", "title": "" }, { "docid": "582b9c82eec0476683fba7823cf950ac", "text": "\"Short answer: If you bought the car -- as opposed to leasing it -- there is no one to \"\"turn it in\"\" to. The reality of cars and car loans is this: The value of a car tends to fall rapidly the first couple of years, then more slowly after that. Like it might lose $2000 the first year, $1000 the second, $500 the third, etc. What you owe on a loan falls slowly at first, because a lot of your payment is going to interest, but then as time goes on you pay off the loan faster and faster. So you may pay off $1000 the first year, $1100 the second, etc. (I'm just making up numbers, depends on the value of the car, and the term and interest rate of the loan, but that's the general idea.) Combining these two things means that in the first few years after you buy a car, if you had a small or no down payment, you might well owe more on the car than it is worth. That's just how the numbers work out. If you keep the car long enough, eventually you hit a point where it is worth more than you owe. Keep it until you've paid off the loan and you owe $0 but the car is still worth SOMETHING, exactly how much depending on its condition and other factors. If you just use the car and pay off the loan, i.e. if you don't sell the car or refinance the loan or some such, then this doesn't matter very much. You make your loan payments, and you have use of the car. What difference does the book value of the car at any given moment matter to you? If the idea of owing more than the car is worth bothers you in principle, then in the future you could make a larger down payment. Or make extra payments on the loan the first couple of years to knock the principle down faster. That's about the only things you can do. Well, you could buy with cash so you owe zero and the car is always worth more than you owe. But given that you are where you are: If you just keep the car and keep driving it and keep paying the loan, then you are exactly where you thought you would be when you bought the car, right? I mean, the day you bought the car, you presumably weren't thinking that at some future date you could refinance at a lower rate. How would you know? So I think the easy answer is: Don't sweat it. Just enjoy the car and pay your bills.\"", "title": "" }, { "docid": "cd7306a60bf14d01085ce39d5567c46d", "text": "Two adages come to mind. Never finance a depreciating asset. If you can't pay cash for a car, you can't afford it. If you decide you can finance at a low rate and invest at a higher one, you're leveraging your capital. The risk here is that your investment drops in value, or your cash flow stops and you are unable to continue payments and have to sell the car, or surrender it. There are fewer risks if you buy the car outright. There is one cost that is not considered though. Opportunity cost. Since you've declared transportation necessary, I'd say that opportunity cost is worth the lower risk, assuming you have enough cash left after buying a car to fund your emergency fund. Which brings me to my final point. Be sure to buy a quality used car, not a new one. Your emergency fund should be able to replace the car completely, in the case of a total loss where you are at fault and the loss is not covered by insurance. TLDR: My opinion is that it would be better to pay for a quality, efficient, basic transportation car up front than to take on a debt.", "title": "" }, { "docid": "151409bd98f97fac15cdbd4298f7cc45", "text": "At minimum, put down the sale price less what insurance would pay if you got in an accident when driving home, OR purchase gap insurance. This auto loan calculator is fun to play around with. The larger the down payment, the smaller your monthly payments will be. Don't forget to budget insurance and gas! Insurance on a car you make payments on is more expensive. http://www.bankrate.com/calculators/auto/auto-loan-calculator.aspx A buddy of mine had a string of bad luck and totaled his car a few months after the date of purchase. He learned what it meant to be 'underwater', insurance paid him a few thousand less than the value of his loan. What's worse than having no car, having no car and a loan!", "title": "" }, { "docid": "eef055196175fbe5e94619b63cc7600b", "text": "\"My recommendation is to pay off your student loans as quickly as possible. It sounds like you're already doing this but don't incur any other large debts until you have this taken care of. I'd also recommend not buying a car, especially an expensive one, on credit or lease either. Back during the dotcom boom I and many friends bought or leased expensive cars only to lose them or struggle paying for them when the bottom dropped out. A car instantly depreciates and it's quite rare for them to ever gain value again. Stick with reliable, older, used cars that you can purchase for cash. If you do borrow for a car, shop around for the best deal and avoid 3+ year terms if at all possible. Don't lease unless you have a business structure where this might create a clear financial advantage. Avoid credit cards as much as possible although if you do plan to buy a house with a mortgage you'll need to maintain some credit history. If you have the discipline to keep your balance small and paid down you can use a credit card to build credit history. However, these things can quickly get out of hand and you'll wonder why you suddenly owe $10K, $20K or even more on them so be very careful with them. As for the house (speaking of US markets here), save up for at least a 20% down payment if you can. Based on what you said, this would be about $20-25K. This will give you a lot more flexibility to take advantage of deals that might come your way, even if you don't put it all into the house. \"\"Stretching\"\" to buy a house that's too expensive can quickly lead to financial ruin. As for house size, I recommend purchasing a 4 bedroom house even if you aren't planning on kids right away. It will resell better and you'll appreciate having the extra space for storage, home office, hobbies, etc. Also, life has a way of changing your plans for having kids and such.\"", "title": "" }, { "docid": "f1ebfd79bc9d4bef340a0a0db7ad909b", "text": "You are currently $30k in debt. I realize it is tempting to purchase a new car with your new job, but increasing your debt right now is heading in the wrong direction. Adding a new monthly payment into your budget would be a mistake, in my opinion. Here is what I would suggest. Since you have $7k in the bank, spend up to $6k on a nice used car. This will keep $1k in the bank for emergencies, and give you transportation without adding debt and a monthly payment. Then you can focus on knocking out the student loans. Won't it be nice when those student loans are gone? By not going further into debt, you will be much closer to that day. New cars are a luxury that you aren't in a position to splurge on yet.", "title": "" }, { "docid": "549024c7f22f60b5b0b2b65245f209a4", "text": "As the other answers indicate, if you look only at the clear mathematical formulas regarding your debts and their interest rates, then you'll see that it's better (less expensive) to pay off your student debt first. However, you must also take into account the value of your car, as it is an asset. The older your car gets, the less it's worth. The more your car gets used and worn out, the less it's worth. Cars depreciate at about 15% per year on average. However, you're continuing to pay the same amount of money to keep a decreasingly valuable asset. Now, you also have to include the fact that you may be required to carry full-coverage car insurance, versus liability insurance. This can represent an increase in spending if you'd prefer to have liability only. With insurance in the picture, you should also be thinking about the possibility that something could happen to your vehicle that causes it to be worth less than you owe, or just worthless. If such an event happens, then you may have more difficulty acquiring a replacement vehicle. I, personally, don't find the increase in total interest paid on student loans to offset the other consideration regarding the value of a car. I'm in a similar situation as you (except your values are all about double what mine are). The peace of mind I gain from being able to pay off the car more quickly, and use that money towards loans or whatever I want, is worth the interest I'll earn by not putting that money into the student loans instead. I also prefer the idea of being able to more easily use my vehicle as a trade in, in case I need to get a different vehicle to better suit my family size.", "title": "" }, { "docid": "1dcfca5dc125aa1279c8d3034291cb9f", "text": "One additional reason to pay with cash rather than financing is that you will be able to completely shut down the dealership from haggling over finance terms and get right to the point of haggling over the cost of the car (which you should always do).", "title": "" }, { "docid": "1fcdc5d9cd3b7f6107c1f75848119357", "text": "\"There's two scenarios: the loan accrues interest on the remaining balance, or the total interest was computed ahead of time and your payments were averaged over x years so your payments are always the same. The second scenarios is better for the bank, so guess what you probably have... In the first scenario, I would pay it off to avoid paying interest. (Unless there is a compelling reason to keep the cash available for something else, and you don't mind paying interest) In the second case, you're going to pay \"\"interest over x years\"\" as computed when you bought the car no matter how quickly you pay it off, so take your time. (If you pay it earlier, it's like paying interest that would not have actually accrued, since you're paying it off faster than necessary) If you pay it off, I'm not sure if it would \"\"close\"\" the account, your credit history might show the account as being paid, which is a good thing.\"", "title": "" }, { "docid": "bae9284c2bfd4171dac291ae6829959d", "text": "Would you borrow money at 3% just to leave it in a savings account? That's effectively what you're doing by not paying of your student loans. I would pay of all of the student loans, and consider putting a little toward the car loan. If you do run into an emergency you still have your $2K/month to help build your savings back up.", "title": "" }, { "docid": "9bcc0c9036c690555368b96512ef7ed8", "text": "\"A Tweep friend asked me a similar question. In her case it was in the larger context of a marriage and house purchase. In reply I wrote a detail article Student Loans and Your First Mortgage. The loan payment easily fit between the generally accepted qualifying debt ratios, 28% for house/36 for all debt. If the loan payment has no effect on the mortgage one qualifies for, that's one thing, but taking say $20K to pay it off will impact the house you can buy. For a 20% down purchase, this multiplies up to $100k less house. Or worse, a lower down payment percent then requiring PMI. Clearly, I had a specific situation to address, which ultimately becomes part of the list for \"\"pay off student loan? Pro / Con\"\" Absent the scenario I offered, I'd line up debt, highest to lowest rate (tax adjusted of course) and hack away at it all. It's part of the big picture like any other debt, save for the cases where it can be cancelled. Personal finance is exactly that, personal. Advisors (the good ones) make their money by looking carefully at the big picture and not offering a cookie-cutter approach.\"", "title": "" }, { "docid": "2d1f550144d06e304037346ce25ed698", "text": "I might be missing something, but I always understood that leasing is about managing cash-flow in a business. You have a fixed monthly out-going as opposed to an up-front payment. My accountant (here in Germany) recommended: pay cash, take a loan (often the manufactures offer good rates) or lease - in that order. The leasing company has to raise the cash from somewhere and they don't want to make a loss on the deal. They will probably know better than I how to manage that and will therefore be calculating in the projected resale value at the end of the leasing period. I can't see how an electric car would make any difference here. These people are probably better informed about the resale value of any type of car than I am. My feeling is to buy using a loan from the manufacturer. The rates are often good and I have also got good deals on insurance as a part of that package. Here in Germany the sales tax (VAT) can be immediately claimed back in full when the loan deal is signed.", "title": "" }, { "docid": "584d3a1d780d21200d209d91a428d8b4", "text": "Cash price is $22,500. Financed, it's the same thing (0% interest) but you pay a $1500 fee. 1500/22500 = 6.6%. Basically the APR for your loan is 1.1% per year but you are paying it all upfront. Opportunity cost: If you take the $22,500 you plan to pay for the car and invested it, could you earn more than the $1500 interest on the car loan? According to google, as of today you can get 1 year CD @ 1.25% so yes. It's likely that interest rates will be going up in medium term so you can potentially earn even more. Insurance cost: If you finance you'll have to get comprehensive insurance which could be costly. However, if you are planning to get it anyway (it's a brand new car after all), that's a wash. Which brings me to my main point: Why do you have $90k in a savings account? Even if you are planning to buy a house you should have that money invested in liquid assets earning you interest. Conclusion: Take the cheap money while it's available. You never know when interest rates will go up again.", "title": "" }, { "docid": "e346a7e245bbe83d9c2932a8ed22b985", "text": "Here is a simple way to analyze the situation. Go to your bank or credit union website and use their loan calculator with their current real interest rates and down payment requirements. Enter the rate, and number of years. Enter different values for the loan amount to get the monthly payment to the level you want ($400). Today for my credit union, the max loan would be about $9,500. Keep in mind there may be taxes, registration fees, and down payment on top of this. Jump ahead two years. The loan is paid off, the car is owned free and clear. You will be able to sell it and get some money in your pocket. If you go for a longer term loan to keep the payments under your goal the issue is that in two years you might be upside down on the loan. The car may be worth less than the remaining balance on the loan. Your equity would be negative.", "title": "" } ]	fiqa
9b27c3cd9b4e2f496d5c10ab9f470440	F-1 Visa expired - Unable to repay private student loan. What to do?	[ { "docid": "29b9d955d1049837a186569160aa9467", "text": "I would contact your loan servicing company explain the situation and see if you can renegotiate terms. They may be able to drop the interest rate or lengthen the schedule to reduce the payment amount. I wouldn't default on the loan as that would likely hinder coming to/working in the US in the future. Not knowing your financial situation or country, could you attempt to obtain financing in your own country in order to pay off the US based loan? I would at least attempt to make some sort of payment while you attempt renegotiation, refinancing or pursue a job in the US, even if it technically puts or keeps you in default of the loan. Making any payment at least shows the willingness to pay back the loan, and you're not intentionally defaulting on your obligation.", "title": "" }, { "docid": "a4db30f5527ac491782383a88de3bb97", "text": "As an international student, the tuition is sky high. Typically, most students take loans for Education and start paying it back once they get a job. If you have exhausted your OPT period and have not got H1B, your options are either to go for further education(Hint: Phd), you can hope to cover living expense by part-time on campus job. This will give you additional time to look for a job and try for H1B again!", "title": "" } ]	[ { "docid": "89435a96181136431689538c7ba0448b", "text": "\"The thing to recall here is that auto-pay is a convenience, not a guarantee. Auto-pay withdrawals, notices that a bill is due, all of these are niceties that the lender uses to try to make sure you consistently pay your bill on time, as all businesses enjoy steady cash flows. Now, what all of these \"\"quality of life\"\" features don't do is mitigate your responsibility, as outlined when you first took out the loan, to pay it back in a timely manner and according to the terms and conditions of the loan. If your original contract for the loan states you shall make \"\"a payment of $X.XX each calendar month\"\", then you are required to make that payment one way or another. If auto-pay fails, you are still obligated to monitor that and correct the payment to ensure you meet your contractual obligation. It's less than pleasant that they didn't notify you, but you were already aware you had an obligation to pay back the loan, and knew what the terms of the loan were. Any forgiveness of interest or penalties for late fees is entirely up to the CSR and the company's internal policies, not the law.\"", "title": "" }, { "docid": "cbd9dfe952f74b25dbcfbe52b673e532", "text": "\"A day or so later I get an email from the mattress company where the rep informs me that they will need to issue me a paper check for the full amount and that I would have to contact Affirm to stop charging me. To which I rapidly answered \"\"Please confirm that with Affirm prior to mailing anything out. On my end the loan was cancelled.\"\" To which the rep replied \"\"confirmed. It has been cancelled.\"\" I think your communication could have been more explicit mentioning that not only was the loan cancelled, you got your initial payments. You have not paid for the mattress. The refund if any should go to Affirm. The Rep has only confirmed that loan has been cancelled. at what point, if any, am i free to use this money? I was planning to just let it sit there until the shoe drops and just returning. But for how long is too long? Sooner or later the error would get realized and you would have to pay this back.\"", "title": "" }, { "docid": "0a49390557b893a6699e8fafbf22181f", "text": "Your wife doesn't need to file a 2014 tax return because she's a nonresident and she didn't have any U.S. income. Her visa is irrelevant; it only matters what her status was (if she was in the U.S., but she wasn't) and if she had U.S. income. Your child doesn't need to file a tax return because she didn't have any income. There's a certain income threshold below which she doesn't have to file. Children generally never file their own tax returns. I don't know who told you otherwise. You may have to file if you had income (maybe including fellowship income and stuff like that) in the U.S. during the year? Did you? If you didn't then you probably don't need to file a tax return. Also, you said you're nonresident for the year. Are you sure about that? Students are generally nonresident for the first 5 calendar years, and resident thereafter. So if you came in 2009 or before, you would be resident for all of 2014; but if you came in 2010 or after, you would be nonresident for all of 2014. If you were in the first 5 calendar years of being a student, you also need to file Form 8843 regardless of whether you need to file a tax return. Nonresidents generally can't claim dependents. Residents can, however. A dependent will provide you with an exemption (it reduces your taxable income by a certain amount). You can also get the Child Tax Credit if your income is low enough. There is a U.S.-Sweden tax treaty. It has a section covering students. It may exempt some or all of your income from U.S. tax. Most universities provide free international tax programs for their international students and scholars. You should look to see if your school offers this. Don't go to outside tax filing places because those generally don't know anything about how to file for nonresidents.", "title": "" }, { "docid": "dbb1a5aaa7bc8c7f62db10fa77815473", "text": "Based on your numbers, it sounds like you've got 12 years left in the private student loan, which just seems to be an annoyance to me. You have the cash to pay it off, but that may not be the optimal solution. You've got $85k in cash! That's way too much. So your options are: -Invest 40k -Pay 2.25% loan off -Prepay mortgage 40k Play around with this link: mortgage calculator Paying the student loan, and applying the $315 to the monthly mortgage reduces your mortgage by 8 years. It also reduces the nag factor of the student loan. Prepaying the mortgage (one time) reduces it by 6 years. (But, that reduces the total cost of the mortgage over it's lifetime the most) Prepaying the mortgage and re-amortizing it over thirty years (at the same rate) reduces your mortgage payment by $210, which you could apply to the student loan, but you'd need to come up with an extra $105 a month.", "title": "" }, { "docid": "add38ca7424072cd6aa0226650874a23", "text": "\"I had about $16k in student loans. I defaulted on the loans, and they got > passed to a collection type agency (OSCEOLA). These guys are as legitimate as a collection agency can be. One thing that I feel is very sketchy is when they were verifying my identity they said \"\"Does your Social Security Number end in ####. Is your Birthday Month/Day/Year.\"\" That is not sketchy. It would be sketchy for a caller to ask you to give that information; that's a common scheme for identity theft. OSCEOLA are following the rules on this one. My mom suggested I should consider applying for bankruptcy Won't help. Student loans can't be discharged in bankruptcy. You have the bankruptcy \"\"reform\"\" act passed during the Bush 43 regime for that. The loan itself is from school. What school? Contact them and ask for help. They may have washed their hands of your case when they turned over your file to OSCEOLA. Then again, they may not. It's worth finding out. Also, name and shame the school. Future applicants should be warned that they will do this. What can I do to aid in my negotiations with this company? Don't negotiate on the phone. You've discovered that they won't honor such negotiations. Ask for written communications sent by postal mail. Keep copies of everything, including both sides of the canceled checks you use to make payments (during the six months and in the future). Keep making the payments you agreed to in the conversation six months ago. Do not, EVER, ignore a letter from them. Do not, EVER, skip going to court if they send you a summons to appear. They count on people doing this. They can get a default judgement if you don't show up. Then you're well and truly screwed. What do you want? You want the $4K fee removed. If you want something else, figure out what it is. Here's what to do: Write them a polite letter explaining what you said here. Recount the conversation you had with their telephone agent where they said they would remove the $4K fee if you made payments. Recount the later conversation. If possible give the dates of both conversations and the names of the both agents. Explain the situation completely. Don't assume the recipient of your letter knows anything about your case. Include evidence that you made payments as agreed during the six months. If you were late or something, don't withhold that. Ask them to remove the extra $4K from your account, and ask for whatever else you want. Send the letter to them with a return receipt requested, or even registered mail. That will prevent them from claiming they didn't get it. And it will show them you're serious. Write a cover letter admitting your default, saying you relied on their negotiation to set things straight, and saying you're dismayed they aren't sticking to their word. The cover letter should ask for help sorting this out. Send copies of the letter with the cover letter to: Be sure to mark your letter to OSCEOLA \"\"cc\"\" all these folks, so they know you are asking for help. It can't hurt to call your congressional representative's office and ask to whom you should send the letter, and then address it by name. This is called Constituent Service, and they take pride in it. If you send this letter with copies you're letting them know you intend to fight. The collection agency may decide it's not worth the fight to get the $4K and decide to let it go. Again, if they call to pressure you, say you'd rather communicate in writing, and that they are not to call you by telephone. Then hang up. Should I hire a lawyer? Yes, but only if you get a court summons or if you don't get anywhere with this. You can give the lawyer all this paperwork I've suggested here, and it will help her come up to speed on your case. This is the kind of stuff the lawyer would do for you at well over $100 per hour. Is bankruptcy really an option Certainly not, unfortunately. Never forget that student lenders and their collection agencies are dangerous and clever predators. You are their lawful prey. They look at you, lick their chops, and think, \"\"food.\"\" Watch John Oliver's takedown of that industry. https://www.youtube.com/watch?v=hxUAntt1z2c Good luck and stay safe.\"", "title": "" }, { "docid": "85794d485be3d23157e21a9378a3e00f", "text": "To start with, I should mention that many tax preparation companies will give you any number of free consultations on tax issues — they will only charge you if you use their services to file a tax form, such as an amended return. I know that H&R Block has international tax specialists who are familiar with the issues facing F-1 students, so they might be the right people to talk about your specific situation. According to TurboTax support, you should prepare a completely new 1040NR, then submit that with a 1040X. GWU’s tax department says you can submit late 8843, so you should probably do that if you need to claim non-resident status for tax purposes.", "title": "" }, { "docid": "b8f0d645ba2c6b1ef9a62e5b425032fa", "text": "I know what you are talking about and this is what students at UC I know usually do in such cases: Talk with the cashier's/registar's office and see if you have been reported to collections. If you had plans to pay via financial aid, this can be a non-issue, but be sure. It's critical to remove your record from collections, if any. Take a loan and find out how the loan will be paid. Most lenders pay the school directly based on what the school bills for the quarter. If you signed up for X units in Fall '10 and plan to take Y units in Winter '12, add X+Y units in your list of courses. Those X units could be anything in your course catalog. Once the school sends out the bill and the lender pays it, drop the X units. This will give you a check and use that to pay out the outstanding amounts. Most schools will include all outstanding amounts in the bill for your current quarter, but I am not sure if your lenders has agreements otherwise. Also, some lenders have agreements in place to send refunds directly to them, but remember, the cashier is king and she can make refunds happen the way she likes, and she is likely to help a student unless you have a bad payment history (collections, bounced checks..)", "title": "" }, { "docid": "bd157acb0e9dec2b7b4343d6a0a95b9d", "text": "Maybe you know something I don't, but as far as I'm aware, you can't get rid of it. Student loans are with you for life. You will be sent to collections, but it doesn't disappear after 7 years. Settlements are incredibly rare unless your loan is ballooning... in which case, a settlement doesn't change all that much. You will lose tax benefits, the government will garnish 15% of your wages, and you will be a debt slave until it's paid off. Defaulting on student loans is much, much more painful than defaulting on private loans. The only exception to this is if you've made 120 months of repayments while employed at a qualifying non-profit or governmental organization. And even then, it only applies to federal loans and there are exceptions (better not refinance or the clock resets, for example). Also, if you default, you will no longer be eligible. Private student loans have no escape hatch and are equally unforgiving. Thank your elected representatives.", "title": "" }, { "docid": "6724e167a6db3a6d6cc043a9995f89a8", "text": "My grace period is up in a few months, and I am not looking forward to it. I got the minimum federal aid possible for all 4 years, so I had to turn to private loans and whatever I could make over summers and what my parents could help me with. Ended up with $50k in debt, about 20k of it being with Sallie Mae. I can confirm they are bad on the collection side already. Just happened to miss a payment during school (paid off interest every month for the last 4 years), and they called me 3 times during class, sent an email, letter, and called my bilogical dad who cosigned for the loan. I can only imagine what they are like for people defaulting. All comes down to it though, have a plan when borrowing money for school. I knew my parents would only be able to help me out a little bit, and I got minimum federal aid (as in just loans) because my step father had assets that counted against me (and he told me I was on my own). So I had to figure out how to not be screwed from the beginning. I paid off my interest every month while working during school, and made sure to work hard to graduate with a good job. I can't imagine how some students feel when they graduate with nothing.", "title": "" }, { "docid": "18ee590fcebd7e5ad0f366d50040e2e9", "text": "From the description, you have a post-1998 income contingent loan. The interest rate on those is currently 1.5% but it has varied quite a bit in the last few years due to the formula used to calculate it, which is either the inflation rate (RPI), or 1% + the highest base rate across a group of banks - whichever is smaller. This is indeed really cheap credit compared to any commercial loan you could get, though whether you should indeed just repay the minimum depends on making a proper comparison with the return on any spare money you could get after tax elsewhere. There is a table of previous interest rates. From your description I think you've had the loan for about 4 years - your final year of uni, one year of working without repayments and then two years of repayments. A very rough estimate is that you would have been charged about £300 of interest over that period. So there's still an apparent mismatch, though since both you and I made rough calculations it may be that a more precise check resolves it. But the other thing is that you should check what the date on the statement is. Once you start repaying, statements are sent for a period ending 5th April of each year. So you may well not be seeing the effect of several months of repayments since April on the statement. Finally, there's apparently an online facility you can use to get an up to date balance, though the administration of the loans repaid via PAYE is notoriously inefficient so there may well be a significant lag between a payment being made and it being reflected in your balance, though the effect should still be backdated to when you actually made it.", "title": "" }, { "docid": "0d2f672f4d952b54b5b747e72909d1ce", "text": "What are the consequences if I ignore the emails? That would depend on how much efforts the collection agency is ready to put in. I got a social security number when I took up on campus jobs at the school and I do have a credit score. Can they get a hold of this and report to the credit bureaus even though I don't live in America? Possibly yes, they may already be doing it. Will they know when I come to America and arrest me at the border or can they take away my passport? For this, they would have to file a civil case in the court and get an injunction to arrest you. Edit: Generally it is unlikely that the court may grant an arrest warrant, unless in specific cases. A lawyer advise would be more appropriate. End Edits It is possible that the visa would also get rejected as you would have to declare previous visits and credit history is not good.", "title": "" }, { "docid": "090598b25ad86dc8c42f5c2246085762", "text": "Another option, not yet discussed here, is to allow the loan to go into default and let the loaning agency repossess the property the loan was used for, after which they sell it and that sale should discharge some significant portion of the loan. Knowing where the friend and property is, you may be able to help them carry out the repossession by providing them information. Meanwhile, your credit will take a significant hit, but unless your name is on the deed/title of the property then you have little claim that the property is yours just because you're paying the loan. The contract you signed for the loan is not going to be easily bypassed with a lawsuit of any sort, so unless you can produce another contract between you and your friend it's unlikely that you can even sue them. In short, you have no claim to the property, but the loaning agency does - perhaps that's the only way to avoid paying most of the debt, but you do trade some of your credit for it. Hopefully you understand that what you loaned wasn't money, but your credit score and earning potential, and that you will be more careful who you choose to lend this to in the future.", "title": "" }, { "docid": "41bfce6ad28cda087090b8f58cb940bf", "text": "At the current rates, stated in the question, I would push additional funds towards your Stafford loans as their higher interest rates will incur interest charges almost 3 times faster than your private loans. With my loans I have not seen much information regarding private loans jumping the interest rate close to the 6.8% any time in the coming years (if others have insight to this I look forward to the comments). Due to the private loans being variable there is an element of risk to their rates increasing. Another way to look at it may be to prorate your amount of extra payments according to their interest rate. $1,000 x 0.068 /(0.068 + 0.025) = $731.18 Toward your Stafford Loans $1,000 x 0.025 /(0.068 + 0.025) = $268.82 Toward your Private Loans", "title": "" }, { "docid": "2ca173152b148d47e7161915a18a6756", "text": "Two choices: 1. Sell everything you have and move to North Korea. 2. Questions regarding loans, refinancing, mortgages, credit cards, investing and anything else that may be related to personal finance should be directed towards the subreddit /r/personalfinance. You will receive a probation (temporary ban) for disregarding this rule.", "title": "" }, { "docid": "73f46ebcfc2e50b94d835095573d2fd9", "text": "You should definitely pay the remaining loan amount as quickly as possible. A loan in bad debts means that Bank has written it off books as its a education loan and there is no collateral. The defaults do get report to CIBIL [Credit Information Bureau India] and as such you will have difficulties getting credit card / new loans in future. Talk to the Bank Manager and ask can you regularize the loan? There are multiple options you would need to talk and find out; 1. You can negotiate and arrive at a number. Typically more than the principal outstanding and less than interest and penalties charged. 2. You can request to re-do the monthly payments with new duration, this will give you more time. 3. May one time large payment and subsequent amount in monthly payments. At the end its Bank's discretion whether to accept your terms or not.", "title": "" } ]	fiqa
631aad419d1f344560df83c42c8b03f4	How to measure systematic risk of a stock?	[ { "docid": "8f70e124bf017400421257713171e9b1", "text": "\"Beta is the correct answer. It is THE measure of the risk relationship of a stock with the broad market. R squared is incorrect unless you mean something very odd by \"\"co-efficiency.\"\" A stock that goes up each time the market goes down has very low co-efficiency (negative risk as you have defined it) but very high R squared. A stock that goes the same direction as the market but twice as far (with a lot of noise) has a very low R squared but contains a lot of market risk. A stock that always goes in the same direction as the market but only a 100th as far is very safe but has a very high R squared. You can calculate beta using \"\"slope\"\" in excel or doing a regression, but the easiest thing is just to look up the beta in yahoo finance or elsewhere. You don't need to calculate it for yourself normally.\"", "title": "" } ]	[ { "docid": "4e0a75beec67e1583279b4a0d8dae31a", "text": "\"Certainly no one knows in advance how much a stock is going to swing around. However, there are measures of how much it has swung around in the past, and there are people who will estimate the probability. First of all, there's a measure of an individual stock's volatility, commonly referred to as \"\"beta\"\". A stock with a beta of 1 tends to rise and fall about as much as the market at large. A stock with a beta of 2, in the meantime, would rise 10% when the market is up 5%. These are, of course, historical averages. See Wikipedia: http://en.wikipedia.org/wiki/Beta_(finance) Secondly, you can get an implied measure of volatility expectations by looking at options pricing. If a stock is particularly volatile, the chance of a big price move will be baked into the price of the stock options. (Note also that other things affect options pricing, such as the time value of money.) For an options-based measure of the volatility of the whole market, see the Volatility Index aka the \"\"Fear Gauge\"\", VIX. Wikipedia: http://en.wikipedia.org/wiki/VIX Chart: http://finance.yahoo.com/q?s=%5EVIX Looking at individual stocks as a group (and there's an oxymoron for you), individual stocks are definitely much more likely to have big moves than the market. Besides Netflix, consider the BP oil spill, or the Tokyo Electric Power Company's Fukushima incident (yow!). I don't have any detailed statistics on quantitatively how much, mind you, but in application, a standard piece of advice says not to put more than 5% of your portfolio in a single company's stock. Diversification protects you. (Alternatively, if you're trying to play Mr. Sophisticated Stock-Picker instead of just buying an index fund, you can also buy insurance through stock options: hedging your bets. Naturally, this will eat up part of your returns if your pick was a good one).\"", "title": "" }, { "docid": "84684ca8001220b80db21a461e7b2e21", "text": "You won't be able to know the trading activity in a timely, actionable method in most cases. The exception is if the investor (individual, fund, holding company, non-profit foundation, etc) is a large shareholder of a specific company and therefore required to file their intentions to buy or sell with the SEC. The threshold for this is usually if they own 5% or greater of the outstanding shares. You can, however, get a sense of the holdings for some of the entities you mention with some sleuthing. Publicly-Traded Holding Companies Since you mention Warren Buffett, Berkshire Hathaway is an example of this. Publicly traded companies (that are traded on a US-based exchange) have to file numerous reports with the SEC. Of these, you should review their Annual Report and monitor all filings on the SEC's website. Here's the link to the Berkshire Hathaway profile. Private Foundations Harvard and Yale have private, non-profit foundations. The first place to look would be at the Form 990 filings each is required to file with the IRS. Two sources for these filings are GuideStar.org and the FoundationCenter.org. Keep in mind that if the private foundation is a large enough shareholder in a specific company, they, too, will be required to file their intentions to buy or sell shares in that company. Private Individuals Unless the individual publicly releases their current holdings, the only insight you may get is what they say publicly or have to disclose — again, if they are a major shareholder.", "title": "" }, { "docid": "bb2125f617de0d2ef9c2669b5daee3e3", "text": "\"There are a number of ways to measure such things and they are generally called \"\"sentiment indicators\"\". The ones that I have seen \"\"work\"\", in the sense that they show relatively high readings near market tops and relatively low readings near market bottoms. The problem is that there are no thresholds that work consistently. For example, at one market top a sentiment indicator may read 62. At the next market top that same indicator might read 55. So what threshold do you use next time? Maybe the top will come at 53, or maybe it will not come until 65. There was a time when I could have listed examples for you with the names of the indicators and what they signaled and when. But I gave up on such things years ago after seeing such wide variation. I have been at this a long time (30+ years), and I have not found anything that works as well as we would like at identifying a top in real time. The best I have found (although it does give false signals) is a drop in price coupled with a bearish divergence in breadth. The latter is described in \"\"Stan Weinstein's Secrets For Profiting in Bull and Bear Markets\"\". Market bottoms are a little less difficult to identify in real time. One thing I would suggest if you think that there is some way to get a significant edge in investing, is to look at the results of Mark Hulbert's monitoring of newsletters. Virtually all of them rise and fall with the market and almost none are able to beat buy and hold of the Wilshire 5000 over the long term.\"", "title": "" }, { "docid": "2737555cec11157babb0aff5bd578d75", "text": "\"the \"\"how\"\" all depends on your level of computer savvy. Are you an Excel spreadsheet user or can you write in programming languages such as python? Either approach have math functions that make the calculation of ROI and Volatility trivial. If you're a python coder, then look up \"\"pandas\"\" (http://pandas.pydata.org/) - it handles a lot of the book-keeping and downloading of end of day equities data. With a dozen lines of code, you can compute ROI and volatility.\"", "title": "" }, { "docid": "3f7bfbd56d669e0399eb055e331c64dd", "text": "Set your xirr formula to a very tall column, leaving lots of empty rows for future additions. In column C, instead of hardcoding the value, use a formula that tests if it's the current bottom entry, like this: =IF(ISBLANK(A7),-C6, C6) If the next row has no date entered (yet), then this is the latest value, and make it negative. Now, to digress a bit, there are several ways to measure returns. I feel XIRR is good for individual positions, like holding a stock, maybe buying more via DRIP, etc. For the whole portfolio it stinks. XIRR is greatly affected by timing of cash flows. Steady deposits and no withdrawals dramatically skew the return lower. And the opposite is true for steady withdrawals. I prefer to use TWRR (aka TWIRR). Time Weighted Rate of Return. The word 'time' is confusing, because it's the opposite. TWRR is agnostic to timing of cashflows. I have a sample Excel spreadsheet that you're welcome to steal from: http://moosiefinance.com/static/models/spreadsheets.html (it's the top entry in the list). Some people prefer XIRR. TWRR allows an apples-to-apples comparison with indexes and funds. Imagine twin brothers. They both invest in the exact same ideas, but the amount of cash deployed into these ideas is different, solely because one brother gets his salary bonus annually, in January, and the other brother gets no bonus, but has a higher bi-weekly salary to compensate. With TWRR, their percent returns will be identical. With XIRR they will be very different. TWRR separates out investing acumen from the happenstance timing of when you get your money to deposit, and when you retire, when you choose to take withdrawals. Something to think about, if you like. You might find this website interesting, too: http://www.dailyvest.com/", "title": "" }, { "docid": "55f332da2bc6737a330b520c90586811", "text": "The portion of a stock movement not correlated with stocks in general is called Alpha. I don't know of any online tools to graph alpha. Keep in mind that a company like Apple is so huge right now that any properly weighted index will have to correlate with it to some degree.", "title": "" }, { "docid": "a553405f8eccfb06d6fae1018d4ab54a", "text": "\"For a retail investor who isn't a Physics or Math major, the \"\"Beta\"\" of the stock is probably the best way to quantify risk. Examples: A Beta of 1 means that a stock moves in line with the market. Over 1 means that you would expect the stock to move up or down faster than the market as a whole. Under 1 means that you would expect the stock to move slower than the market as a whole.\"", "title": "" }, { "docid": "4a542f5a5340c9199f4b22c4bd526ec4", "text": "\"The question is: how do you quantify investment risk? As Michael S says, one approach is to treat investment returns as a random variable. Bill Goetzmann (Yale finance professor) told me that if you accept that markets are efficient or that the price of an asset reflects it's underlying value, then changes in price represent changes in value, so standard deviation naturally becomes the appropriate measure for riskiness of an asset. Essentially, the more volatile an asset, the riskier it is. There is another school of thought that comes from Ben Graham and Warren Buffett, which says that volatility is not inherently risky. Rather, risk should be defined as the permanent loss of capital, so the riskiness of an asset is the probability of a permanent loss of capital invested. This is easy to do in casino games, based on basic probability such as roulette or slots. But what has been done with the various kinds of investment risks? My point is saying that certain bonds are \"\"low risk\"\" isn't good enough; I'd like some numbers--or at least a range of numbers--and therefore one could calculate expected payoff (in the statistics sense). Or can it not be done--and if not, why not? Investing is more art than science. In theory, a Triple-A bond rating means the asset is riskless or nearly riskless, but we saw that this was obviously wrong since several of the AAA mortgage backed securities (MBS) went under prior to the recent US recession. More recently, the current threat of default suggests that bond ratings are not entirely accurate, since US Treasuries are considered riskless assets. Investors often use bond ratings to evaluate investments - a bond is considered investment grade if it's BBB- or higher. To adequately price bonds and evaluate risk, there are too many factors to simply refer to a chart because things like the issuer, credit quality, liquidity risk, systematic risk, and unsystematic risk all play a factor. Another factor you have to consider is the overall portfolio. Markowitz showed that adding a riskier asset can actually lower the overall risk of a portfolio because of diversification. This is all under the assumption that risk = variance, which I think is bunk. I'm aware that Wall Street is nothing like roulette, but then again there must be some math and heavy economics behind calculating risk for individual investors. This is, after all, what \"\"quants\"\" are paid to do, in part. Is it all voodoo? I suspect some of it is, but not all of it. Quants are often involved in high frequency trading as well, but that's another note. There are complicated risk management products, such as the Aladdin system by BlackRock, which incorporate modern portfolio theory (Markowitz, Fama, Sharpe, Samuelson, etc) and financial formulas to manage risk. Crouhy's Risk Management covers some of the concepts applied. I also tend to think that when people point to the last x number of years of stock market performance, that is of less value than they expect. Even going back to 1900 provides \"\"only\"\" 110 years of data, and in my view, complex systems need more data than those 40,500 data points. 10,000 years' worth of data, ok, but not 110. Any books or articles that address these issues, or your own informed views, would be helfpul. I fully agree with you here. A lot of work is done in the Santa Fe Institute to study \"\"complex adaptive systems,\"\" and we don't have any big, clear theory as of yet. Conventional risk management is based on the ideas of modern portfolio theory, but a lot of that is seen to be wrong. Behavioral finance is introducing new ideas on how investors behave and why the old models are wrong, which is why I cannot suggest you study risk management and risk models because I and many skilled investors consider them to be largely wrong. There are many good books on investing, the best of which is Benjamin Graham's The Intelligent Investor. Although not a book on risk solely, it provides a different viewpoint on how to invest and covers how to protect investments via a \"\"Margin of Safety.\"\" Lastly, I'd recommend Against the Gods by Peter Bernstein, which covers the history of risk and risk analysis. It's not solely a finance book but rather a fascinating historical view of risk, and it helps but many things in context. Hope it helps!\"", "title": "" }, { "docid": "dfe42869d03227277ae9575312efd0e8", "text": "Volatility is a shitty metric and is sample dependent, What is more interesting is point recurrence, i.e. how many times has a certain point been touched in x time, you can make good day trading strategies off point recurrence (relative that is).", "title": "" }, { "docid": "6f223dd9cf545da0fdadcbc3847f769e", "text": "Basically you'd take all the companies in a given universe (like the S&P 500 or the Russell 3000) and instead of weighting them by market cap as they are currently done, you would weight by an alternative measure. Right now, if you're invested in an index that is market cap weighted, you're effectively momentum chasing. If a stock runs up, you're going to have a higher weight in your portfolio because of it (but only after the increase). An alternative that OppenheimerFunds has come up with is using revenue-weighting. That way you're using company fundamentals and only when the fundamentals are improving do you increase the weight in your portfolio. I haven't yet seen any research that explores weighting by other fundamentals. I would think that revenues aren't perfect either and that you might want to weight by Net Income. Or to go several steps further, by year over year Free Cash Flow growth. It could be a seminal paper if you are the one who empirically identifies a better weighting methodology and then have everyone else fight over the theoretical underpinnings. This is effectively what goes into Smart Beta investing: http://www.investopedia.com/terms/s/smart-beta.asp", "title": "" }, { "docid": "ff68b09fef2ab83c41d8cf7759d12c2c", "text": "The point of that question is to test if the user can connect shares and stock price. However, that being said yeah, you're right. Probably gives off the impression that it's a bit elementary. I'll look into changing it asap.", "title": "" }, { "docid": "0d008a892deb44faa5fcc7a59cdb2cb0", "text": "\"I'll give the TLDR answer. 1) You can't forecast the price direction. If you get it right you got lucky. If you think you get it right consistently you are either a statistical anomaly or a victim of confirmation bias. Countless academic studies show that you can not do this. 2) You reduce volatility and, importantly, left-tail risk by going to an index tracking ETF or mutual fund. That is, Probability(Gigantic Loss) is MUCH lower in an index tracker. What's the trade off? The good thing is there is NO tradeoff. Your expected return does not go down in the same way the risk goes down! 3) Since point (1) is true, you are wasting time analysing companies. This has the opportunity cost of not earning $ from doing paid work, which can be thought of as a negative return. \"\"With all the successful investors (including myself on a not-infrequent basis) going for individual companies directly\"\" Actually, academic studies show that individual investors are the worst performers of all investors in the stock market.\"", "title": "" }, { "docid": "9daac524bddb7ad59fcf8b78ff44ab6f", "text": "Since you seem determined to consider this, I'd like to break down for you why I believe it is an incredibly risky proposition: 1) In general, picking individual stocks is risky. Individual stocks are by their nature not diversified assets, and a single company-wide calamity (a la Volkswagen emissions, etc.) can create huge distress to your investments. The way to mitigate this risk is of course to diversify (invest in other types of assets, such as other stocks, index funds, bonds, etc.). However, you must accept that this first step does have risks. 2) Picking stocks on the basis of financial information (called 'fundamental analysis') requires a very large amount of research and time dedication. It is one of the two main schools of thought in equity investing (as opposed to 'technical analysis', which pulls information directly from stock markets, such as price volatility). This is something that professional investors do for a living - and that means that they have an edge you do not have, unless you dedicate similar resources to this task. That information imbalance between you and professional traders creates additional risk where you make determinations 'against the grain'. 3) Any specific piece of public information (and this is public information, regardless of how esoteric it is) may be considered to be already 'factored into' public stock prices. I am a believer in market efficiency first and foremost. That means I believe that anything publically known related to a corporation ['OPEC just lowered their oil production! Exxon will be able to increase their prices!'] has already been considered by the professional traders currently buying and selling in the market. For your 'new' information to be valuable, it would need to have the ability to forecast earnings in a way not already considered by others. 4) I doubt you will be able to find the true nature of the commercial impact of a particular event, simply by knowing ship locations. So what if you know Alcoa is shipping Aluminium to Cuba - is this one of 5 shipments already known to the public? Is this replacement supplies that are covering a loss due to damaged goods previously sent? Is the boat only 1/3 full? Where this information gets valuable, is when it gets to the level of corporate espionage. Yes, if you had ship manifests showing tons of aluminum being sold, and if this was a massive 'secret' shipment about to be announced at the next shareholders' meeting, you could (illegally) profit from that information. 5) The more massive the company, the less important any single transaction is. That means the super freighters you may see transporting raw commodities could have dozens of such ships out at any given time, not to mention news of new mine openings and closures, price changes, volume reports, etc. etc. So the most valuable information would be smaller companies, where a single shipment might cover a month of revenue - but such a small company is (a) less likely to be public [meaning you couldn't buy shares in the company and profit off of the information]; and (b) less likely to be found by you in the giant sea of ship information. In summary, while you may have found some information that provides insight into a company's operations, you have not shown that this information is significant and also unknown to the market. Not to mention the risks associated with picking individual stocks in the first place. In this case, it is my opinion that you are taking on additional risk not adequately compensated by additional reward.", "title": "" }, { "docid": "af49ec901f6c1437fa997bf88b1346ad", "text": "\"Calculating beta is finding the correlation between the dependent variable, MSCI world benchmark, and the independent variable, your companies. If you know how to run liner regression models, run each company as the independent variable with the dependent MSCI. You can use Excel to gather this result (Y = MSCI price change at closing hour while X = company stock price closing prince). Running the regression will give you the Beta (and alpha when doing portfolios); which (from linear algebra) is the \"\"m\"\" in y = mx + b\"", "title": "" }, { "docid": "9031cd641767c4fa0b9f66906157836f", "text": "I think by definition there aren't, generally speaking, any indicators (as in chart indicators, I assume you mean) for fundamental analysis. Off the top of my head I can't think of one chart indicator that I wouldn't call 'technical', even though a couple could possibly go either way and I'm sure someone will help prove me wrong. But the point I want to make is that to do fundamental analysis, it is most certainly more time consuming. Depending on what instrument you're investing in, you need to have a micro perspective (company specific details) and a macro perspective (about the industry it's in). If you're investing in sector ETFs or the like, you'd be more reliant on the macro analysis. If you're investing in commodities, you'll need to consider macro analysis in multiple countries who are big producers/consumers of the item. There's no cut and dried way to do it, however I personally opt for a macro analysis of sector ETFs and then use technical analysis to determine my entry and/or exit.", "title": "" } ]	fiqa
4cda5efddaeb51db7109a062ee0ee3cd	Do Americans still need extra health care / medical insurance after reform to health care? [U.S.]	[ { "docid": "460fa6727b7160bcd01bef408a386866", "text": "I think it is too early to tell. They changed so many variables in an incredibly complex system, and a lot of it will depend on how the requirements in the legislation look once the bureaucrats and insurance companies get a chance to interpret them and implement them as policy. My gut feeling is that for most people, you should plan on some pretty price increases for insurance in the next few years as insurance companies try cover the costs of removing lifetime caps and insuring people with pre-existing conditions. That said, the personal finance issue that you really should be planning for is your portfolio not your insurance costs. The bill includes almost a 4% increase in capital gains taxes.", "title": "" } ]	[ { "docid": "7c976a00a66a84005a1b3ac860291b59", "text": "I don't see how this is an example of throwing more money at the problem. I see this as an issue of taking for-profit health insurance providers out of the equation, and making the U.S. government (i.e. the taxpayer) the sole payer for health care services in the United States. Just like almost every other developed nation does it.", "title": "" }, { "docid": "dcdb74b676a5c610589b8ecc1f25d49e", "text": "Thats a good question. You don't have any argument from me on that. However, I have friends who have done that and after a few years living like that, its extremely hard on them if they get sick, because the system THAT I AM TELLING YOU ABOUT, will ruin them in a flash. Its increasingly designed to take ALL of people's money when they are at their most vulnerable, when they are sick. And IT doesn't care. Single payer systems will just fix you up, you dont get a bill. They have to be free, which you can tell [by reading this](http://www.iatp.org/files/GATS_and_Public_Service_Systems.htm) - which explains why.", "title": "" }, { "docid": "c01a626cd90712b0a4fc85fe0b0e41de", "text": "\"Its the economics subreddit. People post here to talk about economics. I assume people here have attention spans long enough to read a few paragraphs. I can understand your issue with principal. I understand people who will willingly take a worse system that costs more just to fuck over a drug addict. I'm not one of them. Personally, I would pay zero dollars extra to fuck over drug addicts and I have no desire to have worse quality care so drug addicts can be denied care. I want the system that is a good balance between cost and quality. Sure, the trade off of paying \"\"less for better\"\" is when everyone else is covered, there will be people who I don't like, and who made poor choices that will also get that coverage. I suppose one could make a single payer system that also doesn't cover drug addicts. Maybe that would be ideal for you. However, studies also find that paying for these drug addicts/lazy assholes also saves money in the long run. I assume you don't want to explore the theories as to why statistically this is the case because you know.....TL DR. I'm sorry you don't like the ideas. Don't worry about ideas. Worry about facts and reality. Base what you \"\"agree with\"\" on reality. I'm going to go out on a limb, I think if you thought about it, saving yourself and your family money for better treatment will rank higher than the principal of denying treatment to those who you don't like. Once you establish what you value, abandon ideology. See what works best with what you value and go from there. I would make a guess that one of the reasons Americans are absolutely ripped off when it comes to medical costs is because people don't agree with \"\"ideas\"\".\"", "title": "" }, { "docid": "dec78bc8374be50700f1d553945460f5", "text": "The special rights for corporations come automatically when US companies become a multinational. And that binds the US, just like it did, for example, Slovakia, [blocking their right to have affordable health care](http://www.italaw.com/sites/default/files/case-documents/italaw3206.pdf), because an insurance company had silently, invisibly finagled a SUPERIOR right to massive compensation, basically free money.", "title": "" }, { "docid": "4fee06b37c87cee42807c9ce4ebb7e58", "text": "Article was about insurers not liking the uncertainty. Some insurers want Obamacare repealed, some of them want it to stay. But they all don't want to political climate of uncertainty. A situation where people wouldn't be mandated to buy insurance because they don't fear the IRS actually requiring them, but where the actual regulations haven't been changed yet is a nightmare for insurers.", "title": "" }, { "docid": "394e2c739f4870cd08159d90823caba2", "text": "\"I had an HSA for two or three years. I found very routinely that my insurance company had negotiated rates with in-network providers. So as I never hit the deductible, I always had to pay 100% of the negotiated rate, but it was still much less than the providers general rate. Sometimes dramatically so. Like I had some blood and urine tests done and the general rate was $450 but the negotiated rate was only $40. I had laser eye surgery and the general rate was something like $1500 but the negotiated rate was more like $500. Et cetera. Other times it was the same or trivially different, like routine office visits it made no difference. I found that I could call the insurance company and ask for the negotiated rate and they would tell me. When I asked the doctor or the hospital, they either couldn't tell me or they wouldn't. It's possible that the doctor's office doesn't really know what rates they've agreed to, they might have just signed some contract with the insurance company that says, yes, we'll accept whatever you give us. But either way, I had to go to the insurance company to find out. You'd think they'd just publish the list on a web site or something. After all, it's to the insurance company's advantage if you go to the cheapest provider. With a \"\"regular\"\" non-HSA plan, they're share of the total is less. Even with an HSA plan if you go to a cheaper provider you are less likely to hit the deductible. Yes, medical care in the U.S. is rather bizarre in that providers routinely expect you to commit to paying for their services before they will tell you the price. Can you imagine any other industry working this way? Can you imagine buying a car and the dealer saying, \"\"I have no idea what this car costs. If you like it, great, take it and drive it home, and in a few weeks we'll send you a bill. And of course whatever amount we put on that bill you are legally obligated to pay, but we refuse to tell you what that amount will be.\"\" The American Medical Association used to have a policy that they considered it \"\"unethical\"\" for doctors to tell patients the price of treatment in advance. I don't know if they still do.\"", "title": "" }, { "docid": "9ba6050b6f83ee2f240815c35570b25e", "text": "\"This is the best tl;dr I could make, [original](https://www.bloomberg.com/view/articles/2017-07-20/spending-a-lot-on-health-care-is-the-american-way) reduced by 86%. (I'm a bot) *** > Why? And might we hope to get this spending down? Unfortunately, expensive health care is embedded in the American way of life - more specifically, the American desire to live it up with high consumption. > Why is American consumption so disproportionate to American GDP? One reason is the relatively low household savings rate, or possibly American net wealth is high relative to GDP. Consumption in the U.S., per capita, measures about 50 percent higher than in the European Union. > To put it most simply, we Americans spend a lot on health care because we spend a lot period. * [Extended Summary*](http://np.reddit.com/r/autotldr/comments/6pl8ob/spending_a_lot_on_health_care_is_the_american_way/) \| [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~175686 tl;drs so far.\"\") \| [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") \| Top* keywords: American^#1 consumption^#2 spend^#3 health-care^#4 more^#5\"", "title": "" }, { "docid": "1ba49f35e4c54d3aaf2167107bed7d04", "text": "\"The way you phrased what you said was bothering me. What is happening is that many, a great many, die from diseases that would be effectively treated in other countries. Here the care keeps getting more and more abbreviated and more and more people fall through the cracks. Also, the US is [trying to use trade with the US](http://www.ttip2014.eu) as a means of eliminating new public healthcare and incrementally dismantling existing public health care and access to generic medicines around the globe. Since thats obviously \"\"what rich Americans want\"\" </sarc> (people really say that) having elected neoliberal Obama.\"", "title": "" }, { "docid": "12d2a2d9c6a23b4f53e361c3547a3c3d", "text": "As others have said, it depends entirely on what benefits are provided, and how much of the cost of those benefits is paid by the employer and how much is paid by the employee, and compare that to what it would cost to obtain the necessary/equivalent coverage without employer assistance. In my case, my employer pays more than $10,000 per year toward the cost of medical, dental, vision, disability, and life insurance for myself and my family. That's almost 20% of the average total household income in my state, so it is not an insignificant amount at all.", "title": "" }, { "docid": "1b0fc39ae768e96cbaf57581ee3fe921", "text": "Americans want cheaper health care. They do not want one where you have to wait months for a blood test and sometimes they cut off the wrong leg (see video on Canadian health care system below). https://www.youtube.com/watch?v=q2jijuj1ysw There is a medium between a monopoly market (what exists today) and a socialized one. It is called a free market.", "title": "" }, { "docid": "9ec1ba1b17dda00950e30201d22de91d", "text": "\"For most situations the \"\"no need\"\" answers are 100% correct. The corner case to think about depends on your health and your family history. Not to be morose, but if folks in your family who died young from heart issues, clusters of cancer or other terminal illnesses, you may want to consider getting medically qualified for a modest amount of insurance when you are young. Then, when you have children, you usually have the option of incrementally upgrading your coverage over time.\"", "title": "" }, { "docid": "a918c0943143c25b70cf374b858608d6", "text": "\"No, I think the US should be under a single payer system. Care in the US is is shitty as it is. \"\"It is hard to ignore that in 2006, the United States was number 1 in terms of health care spending per capita but ranked 39th for infant mortality, 43rd for adult female mortality, 42nd for adult male mortality, and 36th for life expectancy... Comparisons also reveal that the United States is falling farther behind each year\"\" [New England Journal of Medicine](http://www.nejm.org/doi/full/10.1056/NEJMp0910064). Also another point I didn't mention is that most US 'middle class' families are literally only one sickness away from having to choose between medical bills or mortgage payments. I personally have had friends who had to drop out of college after their dad got sick, and I wouldn't mind paying more taxes if it meant that never happened again, or happened to my children once I start a family.\"", "title": "" }, { "docid": "168aedc76748a869f5c5ba50a55620df", "text": "\"What you have here is an interesting argument. Right now, this is totally complicated by the state of \"\"forced insurance\"\" that is currently in such hot debate right now. As a general rule of thumb though, most Americans pay their medical bills in one way or another. Though It is also accurate to say that most Americans have avoided paying a medical bill at one point or another. I will give an example that will help clarify. My wife gets a Iron infusion shot one every year or so. We choose not to have insurance. The cost to us is around $275. We know this upfront and have always paid it up front. Except for one year. One year we had insurance. The facility that does the infusions charged us $23,500 to do the infusion that year. The insurance paid $275 to them. We refused to pay the remaining $23,225. This is a real example using real numbers. SO while we are more then able to pay the \"\"normal\"\" amount, and we could, in theory, pay the inflated amount, We out right refuse to. The medical facility tried to negotiated the amount down to $11,000 but we refused. They then tried to talk us into a credit plan. We refused. Then they negotiated the entire thing down to $500. We refused. Finally, after 2 years of fighting they agreed that the service had been pair for by the insurance. And sent us a $0 bill. The entire time, that facility was more then willing to keep doing this annual service for $275.At no time were we denied care. We did have a dent in our credit for a while, but honestly it didn't matter to us. Wrap Up It is fair to say that most Americans do pay their medical bills, but it is also fair to say that most Americans do not pay all their medical bills. The situation is complicated, and made more so by recent changes. Heath insurance is the U.S. is nearly criminal and while some changes have been made in recent years the same overriding truth exists. Sometimes, a medical bill, when going through insurance, is just plain silly, and the only recourse you have as a customer is to not pay it, for a while, till you get it sorted out.\"", "title": "" }, { "docid": "a65f879139eb13c0a40205d0af0f9353", "text": "It's possible. Our healthcare systems is a serious mess, but universal healthcare could also make things worse. The problem is that our healthcare system is afflicted by a litany of regulations neither guarantee care to the most vulnerable nor allow the market mechanisms to work. The Mises Institute has a few good pieces on this ([here's one](https://mises.org/blog/how-government-regulations-made-healthcare-so-expensive)), but to put it very simply, the issue is we are letting bureaucrats run our healthcare instead of leaving medical choices to physicians. I'd wager that NZ physicians have greater freedom to practice than US ones, but that's only a guess. That's the key though. Medical choices need to be left up to doctors and patients whether we adopt a market-oriented system or a universal care scheme. If this isn't done, quality of care will be poor and costs (direct or indirect) will be high. At the end of the day we could screw up either approach. I will say, that I've read Sen. Rand Paul's [proposal](https://www.paul.senate.gov/imo/media/doc/ObamacareReplacementActSections.pdf) (not the current Republican plan) and it seems like a good example of practical market reforms.", "title": "" }, { "docid": "66ae57cb031636ae2d3d2ab71486356f", "text": "No, I'd prefer a healthcare environment where prices are so reasonable you don't need outlandish insurance and trillion dollar government programs. But no, the government refuses to negotiate. Why? Because the almost all healthcare legislation is created to enrich the industry itself. Obamacare is nice in theory, but what it really does is give the insurance industry 30 million new customers without so much as a token discount. Medicare has a provision that specifically prohibits negotiation of prices on drugs. So you tell me, should the role of the government be to enrich the companies by feeding them more customers, err.... I mean enrolling more citizens. Or should the role of government be to keep regulation in check to where it doesn't cost $80 for a single pair of latex gloves.", "title": "" } ]	fiqa
6529e4ddb4cde3bfbeb18dfac98d06c7	Deceived by car salesman	[ { "docid": "1eddbb5b263b55e6f0e641a145eeb363", "text": "The only thing that is important here is the documentation you and your daughter signed. If that documentation states that you were a co-signer and that your daughter was the primary on the loan, and then if the loan is not being reported in your daughter's name, you have a cause for action. If, however, the documentation says the loan is entirely in your name, the mistake is yours. Even in that case, though, your daughter may be able to take over the loan, or she may be able to take out a loan from a separate institution and use that to pay off the current loan. Obviously, this may be difficult if she does not have a credit history, which is what got you here in the first place. :(", "title": "" }, { "docid": "19a41f572fb72c31a0e903d04b283a65", "text": "\"At this point there is not much you can do. The documentation probably points to you being the sole owner and signer on the loan. Then, any civil suit will degenerate into a \"\"he said, she said\"\" scenario. Luckily, no one was truly harmed in the scenario. Obtaining financing through a car dealer is almost always not advisable. So from here, you can do what should have been done in the first place. Go to banks and credit unions so your daughter can refinance the car. You will probably get a lower rate, and there is seldom a fee. I would start with the bank/CU where she does her checking or has some other kind of a relationship. If that fails, anywhere you can actually sit and talk with a loan officer is preferable over the big corporate type banks. Car dealers lying is nothing new, it happens to everyone. Buying a car is like a battle.\"", "title": "" } ]	[ { "docid": "a6e561ad5b78a05ac6207763335bb369", "text": "\"Not having seen the movie, I don't know what you mean by \"\"fraudulent options buys.\"\" But there are two possibilities: 1) Someone placed buy orders on the account without authorization. In which case it comes down to a protracted lawsuit to determine whether the broker exercised due diligence, or whether Bruce foolishly gave someone his password. 2) The options themselves were fraudulent. In which case the OCC is responsible for making everyone whole.\"", "title": "" }, { "docid": "4a2b050aba268dcfe27aad7eefdd6ea5", "text": "There are few main reasons I can think of that the salesperson would do this: A lot of people assume it's the 3rd option always. But if the person is reputable, it's most likely 1 or 2. You can't run a business doing option 3 for long without getting a reputation.", "title": "" }, { "docid": "137a3e87be092013b7b45a65eb330fc6", "text": "The sales manager and/or finance manager applied a rebate that did not apply. It's their fault. They have internal accounts to handle these situations as they do come up from time to time. The deal is done. They have no legal ground.", "title": "" }, { "docid": "6f74e06785dd589d7d2e3505795b36bf", "text": "\"It's definitely annoying, but it's not necessarily false advertising. There is no rule or law that says they have to fix a pricing error at all, let alone within a certain period of time. Unfortunately they have no obligation to do business with you unless they take (and keep) your money. If they canceled the order and returned your money you have no binding agreement with them. On top of that, in the US... 'misleading advertising' usually refers to \"\"Any advertising or promotion that misrepresents the nature, characteristics, qualities or geographic origin of goods, services or commercial activities\"\" (Lanham Act, 15 U.S.C.A. § 1125(a)). The main criteria that they evaluate before taking legal action is whether or not someone has suffered harm or loss due to the reliance on the bad information. But you're in Europe. The EU ideas behind misleading advertising tend to focus a lot more on comparing one product to someone else's and making subjective claims or false promises. Pricing does come up, but still, you need to have an ability to prove that you suffered harm or a loss from the business' actions. Even if you were able to prove that, to force the business to change its price catalog, you would need to go through legal proceedings, demonstrate the harm that you've sustained, and then have a judge decide in your favor and order the supplier to comply. My guess is that it's just not worth it for you, but you haven't specified if this is just an annoying shoe-shopping experience or if you are regularly experiencing bait-and-switch tactics from a supplier that is a crucial part of a business operation. If it's the former, just like a physical shop reserves the right to kick you out if you're not behaving, (but usually doesn't because they'd like to keep you as a customer), an online shop can update its prices whenever they like. They can change their prices too, and cancel orders. If it's the latter, then start putting together some documentation on how many times this has happened and how it has damaged your business. But before you get on the warpath I would recommend you look for another place to buy whatever you have in mind, or else try a pound of sugar in your approach to this supplier... My own business experience has shown that can go a lot way in figuring out a mutually beneficial resolution. If you want to see a bit more... Here is the EU Justice Commission's website on false advertising, Here is a PDF leaflet from the UK Office of Fair Trading that spells out what is explicitly not allowed from a business by way of advertising & business practices.\"", "title": "" }, { "docid": "6e28e5671bed55ef1c2f19f29e533bb1", "text": "\"this isn't false advertising. False advertising is offering something to lure you in but it turning out to be something totally different, substantially less or different terms than what you thought you were agreeing too. You're still getting 60% off. This is more like \"\"sleazy advertising\"\"... but tons of companies do these 24/7 \"\"sales\"\"\"", "title": "" }, { "docid": "2ef47bc6e77a08529092f461b85d993b", "text": "\"The lead story here is you owe $12,000 on a car worth $6000!! That is an appalling situation and worth a lot to get out of it. ($6000, or a great deal more if the car is out of warranty and you are at risk of a major repair too.) I'm sorry if it feels like the payments you've made so far are wasted; often the numbers do work out like this, and you did get use of the car for that time period. Now comes an \"\"adversary\"\", who is threatening to snatch the car away from you. I have to imagine they are emotionally motivated. How convenient :) Let them take it. But it's important to fully understand their motivations here. Because financially speaking, the smart play is to manage the situation so they take the car. Preferably unbeknownst that the car is upside down. Whatever their motivation is, give them enough of a fight; keep them wrapped up in emotions while your eye is on the numbers. Let them win the battle; you win the war: make sure the legal details put you in the clear of it. Ideally, do this with consent with the grandfather \"\"in response to his direct family's wishes\"\", but keep up the theater of being really mad about it. Don't tell anyone for 7 years, until the statute of limitations has passed and you can't be sued for it. Eventually they'll figure out they took a $6000 loss taking the car from you, and want to talk with you about that. Stay with blind rage at how they took my car. If they try to explain what \"\"upside down\"\" is, feign ignorance and get even madder, say they're lying and they won, why don't they let it go? If they ask for money, say they're swindling. \"\"You forced me, I didn't have a choice\"\". (which happens to be a good defense. They wanted it so bad; they shoulda done their homework. Since they were coercive it's not your job to disclose, nor your job to even know.) If they want you to take the car back, say \"\"can't, you forced me to buy another and I have to make payments on that one now.\"\"\"", "title": "" }, { "docid": "3cfa23856809120150fb4a487dadcfe4", "text": "Its not a scam. The car dealership does not care how you pay for the car, just that you pay. If you come to them for a loan they will try and service you. If you come with cash, they will sell you a car and not try to talk you into financing. If you come with a check from another bank, they will happily accept it. I would try to work with Equifax or a local credit union to figure out what is going on. Somehow she probably had her credit frozen. Here are some really good things to mitigate this situation: Oh and make sure you do #1 and forget about financing cars ever again. I mean if you want to build wealth.", "title": "" }, { "docid": "f00e645c272e30ba5a5a511bcd8e60d0", "text": "So, you think forcing people to buy their auto insurance doesn't provide any money? It sounds like the customer didn't even know they were paying for it. Or, are you saying that this minor scam is nothing in the grand scheme of things, and that we should expect their scams to pay out at least a few billion?", "title": "" }, { "docid": "5f9f3e4354dabf864196cecc71e910a2", "text": "So extenuating circumstances might make it OK for someone to lie to you. In this specific case, BofA withheld material information from its shareholders and asked them to approve the merger on the basis of known false information. This is, by definition, fraud.", "title": "" }, { "docid": "168704f710afdf153cf1d910d90c06eb", "text": "\"You can greatly reduce the risk if you can line up a buyer prior to purchasing the car. That kind of thing is common in business, one example is drop shipping. Also there are sales companies that specialize in these kinds of things bringing manufacturers of goods together with customers. The sales companies never take delivery of the product, just a commission on the sales. From this the manufacturers are served as they have gained a customer for their goods. The buying company is served as they can make a \"\"better\"\" end product. The two parties may have not been brought together had it not been for the sales company so on some level both are happy to pay for the service. Can you find market inequalities and profit from them? Sure. I missed a great opportunity recently. I purchased a name brand shirt from a discount store for $20. Those shirts typically sell on ebay for $80. I should have cleaned out that store's inventory, and I bet someone else did as by the time I went back they were gone. That kind of thing was almost risk-less because if the shirts did not sell, I could simply return them for the full purchase price. That and I can afford to buy a few hundred dollars worth of shirts. Can you afford to float 45K CDN? What if it takes a year to sell the car? What if the economy goes sour and you are left \"\"holding the bag\"\"? Why are not car dealers doing exactly what you propose? Here in the US this type of thing is called \"\"horse trading\"\" and is very common. I've both lost and made money on these kind of deals. I would never put a significant amount of my net worth at risk.\"", "title": "" }, { "docid": "df6212d4d0d3342b5759dd5e3439f857", "text": "You mean auto dealer bailouts? Has happened multiple times already. Also dealerships have been doing this type of lending with banks for years.. which is why direct sales is likely a mu have better model than dealership model...but hey I didn't invent this.", "title": "" }, { "docid": "5c4808c281ff489db9905e886ce65188", "text": "Except when it does. [Legal definition of fraud](http://legal-dictionary.thefreedictionary.com/fraud): Fraud must be proved by showing that the defendant's actions involved five separate elements: (1) a false statement of a material fact,(2) knowledge on the part of the defendant that the statement is untrue, (3) intent on the part of the defendant to deceive the alleged victim, (4) justifiable reliance by the alleged victim on the statement, and (5) injury to the alleged victim as a result. 1.) a false statement of fact is implied as the person using the coupon is representing themselves as someone who is using the coupon for the first time (as he/she is in a disguise to appear to be a different person) 2.) knowledge is clear - the person using the coupon is going to the length of donning a disguise - they know they're trying to get away with something 3.) intent is shown by the length the person went to present themselves as a new customer as well as the posts on the forum 4.) assuming the cashier was deceived by the disguise, it's reasonable that Target put the transaction through as it believed it was doing so with a new customer 5.) injury is obvious", "title": "" }, { "docid": "97aa7ee39f4e3b1bf24b0b5528de05a5", "text": "\"This is the best tl;dr I could make, [original](http://www.france24.com/en/20170601-us-car-sales-struggle-may-despite-record-discounts) reduced by 77%. (I'm a bot) *** > Auto makers offered big discounts over the Memorial Day holiday, but the response from US car buyers in May was not enough to definitively reverse months of sales declines. > After seven years of gains, there were further signs that US car sales have plateaued, analysts said, as monthly sales data suggested a mixed picture amid heavy incentives to lure buyers into showrooms, even as truck and SUV sales surged. > The biggest US car maker, GM, saw its sales fall 1.3 percent last month compared to the same period a year earlier. * [Extended Summary*](http://np.reddit.com/r/autotldr/comments/6eqkaa/auto_makers_offered_big_discounts_over_the/) \| [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~134307 tl;drs so far.\"\") \| [Theory](http://np.reddit.com/r/autotldr/comments/31bfht/theory_autotldr_concept/) \| [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") \| Top* keywords: sales^#1 percent^#2 car^#3 truck^#4 consumer^#5\"", "title": "" }, { "docid": "78c7b2bf71f314407d951a11d5e096fb", "text": "\"It's possible the $16,000 was for more than the car. Perhaps extras were added on at purchase time; or perhaps they were folded into the retail price of the car. Here's an example. 2014: I'm ready to buy. My 3-year-old trade-in originally cost $15,000, and I financed it for 6 years and still owe $6500. It has lots of miles and excess wear, so fair blue-book is $4500. I'm \"\"upside down\"\" by $2000, meaning I'd have to pay $2000 cash just to walk away from the car. I'll never have that, because I'm not a saver. So how can we get you in a new car today? Dealer says \"\"If you pay the full $15,000 retail price plus $1000 of worthless dealer add-ons like wax undercoat (instead of the common discounted $14,000 price), I'll eat your $2000 loss on the trade.\"\" All gets folded into my new car financing. It's magic! (actually it's called rollover.) 2017: I'm getting itchy to trade up, and doggone it, I'm upside down on this car. Why does this keep happening to me? In this case, it's rollover and other add-ons, combined with too-long car loans (6 year), combined with excessive mileage and wear on the vehicle.\"", "title": "" }, { "docid": "5bcc7514248f05f2d1846ea0d0d54932", "text": "That is horrible. I would contact your local news stations, local authorities, and demand to talk to the owner of the dealership. Get the story out on social media and do everything you can to put bad publicly on the dealership. Maybe they will see how big of a fuck up they made and make things right. Fuck those guys.", "title": "" } ]	fiqa
97a47b6386d8e4ead949044591bedd75	Capital gains loss, can IRS waive the loss?	[ { "docid": "b13411bb3edd8f14b046c3f5954493ca", "text": "The cap loss can be used to offset future gains or $3000/yr of ordinary income. (I just used up the last of mine from the dot com bubble.) I hope you have future gains that let you use this up quickly. The IRS debt is separate, and I don't imagine they'll let you use any of the loss to offset it. As always, it can't hurt to ask. Their normal payment plans are for 5 years. $40k/yr is a lot. Edit - The IRS does negotiate. I recall, from the dot-com bubble, instances where someone exercised stock grants, but kept the shares. Now, they had a $1M gain, but after year end, the stock crashed. They owed tax on that gain, but the loss was in the next tax year, with nothing to offset. These people were 'regular' guys and gals, no background in finance. I understand the IRS looked at these people and made some exceptions.", "title": "" } ]	[ { "docid": "20c9e9ae8c397b3bcdda3a75e314265a", "text": "You can write industry loss warrants. This is the closest thing I’ve found since I’ve been interested in this side of the ILS trade. Hedge funds and asset managers can do this. From what I understand it’s you selling the risk. Want to start a fund? 🤔", "title": "" }, { "docid": "9aa3d399c15349ee6a594905f9ce68d1", "text": "Capital gains and losses offset each other first, then your net gain is taxed at the applicable rate. If you have a net loss, you can offset your other income by up to $3,000. In your example, you have no net-gain or loss, so no tax implications from your activity.", "title": "" }, { "docid": "1c7beebb3549c75c9dd76f80232f5e9c", "text": "What you are looking for is a 1031 exchange. https://www.irs.gov/uac/like-kind-exchanges-under-irc-code-section-1031 Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free. You may also sell your house for bitcoin and record the sales price on the deed with an equal or lesser amount that you bought it for.", "title": "" }, { "docid": "8de3797d802df425c6de7bf8a2c2f243", "text": ">suffering, say, a potential 20% loss for business reasons can be preferable to creating a guaranteed, irreversible 37% loss due to state and federal LTCG taxes. You don't pay taxes on capital losses... In fact, you can write them off against future gains.", "title": "" }, { "docid": "14f144db69e3441a4aad7a98c912dc3d", "text": "\"In the US tax system, you cannot \"\"write-off\"\" capital assets. You have to depreciate them, with very specific exceptions. So while you may be purchasing $4500 of equipment, your deduction may be significantly less. For example, computers are depreciated over the period of 5 years, so if you bought a $1000 computer - you write off $200/year until it is completely depreciated, not $1000 at once. There are exceptions however, for example - IRC Sec. 179 is one of them. But you should talk to a tax adviser (EA/CPA licensed in your State) about whether it is applicable to the specific expense you want to \"\"write off\"\" and to what extent. Also, keep in mind that State laws may not conform to the Federal IRC. While you may be able to use Sec. 179 or other exceptions and deduct your expenses on your Federal return, you may end up with a whole different set of deductions on your State return. And last but not least: equipment that you depreciated or otherwise \"\"wrote off\"\" that is later sold - is income to you, since depreciation/deduction reduces basis. Ah, and keep in mind - the IRS frowns upon Schedule C business that consistently show losses. If you have losses for more than 3 in the last 5 years - your business may be classified as \"\"hobby\"\", and deductions may be disallowed. But the bottom line is that yes, it is possible to end up with 0 tax liability with business income offset by business deductions. However, not for prolonged periods of time (not for years consistently, but first year may fly). Again - you should talk to a licensed tax adviser (EA/CPA licensed in your State). It is well worth the money. Do not rely on answers on free Internet forums as a tax advice - it is not.\"", "title": "" }, { "docid": "03cd2798097762b25fb89bff28c5dde5", "text": "\"The IRS rules are actually the same. 26 U.S. Code § 1091 - Loss from wash sales of stock or securities In the case of any loss claimed to have been sustained from any sale or other disposition of shares of stock or securities where it appears that, within a period beginning 30 days before the date of such sale or disposition and ending 30 days after such date, the taxpayer has acquired (by purchase or by an exchange on which the entire amount of gain or loss was recognized by law), or has entered into a contract or option so to acquire, substantially identical stock or securities, then no deduction shall be allowed... What you should take away from the quote above is \"\"substantially identical stock or securities.\"\" With stocks, one company may happen to have a high correlation, Exxon and Mobil come to mind, before their merger of course. With funds or ETFs, the story is different. The IRS has yet to issue rules regarding what level of overlap or correlation makes two funds or ETFs \"\"substantially identical.\"\" Last month, I wrote an article, Tax Loss Harvesting, which analyses the impact of taking losses each year. I study the 2000's which showed an average loss of 1% per year, a 9% loss for the decade. Tax loss harvesting made the decade slightly positive, i.e. an annual boost of approx 1%.\"", "title": "" }, { "docid": "2eece10018e187b5456011337e0d74c9", "text": "It was not 100% clear if you have held all of these stocks for over a year. Therefore, depending on your income tax bracket, it might make sense to hold on to the stock until you have held the individual stock for a year to only be taxed at long-term capital gains rates. Also, you need to take into account the Net Investment Income Tax(NIIT), if your current modified adjusted income is above the current threshold. Beyond these, I would think that you would want to apply the same methodology that caused you to buy these in the first place, as it seems to be working well for you. 2 & 3. No. You trigger a taxable event and therefore have to pay capital gains tax on any gains. If you have a loss in the stock and repurchase the stock within 30 days, you don't get to recognize the loss and have to add the loss to your basis in the stock (Wash Sales Rules).", "title": "" }, { "docid": "c4a1738922520dca65133b950a2f75df", "text": "\"There are different schools of thought. You can ask the IRS - and it would not surprise me if you got different answers on different phone calls. One interpretation is that a put is not \"\"substantially identical\"\" to the disposed stock, therefore no wash is triggered by that sale. However if that put is exercised, then you automatically purchase the security, and that is identical. As to whether the IRS (or your brokerage firm) recognizes the identical security when it falls out of an option, I can't say; but technically they could enforce it because the rule is based on 30 days and a \"\"substantially identical\"\" stock or security. In this interpretation (your investor) would probably at least want to stay out of the money in choosing a strike price, to avoid exercise; however, options are normally either held or sold, rather than be exercised, until at or very close to the expiration date (because time value is left on the table otherwise). So the key driver in this interpretation would be expiration date, which should be at least 31 days out from the stock sale; and it would be prudent to sell an out of the money put as well, in order to avoid the wash sale trigger. However there is also a more unfavorable opinion - see fairmark.com/capgain/wash/wsoption.htm where they hold that a \"\"deep in the money\"\" option is an immediate trigger (regardless of exercise). This article is sage, in that they say that the Treasury (IRS) may interpret an option transaction as a wash if it's ballpark to being exercisable. And, if the IRS throws paper, it always beats each of paper, rock and scissors :( A Schwab article (\"\"A Primer on Wash Sales\"\") says, if the CUSIPs match, bang, wash. This is the one that they may interpret unfavorably on in any case, supporting Schwab's \"\"play it safe\"\" position: \"\"3. Acquire a contract or option to buy substantially identical stock or securities...\"\" . This certainly nails buying a call. As to selling a put, well, it is at least conceivable that an IRS official would call that a contract to buy! SO it's simply not a slam dunk; there are varying opinions that you might describe as ranging from \"\"hell no\"\" to \"\"only if blatant.\"\" If you can get an \"\"official\"\" predetermination, or you like to go aggressive in your tax strategy, there's that; they may act adversely, so Caveat Taxfiler!\"", "title": "" }, { "docid": "b53a96763ca7c8a044099cc57e193c1e", "text": "\"I did a little research and found this article from 2006 by a Villanova law professor, titled \"\"No Thanks, Uncle Sam, You Can Keep Your Tax Break\"\". The final paragraph of the article says: Under these circumstances, it is reasonable to conclude that a taxpayer is not required to claim a allowable deduction unless a statutory provision so requires, or a binding judicial precedent so specifies. It would be unwise, of course, to forego a deduction that the IRS considers mandatory such as those claimed by self-employed individuals with respect to their self-employment, whether for purposes of the self-employment tax or the earned income tax credit. Until the statute is changed or some other binding authority is issued, there is no reason taxpayers who wish to forego deductions, such as the dependency exemption deduction, should hesitate in doing so. (The self-employment tax issues in the quote cited by CQM are explicitly discussed in the article as one of a few special kinds of deduction which are mandatory.) This is not a binding statement: it's not law or even official IRS policy. You could never use it as a defense in the event that this professor turned out to be wrong and the IRS decided to go after you anyway. However, it is a clear statement from a credible, qualified source.\"", "title": "" }, { "docid": "6ff9928c031afb43520082e791325731", "text": "(I'm assuming the tag of United-states is accurate) Yes, the remaining amount is tax free -- at the current price. If you sell at exactly the original price, there is no capital gain, no capital loss. So you've already payed the taxes. If you sell and there is a capital gain of $3000, then you will pay taxes on the $3000. If 33% is your marginal tax rate, and if you held the stock for less than a year, then you will keep $7000 and pay taxes of $1000. Somehow, I doubt your marginal tax rate is 33%. If you hold the stock for a year after eTrade sold some for you to pay taxes, then you will pay 15% on the gain -- or $450. eTrade sold the shares to pay the taxes generated by the income. Yes, those shares were considered income. If you sell and have a loss, well, life sucks. However, if you sell something else, you can use the loss to offset the other gain. So if you sell stock A for a loss of $3000, and sell stock B at a gain of $4000, then you pay taxes on the net of $1000.", "title": "" }, { "docid": "182b561785b6dbb85ff8bf140ba84456", "text": "\"If you only have to pay 23k federal taxes on 100k, that means you are in the long term capital gains tax rate, which is the lower of the tax rates available. First you get your federal income tax marginal tax rate, and then find the matching long term capital gains tax rate. For example, if your marginal federal income tax rate is 28%, your capital gains tax rate would be 15%. Or rather, if the amount of the gain would put you in the 28% rate, then your long term capital gains tax rate is 15%. You can reduce that by having more losses. If you have anything else invested anywhere that is taking a loss, then you can sell that this year and it will offset the other gains you have realized. The only note is that your losses have to be long term capital losses too. Tax loss harvesting takes this to an extreme where you sell something at a loss to lock in the tax loss, but you didn't really want to get rid of that investment, so then you buy a nearly identical investment. ie. if you owned shares of \"\"Direxion Tech Sector ETF\"\" and it was at a loss, you would sell that and then immediately buy \"\"ProShares Tech Sector ETF\"\", the competing product that does the exact same thing. Then there is charity. This still requires spending money and you not having it any longer. If you feel that a cause can use the money more directly than the US government, you can donate an appreciated asset to the charity - not report a gain and also take a charitable deduction.\"", "title": "" }, { "docid": "d658c3ec1d9279c81cc4cf3a58c86168", "text": "\"Short answer: Yes. For Federal income tax purposes, you are taxed on your total income, adding up positives and negatives. If business A made, say, $100,000 while business B lost $20,000, then your total income is $80,000, and that's what you'll be taxed on. As @littleadv says, of course any business losses you claim must qualify as business losses under IRS rules. And yes, there are special rules about losses that the IRS considers \"\"passive\"\". If you have wage income in addition to business income, business losses don't offset wage income for social security and medicare tax purposes. You can't get a refund of the social security tax deducted from your paycheck. I don't know if this is relevant to you, but: If you have businesses in different states, each is taxed by that state. For example I have two tiny side businesses, one in Michigan and one in Ohio. Last year the Michigan business made money while the Ohio business lost money. So my federal income was Michigan minus Ohio. My Ohio income was negative so I owed no Ohio income tax. But I couldn't subtract my Ohio losses from my Michigan income for Michigan income tax purposes. Thus, having, say, $10,000 income in Michigan and $10,000 in Ohio would result in lower taxes than $30,000 income in Michigan and a $10,000 loss in Ohio, even though the total income in both cases is the same. And this would be true even if the tax rates in both states were identical.\"", "title": "" }, { "docid": "a9f1667c1c5842672022e480c86b017a", "text": "Note that the rules around wash sales vary depending on where you live. For the U.S., the wash sale rules say that you cannot buy a substantially identical stock or security within 30 days (before or after) your sale. So, you could sell your stock today to lock in the capital losses. However, you would then have to wait at least 30 days before purchasing it back. If you bought it back within 30 days, you would disqualify the capital loss event. The risk, of course, is that the stock's price goes up substantially while you are waiting for the wash sale period. It's up to you to determine if the risk outweighs the benefit of locking in your capital losses. Note that this applies regardless of whether you sell SOME or ALL of the stock. Or indeed, if we are talking about securities other than stocks.", "title": "" }, { "docid": "c5cd81de821f805259c65c75740592fe", "text": "I found the answer I was looking for. Even though I don't have any capital gains to offset, I can deduct up to $3,000 of that loss against other kinds of income, including salary.", "title": "" }, { "docid": "f8e8ea901175d73d27287d7dee8f433f", "text": "Since you say the money was invested in a corporation that would lead me to believe you mean a stock purchase. Stock losses can be treated as a tax exemption filed as a capital loss. http://moneycentral.msn.com/content/Taxes/Cutyourtaxes/P33438.asp http://www.usatoday.com/money/perfi/columnist/krantz/2006-03-10-capital-losses_x.htm Canada has slightly more restrictions on how this can be done. http://www.taxtips.ca/filing/capitallosses.htm", "title": "" } ]	fiqa
3112d7f74adab7b205f6500bfa9b3f44	Why would you use an IFA for choosing a pension fund	[ { "docid": "f2f8f38fd4980be3ead50b16da75a484", "text": "Why would anyone listen to someone else's advice? Because they believe that the person advising them knows better than they do. It's as simple as that. The fact that you're doing any research at all - indeed, the fact that you know about a site on the internet where personal finance questions get asked and answered - puts you way ahead of the average member of the population when it comes to pensions. If you think you know better than the SJP adviser (and I don't mean that aggressively, just as a matter of fact), then by all means do your own thing. But remember about unknown unknowns - you don't know everything the adviser might say, depending on your circumstances and changes to them over time...", "title": "" } ]	[ { "docid": "3221ea586106f111e68b463d6aeb1d53", "text": "Efficient Frontier has an article from years ago about the small-cap and value premiums out there that would be worth noting here using the Fama and French data. Eugene Fama and Kenneth French (F/F) have shown that one can explain almost all of the returns of equity portfolios based on only three factors: market exposure, market capitalization (size), and price-to-book (value). Wikipedia link to the factor model which was the result of the F/F research.", "title": "" }, { "docid": "ed961bc386f62746a9c09a3a9344c4f0", "text": "Frankly, the article is mostly right, but I disagree with his specific recommendation. Why use one of these software services at all? Put your money into a retirement (or other) account and invest it in index funds. Beating index funds over the long run is pretty difficult, and if anyone's going to do it, it won't be someone that treats it like a hobby, regardless of whether you pick stocks yourself or let some software do it for you. I personally think the big value-add from investment advisers only comes in the form of tax and regulation advice. Knowing what kind of tax-exempt accounts exist and what the rules for them are is useful, and often non-trivial to fully grasp and plan for. Also, the investment advisers I've talked to seemed to be pretty knowledgeable about that sort of thing, whereas their understanding of investment concepts like risk/reward tradeoffs, statistics, and portfolio optimization is generally weak.", "title": "" }, { "docid": "90fead46e9d8314e5f383a09a89b73e6", "text": "I've not gotten an answer so far. Since I've started my search for a new financial planner here are the criteria I am using:", "title": "" }, { "docid": "6167f63bc9252ad2217dda31cefa0496", "text": "\"I separate them out, simply because they're for different purposes, with different goals and time-frames, and combining them may mask hidden problems in either the retirement account or the regular account. Consider an example: A young investor has been working on their retirement planning for a few years now, and has a modest amount of retirement savings (say $15,000) allocated carefully according to one of the usually recommended schemes. A majority exposure to large cap U.S. stocks, with smaller exposures to small cap, international and bond markets. Years before however, they mad an essentially emotional investment in a struggling manufacturer of niche personal computers, which then enjoyed something of a renaissance and a staggering growth in shareholder value. Lets say their current holdings in this company now represent $50,000. Combining them, their portfolio is dominated by large cap U.S. equities to such an extent that the only way to rebalance their portfolio is to pour money into bonds and the international market for years on end. This utterly changes the risk profile of their retirement account. At the same time, if we switch the account balances, the investor might be reassured that their asset allocation is fine and diversified, even though the assets they have access to before retirement are entirely in a single risky stock. In neither case is the investor well served by combining their funds when figuring out their allocation - especially as the \"\"goal\"\" allocations may very well be different.\"", "title": "" }, { "docid": "e5edb2b7684003ea4f01ab69a4c02e39", "text": "why should I have any bias in favour of my local economy? The main reason is because your expenses are in the local currency. If you are planning on spending most of your money on foreign travel, that's one thing. But for most of us, the bulk of our expenses are incurred locally. So it makes sense for us to invest in things where the investment return is local. You might argue that you can always exchange foreign results into local currency, and that's true. But then you have two risks. One risk you'll have anywhere: your investments may go down. The other risk with a foreign investment is that the currency may lose value relative to your currency. If that happens, even a good performing investment can go down in terms of what it can return to you. That fund denominated in your currency is really doing these conversions behind the scenes. Unless the bulk of your purchases are from imports and have prices that fluctuate with your currency, you will probably be better off in local investments. As a rough rule of thumb, your country's import percentage is a good estimate of how much you should invest globally. That looks to be about 20% for Australia. So consider something like 50% local stocks, 20% local bonds, 15% foreign stocks, 5% foreign bonds, and 10% local cash. That will insulate you a bit from a weak local currency while not leaving you out to dry with a strong local currency. It's possible that your particular expenses might be more (or less) vulnerable to foreign price fluctuations than the typical. But hopefully this gives you a starting point until you can come up with a way of estimating your personal vulnerability.", "title": "" }, { "docid": "6733d9bb2f5cf453abc85a901eb8cb9f", "text": "It's a good question, I am amazed how few people ask this. To summarise: is it really worth paying substantial fees to arrange a generic investment though your high street bank? Almost certainly not. However, one caveat: You didn't mention what kind of fund(s) you want to invest in, or for how long. You also mention an “advice fee”. Are you actually getting financial advice – i.e. a personal recommendation relating to one or more specific investments, based on the investments' suitability for your circumstances – and are you content with the quality of that advice? If you are, it may be worth it. If they've advised you to choose this fund that has the potential to achieve your desired returns while matching the amount of risk you are willing to take, then the advice could be worth paying for. It entirely depends how much guidance you need. Or are you choosing your own fund anyway? It sounds to me like you have done some research on your own, you believe the building society adviser is “trying to sell” a fund and you aren't entirely convinced by their recommendation. If you are happy making your own investment decisions and are merely looking for a place to execute that trade, the deal you have described via your bank would almost certainly be poor value – and you're looking in the right places for an alternative. ~ ~ ~ On to the active-vs-passive fund debate: That AMC of 1.43% you mention would not be unreasonable for an actively managed fund that you strongly feel will outperform the market. However, you also mention ETFs (a passive type of fund) and believe that after charges they might offer at least as good net performance as many actively managed funds. Good point – although please note that many comparisons of this nature compare passives to all actively managed funds (the good and bad, including e.g. poorly managed life company funds). A better comparison would be to compare the fund managers you're considering vs. the benchmark – although obviously this is past performance and won't necessarily be repeated. At the crux of the matter is cost, of course. So if you're looking for low-cost funds, the cost of the platform is also significant. Therefore if you are comfortable going with a passive investment strategy, let's look at how much that might cost you on the platform you mentioned, Hargreaves Lansdown. Two of the most popular FTSE All-Share tracker funds among Hargreaves Lansdown clients are: (You'll notice they have slightly different performance btw. That's a funny thing with trackers. They all aim to track but have a slightly different way of trading to achieve it.) To hold either of these funds in a Hargreaves Lansdown account you'll also pay the 0.45% platform charge (this percentage tapers off for portolio values higher than £250,000 if you get that far). So in total to track the FTSE All Share with these funds through an HL account you would be paying: This gives you an indication of how much less you could pay to run a DIY portfolio based on passive funds. NB. Both the above are a 100% equities allocation with a large UK companies weighting, so won't suit a lower risk approach. You'll also end up invested indiscriminately in eg. mining, tobacco, oil companies, whoever's in the index – perhaps you'd prefer to be more selective. If you feel you need financial advice (with Nationwide) or portfolio management (with Nutmeg) you have to judge whether these services are worth the added charges. It sounds like you're not convinced! In which case, all the best with a low-cost passive funds strategy.", "title": "" }, { "docid": "2b6cde81fdb549260eac7262ff180761", "text": "The idea of an index is that it is representative of the market (or a specific market segment) as a whole, so it will move as the market does. Thus, past performance is not really relevant, unless you want to bank on relative differences between different countries' economies. But that's not the point. By far the most important aspect when choosing index funds is the ongoing cost, usually expressed as Total Expense Ratio (TER), which tells you how much of your investment will be eaten up by trading fees and to pay the funds' operating costs (and profits). This is where index funds beat traditional actively managed funds - it should be below 0.5% The next question is how buying and selling the funds works and what costs it incurs. Do you have to open a dedicated account or can you use a brokerage account at your bank? Is there an account management fee? Do you have to buy the funds at a markup (can you get a discount on it)? Are there flat trading fees? Is there a minimum investment? What lot sizes are possible? Can you set up a monthly payment plan? Can you automatically reinvest dividends/coupons? Then of course you have to decide which index, i.e. which market you want to buy into. My answer in the other question apparently didn't make it clear, but I was talking only about stock indices. You should generally stick to broad, established indices like the MSCI World, S&P 500, Euro Stoxx, or in Australia the All Ordinaries. Among those, it makes some sense to just choose your home country's main index, because that eliminates currency risk and is also often cheaper. Alternatively, you might want to use the opportunity to diversify internationally so that if your country's economy tanks, you won't lose your job and see your investment take a dive. Finally, you should of course choose a well-established, reputable issuer. But this isn't really a business for startups (neither shady nor disruptively consumer-friendly) anyway.", "title": "" }, { "docid": "8641ee45104015492e4550bfe9dfbc25", "text": "\"The advantages of the TFSA are This makes them great for 50-somethings who didn't do any saving yet, for whom clawbacks when they drawdown RRSPs will have a big impact on taxes and government-related income. It also makes them great for \"\"I will save up for that car / my downpayment / the kids skating fees next year\"\" when the money would come out of an RRSP at the same or even a higher tax rate and would not have time to compound for long. This may apply to you. And finally it makes them great for highly paid people who just don't know what the heck to do with all the money that is piling up and have no intention of ever using any of it while they're working, but have filled up their RRSPs. My 20-somethings are using them because they pay essentially no taxes now, so are waiting to use their RRSP room later. If you have money that you are saving for something other than retirement, put it in a TFSA. If you've maxed the RRSP and still have money left over, put it in an TFSA. If you have children, consider an RESP first, because of the bonus money. But don't think TFSA first unless it's for timelimited saving like towards a car or renovation.\"", "title": "" }, { "docid": "0d748bd4ea29786d0b5714c37cbe35e6", "text": "My perspective is from the US. Many employers offer 401(k)s and you can always contribute to an IRA for either tax deferred or tax free investment growth. If you're company offers a 401(k) match you should always contribute the maximum amount they max or you're leaving money on the table. Companies can't always support pensions and it isn't the best idea to rely on one entirely for retirement unless your pension is from the federal government. Even states such as Illinois are going through extreme financial difficulties due to pension funding issues. It's only going to get worse and if you think pension benefit accrual isn't going to be cut eventually you'll have another thing coming. I'd be worried if I was a state employee in the middle of my career with no retirement savings outside of my pension. Ranting: Employees pushed hard for some pretty absurd commitments and public officials let the public down by giving in. It seems a little crazy to me that someone can work for the state until they're in their 50's and then earn 70% of their 6 figure salary for the rest of their life. Something needs to be done but I'd be surprised if anyone has the political will to make tough choices now before thee options get much much worse and these states are forced to make a decision.", "title": "" }, { "docid": "2f1a0f80e6dd21796aad206c5e742633", "text": "Some index funds offer lower expense ratios to those who invest large amounts of money. For example, Vanguard offers Admiral Shares of many of its mutual funds (including several index funds) to individuals who invest more than $50K or $100K, and these Shares have lower expense ratios than the Investor shares in the fund. There are Institutional Shares designed for investments by pension plans, 401k plans of large companies etc which have even lower expenses than Admiral Shares. Individuals working for large companies sometimes get access to Institutional Shares through their 401k plans. Thus, there is something to gained by investing in just one index fund (for a particular index) that offers lower expense ratios for large investments instead of diversifying into several index funds all tracking the same index. Of course, this advantage might be offset by failure to track the index closely, but this tracking should be monitored not on a daily basis but over much longer periods of time to test whether your favorite fund is perennially trailing the index by far more than its competitors with larger expense ratios. Remember that the Net Asset Value (NAV) published by each mutual fund after the markets close already take into account the expense ratio.", "title": "" }, { "docid": "5e1a32fd89b6eb8df2bf94f74df763da", "text": "\"First of all, it's great you're now taking full advantage of your employer match – i.e. free money. Next, on the question of the use of a life cycle / target date fund as a \"\"hedge\"\": Life cycle funds were introduced for hands-off, one-stop-shopping investors who don't like a hassle or don't understand. Such funds are gaining in popularity: employers can use them as a default choice for automatic enrollment, which results in more participation in retirement savings plans than if employees had to opt-in. I think life cycle funds are a good innovation for that reason. But, the added service and convenience typically comes with higher fees. If you are going to be hands-off, make sure you're cost-conscious: Fees can devastate a portfolio's performance. In your case, it sounds like you are willing to do some work for your portfolio. If you are confident that you've chosen a good equity glide path – that is, the initial and final stock/bond allocations and the rebalancing plan to get from one to the other – then you're not going to benefit much by having a life cycle fund in your portfolio duplicating your own effort with inferior components. (I assume you are selecting great low-cost, liquid index funds for your own strategy!) Life cycle are neat, but replicating them isn't rocket science. However, I see a few cases in which life cycle funds may still be useful even if one has made a decision to be more involved in portfolio construction: Similar to your case: You have a company savings plan that you're taking advantage of because of a matching contribution. Chances are your company plan doesn't offer a wide variety of funds. Since a life cycle fund is available, it can be a good choice for that account. But make sure fees aren't out of hand. If much lower-cost equity and bond funds are available, consider them instead. Let's say you had another smaller account that you were unable to consolidate into your main account. (e.g. a Traditional IRA vs. your Roth, and you didn't necessarily want to convert it.) Even if that account had access to a wide variety of funds, it still might not be worth the added hassle or trading costs of owning and rebalancing multiple funds inside the smaller account. There, perhaps, the life cycle fund can help you out, while you use your own strategy in your main account. Finally, let's assume you had a single main account and you buy partially into the idea of a life cycle fund and you find a great one with low fees. Except: you want a bit of something else in your portfolio not provided by the life cycle fund, e.g. some more emerging markets, international, or commodity stock exposure. (Is this one reason you're doing it yourself?) In that case, where the life cycle fund doesn't quite have everything you want, you could still use it for the bulk of the portfolio (e.g. 85-95%) and then select one or two specific additional ETFs to complement it. Just make sure you factor in those additional components into the overall equity weighting and adjust your life cycle fund choice accordingly (e.g. perhaps go more conservative in the life cycle, to compensate.) I hope that helps! Additional References:\"", "title": "" }, { "docid": "03bdcd1b1605b952c67b41e225da099a", "text": "\"The end result is basically the same, it's just a choice of whether you want to base the final amount you receive on your salary, or on the stock market. You pay in a set proportion of your salary, and receive a set proportion of your salary in return. The pension (both contributions and benefit) are based on your career earnings. You get x% of your salary every year from retirement until death. These are just a private investment, basically: you pay a set amount in, and whatever is there is what you get at the end. Normally you would buy an annuity with the final sum, which pays you a set amount per year from retirement until death, as with the above. The amount you receive depends on how much you pay in, and the performance of the investment. If the stock market does well, you'll get more. If it does badly, you could actually end up with less. In general (in as much as anything relating to the stock market and investment can be generalised), a Defined Benefit plan is usually considered better for \"\"security\"\" - or at least, public sector ones, and a majority of people in my experience would prefer one, but it entirely depends on your personal attitude to risk. I'm on a defined benefit plan and like the fact that I basically get a benefit based on a proportion of my salary and that the amount is guaranteed, no matter what happens to the stock market in the meantime. I pay in 9% of my salary get 2% of my salary as pension, for each year I pay into the pension: no questions, no if's or buts, no performance indicators. Others prefer a defined contribution scheme because they know that it is based on the amount they pay in, not the amount they earn (although to an extent it is still based on earnings, as that's what defines how much you pay in), and because it has the potential to grow significantly based on the stock market. Unfortunately, nobody can give you a \"\"which is best\"\" answer - if I knew how pension funds were going to perform over the next 10-50 years, I wouldn't be on StackExchange, I'd be out there making a (rather large) fortune on the stock market.\"", "title": "" }, { "docid": "3b128ed843074e19dbc02445a0e8c091", "text": "Though I did answer the linked question, I thought to quote parts of this article. Source: The RRSP advantage, by David Hodges, February 6th 2015 [John] Storjohann ['the 58-year-old Calgary project manager'] is keenly aware of the two main advantages of RRSPs: the tax refund when you make a contribution, and the tax-deferred growth until you make withdrawals in retirement. These make RRSPs ideal for those who expect to be in a lower tax bracket when they stop working—which will be the case for most Canadians. For those in the highest tax bracket today, the RRSP is a no-brainer. That’s why Storjohann’s always surprised when he meets people pulling in good incomes who think TFSAs stack up better than RRSPs. “People just don’t understand how these accounts work.” This is the most common objection to RRSPs: people simply hate the idea of paying taxes on the withdrawals. Money taken out of a TFSA, by contrast, is tax-free, which sounds far more appealing. But that logic ignores the fact that you receive a tax refund when you put money in an RRSP, while TFSA contributions are made with after-tax dollars. So for the Fosters and other Canadians weighing this decision, it comes down to whether it’s better to pay tax now or later. And that’s not an easy question to answer. Both Hamilton and Kirzner say that anyone earning more than $50,000 is usually better off prioritizing RRSPs over TFSAs. While both accounts allow your investments to grow tax-free, the tax refund makes the RRSP more attractive for high-income earners. ... That, in a nutshell, is what makes RRSPs better than TFSAs for higher earners: Not only are you taxed on your money years later, but because you’re in a lower bracket when you retire, you’ll pay less tax too. When your income is between $35,000 and $50,000, the long-term tax differences between RRSPs and TFSAs become negligible, says Malcolm Hamilton. In that salary range, “just being able to put money aside in either an RRSP or a TFSA is great.” But RRSPs can still be a better choice for reasons that don’t involve tax deferral or refunds. In his new book, Wealthing Like Rabbits, author Robert Brown makes the case for favouring RRSPs over TFSAs most of the time because the former usually means less temptation to access your retirement savings early. Footnote: This 2012 CBC.ca article intelligibly explains RRSPs, free of jargon.", "title": "" }, { "docid": "b4888bff0729195733eff5acf5f368f1", "text": "\"I'm in a similar situation. First, a 529 plan can be use for \"\"qualifying\"\" international schools. There are 336 for 2015, which includes many well known schools but also excludes many schools, especially lower level or vocational schools and schools in non-English speaking countries. I ran 3 scenarios to see what the impact would be if you invested $3000 a year for 14 years in something tracking the S&P 500 Index: For each of these scenarios, I considered 3 cases: a state with 0% income tax, a state with the median income tax rate of 6% for the 25% tax bracket, and California with an income tax rate of 9.3% for the 25% tax bracket. California has an addition 2.5% penalty on unqualified distributions. Additionally, tax deductions taken on contributions that are part of unqualified distributions will be viewed as income and that portion of the distribution will be taxed as such at the state level. Vanguard's 500 Index Portfolio has a 10 year average return of 7.63%. Vanguard's S&P 500 Index fund has a 10 year average return of 7.89% before tax and 7.53% after taxes on distributions. Use a 529 as intended: Use a 529 but do not use as intended: Invest in a S&P 500 Index fund in a taxable account: Given similar investment options, using a 529 fund for something other than education is much worse than having an investment in a mutual fund in a taxable account, but there's also a clear advantage to using a 529 if you know with certainty you can use it for qualified expenses. Both the benefits for correct use of a 529 and the penalties for incorrect use increase with state tax rates. I live in a state with no income tax so the taxable mutual fund option is closer to the middle between correct and incorrect use of a 529. I am leaning towards the investment in a taxable account.\"", "title": "" }, { "docid": "634312a11375ed10181224df31580810", "text": "\"I'm assuming that all the savings are of 'defined contribution' type, and not 'defined benefit' as per marktristan's comment to the original question. Aside from convenience of having all the pension money in one place, which may or may not be something you care about, there may be a benefit associated with being able to rebalance your portfolio when you need do. Say you invest your pension pot in a 60%/40% of equities and bonds respectively. Due higher risk/reward ratio of the equities part, in the long run equities tend to get 'overweight' turning your mix into 70%/30% or even 80%/20%, therefore raising your overall exposure to equities. General practice is to rebalance your portfolio every now and then, in this case, by selling some equities and buying more bonds (\"\"sell high, buy low\"\"). Now if you have few small pockets of pension money, it makes it harder to keep track of the overall asset allocation and actually do the rebalancing as you cannot see and trade everything from one place.\"", "title": "" } ]	fiqa
92d17464cac5f016aa7f0310f3c92a14	Why do they call them “financial products”?	[ { "docid": "f743afe57f0d06f6f3ef43687a408a5f", "text": "\"They are called \"\"financial products\"\" because they are contracts that are \"\"produced\"\" by the financial industry. For example, you could also say that a car manufacturer does not sell you a car, but a contract that will gives you ownership of a car. And, if a contract is a service and not product, in that case a car manufacturer is only selling services. It seems like it is more about the definition of \"\"product\"\" than \"\"financial product\"\". I think that as long as something is produced by the effort of labor, it could be called a product, and since financial contracts are produced by the people working in the finance industry, they can be qualified as products too. Maybe this page of wikipedia could explain things better than I just did: http://en.wikipedia.org/wiki/Product_%28business%29\"", "title": "" } ]	[ { "docid": "e82749a12bb0dc7acbcdae7eb3ee76e6", "text": "\"For most people \"\"home ownership\"\" is a long term lifestyle strategy (i.e. the intention is to own a home for several decades, regardless of how many times one particular house might be \"\"swapped\"\" for a different one. In an economic environment with steady monetary inflation, taking out a long-term loan backed by a tangible non-depreciating \"\"permanent\"\" asset (e.g. real estate) is in practice a form of investing not borrowing, because over time the monetary value of the asset will increase in line with inflation, but the size of the loan remains constant in money terms. That strategy was always at risk in the short term because of temporary falls in house prices, but long-term inflation running at say 5% per year would cancel out even a 20% fall in house prices in 4 years. Downturns in the economy were often correlated with rises in the inflation rate, which fixed the short-term problem even faster. Car and student loans are an essentially different financial proposition, because you know from the start that the asset will not retain its value (unless you are \"\"investing in a vintage car\"\" rather than \"\"buying a means of personal transportation\"\", a new car will lose most of its monetary value within say 5 years) or there is no tangible asset at all (e.g. taking out a student loan, paying for a vacation trip by credit card, etc). The \"\"scariness\"\" over home loans was the widespread realization that the rules of the game had been changed permanently, by the combination of an economic downturn plus national (or even international) financial policies designed to enforce low inflation rates - with the consequence that \"\"being underwater\"\" had been changed from a short term problem to a long-term one.\"", "title": "" }, { "docid": "f4aa10b157076a2d41f8f8ec9de3d2c1", "text": "\"The \"\"just accounting\"\" is how money market works these days. Lets look at this simplified example: The bank creates an asset - loan in the amount of X, secured by a house worth 1.25X (assuming 20% downpayment). The bank also creates a liability in the amount of X to its depositors, because the money lent was the money first deposited into the bank by someone else (or borrowed by the bank from the Federal Reserve(), which is, again, a liability). That liability is not secured. Now the person defaults on the loan in the amount of X, but at that time the prices dropped, and the house is now worth 0.8X. The bank forecloses, sells the house, recovers 80% of the loan, and removes the asset of the loan, creating an asset of cash in the value of 0.8X. But the liability in the amount of X didn't go anywhere. Bank still has to repay the X amount of money back to its depositors/Feds. The difference? 20% of X in our scenario - that's the bank's loss. (*) Federal Reserve is the US equivalent of a central bank.\"", "title": "" }, { "docid": "88eb0c2b6d234fab9d14c3c476390f47", "text": "I am not a structured products expert, just relaying what's in the article, but I'd imagine it includes a larger equity tranche in the structured product, thereby giving more cushion against losses to the actual debt investors in the tranches above it in the payment water fall.", "title": "" }, { "docid": "499d8adf4782925193c55e97dde77c6a", "text": "Enron did a wide range of dodgy financial accounting, using tricks to severely mis-represent their financial situation. They then used these doctored accounts to fool lenders and stock-buyers that the company had more money, and fewer debts or problems, than it really had. Eventually they ran out of money and went bankrupt, leaving the lenders and stock-buyers with nothing.", "title": "" }, { "docid": "9ddaeefedd377e0765564f49d50c76b3", "text": "\"It has little to do with money or finance. It's basic neuroscience. When we get money, our brains release dopamine (read Your Money and Your Brain), and receiving dividends is \"\"getting money.\"\" It feels good, so we're more likely to do it again. What you often see are rationalizations because the above explanation sounds ... irrational, so many people want to make their behavior look more rational. Ceteris paribus a solid growth stock is as good as a solid company that pays dividends. In value-investing terms, dividend paying stocks may appear to give you an advantage in that you can keep the dividends in cash and buy when the price of the security is low (\"\"underpriced\"\"). However, as you realize, you could just sell the growth stock at certain prices and the effect would be the same, assuming you're using a free brokerage like Robin Hood. You can easily sell just a portion of the shares periodically to get a \"\"stream of cash\"\" like dividends. That presents no problem whatsoever, so this cannot be the explanation to why some people think it is \"\"smart\"\" to be a dividend investor. Yes, if you're using a brokerage like Robin Hood (there may be others, but I think this is the only one right now), then you are right on.\"", "title": "" }, { "docid": "8df64277d91696b72fff884acb9e2c21", "text": "\"From https://secure.wikimedia.org/wikipedia/en/wiki/Banc: Banq (also Banc, banc-corp, bancorp, or bancorporation) is an intentionally erroneous spelling of the word bank, but pronounced the same way. It has been adopted by companies which are not banks but wish to appear as such, and satisfy legal restrictions on the usage of the word bank. ... For instance, if the original company is known as Bank of America, then the new investment banking entity may be known as Banc of America Securities LLC. If the original company is known as Bank of Manhattan, then its insurance business might be known as \"\"Banc of Manhattan Insurance\"\" and its holding company might be called \"\"Manhattan Bancorp\"\". This practice originates from legal necessity: Under the laws of most states, a corporation may only use the word \"\"bank\"\" in its name if it has obtained a banking charter under state or federal banking laws. So, \"\"Banc of America\"\" is the subsidiary of BoA that doesn't have appropriate licenses to be called \"\"bank\"\". Wonders of complex regulation :)\"", "title": "" }, { "docid": "555be60b1c7c421fc2d3104626e6fa19", "text": "\"Most likely because they don't know what they're talking about. They all have a belief without evidence that information set X is internalised into the price but information set Y is not. If there is some stock characteristic, call it y, that belongs to set Y, then that moves the gauge towards a \"\"buy\"\" recommendation. However, the issue is that no evidence has been used to determine the constituents of X and Y, or even whether Y exists in any non-trivial sense.\"", "title": "" }, { "docid": "573857d250c22ecd0a0f9a1a0cacee2e", "text": "Serious question - I don't work in finance, but I always hear how the big finance firms only hire the best and brightest and if they don't know anything, they'll pick it up quickly. How is it possible that those who work in derivatives find it that difficult to explain them. resistite's definition of derivatives is essentially what is taught to any beginner, so I don't quite understand how anyone with a finance background would find it difficult to explain (at least at a very general level).", "title": "" }, { "docid": "ea334ad4ac33cf1f6fb0128a5aba4dde", "text": "\"CFP stands for \"\"Certified Financial Planner\"\", and is a certification administered by the CFP board (a non-government non-profit entity). This has nothing to do with insurance, and CFP are not insurance agents. Many States require insurance agents to be explicitly licensed by the State as such, and only licensed insurance agents can advise on insurance products. When you're looking for an insurance policy as an investment vehicle, a financial adviser (CFP, or whatever else acronym on the business card - doesn't matter) may be helpful. But in any case, when dealing with insurance - talk to a licensed insurance agent. If your financial adviser is not a licensed tax adviser (EA/CPA licensed in your State) - talk to a licensed tax adviser about your options before making any decisions.\"", "title": "" }, { "docid": "06467e2f3a7c9a212616baf1037b9cdb", "text": "Ahh the vest. The mark of a Finance professional. Seriously, I don't know of any other person outside of a Finance career that wears it. My theory is that it's warm and it lessens the need to re-tuck your shirt every few minutes for those that don't have tailored shirts.", "title": "" }, { "docid": "e730d86efee5480370fa9b0defe04d2b", "text": "You need wealth in order to have a sovereign wealth fund. The countries that do it are usually petro states such as Norway and Saudi Arabia. Since petrol is in dollars, they sell oil and get dollars. They need a way to then spend this money, hence the wealth fund.", "title": "" }, { "docid": "0bd36117df316b80eab6b40eb5f3618d", "text": "\"From my understanding, a CDS is a financial product to buy protection against an event of \"\"default\"\" (default of payment). Example: if General Motors owes me money $10,000,000 (because I own GM bonds for example) and I wish to protect myself against the event of GM not repaying the money they owe me (event called \"\"credit default\"\"), I pay FinancialCompany_X (the seller of the CDS) perhaps $250,000 per year against the promise that FinancialCompany_X will pay me in case GM is not paying me. This way I protected myself against that risk. FinancialCompany_X took the risk (against money). A CDS is in fact an insurance. Except they don't call it an insurance which enabled the financial industry to avoid the regulation that applies to insurances. There is a lot of infos here: http://en.wikipedia.org/wiki/Credit_default_swap\"", "title": "" }, { "docid": "26de817b231e2cc50fe71bdd00bf0b18", "text": "Because the federal government won't use the money to buy a car thus generating profits for the car company. The aim of cheap loans is to drive sales of cars. The difference between the amount of interest paid on the loan, and the amount they could have got by investing it elsewhere, is simply a reduction in the profit. This is true whatever the actual interest rates are.", "title": "" }, { "docid": "2e6ffcf7409d456e200ca9836aa9a124", "text": "Credit products and securitized debt. Credit/debt is the flip side of equity but has less volatility. In today's investing environment people are not looking for a big return as much as less risk with a modest return. Another trend I think you will see is the disappearance of the wall between interest rate products/fixed income and credit products.", "title": "" }, { "docid": "92e80fce429e95ee5dfffd51e5ce41db", "text": "Financial advisors are a client facing role and their utilization of math is relatively limited as far as I am aware. Most of the bigger PWM/AWM groups do the analytical work at a head office and the FA's in the field are basically account men. Their entire livelihood is based around relationship management with their clients.", "title": "" } ]	fiqa
e8dbf104e533d1ff68218e7b63933f07	Cost basis allocation question: GM bonds conversion to stock & warrants	[ { "docid": "68f1c5e6229de1433d75d74a5955761f", "text": "This is a bit complicated because of all the moving parts, but is a little simpler because the two warrants are now publicly traded. The main rule appears to be that your cost should be apportioned into the bases for the pieces you received by the proportions of the prices established in the market on the first day of trading in which they trade separately (source: costbasis.com). Since the A and B GM warrants began trading in March 2011 (at least that's what a quick search shows), use their prices and the GM price on the same day to establish the proportions. You also must include the factor of how much of each piece you received for each of your bonds. So, for example, if the prices of GM, WSA, and WSB, were $32, $23, and $17 on the first day of trading, and you got 3 shares GM, 2 A warrants, and 1 B warrant for your bonds, their worth on first day of separate trading would be: and so the proportion of your bond cost to be allocated to your A warrants, for instance, would be 46/159 or about 28.9% using these example figures. The small dribbles of additional securities you have received already, I would include in the calculation above, and if you in the future receive any further dribbles, I would assign them a basis of $0 (as your full bond cost would have already been completely allocated).", "title": "" }, { "docid": "5f5fa3de79b9b0d7b8c2a415881e1f42", "text": "I found additional evidence on TDAmeritrade's website that helps confirm that the 3/17/11 prices Jason found are the ones to use since all three were traded on that day. Although GM+A had prices and trading as early as 2/28/11, GM+B's price and trading shows up no earlier than 3/14/11, but there was no trading indicated for GM+A on 3/14 so 3/14 can't be used. The two warrants were not traded every day after they came out. The next date that I found when all three, GM, GM+A and GM+B had trades was 4/11/11. I found Google and Yahoo Finance unable to produce the historical prices for the warrants that far back. Unfortunately, you need to be a TDA accountholder in order to access TDA's historical price information for stocks.", "title": "" }, { "docid": "f4303dc4fdce909f8af8b9e3d983cc1f", "text": "Because the distribution date was APR 21, 2011, THAT should be the correct date for ascertainng the stock prices of the GM stock and warrants. The subsequent distributions after April should also be allocated in accordance with their distribution dates, with tax basis being reduced from the original APR 21st date's allocations, and reallocated to those subsequent distributions, taking into account any interim sales you might have made.", "title": "" }, { "docid": "dfec1ad2a7b27423a232906f78bca790", "text": "Your final tax basis could not be determined until June 14, 2012, the first day of separate trading of all four securities that you received from the GM bankruptcy reorganization.", "title": "" } ]	[ { "docid": "49f29b55b33e9105340e11bfb78539e9", "text": "You also may want to consider how this interacts with the stepped up basis of estates. If you never sell the stock and it passes to your heirs with your estate, under current tax law the basis will increase from the purchase price to the market price at the time of transfer. In a comment, you proposed: Thinking more deeply though, I am a little skeptical that it's a free lunch: Say I buy stock A (a computer manufacturer) at $100 which I intend to hold long term. It ends up falling to $80 and the robo-advisor sells it for tax loss harvesting, buying stock B (a similar computer manufacturer) as a replacement. So I benefit from realizing those losses. HOWEVER, say both stocks then rise by 50% over 3 years. At this point, selling B gives me more capital gains tax than if I had held A through the losses, since A's rise from 80 back to 100 would have been free for me since I purchased at 100. And then later thought Although thinking even more (sorry, thinking out loud here), I guess I still come out ahead on taxes since I was able to deduct the $20 loss on A against ordinary income, and while I pay extra capital gains on B, that's a lower tax rate. So the free lunch is $20[number of shares]([my tax bracket] - [capital gains rates]) That's true. And in addition to that, if you never sell B, which continues to rise to $200 (was last at $120 after a 50% increase from $80), the basis steps up to $200 on transfer to your heirs. Of course, your estate may have to pay a 40% tax on the $200 before transferring the shares to your heirs. So this isn't exactly a free lunch either. But you have to pay that 40% tax regardless of the form in which the money is held. Cash, real estate, stocks, whatever. Whether you have a large or small capital gain on the stock is irrelevant to the estate tax. This type of planning may not matter to you personally, but it is another aspect of what wealth management can impact.", "title": "" }, { "docid": "67d0933ebc414d7cc9167018cbc619f2", "text": "I am not a tax professional, only an investment professional, so please take the following with a grain of salt and simply as informational guidance, not a personal recommendation or solicitation to buy/sell any security or as personal tax or investment advice. As Ross mentioned, you need to consult a tax advisor for a final answer concerning your friend's personal circumstances. In my experience advising hundreds of clients (and working directly with their tax advisors) the cost basis is used to calculate tax gain or loss on ordinary investments in the US. It appears to me that the Edward Jones description is correct. This has also been the case for me personally in the US with a variety of securities--stocks, options, futures, bonds, mutual funds, and exchange traded funds. From the IRS: https://www.irs.gov/uac/about-form-1099b Form 1099-B, Proceeds From Broker and Barter Exchange Transactions A broker or barter exchange must file this form for each person: Edward Jones should be able to produce a 1099b documenting the gains/losses of any investments. If the 1099b document is confusing, they might have a gain/loss report that more clearly delineates proceeds, capital returns, dividends, and other items related to the purchase and sale of securities.", "title": "" }, { "docid": "f469aad776f005ed531a025b282f05ad", "text": "This is great! I'm not a CPA, but work in finance. As such, my course/professional work is focused more on the economic and profitability aspects of transfer pricing. As you might imagine, it tended to analyze corporate strategy decisions under various cost allocation models, which you thoroughly discuss. I would agree with the statement that it is based on the matching principle but would like to add that transfer pricing is interesting as it falls under several fields: accounting, finance, and economics. Fundamentally it is based on the matching principal, but it's real world applications are based on all three (it's often used to determine divisional and even individual sales peoples profitability; as is the case with bank related funds transfer pricing on stuff like time deposits). In this case, the correct accounting principal allows you to, when done properly, better understand the economics, strategy, and operations of an organization. In effect, when done correctly, it provides transparency for strategic decision making to executives. As I said, since my coursework tended to focus more on that aspect, I definitely have a natural tendency towards it. This is an amazing explanation (esp. about interest on M&A bridge loans, I get that) of the more detailed stuff! Truthfully, I'm not as familiar with it and was just trying to show more of the conceptual than nitty-gritty. Thanks for the reply!", "title": "" }, { "docid": "be9423a0060236498153c933d648c914", "text": "\"There are two scenarios to determine the relevant date, and then a couple of options to determine the relevant price. If the stocks were purchased in your name from the start - then the relevant date is the date of the purchase. If the stocks were willed to you (i.e.: you inherited them), then the relevant date is the date at which the person who willed them to you had died. You can check with the company if they have records of the original purchase. If it was in \"\"street name\"\" - they may not have such records, and then you need to figure out what broker it was to hold them. Once you figured out the relevant date, contact the company's \"\"investor relationships\"\" contact and ask them for the adjusted stock price on that date (adjusted for splits/mergers/acquisitions/whatever). That would be the cost basis per share you would be using. Alternatively you can research historical prices on your favorite financial information site (Google/Yahoo/Bloomberg or the stock exchange where the company is listed). If you cannot figure the cost basis, or it costs too much - you can just write cost basis as $0, and claim the whole proceeds as gains. You'll pay capital gains tax on the whole amount, but that may end up being cheaper than conducting the investigation to reveal the actual numbers.\"", "title": "" }, { "docid": "3f8851d458841a55b140337c80cb1702", "text": "\"The first thing that it is important to note here is that the examples you have given are not individual bond prices. This is what is called the \"\"generic\"\" bond price data, in effect a idealised bond with the indicated maturity period. You can see individual bond prices on the UK Debt Management Office website. The meaning of the various attributes (price, yield, coupon) remains the same, but there may be no such bond to trade in the market. So let's take the example of an actual UK Gilt, say the \"\"4.25% Treasury Gilt 2019\"\". The UK Debt Management Office currently lists this bond as having a maturity date of 07-Mar-2019 and a price of GBP 116.27. This means that you will pay 116.27 to purchase a bond with a nominal value of GBP 100.00. Here, the \"\"nominal price\"\" is the price that HM Treasury will buy the bond back on the maturity date. Note that the title of the bond indicates a \"\"nominal\"\" yield of 4.25%. This is called the coupon, so here the coupon is 4.25%. In other words, the treasury will pay GBP 4.25 annually for each bond with a nominal value of GBP 100.00. Since you will now be paying a price of GBP 116.27 to purchase this bond in the market today, this means that you will be paying 116.27 to earn the nominal annual interest of 4.25. This equates to a 3.656% yield, where 3.656% = 4.25/116.27. It is very important to understand that the yield is not the whole story. In particular, since the bond has a nominal value of GBP100, this means that as the maturity date approaches the market price of the bond will approach the nominal price of 100. In this case, this means that you will witness a loss of capital over the period that you hold the bond. If you hold the bond until maturity, then you will lose GBP 16.27 for each nominal GBP100 bond you hold. When this capital loss is netted off the interest recieved, you get what is called the gross redemption yield. In this case, the gross redemption yield is given as approximately 0.75% per annum. NB. The data table you have included clearly has errors in the pricing of the 3 month, 6 month, and 12 month generics.\"", "title": "" }, { "docid": "78c1dad9e8e61a6da10385bf32fbcf66", "text": "Let's assume that the bonds have a par value of $1,000. If conversion happens, then one bond would be converted into 500 shares. The price in the market is unimportant. Regardless of the share price in the market, the income per share would be increased by the absence of $70 in interest expense. It would be decreased by the lost tax deduction. It would be further diluted by the increase in 500 shares. Likewise, the debt would be extinguished and the equity section increased. Whether it increased or decreased on a per share basis would depend upon the average amount paid in per share in the currently existing structure, adjusted for changes in retained earnings since the initial offering and for any treasury shares. There would be a loss in value, generally, if it is trading far from $2.00 because it would be valued based on the market price. Had the bond not converted, it would trade in the market as a pure bond if the stock price is far below the strike price and as an ordinary pure bond plus a premium if near enough to the strike price in a manner that depends upon the time remaining under the conversion privilege. I cannot think of a general case where someone would want to convert below strike and indeed, barring a very strange tax, inheritance or legal situation (such as a weird divorce), I cannot think of a case where it would make sense. It often does not make sense to convert far from maturity either as the option premium only vanishes well above $2. The primary case for conversion would be where the after-tax dividend is greater than the after-tax interest payment.", "title": "" }, { "docid": "b9d65921f3dd4bb75d269ea1873d8ddf", "text": "The default is FIFO: first in - first out. Unless you specifically instruct the brokerage otherwise, they'll report that the lot you've sold is of Jan 5, 2011. Note, that before 2011, they didn't have to report the cost basis to the IRS, and it would be up to you to calculate the cost basis at tax time, but that has been changed in 2011 and you need to make sure you've instructed the brokerage which lot exactly you're selling. I'm assuming you're in the US, in other places laws may be different.", "title": "" }, { "docid": "69c90279a1829fd8ce58e09cb7fd2a79", "text": "No. If you didn't specify LIFO on account or sell by specifying the shares you wish sold, then the brokers method applies. From Publication 551 Identifying stock or bonds sold. If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds. If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Pub. 550. The trick is to identify the stock lot prior to sale.", "title": "" }, { "docid": "18071d76fb5e7a6aa75d70485cbdb016", "text": "Thanks. I was trying to keep it pretty simple. I would mostly agree with you, and 100% on the first part. That gets as much into cost allocation methods as anything else though (a topic I just didn't feel like going into haha. You could do a whole managerial accounting course on it). My caveat is the only time when C-suites screw up transfer pricing and division economics are if they don't fully understand the cost allocation going on behind the scenes. I've seen too many get bogged down with analysts pressing against unprofitable divisions without FULLY taking into account the intricacies of various costing methods (some of which are better than others!). I think 90% of the time the C-suite gets it. I've just seen a number (ESP small companies) who don't, and end up really screwing things up. Again though, GE is the master of accounting.", "title": "" }, { "docid": "ac96c3696939f1378a084c68042a70ab", "text": "\"They do not. M&A execution is housed within industry coverage groups; there's no separate group that executes. They have a group called \"\"M&A\"\" that advises on tax structuring, anti-raid, and other assorted issues (e.g. MASA) but they don't run the model and they're not really executing. Most of the people there are ex-lawyers or experienced bankers. Trust me on this, if you tell someone at GS you're interested in working in the M&A group, you're not getting an offer.\"", "title": "" }, { "docid": "f08935866a28093a6c1ec0b4ac63cb12", "text": "Okay- I follow that. When we look a shorting a name - what makes that an equity transaction rather than a debt one? I guess how does that differ from investing in a bond? I recognize the simplicity of this question. Thanks.", "title": "" }, { "docid": "380476c51408ac4361b1508bd290e98e", "text": "\"During GM's Chapter 11 reorganization in 2009, a new company was formed, with new stock. The old General Motors Corporation was renamed to \"\"Motors Liquidation Company,\"\" and the new company was named \"\"General Motors Company.\"\" The new company purchased some of the assets from the old company, and the old company was left to sell off the remaining assets and settle the debts. None of the stock transferred from the old company to the new one; if you were a GM stockholder of the old company and didn't sell, it is now worthless. When the new company formed, the stock was not traded publicly. The company was primarily owned by the United States and Canadian governments; together, they owned 72.5%. In 2010, GM had an IPO, and the US government sold most of their stake. By the end of 2013, the US government sold the remaining stake; the government no longer has any ownership in GM. When we talk about voting rights for stockholders, we are mainly talking about voting for the members of the board of directors. And yes, the government did indeed have a hand in selecting the board of the new company. The Treasury Department selected 10 members of the board, and the Canadian government selected 1 member. There were 19 board members total. (Source) Unlike some companies, there are not \"\"voting\"\" and \"\"non-voting\"\" classes of GM stock. All the shares sold by the US government are voting shares. Additional Sources:\"", "title": "" }, { "docid": "e9343d55d9c40a3883063ddba8f15f63", "text": "\"at $8.50: total profit = $120.00 *basis of stock, not paid in cash, so not included in \"\"total paid\"\" at $8.50: total profit = $75.00\"", "title": "" }, { "docid": "57fb897c059fe117bf76781c5306adb8", "text": "\"Thanks for the response. I am using WRDS database and we are currently filtering through various variables like operating income, free cash flow etc. Main issue right now is that the database seems to only go up to 2015...is there a similar database that has 2016 info? filtering out the \"\"recent equity issuance or M&A activity exceeding 10% of total assets\"\" is another story, namely, how can I identify M&A activity? I suppose we can filter it with algorithm stating if company's equity suddenly jumps 10% or more, it get's flagged\"", "title": "" }, { "docid": "ad583b8150b66387306f405e29f9831a", "text": "The average price would be $125 which would be used to compute your basis. You paid $12,500 for the stock that is now worth $4,500 which is a loss of $8,000 overall if you sell at this point.", "title": "" } ]	fiqa
23356f49135f50168f428a8a8c43c90f	Should an IRA be disclaimed to allow it to be distributed according to a will?	[ { "docid": "36dc4003aa8566c138d2964fa3226125", "text": "There are two different possible taxes based on various scenarios proposed by the OP or the lawyer who drew up the OP's father's will or the OP's mother. First, there is the estate tax which is paid by the estate of the deceased, and the heirs get what is left. Most estates in the US pay no estate tax whatsoever because most estates are smaller than $5.4M lifetime gift and estate tax exemption. But, for the record, even though IRAs pass from owner to beneficiary independent of whatever the will might say about the disposition of the IRAs, the value of the deceased's IRAs is part of the estate, and if the estate is large enough that estate tax is due and there is not enough money in the rest of the estate to pay the estate tax (e.g. most of the estate value is IRA money and there are no other investments, just a bank account with a small balance), then the executor of the will can petition the probate court to claw back some of the IRA money from the IRA beneficiaries to pay the estate tax due. Second, there is income tax that the estate must pay on income received from the estate's assets, e.g. mutual fund dividends paid between the date of death and the distribution of the assets to the beneficiaries, or income from cashing in IRAs that have the estate as the beneficiary. Now, most of OP's father's estate is in IRAs which have the OP's mother as the primary beneficiary and there are no named secondary beneficiaries. Thus, by default, the estate is the IRA beneficiary should the OP's mother disclaim the IRAs as the lawyer has suggested. As @JoeTaxpayer says in a comment, if the OP's mother disclaims the IRA, then the estate must distribute all the IRA assets to the three beneficiaries by December 31 of the year in which the fifth anniversary of the death occurs. If the estate decides to do this by itself, then the distribution from the IRA to the estate is taxable income to the estate (best avoided if possible because of the high tax rates on trusts). What is commonly done is that before December 31 of the year following the year in which the death occurred, the estate (as the beneficiary) informs the IRA Custodian that the estate's beneficiaries are the surviving spouse (50%), and the two children (25% each) and requests the IRA custodian to divide the IRA assets accordingly and let each beneficiary be responsible for meeting the requirements of the 5-year rule for his/her share. Any assets not distributed in timely fashion are subject to a 50% excise tax as penalty each year until such time as these monies are actually withdrawn explicitly from the IRA (that is, the excise tax is not deducted from the remaining IRA assets; the beneficiary has to pay the excise tax out of pocket). As far as the IRS is concerned, there are no yearly distribution requirements to be met but the IRA Custodial Agreement might have its own rules, and so Publication 590b recommends discussing the distribution requirements for the 5-year rule with the IRA Custodian. The money distributed from the IRA is taxable income to the recipients. In particular, the children cannot roll the money over into another IRA so as to avoid immediate taxation; the spouse might be able to roll over the money into another IRA, but I am not sure about this; Publication 590b is very confusing on this point. All this is assuming that the deceased passed away before well before his 70.5th birthday so that there are no issues with RMDs (the interactions of all the rules in this case is an even bigger can of worms that I will leave to someone else to explicate). On the other hand, if the OP's mother does not disclaim the IRAs, then she, as the surviving spouse, has the option of treating the inherited IRAs as her own IRAs, and she could then name her two children as the beneficiaries of the inherited IRAs when she passes away. Of course, by the same token, she could opt to make someone else the beneficiary (e.g, her children from a previous marriage) or change her mind at any later time and make someone else the beneficiary (e.g. if she remarries, or becomes very fond of the person taking care of her in a nursing home and decides to leave all her assets to this person instead of her children, etc). But even if such disinheritances are unlikely and the children are perfectly happy to wait to inherit till Mom passes away, as JoeTaxpayer points out, by not disclaiming the IRAs, the OP's mother can delay taking distributions from the IRAs till age 70.5, etc. which is also a good option to have. The worst scenario is for the OP's mother to not disclaim the IRAs, cash them in right away (huge income tax whack on her) or at least 50% of them, and gift the OP and his sibling half of what she withdrew (or possibly after taking into account what she had to pay in income tax on the distribution). Gift tax need not be paid by the OP's mother if she files Form 709 and reduces her lifetime combined gift and estate tax exemption, and the OP and his sibling don't owe any tax (income or otherwise) on the gift amount. But, all that money has changed from tax-deferred assets to ordinary assets, and any additional earnings on these assets in the future will be taxable income. So, unless the OP and his sibling need the cash right away (pay off credit card debt, make a downpayment on a house, etc), this is not a good idea at all.", "title": "" }, { "docid": "62d87d57d8983cfcd5b6402e797eeef7", "text": "She is very wrong. If the IRA is a traditional, i.e. A pretax IRA (not a Roth), all withdrawals are subject to tax at one's marginal rate. Read that to mean that a large sum can easily push her into higher brackets than normal. If it stayed with her, she'd take smaller withdrawals and be able to throttle her tax impact. Once she takes it all out, and gifts it to you, no gift tax is due, but there's form 709, where it's declared, and counts against her $5.5M lifetime estate exemption. There are a few things in the world of finance that offend me as much as lawyer malpractice, going into an area they are ignorant of.", "title": "" } ]	[ { "docid": "fb9d030ac35296ba5c9fae89e43b890a", "text": "Once upon a time, money rolled over from a 401k or 403b plan into an IRA could not be rolled into another 401k or 403b unless the IRA account was properly titled as a Rollover IRA (instead of Traditional IRA - Roth IRAs were still in the future) and the money kept separate (not commingled) with contributions to Traditional IRAs. Much of that has fallen by the way side as the rules have become more relaxed. Also the desire to roll over money into a 401k plan at one's new job has decreased too -- far too many employer-sponsored retirement plans have large management fees and the investments are rarely the best available: one can generally do better keeping ex-401k money outside a new 401k, though of course new contributions from salary earned at the new employer perforce must be put into the employer's 401k. While consolidating one's IRA accounts at one brokerage or one fund family certainly saves on the paperwork, it is worth keeping in mind that putting all one's eggs in one basket might not be the best idea, especially for those concerned that an employee might, like Matilda, take me money and run Venezuela. Another issue is that while one may have diversified investments at the brokerage or fund family, the entire IRA must have the same set of beneficiaries: one cannot leave the money invested in GM stock (or Fund A) to one person and the money invested in Ford stock (or Fund B) to another if one so desires. Thinking far ahead into the future, if one is interested in making charitable bequests, it is the best strategy tax-wise to make these bequests from tax-deferred monies rather than from post-tax money. Since IRAs pass outside the will, one can keep separate IRA accounts with different companies, with, say, the Vanguard IRA having primary beneficiary United Way and the Fidelity IRA having primary beneficiary the American Cancer Society, etc. to achieve the appropriate charitable bequests.", "title": "" }, { "docid": "df4fa1cf349ebf78d37f57c8c81557e5", "text": "\"> Who gets control of your wealth when you pass away then? If someone has no remaining heirs in his/her generation then he/she can leave the money to the charity/non-profit of choice. Of course, it would be illegal to set up the \"\"give lots of money to Mr. Burns descendants\"\" endowment.\"", "title": "" }, { "docid": "49f29b55b33e9105340e11bfb78539e9", "text": "You also may want to consider how this interacts with the stepped up basis of estates. If you never sell the stock and it passes to your heirs with your estate, under current tax law the basis will increase from the purchase price to the market price at the time of transfer. In a comment, you proposed: Thinking more deeply though, I am a little skeptical that it's a free lunch: Say I buy stock A (a computer manufacturer) at $100 which I intend to hold long term. It ends up falling to $80 and the robo-advisor sells it for tax loss harvesting, buying stock B (a similar computer manufacturer) as a replacement. So I benefit from realizing those losses. HOWEVER, say both stocks then rise by 50% over 3 years. At this point, selling B gives me more capital gains tax than if I had held A through the losses, since A's rise from 80 back to 100 would have been free for me since I purchased at 100. And then later thought Although thinking even more (sorry, thinking out loud here), I guess I still come out ahead on taxes since I was able to deduct the $20 loss on A against ordinary income, and while I pay extra capital gains on B, that's a lower tax rate. So the free lunch is $20[number of shares]([my tax bracket] - [capital gains rates]) That's true. And in addition to that, if you never sell B, which continues to rise to $200 (was last at $120 after a 50% increase from $80), the basis steps up to $200 on transfer to your heirs. Of course, your estate may have to pay a 40% tax on the $200 before transferring the shares to your heirs. So this isn't exactly a free lunch either. But you have to pay that 40% tax regardless of the form in which the money is held. Cash, real estate, stocks, whatever. Whether you have a large or small capital gain on the stock is irrelevant to the estate tax. This type of planning may not matter to you personally, but it is another aspect of what wealth management can impact.", "title": "" }, { "docid": "8459f004f4e0af10ecbb3300600c0704", "text": "\"First - for anyone else reading - An IRA that has no beneficiary listed on the account itself passes through the will, and this eliminates the opportunity to take withdrawals over the beneficiaries' lifetimes. There's a five year distribution requirement. Also, with a proper beneficiary set up on the IRA account the will does not apply to the IRA. An IRA with me as sole beneficiary regardless of the will saying \"\"all my assets I leave to the ASPCA.\"\" This is also a warning to keep that beneficiary current. It's possible that one's ex-spouse is still on IRA or 401(k) accounts as beneficiary and new spouse is in for a surprise when hubby/wife passes. Sorry for the tangent, but this is all important to know. The funneling of a beneficiary IRA through a trust is not for amateurs. If set up incorrectly, the trust will not allow the stretch/lifetime withdrawals, but will result in a broken IRA. Trusts are not cheap, nor would I have any faith in any attorney setting it up. I would only use an attorney who specializes in Trusts and Estate planning. As littleadv suggested, they don't have to be minors. It turns out that the expense to set up the trust ($1K-2K depending on location) can help keep your adult child from blowing through a huge IRA quickly. I'd suggest that the trust distribute the RMDs in early years, and a higher amount, say 10% in years to follow, unless you want it to go just RMD for its entire life. Or greater flexibility releasing larger amounts based on life events. The tough part of that is you need a trustee who is willing to handle this and will do it at a low cost. If you go with Child's name only, I don't know many 18/21 year old kids who would either understand the RMD rules on IRAs or be willing to use the money over decades instead of blowing it. Edit - A WSJ article Inherited IRAs: a Sweet Deal and my own On my Death, Please, Take a Breath, an article that suggests for even an adult, education on how RMDs work is a great idea.\"", "title": "" }, { "docid": "0d1246ed1d6f0a9677726f03e26d78a8", "text": "Because this is Money.SE and you're connecting it to offspring, I'd think about a discussion with them to get their agreements. From my perspective, anything (my wife and) I have will go to offspring in the end. As such, everything borrowed and not repaid simply reduces the estate by that much. Among multiple offspring, such reductions should be against the borrower rather than spreading it out. That should be accounted for in whatever will is created. This would be the discussion point. It might also be discussed how or even if any interest should accrue for unpaid amounts. If, for example, a 1% APR is agreed upon for unpaid loans, then the final principle+interest amount is taken off of the borrower's inheritance. Existing outstanding loans might (or might not!) be useful examples for sample calculations if desired or needed. (If nothing else, they might serve as reminders that loans were not forgotten.) By having such a discussion, you can show that you are trying to plan for a fair distribution of your estate, perhaps thereby sidestepping any concern about charging interest to offspring for repaid loans. At the same time, you're handing over some financial responsibility, giving them a power of personal choice, which seems to be a part of what you're concerned about. Once such a discussion is started, it's possible that any question of interest will resolve itself naturally. The discussion almost necessarily must include all offspring at once. One will find it harder to negotiate from a standpoint of pure self-interest without objection from another. Think beforehand about what will be said and about what responses might come. Think things through as much as you can.", "title": "" }, { "docid": "a83b5dd0290b284fe4ca0d42b88cebfd", "text": "\"All transactions within an IRA are irrelevant as far as the taxation of the distributions from the IRA are concerned. You can only take cash from an IRA, and a (cash) distribution from a Traditional IRA is taxable as ordinary income (same as interest from a bank, say) without the advantage of any of the special tax rates for long-term capital gains or qualified dividends even if that cash was generated within the IRA from sales of stock etc. In short, just as with what is alleged to occur with respect to Las Vegas, what happens within the IRA stays within the IRA. Note: some IRA custodians are willing to make a distribution of stock or mutual fund shares to you, so that ownership of the 100 shares of GE, say, that you hold within your IRA is transferred to you in your personal (non-IRA) brokerage account. But, as far as the IRS is concerned, your IRA custodian sold the stock as the closing price on the day of the distribution, gave you the cash, and you promptly bought the 100 shares (at the closing price) in your personal brokerage account with the cash that you received from the IRA. It is just that your custodian saved the transaction fees involved in selling 100 shares of GE stock inside the IRA and you saved the transaction fee for buying 100 shares of GE stock in your personal brokerage account. Your basis in the 100 shares of GE stock is the \"\"cash_ that you imputedly received as a distribution from the IRA, so that when you sell the shares at some future time, your capital gains (or losses) will be with respect to this basis. The capital gains that occurred within the IRA when the shares were imputedly sold by your IRA custodian remain within the IRA, and you don't get to pay taxes on that at capital gains rates. That being said, I would like to add to what NathanL told you in his answer. Your mother passed away in 2011 and you are now 60 years old (so 54 or 55 in 2011?). It is likely that your mother was over 70.5 years old when she passed away, and so she likely had started taking Required Minimum Distributions from her IRA before her death. So, You should have been taking RMDs from the Inherited IRA starting with Year 2012. (The RMD for 2011, if not taken already by your mother before she passed away, should have been taken by her estate, and distributed to her heirs in accordance with her will, or, if she died intestate, in accordance with state law and/or probate court directives). There would not have been any 10% penalty tax due on the RMDs taken by you on the grounds that you were not 59.5 years old as yet; that rule applies to owners (your mom in this case) and not to beneficiaries (you in this case). So, have you taken the RMDs for 2012-2016? Or were you waiting to turn 59.5 before taking distributions in the mistaken belief that you would have to pay a 10% penalty for early wthdrawal? The penalty for not taking a RMD is 50% of the amount not distributed; yes, 50%. If you didn't take RMDs from the Inherited IRA for years 2012-2016, I recommend that you consult a CPA with expertise in tax law. Ask the CPA if he/she is an Enrolled Agent with the IRS: Enrolled Agents have to pass an exam administered by the IRS to show that they really understand tax law and are not just blowing smoke, and can represent you in front of the IRS in cases of audit etc,\"", "title": "" }, { "docid": "d90d0c190348a1293aef06588932c858", "text": "No. Disclaimer - As a US educated fellow, I needed to search a bit. I found an article 7 Common SMSF Pension Errors. It implied that there are minimum payments required each year as with our US retirement accounts. These minimums are unrelated to the assets within the account, just based on the total value. The way I read that, there would be a point where you'd have to sell a property or partial interest to be sure you have the cash to distribute each year. I also learned that unlike US rules, which permit a distribution of stock as part of a required minimum distribution, in Australia, the distribution must be in cash (or a deposited check, of course.)", "title": "" }, { "docid": "65d0e65fc15b89d957ea8f4aacf84849", "text": "Brokerages are supposed to keep your money separate from theirs. So, even if they fail as a company, your money and investments are still there, and can be transferred to another brokerage. It doesn't matter if it's an IRA or taxable account. Of course, as is the case with MF Global, if illegally take their client's money (i.e., steal), it may be a different story. In such cases, SIPC covers up to $500K, of which $250K can be cash, as JoeTaxpayer said. You may be interested in the following news item from the SEC. It's about some proposed changes, but to frame the proposal they lay out the way it is now: http://www.sec.gov/news/press/2011/2011-128.htm The most relevant quote: The Customer Protection Rule (Rule 15c3-3). This SEC rule requires a broker-dealer to segregate customer securities and cash from the firm’s proprietary business activities. If the broker-dealer fails, these customer assets should be readily available to be returned to customers.", "title": "" }, { "docid": "8f77159e3b4d193b5e3b72e959ddf5cf", "text": "You don't need to submit a K-1 form to anyone, but you will need to transcribe various entries on the K-1 form that you will receive onto the appropriate lines on your tax return. Broadly speaking, assets received as a bequest from someone are not taxable income to you but any money that was received by your grandmother's estate between the time of death and the time of distribution of the assets (e.g. interest, mutual fund distributions paid in cash, etc) might be passed on to you in full instead of the estate paying income tax on this income and sending you only the remainder. If so, this other money would be taxable income to you. The good news is that if the estate trust distributions include stock, your basis for the stock is the value as of the date of death (nitpickers: I am aware that the estate is allowed to pick a different date for the valuation but I am trying to keep it simple here). That is, if the stock has appreciated, your grandmother never paid capital gains on those unrealized capital gains, and you don't have to pay tax on those capital gains either; your basis is the appreciated value and if and when you sell the stock, you pay tax only on the gain, if any, between the day that Grandma passed away and the day you sell the stock.", "title": "" }, { "docid": "61bca5eaadfad484bdc2f9c3fa39eb81", "text": "You should talk to a tax professional in your area. It seems like you should start filing your returns. In the US there are certain income thresholds that need to be attained before a return is required, though it's often thought of as best practice to file anyway. Also in the US there are programs designed to encourage delinquent filers to begin filing again, which may include penalty/fee reduction for voluntarily filing. Somehow I suspect Canada has similar programs. If you stand to inherit a sizable amount of money it seems that you should have a history of tax returns in order to minimize the number of questions that are asked should the money come your way. I'd talk to a tax person before consulting an attorney. From the tone of your question the Canadian tax authority hasn't initiated anything against you. You just want to understand the best course of action regarding your tax situation.", "title": "" }, { "docid": "bed338db9cdf1dd0f3be10e06e8adaf3", "text": "\"Yes, this is restricted by law. In plain language, you can find it on the IRS website (under the heading \"\"When Can a Retirement Plan Distribute Benefits?\"\"): 401(k), profit-sharing, and stock bonus plans Employee elective deferrals (and earnings, except in a hardship distribution) -- the plan may permit a distribution when you: •terminate employment (by death, disability, retirement or other severance from employment); •reach age 59½; or •suffer a hardship. Employer profit-sharing or matching contributions -- the plan may permit a distribution of your vested accrued benefit when you: •terminate employment (by death, disability, retirement or other severance from employment); •reach the age specified in the plan (any age); or •suffer a hardship or experience another event specified in the plan. Form of benefit - the plan may pay benefits in a single lump-sum payment as well as offer other options, including payments over a set period of time (such as 5 or 10 years) or a purchased annuity with monthly lifetime payments. Source: https://www.irs.gov/retirement-plans/plan-participant-employee/when-can-a-retirement-plan-distribute-benefits If you want to actually see it in the law, check out 26 USC 401(k)(2)(B)(i), which lists the circumstances under which a distribution can be made. You can get the full text, for example, here: https://www.law.cornell.edu/uscode/text/26/401 I'm not sure what to say about the practice of the company that you mentioned in your question. Maybe the law was different then?\"", "title": "" }, { "docid": "5a33bbdef2b4959cf73e8714d21e6725", "text": "Is there a better vehicle for this than an index fund? Seems like a good choice to me, unless you want to protect it from market risk since it's in essence an emergency fund, in which case maybe you'd want to keep some of it in CD's. Are significant downsides to keeping the money in our name until he needs it? The main downside would be if you had need to dole out more than the maximum annual gift exclusion amount in a single year (currently $14,000), you'd have to report it as a taxable gift on your tax return and it'd count toward your lifetime gift exclusion. You and your wife can each give a gift, and if your brother were married you and your wife could each give to both he and his spouse, so 2-4x the annual gift limit before this becomes an issue. Additionally you can pay medical/education expenses directly and that is not counted toward the annual exclusion. Are there any other considerations that we are overlooking? There's always a risk that gift-giving can create expectation and/or resentment. I'd think you'd want to make instances of giving not sound like something you planned for, but something you are sacrificing for. Not sure what the best strategy is there, every family is different when it comes to dealing with finances.", "title": "" }, { "docid": "cd8357d402dd8084d8d89d0fc81cd792", "text": "Of course, you've already realized that some of that is that smaller estates are more common than larger estates. But it seems unlikely that there are four times as many estates between $10 and $11 million as above that range. People who expect to die with an estate subject to inheritance tax tend to prepare. I don't know how common it is, but if the surviving member of a couple remarries, then the new spouse gets a separate exemption. And of course spouses inherit from spouses without tax. In theory this could last indefinitely. In practice, it is less likely. But if a married couple has $20 million, the first spouse could leave $15 million to the second and $5 million to other heirs. The second spouse could leave $10 million to a third spouse (after remarrying) and another $5 million to children with the first spouse. All without triggering the estate tax. People can put some of their estate into a trust. This can allow the heirs to continue to control the money while not paying inheritance tax. Supposedly Ford (of Ford Motor Company) took that route. Another common strategy is to give the maximum without gift tax each year. That's at least $14k per donor and recipient per year. So a married couple with two kids can transfer $56k per year. Plus $56k for the kids' spouses. And if there are four grandchildren, that's another $112k. Great-grandchildren count too. That's more than a million every five years. So given ten years to prepare, parents can transfer $2 million out of the estate and to the heirs without tax. Consider the case of two wealthy siblings. They've each maxed out their gifts to their own heirs. So they agree to max out their gifts to their sibling's heirs. This effectively doubles the transfer amount without tax implication. Also realize that they can pretransfer assets at the current market rate. So if a rich person has an asset that is currently undervalued, it may make sense to transfer it immediately as a gift. This will use up some of the estate exemption. But if you're going to transfer the asset eventually, you might as well do so when the value is optimal for your purpose. These are just the easy things to do. If someone wants, they can do more complicated things that make it harder for the IRS to track value. For example, the Bezos family invested in Amazon.com when Jeff Bezos was starting it. As a result, his company could survive capital losses that another company might not. The effect of this was to make him fabulously rich and his parents richer than they were. But he won't pay inheritance tax until his parents actually transfer the estate to him (and I believe they actually put it in a charitable trust). If his company had failed instead, he still would have been supported by the capital provided by his parents while it was open (e.g. his salary). But he wouldn't have paid inheritance tax on it. There are other examples of the same pattern: Fred Smith of FedEx; Donald Trump; Bill Gates of Microsoft; etc. The prime value of the estate was not in its transfer, but in working together while alive or through a family trust. The child's company became much more valuable as a result of a parent's wealth. And in two of those examples, the child was so successful that the parent became richer as a result. So the parent's estate does count. Meanwhile, another company might fail, leaving the estate below the threshold despite a great deal of parental support. And those aren't even fiddles. Those children started real companies and offered their parents real investment opportunities. A family that wants to do so can do a lot more with arrangements. Of course, the IRS may be looking for some of them. The point being that the estate might be more than $11 million earlier, but the parents can find ways to reduce it below the inheritance tax exemption by the time that they die.", "title": "" }, { "docid": "127a6a24cda39e7ef42bb5093636183c", "text": "Yes. If the deceased owned the policy, the proceeds are considered part of the estate. In the specific case where the estate is worth (this year 2011) more than $5M, there may be estate taxes due and the insurance would be prorated to pay its portion of that estate tax bill. Keep in mind, the estate tax itself is subject to change. I recall when it was a simple $1M exemption, and if I had a $1M policy and just say $100K in assets, there would have been tax due on the $100K. In general, if there's any concern that one's estate would have the potential to owe estate tax, it's best to have the insurance owned by the beneficiary and gift them the premium cost each year.", "title": "" }, { "docid": "18d1512abda4de57076a40fc825450fd", "text": "You bring up a valid concern. IRAs are good retirement instruments as long as the rules don't change. History has shown that governments can change the rules regarding retirement accounts. As long as you have some of your retirement assets outside of an IRA I think IRAs are good ways to save for retirement. It's not possible to withdraw the money before retirement without penalty. Also, you will be penalized if you do not withdraw enough when you do retire.", "title": "" } ]	fiqa
0726c63adb5fb82cdaf974f9920d34f7	Lowest Interest Options for Short-Term Loan	[ { "docid": "9ea698ba1a4770554825ae07b39c0acb", "text": "\"Also talk to your bank(s) or credit union(s); first one of mine I looked at offers an unsecured loan at 7% variable, and a signature loan at 7.5% fixed, no hidden costs on either. You might do better. Also check store credit. Sears used to offer 1-year-0% financing on appliances if you signed up for the store's card at the time of purchase, and if you have the discipline to reliably pay it off before interest hits that's a hard deal to best. Other stores have offered something similar for major purchases of this sort; do some homework to find out who. (I bought my fridge that way, paying it in month 10.) The \"\"catch\"\" is that many people get distracted and do wind up paying interest, and the store hopes that having an account with them will encourage you to shop there more often.)\"", "title": "" } ]	[ { "docid": "f6a6169d9a0572bb2db48ad625e6a4ea", "text": "A normal FSA also gives you a short term loan: money earmarked is available in entirety immediately, while you repay it every paycheck. This is interest free, and if you time your large planned medical expenses for January, can be a nice cheap loan.", "title": "" }, { "docid": "8669ca18d1876d62225229827919ee84", "text": "\"Depends on how far down the market is heading, how certain you are that it is going that way, when you think it will fall, and how risk-averse you are. By \"\"better\"\" I will assume you are trying to make the most money with this information that you can given your available capital. If you are very certain, the way that makes the most money for the least investment from the options you provided is a put. If you can borrow some money to buy even more puts, you will make even more. Use your knowledge of how far and when the market will fall to determine which put is optimal at today's prices. But remember that if the market stays flat or goes up you lose everything you put in and may owe extra to your creditor. A short position in a futures contract is also an easy way to get extreme leverage. The extremity of the leverage will depend on how much margin is required. Futures trade in large denominations, so think about how much you are able to put to risk. The inverse ETFs are less risky and offer less reward than the derivative contracts above. The levered one has twice the risk and something like twice the reward. You can buy those without a margin account in a regular cash brokerage, so they are easier in that respect and the transactions cost will likely be lower. Directly short selling an ETF or stock is another option that is reasonably accessible and only moderately risky. On par with the inverse ETFs.\"", "title": "" }, { "docid": "2bcdda60f3b4d3e30dc4ab0a0479d764", "text": "\"Dave Ramsey would tell you to pay the smallest debt off first, regardless of interest rate, to build momentum for your debt snowball. Doing so also gives you some \"\"wins\"\" sooner than later in the goal of becoming debt free.\"", "title": "" }, { "docid": "8d9a776d08c206dacd7cec3133072133", "text": "\"With (1), it's rather confusing as to where \"\"interest\"\" refers to what you're paying and where it refers to what you're being paid, and it's confusing what you expect the numbers to work out to be. If you have to pay normal interest on top of sharing the interest you receive, then you're losing money. If the lending bank is receiving less interest than the going market rate, then they're losing money. If the bank you've deposited the money with is paying more than the going market rate, they're losing money. I don't see how you imagine a scenario where someone isn't losing money. For (2) and (3), you're buying stocks on margin, which certainly is something that happens, but you'll have to get an account that is specifically for margin trading. It's a specific type of credit with specific rules, and you if you want to engage in this sort of trading, you should go through established channels rather than trying to convert a regular loan into margin trading. If you get a personal loan that isn't specifically for margin trading, and buy stocks with the money, and the stocks tank, you can be in serious trouble. (If you do it through margin trading, it's still very risky, but not nearly as risky as trying to game the system. In some cases, doing this makes you not only civilly but criminally liable.) The lending bank absolutely can lose if your stocks tank, since then there will be nothing backing up the loan.\"", "title": "" }, { "docid": "eb075ec99e3a7eff8edf3ac57e3f431a", "text": "In france you have several options: A good place to starts with: 1% as of may 2015 interest is low, but's money is 100% liquid (you can withdraw antime). You got slightly superior interest rates, and have to wire at least 45€ a month on it. It gives you lots of advantages if you use it to buy a house. You cannot use the money unless you close the account, so it's not as flexible. You get 2% rates as of may 2015 which is quite good. [If you open this account now, it's only 1% making it not so attractive. Look at Life Insurance Instead.] This one is useless: interest rate is too low. I highly recommend this one. You can open it with 0 cost with several online banks (ing, boursorama, ...) Minimum deposit should be around 1000€. Rate is flexible, but usually higher than what you get with the others. You shouldn't withdraw the money before 8 years (because of taxes, but you can still do it if you need). You can add money on it later if you want. Because of the 8 year duration, it's better to open one as soon as you can, even with the minimum amount. Open an PEL + Livret A + Life insurance. Put the minimum on both PEL + life insurance. Put every thing else on Livret A. If you are 100% sure you don't need some of the livret A money, send it to PEL. [As of 2017, PEL is not so attractive anymore. Bet on the Life Insurance instead, unless your account was open prior to this].", "title": "" }, { "docid": "c1065ee20942a2afea1ec71785bc1d8f", "text": "Makes sense so long as you can afford it while still maintaining at least six months living reserves. The sooner you own outright a decreasing asset the better which should be considered when selecting your loan term. However, with today's low rates and high performing stock market you may want to consider allowing that money to be put to better use. It all depends how risk adverse you are. That emotional aide of this decision and emotions have value, but only you can determine what that value is. So - generally speaking, the sooner you own an asset of decreasing value the better off you are, but in exceptionally low interest rate environments such as today there are, as mentioned, other things you may want to consider. Good luck and enjoy your new ride. Nothing better then some brand new wheels aye.", "title": "" }, { "docid": "25165446ba66ac50fff2c85cdaff029d", "text": "Ben already covered most of this in his answer, but I want to emphasize the most important part of getting a loan with limited credit history. Go into a credit union or community bank and talk to the loan officer there in person. Ask for recommendations on how much they would lend based on your income to get the best interest rate that they can offer. Sometimes shortening the length of the loan will get you a lower rate, sometimes it won't. (In any case, make sure you can pay it off quickly no matter the term that you sign with.) Each bank may have different policies. Talk to at least two of them even if the first one offers you terms that you like. Talking to a loan officer is valuable life experience, and if you discuss your goals directly with them, then they will be able to give you feedback about whether they think a small loan is worth their time.", "title": "" }, { "docid": "d76c232eae67ce53df0a866d6dfaec66", "text": "I would put about a month's worth of expenses in the highest-paying savings account that you find convenient to access. For the rest, I recommend Ally's High-Yield CDs — specifically, the 5-year option. Normally 5 years would be way too long to commit short-term savings to a CD. However, the Ally CDs allow you to break them for a penalty of only two months worth of interest. If you look at the graph below (from when the rates were 3.09% APY), you can see the effective interest rate at every possible time you break the CD early. Doing the math, if you can keep your savings in the account for at least four months, it will outperform any other current FDIC-backed investment that I am aware of, for the length of time the money was invested. (credit: MyMoneyBlog)", "title": "" }, { "docid": "7e33d6cc87fcb2c47d6eb1a0b9675d66", "text": "You may also want to consider short term, low risk investments. Rolling Certificate of Deposits can be good for this. They don't grow like an Index Fund but there's 0 risk and they will grow faster than your bank. For my bank as an example today's rates on my Money Market is 0.10% APY while the lowest CD (90 days) is 0.20% APY with a 5 year going up to 0.90% APY. It's not substantial by any stretch but its secure and the money would just be sitting in my bank otherwise. For more information look at: What is CD laddering and what are its pros and cons?", "title": "" }, { "docid": "7f36c05d8eff0f82f58f3cdf2cc742d0", "text": "The safest investment in the United States is Treasures. The Federal Reserve just increased the short term rate for the first time in about seven years. But the banks are under no obligation to increase the rate they pay. So you (or rather they) can loan money directly to the United States Government by buying Bills, Notes, or Bonds. To do this you set up an account with Treasury Direct. You print off a form (available at the website) and take the filled out form to the bank. At the bank their identity and citizenship will be verified and the bank will complete the form. The form is then mailed into Treasury Direct. There are at least two investments you can make at Treasury Direct that guarantee a rate of return better than the inflation rate. They are I-series bonds and Treasury Inflation Protected Securities (TIPS). Personally, I prefer the I-series bonds to TIPS. Here is a link to the Treasury Direct website for information on I-series bonds. this link takes you to information on TIPS. Edit: To the best of my understanding, the Federal Reserve has no ability to set the rate for notes and bonds. It is my understanding that they can only directly control the overnight rate. Which is the rate the banks get for parking their money with the Fed overnight. I believe that the rates for longer term instruments are set by the market and are not mandated by the Fed (or anyone else in government). It is only by indirect influence that the Fed tries to change long term rates.", "title": "" }, { "docid": "f62e1d6e5427c04a8259add514d801be", "text": "I struggle to see the value to this risk from the standpoint of your mother-in-law. This is not a small amount of money for a single person to lend to a single person ignoring your personal relationship. Right now, using a blended rate of about 8% and a 5 year payment period, your cost on that $50,000 is somewhere in the neighborhood of $11,000 with a monthly payment around $1,014. Using the same monthly payment but paying your MIL at 5% you'll complete the loan about 3.5 months sooner and save about $5,000, she will make about $6,000 in interest over 5 years against a $50,000 outlay. Alternatively, you can just prioritize payments to the more expensive loans. It's difficult to work out a total cost comparison without your expected payoff timelines and amount(s) you're currently paying toward all the loans. I'm sure a couple hours with a couple of spreadsheets could yield a plan that would net you a savings substantially close to the $5,000 you'd save by risking your mother in law's money. A lot of people think personal lending risk is about the relationship between the people involved, but there's more to it than that. It's not about you and your wife separating, it's not about the awkward dinner and conversations if you lose your job. Something might physically happen to you, you could become disabled or die. Right now, that's an extremely diversified and calculated risk taken by a gigantic lender. Unless your mother in law is very wealthy, this is not nearly enough reward to assume this sort of risk (in my opinion). Her risk FAR outpaces your potential five year savings. IF you wanted to pursue this as a means of paying interest to a family member rather than the bank, I'd only borrow an amount I budgeted and intended to pay within this single year. Say $10,000 against the highest interest loan.", "title": "" }, { "docid": "046678fd241d5fd776f2a2c6d324bd7e", "text": "No. It's perhaps a bit obvious, but with the shorter term loan you would be contractually obligated to pay the higher monthly payment. By paying double on the longer loan, you retain the flexibility to pay less. And you would pay less interest if you truly doubled your payment on the longer loan. This is because you'd be paying off more of the principal more quickly. (But you'd also be making a slightly higher payment than on the shorter term loan.) You can play with the amortization calculator at Bankrate to understand this.", "title": "" }, { "docid": "ab0b002019998dadfd61f5d5231a3e07", "text": "Excellent question and it is a debate that is often raised. Mathematically you are probably best off using option #1. Any money that is above and beyond minimum payments earns a pretty high interest rate, about 6.82% in the form of saved interest payments. The problem is you are likely to get discouraged. Personal finance is a lot about behavior, and after working at this for a year, and still having 5 loans, albeit a lower balance, might take a bit of fight out of you. Paying off such a large balance, in a reasonable time, will take a lot of fight. With the debt snowball, you pay the minimum to the student loan, save in an outside account, and when it is large enough, you execute option #2. So a year from now you might only have three loans instead of five. If you behaved exactly the same your balance would be higher after that year then using the previous method. However often one does not behave the same. Because the goals are shorter and more attainable it is easier to delay some gratification. The 8 dollars you are saving in your weekly gas budget, because of low prices, is meaningful when saving for a 4K goal, where it is meaningless when looking at it as a 74K goal. With the 4K goal you are more apt to put that money in your savings, where the 74K goal you might spend it on a latte. For me, the debt snowball worked really well. With either option make sure that excess payments actually go to a reduction in principle not a prepayment of interest. Given this you may be left with no option. For example if method #1 you only prepay interest, you are forced to use option #2.", "title": "" }, { "docid": "c4fe26e16c35821b744bb322c63f1807", "text": "\"The interest rate is determined by your 401(k) provider and your plan document. Of course you may be able to influence this, depending on your relationship with the provider. I'm very certain that prime+1% is not the only rate that is possible. However, your provider is constrained by IRC 4975(d), which states that the loan must be made \"\"at a reasonable rate of interest.\"\" The definition of \"\"reasonable rate of interest\"\" would probably need to go to court and I do not know if it has. The IRS probably has internal guidelines that determine who gets thrown to the dogs but they would not make those public because it takes away their discretion. Because of the threat of getting pounded by the IRS, I think you will have a hard time getting a provider to allow super high or super low interest rate loans. Note: I am not a lawyer.\"", "title": "" }, { "docid": "a4c2ca6eaa1aa65258cf0cedd61150a0", "text": "\"I don't want to bother with micropayments, and harassing her for monthly payments. Alternative approach to lending her $20K, arranging for her to pay you back $x per month, and having to (as you say) harass her for micropayments. Instead, you give her the $20K, and she sets up a savings account with a monthly direct debit deposit of $x. The bank takes care of the monthly \"\"payments\"\" into the savings account, and at the end of the loan period, you've got your $20K, and instead of the bank making interest off your mom, you make some interest out of the savings account.\"", "title": "" } ]	fiqa
65dd9aa8b5112281c3bcabed10890a3f	Will I be liable for taxes if I work for my co. in India for 3 months while I am with my husband in UK	[ { "docid": "99cdc7e19168d7ce036cfcc197e78300", "text": "The key factors here are You will need to pay tax in the UK only if you live more than 183 days - that too in a tax year. Indian tax system will also classify you as a NR (Non-resident) if you live outside for more than 182 days in a tax year. In your case, your income will be in India and will stay in India. So there should not be any UK tax until you try and get that money to the UK. I will not go into outlining what if you want to go down that road since it does not apply. As for tax in India, You will need to pay tax since the source of income is Indian. Hope this helps.", "title": "" }, { "docid": "735288ea721f87fe49b5c1098226c735", "text": "The finance team from your company should be able to advise you. From what I understand you are Indian Citizen for Tax purposes. Any income you receive globally is taxable in India. In this specific case you are still having a Employee relationship with your employer and as such the place of work does not matter. You are still liable to pay tax in India on the salary. If you are out of India for more than 182 days, you can be considered as Non-Resident from tax point of view. However this clause would not be of any benefit to you as are having a Employee / Employer relationship and being paid in India. Edit: This is only about the India portion of taxes. There maybe a UK protion of it as well, plus legally can you work and your type of Visa in UK may have a bearing on the answer", "title": "" }, { "docid": "253a71e92dc2a0871bdb22b4423e3a6d", "text": "Generally all the countries have similar arrangement regarding Income Tax, if you live in the UK for more than you stay in India for a given year then the Indian authorities won't be able to tax you but you might come under the UK Tax Law.", "title": "" }, { "docid": "a4bd83ee17b3aecbffeb30623c980184", "text": "For information about the UK situation, check the government website at http://www.hmrc.gov.uk/incometax/tax-arrive-uk.htm It all depends on the time. If I read it right (but you should check yourself) you can stay almost six months at a time, but at most 3 months on average over 4 years. Above this limit, you should either avoid the situation, or get professional advice, because things will be complicated.", "title": "" } ]	[ { "docid": "5ad774d144f61833b720a43b509ca992", "text": "From HMRC Note that the rule is when a person becomes entitled to payment of earnings. This is not necessarily the same as the date on which an employee acquires a right to be paid. For example, an employee's terms of service may provide for the employee to receive a bonus for the year to 31 December 2004, payable on 30 June 2005 if the employee is still in the service of the employer on 31 December 2004. If the condition is satisfied the employee becomes entitled to a payment on 31 December 2004 but is only entitled to payment of it on 30 June 2005. So PAYE applies to it on 30 June 2005 and it is assessable for 2005/06. The date that matters is the date the employee is entitled to be paid the bonus. But why are you worried about paying tax. That is your employer's responsibility and they will do it for you. Ask you firm's finance department also for further clarification. HMRC are not an organization to mess with, they will tie up your life in knots.", "title": "" }, { "docid": "b0e89d948d1a3eeeb4332ed2e5712a2a", "text": "Tax Deducted at source is applicable to Employee / Employer [contract employee] relations ... it was also made applicable for cases where an Indian company pays for software products [like MS Word etc] as the product is not sold, but is licensed and is treated as Royalty [unlike sale of a consumer product, that you have, say car] ... Hence it depends on how your contract is worded with your India clients, best is have it as a service agreement. Although services are also taxed, however your contract should clearly specify that any tax in India would be borne by your Indian Client ... Cross Country taxation is an advanced area, you will not find good advice free :)", "title": "" }, { "docid": "c6019c84871971a919272101d493033a", "text": "I would talk to your HMRC tax office they do have guidance on this issue here http://www.hmrc.gov.uk/working/intro/employed-selfemployed.htm", "title": "" }, { "docid": "d1b56254525ee1a4d3bd61ecf5a539da", "text": "Before answering specific question, you are liable to pay tax as per your bracket on the income generated. I work with my partner and currently we transfer all earning on my personal bank account. Can this create any issue for me? If you are paying your partner from your account, you would need to maintain proper paperwork to show the portion of money transferred is not income to you. Alternatively create a join Current Account. Move funds there and then move it to your respective accounts. Which sort off account should be talk and by whose name? Can be any account [Savings/Current]. If you are doing more withdrawls open Current else open Savings. It does not matter on whos name the account is. Paperwork to show income matters from tax point of view. What should we take care while transfering money from freelance site to bank? Nothing specific Is there any other alternative to bank? There is paypal etc. However ultimately it flows into a Bank Account. What are other things to be kept in mind? Keep proper record of actual income of each of you, along with expenses. There are certain expenses you can claim from income, for example laptop, internet, mobile phone etc. Consult a CA he will be able to guide and it does not cost much.", "title": "" }, { "docid": "8faf102c4cceb0254f9731411e2413c0", "text": "If the firm treats you as an employee then they are treated as having a place of business in the UK and therefore are obliged to operate PAYE on your behalf - this rule has applied to EU States since 2010 and the non-EU EEA members, including Switzerland, since 2012. If you are not an employee then your main options are: An umbrella company would basically bill the client on your behalf and pay you net of taxes and NI. You potentially take home a bit less than you would being 100% independent but it's a lot less hassle and potentially makes sense for a small contract.", "title": "" }, { "docid": "6c31cc642447b46b462ffbae99e40bcf", "text": "\"As you are earning an income by working in India, you are required to pay tax in India. If you contract is of freelance, then the income earned by you has to be self declared and taxes paid accordingly. There are some expenses one can claim, a CA should be able to guide you. Not sure why the Swiss comapny is paying taxes?. Are they depositing this with Income Tax, India, do they have a TAN Number. If yes, then you don't need to pay tax. But you need to get a statement from your company showing the tax paid on behalf of you. You can also verify the tax paid on your behalf via \"\"http://incometaxindia.gov.in/26ASTaxCreditStatement.asp\"\" you cna register. Alternatively if you have a Bank Account in India with a PAN card on their records, most Banks provide a link to directly see\"", "title": "" }, { "docid": "47314782ea3b3385bd6b88e24f627530", "text": "If the work is done in India, then the income arising out of it, is taxable when received by you, and not when it come into India ...", "title": "" }, { "docid": "0a998ba4e2f818772ac51100aeaa986e", "text": "I am from India. I visited US 6-8 times on business VISA and then started 2 Member LLC. Myself and My wife as LLC Members. We provide Online Training to american students from India. Also Got EIN number. Never employed any one. Do i need to pay taxes? Students from USA pays online by Paypal and i am paying taxes in India. Do i need to pay Taxes in US? DO i need to file the Tax returns? Please guide me. I formed LLC in 2010. I opened an Office-taken Virtual office for 75 USD per month to open LLC in 2010. As there is physical virtual address, am i liable for US taxes? All my earning is Online, free lancing.", "title": "" }, { "docid": "aaaeb8c5539b9bdb86df3c8a98a12cf9", "text": "As you're working, you and your spouse were probably born after 1935, so I'll assume that Marriage Allowance is relevant to you rather than Married Couple's Allowance. The allowance applies if your husband or wife earns less than the personal allowance in salary (£10,600/year), and less than £5,000/year in savings interest. For example it's likely this will apply if he or she's not working. Also, you need to be only a basic rate taxpayer, earning less than £42,385/year. In that case they can register online to transfer £1,060 of their personal allowance to you, which will reduce your tax bill by £212/year if you yourself earn more than £1,060 above the personal allowance. This will usually work by HMRC issuing a new tax code to your employer who will then automatically withhold less of your salary. You can't get your employer to do this directly, you have to go via HMRC. The allowance change will be effective as if from the start of the curren tax year in April 2015, so you will probably end up getting the proportion of the £212 that you could have had up till now (from April to August) back all at once in your next pay cheque, or possibly spread out over the rest of the tax year. Apart from that you'll get it spread out evenly over the year - i.e. about £17/month.", "title": "" }, { "docid": "91bf2685d76dc455ccccee5fe87b85e3", "text": "Depending on how much freelance work we're talking about you could set up a limited company, with you and your wife as directors. By invoicing all your work through the limited company (which could have many other benefits for you, an accountant/advisor would... well, advise...) it's the company earning the money, not you or her personally. You can then pay your wife up to £10,000 per year (as of writing this) without income tax kicking in. You would probably have to pay yourself a small amount to minimise exposure to HMRC's snooping, but possibly not... as far as I'm aware the rules do not state anything about working for free, for yourself - and I wouldn't worry about the ethics, you're already paying plenty into HMRC's bank account through your day job! Some good information here if you're interested: https://www.whitefieldtax.co.uk/web/psc-guide/pscguide-how-does-it-all-work-in-practice-salaries-and-dividends/", "title": "" }, { "docid": "8e28ce63fad505ea23d7d22aac738b01", "text": "Yes, You will have to pay the taxes at least initially but you'll most probably get a refund when you will file returns depending upon the amount and tax brackets in the UK.", "title": "" }, { "docid": "35c5605589b6b4dbdea21675a10af603", "text": "There might be a problem. Some reporting paperwork will have to be done for the IRS, obviously, but technically it will be business income zeroed out by business expense. Withholding requirements will shift to your friend, which is a mess. Talk to a licensed tax adviser (EA/CPA) about these. But the immigration may consider this arrangement as employment, which is in violation of the visa conditions. You need to talk to an immigration attorney.", "title": "" }, { "docid": "e6c0ce6d855e23a095166cf2c36b03e8", "text": "Your answer will need loads of information and clarification, so I will ask you to visit the VAT and have a peruse. 1) Obligation is for you to find out the correct rate of VAT, charge and pay tax accordingly. You can call up the HMRC VAT helpline for help, which they will be happy to oblige. Normally everybody pays VAT every 3 months or you can pay once in a year. 2) Depends on your annual turnover, including VAT. Less than £150000 you join the Flat rate scheme. There are schemes for cultural activities. Might be good to check here on GOV.UK. 3) If you pay VAT in EU countries, you can reclaim VAT in UK. You need to reclaim VAT while filing in your VAT returns. But be careful about your receipts, which can be checked to verify you are not defrauding HMRC. The basic rule is that B2B services are, as the name suggests, supplies from one business to another. And, subject to some exceptions, are treated as made where the customer belongs. No VAT is chargeable on B2B supplies to an overseas customer. But where you make a B2C supply, VAT depends on where your customer is located: 1) if they are outside the EU, you don’t need to charge VAT 2) if they are located in an EU country, then you must charge VAT. Source All in all keep all records of VAT charged and paid to satisfy the taxman. If the rules get complicated, get an accountant to help you out. Don' take chances of interpreting the law yourself, the fines you might pay for wrong interpretation might be a deal breaker.", "title": "" }, { "docid": "70a52b4c0f3fde7f782b50da8799b4a9", "text": "\"If a country had a genuine completely flat income tax system, then it wouldn't matter who paid the tax since it doesn't depend on the employee's other income. Since not many countries run this, it doesn't really make sense for the employee to \"\"take the burden\"\" of the tax, as opposed to merely doing the administration and paying the (probable) amount of tax at payroll, leaving the employee to use their personal tax calculation to correct the payment if necessary. Your prospective employer is probably saying that your tax calculation in Singapore is so simple they can do it for you. They may or may not need to know a lot of information about you in order to do this calculation, depending what the Singapore tax authorities say. If you're not a Singapore national, they may or may not be relying on bilateral tax agreements with your country to assert that you won't have to pay any further tax on the income in your own country. It's possible they're merely asserting that you won't owe anything else in Singapore, and in fact you will have taxes to report (even if it's just reporting to your home tax authority that you've already paid the tax). Still, for a foreign worker a guarantee you won't have to deal with the local tax authority is a good thing to have even if that's all it is. Since there doesn't appear to be any specific allowance for \"\"tax free money\"\" in the Singapore tax system, it looks like what you have here is \"\"just\"\" the employer agreeing to do something that will normally result in the correct tax being paid in your behalf. This isn't uncommon, but it's also not exactly what you asked for. And in particular if you have two jobs in Singapore then they can't both be doing this, since tax is not flat. The example calculation includes varying tax rates for the first X amount of income that (I assume without checking) are per person, not per employment. Joe's answer has the link. In practice in the UK (for example), there are plenty of UK nationals working in the UK who don't need to do a full tax return and whose tax is collected entirely at source (between PAYE and deductions on bank interest and suchlike). In this sense the employer is required by law to take the responsibility for doing the admin and making the tax payments to HMRC. Note that a UK employer doesn't need to know your circumstances in detail to make the correct payroll deductions: all they need is a so-called \"\"tax code\"\", which is calculated by HMRC and communicated to the employer, and which basically encodes how much they can pay you at zero rate before the various tax rate tiers kick in. That's all the employer needs to know here for the typical employee: they don't need to know precisely what credits and liabilities resulted in the figure. However, these employers still don't offer empoyees a net salary (that is, they don't take on the tax burden), because different employees will have different tax codes, which the employer would in effect be cancelling out by offering to pay two people the same net salary regardless of their individual circumstances. The indications seem to be that the same applies in Singapore: this offer is really a net salary subject to certain assumptions (the main one being that you have no other tax liabilities in Singapore). If you're a Singapore millionaire taking that job for fun, you might find that the employer doesn't/can't take on your non-standard tax liability on this marginal income.\"", "title": "" }, { "docid": "53b920a8744acc0df88502e7a62a2264", "text": "A lot of questions, but all it boils down to is: . Banks usually perform T+1 net settlements, also called Global Netting, as opposed to real-time gross settlements. That means they promise the counterparty the money at some point in the future (within the next few business days, see delivery versus payment) and collect all transactions of that kind. For this example say, they will have a net outflow of 10M USD. The next day they will purchase 10M USD on the FX market and hand it over to the global netter. Note that this might be more than one transaction, especially because the sums are usually larger. Another Indian bank might have a 10M USD inflow, they too will use the FX market, selling 10M USD for INR, probably picking a different time to the first bank. So the rates will most likely differ (apart from the obvious bid/ask difference). The dollar rate they charge you is an average of their rate achieved when buying the USD, plus some commission for their forex brokerage, plus probably some fee for the service (accessing the global netting system isn't free). The fees should be clearly (and separately) stated on your bank statement, and so should be the FX rate. Back to the second example: Obviously since it's a different bank handing over INRs or USDs (or if it was your own bank, they would have internally netted the incoming USDs with the outgoing USDs) the rate will be different, but it's still a once a day transaction. From the INRs you get they will subtract the average FX achieved rate, the FX commissions and again the service fee for the global netting. The fees alone mean that the USD/INR sell rate is different from the buy rate.", "title": "" } ]	fiqa
f3471f9eb7faf018b664cec1b20870ac	Buying insurance (extended warranty or guarantee) on everyday goods / appliances?	[ { "docid": "4c1d864d8b380e5dd327a2cc1e64b98b", "text": "\"Generally, a polite decline. However, I have dealt with sales people who take first refusal as a \"\"test\"\" response, and decide to go into the details anyway. The longer they talk the more robust my responses. See this Telegraph article that discusses why their experts think it's a ripoff, and why you should check your credit cards and home insurance policies as they may already have you covered (possibly UK/Europe only). http://www.telegraph.co.uk/finance/personalfinance/2820644/Extended-warranties-In-our-view-its-a-rip-off.html On a different note, see this list of questions to ask if you are considering going with the extended warranty. The source doesn't rule for or against the idea, leaving it at caveat emptor: http://www.choice.com.au/reviews-and-tests/technology/home-entertainment/accessories/extended-warranties/page/questions%20to%20ask.aspx\"", "title": "" }, { "docid": "47ebe7169646dcba24dc8ba34307af1c", "text": "\"IMO it's usually not worth it and here's why. There's a statistical distribution of how likely a unit may fail depending on its age. Probability is high for a short period after the unit comes into use because there are parts that were not thoroughly tested and manufacturing defects. Then all those defective parts fail and get replaces and the unit likely functions without faults for years. Then it reaches it lifetime end and again probability becomes much higher - parts wear out and start failing one by one. Every unit comes with a manufacturer warranty of one to two years already and that warranty will likely cover any defect causes by materials and manufacturing defects - the period when fault probability is initially high. \"\"Extended warranty\"\" only covers the unit for two-to-five years and most units have lifetime of about ten years. This means that the \"\"extended warranty\"\" is in effect when it is least useful.\"", "title": "" }, { "docid": "c531e72f8977fc24c624a99cc206fe5c", "text": "On most of the consumer electronics it would not make much sense to get Insurance. Mostly these are not priced right [are typically priced higher]. IE there is no study to arrive at equivalent claim rates as in motor vehicle. Further on most of the items there is adequate manufacturing warranty to take care of initial defects. And on most it would make sense to buy a newer model as in todays world consumer electronics are not only getting cheaper by the day, but are also have more function & features.", "title": "" }, { "docid": "78d6638492c295dc91d4096dd90e87b5", "text": "I politely decline. Insurance is there to protect me against catastrophic financial loss (huge medical bills, owing a mortgage on a house that burned down, etc.) not a way to game the system and pay for routine expenses or repairs.", "title": "" }, { "docid": "9898784d2a734bcb80dcf5e954f19d2c", "text": "\"I decline politely. The cost of the insurance policy has two components: The actual cost of a likely repair + profit. If I set aside the cost of a likely repair myself, then I get to keep the profit. If the item doesn't break, I get to keep the \"\"repair\"\" money too :)\"", "title": "" }, { "docid": "64f7abd58dd9daca8a22c2176fb24368", "text": "\"Most of the consumer products that you buy at retail these days are commodity priced, and have been for a long time. Margins are thin, so if there are retail salespeople milling about, their compensation isn't coming from the TV or computer with a 6% gross margin. It comes from the extended warranty programs (which are not insurance and do not have regulated underwriting standards), which are typically sold at a 65-95% gross margin. So that $200 warranty most likely costs the retailer $50. The salesman gets $15-25. I paid for my college education working at a CompUSA selling these things, along with other high margin items that paid commission. In most cases, you aren't getting much coverage anyway. Most products carry a 1 year warranty, and using most \"\"gold\"\" or \"\"platinum\"\" credit cards doubles a manufacturer's warranty by up to 1 year. So with most transactions, you are already walking away with a 2 year warranty. Warranties or service plans make sense for durable goods that cost alot and are expected to last a long time and/or require regular maintenance. I think they especially make sense if your budget is really tight -- a fixed maintenance cost can be an asset to some people because they can plan around it. Examples of this include: service plans for a furnace, boiler or water heater or a car if you're buying a manufacturer-endorsed service/maintenance plan from a dealer.\"", "title": "" }, { "docid": "ca149e4a12fc92efa549333af9f46d68", "text": "\"I usually say \"\"no thank you\"\", but if the salesperson gets pushy I say \"\"if I need insurance, I guess I won't buy the product because I only want to buy quality that will last a good long while\"\" I have never actually walked away from a purchase because I generally research these things ahead of time, but I think I mean it when I say it.\"", "title": "" }, { "docid": "f3fa1634ac4f470dc2854ecfe8654f9b", "text": "One important issue that has yet to be covered is the cost (to you) in terms of paperwork, lost time, and phone calls that you have to make to claim the insurance. Such insurance claims often are very low priority on their customer service queues (for obvious reasons, since they have already made the sale). Therefore, you might have to spend up to a few hours of your time calling or writing emails to claim the warranty, which may often not be much ( Therefore, many people end up not claiming the warranty during the hassle. Much like non-scam mail-in rebates, more often than not you would either forget to or decide it is not worth your time to claim the warranty. Before buying such policies, other than the obvious cost-benefit calculations, you should also take this additional factor into account. Therefore, many people end up not claiming the warranty during the hassle. Much like non-scam mail-in rebates, more often than not you would either forget to or decide it is not worth your time to claim the warranty. Before buying such policies, other than the obvious cost-benefit calculations, you should also take this additional factor into account.", "title": "" } ]	[ { "docid": "8e3286a63e75743a10243bccf848329f", "text": "Watch this super late post to a 2009 thread. Thread Necromancy in action! Yes, it's absolutely worth it to get an extended warranty because electronics just don't last as long as they used to. This is ever more prevalent in the year 2013. Is it a ripoff? Future Shop (in Canada) and Best Buy (U.S. & Canada) offer warranties that are typically 25% of the cost of the product. That's a huge mark-up, massive! Yet, to my knowledge they are one of the only retailers that you can walk into the store and just drop it off for exchange. As opposed to, buying a 3rd party extended warranty that is considerably less expensive, yet it puts the burden on you to mail the product in, wait for god knows how long to receive a refurbished, repaired, or new (their choice) product. It's a gamble, an expensive one. Yet, if you're spending top dollar on a product, wouldn't you like to have some peace of mind that it will last you at least 2-3 years. Unfortunately as I mentioned earlier, electronics (or anything for that matter) just aren't as reliable as you'd hope. The Xbox 360 gaming console was notorious for being poorly made. In fact, many people not only had to take advantage of the extended warranty, but had to do so, more than 2-3 times. So make sure you do your homework on a product, before you even think about buying it. What do I do? I buy at Future Shop, Best Buy or Staples for the convenience of dropping off the product in the event of an issue. I really don't want to bother with the hassle of applying for warranty service and long mail-in / return wait period. If the product is $100 or so, forget it..and just buy it whoever has it cheapest and cross your fingers.", "title": "" }, { "docid": "bbbeb5a0fef77fa10d779f442ce583e1", "text": "You didn't buy it. Your mother did. You can try to cancel it if it was purchased in your name; if your mother purchased it she would have to cancel it. Either way, the company has done it's part by carrying you until that cancellation and you have no grounds for demanding a refund for time already covered. If your mother was spending your money, that is something you need to take up with her unless you want to bring charges against her for theft/fraud. If she was spending her own money, then you may want to talk to a lawyer about getting her declared incompetent so someone else can control her spending. But the money paid is probably gone. It isn't the insurance company's fault that you didn't want it doesn't, and if you don't bring charges you can't complain about their having accepted stolen money. Even if you do bring charges and win, it isn't clear you can get a refund. If you really want to pursue any of this, your next step is to talk to a lawyer.", "title": "" }, { "docid": "e7c606e17d41f33ef5ca789b461f6c8b", "text": "(Disclosure - I am a real estate agent, involved with houses to buy/sell, but much activity in rentals) I got a call from a man and his wife looking for an apartment. He introduced itself, described what they were looking for, and then suggested I google his name. He said I'd find that a few weeks back, his house burned to the ground and he had no insurance. He didn't have enough savings to rebuild, and besides needing an apartment, had a building lot to sell. Insurance against theft may not be at the top of your list. Don't keep any cash, and keep your possessions to a minimum. But a house needs insurance for a bank to give you a mortgage. Once paid off, you have no legal obligation, but are playing a dangerous game. You are right, it's an odds game. If the cost of insurance is .5% the house value and the chance of it burning down is 1 in 300 (I made this up) you are simply betting it won't be yours that burns down. Given that for most people, a paid off house is their largest asset, more value that all other savings combined, it's a risk most would prefer not to take. Life insurance is a different matter. A person with no dependents has no need for insurance. For those who are married (or have a loved one), or for parents, insurance is intended to help survivors bridge the gap for that lost income. The 10-20 times income value for insurance is just a recommendation, whose need fades away as one approaches independence. I don't believe in insurance as an investment vehicle, so this answer is talking strictly term.", "title": "" }, { "docid": "9ea698ba1a4770554825ae07b39c0acb", "text": "\"Also talk to your bank(s) or credit union(s); first one of mine I looked at offers an unsecured loan at 7% variable, and a signature loan at 7.5% fixed, no hidden costs on either. You might do better. Also check store credit. Sears used to offer 1-year-0% financing on appliances if you signed up for the store's card at the time of purchase, and if you have the discipline to reliably pay it off before interest hits that's a hard deal to best. Other stores have offered something similar for major purchases of this sort; do some homework to find out who. (I bought my fridge that way, paying it in month 10.) The \"\"catch\"\" is that many people get distracted and do wind up paying interest, and the store hopes that having an account with them will encourage you to shop there more often.)\"", "title": "" }, { "docid": "a11b3faa4f2d442093ab3f4f0a497ccc", "text": "\"If your meaning of \"\"asset protection\"\" is buying gold and canned food in the name of a Nevada LLC because some radio guy said so, bad idea. For a person, if you have assets, buy appropriate liability limits with your homeowner/renter insurance policy or purchase an \"\"umbrella\"\" liability policy. This type of insurance is cheap. If you don't have assets, it may not be worth the cost of insuring yourself beyond the default limits on your renter's or homeowner's policy. If you have a business, you need to talk to your insurance agent about what coverage is appropriate for the business as a whole vs. you personally. You also need to talk to your attorney about how to conduct yourself so that your business interests are separated from your personal interests.\"", "title": "" }, { "docid": "a7fe4f6a428b10d9af4eac146034bde4", "text": "Generically, like farnsy noted in the other answer, you will only come ahead in dollar terms when you are significantly riskier than the average insuree. Otherwise the insurance company would have higher rates to make a profit. In the case of Apple Care there can arguably be other factors involved. If you did not insure your $2000 laptop and it broke (unfixably) just after the warranty period, would you replace it with a new Apple product? Maybe not, so Apple could lose a customer. That means they have an incentive to keep you happy. If your product breaks but insurance replaces it, you are a happier customer and more likely to buy other Apple products. This is not an incentive for traditional insurance companies that only do business in insurance. Now, with the profit margins Apple likes in general, I don't know if they've underpriced their insurance. I sort of doubt it even. But their margins on it are probably not high, meaning it's a closer call even if you are only averagely risky.", "title": "" }, { "docid": "6bd83f933a663f9f1897b1a8b0197fb4", "text": "There seems to be a contradiction here: Home warranties not worth paper they're written on and: What struck us is that the HWC [...] immediately had the unit replaced. There is a huge difference when you buy the insurance yourself and when a bank forces you to buy one. Because in the latter case, the insurance is not for you, it's for the bank to protect their collateral (which is your asset as well). It becomes obvious when a claim comes up, because the insurer is not negotiating with you, it's negotiating with another large financial institution. And as far as the stereotype of banks being ruthless behemoths goes, in this case you happen to benefit from being on the behemoth's side and the insurer simply can't brush off a bank as much as it can brush off a person like you. As you've put it, a house in Phoenix without AC is not worth much, so the bank could not let that happen. Because in case of another foreclosure they would have to fix the AC anyway.", "title": "" }, { "docid": "e78c47a389e622bbb8e5b811e788ed9d", "text": "\"According to US News, renter's insurance does cover liability as well as your own belongings. They list this as one of four \"\"myths\"\" often promulgated about renter's insurance. This is backed up by esurance.com, which explicitly mentions \"\"Property damage to others\"\" as covered. Nationwide Insurance says that renter's insurance covers \"\"Personal liability insurance for renters\"\" and \"\"Personal umbrella liability insurance\"\". Those were the first three working links for \"\"what does renters insurance cover\"\" on Google. In short, while it is possible that you currently have a different kind of coverage, this is not a limitation of renter's insurance per se. It could be a limitation in your current coverage. You may be able to simply change your coverage with your current provider. Or switch providers. Or you may already be covered. Note that renter's insurance does not cover the building against general damage, e.g. tornado or a fire spreading from an adjacent building. It is specific to covering things that you caused. This may be the cause of the confusion, as some sources say that it doesn't cover anything in the building. That's generally not true. It usually covers all your liability except for specific exceptions (e.g. waterbed insurance is often extra).\"", "title": "" }, { "docid": "d92444e61d7542216260a9e873c16077", "text": "If you're really strapped for cash, you can get one on the off-chance the furnace or air conditioner goes. But if you do have the cash to self-insure against these kinds of things, I wouldn't bother with the home warranty. Here was our experience. Our daughter was only a few months old, and the air conditioner went in June, in Virginia. We called in the warranty. They came out, tried the cheapest fix they could to fix the leak. It didn't work again in two days. Two weeks later, they try again with the next cheapest fix. (By this point, we had gotten a window unit for our bedroom.) It didn't work again in two days. Two more weeks later, they finally got authorization to replace the unit. They replaced it with the cheapest one they could, and wanted to charge me $75 to haul the old one away. When I said no thanks to that extra service (I was calling from work at the time), the guy ended the conversation in a huff, walked away from the phone and drove off. I later found out (when I called a reputable HVAC guy) that they didn't even hook the thing up correctly! What happens is the contractors get squeezed by the warranty company at every turn. These calls get low priority, and the quality of service is as low as they can get away with without violating the terms of their contract with the warranty company. For the big stuff, it's better than nothing, but not much better. Check to see that the big stuff is still covered before buying it at all, and drop it after getting a payout (like we did).", "title": "" }, { "docid": "a7d82cccee4da724a6800ad82c18e73c", "text": "For example, it is not allowed to buy flood insurance at peak flood season and then cancel it when it is over. They are not offering this right now. So it would be interesting to see if they offer this and how they offer this. For example, you can insure your camera for a week when you are going on vacation. They call it on-demand insurance. They segment Trov is targeting consumer electronics. More often people don't take insurance in this segment as the insurance cost is high and benefits low. However if going on vacation, most are afraid of loosing / damaging equipments. Generally although we are afraid, most often nothing happens. It is this segment; you make the insurance cheap and easy to buy and create a new segment. Insurance fraud detection is an important part of insurance process such that insurance companies allocate a lot of resources to detect improper insurance claims. The website does not mention how they process claims. Although it looks easy, they may have a more stringent process. For example what is stopping me from buying an insurance after event; i.e. break my phone Monday, buy insurance on Monday and make a claim on Tuesday saying the phone broke on Tuesday.", "title": "" }, { "docid": "4cfffdac2d5dcc80ccfa0c1f8f6469a9", "text": "Insurance is for events that are both and Unexpected and, for many people, catastrophic events are, for example, sickness, disability, death, car accidents, house fires, and burglaries, for which you may buy health, disability, life, auto, home, and renter's insurance. It may be catastrophic for a family relying on a very old earner for that earner to die, and you can buy life insurance up to a very old age, but the premiums will reflect the likelihood of someone of that age dying within the covered period. The more expected an event is, the more anything referred to as insurance is actually forced savings. Health insurance with no copays on regular checkups expects the insured to use them, so the cost of those checkups plus a profit for the insurance company is factored into the premiums ahead of time. A wooden pencil breaking may be unexpected. Regardless of foreseeability, no one buys insurance on wooden pencils, as the loss of a pencil is not catastrophic. What is catastrophic can be context dependent. Health-care needs are typically unforeseeable, as you don't know when you'll get sick. For a billionaire, needing health-care, while unforeseeable, the situation would not be catastrophic, and the billionaire can easily self-insure his or her health to the same extent as most caps offered by health insurance companies. If you're on a fixed budget buying a laptop, if it unexpectedly failed, that would be catastrophic to you, so budgeting in the cost of insurance or an extended warranty while buying your laptop would probably make sense. Especially if you need that $2000 laptop, spending an extra 17.5% would safeguard against you having to come out of pocket and depleting your savings to replace it, even though that brings you to a grand total of $2350 before taxes. However, if you're in that tight of a situation, I would strongly recommend you to find a less expensive option that would allow you to self-insure. If you found a used laptop for much less (I can even see Apple selling refurbished Macs for less than $1000) you might decide that your budget allows you to self-insure, and you could profit from being careful with your hardware and resolving to cover any issues with it yourself.", "title": "" }, { "docid": "fe4aa6d04b18ab3532ade925b5239f74", "text": "Kate Gregory has already covered maintenance and tools. As a one-off, there's furniture and soft furnishings for the home. Cable/satellite TV if you want it. You listed car insurance, but not fuel, servicing, repairs and depreciation/leasing (as applicable). And, there's also food.", "title": "" }, { "docid": "3aadaf75dc0c8ee36d023b7551df1937", "text": "Insurance is mostly for covering against catastrophic events, it's not something that must be helpful to you every day. Sounds like you health is okay and you don't mind paying some cash in case of minor events. You could try to find a policy where coverage kicks in only once an incident is big enough (high deductible) - in such cases you payments will be significantly lower because you'll be unable to apply with minor incidents and that saves money to the insurance company and you're still covered against catastrophic events.", "title": "" }, { "docid": "eb8f3231846c74764f1f7cdf3a068ff6", "text": "Stocks go down and go back up, that's their nature... Why would you sell on a low point? Stocks are a long term investment. If the company is still healthy, it's very likely you'll be able to sell them with a profit if you wait long enough.", "title": "" }, { "docid": "7481bda891fd7c3cba5b14c0bd6feb68", "text": "how do they turn shares into cash that they can then use to grow their business? Once a Company issues an IPO or Follow-On Public Offer, the company gets the Money. Going over the list of question tagged IPO would help you with basics. Specifically the below questions; How does a company get money by going public in an IPO? Why would a company care about the price of its own shares in the stock market? Why would a stock opening price differ from the offering price? From what I've read so far, it seems that pre-IPO an investment bank essentially buys the companies public shares, and that bank then sells them on the open market. Is the investment bank buying 100% of the newly issued public shares? And then depositing the cash equivalent into the companies bank account? Additionally, as the stock price rises and falls over the lifetime of the company how does that actually impact the companies bank balance? Quite a bit on above is incorrect. Please read the answers to the question tagged IPO. Once an IPO is over, the company does not gain anything directly from the change in shareprice. There is indirect gain / loss.", "title": "" } ]	fiqa
bbe2a67b55ec834e0cf67606ed5465d5	Buy tires and keep car for 12-36 months, or replace car now?	[ { "docid": "e663e64de0fd06bc15a34aaa2cfcacb5", "text": "If the car is in otherwise good shape, it's always less expensive to keep it longer. Think of it this way: you have to buy new tires no matter what. It's just a question of whether or not those new tires are attached to a new car or your current car.", "title": "" }, { "docid": "ba1fbcb5b6de5bf4d70c78c1731ee206", "text": "I don't see how anyone could give you a hard-and-fast formula, unless they know where to get some applicable statistics. Because several factors here are not a straight calculation. If you don't replace the tires but keeping driving the car, what is the increased probability that you will get into an accident because of the bald tires? How much will bald tires vs new tires affect the selling price of the car? Presumably the longer you drive the car after getting new tires, the less increase this will give to the market value of the car. What's the formula for that? If you keep the car, what's the probability that it will have other maintenance problems? Etc. That said, it's almost always cheaper to keep your current car than to buy a new one. Even if you have maintenance problems, it would have to be a huge problem to cost more than buying a new car. Suppose you buy a $25,000 car with ... what's a typical new car loan these days? maybe 5 years at 5%? So your payments would be about $470 per month. If you compare spending $1000 for new tires versus paying $470 per month on a new car loan, the tires are cheaper within 3 months. The principle is the same if you buy with cash. To justify buying a new car you have to factor in the value of the pleasure you get from a new car, the peace of mind from having something more reliable, etc, mostly intangibles.", "title": "" }, { "docid": "a126eabc0702abd8448d4555f3a2125b", "text": "I tend to agree with Rocky's answer. However it sounds like you want to look at this from the numbers side of things. So let's consider some numbers: I'm assuming you have the money to buy the new car available as cash in hand, and that if you don't buy the car, you'll invest it reasonably. So if you buy the new car today, you're $17K out of pocket. Let's look at some scenarios and compare. Assuming: If you buy the new car today, then after 1 year you'll have: If you keep the old car, after 1 year you get: After 2 years, you have: And after 3 years, you're at: Or in other words, nothing depletes the value of your assets faster than buying the new car. After 1 year, you've essentially lost $5K to depreciation. However, over the short term the immediate cost of the tires combined with the continued depreciation of the old car do reduce your purchasing power somewhat (you won't be able to muster $25K towards a new car without chipping in a bit of extra cash), and inflation will tend to drive the cost of the new car up as time goes on. So the relative gap between the value of your assets and the cost of the new car tends to increase, though it stays well below the $5k that you lose to depreciation if you buy the new car immediately. Which is something that you could potentially spin to support whichever side you prefer, I suppose. Though note that I've made some fairly pessimistic assumptions. In particular, the current U.S. inflation rate is under 1%, and a new car may depreciate by as much as 25% in the first year while older cars may depreciate by less than the 8% assumed. And I selected the cheapest new car price cited, and didn't credit the tires with adding any value to your old car. Each of those aspects tends to make continuing to drive the older car a better option than buying the new one.", "title": "" }, { "docid": "df86779cf6997e4ea645f202520efc49", "text": "It depends how detailed you want to get in your calculation, but fundamentally, 1K < 25K. On a very basic level, divide the cost (less what you sell it for) by the time you'll have the car for. If you junk it, $1K/12 month = $83/month to buy tires to have a car for a year. If you sell it for $1K, then it become $0/month. (Plus other maintenance, etc..., obviously). If you pay 25K and keep the new car for ten years and sell it for nothing, it becomes roughly $208/month (plus maintenance). If you want to get more accurate, there are a lot of variables you can take into account--time cost of money, financing, maintenance costs of different vehicle types, etc...", "title": "" }, { "docid": "6b9547bbb145fba640b8a5633ba5deea", "text": "Would you buy this used car, in its current condition but with new tires, for the price of the tires? If so, buy the tires.", "title": "" }, { "docid": "d656c57d1205ae4ee389bed0fd9b70d4", "text": "New tires will increase the resale value of the car; while not by the full cost of the tires, it will not be entirely a sunk cost. You'd need to factor that in and find out how much the new tires increase the resale value of the car to determine how much they would truly cost you. However, I suspect they would cost you less than a $25,000 car a year early would. That new car would cost some amount over time - it sounds like you buy a new car every 8 years or so? So it would cost you $25/8 = $3.3k/year. That would, then, be the overall cost of the new car a year early - $3.3k (as it would mean one less year out of your old car, so assuming it was also $25k/8 year or similar, that year becomes lost and thus a cost).", "title": "" }, { "docid": "3a0485f78810e7db67128ae2e457166d", "text": "There are a few factors I like to consider when I'm reasoning financially over my households cars. How many KMs will the car travel each year because I like to factor in how often tires will need to be changed, how much tires for my models cost as well as how gas efficient they are. Knowing how much the car is driven and in what environmental/road conditions is also important factors to know because that will help guestimate possible repairs cost. Also possible taxes should be taken in to consideration. For example a few years ago I had a diesel Citroen C5 that had yearly taxes of roughly 500$. The replacement costs only 150$ a year in taxes. So switching cars 3 years early would have saved me 1050$ in taxes. So some information on possible taxes, how far you drive each year, what environmental conditions, type of driving (daily long rides or just short etc..) as well as the fuel efficiency of both cars would help to better calculate your costs for say three scenarios. Car change in 12, 24 and 32 months respectively.", "title": "" }, { "docid": "bd5930583bb29a301015383439a583da", "text": "If You use the car regulary, I don't think that driving on the bald tires for 3 years is a reasonable option. Have You considered buying used tires? Those will be cheaper and will last till You get to replace the car.", "title": "" } ]	[ { "docid": "15ba43220578c9b495c2baeeb42ca862", "text": "\"I would split the savings as you may need some of it quickly for an emergency. At least 1/2 should be very liquid, such as cash or MMA/Checking. From there, look at longer term CDs, from 30 day to 180 day, depending upon your situation. Don't be surprised if by the time you've saved the money up, your desire for the car will have waned. How many years will it take to save up enough? 2? 5? 10? You may want to review your current work position instead, so you'll make more and hopefully save more towards what you do want. Important: Be prepared for the speed bumps of life. My landlord sold the house I was renting out from under me, as I was on a month-to-month contract. I had to have a full second deposit at the ready to put down when renting elsewhere, as well as the moving expenses. Luckily, I had done what my tax attorney had said, which is \"\"Create a cushion of liquid assets which can cover at least three months of your entire outgoing expenses.\"\" The Mormon philosophy is to carry at least one year's worth of supplies (food, water, materials) at all times in your home, for any contingency. Not Mormon, not religious, but willing to listen to others' opinions. As always, YMMV. Your Mileage May Vary.\"", "title": "" }, { "docid": "cd7306a60bf14d01085ce39d5567c46d", "text": "Two adages come to mind. Never finance a depreciating asset. If you can't pay cash for a car, you can't afford it. If you decide you can finance at a low rate and invest at a higher one, you're leveraging your capital. The risk here is that your investment drops in value, or your cash flow stops and you are unable to continue payments and have to sell the car, or surrender it. There are fewer risks if you buy the car outright. There is one cost that is not considered though. Opportunity cost. Since you've declared transportation necessary, I'd say that opportunity cost is worth the lower risk, assuming you have enough cash left after buying a car to fund your emergency fund. Which brings me to my final point. Be sure to buy a quality used car, not a new one. Your emergency fund should be able to replace the car completely, in the case of a total loss where you are at fault and the loss is not covered by insurance. TLDR: My opinion is that it would be better to pay for a quality, efficient, basic transportation car up front than to take on a debt.", "title": "" }, { "docid": "792f34a8a0feaa870a3ffcb996e3ab3c", "text": "The stupid question nobody asked: how mechanically inclined are you? I buy used cars, but then again I can work on them (I am building a new engine to my specs for one of my cars). Replacing a head gasket in a Subaru would be less than $200 for me, so I would find someone who blew his and offer $1000-1500 for the car if it is one of the models I like. The reality of buying an used car is that you are buying someone's else problems. How much do you know about that specific car model, its quirks, and what usually goes bad on them? For instance, it is a fact most people who buy a BMW 3 series flog them, so expect an used one to have been abused by someone trying to pick up girls by acting like he is a racer. A 5 series, on the other hand, would have a better life. Then some cars tend to rust on certain areas of the body. On the other hand I have seen Hyundai Elantras take a lot of abuse -- no oil change in 3 years -- and keep on ticking. Yes, you need to do some research on new cars, but old ones require even more. If you are going to save money buying used, make sure to spend time and research the options and their hidden costs. And learn how to check a car and have a feel for how much you will spent on repairing/maintaining it. And what you are willing to give up on your first car: is having a working AC that important? How about power windows? If you do buy a used car, try to put $100-200 aside every month, as if you are doing car payments. That will be your emergency and downpayment-for-next-car money. No matter what you buy, remember all you want on a new car is reliability and fuel efficiency. And, how much do you need a car right now? If you have to ride 30minutes to work in pouring rain and then be talking to customers, maybe a car worth having. But, where I live, a lot of people ride bicycles to work and back or use public transportation. I would trust getting into my car right now and drive 5h, and yet I take the bus every day (I like saving money on fuel and parking fees).", "title": "" }, { "docid": "23fd7f9dc7b35a42c2e519670245b8b1", "text": "I've read online that 20% is a reasonable amount to pay for a car each month - Don't believe everything you read on the internet. But, let me ask, does your current car have zero expense? No fuel, no oil change, no repairs, no insurance? If the 20% is true, you are already spending a good chunk of it each month. My car just celebrated her 8th birthday. And at 125,000 miles, needed $3000 worth of maintenance repairs. The issue isn't with buying the expensive car, you can buy whatever you can afford, that's a personal preference. It's how you propose to budget for it that seems to be bad math. Other members here have already pointed out that this financial decision might not be so wise.", "title": "" }, { "docid": "abeb0190ccb8b7150937156566d9cf42", "text": "\"This is my opinion as a car nut. It depends on what you want out of a car. For your situation (paying cash, want to keep the car long-term but also save money) I recommend seriously considering a slightly used vehicle, maybe 2 or 3 years old, or a \"\"certified pre-owned vehicle\"\". Reasons: Much less expensive than a brand new car because the first two years have the biggest depreciation hit. Cars come with a 4-year warranty, so a 3 year old car will still be in warranty. Yes, a certified pre-owned car will have a bit of a premium compared to a private-party used car, but the peace of mind of knowing it's in good shape is worth the extra cost considering you want to keep it long term. Consumer Reports will have good advice on the best values in used cars.\"", "title": "" }, { "docid": "a3fd13bf1e34c6ca404f8523b7ca2062", "text": "\"As cars age, the amount of deprecation tends to decrease. You have already lost between 19 and 17K on the car in the past 3.5 years. You can't lose that much on that car ever again! First because it is not worth that much. Second, because even if the engine blows up, or it is totaled you can always get about $300-$400 for it. If you trade this car for a newer model the same exact scenario is likely to happen again. In three years (or so) the car will lose half its value. If you happen to stick the same price point, and are comfortable with $5000/year going \"\"out the window\"\", then it might be time to trade up. You can get a decent idea of what your car will be worth in the 2.5 years by seeing what a 2006 with 116K miles on it. One option is to keep driving it after it is paid off. With putting a little money into it, and having it detailed every once in a while it can feel like a pretty sweet ride for many years and miles to come. Even if you have maintenance costs, you won't have a car payment. How sweet would that be?\"", "title": "" }, { "docid": "0dde5983c3293f42747f39062339274b", "text": "Which way would save the most money? Paying of the car today would save the most money. Would you borrow money at 20% to put it in a savings account? That's effectively what she is doing by not paying off the car. If it were me, I would pay off the car today, and add the car payment to my savings account each month. If the car payment is $400, that's $1,500 a month that can be saved, and the $12k will be back in 8 months. That said - remember that this is your GIRLFRIEND, not a spouse. You are not in control (or responsible for) her finances. I would not tell her that she SHOULD do this - only explain it to her in different ways, and offer advice as to what YOU would do. Look together at how much has been paid in principal and interest so far, how much she's paying in interest each month now, and how much she'll pay for the car over the life of the loan. (I would also encourage her not to buy cars with a 72-month loan, which I'm guessing is how she got here). In the end, though, it's her decision.", "title": "" }, { "docid": "b4ee97c68281a1e2de37b6a52989a6a1", "text": "If you lease a car, you are paying for the depreciation of a certain number of miles, even if you don't actually use those miles. Since you know you will be well under the standard number of miles when your lease is up, and you already know that you want to keep the car, buying is better than leasing.", "title": "" }, { "docid": "13f8f990eb2701f4c3ca892e40f200d7", "text": "A loan that does not begin with at least a 20% deposit and run through a term of no longer than 48 months is the world's way of telling you that you can't afford this vehicle. Consumer-driven cars are rapidly depreciating assets. Attenuating the loan to 70 months or longer means that payments will not keep up with normal depreciation, thus trapping the buyer in an upside down loan for the entire term.", "title": "" }, { "docid": "2bf62c09fe325de41096aaf3e8b4b8f3", "text": "\"Does your planning include contingencies for Can you afford the late fees, insurance increases, bad credit hits and all the other downsides when this goes bad? Why does she NEED a new car on lease? Personally? I'd go for option B) Do what it takes to have her OWN a car. Why not just have her get a car that costs IN ENTIRE the $3k that would be used for a down payment on a lease? Maybe add a bit of your own money \"\"for old times sake\"\" to the pile? Or a small loan to get to where she can get a usable, dependable car? Say, a $3-5k loan in your name that she's responsible for the payments. $3-10k can get a very dependable old car. 10 great cars for 6k or less Everyone else has been burned by her - for whatever reason. No idea what the reasons are, but she seems to be unable to pay her bills. Why would this time be any different? Your name on a car + someone who can't pay bills = a bad proposition. I would LOVE to help anyone who's been important in my life. Including MY x-wife. But I wouldn't agree to this deal unless I KNEW that I could 100% cover the costs when things go bad - because at this point, odds are they will.\"", "title": "" }, { "docid": "833192fa2624bd4fca23f6210fe60398", "text": "It is almost never going to be more economical to buy a new car versus repairing your current car. If you want a new car, that is justification enough.", "title": "" }, { "docid": "2877ea212c9e3863024c98fb6b9f6fa0", "text": "In a perfect world scenario you would get a car 2-5 years old that has very little mileage. One of the long standing archaic rules of the car world is that age trumps mileage. This was a good rule when any idiot could roll back an odometer. Chances are now that if you rolled your odometer back the car was serviced somewhere, had inspection or whatever and it is on a report. If seller was found to do this they could face jail time and obviously now their car is almost worthless. Why do I mention this? Because you can take a look at 2011 cars. Those with 20K miles go for just a little more than those with 100K miles. As an owner you will start incurring heavy maintenance costs around 100K on most newer cars. By buying cars with lower mileage, keeping them for a year or two, and reselling them before they get up in miles, you can stay in that magic area where you can drive a pretty good car for $200-300 a month. Note that this takes work on both the buying and selling side and you often need cash to get these cars (dealers are good about siphoning really good used cars to employees/friends). This is a great strategy for keeping costs down and car value up but obviously a lot of people try to do this and it takes work and you have to be willing to settle sometimes on a car that is fine, but not exactly what you want. As for leasing this really gets into three main components: If you are going to do EVERYTHING at a dealership and you want something new or newish you might as well lease. At least then you can shop around for apples to apples. The problem with buying a new/used car from the dealers in perpetuity isn't the buying process. It is the fact that they will screw you on the trade-in. A car that books for 20K may trade-in for 17K. Even if the dealer says they are giving you 20K, then they make you pay list price for the car. I have many many times negotiated a price of a car and then wife brought in our car separately and I can count on ZERO fingers how many times that the dealership honored both sides of the negotiations. Not only did they not honor them but most refused to talk with us after they found out. With a lease you don't have to worry about losing this money in the negotiations. You might pay a little extra (or not since you can shop around) but after the lease you wash your hands of the car. The one caveat to this is the high-end market. When you are talking your Acura, Mercedes, Lexus... It is probably better to buy and trade in every couple years. You lose too much equity by leasing, where it won't cover the trade-in gap and cost of your money being elsewhere. I have a friend that does this and gets a slightly better car every 2-3 years with same monthly payment. Another factor to consider is the price of a car. If your car will be worth over $15K at time of sale you are going to have a hard time selling it by owner. When amounts get this high people often need financing. Yes they can get personal financing but most people are too lazy to do this. So the number of used car buyers on let's say craigslist are way way fewer as you start getting over $10-12K and I have found $15K to be kind of that magic amount. The pro-buy-used side is easy. Aim for those cars around $12-18K that are out there (and many still under warranty). These owners will have issues finding cash buyers. They will drop prices somewhere between book price and dealer trade-in. In lucky cases where they need cash maybe below dealer trade-in. And remember these sellers aren't dealing with 100s let alone 10 buyers. You drive the car for 3-4 years. Maybe it is $7-10K. But now you will get much much closer to book price because there will be far more buyers in this range.", "title": "" }, { "docid": "751399e0e631d9deba48c25b9d4e5cfa", "text": "When I was in that boat a few years ago, I went for the car first. My thoughts: If I get the car first, I'm guaranteed to have a car that runs well. That makes it more convenient to commute to any job, or for social functions. I ended up dropping about $20k into a car (paid cash, I don't like being in debt). I chose to buy a really nice car, knowing it will last for many years to come - I'm expecting to not replace it for about 10 years from the purchase. I would urge you to consider paying in full for the car; dumping $20k+ is a lot, and there are plenty of nice cars out there in the $10-20k range that will work just fine for years to come. One benefit of paying in full is that you don't have a portion of your income tied into the car loan. The main reason I chose not to go for the house first had more to do with the difference in commitment. A home mortgage is a 30-year commitment on a large chunk of your income. With the job market and housing markets both currently working against you, it's better to wait until you have a large safety net to fall into. For example, it's always recommended to have several months worth of living expenses in savings. Compared to renting, having 6 or more months of mortgage payments + utilities + insurance + property taxes + other mandatory expenses (see: food, gas) comes out to a significant amount more that you should have saved (for me, I'm looking at a minimum of about $20k in savings just to feel comfortable; YMMV). Also, owning a house always has more maintenance costs than you will predict. Even if it's just replacing a few light bulbs at first, eventually you'll need something major: an appliance will die, your roof will spring a leak, anything (I had both of those happen in the first year, though it could be bad luck). You should make sure that you can afford the increased monthly payments while still well under your income. Once you're locked in to the house, you can still set aside a smaller chunk of your income for a new car 5-10 years down the road. But if you're current car is getting down to it's last legs, you should get that fixed up before you lock yourself in to an uncomfortable situation. Don't be in too much of a hurry to buy a house. The housing market still has a ways to go before it recovers, and there's not a whole lot to help it along. Interest rates may go up, but that will only hurt the housing market, so I don't expect it to change too much for the next several months. With a little bit of sanity, we won't have another outrageous housing bubble for many years, so houses should remain somewhat affordable (interest rates may vary). Also keep in mind that if you pay less that 20% down on the house, you may end up with some form of mortgage interest, which is just extra interest you'll owe each month.", "title": "" }, { "docid": "13c784beb80c23267dd7392e8d5b5027", "text": "For a lease, your payment is a function of sale price minus residual value. If the car has a low residual value then the lease payments will be higher. If it has a high residual value then lease payments will be lower but the purchase price at the end of the lease will be higher (potentially even higher than the KBB of the car). There is no gaming the system. Whether you buy now or lease now and buy later, you will be paying for the entire car. Calculate the payments in both scenarios with appropriate interest rates/money factors, sale price, and residual value. This will demonstrate there is no free lunch to be had here. Also, don't forget that financing the vehicle after a three year lease will probably mean a higher interest rate than if you were to finance it all now. With a purchase now you will likely get more favorable financing terms and be able to talk them down on sale price. Leasing will not allow such flexibility generally. Tldr No, that's not how it works. If you plan on owning the car for the duration of a loan (e.g. 5 years) it will be cheaper to just finance now.", "title": "" }, { "docid": "224406f6bceb88a7eb6490251a5f4211", "text": "The are a couple of explanations that I can think of; though for determining exactly what is different you will want to print out both returns and compare them line by line to see how they differ. If the company grossed up your income to account for the taxes on housing (possibly by paying the additional withholding), you may be just benefiting from them estimating your tax rate. This can especially be the case if your only work was the three month internship. They would have to assume your salary was for the entire year. There is an earned income tax credit for low wage earners that you may have qualified for (it would depend your specific circumstances if you meet the criteria). But that credit for a range of income actually pays out more the more you earn (to encourage working that extra hour instead of reducing benefit because you had another hour of employment). As for the housing subsidy itself, while the value is quite high the IRS considers that to be a taxable benefit that the employer provided you and so it needs to be added to your W-2 wages. $8k a month seems quite high, but I don't know the quality of the apartment you were provided and what the going rates are in the area. Given that you said you worked for a major tech company, I can imagine that you might have been working in an area with high rents. If the employer did gross up your paycheck so as to cover your taxes, that $24k would also include that extra tax payment (e.g. if the employer paid $8k in additional taxes for you, then the housing cost that they directly paid were $16k).", "title": "" } ]	fiqa
45081108164efb55a7b2e00fce6bfdbe	Calculating required rate of return for an income-generating savings account	[ { "docid": "e579c480f632018d2e79008cd1ccaa4b", "text": "Line one shows your 1M, a return with a given rate, and year end withdrawal starting at 25,000. So Line 2 starts with that balance, applies the rate again, and shows the higher withdrawal, by 3%/yr. In Column one, I show the cumulative effect of the 3% inflation, and the last number in this column is the final balance (903K) but divided by the cumulative inflation. To summarize - if you simply get the return of inflation, and start by spending just that amount, you'll find that after 20 years, you have half your real value. The 1.029 is a trial and error method, as I don't know how a finance calculator would handle such a payment flow. I can load the sheet somewhere if you'd like. Note: This is not exactly what the OP was looking for. If the concept is useful, I'll let it stand. If not, downvotes are welcome and I'll delete.", "title": "" } ]	[ { "docid": "1840c175462eafdd1a0a67584ec8a85a", "text": "You are looking for the Internal Rate of Return. If you have a spreadsheet like Microsoft Excel you can simply put in a list of the transactions (every time money went in or out) and their dates, and the spreadsheet's XIRR function will calculate a percentage rate of return. Here's a simple example. Investment 1 was 100,000 which is now worth 104,930 so it's made about 5% per year. Investment 2 is much more complicated, money was going in and out, but the internal rate of return was 7% so money in that investment, on average, grew faster than money in the first investment.", "title": "" }, { "docid": "185dbae572642a73b52c95ff09ec426e", "text": "\"For 3X, it's about 114, and for 4X, 144, which naturally, is twice 72. These are close, back of napkin, results. With smart phone apps offering scientific calculators, you should get comfortable just taking the nth root of a number for a more precise answer. Update in response to Brick's comment. The rule of 72 says that (n)(y)=72 to double your money. It answers both questions, how much time do I need, given a rate, and how much return do I need, given a time? Logic tells me that if 72 is the number to double, 144 is the 4X. But I'm a math guy, and my logic might not be logical to OP. So - Let's take the 20th root of 4. This is the key to use. 4, (hit key) 20, equals. The result is 1.07177 or 7.177%. And this is the precise rate you'd need to quadruple your money in 20 years) Now (n)(y)= 20* 7.177 = 143.55 which rounds to 144. \"\"Rule of 144\"\" to quadruple your money. This now answers OP's question, \"\"How to derive a Rule of X\"\" for a return other than doubling. One more example? I want 10X my money. Of course I need the initial guess to enter one calculation. People like 8%, in general. It's a bit below the 10% long term S&P return, and a good round number. The Rule of 72 says 9 years to double, so, 18 years is 4X, and 36 years is 8X. For my initial calculation, I'll use 40 years. The 40th root of 10. I get 5.925% (Again the precise rate that gives 10 fold over 40 years) and multiplying this by 40, I get a \"\"Rule of 237\"\" which I'm tempted to round to 240. At 6%, 237/6= 39.5 yrs, 1.06^39.5 = 9.99 At 6%, 240/6= 40.0 yrs, 1.06^40.0 = 10.29 You can see that you lose some accuracy for the sake of a number that's easier to remember, and manipulate. 72 to double is pretty darn accurate, so I'll stick with \"\"Rule of 237\"\" to get 10X my money. To close, the purpose of these rules is to create the tool that lets you perform some otherwise tough calculations away from any electronic device. Of course I know how to use logs, and in real life I'm paid to explain them to students who are typically glad when that chapter is over. I've shown above how the \"\"Rule of X\"\" can be formulated with a power/root key, which, for most people, is simpler. Ironically, log calculations as @jkuz offered, force a continuous compounding which may not be desired at all. It would give a result of 230 for my 10X return example, and the following (using the first equation he offered) - At 6%, 230/6= 38.3 yrs, 1.06^38.3 = 9.31 which is further away from the desired 10X than my 237 or rounded 240.\"", "title": "" }, { "docid": "841f67a51fe5b559c4ce1db46e0b290f", "text": "The point of a total return index is that it already has accounted for the capital gains + coupon income. If you want to calculate it yourself you'll have to find the on-the-run 10y bond for each distinct period then string them together to calc your total return. Check XLTP if they have anything", "title": "" }, { "docid": "a334ed8f76a17b3941232013b5b9d235", "text": "Aah... well, then in that case you should actually integrate a monte carlo return scenario with your equity values. Ultimately it's not going to matter what your RFR is because it's going to be equal in both cases, so you're really just talking about return differences. Again, it would be impractical for these two options. Maybe just look at cash outlay - an amortization table of sorts, and that's how you'd calculate the breakeven point. You could inflate the unspent cash difference by a small margin (perhaps 0.5% to account for something like a CD or an ARS) but the big difference is going to be the interest rate with respect to a mortgage vs. a perpetual cash payment of rent that never attains any real value.", "title": "" }, { "docid": "e87cf009a427c288022fcb9eaf253bed", "text": "You are comparing a risk-free cost with a risky return. If you can tolerate that level of risk (the ups and downs of the investment) for the chance that you'll come out ahead in the long-run, then sure, you could do that. So the parameters to your equation would be: If you assume that the risky returns are normally distributed, then you can use normal probability tables to determine what risk level you can tolerate. To put some real numbers to it, take the average S&P 500 return of 10% and standard deviation of 18%. Using standard normal functions, we can calculate the probability that you earn more than various interest rates: so even with a low 3% interest rate, there's roughly a 1 in 3 chance that you'll actually be worse off (the gains on your investments will be less than the interest you pay). In any case there's a 3 in 10 chance that your investments will lose money.", "title": "" }, { "docid": "44f9f76999c87d2d86618c849ab259aa", "text": "Well, one can easily have rates below -100%. Suppose I start with $100, and end up with $9 after a year. What was my rate of return? It could be -91%, -181%, -218%, or -241%, or something else, depending on the compounding method. We always have that the final amount equals the initial amount times a growth factor G, and we can express this using a rate r and a day count fraction T. In this case, we have T = 1, and B(T) = B(0) * 0.09, so: So, depending on how we compound, we have a rate of return of -91%, -181%, -218%, or -241%. This nicely illustrates that:", "title": "" }, { "docid": "8006d851062e84cea059ce200dfbe31e", "text": "such analysis helps you keep track of the percentage of income that you invest You could apply 1:1:1 ratio. i.e spend 1/3, save 1/3 and invest 1/3. Hope that helps", "title": "" }, { "docid": "0c504887992c7acc59ad707ecd200e98", "text": "I use the following method. For each stock I hold long term, I have an individual table which records dates, purchases, sales, returns of cash, dividends, and way at the bottom, current value of the holding. Since I am not taking the income, and reinvesting across the portfolio, and XIRR won't take that into account, I build an additional column where I 'gross up' the future value up to today() of that dividend by the portfolio average yield at the date the dividend is received. The grossing up formula is divi(1+portfolio average return%)^((today-dividend date-suitable delay to reinvest)/365.25) This is equivalent to a complex XMIRR computation but much simpler, and produces very accurate views of return. The 'weighted combined' XIRR calculated across all holdings then agrees very nearly with the overall portfolio XIRR. I have done this for very along time. TR1933 Yes, 1933 is my year of birth and still re investing divis!", "title": "" }, { "docid": "d0a026f08202c815affb879b92cd8e3f", "text": "I hope that there are no significant differences between the things you list once the formulas for compounding interest are understood. I will, again, lay out these formulas below. First, definition of the variables: R means Total Return ratio. The sum of all money you get, both dividends (or interest payments) and return of initial capital. I is a ratio. It is the percent (10.4%) divided by 100 (0.104) then added to one (1.104). P means the number of periods in which the interest rate is paid and compounded. R = I^P I = R^(1/P) P = log(R) / log(I) Once you have R you multiply it by the amount of your initial investment to find out how much total money is returned. For simplicity the following amounts are approximate: 2 = 1.104^7 1.104 = 2^(1/7) 7 = log(2) / log(1.104) So to double your money in seven years you need a yearly interest rate of 10.4, if compounded yearly.", "title": "" }, { "docid": "19cee018f7319046d2a12068ecb47663", "text": "There is a fundamental flaw in this statement: For example, a home bought cash $100,000 would have to be sold $242,726.247 30 years later just to make up with inflation, and that would be a 0% return. You forgot to deduct rent from your monthly carrying costs. That changes the calculations significantly. Your calculations are valid ONLY if you were to buy a house, and let it sit empty, which is unlikely. Either you are going to live in it, and save yourself $1000 a month in rent, or, you are going to rent it out to someone, and earn an income of $1000 a month. Either way, you're up $1000 a month and this needs to be included.", "title": "" }, { "docid": "d2fbc5dc05a3d6d3b2e81994ca5c3e12", "text": "I believe the following formula provides a reasonable approximation. You need to fill in the following variables: The average annual return you need on investing the 15% = (((MP5 - MP20) 12) + (.0326 * .95 * PP / Y)) / (PP .15) Example assuming an interest rate of 4% on a 100K home: If you invest the $15K you'll break even if you make a 9.86% return per year on average. Here's the breakdown per year using these example numbers: Note this does not consider taxes.", "title": "" }, { "docid": "dc859b3b25fca1555b0fd5f6dddb8d2b", "text": "As Chris pointed out: If your expenses are covered by the income exactly, as you have said to assume, then you are basically starting with a $40K asset (your starting equity), and ending with a $200K asset (a paid for home, at the same value since you have said to ignore any appreciation). So, to determine what you have earned on the $40K you leveraged 5x, wouldn't it be a matter of computing a CAGR that gets you from $40K to $200K in 30 years? The result would be a nominal return, not a real return. So, if I set up the problem correctly, it should be: $40,000 (1 + Return)^30 = $200,000 Then solve for Return. It works out to be about 5.51% or so.", "title": "" }, { "docid": "e381aeb1110d8b207c75ddc922101ea8", "text": "Interesting. The answer can be as convoluted/complex as one wishes to make it, or back-of-envelope. My claim is that if one starts at 21, and deposits 10% of their income each year, they will likely hit a good retirement nest egg. At an 8% return each year (Keep in mind, the last 40 years produced 10%, even with the lost decade) the 10% saver has just over 15X their final income as a retirement account. At 4% withdrawal, this replaces 60% of their income, with social security the rest, to get to nearly 100% or so replacement. Note - I wrote an article about Social Security Benefits, showing the benefit as a percent of final income. At $50K it's 42%, it's a higher replacement rate for lower income, but the replacement rate drops as income rises. So, the $5000 question. For an individual earning $50K or less, this amount is enough to fund their retirement. For those earning more, it will be one of the components, but not the full savings needed. (By the way, a single person has a standard deduction and exemption totaling $10150 in 2014. I refer to this as the 'zero bracket.' The next $8800 is taxed at 10%. Why go 100% Roth and miss the opportunity to fund these low or no tax withdrawals?)", "title": "" }, { "docid": "3a5e579b13be145ba602a0f1c0448c12", "text": "\"It can be pretty hard to compute the right number. What you need to know for your actual return is called the dollar-weighted return. This is the Internal Rate of Return (IRR) http://en.wikipedia.org/wiki/Internal_rate_of_return computed for your actual cash flows. So if you add $100 per month or whatever, that has to be factored in. If you have a separate account then hopefully your investment manager is computing this. If you just have mutual funds at a brokerage or fund company, computing it may be a bunch of manual labor, unless the brokerage does it for you. A site like Morningstar will show a couple of return numbers on say an S&P500 index fund. The first is \"\"time weighted\"\" and is just the raw return if you invested all money at time A and took it all out at time B. They also show \"\"investor return\"\" which is the average dollar-weighted return for everyone who invested in the fund; so if people sold the fund during a market crash, that would lower the investor return. This investor return shows actual returns for the average person, which makes it more relevant in one way (these were returns people actually received) but less relevant in another (the return is often lower because people are on average doing dumb stuff, such as selling at market bottoms). You could compare yourself to the time-weighted return to see how you did vs. if you'd bought and held with a big lump sum. And you can compare yourself to the investor return to see how you did vs. actual irrational people. .02, it isn't clear that either comparison matters so much; after all, the idea is to make adequate returns to meet your goals with minimum risk of not meeting your goals. You can't spend \"\"beating the market\"\" (or \"\"matching the market\"\" or anything else benchmarked to the market) in retirement, you can only spend cash. So beating a terrible market return won't make you feel better, and beating a great market return isn't necessary. I think it's bad that many investment books and advisors frame things in terms of a market benchmark. (Market benchmarks have their uses, such as exposing index-hugging active managers that aren't earning their fees, but to me it's easy to get mixed up and think the market benchmark is \"\"the point\"\" - I feel \"\"the point\"\" is to achieve your financial goals.)\"", "title": "" }, { "docid": "478bf5c86f175e786a9a7ca05f38691a", "text": "\"There is a very simple calculation that will answer the question: Is the expected ROI of the 401K including the match greater than the interest rate of your credit card? Some assumptions that don't affect the calculation, but do help illustrate the points. You have 30 years until you can pull out the 401K. Your credit card interest rate is 20% compounded annually. The minimum payoffs are being disregarded, because that would legally just force a certain percentage to credit card. You only have $1000. You can either pay off your credit card or invest, but not both. For most people, this isn't the case. Ideally, you would simply forego $1000 worth of spending, AND DO BOTH Worked Example: Pay $1000 in Credit Card Debt, at 20% interest. After 1 year, if you pay off that debt, you no longer owe $1200. ROI = 20% (Duh!) After 30 years, you no longer owe (and this is pretty amazing) $237,376.31. ROI = 23,638% In all cases, the ROI is GUARANTEED. Invest $1000 in matching 401k, with expected ROI of 5%. 2a. For illustration purposes, let's assume no match After 1 year, you have $1050 ($1000 principal, $0 match, 5% interest) - but you can't take it out. ROI = 5% After 30 years, you have $4321.94, ROI of 332% - assuming away all risk. 2b. Then, we'll assume a 50% match. After 1 year, you have $1575 ($1000 principle, $500 match, 5% interest) - but you can't take it out. ROI = 57% - but you are stuck for a bit After 30 years, you have $6482.91, ROI of 548% - assuming away all risk. 2c. Finally, a full match After 1 year, you have $2100 ($1000 principle, $1000 match, 5% interest) - but you can't take it out. ROI = 110% - but again, you are stuck. After 30 years, you have $8643.89, ROI of 764% - assuming away all risk. Here's the summary - The interest rate is really all that matters. Paying off a credit card is a guaranteed investment. The only reason not to pay off a 20% credit card interest rate is if, after taxes, time, etc..., you could earn more than 20% somewhere else. Note that at 1 year, the matching funds of a 401k, in all cases where the match exceeded 20%, beat the credit card. If you could take that money before you could have paid off the credit card, it would have been a good deal. The problem with the 401k is that you can't realize that gain until you retire. Credit Card debt, on the other hand, keeps growing until you pay it off. As such, paying off your credit card debt - assuming its interest rate is greater than the stock market (which trust me, it almost always is) - is the better deal. Indeed, with the exception of tax advantaged mortgages, there is almost no debt that has an interest rate than is \"\"better\"\" than the market.\"", "title": "" } ]	fiqa
f29256ed3b34f9b9c151a5919e072d83	Life insurance policy	[ { "docid": "f1ab32d458b6514b0ef550fc9c1f369c", "text": "\"From the details you have given it looks like you have \"\"Unit Linked\"\" insurance policy. In such policies a part of the premium goes towards the \"\"Insurance\"\", the balance is invested into \"\"Mutual Funds / stock Market\"\". It is generally not advisable to have \"\"Unit Linked\"\" policy compared to pure \"\"Term\"\" policy. Generally the amount of fees charged for \"\"Unit Linked\"\" policy is high and hence the returns to the end user are low. i.e. if you buy a \"\"Term\"\" insurance for the same sum insured and invest on your own the balance in any \"\"Mutual Fund\"\" you will end up making more that what you are getting now. Typically these policies have 3 years lock-in period. As you have purchased this in 2008, you can cancel the policy without any penalties. This will save you future premium and you can buy a term insurance and invest the difference yourself. Note the unit linked policy is useful for people who do not invest on their own and this is a good way to be forced into saving than nothing else.\"", "title": "" }, { "docid": "6df5d9c36f576d1268036e98f7e8ccf1", "text": "First off, I would question why do you need a LI policy? While you may be single are you supporting anyone? If not, and you have some money saved to cover a funeral; or, your next of kin would be able to pay for final expenses then you probably don't have a need. In, general, LI is a bad investment vehicle. I do not know hardly anything about the Indian personal finance picture, but here in the US, agents tout LI as a wonderful investment. This can be translated as they make large commissions on such products. Here in the US one is far better off buying a term product, and investing money elsewhere. I image it is similar in India. Next time if you want to help a friend, listen to his sales presentation, give some feedback, and hand him some cash. It is a lot cheaper in the long run.", "title": "" }, { "docid": "c59ed3cf8ce44c1fe805db09b37a9cae", "text": "I would like to add to the answer provided by Dheer. I think under some ULIPs you need not pay premium after 3 years and you can take the money back after 5 years (something like that, read your policy statement of course). Since the money is invested in Stock markets and since generally people say the longer money stays in stocks, the better; you can keep the money with them without taking it back and without paying any further premium. That way, whatever you paid will be invested and you can get it back later when you feel you will make a profit.", "title": "" } ]	[ { "docid": "1176912da74cf1b97a8f7dcf90586010", "text": "\"I have an answer and a few comments. Back to the basics: Insurance is purchased to provide protection in case of a loss. It sounds as though you are doing well, from a financial perspective. If you have $0 of financial obligations (loans, mortgages, credit cards, etc.) and you are comfortable with the amount that would be passed on to your heirs, then you DO NOT NEED LIFE INSURANCE. Life insurance is PROTECTION for your heirs so that they can pay off debts and pay for necessities, if you are the \"\"bread-winner\"\" and your assets won't be enough. That's all. Life insurance should never be viewed as an investment vehicle. Some policies allow you to invest in funds of your choosing, but the fees charged by the insurance company are usually high. Higher than you might find elsewhere. To answer your other question: I think NY Life is a great life insurance company. They are a mutual company, which is better in my opinion than a stock company because they are okay with holding extra capital. This means they are more likely to have the money to pay all of their claims in a specific period, which shows in their ratings: http://www.newyorklife.com/about/what-rating-agencies-say Whereas public companies will yield a lower return to their stock holders if they are just sitting on additional capital and not paying it back to their stock holders.\"", "title": "" }, { "docid": "faf771838eccce369d94d11fa1701ebc", "text": "\"The problem above is actually a pretty good list of the concerns around life insurance. While there is no correct answer to the question as posed, this will vary among different WSCs, there is a simpler way to think about insurance in general that may make finding what is right answer for you easier. Buying life insurance, like almost all insurance, is on average a money losing purchase. This is simply because the companies selling wouldn't offer it if they couldn't expect to make money on it. Think about buying insurance (a warranty) on a new cell phone, maybe if you are particularly prone to damaging cell phones it can be in your favor, but for most of the people that buy it will lose money on average. People, of course, still buy insurance anyway to protect themselves from unlikely but very bad consequences. The big reason to make this trade off is if the loss will have big lasting consequences. To stay with our cell phone example having to replace a cell phone, at least for me, would be annoying but not a catastrophic event. For myself, the protection is not worth the warranty cost, but that is not true for everyone. Life insurance is a pretty extreme case of this, but I find the best question to ask is \"\"if you (you and your spouse) were to die will your dependents lives become so much worse that you really dislike the idea of not being insured?\"\" For some working seniors, they already have enough saved to bridge their kids/spouse to adulthood/old-age that insurance makes no sense. For some, their children/husband/wife would be destitute and insurance is an obvious choice and an easy price to pay even if it is very high. The example you suggest seems on the border and good questions to ask are: Thinking about those questions may help you understand if the protection offers is worth the cost.\"", "title": "" }, { "docid": "64179b9abe526e78ade3da280069e512", "text": "You are likely thinking of a individual variable insurance contract (IVIC) , better known as a segregated fund, or a principal-protected note (PPN). For a segregated fund, to get a full guarantee on invested capital, you need a 100/100 where the maturity value and death benefit are each 100% guaranteed. The PPN works similar to a long-term GIC (or CD) with a variable investment component. The thing is, neither of these things are cheap and the cost structure that is built in behind them makes it difficult to make any real above market rates of return. In both cases, if you try to break the contracts early then the guarantees are null and void and you get out what you get out.", "title": "" }, { "docid": "44d368f9c761debde9b6911dd5d7e889", "text": "The problem with the cash value is that it's really slow to accumulate. For the first many years you'll just be paying premiums which are front loaded until the insurance company gets their money back. Whole life is NOT an investment, regardless of what your 'advisor' says. It's insurance, and expensive insurance at that.", "title": "" }, { "docid": "b1234f8cb5c80b9ebe1fd888e157d3d7", "text": "\"The short answer is \"\"No\"\". There a 2 ways to get cash from a life insurance policy. If the policy has cash value greater than the surrender value, then the difference can be borrowed, but will generally increase premiums in the future. The other method, available on many term policies allows the owner to receive part of the death benefit if the insured has a physician willing to certify that he/she will probably pass away within a 12 month period. Several carriers also offer cash benefits for critical care.\"", "title": "" }, { "docid": "1a9f121fbe0476a9171c76a7b24e0f99", "text": "You only insure assets, and you only insure them for the people that depend on them. You don't need to insure a liability. Therefore: Example: I have life insurance equal to a couple of years salary, in order to make sure my wife doesn't encounter any hardships if I die. I'm the primary income earner, and she will take of the kids. Once we have kids we'll get life insurance for her to cover what the costs would be to take care of the kids if she were to die.", "title": "" }, { "docid": "17e7281a60366dbbcafa17128fce3777", "text": "The main Part of this strategy is to get as much money as possible into the policy and then take policy loans ever year. As long as you don't withdraw too much too fast you can take a loan each year that is tax free and then once you die your beneficiary still receives the face value of the policy less any outstanding loans tax free.", "title": "" }, { "docid": "fc0e09fc1b6e0a85014e9fdbe99facf9", "text": "\"Short answer: Yes. Longer answer: There may or may not be a medical exam, or a physical, as with a life insurance policy. But your medical history is considered in the underwriting process. Disclosure: I once worked as a financial advisor, and held an insurance license for life, annuity and long-term care. It has been 8 years since I left that line of work. There are some \"\"knock-out\"\" questions that the salesperson is encouraged/required to ask just to see if there would be anything obvious that would disqualify you. The only one I can remember from that list is COPD. If you have that as a diagnosis in your personal medical history, the instruction to the salesperson is to not waste anybody's time. There were several other conditions, all with very long technical names. If you're not disqualified by the no-brainer knock-out questions, your medical history will likely be included in the underwriting process. Not every serious illness is an automatic disqualifier, including cancer. It may cause your premiums to be a little higher, as the underwriters will take a closer look and increase your risk profile due to the history. There may be some group policies where underwriting is limited or not required at all. As with all group insurance policies, the healthy members in the group are paying more in premiums than they otherwise would, in order to \"\"subsidize\"\" the premiums of the less healthy members. It's almost always cheaper to get your own personal policy unless you know you wouldn't qualify for it. Then, the group policy might be your only chance for some coverage. Age 60-62 is statistically the best time to purchase LTCI. On average, if you make it to 62, you have a very high chance of making it to 90. (These were the numbers available to me 8 years ago when I was in the business.) After 62, the prices go up a lot faster with each year of age. I can't answer with anything helpful about your spouse's specific situation. It would be good to talk to a licensed insurance broker about it (not a salesman from a specific company). The broker is not necessarily bound to disclose personal details you might have shared with them. The company salesman would be obligated to disclose it to their company.\"", "title": "" }, { "docid": "0d52ed15cb24de54370aeeda8b7c0965", "text": "If your uncle is looking to maintain life insurance coverage for specific shorter period of time he may want to look into hybrid life insurance. If you buy a hybrid universal life policy, the premium and death benefit can be guaranteed to last until any age. Since, most permanent policies focus on cash value accumulation it is hard for most people to find cheap whole life or affordable universal life. Consumers only looking for a longer duration have a more flexible choice with a new hybrid product that combines elements of both term life coverage and universal life. Hybrid universal policies are much cheaper then other permanent coverage such as whole life coverage because they do not emphasize cash value accumulation. However, the premiums and death benefits can still be guaranteed to a specific age (i.e. 85, 90, 95, 100). So, premiums can be scaled to coordinate with your desired budget and the face amount required for your family. Typical universal life and whole life insurance contracts only allow for lifetime coverage. However, hybrid universal life offers a much smaller premium because the coverage can be dialed into a specific age. If the policyholder does live beyond the originally selected age, the death benefit will simply begin getting smaller, while the original premium will continue to remain the same.", "title": "" }, { "docid": "a06d0f962d79ab8e476d9ed71d01f442", "text": "\"Buy term and invest the rest is something you will hear all the time, but actually cash value life insurance is a very misunderstood, useful financial product. Cash value life insurance makes sense if: If you you aren't maxing out your retirement accounts, just stick with term insurance, and save as much as you can for retirement. Otherwise, if you have at least 5 or 10k extra after you've funded retirement (for at least 7 years), one financial strategy is to buy a whole life policy from one of the big three mutual insurance firms. You buy a low face value policy, for example, say 50k face value; the goal is to build cash value in the policy. Overload the policy by buying additional paid up insurance in the first 7 years of the policy, using a paid-up addition rider of the policy. This policy will then grow its cash value at around 2% to 4% over the life of the policy....similar perhaps to the part of your portfolio that would would be in muni bonds; basically you are beating inflation by a small margin. Further, as you dump money into the policy, the death benefit grows. After 7 or 8 years, the cash value of the policy should equal the money you've put into it, and your death benefit will have grown substantially maybe somewhere around $250k in this example. You can access the cash value by taking a policy loan; you should only do this when it makes sense financially or in an emergency; but the important thing to realize is that your cash is there, if you need it. So now you have insurance, you have your cash reserves. Why should you do this? You save up your cash and have access to it, and you get the insurance for \"\"free\"\" while still getting a small return on your investment. You are diversifying your financial portfolio, pushing some of your money into conservative investments.\"", "title": "" }, { "docid": "f79729b222ca3a4907afedab96a66a58", "text": "Options do act, somewhat, like insurance.... However.... An insurance policy will not have such short term expiration time frames. A 20 year term life insurance policy can be thought of as insurance with an expiration. But the expiration on options is in weeks, not decades. So (IMO) options make terrible insurance policies because of the very short term expirations they have.", "title": "" }, { "docid": "d138445f43465adaec68e65a19c491f3", "text": "There's a cool calculator at Money Chimp that lets you plug in a start and end year and see what the compound annual growth rate of the S&P 500. The default date range of 1871 through 2010 gives a rate of 8.92% for example. Something you need to take into account when comparing returns to a whole life policy is what happens to the cash value in your policy when you die. Many of these policies are written so that your beneficiaries only get the face value of the policy, and the insurance company keeps the cash value.", "title": "" }, { "docid": "cd9b76c3ca143af260f9aa3290c8779a", "text": "\"These policies are usually called dread disease policies or critical illness insurance, and they normally aren't a good deal. Furthermore, with the passage of the Affordable Care Act, such policies may become less common or disappear entirely. These policies aren't a great deal because of the effects of adverse selection and asymmetric information, two closely related concepts in the economics of insurance. When you purchase an insurance policy, the insurance company charges you a premium based on your average risk level or the average risk level of your risk pool, e.g. you and your fellow employees, if you get insurance through your employer. For health insurance, this average risk level is the average probability that you'll incur healthcare costs. The insurer's actuaries calculate this probability from numerous factors, like your age, sex, current health, socioeconomic status, etc. Asymmetric information exists when you know more about this probability than the insurance company does. For example, you may look like a relatively low-risk individual on paper, but little does the insurance company know, BASE jumping is one of your hobbies. Because you know about your hobby and the insurance company doesn't, you secretly know that your risk of incurring healthcare expenses is much higher than the insurance company expects. If the insurance company knew this, they would like to charge you a much higher premium, if they could. However, they can't, because a) they don't know about your hobby, and b) the premium may be decided for the entire group/risk pool, so they can't increase it simply because a few individuals in the group have higher risk levels. Adverse selection occurs when individuals with higher risk levels are more likely to buy insurance. You may decide that because of your dangerous hobby, you do want to take advantage of your employer's healthcare plan. Unfortunately for the insurance company, they can't adjust their price accordingly. Adverse selection is a major factor in insurance markets, so I didn't go into much detail here (too much detail is probably off-topic anyway). I can point you towards more resources on the topic if you're interested. However, the situation is different when you purchase a dread disease policy. By expressing interest in such a specific policy, e.g. a cancer insurance policy, you signal to the insurance company that you feel you have a higher risk of facing that disease. In your case, you're signaling to the insurance company that your family probably has a history of cancer or that you have habits that make you more susceptible to it, and your premiums will be higher to compensate the insurance company for bearing this additional risk. Since the insurance company already has a rough estimate of your chances of developing that illness, they may already know that you have a higher chance of facing it. However, when you express interest in a disease-specific policy, this signals the existence of asymmetric information (your family history or other habits), and the insurer assumes you know something they don't that elevates your risk level of that specific disease. Since these policies are optional policies often sold as riders to existing policies, the insurance company has more flexibility in pricing them. They can charge you a higher premium because you've signaled to the insurer that you have a significantly above-average risk of contracting a specific disease. Also, the insurer can do a much better job of estimating the expected costs of insuring you since they need only focus on data surrounding one disease. The policy will be priced accordingly, i.e. in such a way that isn't necessarily beneficial to you. Furthermore, most dread disease policies aren't guaranteed renewable, which means that even if you are willing to keep paying the premiums, the insurance company doesn't have to keep insuring you. As your risk of developing the specific disease grows, e.g. with age, it may pass the point where insuring you is no longer an acceptable risk. The company expects you to develop the illness with the next few renewal cycles, so they decide not to renew your policy. The end result? The insurance company has the premiums you've paid previously, but you no longer have coverage for that illness, and ex post, you've suffered a net loss with no reduction of risk for the foreseeable future. Dread disease policies are changing under the Affordable Care Act. According to healthcare.gov Starting in 2014, ... all new health insurance plans sold to individuals and small businesses, and plans purchased in the new Affordable Insurance Exchanges, must include a range of essential health benefits. The essential health benefits include quite a few areas of coverage; since this applies to policies offered on the state insurance exchanges and those offered outside of it, dread disease policies wouldn't seem to qualify. For more information, you can read the linked page on healthcare.gov or see Section 1302, subsection b), titled \"\"Essential Health Benefits Requirements\"\" in the law itself (p87). I imagine more details will be available on a state-by-state basis through 2014 and into 2015. One legal source (see the discussion on p24) states that: whatever else the ACA does with excepted benefit policies, including specific disease and fixed dollar indemnity policies, it does explicitly provide that such policies do not count as minimum essential coverage for purposes of the ACA This seems pretty straightforward; a dread disease (or \"\"specific disease\"\" policy, as it's referred to in the article), won't count towards the minimum essential requirements. This may not be an issue for you, but for others, it's important to understand that you'll still need to pay the penalty if you only purchase one of these policies. The ACA spells this out in Section 5000(f) (see p316, which states that \"\"excepted benefit policies\"\" are excluded and defines them using the definition in the Public Health Service Act (PHSA). *The PSHA specifically includes \"\"Coverage only for a specified disease or illness\"\" in their definition of \"\"excepted benefit policies\"\" (see section 2791(b), paragraph 3A on p82, so it's probably a safe bet that such policies won't count towards the minimum. Also, as Rick pointed out in the comments, the Affordable Care Act also forbids lifetime limits on most insurance plans, so assuming you find an insurance policy with adequate coverage for the specific disease you're worried about, such a plan should cover the related expenses without a lifetime limit. Deductibles, annual limits, and other factors may complicate this somewhat. In the section about lifetime limits (Sec. 2711, p2), the Affordable Care Act states that: A group health plan and a health insurance issuer offering group or individual health insurance coverage may not establish ... lifetime limits on the dollar value of benefits for any participant or beneficiary. However, the law states in the next paragraph that the preceding statement should not be construed to prevent a group health plan or health insurance coverage from placing annual or lifetime per beneficiary limits on specific covered benefits that are not essential health benefits under section 1302(b) of the Patient Protection and Affordable Care Act, to the extent that such limits are otherwise permitted under Federal or State law The section also contains similarly vague caveats about annual limits, so the actual details and limits may vary once individual states finalize their policies. The law is intentionally vague because the vast majority of the law's implementation is left up to individual states. Furthermore, certain parts of the law specify actions involving the Secretary of Health and Human Services, so these may require further codification in the future too. You should still read the fine print of any insurance policy you buy and evaluate it as you would any contract (see the next section). Since a dread disease policy probably isn't a good idea, you'll probably want to evaluate the healthcare plans offered by your employer or individual plans offered in your area (if your employer doesn't offer coverage). I've tried to include the basic points offered in these articles to give you or future visitors some idea of where to start. These points may change once the Affordable Care Act is implemented, so I'll try to keep them as general as possible. Services - Above and beyond the minimum essential requirements, what services does the plan offer? Are these services a good match for you and/or your family, or do they add unnecessary cost to the premium with little or no benefit? For example, my health insurance plan offers basic dental coverage with a small co-pay, so I don't need a separate dental plan, even though my employer offers one. Choice - What doctors, clinics, hospitals, etc. are preferred providers under your plan? Do you need a referral from your primary care doctor to see a specialist, or can you find one on your own? Are the preferred providers convenient for you? In my first year of college (about five years ago), my student health insurance only covered a few hospitals that were in the suburbs and somewhat difficult for me to reach. This is something to keep in mind, depending on where you live. Costs - This is a major one, obviously. Deductibles, copays, maximum cost limits over a year or your lifetime, out-of-network costs, etc. are all variables to consider. There are other factors, but since I don't have a family, other members of the site can provide more detailed information about what to look for in family policies. In place of a dread disease policy, you're likely better off purchasing a comprehensive health insurance policy, perhaps a catastrophic coverage policy with a high deductible that will kick in once you've exhausted your standard insurance policy. However, this may be a moot point since the passage of the Affordable Care Act may significantly reduce the availability of such policies anyway.\"", "title": "" }, { "docid": "3a0f505ba085c721b1b2c37971c15a3c", "text": "Whole life policies have its own useful purpose, but it is never meant to be a vehicle that allows you to maximize cash value accumulation. Yes, you can buy term and invest the difference. Assuming you set out to reduce your liabilities to zero/minimum when that term policy ends or you have no such desires to transfer your wealth to your next of kin income tax free. Indexed universal life and variable universal life is much better suited for cash value accumulation when looking at life insurance products.", "title": "" }, { "docid": "a0bdf37369e5c276708f779ca4706875", "text": "The NYSE 20 Year Plus Treasury Bond Index (AXTWEN) is a multiple-security fixed income index that aims to track the total returns of the long-term 20 year and greater maturity range of the U.S. Treasury bond market. The index constituent bonds are weighted by their relative amounts outstanding.One cannot directly invest in an Index. Index Bond Maturities 24 to 27 Years 20.36% /27 to 29 Years 79.64% Index Duration 17.47 Years An oversimplification of how bonds value changes as rates change is they are inversely related based on the duration of the bond. Think of duration as the time-weighted average of all the coupons and the final payment. In this case, a drop in rates of about 1% will cause a rise in value of about 17.4%. Long term rates took a drop in the last year.", "title": "" } ]	fiqa
c6e042d7508de20c2b570d600033e972	What happen in this selling call option scenario	[ { "docid": "9c613135e5b27ab8a5f96d0ea3560e5e", "text": "\"But what happen if the stock price went high and then go down near expiry date? When you hold a short (sold) call option position that has an underlying price that is increasing, what will happen (in general) is that your net margin requirements will increase day by day. Thus, you will be required to put up more money as margin to finance your position. Margin money is simply a \"\"good faith\"\" deposit held by your broker. It is not money that is debited as cash from the accounting ledger of your trading account, but is held by your broker to cover any potential losses that may arise when you finally settle you position. Conversely, when the underlying share price is decreasing, the net margin requirements will tend to decrease day by day. (Net margin is the net of \"\"Initial Margin\"\" and \"\"Variation Margin\"\".) As the expiry date approaches, the \"\"time value\"\" component of the option price will be decreasing.\"", "title": "" } ]	[ { "docid": "9b4d93b9dbd732db251e4c0d6cecbf1e", "text": "You haven't said why you think you will gain at $41, but the graph never lies. Take it one piece at a time: At $41, your stock will lose a big chunk of value. Your short calls will expire. Your puts will gain a bit of value. The stock's loss outweighs the option gains.", "title": "" }, { "docid": "b75e930b98cb6c9e4b9a575ff5982ce1", "text": "To Chris' comment, find out if the assignment commission is the same as the commission for an executed trade. If that does affect the profit, just let it expire. I've had spreads (buy a call, sell a higher strike call, same dates) so deep in the money, I just made sense to let both exercise at expiration. Don't panic if all legs ofthe trade don't show until Sunday or even Monday morning.", "title": "" }, { "docid": "3e6d4ac77831963abd6658de914ac4f9", "text": "The Explanation is correct. The Traders buys the 1st call and profits linearly form 40$ onwards. At at 45 the short call kick in and neutralizes any further profit on the first call.", "title": "" }, { "docid": "7a75b535aa087132d36f9dd54f4abc64", "text": "I understand the question, I think. The tough thing is that trades over the next brief time are random, or appear so. So, just as when a stock is $10.00 bid / $10.05 ask, if you place an order below the ask, a tick down in price may get you a fill, or if the next trades are flat to higher, you might see the close at $10.50, and no fill as it never went down to your limit. This process is no different for options than for stocks. When I want to trade options, I make sure the strike has decent volume, and enter a market order. Edit - I reworded a bit to clarify. The Black–Scholes is a model, not a rigid equation. Say I discover an option that's underpriced, but it trades under right until it expires. It's not like there's a reversion to the mean that will occur. There are some very sophisticated traders who use these tools to trade in some very high volumes, for them, it may produce results. For the small trader you need to know why you want to buy a stock or its option and not worry about the last $0.25 of its price.", "title": "" }, { "docid": "df3b8a200267abcd62e8f9bb8332d003", "text": "Option prices consist of two parts: the intrinsic value (the difference between the strike and the current price of the stock) and a time premium, representing the probability that the stock will end up above the strike for a call (or below for a put). All else being equal, options decline in value as time passes, since there is less uncertainty about the expected value of the stock at expiration and thus the time premium is smaller. Theta is the measure of the change in value in one day. So for every day that passes, the calls you sold are going down by $64.71 (which is positive to you since you sold them at a higher value) and the calls you sold are going down by $49.04. So your position (a short spread) is gaining $15.67 each day (assuming no change in stock price or volatility). In reality, the stock price and volatility also change every day, and those are much stronger drivers of the value of your options. In your case, however, the options are deep out of the money, meaning it's very likely that they'll expire worthless, so all you have left is time premium, which is decaying as time goes on.", "title": "" }, { "docid": "3631af51555feb4c27a4241fe7870abe", "text": "\"Your broker likely didn't close your position out because it is a covered position. Why interfere with a trade that has no risk to it, from their perspective? There's no risk for the broker since your account holds the shares available for delivery (definition of covered), for if and when the options you wrote (sold) are exercised. And buyers of those options will eventually exercise the options (by expiration) if they remain in-the-money. There's only a chance that an option buyer exercises prematurely, and usually they don't because there's often time value left in the option. That the option buyer has an (ahem) \"\"option\"\" to exercise is a very key point. You wrote: \"\"I fully expected my position to be automatically liquidated by whoever bought my call\"\". That's a false assumption about the way options actually work. I suggest some study of the option exercise FAQs here: Perhaps if your position were uncovered – i.e. you wrote the call without owning the stock (don't try this at home, kids!) – and you also had insufficient margin to cover such a short position, then the broker might have justifiably liquidated your position. Whereas, in a covered call situation, there's really no reason for them to want to interfere – and I would consider that interference, as opposed to helpful. The situation you've described is neither risky for them, nor out of the ordinary. It is (and should be) completely up to you to decide how to close out the position. Anyway, your choices generally are:\"", "title": "" }, { "docid": "b1fd26ee58a9ba5d07e635ce82827285", "text": "Good questions. I can only add that it may be valuable if the company is bought, they may buy the options. Happened to me in previous company.", "title": "" }, { "docid": "e8ae56207c7b41a3488d268e08cb8ae3", "text": "They can sell a lower price call if they expect the stock to plummet in the near term but they are bullish on the longer term. What they are looking to do is collect the call premium and hope it expires worthless. And then again 'hope' that the stock will ultimately turn around. So yes, a lot of hoping. But can you explain what you mean by 'my brokerage gives premiums for prices lower than the current price'? Do you mean you pay less in commissions for ITM calls?", "title": "" }, { "docid": "0bc45136caca7745acf7af3a33fe7e41", "text": "I don't think you understand options. If it expires, you can't write a new call for the same expiration date as it expired that day. Also what if the stock price decreases further to $40 or even more? If you think the stock will move in either way greatly, and you wish to be profit from it, look into straddles.", "title": "" }, { "docid": "d84f603fa1ede82d7a84beee52e7fa18", "text": "You sold a call, and have a risk if the stock rises. You bought a put and gain when the stock drops. You, sir, have a synthetic short position. It's Case 3 from your linked example: Suppose you own Long Stock and the company is going to report earnings but you’re going on vacation. How can you hedge your position without selling your stock? You can short the stock synthetically with options! Short Stock = Short Call + Long Put They conclude with the net zero remark, because the premise was an existing long position. A long plus this synthetic short results in a neutral set of positions (and the author's ability to go on vacation not concerned about any movement in the stock.)", "title": "" }, { "docid": "1c9a310e4f1b457214293130c02765e1", "text": "Depending on the day and even time, you'd get your $2 profit less the $5 commission. Jack's warning is correct, but more so for thinly traded options, either due to the options having little open interest or the stock not quite so popular. In your case you have a just-in-the-money strike for a highly traded stock near expiration. That makes for about the best liquidity one can ask for. One warning is in order - Sometime friday afternoon, there will be a negative time premium. i.e. the bid might seem lower than in the money value. At exactly $110, why would I buy the option? Only if I can buy it, exercise, and sell the stock, all for a profit, even if just pennies.", "title": "" }, { "docid": "87762fba6c108480835b5f9945920f30", "text": "\"I look for buying a call option only at the money, but first understand the background above: Let's suppose X stock is being traded by $10.00 and it's January The call option is being traded by $0.20 with strike $11.00 for February. (I always look for 2% prize or more) I buy 100 stocks by $10.00 each and sell the option, earning $0.20 for each X stock. I will have to deliver my stocks by $11.00 (strike value agreed). No problem for me here, I took the prize plus the gain of $1.00. (continuing from item 3) I still can sell the option for the next month with strike equal or higher than that I bought. For instance, I can sell a call option of strike $10.00 and it might be worth to deliver stocks by $10.00 and take the prize. (continuing from item 3) Probably, it won't be possible to sell a call option with strike at the price that I paid for the stock, but that's not a problem. At the end of the option life (in February), the strike was $11.00 but the stock's price is $8.00. I got the $0.20 as prize and my stocks are free for trade again. I'll sell the call option for March with strike $9.00 (taking around 2% of prize). Well, I don't want to sell my stocks by $9.00 and make loss, right? But I'm selling the call option anyway. Then I wait till the price of the stock gets near the strike value (almost ATM) and I \"\"re-buy\"\" the option sold (Example: [StockX]C9 where C means month = March) and sell again the call option with higher strike to April (Example [StockX]D10, where D means month = April) PS.: At item 9 there should be no loss between the action of \"\"re-buy\"\" and sell to roll-out to the next month. When re-buying it with the stock's price near the strike, option value for March (C9) will be lower than when selling it to April (D10). This isn't any rule to be followed, this is just a conservative (I think they call it hedge) way to handle options and stocks. Few free to make money according to your goals and your style. The perfect rule is the one that meet your expectation, don't take the generalized rules too serious.\"", "title": "" }, { "docid": "5f9b7c61ebc02bc82d019ad55370bd95", "text": "Just so I'm clear- the end result is a long call, and you think the stock is going up. There is nothing wrong with that fundamentally. Be aware though: That's a negative theta trade. This means if your stock doesn't increase in price during the remaining time to expiration of your call option, the option will lose some of its value every day. It may still lose some of its value every day, depending on how much the stock price increases. The value of the call option just goes down and down as it approaches maturity, even if the stock price stays about the same. Being long a call (or a put) is a tough way to make money in the options market. I would suggest using an out-of-the-money butterfly spread. The potential returns are a bit less. However, this is a cheap positive theta trade so you avoid time decay on the value of the option.", "title": "" }, { "docid": "7c22523023bff08af8133c15b5adbeab", "text": "We struck a deal. I sold an asset to some body on june 1 . However he says, he would pay me any time on or before august 1st . This puts me in a dilemma. What if price goes down by august 1st and i would have to accept lower payment from him.? If price goes up till august 1st, then obviously i make money since ,even though item is sold,price is yet to be fixed between parties. However i know anytime on or before august 1st, i would get paid the price quoted on that particular day. This price could be high in my favor, or low against me. And, this uncertainty is causing me sleepless nights. i went to futures market exchange. My item (sugar,gold,wheat,shares etc..anything). i short sell a futures which just happens to be equivalent to the quantity of my amount i sold to the acquirer of my item. I shorted at $ 100 , with expiry on august 1st. Now fast orward and august 1st comes. price is $ 120 quoted . lets Get paid from the guy who was supposed to pay on or before august 1st. He pays 120 $. his bad luck, he should have paid us 100 $ on june 1st instead of waiting for august 1st . His judgement of price movement faulted. WE earned 20 $ extra than we expected to earn on june 1st (100$) . However the futures short of 100$ is now 120$ and you must exit your position by purchasing it at back. sell at 100$ and buy at 120$ = loss of 20$ . Thus 20 $ gained from selling item is forwarded to exchange . Thus we had hedged our position on june 1st and exit the hedge by august 1st. i hope this helps", "title": "" }, { "docid": "6cec0fbc02f791ad8baf221e975ecc00", "text": "Bank-to-Bank wire transfer would be the best option. Dollar is going up nowadays, so if he brought the money not so long ago he might even earn the cost of the transfers back through the difference of the exchange rates. Re the IRS - they don't care. Same goes to the Israeli Tax Authority. What you and your friend need to show, if asked, is the paper trail. I.e.: if he brought you the $10K in cash - that may be an issue unless he kept all the receipts for getting it. But for such a low amount you can always resort to claiming it is a gift from you, in this case.", "title": "" } ]	fiqa
fcacec24517b1b732ac577436a9f5670	How to get a down payment for your next home? Use current home as the down payment on the new one?	[ { "docid": "ce454d430bb2b09d8cd5bf04a2243067", "text": "This is of course a perfectly normal thing to happen. People trade up to a bigger house every day. When you've found a bigger house you want to move to and a buyer for your existing one, you arrange 'closing dates' for both i.e. the date on which the sale actually happens. Usually you make them very close, either on the same day or with an overlap of a few weeks. You use the equity (i.e. the difference between the house value and the mortgage) in the old house as the down payment on the new house. You can't of course use the part of the old house that is mortgaged. If the day you buy the new and sell the old is the same, your banks and lawyers do everything for you on that day. If there is an overlap then you need something called 'bridge financing' to cover the period when you own two houses. Banks are used to doing this, and it's not really that expensive when you take into account all the other costs of moving house. Talk to them for details. As a side note, it is generally reckoned not to be worth buying a house if you only intended to live there one or two years. The costs involved in the process of buying, selling and moving usually outweigh any gains in house value. You may find yourself with a higher down payment if you rent for a year or two and save up a down payment for your 'bigger' house instead.", "title": "" }, { "docid": "d19970a098e698738f59751a42ff9e9d", "text": "\"What you're looking at is something called \"\"Bridge-Financing\"\". Essentially, it allows you to borrow your down-payment from the bank, using your old home as collateral. The interest rate varies, but if you get the bridge from the same institution as your new mortgage, they will often be a bit flexible. You take possession of the new home, and begin mortgage payments on it normally. When the old home is sold, the bridge is paid off. Note that the deposit on signing for the new house will still have to be cash. All bets are off if you are talking about a NEW new home, as builders usually require advance payments during the build.\"", "title": "" }, { "docid": "67faeff9e3ce897091306276edad0266", "text": "\"I know you've clarified that you're in the US, but in case anyone else comes across this question: in the UK this is completely normal (including if you still have outstanding mortgage on your current home). We end up with long \"\"chains\"\" of buyers and sellers all completing / moving on the same day so that the proceeds from one sale can be used as the downpayment on the next.\"", "title": "" } ]	[ { "docid": "7dac3bea905e716cc1763cc0cedb785b", "text": "I could be wrong, but I doubt you're going to be able to roll the current mortgage into a new one. The problem is that the bank is going to require that the new loan is fully collateralized by the new house. So the only way that you can ensure that is if you can construct the house cheaply enough that the difference between the construction cost and the end market value is enough to cover the current loan AND keep the loan-to-value (LTV) low enough that the bank is secured. So say you currently owe $40k on your mortgage, and you want to build a house that will be worth $200k. In order to avoid PMI, you're going to have to have an LTV of 80% or less, which means that you can spend no more than $160k to build the house. If you want to roll the existing loan in, now you have to build for less than $120k, and there's no way that you can build a $200k house for $120k unless you live in an area with very high land value and hire the builders directly (and even then it may not be possible). Otherwise you're going to have to make up the difference in cash. When you tear down a house, you are essentially throwing away the value of the house - when you have a mortgage on the house, you throw away that value plus you still owe the money, which is a difficult hole to climb out of. A better solution might be to try and sell the house as-is, perhaps to someone else who can tear down the house and rebuild with cash. If that is not a viable option (or you don't want to move) then you might consider a home equity loan to renovate parts of the house, provided that they increase the market value enough to justify the cost (e.g. modernize the kitchen, add on a room, remodel bathrooms, etc. So it all depends on what the house is worth today as-is, how much it will cost you to rebuild, and what the value of the new house will be.", "title": "" }, { "docid": "c8a32bd41ce337dbffc94eb86141d43a", "text": "In response to one of the comments you might be interested in owning the new home as a rental property for a year. You could flip this thinking and make the current home into a rental property for a period of time (1 year seems to be the consensus, consult an accountant familiar with real estate). This will potentially allow for a 1031 exchange into another property -- although I believe that property can't then be a primary residence. All potentially not worth the complication for the tax savings, but figured I'd throw it out there. Also, the 1031 exchange defers taxes until some point in the future in which you finally sell the asset(s) for cash.", "title": "" }, { "docid": "fe42f4891bb8abe1c35dea12d56d0e78", "text": "Save up a bigger downpayment. The lender's requirement is going to be based on how much you finance, not the price of the house.", "title": "" }, { "docid": "b381fce7dd29bb532e1caeb0c23caf36", "text": "\"Let me summarize your question for you: \"\"I do not have the down payment that the lender requires for a mortgage. How can I still acquire the mortgage?\"\" Short answer: Find another lender or find more cash. Don't overly complicate the scenario. The correct answer is that the lender is free to do what they want. They deem it too risky to lend you $1.1M against this $1.8M property, unless they have $700k up front. You want their money, so you must accept their terms. If other lenders have the same outlook, consider that you cannot afford this house. Find a cheaper house.\"", "title": "" }, { "docid": "a1ebbc5a056464b41ab9e59830944367", "text": "\"You are \"\"pool[ing] the sales from both houses as downpayment on the new house.\"\" But they are going to pay you rent. Your question as it stands, just opens more questions. What, exactly is the ownership of the new house? If your's (and your wife's) was the money a gift? Ignoring the gift, if that's what it is, and if the in-law suite is 25% of the house value, you have a rental. You claim 25% of the expenses, including property tax and mortgage interest, along with 25% of the utilities, unless their part has its own meters. That's a start, if you add details, I may edit my answer. (Not to be pedantic, but whose parents are they. They can't be \"\"our in-laws,\"\" can they?)\"", "title": "" }, { "docid": "c89cf1c6e8abe3866cae50a53b47197a", "text": "we have little money in cash for a down-payment This is a red flag to me. If you have little money in cash for a down-payment, how are you supposed to be a landlord too? You could try is to do a lease to own from your Dad. Get a renter into the other home for at least a year or more and then close on the house once your financial situation improves. You still have the same problem of being a landlord. Another option is to receive a gift letter from your Dad since he is gifting the money on the home. It might extend your closing a little bit so you can get an appraisal done and loan application. This to me is the most sane option.", "title": "" }, { "docid": "b74742b32b99f9bd32cd60cc84d3206f", "text": "\"Often the counter-party has obligations with respect to timelines as well -- if your buying a house, the seller probably is too, and may have a time-sensitive obligation to close on the deal. I'm that scenario, carrying the second mortgage may be enough to make that deal fall through or result in some other negative impact. Note that \"\"pre-approval\"\" means very little, banks can and do pass on deals, even if the buyer has a good payment history. That's especially true when the economy is not so hot -- bankers in 2011 are worried about not losing money... In 2006, they were worried about not making enough!\"", "title": "" }, { "docid": "a9e31264f9315abe930f2a44710544f2", "text": "\"There are a few of ways to do this: Ask the seller if they will hold a Vendor Take-Back Mortgage or VTB. They essentially hold a second mortgage on the property for a shorter amortization (1 - 5 years) with a higher interest rate than the bank-held mortgage. The upside for the seller is he makes a little money on the second mortgage. The downsides for the seller are that he doesn't get the entire purchase price of the property up-front, and that if the buyer goes bankrupt, the vendor will be second in line behind the bank to get any money from the property when it's sold for amounts owing. Look for a seller that is willing to put together a lease-to-own deal. The buyer and seller agree to a purchase price set 5 years in the future. A monthly rent is calculated such that paying it for 5 years equals a 20% down payment. At the 5 year mark you decide if you want to buy or not. If you do not, the deal is nulled. If you do, the rent you paid is counted as the down payment for the property and the sale moves forward. Find a private lender for the down payment. This is known as a \"\"hard money\"\" lender for a reason: they know you can't get it anywhere else. Expect to pay higher rates than a VTB. Ask your mortgage broker and your real estate agent about these options.\"", "title": "" }, { "docid": "e0f3195d0e9409f2aa92e1fb02bc0eef", "text": "\"There are actually a few questions you are asking here. I will try and address each individually. Down Payment What you put down can't really be quantified in a dollar amount here. $5k-$10k means nothing. If the house costs $20k then you're putting 50% down. What is relevant is the percent of the purchase price you're putting down. That being said, if you go to purchase a property as an investment property (something you wont be moving into) then you are much more likely to be putting a down payment much closer to 20-25% of the purchase price. However, if you are capable of living in the property for a year (usually the limitation on federal loans) then you can pay much less. Around 3.5% has been my experience. The Process Your plan is sound but I would HIGHLY suggest looking into what it means to be a landlord. This is not a decision to be taken lightly. You need to know the tenant landlord laws in your city AND state. You need to call a tax consultant and speak to them about what you will be charging for rent, and how much you should withhold for taxes. You also should talk to them about what write offs are available for rental properties. \"\"Breaking Even\"\" with rent and a mortgage can also mean loss when tax time comes if you don't account for repairs made. Financing Your first rental property is the hardest to get going (if you don't have experience as a landlord). Most lenders will allow you to use the potential income of a property to qualify for a loan once you have established yourself as a landlord. Prior to that though you need to have enough income to afford the mortgage on your own. So, what that means is that qualifying for a loan is highly related to your debt to income ratio. If your properties are self sustaining and you still work 40 hours a week then your ability to qualify in the future shouldn't be all that impacted. If anything it shows that you are a responsible credit manager. Conclusion I can't stress enough to do YOUR OWN research. Don't go off of what your friends are telling you. People exaggerate to make them seem like they are higher on the socioeconomic ladder then they really are. They also might have chicken little syndrome and try to discourage you from making a really great choice. I run into this all the time. People feel like they can't do something or they're to afraid so you shouldn't be able to either. If you need advice go to a professional or read a book. Good luck!\"", "title": "" }, { "docid": "c805b4bd5c0bdcc9a481645e470d3ae8", "text": "You're effectively looking for a mortgage for a new self-build house. At the beginning, you should be able to get a mortgage based on the value of the land only. They may be willing to lend more as the build progresses. Try to find a company that specializes in this sort of mortgage.", "title": "" }, { "docid": "9ea9a62265fcf4949947d15397964d13", "text": "\"The only way to \"\"roll\"\" debt into a home purchase is to have sufficient down payment. Under the \"\"new\"\" lending rules that took effect in Canada earlier this year, you must have at least 5% of the purchase price as a down payment. If you have $60,000 in additional debt, the total amount of mortgage still cannot be greater than 95% of the purchase price. Below is an example. Purchase price of home $200,000. Maximum mortgage $190,000 (95% of purchase price) Total outside debt $60,000 That means the mortgage (other than the current debt of $60k) can only be $130,000 This means you would need a down payment of $70,000. Also keep in mind that I have not included any other legal fees, real estate commissions, etc in this example. Since it is safe to assume that you do not have $70k available for a down payment, renting and paying down the debt is likely the better route. Pay off the credit card(s) first as they have the higher interest amount. Best of luck!\"", "title": "" }, { "docid": "a192109b0e014b9a0563b0d88a7bb6d3", "text": "You can definitely get access to cash during the selling of your home and buying of a new one. Think of the home sale and buy as two distinct transactions. As long as your mortgage qualification doesn't depend on all the proceeds from the first sale being rolled into the new mortgage, you'll be fine.", "title": "" }, { "docid": "441cb33517b78809ab0bb9a2dcf44c46", "text": "So let's assume some values to better explain this. For simplicity, all of these are in thousands: So in this example, you're going to destroy $250 in value, pay off the existing $150 loan and have to invest $300 in to build the new house and this example doesn't have enough equity to cover it. You typically can't get a loan for much more than the (anticipated) property value. Basically, you need to get a construction loan to cover paying off the existing loan plus whatever you want to spend to pay for the new house minus whatever you're planning to contribute from savings. This new loan will need to be for less than the new total market value. The only way this will work out this way is if you bring significant cash to closing, or you owe less than the lot value on the current property. Note, that this is in effect a simplification. You can spend less building a house than it's worth when you're done with it, etc., but this is the basic way it would work - or NOT work in most cases.", "title": "" }, { "docid": "d1849bb66104f42c71b3be6293247b9f", "text": "Is used cmc markets application (via my bank at the time) to gain leveraged exposure to the financial markets, with no tax payable as its classed as gambling. I am sure there are other websites/application offering the same. The results weren't particularly pretty for me, but the concept is sound imo.", "title": "" }, { "docid": "58860fe0de482e4d2eb3464f2934d2b9", "text": "\"Clearing means processing unsettled transactions. Specifically - all the money transfers between the banks, in this case. Clearing Bank for RMB business means that all RMB transactions will be cleared through that specific bank. If bank A in Hong Kong gets a check drawn on Bank B in Hong Kong, and the check is in RMB - A will go to the BoC with the check and will get the money, and BoC will take the money from B. That obviously requires both A and B have accounts with BoC. \"\"Sole\"\" clearing house means there's only one. I.e.: in our example, A and B cannot settle the check through C where they both happen to have accounts, or directly with each other. They MUST utilize the services of BoC.\"", "title": "" } ]	fiqa
3fb0cd9ad811e715eea231a610b8320a	Should I put more money down on one property and pay it off sooner or hold on to the cash?	[ { "docid": "5334ecb10e7edc640226aeaf0b65475b", "text": "\"I'm a little confused on the use of the property today. Is this place going to be a personal residence for you for now and become a rental later (after the mortgage is paid off)? It does make a difference. If you can buy the house and a 100% LTV loan would cost less than 125% of comparable rent ... then buy the house, put as little of your own cash into it as possible and stretch the terms as long as possible. Scott W is correct on a number of counts. The \"\"cost\"\" of the mortgage is the after tax cost of the payments and when that money is put to work in a well-managed portfolio, it should do better over the long haul. Don't try for big gains because doing so adds to the risk that you'll end up worse off. If you borrow money at an after-tax cost of 4% and make 6% after taxes ... you end up ahead and build wealth. A vast majority of the wealthiest people use this arbitrage to continue to build wealth. They have plenty of money to pay off mortgages, but choose not to. $200,000 at 2% is an extra $4000 per year. Compounded at a 7% rate ... it adds up to $180k after 20 years ... not exactly chump change. Money in an investment account is accessible when you need it. Money in home equity is not, has a zero rate of return (before inflation) and is not accessible except through another loan at the bank's whim. If you lose your job and your home is close to paid off but isn't yet, you could have a serious liquidity issue. NOW ... if a 100% mortgage would cost MORE than 125% of comparable rent, then there should be no deal. You are looking at a crappy investment. It is cheaper and better just to rent. I don't care if prices are going up right now. Prices move around. Just because Canada hasn't seen the value drops like in the US so far doesn't mean it can't happen in the future. If comparable rents don't validate the price with a good margin for profit for an investor, then prices are frothy and cannot be trusted and you should lower your monthly costs by renting rather than buying. That $350 per month you could save in \"\"rent\"\" adds up just as much as the $4000 per year in arbitrage. For rentals, you should only pull the trigger when you can do the purchase without leverage and STILL get a 10% CAP rate or higher (rate of return after taxes, insurance and other fixed costs). That way if the rental rates drop (and again that is quite possible), you would lose some of your profit but not all of it. If you leverage the property, there is a high probability that you could wind up losing money as rents fall and you have to cover the mortgage out of nonexistent cash flow. I know somebody is going to say, \"\"But John, 10% CAP on rental real estate? That's just not possible around here.\"\" That may be the case. It IS possible somewhere. I have clients buying property in Arizona, New Mexico, Alberta, Michigan and even California who are finding 10% CAP rate properties. They do exist. They just aren't everywhere. If you want to add leverage to the rental picture to improve the return, then do so understanding the risks. He who lives by the leverage sword, dies by the leverage sword. Down here in the US, the real estate market is littered with corpses of people who thought they could handle that leverage sword. It is a gory, ugly mess.\"", "title": "" }, { "docid": "dc7aaf97583f7dde2cd3cbf4ba990d91", "text": "I'd suggest taking all the money you have saved up and putting in a mutual fund and hold off on buying a rental property until you can buy it outright. I know it seems like this will take forever, but it has a HUGE advantage: I know it seems like it will take forever to save up the money to buy a property for cash, but in the long run, its the best option by far.", "title": "" }, { "docid": "4647b65189f441f7930a360106a9f1bf", "text": "I would go with the 2nd option (put down as little as possible) with a small caveat: avoid the mortgage insurance if you can and put down 20%. Holding your rental property(ies)'s mortgage has some benefits: You can write off the mortgage interest. In Canada you cannot write off the mortgage interest from your primary residence. You can write off stuff renovations and new appliances. You can use this to your advantage if you have both a primary residence and a rental property. Get my drift? P.S. I do not think it's a good time right now to buy a property and rent it out simply because the housing prices are over-priced. The rate of return of your investment is too low. P.S.2. I get the feeling from your question that you would like to purchase several properties in the long-term future. I would like to say that the key to good and low risk investing is diversification. Don't put all of your money into one basket. This includes real estate. Like any other investment, real estate goes down too. In the last 50 or so years real estate has only apprepriated around 2.5% per year. While, real estate is a good long term investment, don't make it 80% of your investment portfolio.", "title": "" }, { "docid": "516c2d122e4ea621f52e35fbf8647cce", "text": "My figuring (and I'm not an expert here, but I think this is basic math) is: Let's say you had a windfall of $1000 extra dollars today that you could either: a. Use to pay down your mortgage b. Put into some kind of equity mutual fund Maybe you have 20 years left on your mortgage. So your return on investment with choice A is whatever your mortgage interest rate is, compounded monthly or daily. Interest rates are low now, but who knows what they'll be in the future. On the other hand, you should get more return out of an equity mutual fund investment, so I'd say B is your better choice, except: But that's also the other reason why I favour B over A. Let's say you lose your job a year from now. Your bank won't be too lenient with you paying your mortgage, even if you paid it off quicker than originally agreed. But if that money is in mutual funds, you have access to it, and it buys you time when you really need it. People might say that you can always get a second mortgage to get the equity out of it, but try getting a second mortgage when you've just lost your job.", "title": "" }, { "docid": "8c3541c1e7024310c487cfd522ce06a5", "text": "I would go with option B. That is safer, as it would leave you with more options, in case of an unexpected job loss or an emergency.", "title": "" } ]	[ { "docid": "302ff94541610d094a190bec9d6a88c4", "text": "Both seem to be reasonable. To decide you need to guess if the value of the house will go up or down between now and when you sell. If you think the value will go up - reach a calculation agreement now. If you think the value will go down - wait until the house is actually sold. So ya pays yer money, and ya takes yer chances... I think I understand the two scenarios Unless you are absolutely confident that you understand both scenarios - make sure your lawyer gets involved and explains them to you until you do understand.", "title": "" }, { "docid": "7e13b75dc06a5eede38b2cc9dc8ea597", "text": "\"Mathematically, the wisest choice is to invest your extra money somewhere else and not pay off your 0% loan early. An extreme example highlights this. Suppose some colossal company offered to loan you a billion dollars at 0 % interest. Would you take it? Or would you say \"\"No thanks, I don't want that much debt.\"\" You would be crazy not to accept. You could put that money in the safest investments available and still pocket millions while making the minimum payments back to them. Your choice here is essentially the same, but unfortunately, on much smaller scale. That said, math doesn't always trump other factors. You need to factor in your peace of mind, future purchases, the need for future borrowing, your short term income and job security, and whether you think you can reliably make payments on this loan without messing up and triggering fees that wipe out the mathematical advantage of slow paying the loan. You are fortunate because you really can't make a wrong choice here. Paying off debt is never a bad choice IMO. However, it may not always be the best choice.\"", "title": "" }, { "docid": "1ce3b4c25472c83166561bff7a946771", "text": "The mortgage is a debt and you pay interest on it, typically more than you can earn elsewhere (especially once taxes are taken into account.) By lowering the principal, you lower the total interest you pay. This is true whether you sell the house after 1 year, 10 years, or 100 years. In your case, prepayments made in the next few years would mean that when you sell, your mortgage principal would be lower than it otherwise would have been, and your house equity will be higher. You can therefore either move up to more house for the same monthly payment, or have a lower monthly payment for the same kind of house. Either of those are good things, right? Now is the easiest time to find a little more money, so do it if you can. Later you will have more obligations, and develop a taste for more expensive things (statistically speaking) and therefore find a few hundred a month much harder to come by.", "title": "" }, { "docid": "6e6c8a8bc66736ec4edd9e77be8941d3", "text": "You have a loan. You can probably assume you're going to have to repay that loan, every dollar. And every dollar that's outstanding on that loan costs you interest. So assuming you're not hit by any pre-payment penalty, any dollar that you pay down on your house right now saves you a compounded R% a year, where R is your mortgage rate. It doesn't really matter whether you're planning to sell it in a few years or not. If you pay $N, you'll save the interest + $N taken from the sale price and sent to the bank when you sell the house and move (though you might get a tax deduction on the interest). If you have a better place to park your money and earn a decent rate of return, it would be worth it to do that instead of paying down the mortgage. If you had another loan with higher interest rates, that's probably a better loan to pay off. If you can spend some of all of it on something that's actually genuinely worth R% of its purchase price a year (plus whatever the wear and tear takes away from its value, if anything) then spend it on that instead; that'd be a better investment. (For instance, investments in the stock market may offer better returns. However, that's risky! Observe that you can't lose money paying down your mortgage, and that Safety is usually relatively expensive these days, so it's not a bad deal. But if you're talking about using it for long-term retirement savings that are tax-advantaged to boot, that's another matter.) If you already have ample emergency funds and were just planning on putting the money into a savings account to rot at ~1.35% taxable interest, it's definitely worth it to pay down your balance now, unless you're about to sell (so the savings are slight) and it's a real inconvenience.", "title": "" }, { "docid": "ade1a70a1ee0761e9bad174726ff779e", "text": "\"I've heard that the bank may agree to a \"\"one time adjustment\"\" to lower the payments on Mortgage #2 because of paying a very large payment. Is this something that really happens? It's to the banks advantage to reduce the payments in that situation. If they were willing to loan you money previously, they should still be willing. If they keep the payments the same, then you'll pay off the loan faster. Just playing with a spreadsheet, paying off a third of the mortgage amount would eliminate the back half of the payments or reduces payments by around two fifths (leaving off any escrow or insurance). If you can afford the payments, I'd lean towards leaving them at the current level and paying off the loan early. But you know your circumstances better than we do. If you are underfunded elsewhere, shore things up. Fully fund your 401k and IRA. Fill out your emergency fund. Buy that new appliance that you don't quite need yet but will soon. If you are paying PMI, you should reduce the principal down to the point where you no longer have to do so. That's usually more than 20% equity (or less than an 80% loan). There is an argument for investing the remainder in securities (stocks and bonds). If you itemize, you can deduct the interest on your mortgage. And then you can deduct other things, like local and state taxes. If you're getting a higher return from securities than you'd pay on the mortgage, it can be a good investment. Five or ten years from now, when your interest drops closer to the itemization threshold, you can cash out and pay off more of the mortgage than you could now. The problem is that this might not be the best time for that. The Buffett Indicator is currently higher than it was before the 2007-9 market crash. That suggests that stocks aren't the best place for a medium term investment right now. I'd pay down the mortgage. You know the return on that. No matter what happens with the market, it will save you on interest. I'd keep the payments where they are now unless they are straining your budget unduly. Pay off your thirty year mortgage in fifteen years.\"", "title": "" }, { "docid": "d1472c65dc003b8301b259da45632449", "text": "Have you changed how you handle fund distributions? While it is typical to re-invest the distributions to buy additional shares, this may not make sense if you want to get a little cash to use for the home purchase. While you may already handle this, it isn't mentioned in the question. While it likely won't make a big difference, it could be a useful factor to consider, potentially if you ponder how risky is it having your down payment fluctuate in value from day to day. I'd just think it is more convenient to take the distributions in cash and that way have fewer transactions to report in the following year. Unless you have a working crystal ball, there is no way to definitively predict if the market will be up or down in exactly 2 years from now. Thus, I suggest taking the distributions in cash and investing in something much lower risk like a money market mutual fund.", "title": "" }, { "docid": "ad33a976edb517e8395a66c4212ed499", "text": "First of all, you should absolutely put money into savings until you have at least a 6 month cushion, and preferably longer. It doesn't matter if you get 0% interest in your savings and have a high interest rate mortgage, the cushion is still more important. Once you have a nice emergency fund, you can then consider the question of whether to pay more towards the mortgage if the numbers make sense. However, in my opinion, it's not just a straight comparison of interest rates. In other words, if your savings account gives you 1% and your mortgage is 5%, that's still not an automatic win for the mortgage. The reason is that by putting the money into your mortgage, you're locking it up and can't access it. To me, money in the hand is worth a lot more than money that's yours on paper but not easily accessible. I don't know the math well enough, but you don't really need the math. Just keep in mind that you have to weight the present value of putting that money into savings vs the future value of putting it into your mortgage and paying less interest at some point in the future. Do the math and see how much you will save by paying the mortgage down faster, but also keep in mind that future money is worth less than present money. A LOT less if you suddenly have an emergency or decide on a major purchase and need the money, but then have to jump through hoops to get to it. To me, you need to save a considerable amount by paying down the mortgage, and also understand that your money is getting locked away, for it to make sense.", "title": "" }, { "docid": "6e5776554e72177e1428313f872537e1", "text": "\"Thanks for your question. Definitely pay the car down as soon as possible (reasoning to follow). In fact, I would go even further and recommend the following: Why? 1) Make money risk free - the key here is RISK FREE. By paying down the loan now, you can avoid paying interest on the additional amount paid toward principal risk free. Imagine this scenario: if you walked into a bank and they said, \"\"If you give us $100, we'll give you $103 back today\"\", would you do it? That is exactly what you get to do by not paying interest on the remaining loan principal. 2) The spread you might make by investing is not as large as you may think. Let's assume that by investing, you can make a market return of 10%. However, these are future cash flows, so let's discount this for inflation to a \"\"real\"\" 8% return. Then let's assume that after fees and taxes this would be a 7% real after-tax return. You also have to remember that this money is at risk in the market and may not get this return in some years. Assuming that your friend's average tax rate on earned income is 25%, this means that he'd need to earn $400 pre-tax to pay the after-tax payment of $300. So this is a 4% risk-free return after tax compared to a 7% average after tax return from the market, but one where the return is at risk. The equivalent after-tax risk-free return from the market (think T-Bills) is much lower than 7%. You are also reducing risk by paying the car loan off first in a few other ways, which is a great way to increase peace of mind. First, since cars decline in value over time, you are minimizing the possibility that you will eventually end up \"\"under water\"\" on the loan, where the loan balance is greater than the value of the car. This also gives you more flexibility in terms of being able to sell the car at any point if desired. Additionally, if the car breaks down and must be replaced, you would not need to continue making payments on the old loan, of if your friend loses his job, he would own the car outright and would not need to make payments. Finally, ideally you would only be investing in the market when you intend to leave the money there for 5+ years. Otherwise, you might need to pull money out of the market at a bad time. Remember, annual market returns vary quite a bit, but over 5-10 year periods, they are much more stable. Unfortunately, most people don't keep cars 5-10+ years, so you are likely to need the money back for another car more frequently than this. If you are pulling money out of the market every 5-10 years, you are more likely to need to pull money out at a bad time. 3) Killing off the \"\"buy now, pay later\"\" mindset will result in long-term financial benefits. Stop paying interest on things that go down in value. Save up and buy them outright, and invest the extra money into things that generate income/dividends. This is a good long-term habit to have. People also tend to be more prudent when considering the total cost of a purchase rather than just the monthly payment because it \"\"feels\"\" like more money when you buy outright. As a gut check for whether this is a good idea, here is an example that Dave Ramsey likes to use: Suppose that your friend did not have the emergency fund, and also did not have the car loan and owned the car outright. In that case, would your friend take out a title loan on the car in order to have an emergency fund? I think that a lot of people would say no, which may be a good indicator that it is wise to reduce the emergency fund in order to wipe out the debt, rather than maintaining both.\"", "title": "" }, { "docid": "daaa9172d6c79bd2a0d16be64af3223c", "text": "\"Paying off your house quickly should be a #2-level priority, behind making sure you have some basic savings but definitely ahead of any investing concerns, because your house is not an investment; it's your home. (If you're brave/foolish enough to try buying houses-as-investments in the current climate, this obviously doesn't apply to you!) This isn't a financial matter so much as an issue of basic prudence. If something disastrous happens, (you lose your job, get in a serious car accident, your kid comes down with cancer, etc,) it will put tremendous strain on your financial resources. If you own your home outright when this happens, it means that no matter what else might go wrong, you can't get foreclosed on and end up out on the streets, and that's worth more than any rate of return you can reasonably expect to find even in the best of times. It's a well-known investing maxim to \"\"never bet anything that you can't afford to lose.\"\" In light of that, consider this: if you have a mortgage that is not paid off, that's exactly what you're doing. You are placing a bet against a bank that you'll remain solvent long enough to pay off the mortgage, and your home is the wager. Mortgages may be a necessary evil with housing prices being what they are, but make no mistake, they are evil. Get rid of yours as quickly as you can.\"", "title": "" }, { "docid": "c1065ee20942a2afea1ec71785bc1d8f", "text": "Makes sense so long as you can afford it while still maintaining at least six months living reserves. The sooner you own outright a decreasing asset the better which should be considered when selecting your loan term. However, with today's low rates and high performing stock market you may want to consider allowing that money to be put to better use. It all depends how risk adverse you are. That emotional aide of this decision and emotions have value, but only you can determine what that value is. So - generally speaking, the sooner you own an asset of decreasing value the better off you are, but in exceptionally low interest rate environments such as today there are, as mentioned, other things you may want to consider. Good luck and enjoy your new ride. Nothing better then some brand new wheels aye.", "title": "" }, { "docid": "b11a00537c257f650ed6a54ae8d0c128", "text": "I'm not sure about your first two options. But given your situation, a variant of option three seems possible. That way you don't have to throw away your appraisal, although it's possible that you'll need to get some kind of addendum related to the repairs. You also don't have your liquid money tied up long term. You just need to float it for a month or two while the repairs are being done. The bank should be able to preapprove you for the loan. Note that you might be better off without the loan. You'll have to pay interest on the loan and there's extra red tape. I'd just prefer not to tie up so much money in this property. I don't understand this. With a loan, you are even more tied up. Anything you do, you have to work with the bank. Sure, you have $80k more cash available with the loan, but it doesn't sound like you need it. With the loan, the bank makes the profit. If you buy in cash, you lose your interest from the cash, but you save paying the interest on the loan. In general, the interest rate on the loan will be higher than the return on the cash equivalent. A fourth option would be to pay the $15k up front as earnest money. The seller does the repairs through your chosen contractor. You pay the remaining $12.5k for the downpayment and buy the house with the loan. This is a more complicated purchase contract though, so cash might be a better option. You can easily evaluate the difficulty of the second option. Call a different bank and ask. If you explain the situation, they'll let you know if they can use the existing appraisal or not. Also consider asking the appraiser if there are specific banks that will accept the appraisal. That might be quicker than randomly choosing banks. It may be that your current bank just isn't used to investment properties. Requiring the previous owner to do repairs prior to sale is very common in residential properties. It sounds like the loan officer is trying to use the rules for residential for your investment purchase. A different bank may be more inclined to work with you for your actual purchase.", "title": "" }, { "docid": "897b1fcdfb82e4434aab17ca5ed7baa9", "text": "You can increase your monthly cash flow in two ways: It's really that simple. I'd even argue that to a certain extent, decreasing expenses can be more cash-positive than increasing income by the same amount if you're spending post-tax money because increasing income generally increases your taxes. So if you have a chunk of cash and you want to increase your cash flow, you could decrease debt (like Chris suggested) and it would have the same effect on your monthly cash flow. Or you could invest in something that pays a dividend or pays interest. There are many options other than real estate, including dividend-paying stocks or funds, CDs, bonds, etc. To get started you could open an account with any of the major brokerage firms and get suggestions from their financial professionals, usually for free. They'll help you look at the risk/reward aspects of various investments.", "title": "" }, { "docid": "669fa0e4a8df16b1139a5b3b44fdc799", "text": "Personally, I would split the difference, putting about half into each. Simply because it balances out the problem and I don't have to fret about whether one or the other will provide a significant difference. As bstpierre points out, the one which will make you more in the end is the one which you can grow the fastest. The mortgage payment is locked at 5% growth, which, while modest, is also essentially guaranteed at this point. The CD in your IRA is likely less than that amount, even after tax consideration. A couple additional points to consider:", "title": "" }, { "docid": "4219f1b4c9bc79997ce785361da41a1c", "text": "I'd pile up as much cash as you can in a savings account - you will need money for the move (even if it's just gas money) and it's going to be hard to predict where house prices are going so you might or might not be underwater when it comes time to sell the house. Or you might be so deep underwater by then that the extra money doesn't make much of a difference anymore anyway. Once you're actually in the process of selling the house, you can figure out if you can (or need to) use the savings to cover the shortfall, closing costs or if you just built up a little wealth during the time you put the money aside.", "title": "" }, { "docid": "2afd676bda3cbc1e3c24aac9c5a2ab01", "text": "If you decide you need the extra money, you can always go refinance and get more cash out. At the end of the day, though, if you pay off your house sooner you can invest more of your income sooner; that's just a matter of discipline.", "title": "" } ]	fiqa
52edc429d8c44ddc196c1b4c5f2e967e	Why YTM is higher than current yield in discount bond	[ { "docid": "20b29763e065272d5f4da2550a982ceb", "text": "Say you buy a bond that currently costs $950, and matures in one year, at $1000 face value. It has one coupon ($50 interest payment) left. The coupon, $50, is 50/950 or 5.26%, but you get the face value, $1000, for an additional $50 return. This is why the yield to maturity is higher than current yield. If the maturity were in two years, the coupons still provide 5.26%, and the extra 1000/950 is another 5.26% over 2 years, or (approx) 2.6%/yr compounded, for a total YTM of 7.86%. This is a back-of envelope calculation, the real way to calculate is with a finance calculator. Entering PV (present value) FV (future value) PMT (coupon payment(s)) and N (number of periods). With no calculator or spreadsheet, my estimate will be pretty close.", "title": "" } ]	[ { "docid": "ebe6ac0b79f9cec2027e75b7e1e713e5", "text": "You’ve really got three or four questions going here… and it’s clear that a gap in understanding one component of how bonds work (pricing) is having a ripple effect across the other facets of your question. The reality is that everybody’s answers so far touch on various pieces of your general question, but maybe I can help by integrating. So, let’s start by nailing down what your actual questions are: 1. Why do mortgage rates (tend to) increase when the published treasury bond rate increases? I’m going to come back to this, because it requires a lot of building blocks. 2. What’s the math behind a bond yield increasing (price falling?) This gets complicated, fast. Especially when you start talking about selling the bond in the middle of its time period. Many people that trade in bonds use financial calculators, Excel, or pre-calculated tables to simplify or even just approximate the value of a bond. But here’s a simple example that shows the math. Let’s say we’ve got a bond that is issued by… Dell for $10,000. The company will pay it back in 5 years, and it is offering an 8% rate. Interest payments will only be paid annually. Remember that the amount Dell has promised to pay in interest is fixed for the life of the bond, and is called the ‘coupon’ rate. We can think about the way the payouts will be paid in the following table: As I’m sure you know, the value of a bond (its yield) comes from two sources: the interest payments, and the return of the principal. But, if you as an investor paid $14,000 for this bond, you would usually be wrong. You need to ‘discount’ those amounts to take into account the ‘time value of money’. This is why when you are dealing in bonds it is important to know the ‘coupon rate’ (what is Dell paying each period?). But it is also important to know your sellers’/buyers’ own personal discount rates. This will vary from person to person and institution to institution, but it is what actually sets the PRICE you would buy this bond for. There are three general cases for the discount rate (or the MARKET rate). First, where the market rate == the coupon rate. This is known as “par” in bond parlance. Second, where the market rate < the coupon rate. This is known as “premium” in bond parlance. Third, where the market rate > coupon rate. This is known as a ‘discount’ bond. But before we get into those in too much depth, how does discounting work? The idea behind discounting is that you need to account for the idea that a dollar today is not worth the same as a dollar tomorrow. (It’s usually worth ‘more’ tomorrow.) You discount a lump sum, like the return of the principal, differently than you do a series of equal cash flows, like the stream of $800 interest payments. The formula for discounting a lump sum is: Present Value=Future Value* (1/(1+interest rate))^((# of periods)) The formula for discounting a stream of equal payments is: Present Value=(Single Payment)* (〖1-(1+i)〗^((-n))/i) (i = interest rate and n = number of periods) *cite investopedia So let’s look at how this would look in pricing the pretend Dell bond as a par bond. First, we discount the return of the $10,000 principal as (10,000 (1 / 1.08)^5). That equals $6,807.82. Next we discount the 5 equal payments of $800 as (800* (3.9902)). I just plugged and chugged but you can do that yourself. That equals $3,192.18. You may get slightly different numbers with rounding. So you add the two together, and it says that you would be willing to pay ($6,807.82 + $3,192.18) = $10,000. Surprise! When the bond is a par bond you’re basically being compensated for the time value of money with the interest payments. You purchase the bond at the ‘face value’, which is the principal that will be returned at the end. If you worked through the math for a 6% discount rate on an 8% coupon bond, you would see that it’s “premium”, because you would pay more than the principal that is returned to obtain the bond [10,842.87 vs 10,000]. Similarly, if you work through the math for a 10% discount rate on an 8% coupon bond, it’s a ‘discount’ bond because you will pay less than the principal that is returned for the bond [9,241.84 vs 10,000]. It’s easy to see how an investor could hold our imaginary Dell bond for one year, collect the first interest payment, and then sell the bond on to another investor. The mechanics of the calculations are the same, except that one less interest payment is available, and the principal will be returned one year sooner… so N=4 in both formulae. Still with me? Now that we’re on the same page about how a bond is priced, we can talk about “Yield To Maturity”, which is at the heart of your main question. Bond “yields” like the ones you can access on CNBC or Yahoo!Finance or wherever you may be looking are actually taking the reverse approach to this. In these cases the prices are ‘fixed’ in that the sellers have listed the bonds for sale, and specified the price. Since the coupon values are fixed already by whatever organization issued the bond, the rate of return can be imputed from those values. To do that, you just do a bit of algebra and swap “present value” and “future value” in our two equations. Let’s say that Dell has gone private, had an awesome year, and figured out how to make robot unicorns that do wonderful things for all mankind. You decide that now would be a great time to sell your bond after holding it for one year… and collecting that $800 interest payment. You think you’d like to sell it for $10,500. (Since the principal return is fixed (+10,000); the number of periods is fixed (4); and the interest payments are fixed ($800); but you’ve changed the price... something else has to adjust and that is the discount rate.) It’s kind of tricky to actually use those equations to solve for this by hand… you end up with two equations… one unknown, and set them equal. So, the easiest way to solve for this rate is actually in Excel, using the function =RATE(NPER, PMT, PV, FV). NPER = 4, PMT = 800, PV=-10500, and FV=10000. Hint to make sure that you catch the minus sign in front of the present value… buyer pays now for the positive return of 10,000 in the future. That shows 6.54% as the effective discount rate (or rate of return) for the investor. That is the same thing as the yield to maturity. It specifies the return that a bond investor would see if he or she purchased the bond today and held it to maturity. 3. What factors (in terms of supply and demand) drive changes in the bond market? I hope it’s clear now how the tradeoff works between yields going UP when prices go DOWN, and vice versa. It happens because the COUPON rate, the number of periods, and the return of principal for a bond are fixed. So when someone sells a bond in the middle of its term, the only things that can change are the price and corresponding yield/discount rate. Other commenters… including you… have touched on some of the reasons why the prices go up and down. Generally speaking, it’s because of the basics of supply and demand… higher level of bonds for sale to be purchased by same level of demand will mean prices go down. But it’s not ‘just because interest rates are going up and down’. It has a lot more to do with the expectations for 1) risk, 2) return and 3) future inflation. Sometimes it is action by the Fed, as Joe Taxpayer has pointed out. If they sell a lot of bonds, then the basics of higher supply for a set level of demand imply that the prices should go down. Prices going down on a bond imply that yields will go up. (I really hope that’s clear by now). This is a common monetary lever that the government uses to ‘remove money’ from the system, in that they receive payments from an investor up front when the investor buys the bond from the Fed, and then the Fed gradually return that cash back into the system over time. Sometimes it is due to uncertainty about the future. If investors at large believe that inflation is coming, then bonds become a less attractive investment, as the dollars received for future payments will be less valuable. This could lead to a sell-off in the bond markets, because investors want to cash out their bonds and transfer that capital to something that will preserve their value under inflation. Here again an increase in supply of bonds for sale will lead to decreased prices and higher yields. At the end of the day it is really hard to predict exactly which direction bond markets will be moving, and more importantly WHY. If you figure it out, move to New York or Chicago or London and work as a trader in the bond markets. You’ll make a killing, and if you’d like I will be glad to drive your cars for you. 4. How does the availability of money supply for banks drive changes in other lending rates? When any investment organization forms, it builds its portfolio to try to deliver a set return at the lowest risk possible. As a corollary to that, it tries to deliver the maximum return possible for a given level of risk. When we’re talking about a bank, DumbCoder’s answer is dead on. Banks have various options to choose from, and a 10-year T-bond is broadly seen as one of the least risky investments. Thus, it is a benchmark for other investments. 5. So… now, why do mortgage rates tend to increase when the published treasury bond yield rate increases? The traditional, residential 30-year mortgage is VERY similar to a bond investment. There is a long-term investment horizon, with fixed cash payments over the term of the note. But the principal is returned incrementally during the life of the loan. So, since mortgages are ‘more risky’ than the 10-year treasury bond, they will carry a certain premium that is tied to how much more risky an individual is as a borrower than the US government. And here it is… no one actually directly changes the interest rate on 10-year treasuries. Not even the Fed. The Fed sets a price constraint that it will sell bonds at during its periodic auctions. Buyers bid for those, and the resulting prices imply the yield rate. If the yield rate for current 10-year bonds increases, then banks take it as a sign that everyone in the investment community sees some sign of increased risk in the future. This might be from inflation. This might be from uncertain economic performance. But whatever it is, they operate with some rule of thumb that their 30-year mortgage rate for excellent credit borrowers will be the 10-year plus 1.5% or something. And they publish their rates.", "title": "" }, { "docid": "b5800f63f0c10a1e5baba7f2a38d43ef", "text": "From the hover text of the said screen; Latest dividend/dividend yield Latest dividend is dividend per share paid to shareholders in the most recent quarter. Dividend yield is the value of the latest dividend, multiplied by the number of times dividends are typically paid per year, divided by the stock price. So for Ambev looks like the dividend is inconsistantly paid and not paid every quarter.", "title": "" }, { "docid": "e6d9456ced95d82d4b55a30dcd8ae546", "text": "Russia has become more risky as an investment, thus investors, basically the market, wants to be paid more for investing in or owning those bonds. As yields go up, prices go down. So right now you can buy a low priced Russian bond with a high yield because the market views the risk involved as higher than risks involved in other similar securities.", "title": "" }, { "docid": "bb27312cdf3703a383fa28960ac1908a", "text": "This directly relates to the ideas behind the yield curve. For a detailed explanation of the yield curve, see the linked answer that Joe and I wrote; in short, the yield curve is a plot of the yield on Treasury securities against their maturities. If short-term Treasuries are paying higher yields than long-term debt, the yield curve has a negative slope. There are a lot of factors that could cause the yield curve to become negatively sloped, or at least less steep, but in this case, oil prices and the effective federal funds rate may have played a significant role. I'll quote from the section of the linked answer that describes the effect of oil prices first: a rise in oil prices may increase expectations of short-term inflation, so investors demand higher interest rates on short-term debt. Because long-term inflation expectations are governed more by fundamental macroeconomic factors than short-term swings in commodity prices, long-term expectations may not rise nearly as much as short term expectations, which leads to a yield curve that is becoming less steep or even negatively sloped. As the graph shows, oil prices increased dramatically, so this increase may have increased expectations of short-term inflation expectations substantially. The other answer describes an easing of monetary policy, e.g. a decrease in the effective federal funds rate (FFR), as a factor that could increase the slope of the yield curve. However, a tightening of monetary policy, e.g. an increase in the FFR, could decrease the slope of the yield curve because a higher FFR leads investors to demand a higher rate of return on shorter-term securities. Longer-term Treasuries aren't as affected by short-term monetary policy, so when short-term yields increase more than long-term yields, the yield curve becomes less steep and/or negatively sloped. The second graph shows the effective federal funds rate for the period in question, and once again, the increase is significant. Finally, look at a graph of inflation for the relevant period. Intuitively, the steady increase in inflation from 1975 onward may have increased investors expectations of short-term inflation, therefore increasing short-term yields more than long-term yields (as described above and in the other answer). These reasons aren't set in stone, and just looking at graphs isn't a substitute for an actual analysis of the data, but logically, it seems plausible that the positive shock to oil prices, increases in the effective federal funds rate, and increases in inflation and expectations of inflation contributed at least partially to the inversion of the yield curve. Keep in mind that these factors are all interconnected as well, so the situation is certainly more complex. If you approve of this answer, be sure to vote up the other answer about the yield curve too.", "title": "" }, { "docid": "48c01e8025f37a2255ffd3c048d8b06a", "text": "Perhaps something else comes with the bond so it is a convertible security. Buffett's Negative-Interest Issues Sell Well from 2002 would be an example from more than a decade ago: Warren E. Buffett's new negative-interest bonds sold rapidly yesterday, even after the size of the offering was increased to $400 million from $250 million, with a possible offering of another $100 million to cover overallotments. The new Berkshire Hathaway securities, which were underwritten by Goldman, Sachs at the suggestion of Mr. Buffett, Berkshire's chairman and chief executive, pay 3 percent annual interest. But they are coupled with five-year warrants to buy Berkshire stock at $89,585, a 15 percent premium to Berkshire's stock price Tuesday of $77,900. To maintain the warrant, an investor is required to pay 3.75 percent each year. That provides a net negative rate of 0.75 percent.", "title": "" }, { "docid": "2a0324b0cdfebc89bc0461b5ea87187f", "text": "Yield is the term used to describe how much income the bond will generate if the bond was purchased at a particular moment in time. If I pay $100 for a one year, $100 par value bond that pays 5% interest then the bond yields 5% since I will receive $5 from a $100 investment if I held the bond to maturity. If I pay $90 for the same one year bond then the bond yields 17% since I will receive $15 from a $90 investment if I held the bond to maturity. There are many factors that affect what yield creditors will accept: It is the last bullet that ultimately determines yield. The other factors feed into the creditor’s desire to hold money today versus receiving money in the future. I desire money in my hand more than a promise to receive money in the future. In order to entice me to lend my money someone must offer me an incentive. Thus, they must offer me more money in the future in order for me to part with money I have. A yield curve is a snapshot of the yields for different loan durations. The x-axis is the amount of time left on the bond while the y-axis is the yield. The most cited yield curve is the US treasury curve which displays the yields for loans to the US government. The yield curve changes while bonds are being traded thus it is always a snapshot of a particular moment in time. Short term loans typically have less yield than longer term loans since there is less uncertainty about the near future. Yield curves will flatten or slightly invert when creditors desire to keep their money instead of loaning it out. This can occur because of a sudden disruption in the market that causes uncertainty about the future which leads to an increase in the demand for cash on hand. The US government yield curve should be looked at with some reservation however since there is a very large creditor to the US government that has the ability to loan the government an unlimited amount of funds.", "title": "" }, { "docid": "7fd0e843fca80da2dcfa715ff3d71960", "text": "The US Treasury is not directly/transactionally involved, but can affect the junk bond market by issuing new bonds when rates rise. Since US bonds are considered completely safe, changes in yield will affect low quality debt. For example, if rates rose to levels like 1980, a 12% treasury bond would drive the prices of junk bonds issued today dramatically lower. Another price factor is likelihood of default. Companies with junk credit ratings have lousy balance sheets, so negative economic conditions or tight short term debt markets can result in default for many of these companies. Whether bonds in a fund are new issues or purchased on the secondary market isn't something that is very relevant to the individual investor. The current interest rate environment is factored into the market already via prices of bonds.", "title": "" }, { "docid": "8eb15fd9cad42cbd62a7309b9306c4e1", "text": "But the notes are always called at par, no? So you have a fixed yield which depends on the coupon and price you bought it at. I still don't see how the company doing better than expected changes the yield on your investment.", "title": "" }, { "docid": "34dd146d5dc37e1b2ec68b29106277b3", "text": "You might want to look up Dividend Yield Trap. Many stocks with high dividend yields got that way not because they decided to increase their dividend, but because their prices have dropped. Usually the company is not in good shape and will reduce their dividend, and you're stuck with a low-yield stock which has also decreased in price.", "title": "" }, { "docid": "4bb5850e3ec9206f48e198dc9fef59bc", "text": "If the market rate and coupon were equal, the bond would be valued at face value, by definition. (Not 100% true, but this is an exercise, and that would be tangent to this discussion). Since the market rate is higher than the coupon rate, the value I am willing to pay drops a bit, so my return is the same as the market rate. This can be done by hand, a time value of money calculation for each payment. Discount by the years till received at the market rate to get the present value for each payment, and sum up the numbers. The other way is to use a finance calculator and solve for rate. The final payment of $10,000 (ignore final coupon just now) is $10,000/(1.1^5). In other words, that single chunk of cash is worth 10% less if it's one year away, (1.1)^2 if 2 years away, etc. Draw a timetable with each payment and divide by 1.1 for each year it's away from present. If the 9% coupon is really 4.5% twice a year, it's $450 in 6 month intervals, and each 6 mo interval is really 5% you discount. Short durations like this can be done by hand, a 30 year bond with twice a year payments is a pain. Welcome to Money.SE.", "title": "" }, { "docid": "70895340e89e2ed79c06404366e1c4f7", "text": "\"Probably the most important thing in evaluating a dividend yield is to compare it to ITSELF (in the past). If the dividend yield is higher than it has been in the past, the stock may be cheap. If it is lower, the stock may be expensive. Just about every stock has a \"\"normal\"\" yield for itself. (It's zero for non-dividend paying stocks.) This is based on the stock's perceived quality, growth potential, and other factors. So a utility that normally yields 5% and is now paying 3% is probably expensive (the price in the denominator is too high), while a growth stock that normally yields 2% and is now yielding 3% (e.g. Intel or McDonald'sl), may be cheap.\"", "title": "" }, { "docid": "27f2ea3f06194bf4fdbfa53f7af8e376", "text": "It's the rate of return on new opportunities. The rate on existing projects isn't relevant. If you buy a bond 10 years ago when market Interest rates were 8%, and you have cash to buy another bond today, it is today's interest rates that are relevant, not the rates 10 years ago.", "title": "" }, { "docid": "b3a1c1a22b4ef798a3315cc961bded21", "text": "In your other question about these funds you quoted two very different yields for them. That pretty clearly says they are NOT tracking the same index.", "title": "" }, { "docid": "02712dd09c447dfaea3a56b5f27d68d2", "text": "\"that would imply that a 30Y US Treasury bond only yields 2.78%, which is nonsensically low. Those are annualized yields. It would be more precise to say that \"\"a 30Y US Treasury bond yields 2.78% per year (annualized) over 30 years\"\", but that terminology is implied in bond markets. So if you invest $1,000 in a 30-year T-bond, you will earn roughly 2.78% in interest per year. Also note that yield is calculated as if it compounded, meaning that investing in a 30-year T-bind will give you a return that is equivalent to putting it in a savings account that earns 1.39% interest (half of 2.78%) every 6 months and compounds, meaning you earn interest on top of interest. The trade-off for these low yields is you have virtually no default risk. Unlike a company that could go bankrupt and not pay back the bond, the US Government is virtually certain to pay off these bonds because it can print or borrow more money to pay off the debts. In addition, bonds in general (and especially treasuries) have very low market risk, meaning that their value fluctuates much less that equities, even indicies. S&P 500 indices may move anywhere between -40% and 50% in any given year, while T-bonds' range of movement is much lower, between -10% and 30% historically).\"", "title": "" }, { "docid": "192c5739c61012360fe2e4aa33adabe8", "text": "The forward curve for gold says little, in my opinion, about the expected price of gold. The Jan 16 price is 7.9% (or so) higher than the Jan 12 price. This reflects the current cost of money, today's low interest rates. When the short rates were 5%, the price 4 years out would be about 20% higher. No magic there. (The site you linked to was in German, so I looked and left. I'm certain if you pulled up the curve for platinum or silver, it would have the identical shape, that 7.9% rise over 4 years.) The yield curve, on the other hand, Is said to provide an indication of the direction of the economy, a steep curve forecasting positive growth.", "title": "" } ]	fiqa
9746878732f165353b6f9d4cdebd454b	Calculate Future Value with Recurring Deposits	[ { "docid": "9b3b042c6ff301b29d19d0237bcce58f", "text": "Using the following values: The formula for the future value of an annuity due is d(((1 + i)^t - 1)/i)(1 + i) See Calculating The Present And Future Value Of Annuities In an annuity due, a deposit is made at the beginning of a period and the interest is received at the end of the period. This is in contrast to an ordinary annuity, where a payment is made at the end of a period. The formula is derived, by induction , from the summation of the future values of every deposit. The initial value, with interest accumulated for all periods, can simply be added. So the overall formula is", "title": "" }, { "docid": "25c349cec0a4b8347e29078653079818", "text": "Let's break this into two parts, the future value of the initial deposit, and the future value of the payments: D(1 + i)n For the future value of the payments A((1+i)n-1) / i) Adding those two formulas together will give you the amount of money that should be in your account at the end. Remember to make the appropriate adjustments to interest rate and the number of payments. Divide the interest rate by the number of periods in a year (four for quarterly, twelve for monthly), and multiply the number of periods (p) by the same number. Of course the monthly deposit amount will need to be in the same terms. See also: Annuity (finance theory) - Wikipedia", "title": "" } ]	[ { "docid": "0244ad7d7f3b3a9289ef05a741c226ee", "text": "O boy you can take an entire on this. Here are the basics. Project future cash flows on a series of underlying assumptions such as growth rate and risk free rate. You then have to adjust top line items such as depreciation and come up with FCF. Then discount everything back with a terminal value.", "title": "" }, { "docid": "1d63cd0299ab297fd07d4a648063b2e1", "text": "\"If it could, it seems yet to be proven. Long Term Capital Management was founded by a bunch of math whizzes and they seem to have missed something. I'd never suggest that something has no value, but similar to the concept that \"\"if time travel were possible, why hasn't anyone come back from the future to tell us\"\" I'd suggest that if there were a real advantage to what you suggest, someone would be making money from it already. In my opinion, the math is simple, little more than a four function calculator is needed.\"", "title": "" }, { "docid": "cefc4f123d70fef73e55be2b5f0bfd01", "text": "One way I heard of, from a friend who ran a similar fund as yours, is to calculate $days of investment and divide the investment as accordingly. For example, If I invested 10$ for 10 days and you have invested 20$ for 5 days. At the end of the 10th day my $day = 1010=100, while your $day=205=100. If the investement has grown to 100$, the I should get $100/(100+100)100=$50, you also should get the same. This I guess is equitable, you could try dividing the corpus with above method. It consideres the amount invested as well as the time invested for. I think by the above method, you could also handle the inbetween withdrawals.", "title": "" }, { "docid": "0068be76f8e30082d3ecc91d92b35add", "text": "This calculation arrives at the correct answer. However, it uses the formula for an annuity due. This means the payments are made at the beginning of the month and the last month of the 10 year period has interest accrued. See the section, Calculating the Future Value of an Annuity Due. The rate is given as an effective rate. with In Excel, =FV((1+0.12)^(1/12)-1,120,3500,0,1)", "title": "" }, { "docid": "34df5ec1c05afd8af852ecb3db4b3b77", "text": "\"I got $3394.83 The first problem with this is that it is backwards. The NPV (Net Present Value) of three future payments of $997 has to be less than the nominal value. The nominal value is simple: $2991. First step, convert the 8% annual return from the stock market to a monthly return. Everyone else assumed that the 8% is a monthly return, but that is clearly absurd. The correct way to do this would be to solve for m in But we often approximate this by dividing 8% by 12, which would be .67%. Either way, you divide each payment by the number of months of compounding. Sum those up using m equal to about .64% (I left the calculated value in memory and used that rather than the rounded value) and you get about $2952.92 which is smaller than $2991. Obviously $2952.92 is much larger than $2495 and you should not do this. If the three payments were $842.39 instead, then it would about break even. Note that this neglects risk. In a three month period, the stock market is as likely to fall short of an annualized 8% return as to beat it. This would make more sense if your alternative was to pay off some of your mortgage immediately and take the payments or yp pay a lump sum now and increase future mortgage payments. Then your return would be safer. Someone noted in a comment that we would normally base the NPV on the interest rate of the payments. That's for calculating the NPV to the one making the loan. Here, we want to calculate the NPV for the borrower. So the question is what the borrower would do with the money if making payments and not the lump sum. The question assumes that the borrower would invest in the stock market, which is a risky option and not normally advisable. I suggest a mortgage based alternative. If the borrower is going to stuff the money under the mattress until needed, then the answer is simple. The nominal value of $2991 is also the NPV, as mattresses don't pay interest. Similarly, many banks don't pay interest on checking these days. So for someone facing a real decision like this, I'd almost always recommend paying the lump sum and getting it over with. Even if the payments are \"\"same as cash\"\" with no premium charged.\"", "title": "" }, { "docid": "6473d727ce6f8ff477b24768d2c05b49", "text": "\"Option pricing models used by exchanges to calculate settlement prices (premiums) use a volatility measure usually describes as the current actual volatility. This is a historic volatility measure based on standard deviation across a given time period - usually 30 to 90 days. During a trading session, an investor can use the readily available information for a given option to infer the \"\"implied volatility\"\". Presumably you know the option pricing model (Black-Scholes). It is easy to calculate the other variables used in the pricing model - the time value, the strike price, the spot price, the \"\"risk free\"\" interest rate, and anything else I may have forgotten right now. Plug all of these into the model and solve for volatility. This give the \"\"implied volatility\"\", so named because it has been inferred from the current price (bid or offer). Of course, there is no guarantee that the calculated (implied) volatility will match the volatility used by the exchange in their calculation of fair price at settlement on the day (or on the previous day's settlement). Comparing the implied volatility from the previous day's settlement price to the implied volatility of the current price (bid or offer) may give you some measure of the fairness of the quoted price (if there is no perceived change in future volatility). What such a comparison will do is to give you a measure of the degree to which the current market's perception of future volatility has changed over the course of the trading day. So, specific to your question, you do not want to use an annualised measure. The best you can do is compare the implied volatility in the current price to the implied volatility of the previous day's settlement price while at the same time making a subjective judgement about how you see volatility changing in the future and how this has been reflected in the current price.\"", "title": "" }, { "docid": "34ff158b6ef5069454476b94d3c6f49b", "text": "Okay, I think I managed to find the precise answer to this problem! It involves solving a non-linear exponential equation, but I also found a good approximate solution using the truncated Taylor series. See below for a spreadsheet you can use. Let's start by defining the growth factors per period, for money in the bank and money invested: Now, let S be the amount ready to be invested after n+1 periods; so the first of that money has earned interest for n periods. That is, The key step to solve the problem was to fix the total number of periods considered. So let's introduce a new variable: t = the total number of time periods elapsed So if money is ready to invest every n+1 periods, there will be t/(n+1) separate investments, and the future value of the investments will be: This formula is exact in the case of integer t and n, and a good approximation when t and n are not integers. Substituting S, we get the version of the formula which explicitly depends on n: Fortunately, only a couple of terms in FV depend on n, so we can find the derivative after some effort: Equating the derivative to zero, we can remove the denominator, and assuming t is greater than zero, we can divide by the constant ( 1-G t ): To simplify the equation, we can define some extra constants: Then, we can define a function f(n) and write the equation as: Note that α, β, γ, G, and R are all constant. From here there are two options: Use Newton's method or another numerical method for finding the positive root of f(n). This can be done in a number of software packages like MATLAB, Octave, etc, or by using a graphics calculator. Solve approximately using a truncated Taylor series polynomial. I will use this method here. The Taylor series of f(n), centred around n=0, is: Truncating the series to the first three terms, we get a quadratic polynomial (with constant coefficients): Using R, G, α, β and γ defined above, let c0, c1 and c2 be the coefficients of the truncated Taylor series for f(n): Then, n should be rounded to the nearest whole number. To be certain, check the values above and below n using the formula for FV. Using the example from the question: For example, I might put aside $100 every week to invest into a stock with an expected growth of 9% p.a., but brokerage fees are $10/trade. For how many weeks should I accumulate the $100 before investing, if I can put it in my high-interest bank account at 4% p.a. until then? Using Newton's method to find roots of f(n) above, we get n = 14.004. Using the closed-form approximate solution, we get n = 14.082. Checking this against the FV with t = 1680 (evenly divisible by each n + 1 tested): Therefore, you should wait for n = 14 periods, keeping that money in the bank, investing it together with the money in the next period (so you will make an investment every 14 + 1 = 15 weeks.) Here's one way to implement the above solution with a spreadsheet. StackExchange doesn't allow tables in their syntax at this time, so I'll show a screenshot of the formulae and columns you can copy and paste: Formulae: Copy and paste column A: Copy and paste column B: Results: Remember, n is the number of periods to accumulate money in the bank. So you will want to invest every n+1 weeks; in this case, every 15 weeks.", "title": "" }, { "docid": "ecd4cb3dacf846a7498338c3ce7b3dee", "text": "This investment does not have a payback period as the net present value of your investment is negative. Your investment requires an initial cash outlay of $40,000 followed by annual savings of $2060 for the next 20 years. Your discount rate is 5% at which the NPV is $-14327.85 as calculated below by using this JavaScript financial functions library tadJS that is based on a popular tadXL add-in for Excel 2007, 2010 and 2013.", "title": "" }, { "docid": "a11737e01c9efd4265d445ff5325fc94", "text": "Recurring deposit means you put aside a sum every month to go into your RD account. Fixed deposit means you put aside a lump sum to go into your FD account. If we take investing 12,000 for RD, means 1,000 a month, and 12,000 for FD, means putting in 12,000 straightaway, we will definitely earn more from FD. However, if you do not have a lot of capital at the start, an RD is a good way to start saving in a disciplined manner.", "title": "" }, { "docid": "37b6ad0518ebc7f4b83f9bd343b4f4fd", "text": "When calculating the NPV, is there anything I need to do in between the project start date outlay (Nov 2017), and the first cash inflow (July 2019). Do I need to discount the cashflow to the present, and if so, how? Yes, you need to discount every cash flow to the present time, not just the first one. When discounting cash flows, the appropriate discount rate needs to represent the opportunity cost of the initial cash outlay. Meaning if you were to use that money for something else, what rate of return would you expect? You could be safe and assume only a risk-free return (like 2-3%) or use the average rate of return of other investments (e.g. 10-15%). Another common approach is to use your cost of capital if you're raising funds for the project, or would instead have use the funds to pay off existing debt. Once you find a relevant discount rate, then just discount each cash flow by dividing them by e^rt, where r is the annualized discount rate (e.g. 0.10 for 10%) and t is the decimal number of years between now and the cash flow (e.g. 1.5 for 18 months)", "title": "" }, { "docid": "c0aad58dd1f7708fabaa2d5d9a2c7d99", "text": "> 1)What is the formula to turn the annualized rate into a monthly rate? What do you think* it is? > 2)What is the formula to find out the NPV of monthly cash flows? Same one as usual. Remember, value can only be summed if it's at the same point in time. > For example, if I get $1000, $2000, and $3000 in months 1, 2, and 3, how do I calculate how much each of those are equal to as a present value if the annual discount rate is 8%? Think it through.", "title": "" }, { "docid": "d304ada0eec7878085696ff363929bd9", "text": "\"To calculate the balance (not just principal) remaining, type into your favorite spreadsheet program: It is important that the periods for \"\"Periods\"\" and \"\"Rate\"\" match up. If you use your annual rate with quarterly periods, you will get a horribly wrong answer. So, if you invest $1000 today, expect 6% interest per year (0.5% interest per month), withdraw $10 at the end of each month, and want to know what your investment balance will be 2 years (24 months) from now, you would type: And you would get a result of $872.84. Or, to compute it manually, use the formula found here by poster uart: This is often taught in high-school here as a application of geomentric series. The derivation goes like this. Using the notation : r = 1 + interest_rate_per_term_as_decimal p = present value a = payment per term eot1 denotes the FV at end of term 1 etc. eot1: rp + a eot2: r(rp + a) + a = r^2p + ra + a eot3: r(r^2p + ra + a) + a = r^3p + r^2a + ra + a ... eotn: r^np + (r^(n-1) + r^(n-2) + ... 1)a = p r^n + a (r^n - 1)/(r-1) That is, FV = p r^n + a (r^n - 1)/(r-1). This is precisely what exel [sic] computes for the case of payments made at the end of each term (payment type = 0). It's easy enough to repeat the calculations as above for the case of payments made at the beginning of each term. This won't work for changing interest rates or changing withdrawal amounts. For something like that, it would be better for you (if you don't want online calculators) to set up a table in a spreadsheet so you can adjust different periods manually.\"", "title": "" }, { "docid": "c652aedd98aef8b438875e0bd144b905", "text": "This is a present value calculation, which excel or any financial calculator can handle. N = 300 (months) %i = 5/12 or .05/12 depending on the program/calculator PMT = $5000 (the monthly payment) FV = 0 (you want to end at zero balance) This calculates a PV (present value of $855,300) Chad had it right, but used a calculator that didn't offer the PV function, so he guessed and changed numbers til the answer was clear. user379 makes a good point, but why start inflation calculations at 65, and not now? You look like you're in your 30's, so there's 30 years of inflation, and $60K/yr in today's value will need to be closer to $150K/yr, given about 30 years of 3% inflation.", "title": "" }, { "docid": "5887589fd2f004e5ffadf2a922b01929", "text": "Im creating a 5-year projection on Profit and loss, cash flow and balance sheet and i\\m suppose to use the LIBOR (5 year forward curve) as interest rate on debt. This is the information i am given and it in USD. Thanks for the link. I guess its the USD LIBOR today, in one year, in two years, three years, four years and five years", "title": "" }, { "docid": "1c57244613aca8ac7979581637850f14", "text": "If you didn't have deposits, then the growth rate is simply ((p1/p0)^(1/t))-1, where p0 is the initial balance, p1 is the current balance, and t is the number of periods. For example, suppose you started the account with $100,000 in 2000. It's now 2015 -- 15 years later -- and the balance is $240,000. So the growth is: If you're making regular deposits, especially if you're making deposits of unequal amounts, the problem becomes much more complex. The easiest thing to do is probably to create a spreadsheet. Make a column for principle, a column for deposit amount, and a column for percent growth that period. Assuming A is principle and B is deposit, then the formula for growth C is =((A2-A1-B1)/A1-1)*100. Copy this formula down the column and Excel should automatically adjust the row numbers. Assuming you put one row for each month you can see the growth (or loss) month by month. You can get a general idea of what your overall growth rate has been by taking the average of the monthly amounts, but this would not be a truly accurate measure of your total growth because presumably (hopefully) you have more money in the later months than the earlier months. But it would be a good measure of how your investments are doing.", "title": "" } ]	fiqa
da4189515ad5a226edd411f8d19653bd	What headaches will I have switching from Quicken to GnuCash?	[ { "docid": "a3e7672567da06cb8b0dc6999ced5b7c", "text": "I have not used Quicken; I've used GnuCash exclusively. It feels a bit rough with the UI: Balancing that, the data is stored in a gzip-compressed xml file. The compression is also optional, so you can save it as a plain xml file. This means that you have some hope of recovery if you wind up with a corrupted file. (And for programmer-types, you could keep it in source control for additional peace of mind.) My wife and I have been using it for several years now, and has worked well for us. LWN.net had a pair of Grumpy Editor reviews on personal finance software here and here which would be worth reading.", "title": "" }, { "docid": "82b9b92a9cd236b37a2eb01f8a3d5dfb", "text": "The best way to answer this question is to try. GnuCash is free, so setting it up and giving it a go shouldn't be too hard. After all, what really matters is how helpful the program is for your purposes. One aspect of personal finance that stops me from jumping to GnuCash/KMyMoney/MoneyDance is the ability to download transactions from my financial institutions. Last time I checked, the process was somewhat involved and support was limited for a handful of banks. Because of that, I decided to stick with MS Money (and once Microsoft dropped the ball, with Quicken). I am sure things are better these days, but I am still not comfortable with trusting my finances to something new and unproven. I still remember how painful it was several years ago, when some bug in MS Money caused occasional mess-up of the reconciliation state for the American Express credit cards.", "title": "" }, { "docid": "c06409db3a289957c3d619a503dadff6", "text": "It's been a long time since I've used MS Money and/or Quickbooks (never Quicken), but I've used GnuCash over the past year or so. It works, but it does suffer from some usability problems. Some of the UI is clunky. Data entry sequences are a little harder than they should be. Reports could be a little prettier. But overall it does work, and it's the best I've found on linux. (I would definitely appreciate pointers to something better.)", "title": "" }, { "docid": "1592c9cd0da3961ba90df07a51f28241", "text": "Instead of gnucash i suggest you to use kmymoney. It's easier", "title": "" } ]	[ { "docid": "f124aa4001a9d7b601f65bc11e8e9b50", "text": "Intuit Quicken. Pros: Cons:", "title": "" }, { "docid": "998c6bb64e219b1c2a9fa3c93102ef7f", "text": "If you were a business, all your assets would have a dollar value, so when you sold them you'd decrease the amount of assets by that amount and increase in cash, and if there was a profit on the sale it would go in as income, if there was loss it would count as a cost (or a loss)... so if there was a profit it would increase Equity, a loss then it would decrease Equity. Since it's not really worthwhile doing a estimated cost for everything that you have, I'd just report it as income like you are doing and let the amount of equity increase proportionately. So, implicitly you always had roughly that amount of equity, but some of it was in the form of assets, and now you're liquidating those assets so the amount shows up in GnuCash. When you buy new things you might sell later, you could consider adding them as assets to keep track of this explicitly (but even then you have problems-- the price of things changes with time and you might not want to keep up with those price changes, it's a lot of extra work for a family budget) -- for stuff you already have it's better to treat things as you are doing and just treat the money as income-- it's easier and doesn't really change anything-- you always had that in equity, some of it was just off the books and now you are bringing it into the books.", "title": "" }, { "docid": "9c7310340478610eea3f1d4b154baaf6", "text": "\"As far as I can tell there are no \"\"out-of-the-box\"\" solutions for this. Nor will Moneydance or GnuCash give you the full solution you are looking for. I imaging people don't write a well-known, open-source, tool that will do this for fear of the negative uses it could have, and the resulting liability. You can roll-you-own using the following obscure tools that approximate a solution: First download the bank's CSV information: http://baruch.ev-en.org/proj/gnucash.html That guy did it with a perl script that you can modify. Then convert the result to OFX for use elsewhere: http://allmybrain.com/2009/02/04/converting-financial-csv-data-to-ofx-or-qif-import-files/\"", "title": "" }, { "docid": "d806870dd32858170d30a0ef2ed45e93", "text": "MoneyDance Is the way to go. I've been using it for years and it works well. It keeps getting better, and best of all, it's completely cross platform! Mac, Windows and linux!", "title": "" }, { "docid": "1c4a0bcd6ec884cb4e38e9035f7e5ffb", "text": "I haven't used it in years, but look at GnuCash. From the site, one bullet point under Feature Highlights:", "title": "" }, { "docid": "c33880c4c168a4317fdad0185359c7a0", "text": "I switched from Quicken for Mac to Moneydance, and have not regretted it. I see only one weakness in MD compared with Quicken: its reporting is not very good. Your information is all there and well organized, but sometimes it's hard work to extract it in a convenient form. Of course a lot depends on what you need from the application, but I strongly recommend you take a look at MD before deciding.", "title": "" }, { "docid": "0f1bca174e10f914463e5c7ddcf1433e", "text": "\"Yes. The simplest option to track your spending over time is to familiarize yourself with the \"\"Reports\"\" menu on the toolbar. Take a look specifically at the \"\"Reports > Income/Expense > Income Statement\"\" report, which will sum up your income and spending over a time frame (defaults to the current year). In each report that you run, there is an \"\"Options\"\" button at the top of the screen. Open that and look on the \"\"General\"\" tab, you'll be able to set the time frame that the report displays (if you wanted to set it for the 2 week block since your last paycheck, for example). Other features you're going to want to familiarize yourself with are the Expense charts & statements, the \"\"Cash Flow\"\" report, and the \"\"Budgeting\"\" interface (which is relatively new), although there is a bit of a learning curve to using this last feature. Most of the good ideas when it comes to tracking your spending are independent of the software you're using, but can be augmented with a good financial tracking program. For example, in our household we have multiple credit cards which we pay in full every month. We selected our cards on specific benefits that they provide, such as one card which has a rotating category for cash back at certain business types. We keep that card set on restaurants and put all of our \"\"eating out\"\" expenses on that card. We have other cards for groceries, gas, etc. This makes it easy to see how much we've spent in a given category, and correlates well with the account structure in gnucash.\"", "title": "" }, { "docid": "3231c7537fb00691c38e465d9885fe0c", "text": "Um really, you expect US to know the answer? Why not ask Wells Fargo? Unless someone here happens to work for WF and has access to the right people, this is more likely a question to send to their support people than to get an answer here that is anything other than a SWAG (and in that line of reasoning, and as a software tester by trade, my money is on the already offered reasoning that it's doing some kind of primative 'bad word' search (probably a regular expression match) and getting a hit on tit. ) In the meantime I suggest an alternative term, how about 'offering'", "title": "" }, { "docid": "f0caf721b73d61349849ec09fa64db2f", "text": "Uh, Quicken is virtually identical to MS Money. If you liked money and don't want to change, use that.", "title": "" }, { "docid": "b5ac2c4ff3c5d1c545838bec51ac3bb8", "text": "\"Other responses have focused on getting you software to use, but I'd like to attempt your literal question: how are such transactions managed in systems that handle them? I will answer for \"\"double entry\"\" bookkeeping software such as Quicken or GnuCash (my choice). (Disclaimer: I Am Not An Accountant and accountants will probably find error in my terminology.) Your credit card is a liability to you, and is tracked using a liability account (as opposed to an asset account, such as your bank accounts or cash in your pocket). A liability account is just like an asset except that it is subtracted from rather than added to your total assets (or, from another perspective, its balance is normally negative; the mathematics works out identically). When you make a purchase using your credit card, the transaction you record transfers money from the liability account (increasing the liability) to the expense account for your classification of the expense. When you make a payment on your credit card, the transaction you record transfers money from your checking account (for example) to the credit card account, reducing the liability. Whatever software you choose for tracking your money, I strongly recommend choosing something that is sufficiently powerful to handle representing this as I have described (transfers between accounts as the normal mode of operation, not simply lone increases/decreases of asset accounts).\"", "title": "" }, { "docid": "c1b97df8f72eb9db4c987059358d87ac", "text": "\"Because you've sold something you've received cash (or at least an entry on your brokerage statement to say you've got cash) so you should record that as a credit in your brokerage account in GnuCash. The other side of the entry should go into another account that you create called something like \"\"Open Positions\"\" and is usually marked as a Liability account type (if you need to mark it as such). If you want to keep an accurate daily tally of your net worth you can add a new entry to your Open Positions account and offset that against Income which will be either negative or positive depending on how the position has moved for/against you. You can also do this at a lower frequency or not at all and just put an entry in when your position closes out because you bought it back or it expired or it was exercised. My preferred method is to have a single entry in the Open Positions account with an arbitrary date near when I expect it to be closed and each time I edit that value (daily or weekly) so I only have the initial entry and the current adjust to look at which reduces the number of entries and confusion if there are too many.\"", "title": "" }, { "docid": "b0288ad4861488073b702208da13fa2b", "text": "ACH, Paypal, Amazon Pay are all other options that can be used. ACH is cheapest for the merchant but it is a bit of a pain for the customer to setup (aka adds friction to our sales process, which is very bad). Paypal and Amazon Pay both cost a bit more than regular credit cards for the merchant. Google Wallet is free but not available unless you are a sole proprietor or an individual, which is is useless for businesses. So yeah, other options are either difficult or more expensive.", "title": "" }, { "docid": "b4510cf6016c180b947eab26ae6b837c", "text": "\"Here's a very basic MySQL query I put together that does what I want for income/expense report. Basically it reports the same info as the canned income/expense report, but limits it those income/expenses associated with a particular account (rental property, in my case). My main complaint is the output \"\"report\"\" is pretty ugly. And modifying for a different rental property requires changing the code (I could pass parameters etc). Again, the main \"\"issue\"\" in my mind with GnuCash income/expense report is that there is no filter for which account (rental property) you want income/expenses for, unless you set up account tree so that each rental property has its own defined incomes and expenses (i.e. PropertyA:Expense:Utility:electric). Hopefully someone will point me to a more elegant solution that uses the report generator built into GnuCash. THanks! SELECT a2.account_type , a4.name, a3.name, a2.name, SUM(ROUND(IF(a2.account_type='EXPENSE',- s2.value_num,ABS(s2.value_num))/s2.value_denom,2)) AS amt FROM ( SELECT s1.tx_guid FROM gnucash.accounts AS a1 INNER JOIN gnucash.splits AS s1 ON s1.account_guid = a1.guid WHERE a1.name='Property A' ) AS X INNER JOIN gnucash.splits s2 ON x.tx_guid = s2.tx_guid INNER JOIN gnucash.accounts a2 ON a2.guid=s2.account_guid INNER JOIN gnucash.transactions t ON t.guid=s2.tx_guid LEFT JOIN gnucash.accounts a3 ON a3.guid = a2.parent_guid LEFT JOIN gnucash.accounts a4 ON a4.guid = a3.parent_guid WHERE a2.name <> 'Property A' # get all the accounts associated with tx in Property A account (but not the actual Property A Bank duplicate entries. AND t.post_date BETWEEN CAST('2016-01-01' AS DATE) AND CAST('2016-12-31' AS DATE) GROUP BY a2.account_type ,a4.name, a3.name, a2.name WITH ROLLUP ; And here's the output. Hopefully someone has a better suggested approach!\"", "title": "" }, { "docid": "3fde684749772c7d428b5dac76f79226", "text": "\"The Yahoo Finance API is no longer available, so Finance::Quote needs to point at something else. Recent versions of Finance::Quote can use AlphaVantage as a replacement for the Yahoo Finance API, but individual users need to acquire and input an AlphaVantage API key. Pretty decent documentation for how to this is available at the GnuCash wiki. Once you've followed the directions on the wiki and set the API key, you still need to tell each individual security to use AlphaVantage rather than Yahoo Finance: As a warning, I've been having intermittent trouble with AlphaVantage. From the GnuCash wiki: Be patient. Alphavantage does not have the resources that Yahoo! did and it is common for quote requests to time out, which GnuCash will present as \"\"unknown error\"\". I've certainly been experiencing those errors, though not always.\"", "title": "" }, { "docid": "c5acafc129ddd9f53bcfcca2fc88678d", "text": "If you would like to use linux I suggest you to use KMyMoney http://kmymoney2.sourceforge.net/ It is based on gnucash but it is easier to use IMO", "title": "" } ]	fiqa
954e7160cb7b6fdbc7540ae1d0977980	The doctor didn't charge the health insurance in time, am I liable?	[ { "docid": "2dee3bd7391f7fa666fa9ca7b4777d5f", "text": "This has a straightforward answer. It's likely that your doctor and the hospital have no responsibility to ensure that your insurance claim is filed in a timely manner. They bill you whether you or they get reimbursed by insurance, or not. The insurance company is more than happy not to pay you any way they can. Sorry if this is harsh, but it's up to you to follow through. See also here.", "title": "" }, { "docid": "7203484b828e5aa78784765e4e0261a8", "text": "\"I work for a health billing company. It is completely the provider's responsibility to bill your health insurance in a timely manner if they have your health insurance information on file (it sounds like they did). If you can gather a copy of your EOB (Explanation of Benefits) from your health insurance, it will likely say something to the extent of: \"\"claim was submitted after the timely filing limit, therefore no payment was made. The patient is not liable for the remaining balance.\"\" Don't let the hospital/physician bully you into paying for something they should have submitted to the insurance in the first place.\"", "title": "" }, { "docid": "01716d3654fe82072d9cc6b57757c688", "text": "I was in a similar situation years back and I refused to pay the bill. My point of view was that I provided the hospital with all information needed to submit the claim in a timely matter and that I should not be held responsible for their failure to do so. In the end they waived the charges. So while technically I might have been responsible for paying the charges, in reality I think they decided it wasn't worth the hassle of making me (I would have fought it all the way up to the top). Not sure that I would recommend this approach though :)", "title": "" }, { "docid": "b6cd27e3c2f8b12e4334eb3d747c96c3", "text": "The hospital likely has a contract with your insurance company which makes them obligated to bill the insurance before billing you! I had a similar occurrence that was thrown out when my insurance company provided a copy of a contract with the hospital to the judge. So if there is an agreement they must file with the insurance in timely manner.", "title": "" }, { "docid": "4dbb1d642271e9274a2279c952d8d644", "text": "That is your bill because the services were performed for you. You still can negotiate with the doctor however. Suggest that while you aren't willing to pay the full share, you will pay the negotiated amount he would have actually gotten from the insurance company (or some fraction thereof). Doc did make a mistake, but you are very much liable for it.", "title": "" }, { "docid": "64c4ccde4ee50cfa5b1328ff7781c804", "text": "\"I had a similar issue take place at a hospital when the repeatedly billed the \"\"wrong me\"\" -- a stale insurance record left behind from when I was a dependent on my parent's insurance a decade earlier. They ended up billing me for anesthesia when I had a major surgery (everything else was billed to the correct insurance.) The outsourced billing people were pretty unhelpful (not usually the case with hospitals), so I became the squeaky wheel. I sent certified letters, had my priest rattle the cage (it was a Catholic hospital) and eventually talked myself into a meeting with the VP of Finance, who started paying attention when the incompetence of his folks became apparent. Total cost: $0 + my time.\"", "title": "" }, { "docid": "f42e7c2c07d4c18904e3c41d33b8a482", "text": "\"Here's my thought - call the insurance company back. Ask them to just tell you what the \"\"reasonable and customary\"\" approved payment would be. Offer that exact amount to the hospital, it's what they would have gotten anyway, and you learned a cheap lesson.\"", "title": "" }, { "docid": "18d9cbc00c698170d9acdf0c488dd88c", "text": "If you read all that paperwork they made you fill out at the emergency room, there is probably something in there explicitly stating that you owe any bills you rack up regardless of what happens with the insurance company. They generally have a disclaimer that filing for you with your insurance company is a courtesy service they offer, but they are not obliged to do it. Ultimately, you are responsible for your bills even if the provider slow-billed you. Sorry.", "title": "" } ]	[ { "docid": "c6b09a1c18842ba3d64088cabe20f311", "text": "Personal story here: I ended up at the Santa Monica hospital without insurance and left with a bill of $30k-$35k. They really helped me, so I felt like I had a duty to pay them. However, close inspection revealed ridiculous markups on some items which I would have disputed, but I noticed that I had been billed for a few thousands of services not rendered. I got very mad at them for this, they apologized, told me they'd fix it. I never heard back from them and they never put it in collection either. I'm assuming they (rightfully) got scared that I'd go to court and this would be bad publicity. Sometimes I feel guilty I didn't pay them anything, sometimes I feel like they tried to screw me.", "title": "" }, { "docid": "579cd93851b102554f7383a3fb7ae85e", "text": "\"Just as with any other service provider - vote with your wallet. Do not go back to that doctor's office, and make sure they know why. It's unheard of that a service provider will not disclose the anticipated charges ahead of time. A service provider saying \"\"we won't tell you how much we charge\"\" is a huge red flag, and you shouldn't have been dealing with them to begin with. Now you know. how can we ever get health care costs under control if there's so little transparency? I'm assuming you're in the US. This is not going to change, since there's no profit in not screwing the customers. As long as health-care is a for-profit industry, you should expect everyone in it being busy figuring out a way for money to move from your wallet to their. That's what capitalism is about.\"", "title": "" }, { "docid": "2e69800248f5c294156a5264f1126e7a", "text": "I've considered just calling the out-of-network hospital and asking them to reduce the charges. Ideally they would send my health insurance provider a smaller bill which I could just pay. However I want to be careful about how I proceed. Yes, that's what you should be doing. They might give you a discount, but even if not - they will definitely be willing to work out a payment plan for you so that you could pay in installments and not in a lump sum. I have experience with the El Camino group in California, that did just that. It was several hundreds, so they didn't give a discount, but were able to work out an installment plan for several months without much hassle. That is something to do before you get to lawyers. I'm not sure I know how the lawyer could be useful to you, other than claiming bankruptcy or waiting for them to turn to collections and then fight those. You should also work with your insurance. How much is your deductible? If your deductible is so high that it exceeds the several thousands bill you got - do you have a HSA? FSA? These will allow you paying the bill with pre-tax money, saving quite a lot (depending on your brackets and how much you put there). I would expect the insurance to bill you for the deductible, and cover all the rest. Is it not what is happening?", "title": "" }, { "docid": "78a3ef2b2e99a5dba21d383e0e5c778c", "text": "Due to the fact that months have gone by since the item was shipped to you it will be hard to resolve by sending it back. The collection agency is now only interested in getting as much of the money as they can from you. They may have sent a percentage of the debt to the original company when they bought the debt. They may also be working on a commission. Therefore they are not interested in having everybody happy with the result. They need to follow the law, but they don't care if you are a happy customer. The longer you wait to resolve it, the longer it will remain on the credit report. The fact that it went to collections has already hurt your score. Yes, make sure that they update your credit file to reflect that you have paid the debt. Get it in writing. Also check with your health insurance company to see if this is at least partially covered by insurance. They generally won't cover the $12 in fees from the collections company, but they might cover part of the original bill. Depending on the item, it might also be an allowable expense for your FSA (Flexible spending account) or your HSA (Health Spending account).", "title": "" }, { "docid": "985c27490a1fc20d8f94bcadedf22034", "text": "Unfortunately I've seen every single example you've provided from the health care providers perspective. Trust me, they aren't happy about the situation either - hence the reason they will demand up front payment from you based on who your insurance carrier is. I could name a few of the top brand name insurance companies in this country that do all of this to their clients. Medical billing is an incredibly over complicated beast. One that insurance companies have been doing everything they can to make worse over the years. The codes can change annually and there are MANY different codes which can cover the exact same situation. Sure the insurance company might cover gallstones, but if you happen to be pregnant, well, that may not covered even though the treatment is the exact same. What can you do? Consider locating a new insurance company. You do have options and don't have to go with the one your company uses. The downside is that this is going to take quite a bit of research on your part and it will end up costing you more money on your monthly premiums simply because your company won't be footing part of the bill. Talk to other co-workers and see if their experiences match yours. If so, try to get a large enough group together to approach management and demand resolution. A third potential avenue is to get politically involved - but I'm enough of a pessimist that I doubt that would do any good. From what I've seen, neither major political party's current position actually does anything to solve the problem. A fourth option is suing the insurance company - but that is going to be incredibly expensive and take forever. You might have better luck getting together with a bunch of local people and demand your attorney general review the billing/payment practices. Again, this is going to require a LOT of effort. A fifth option is to attempt to cash pay your bills and submit them yourself to the insurance company for reimbursement. If you do this you can likely negotiate lower bills with the medical provider. For anything less than about $2,000 I negotiate the amount prior to service. Believe me when I say that providers are more than happy to give decent discounts if they know they won't have to deal with the insurance companies themselves. Slightly more work for you, but could be far cheaper in the long run.", "title": "" }, { "docid": "778cfe641844ff39ca898a30407737b5", "text": "First of all, the company will pay the money for the insurance, do not be afraid. They have to pay IF 1) the insurance premium was paid every month and 2) there was not a false declaration of health when the contract was signed 5 or 10 years ago. It normally takes between 1 month and 4 months to settle an insurance contract. Your case might take a little longer. Second, the insurance company admit that you are the beneficiary, so the money will eventually come to you. What they say is that you need someone in charge, a trustee or a curatorship to handle the money in your name. Why? Because you have a mental health team in charge of you. Be patient, and... Third, start by talking to someone in charge in your mental health team or the people you see. What you need is someone acting as a trustee for you. You need to go and seek free legal aid. Depending on your country or state of residence. I cannot help you more than that. You will have the money, eventually in a few months, but you need to find a trustee, a guardian as soon as possible. Someone in your family could easily do it for you ?", "title": "" }, { "docid": "7dc49b86aa304001fc0f24f29ec4a013", "text": "\"Is it common in the US not to pay medical bills? Or do I misunderstood what had been said? I would feel comfortable saying that most people who face medical bills don't pay them. They are unable. If they were able, they would have gotten medical insurance. In America, something like 55% of individuals do not have even $500 of savings, so when a big medical bill rolls in especially on top of lost work hours, they don't have a lot of options. Hospitals charge reasonable prices to insurance companies and Medicare. These fees are negotiated in advance and reflect the hospital's actual costs. This is called \"\"usual, reasonable and customary\"\". Hospitals charge a wildly inflated, criminally outrageous \"\"cash price\"\" to the uninsured. For instance back when Medicare paid about $175 for an ambulance ride, a friend was billed $1100 for the exact same thing. The hospital aims to scare the living daylights out of the patient (caring nothing about what that does to their health!) Perfect world, the patient pays them the $1100 instead of paying their rent. If the patient puts up a fight, they hope to haggle them down to something like $400, remember it really costs $175. This tactic is a huge profit-center for hospitals, even the \"\"charity\"\" hospitals, and they feel justified because so many uninsured don't pay at all (the hospital considers them \"\"deadbeats\"\".) Well, patients don't pay because cash prices are unreachable, so they just give up. Anyway, your friends are correct, don't even think of paying those cash billing amounts. Research and find out what Medicare pays, offer 60% of that, and haggle it to 100%. And sleep well knowing you paid what is fair. Not all services are as overpriced as my example, but most are at least 50% too high. The hospital does send you all the bills as a formality, even while they submit them to your insurance company. And then the insurance company usually pays them, so it is correct to \"\"not pay that bill\"\". A lot of medical offices will check with your insurance company even before you leave the office, and ask you to immediately pay anything the insurance won't cover. For instance they often have \"\"co-pays\"\" where you pay $20 and they pay the rest. To be clear: if your insurance company negotiates a rate with the hospital, say $185 for the ambulance ride, that is your price, which you are entitled to as a member of that insurance system. A lot of people get their livelihood from the inefficiency in medical insurance and billing. Their political power is why it's so hard for America to install a simpler system (or even replace Obamacare in an ideal political environment). It is also a big part of why America spends 18% of GDP on healthcare instead of 7-11% like our European peers who do not have to account for every gauze or rebill multiple insurers. Sorting out \"\"who pays\"\" would be expensive even if everyone did pay.\"", "title": "" }, { "docid": "8c9e00ce04a383d57acbd2b60aa935eb", "text": "Do you have a clue of what would of happened to you if you had some serious condition and at some point you lost your job? Insurers would deny you insurance because of pre-existing conditions, and you would be left out to dry. Now maybe you aren't as unfortunate as having a serious health condition, but no new bill will make everything better for everyone.", "title": "" }, { "docid": "624be7119d309f77ccbe708210bd6d79", "text": "Here's your problem: The debt is valid and it is your debt, regardless of your arrangement with the insurance company. The insurance company (possibly) owes you money, and you owe the Doctor money. You are stuck in the middle, and in the end it doesn't matter whether the insurance company pays as to whether you owe the money. Don't ignore them. Also, disputing the debt it pointless because the truth is that you do owe the debt. The insurance company may owe you money (which is in dispute), but the debt to your medical provider is your own. You are just stuck in the middle. It sucks, but is pretty common. I think the best you can do is keep working on the insurance company and responding to the bill collectors letting them know that you are working on it and will need to pay late. In theory they deal with this a lot and probably understand, not that it will make them lay off you in the meantime. In the end it is possible you might have to sue the insurance company to get the money. One thing to be careful about: If the debt is fairly old (several years) you may want to avoid making partial payments because if this goes on your credit report, that payment may extend the period where the negative information can appear on your credit history.", "title": "" }, { "docid": "8c8ca4077f27a86a88ff81a4d00b991b", "text": "I bought Health Insurance for myself after a period without it, and my premiums were not terrible. I was a 27 year old man, living in California, no preexisting conditions, and I paid approximately 90$ a month. This was for a standard Health Insurance plan. However, when I moved back to NY a little while later, insurance companies wanted almost $500/month for catastrophic coverage. So, from personal experience, my answer is that price varies widely by state. Different states have different regulations as to what Health Insurance Companies need to cover and at what price. In NY, Health Insurance companies can't charge different rates according to age. Also, in NY, there is a price spiral, where the price is so high, few people buy it, so they have to raise the price because not enough well people are in the pool, so fewer people buy it.... To test it out, go to an online insurance broker, like ehealthinsurace, and put in your proposed information, including that you haven't been covered for a period. This way you will know.", "title": "" }, { "docid": "3b4b8a11090f24d11251af51477b9283", "text": "\"At fault doesn't mean negligent... If a driver were doing 150 on the wrong side of the street and gets in an accident, no insurer is paying that out. Likewise a credit agency not properly handling sensitive info and not giving proper disclosures of a breach won't lead to an insurance policy giving them a dime. I'd say google \"\"does insurance cover negligence,\"\" but you should probably Google the definition of negligence first. What your saying and the links you've provided clearly shows you don't even know what that word means.\"", "title": "" }, { "docid": "081a34f8750c0ea02b30f506ccf7d182", "text": "Insurance is not health care. Insurance is a financial instrument designed to protect the insured from short term shocks caused by some calamity by spreading out the cost over time. Not covering someone with a pre-existing condition is similar to an car-insurance company refusing to pay for repairing a damaged car, where the damage was caused prior to obtaining insurance. Not to be rude but failure to understand that utterly simple basic financial concept is exactly the sort of willful ignorance I'm talking about. What you are interested in is 'justice'. Someone was harmed by a desease which is tragic for the individual, and in some sense 'cosmically unfair'. It isn't however the fault of the insurance company that the person didn't purchase a policy beforehand. It would in fact be unfair to existing policy holders if the insurance company pays such claims, as it would raise their rates to cover those who will now rationally choose not to get insurance until after they have a claim.", "title": "" }, { "docid": "8102f2a9404e25c25d0e56eac2f2aa45", "text": "No. You have been purchasing protection from unexpected emergencies. You got the protection you paid for. That money has been spent. Some insurance plans do pay you something at the end. They do this by charging you additional money, and investing it. At the end, you get some of the profit n that investment, after the company has taken payments for managing this account. You can do better by setting up your own investments, separate from the insurance.", "title": "" }, { "docid": "6dcb4047eadf3949ca565819c9a29fc0", "text": "I'm going to echo Phil and say that you should add more information. That being said, I think it is possible for you to owe the government that much. If you received a federal health insurance subsidy and live in a state that didn't expand medicaid, you could have received a subsidy through out the year that you did not end up qualifying for. It appears you are outside the medicaid limit of 133% of the poverty level($11,670) or $15,521. If you received a subsidy of $275 a month from the marketplace, you would have received $3300 worth of aid from the government that you don't qualify for. Now they are expecting you to pay it back.", "title": "" }, { "docid": "764dee227ea830455f3ebacea7bd0685", "text": "Patience is the key to success. If you hold strong without falling to temptations like seeing a small surge in the price. If it goes down it comes up after a period of time. Just invest on the share when it reaches low bottom and you could see you money multiplying year after year", "title": "" } ]	fiqa
37124d0a9bef43182498f8aaae5c4ca4	How do I calculate the dwelling coverage I need from the information I have?	[ { "docid": "1b270b0d606e700dc19a4969d1c78f97", "text": "This is where an insurance agent is very useful. They will help you choose appropriate coverage, based on local rebuilding costs, the build quality of your house (higher quality or historic/semi-historic construction requires a different type of coverage), etc. They can also help advise you on things like the need for flood insurance, etc. Local rules can vary, and the local agent will know about them. For example, we found out that my home was in a semi-historic district, which requires using higher-cost materials for reconstruction. Also, our city separately licenses tradespeople, who tend to be unionized and thus more expensive. Had I just picked default coverages, I would have been in a pickle in the event of a loss.", "title": "" }, { "docid": "a202022404641f8864985959431ebc22", "text": "Never take the first quote. Consider what it would really cost to replace the house -- to rebuild and pay for living while you do so (including demolition, etc.) and/or pay off the mortgage and return your equity if it is a financed property. Most insurances will have a limit on how much coverage you can get based on the property value and your goods value estimates. Shop around for a company that will give you a good price but also good customer service and a smooth claims process. They should be solvent (able to pay your claim if, say, a tornado hit the whole neighborhood). And they should cover your reasonable replacement costs. And remember, insurance is about the big losses like fires. Know what you are comfortable self insuring (higher or lower deductibles, optional coverages, etc.) and you will have an easier time getting the coverage you need for the price you want to pay.", "title": "" }, { "docid": "4f9cb22a348d006122b9c1cb093de2e7", "text": "You can't compare the different quotes unless they have the same numbers to work with. The big companies should use similar models to come up with values for the contents. In many cases they will assume some standard values for things like appliances. Yes you have a stove, but unless it is commercial grade they won't care when giving you a quote. If you have very expensive items you may need a rider to cover them. There is not relationship between the county assessment and the cost to rebuild. The insurance doesn't cover the land. You have to make sure that all quotes include the same riders: cost to put you in a motel, flood insurance... and the same deductibles. Your state may have an insurance office that can help answer your question. Here is the one for Virginia.", "title": "" } ]	[ { "docid": "15d1ca497dfc22d7af0ebe893732281e", "text": "\"There is a term for this. If you google \"\"House Hacking\"\" you will get lots of articles and advice. Some of it will pertain to multifamily properties but a good amount should be owner occupied and renting bedrooms. I would play with a mortgage calculator like Whats My Payment. Include Principle, interest, taxes and insurance see how much it will cost. At 110k your monthly fixed payments will depend on a number of factors (down payment, interest, real estate tax rate and insurance cost) but $700-$1000 would be a decent guess in my area. Going off that with two roommates willing to pay $500 a month you would have no living expenses except any maintenance or utilities. With your income I would expect you could make the payment alone if needed (and it may be needed) so it seems fairly low risk from my perspective. You need somewhere to live you are used to roommates and you can pay the entire cost yourself in a worst case. Some more things to consider.. Insurance will be more expensive, you want to ensure you as the landlord you are covered if anything happens. If a tenant burns down your house or trips and falls and decides to sue you insurance will protect you. Capital Expenses (CapEx) replacing things as they wear out. On a home the roof, siding, flooring and all mechanicals(furnace, water heater, etc.) have a lifespan and will need to be replaced. On rental properties a portion of rent should be set aside to replace these things in the future. If a roof lasts 20yrs,costs $8,000 and your roof is 10years old you should be setting aside $70 a month so in the future when this know expense comes up it is not a hardship. Taxes Yes there is a special way to report income from an arrangement like this. You will fill out a Schedule E form in addition to your regular tax documents. You will also be able to write off a percent of housing expenses and depreciation on the home. I have been told it is not a simple tax situation and to consult a CPA that specializes in real estate.\"", "title": "" }, { "docid": "6950d92f340ffdb328d15afac8299aba", "text": "BLUF: Continue renting, and work toward financial independence, you can always buy later if your situation changes. Owning the house you live in can be a poor investment. It is totally dependent on the housing market where you live. Do the math. The rumors may have depressed the market to the point where the houses are cheaper to buy. When you do the estimate, don't forget any homeowners association fees and periodic replacement of the roof, HVAC system and fencing, and money for repairs of plumbing and electrical systems. Calculate all the replacements as cost over the average lifespan of each system. And the repairs as an average yearly cost. Additionally, consider that remodeling will be needful every 20 years or so. There are also intangibles between owning and renting that can tip the scales no matter what the numbers alone say. Ownership comes with significant opportunity and maintenance costs and is by definition not liquid, but provides stability. As long as you make your payments, and the government doesn't use imminent domain, you cannot be forced to move. Renting gives you freedom from paying for maintenance and repairs on the house and the freedom to move with only a lease to break.", "title": "" }, { "docid": "b19e8b2b32147e2fd88aaead43284ebe", "text": "For each liability, you should insure to the risk. A $150k home should be insured for that amount plus contents. Same for your car, if you want to insure for damages, fine, but liability is mandatory. It's not about what you want to spend but how to not take on more risk than nescesary and not over insure which is just wasteful.", "title": "" }, { "docid": "288eadaa01cd9248517c0b96a13118d2", "text": "I have purchased three properties. I will say the #1 rule is 20% things go wrong all the time. Seriously, renters are pretty terrible. If you aren't making 20% profit on the books. So add up mortgage, insurance, all costs. Then multiply that by 1.25. Whatever number that is is what you must get for rent just to break even. I can't stress this enough. If rental rates don't support you getting that kinda price then don't get into it. This is the break even number.", "title": "" }, { "docid": "3e9ced915f7fb7931adc0b6e4a27c9f3", "text": "If you're looking for some formula, I don't think one exists. People talk about this all the time and give conflicting advice. If there was a proven-accurate formula, they wouldn't be debating it. There are basically 3 reasons to do a home improvement project: (a) Correct a problem so that you prevent on-going damage to your home. For example, have a leaking roof patched or replaced, or exterminate termites. Such a job is worthwhile if the cost of fixing the problem is less than the cost of future damage. In the case of my termite and leaking roof examples, this is almost always worth doing. Lesser maintenance problems might be more debatable. Similarly, some improvements may reduce expenses. Like replacing an old furnace with a newer model may cut your heating bills. Here the question is: how long does it take to repay the investment, compared to other things you might invest your money in. Just to make up numbers: Suppose you find that a new furnace will save you $500 per year. If the new furnace costs $2000, then it will take 4 years to pay for itself. I'd consider that a good investment. If that same $2000 furnace will only cut your heating bills by $100 per year, then it will take 20 years to pay for itself. You'd probably be better off putting the $2000 into the stock market and using the gains to help pay your heating bill. (b) Increase the resale value of your home. If you are paying someone else to do the work, the harsh reality here is: Almost no job will increase the resale value by more than the cost of getting the job done. I've seen many articles over the years citing studies on this. I think most conclude that kitchen remodeling comes closet to paying for itself, and bathrooms come next. New windows are also up there. I don't have studies to prove this, but my guesses would be: Replacing something that is basically nice with a different style will rarely pay for itself. Like, replacing oak cabinets with cherry cabinets. Replacing something that is in terrible shape with something decent is more likely to pay back than replacing something decent with something beautiful. Like if you have an old iron bathtub that's rusting and falling apart, replacing it may pay off. If you have a 5-year-old bathtub that's in good shape but is not premium, top of the line, replacing it with a premium bathtub will probably do very little for resale value. If you can do a lot of the work yourself, the story changes. Many home improvement jobs don't require a lot of materials, but do require a lot of work. If you do the labor, you can often get the job done very cheaply, and it's likely that the increase in resale value will be more than what you spend. For example, most of my house has hardwood floors. Lots of people like pretty hardwood floors. I just restained the floors in two rooms. It cost me, I don't know, maybe $20 or $30 for stain and some brushes. I'm sure if I tried to sell the house tomorrow I'd get my twenty bucks back in higher sale value. Realtors often advise sellers to paint. Again, if you do it yourself, the cost of paint may be a hundred dollars, and it can increase the sale price of the house by thousands. Of course if you do the work yourself, you have to consider the value of your time. (c) To make your home more pleasant to live in. This is totally subjective. You have to make the decision on the same basis that you decide whether anything that is not essential to survival is worth buying. To some people, a bottle of fancy imported wine is worth thousands, even millions, of dollars. Others can't tell the difference between a $10,000 wine and a $15 wine. The thing to ask yourself is, How important is this home improvement to me, compared to other things I could do with the money? Like, suppose you're considering spending $20,000 remodeling your kitchen. What else could you do with $20,000? You could buy a car, go on an elaborate vacation, eat out several times a week for years, retire a little earlier, etc. No one can tell you how much something is worth to you. Any given home improvement may involve a combination of these factors. Like say you're considering that $20,000 kitchen remodeling. Say you somehow find out that this will increase the resale value by $15,000. If the only reason you were considering it was to increase resale value, then it's not worth it -- you'd lose $5,000. But if you also want the nicer kitchen, then it is fair to say, Okay, it will cost me $20,000, but ultimately I'll get $15,000 of that back. So in the long run it will only cost me $5,000. Is having a nicer kitchen worth $5,000 to me? Note, by the way, that resale value only matters if and when you sell the house. If you expect to stay in this house for 20 years, any improvements done are VERY long-term investments. If you live in it until you die, the resale value may matter to your heirs.", "title": "" }, { "docid": "1018d9e6c1f99370dcffd85bd768bfaf", "text": "To your secondary question: Appropriately consider all estimated numbers involved with keeping the house compared to your closest estimate of what the home could sell for. Weigh out the pros and cons yourself as a stranger will not be able to 100% appreciate what you value and dislike. Remember to include insurances, taxes, HOA(s), and the actual mortgage payment. Depending on how you also plan to rent out the property, include whichever utilities you intend to cover (if any). There will also be costs for property management and upkeep as things will break overtime and tenants will not hesitate to get you (or your management) to fix them, either way that means you are paying. I would also keep in mind while homes typically appreciate in value there is a higher risk with tenants for the value to depreciate to damages and poor upkeep. There are increased legal risks to renting, so be sure you have properly vetted whichever management you are going with. In extreme circumstances you also could be required to retain an attorney to defend yourself again litigation because whichever management team you hire will most likely defend themselves and not include you in that umbrella. My family lives in the LA area as well and a judge refused to throw out an obvious frivolous suit when my parents attempted to rent out a house. The possible renters after signing the main paperwork never showed to finish a second set of documents for renting. Parents immediately declined to rent to these people as they missed something so important without any explanation and they sued claiming racism, emotional damages, and some other really crazy things despite my parents never having met them (first meeting was between property management and renters only). Personally and professionally, I would only suggest renting our the place and not selling if you can turn a profit after all the above mentioned costs. If renters are only paying to keep the property in the black you have yourself a non-earning asset which WILL be damaged over time and require repairs which will come out of your pocket. Also, while the property is unoccupied you also must remember it is not earning at that time. Much of this may sound obvious, overcautious, etc... I simply wish to provide my family's experience to help you in making your decisions. Best of luck with your endeavor. Edit: Also, you will be required to report all earned rental income on your taxes. They will fall under the Schedule E and possibly K-1 area. I would strongly recommend consulting with an actual accountant about the impacts to you.", "title": "" }, { "docid": "b3e94cc42dcf1f9e62f72f804069018e", "text": "Seems like a bad deal to me. But before I get to that, a couple of points on your expenses: Onward. You value a property by calculating its CAP rate. This is what you're calculating, except it does NOT include interest like you did -- that's a loan to you, and has no bearing on whether the unit itself is a good investment. It also includes estimations of variable expenses like maintenance and lack of income from vacancies. People argue vociferously on exactly how much to calculate for those. Maintenance will vary by age of the building and how damaging your tenets are. Vacancies vary based on how desirable the location is, how well you've done the maintenance, and how low the rent is. Doing the math based on your numbers, with just the fixed expenses: 8400 rent - 2400 management fee - 100 insurance = 5900/year income. 5900/150000 = 0.0393 = 3.9% CAP rate. And that's not even counting the variable expenses yet! So, what's a good CAP rate? Generally, 10% CAP rate is a good deal, and higher is a great deal. Below that you have to start to get cautious. Some places are worth a lower rate, for instance when the property is new and in a good location. You can do 8% on these. Below 6% CAP rate is usually a really bad investment. So, unless you're confident you can at least double the rent right off the bat, this is a terrible deal. Another way to think about it You're looking to buy with your finances in just about the best position possible -- a huge down payment and really low interest. Plus you haven't accounted for maintenance, taxes (if any), and vacancies. And still you'd make only a measly 1.2% profit? Would you buy a bond that only pays out 1.2%? No? What about a bond that only pays 1.2%, but also from time to time can force YOU to pay into IT a much larger amount every month?", "title": "" }, { "docid": "ad8e946365b5d91b69c106948370a81c", "text": "There's a company called IdealSpot (I haven't used them, just heard of them) that will do that kind of analysis for you and suggest locations. Also, Census data is free and a good resource for demographic data when it comes to neighborhoods. Also, if you have a local SBDC they may have those numbers handy and they also can really walk you through the loan part of the process as well.", "title": "" }, { "docid": "41e358f0c4f17a2e8510b504eef1f6d2", "text": "Retirement calculation, in general, should be based on the amount of money needed per year/month and the expected life expectancy. Life expectancy, if calculated to 90 years (let's say) indicates that post retirement age (60 yrs.) your accumulated/invested money should generate adequate income to cover your expenses till 90 years. The problem in general is not how long you shall live but what would be your expected spending from retirement to end of life expectancy. The idea is at the minimum your investments should generate income that is inflation adjusted. One way to do this is to consider your monthly expense now i.e. the expense that is absolute minimum for carrying on (food, electricity, water, medicines, household consumables, car petrol, insurance, servicing, entertainment, newspaper etc.) this does not contain the amortizable liabilities (home loan, child's education, other debts). It is better to take this amount per family rather than per person and yearly rather than monthly (as we tend to miss a lot of yearly expenses). This amount that you need today will increase at a Compounded Annual Growth Rate (CAGR) of the average inflation. For example, if today you spend 100 per year in 7 years you will need to spend appx. 200 at 10% inflation. Now, your investments will not increase post your retirement, so your current investment needs to do two things (1) give you your yearly requirement (2) grow by a fixed amount so that next year it can give you CAGR adjusted returns. In general, this kind of investment grows by high net amounts initially and slowly the growth decrease. The above can be calculated by Net Present value (NPV) formulae (http://en.wikipedia.org/wiki/Net_present_value). The key is to remember that the money that is invested when you retire should be able to give you inflation adjusted returns to cover your yearly expenses. How much money you need depends on your life style/expectation and how much return is received depends on the instruments that you invest on. As for your question above on the difference between the age of you and your spouse, it better to go with the consolidated family requirement and get an idea of how much investment is necessary and provision the same as soon as possible from your as well as your spouse's income. Hope this helps.- thanks", "title": "" }, { "docid": "bc1dcede73c8ceea3e5cbabdc536be5b", "text": "I would not do this personally for most house items, since I really view them as consumables. I am using household items until they wear out, not placing my money in an investment that needs to retain or return value. If you have any investment-like items, or if the value represents a significant (you decide this) portion of your annual income or net worth, then track it with inventory and schedule it on an insurance policy. If your home is destroyed and you have an inaccurate inventory or no inventory at all, what does insurance provide for replacement of property? Maybe more importantly, will insurance even care about your own personal inventory? (Isn't it easy to scam, through value inflation?) For insurance, you need to start with the details of your homeowners policy. Often there will be a general blanket amount of what they will reimburse. If you have items over that amount, or need more coverage, you will need to schedule the items up-front with insurance. This way, the value of expensive items are known and agreed on by all parties before an event. It ensures a quick claim resolution, and it is the cleanest and easiest way to deal with the insurance company. You need to talk to your agent about the unique aspects of your policy. You need to make sure the policy will cover your liabilities.", "title": "" }, { "docid": "b7db85a99ebe1994875cee8e6b6cc37f", "text": "The metric I prefer is net worth, minus the value of your home, then divide by your annual expenses. The house is subtracted because you need to live somewhere, so its worth isn't part of retirement savings. I divide by expenses to create result that really answers how close one is to being able to retire. The target is to have 25X your required spending gap. Note, as you close in on retirement, and social security is still in place, you can use it in your planning. If I were in my 20s or 30s today, I wouldn't use it in my numbers.", "title": "" }, { "docid": "8ad92aef2db18e00c11a34e335a8493c", "text": "Well for starters you want to rent it for more than the apartment costs you. Aside from mortgage you have insurance, and maintenance costs. If you are going to have a long term rental property you need to make a profit, or at a bare minimum break even. Personally I would not like the break even option because there are unexpected costs that turn break even into a severe loss. Basically the way I would calculate the minimum rent for an apartment I owned would be: (Payment + (taxes/12) + (other costs you provide) + (Expected annual maintenance costs)) * 100% + % of profit I want to make. This is a business arrangement. Unless you are recouping some of your losses in another manner then it is bad business to maintain a business relationship that is costing you money. The only thing that may be worth considering is what comparable rentals go for in your area. You may be forced to take a loss if the rental market in your area is depressed. But I suspect that right now your condo is renting at a steal of a rate. I would also suspect that the number you get from the above formula falls pretty close to what the going rate in your area is.", "title": "" }, { "docid": "1f79e57b1d86b5de06f91f3c14f674b8", "text": "As for a formula, there isn't a simple one that you can apply to every type insurance. I'll try my best for a simple answer. Is the event devastating enough to change your lifestyle (looking at life necessities, not wants and nice to haves)? Is the event very likely to happen? Do you have enough emergency funds to cover such an event? Once that emergency fund is utilized, how long does it take you to restore that fund to be ready for the next event? If the event is devastating enough and is very likely to happen and you do not have the cash to cover the event, and/or it would take too long to restore that emergency fund, then it makes sense to consider insurance. Then you would have to examine if the benefit(s) outweight cost of the premium paid for the insurance. If it is pennies of premium for a dollar of benefit, then it makes sense.", "title": "" }, { "docid": "37528e2711eafb0e0573772a2bf49083", "text": "The equation is the same one used for mortgage amortization. You first want to calculate the PV (present value) for a stream of $50K payments over 20 years at a10% rate. Then that value is the FV (future value) that you want to save for, and you are looking to solve the payment stream needed to create that future value. Good luck achieving the 10% return, and in knowing your mortality down to the exact year. Unless this is a homework assignment, which need not reflect real life. Edit - as indicated above, the first step is to get that value in 20 years: The image is the user-friendly entry screen for the PV calculation. It walks you though the need to enter rate as per period, therefore I enter .1/12 as the rate. The payment you desire is $50K/yr, and since it's a payment, it's a negative number. The equation in excel that results is: =PV(0.1/12,240,-50000/12,0) and the sum calculated is $431,769 Next you wish to know the payments to make to arrive at this number: In this case, you start at zero PV with a known FV calculated above, and known rate. This solves for the payment needed to get this number, $568.59 The excel equation is: =PMT(0.1/12,240,0,431769) Most people have access to excel or a public domain spreadsheet application (e.g. Openoffice). If you are often needing to perform such calculations, a business finance calculator is recommended. TI used to make a model BA-35 finance calculator, no longer in production, still on eBay, used. One more update- these equations whether in excel or a calculator are geared toward per period interest, i.e. when you state 10%, they assume a monthly 10/12%. With that said, you required a 20 year deposit period and 20 year withdrawal period. We know you wish to take out $4166.67 per month. The equation to calculate deposit required becomes - 4166.67/(1.00833333)^240= 568.59 HA! Exact same answer, far less work. To be clear, this works only because you required 240 deposits to produce 240 withdrawals in the future.", "title": "" }, { "docid": "5231937629f4b8e90d974bc1ce6b52da", "text": "In Canada I think you'd do it as a % of square footage. For example: Then you can count 20% of the cost of the of renting the apartment as a business expense. I expect that conventions (i.e. that what's accepted rather than challenged by the tax authorities) may vary from country to country.", "title": "" } ]	fiqa
e0305bb924b62b2d87f2a29d1a270aa9	Analyst estimates for an insurance company	[ { "docid": "47d614e8a3ff344a63666b7022297125", "text": "Something to consider is how broad is Yahoo! Finance taking in their data for making some comparisons. For example, did you look at the other companies in the same industry? On the Industry page, the Top Life Insurance Companies by Market Cap are mostly British companies which could make things a bit different than you'd think. Another point is how this is just for one quarter which may be an anomaly as the data could get a bit awkward if some companies are just coming back to being profitable and could have what appears to be great growth but this is because their earnings grow from $.01/share to $1/share which is a growth of $10,000 percent as this is an increase of 100 times but really this may just be from various accounting charges the company had that hit its reserves and caused its earnings to dip temporarily.", "title": "" } ]	[ { "docid": "ab252f1dce22980b61eddfe374b686c3", "text": "\"> Let's just say the insurance industry knows a lot more about underwriting than you do. I'm sorry, but that is a meaningless statement. I work in insurance (first as a consultant, before 'retiring' to work in insurance distribution a few years ago), and I know that our industry frequently uses flawed or outdated methodologies due to the simple fact that insurance companies are very conservative and very resistant to change when it comes to changes to their core business. Unless you can show a direct, negative impact on the bottom line caused by the currently used method, you are unlikely to make any changes at all. In this case, if the entire US car insurance industry is using the same flawed system, it won't affect a single company if they also stick to it. Until 1996, before the current system was introduced, insurance companies in Germany used to rate liability insurance for cars (almost) exclusively by engine power output. The industry had known that this method was fundamentally flawed since at least the late 1980s (comprehensive and partial coverage had been rated by the 'new' system for a few years at this point, which had also taken years to work out), but it took additional years of planning, negotiations and cooperation by the entire industry to change to the new system for liability. So please, do not ever assume that \"\"the insurance companies are the experts, they know what they are doing!\"\". It might very well be the case that they are stuck with flawed/outdated systems simply because there is no sufficiently strong impulse to change what they do. The current Tesla rate adjustment situation is a wonderful example of this - it apparantly took AAA 5 years since the Model S first came out to realise that their initial estimate was wrong (it seems unlikely that the accident rate or repair costs have suddenly changed over the last year) and take appropriate actions. By late 2013, there were easily enough Teslas on the road (about 20,000) to get realiable data, yet nothing happened for nearly another 4 years.\"", "title": "" }, { "docid": "44e7a7cb513b863434091609d159ded7", "text": "I'm responsible for all our hedging. Since we sell the energy to end users we do mostly fixed buys, swaps and calls. I'm a excel guru and dabble a little in SQL. we have Crystal Ball as well but i have no idea how to use it. I guess I'm trying to figure out if there is a tool that people use to help me analyze the spreads. or perhaps some reading material to help me through this. This is what i've been working towards for so long and i really don't want to fuck this up", "title": "" }, { "docid": "6c228b923306614c984e13541acecbf3", "text": "My company has a dashboard that basically does this. We select industries / companies we want to be notified of and we get an email in outlook when a new analyst note, research report, or SEC filing is posted on that industry or company.", "title": "" }, { "docid": "2096f06bc6bedb8f595b4087654d95e7", "text": "As somebody working in Equity research for one of the top ranked ER producing firms in NA, i'm a little surprised to see so many people down on sellside ER. It absolutely has value, although it is not as directly tangible as somebody sitting at a desk cold calling and closing sales. Every day we are sending out a huge amount of advisory information to our sales and trading guys, as well as our clients. Our MD and analysts are on the phone constantly with guys on the other end looking to make decisions and wanting clarification. My group in particular works in a sector where differentiating between a huge number or relatively similar firms that all require incredibly high capital investments is the name of the game, and as such finding ER analysts who can really pick out the important subtle details is very important for identifying real value. I'll agree that being able to sell is important, but that's always something you have to be good at no matter what it is you're doing. Even in interviews with a hospital you have to sell yourself. This got a bit long but is SS ER dying? Absolutely not. Is there going to be a concentrating focus on a smaller number of quality analysts? Possibly. I'm a junior guy, so who knows where this industry is going. All I know is that compared to my friends in entry level roles in S&T and IB, the technical knowledge i'm picking up with regards to my sector is leaps and bounds ahead of them and will give me a great deal of optionality going into the future as to where I want to take my career. I really like being in ER, and i respect the people I'm lucky enough to work with and I don't think that the guys who really know how to pick the winners are going anywhere.", "title": "" }, { "docid": "b30bd7a9465bf07e15893e3617051654", "text": "\"I am doing an assignment for a finance class, and I am writing a recommendation for a specific capital structure. One of the concerns brought up by the \"\"board of directors\"\" was interest coverage, so in my addressing that topic in my report, I want to compare to competitors. The interest coverage ratio under this capital structure that I'm choosing is 11.8 and the two competitors we are given information on are Company A (who has an interest coverage ratio of 6.67) and Company B (who has an interest coverage ratio of 11.25). It seems good, but my concern is that I may be missing something, as Company A is similar in size (in terms of sales) to the company I am writing a report for while Company B has ~50 times more sales than the company I am writing a report for. Advice, things to consider as I move forward?\"", "title": "" }, { "docid": "a9fbbddf99ada47cb3317b4673d6b8ca", "text": "This is fine, but I'd probably spend a moment introducing WACC and it's estimation. It's also useful to link up the enterprise value to share price, so just also mentioning the debt subtraction to get equity value and division by shares for price. Keep in mind you're usually given like a minute to answer this, so you can afford to be a bit more detailed in some parts.", "title": "" }, { "docid": "c13c73a337f0b416dd0e626ae4d9b7cf", "text": "To be fair, the analyst is talking about the book value of the firm. Basically, the value of all the stuff it owns now. There are plenty of companies with negative book value that can justify a positive share price. Ford, for instance, had negative book value but positive future earnings.", "title": "" }, { "docid": "a0d405c2a246ce18c413415683efe0ff", "text": "\"Insurance companies on average make money by selling insurance, which means you lose money on average by dealing with them. The insurance is not gambling where the house always wins. This expression is literal in gambling, because that's how they set the odds. Insurance isn't necessarily similar. Example. Suppose there's 10% chance that $10,000 the boat sinks due to a defect. So, on average your loss is going to be $1,000. The variability of your loss measured as its standard deviation is $2,846. The variability of loss is a measure of risk. Now, let's look at two $10,000 boats. There's 1% chance that they both sink, and 18% chance that only one of them sinks. So, the expected loss is, unsurprisingly, $2,000. However, the variability of expected loss is $3,842, not quite twice the risk (variability) of a single boat accident. If you imagine that instead of a couple of boats the insurance has 100 boats, the variability of their loss (hence their risk) will increase only by a factor of 10, not 100 compared to a single boat. This means that their risk in relative terms is smaller than yours, the individual insurer's. What I tried to show was that it is possible to both of you and the insurer to benefit from the arrangement. It doesn't mean that it happens in every case, but generally it does. That's why in actuarial science there's a term fair price. UPDATE I was trying to avoid talking about utility here, because it's an involved subject, but you're dragging the discussion in this direction :) You're right that expected value cannot explain the insurance. The reason is that there's another concept that's necessary in addition to the objective measures such as expected value and risk: I mean the utility function or risk-aversion. So, in short you need to maximize expected utility, not the expected payout. Here's a toy example with the same boat. Assume that insurance is $150, and they pay the entire boat's value in case of accident, i.e. $10,000. You're given two choices effectively. At the end of the year, you have either of the following: You're right that the expected value in the second option can be higher in the second option. Let's say the probability of the loss is 10%, in this case the expected value would $9,900, which is higher than certain value of option 1. Why then some people choose option 2? The reason is that we don't maximize the expected payout, but we maximize the utility, according to modern microeconomics and game theory. Utility is some kind of an function that reflects your preference given the uncertain choices. Every person has their own preferences, and utility function. Let's say that yours is exponential with a=10000. In this case we can calculate the expected utility as follows: The math works out in such a way that it accounts for your risk tolerance. Depending on how much you love or hate risk, your expected utilities for these option will come out differently. For this given toy example it turned out that the expected utility is higher with insurance, so this person should get it. However, for different values of a parameter \"\"a\"\" in the function, it may not make a sense to insure. Some people are risk averse, some are risk lovers in certain situations. That's the reason why given the same options we make different choices. You may say that you don't value certainty enough to buy this insurance. The bottom line is that nobody can tell you that you're wrong to not buy an insurance. If your risk tolerance is high it may not make a sense for you. Having said this all, I must note that sometimes the society doesn't accept your preferences and utility function. Yes, you tell me today that you accept the risk, but tomorrow when the boat sinks you may come to me and say that you can't pay the student loan because of the hardship. That's the reason why it's mandatory to get liability insurance on cars, for instance.\"", "title": "" }, { "docid": "2cfb8d79463385c8ed145db074ecd84b", "text": "\"Probably not, though there are a few things to be said for understanding what you are doing here. Primerica acts as an independent financial services firm and thus has various partners that specialize in various financial instruments and thus there may exist other firms that Primerica doesn't use that could offer better products. Now, how much do you want to value your time as it could take more than a few months to go through every possible insurance firm and broker to see what rate you could get for the specific insurance you want. There is also the question of what constitutes best here. Is it paying the minimal premiums before getting a payout? That would be my interpretation though this requires some amazing guesswork to know when to start paying a policy to pay out so quickly that the insurance company takes a major loss on the policy. Similarly, there are thousands of mutual funds out there and it is incredibly difficult to determine which ones would be best for your situation. How much risk do you want to take? How often do you plan to add to it? What kind of accounts are you using for these investments, e.g. IRAs or just regular taxable accounts? Do tax implications of the investments matter? Thus, I'd likely want to suggest you consider this question: How much trust do you have that this company will work well for you in handling the duty of managing your investments and insurance needs? If you trust them, then buy what they suggest. If you don't, then buy somewhere else but be careful about what kind of price are you prepared to pay to find the mythical \"\"best\"\" as those usually only become clear in hindsight. When it comes to trusting a company in case, there are more than a few factors I'd likely use: Questions - How well do they answer your questions or concerns from your perspective? Do you feel that these are being treated with respect or do you get the feeling they want to say, \"\"What the heck are you thinking for asking that?\"\" in a kind of conceited perspective. Structure of meeting - Do you like to have an agenda and things all planned out or are you more of the spontaneous, \"\"We'll figure it out\"\" kind of person? This is about how well do they know you and set things up to suit you well. Tone of talk - Do you feel valued in having these conversations and working through various exercises with the representative? This is kind of like 1 though it would include requests they have for you. Employee turnover - How long has this person been with Primerica? Do they generally lose people frequently? Are you OK with your file being passed around like a hot potato? Not that it necessarily will but just consider the possibility here. Reputation can be a factor though I'd not really use it much as some people can find those bad apples that aren't there anymore and so it isn't an issue now. In some ways you are interviewing them as much as they are interviewing you. There are more than a few companies that want to get a piece of what you'll invest, buy, and use when it comes to financial products so it may be a good idea to shop around a little.\"", "title": "" }, { "docid": "2bd3aaab575cb7711680cb8ef2c7b216", "text": "\"Let me start with a somewhat sarcastic statement: There are probably as many things done to analyze a stock as there are people doing the analysis! That said, at a general level an analyst researches the historical performance of the company at a fairly detailed level (operations within divisions of the company, product development cycles within divisions, expenses vs income trends for each division and product, marketing costs, customer acquisition costs, etc); gathers information about what the company is doing now AND planning to do in the future -- often by a discussion with principles at the company; establishes a view on related macro-economic trends, sector and industry trends, demographic trends, etc.; and combines it all to forecast a change in revenues, margins, free cash flow, dividends, etc. over a period of time. They then apply statistics that relate those numbers to stock price in order to imply stock prices and price ranges over those same periods. Finally, depending on how those stock prices compare to the current stock price, they'll classify the stock as Buy, Sell, Hold, etc. This sounds like alot of work. And it generally is if you get detailed about it, which is what professionals or significant money managers are doing. However, there are also lots of arm-chair analysts posting their output on any number of financial sites (Seeking Alpha, Motley Fool, etc.) if you'd like to really explore the range of detail some people consider as a \"\"stock analysis\"\". That sounds more negative than I intended it to be, so let me clarify that I think some of these write-ups are really quite good IMO.\"", "title": "" }, { "docid": "57fb897c059fe117bf76781c5306adb8", "text": "\"Thanks for the response. I am using WRDS database and we are currently filtering through various variables like operating income, free cash flow etc. Main issue right now is that the database seems to only go up to 2015...is there a similar database that has 2016 info? filtering out the \"\"recent equity issuance or M&A activity exceeding 10% of total assets\"\" is another story, namely, how can I identify M&A activity? I suppose we can filter it with algorithm stating if company's equity suddenly jumps 10% or more, it get's flagged\"", "title": "" }, { "docid": "78befdefe3293d15a9d7b64241702147", "text": "\"If the time horizon is not indicated, this is just a \"\"fair price\"\". The price of the stock, which corresponds with the fair value of the whole company. The value, which the whole business is worth, taking into consideration its net income, current bonds yield, level of risk of the business, perspective of the business etc.. The analyst thinks the price will sooner or later hit the target level (if the price is high, investors will exit stocks, if the price is cheap, investors will jump in), but no one knows, how much time will it take.\"", "title": "" }, { "docid": "6b2c8d6ebf9c7433fb9314fbe40d61cd", "text": "Theres obviously a ton of licensing/certifications that go into an insurance company. I'm wondering anyone has experience with a start up or small insurance company and can speak to the pros and cons of it. More specifically, is there a certain rule about how much money should be set aside as float assuming a policy limit of 10 million? I'd imagine it depends on the type of coverage to a large degree. Just beginning to start the process of researching this based on an unexpected bit of news/opportunity. Thanks.", "title": "" }, { "docid": "c16ef1a480e16041e398776b006863fc", "text": "So the MS analyst wasn't acting independently of MS's role as underwriter when he revised his earnings estimates? MS is a big place. I guess I just assumed that someone could be on one end saying something, with other parts of the company blissfully unaware. All without a conspiracy to commit fraud. Good to know. Perhaps you can point - for those of us ignorant in finance - to the rules or laws that were broken here.", "title": "" }, { "docid": "2298ebfb5de33ae737aa535599ebd79f", "text": "My dad runs an AV labor company (trade show setups etc) and his insurance company called him as they were finalizing his workers comp. They asked when he was submitting all of his employees drug screenings. My dad laughed at them and said he would not be submitting any. They told him his premium would be higher to which my dad replied that if he drug tested, he would have 4 people working for him and thus wouldn't even have a business - just send the bill.", "title": "" } ]	fiqa
04e81a5156dcb3dd1476be045341e842	Buying a House and Taking Part of 20% to move initial payment date forward	[ { "docid": "54100a57d47534dc11922682d2510962", "text": "In the prior PMI discussions here, it's been stated that the bank is not obligated to remove PMI until the mortgage's natural amortization puts the debt at 78% LTV. So, paying in advance like this will not automatically remove the PMI. Nor will a lump sum payment be certain to move the next payment ahead a year. If it's entered as a principal prepayment, the next month's payment is still due. In the world of coupon books, if you sent in a year's payments, you'd not benefit from the interest saved, in one year you'd owe what the amortization table tells you. There's no free lunch when it comes to mortgages or finance in general. This is why we usually caution that one should not be cash poor the day after buying a house. Best to save 30%, put down 20%, and have a cushion after the closing.", "title": "" } ]	[ { "docid": "fe42f4891bb8abe1c35dea12d56d0e78", "text": "Save up a bigger downpayment. The lender's requirement is going to be based on how much you finance, not the price of the house.", "title": "" }, { "docid": "ab25a613fdb672925f18ec5c484f974a", "text": "Can't I achieve the exact same effect and outcome by exchanging currency now and put that amount of USD in a bank account to gain some interest, then make the payment from one year from now? Sure, assuming that the company has the money now. More commonly they don't have that cash now, but will earn it over the time period (presumably in Euros) and will make the large payment at some point in time. Using a forward protects them from fluctuations in the exchange rate between now and then; otherwise they'd have to stow away USD over the year (which still exposes them to exchange rate fluctuations).", "title": "" }, { "docid": "edba9615a6bb1cd4c4198604e9497c9d", "text": "If you really want to help your friend buy a house, make a counter-offer to buy the house yourself and lease it to your friend, with the option to buy for original purchase cost, plus all interest paid so far to the bank, plus closing costs and other expenses incurred by you, minus payments made so far by the friend. Otherwise, just no. The other answers already detail why.", "title": "" }, { "docid": "29ff7c80b140ea58f487d1568da3d1c7", "text": "It seems a bit late in the process, no? They moved in, you are elsewhere, etc. Today, the Prime Rate is 3.25%. I don't know enough to suggest whether this is fair to both parties. It's more than you'd earn in the bank, and less than they'd pay for a business loan. My own equity line is currently 2.5%, for what that's worth.", "title": "" }, { "docid": "5b75e922955ba35d021aa1fdbfdaeebc", "text": "\"There are several areas of passive fraud by being unclear on what you are doing. When a citizen buys a house, the mortgage lender wants all the details as to how the buyer rounded up the money. That is so they can use their own formulas to assess the buyer's creditworthiness and the probability that the buyer will be able to keep up on payments, taxes and maintenance; or have they overextended themselves. The fraud is in the withholding of that info. By way of tricking them into making a favorable decision, when they might not have if they'd had all the facts. Then there's making this sound all lovey-dovey, good intentions, no strings attached, no expectations. You're lying to yourself. What you've actually done is put money between yourselves, because you have not laid down FAIR rules to cover every possibility. You're not willing to plan for failure because you don't want to admit failure is possible, which is vain. Once you leap into this bell jar, the uncertainty of \"\"what happens if...\"\" will intrude itself into everyone's thoughts, slowly corroding your relationship. It's a recipe for disaster. That uncertainty puts her in a very uncomfortable position. She has to labor to make sure the issue doesn't explode, so she's tiptoeing around you to avoid fights. Every fight, she'll wonder if you'll play the breakup card and threaten to demand the money back. The money will literally come between you. This is what money does. Thinking otherwise is a young person's mistake of inexperience. Don't take my word on it, contact Suze Orman and see what she says. Your lender is also not going to like those poorly defined lovers' promises, because they've seen it all before, and don't want to yet again foreclose on a house that fighting lovers trashed. (it's like, superhero battles are awesome unless you own the building they trashed.) This thing can still be done, but to remove this fraud of wishful thinking, you need to scrupulously plan for every possibility, agree to outcomes that are fair and achievable, put it in writing and share it with a neutral third party. You haven't done it, because it seems like it would be awkward as hell - and it will be! - Or it will test your relationship by forcing direct honesty about a bunch of things you haven't talked about or are afraid to - and it will! - And to be blunt, your relationship may not be able to survive that much honesty. But if it does, you'll be in much better shape. The other passive fraud is taxes. By not defining the characteristics of the payment, you fog up the question of how your contribution will be taxed (if it will be taxed). A proper contract with each other will settle that. (there's an argument to be made for involving a tax advisor in the design of that contract, so that you can work things to your advantage.) As an example, defining the payment as \"\"rent\"\" is about the worst you could do, as you will not be able to deduct any home expenses, she will need to pay income tax on the rent, but she can cannot take landlord's tax deductions on anything but the fraction of the house which is exclusively in your control; i.e. none.\"", "title": "" }, { "docid": "116bc8e0713546aaf5c0be5a63134aae", "text": "between two people purchasing a house together, one with good and one with bad credit, will having both persons on the loan raise the interest rates. If the house deed is on both names, generally the Bank would insist the loan should also be on both of your names. This to ensure that Bank has enough leverage to recover the house in case of default. If one of you has bad credit, bank would raise the interest rate, assumption that bad credit would drag the good credit and force him to some activities / actions that could stretch the finance of one with good credit. If timely payments are not made, it would make your good credit to bad. If the house deed is on only on your name and you can get the loan on your own, this would be a better position. If the house deed is on only on your name and you would like to loan to be on both names, then the positive side is credit score of the person with bad credit would start showing improvement over period, provided both of you make timely payments. As pointed out by keshlam, there are enough question where people have entered into agreement without deciding what would happen if they separate. There is no right / wrong answer. It would be best you decide how it would be with respect to the ownership in the house and with respect to payments and if in worst case you part ways, how the settlement should look like.", "title": "" }, { "docid": "21f64d842f1eb7ad89242646cba6366d", "text": "Imagine the bank loaning 100% of the sum of money you needed to buy a house, if the valuation of the house decreases to 90% of the original price after 3 months, would it be unfair for them to ask them for 10% of the original price from you immediately? I suppose the rationale for loaning 80% is so that you will fork our 20% first, and so your property is protected from fluctuations in the market, that they do not need to collect additional money from you as your housing valuation rarely drops below 80% of the original price. Banks do need to make money too, as they run as a business.", "title": "" }, { "docid": "a9e31264f9315abe930f2a44710544f2", "text": "\"There are a few of ways to do this: Ask the seller if they will hold a Vendor Take-Back Mortgage or VTB. They essentially hold a second mortgage on the property for a shorter amortization (1 - 5 years) with a higher interest rate than the bank-held mortgage. The upside for the seller is he makes a little money on the second mortgage. The downsides for the seller are that he doesn't get the entire purchase price of the property up-front, and that if the buyer goes bankrupt, the vendor will be second in line behind the bank to get any money from the property when it's sold for amounts owing. Look for a seller that is willing to put together a lease-to-own deal. The buyer and seller agree to a purchase price set 5 years in the future. A monthly rent is calculated such that paying it for 5 years equals a 20% down payment. At the 5 year mark you decide if you want to buy or not. If you do not, the deal is nulled. If you do, the rent you paid is counted as the down payment for the property and the sale moves forward. Find a private lender for the down payment. This is known as a \"\"hard money\"\" lender for a reason: they know you can't get it anywhere else. Expect to pay higher rates than a VTB. Ask your mortgage broker and your real estate agent about these options.\"", "title": "" }, { "docid": "6702878eced62b5b1a1c2ff83ce6aba8", "text": "\"You seem to think that you are mostly paying interest in the first year because of the length of the loan period. This is skipping a step. You are mostly paying interest in the first year because your principle (the amount you owe) is highest in the first year. You do pay down some principle in that first year; this reduces the principle in the second year, which in turn reduces the interest owed. Your payments stay the same; so the amount you pay to principle goes up in that second year. This continues year after year, and eventually you owe almost no interest, but are making the same payments, so almost all of your payment goes to principle. It is a bit like \"\"compounded interest\"\", but it is \"\"compounded principle reduction\"\"; reducing your principle increases the rate you reduce it. As you didn't reduce your principle until the 16th year, this has zero impact on the interest you owed in the first 15 years. Now, for actual explicit numbers. You owe 100,000$ at 3% interest. You are paying your mortgage annually (keeps it simpler) and pay 5000$ per year. The first year you put 3000$ against interest and 2000$ against principle. By year 30, you put 145$ against interest and 4855$ against principle. because your principle was tiny, your interest was tiny.\"", "title": "" }, { "docid": "19a5c1b6cfacdb7b8407acfbf381879d", "text": "I know that both Lowes and Home Depot (in Canada at least) will offer a 6 month deferred interest payment on all purchases over a certain dollar amount (IIRC, $500+), and sometimes run product specific 1 year deferred interest specials. This is a very effective way of financing renovations. Details: You've probably seen deferred interest -- It's very commonly used in furniture sales (No money down!!! No interest!!! Do not pay for 1 full year!!!) (Personally, I think it's a plot by the exclamation point manufacturers) It works like this: Typically, I manage these types of purchases by dividing the principal by 6, and then adding 5%, and paying that amount each month. Pay close attention to the end date, because you do not want to pay 22% interest on the entire amount. This also requires that you watch your card balance carefully. All payments are usually put to current purchases (i.e. those not under a plan) first, before they are applied to the plan balance. So if you are paying 250 a month on the new floor, and run up another $150 on paint, You need to pay the entire new balance, and then the $250 floor payment in order for it to be applied correctly. Also <shameless plug> http://diy.stackexchange.com </shameless plug> Consider doing it yourself.", "title": "" }, { "docid": "e745cd44815e2f3c66e8bda62f54a823", "text": "This isn't exactly an answer, but I can not comment at the moment. I have bought a house in NZ in the last year, being my first. There are a couple of things that you might need to watch out for with the First Home Subsidy (the $5000), especially the one that says that you have to live in the house that you buy for a certain amount of time otherwise you have to pay it back. I also assume that you have been in Kiwisaver (the superannuation) for at least 5 years? You can only take $1000 for each year you have been in there up to $5000. You can take all of the Kiwisaver funds except what the Government has put in, so if you have $4000 from your employer, then you would probably have more in your contributions that you could use as well. You don't have to have the 20% deposit to be able to buy a house, I went through a broker, and was able to get in with less. Not sure on the exact percentage. The 20% does help to get the bank to put some extra funds in for legal fees etc. My house wasn't an investment property, but I hope this helps.", "title": "" }, { "docid": "baa03a0acecbb06148485f6ff194f9ca", "text": "If the best they can do is 1/8th of a percent for a 15 year term, you are best served by taking the 30 year term. Pay it down sooner if you can, but it's nice to have the flexibility if you have a month where things are tight.", "title": "" }, { "docid": "0b79e739abfa7b6baaacb30fcb6c8a82", "text": "Just to add: the 20% APR is the annualized interest rate, but applied monthly. So you'd be charged $0.50 of interest on your $30 balance, which gets capitalized on the next month. So if you were to miss the next payment for some reason, your new interest charge would be on $30.50 instead of $30 (actually, it'd be much more since there would be a fee for the late payment, but discounting that to illustrate the point).", "title": "" }, { "docid": "ad2a01c151935327633cf20386681699", "text": "\"As I understand it, if the \"\"borrower\"\" puts a down payment of 20% and the bank puts down 80%, then the bank and the \"\"borrower\"\" own the home jointly as tenants in common with a 20%-80% split of the asset amongst them. The \"\"borrower\"\" moves into the home and pays the bank 80% of the fair rental value of the home each month. {Material added/changed in edit: For the purposes of illustration, suppose that the \"\"borrower\"\" and the bank agree that the fair rental per month is 0.5% of the purchase cost. The \"\"borrower\"\" pays 80% of that amount i.e. 0.4% of the purchase cost to the bank on a monthly basis. The \"\"borrower\"\" is not required to do so but may choose to pay more money than this 0.4% of the purchase cost each month, or pay some amount in a lump sum. If he does so, he will own a larger percentage of the house, and so future monthly payments will be a smaller fraction of the agreed-upon fair rental per month. So there is an incentive to pay off the bank.} If and when the house is sold, the sale price is divided between \"\"borrower\"\" and bank according to the percentage of ownership as of the date of sale. So the bank gets to share in the profits, if any. On the other hand, if the house is sold for less than the original purchase price, then the bank also suffers in the loss. It is not a case of a mortgage being paid off from the proceeds and the home-owner gets whatever is left, or even suffering a loss when the dust has settled; the bank gets only its percentage of the sale price even if this amount is less than what it put up in the first place minus any additional payments made by the \"\"borrower\"\". I have no idea how other costs of home ownership (property taxes, insurance, repair and maintenance) or improvements, additions, etc are handled. Ditto what happens on Schedule A if such a \"\"loan\"\" is made to a US taxpayer.\"", "title": "" }, { "docid": "d9dec73a23253f112c5ba37c1bca7d90", "text": "I'd put the 20% down, close on the house, live in it for a year, and save the difference. If you find your cash flow is fine, run a calculation and start on a program of prepaying a bit of principal each month as an extra payment. If you study how amortization works, you'll understand that an extra payment of about 1/6 the amount due will knock off a full payment at the end. This is how a 30 year mortgage starts out. Meanwhile, you should keep in mind, it's easy to prepay the mortgage, but there's really no getting it back. So, before letting go of your money, I'd do a few things; I may be stating the obvious, but consider - No matter how low the payment on your mortgage, a payment is due each and every month until it's paid off. You put 80% down, take a 10 year mortgage, you still have payments for 10 years. You want to insure yourself against needing to sell in a hurry if you both lose your jobs, so whatever you put down, I'd recommend a healthy emergency account, 9-12 months worth of expenses.", "title": "" } ]	fiqa
2f04c6ac16b030c298114dae9dcb84a6	What happens if one brings more than 10,000 USD with them into the US?	[ { "docid": "5b9b2e9c08ae7722a8693d06c547ed4d", "text": "\"The US Customs and Border Protection website states that there is no limit to the amount of currency that can be brought into or taken out of the US. There is no limit on the amount of money that can be taken out of or brought into the United States. However, if a person or persons traveling together and filing a joint declaration (CBP Form 6059-B) have $10,000 or more in currency or negotiable monetary instruments, they must fill out a \"\"Report of International Transportation of Currency and Monetary Instruments\"\" FinCEN 105 (former CF 4790). The CBP site also notes that failure to declare currency and monetary instruments in excess of $10,000 may result in its seizure. Further, the site states that the requirement to report currency on a FinCEN 105 does not apply to imports of gold bullion. However, the legal website The Law Dictionary includes details of how money laundering laws may come into play here : As part of the War on Terror and the War on Drugs, U.S. law enforcement agencies have significantly increased their vigilance over money laundering. To this effect, travelers who carry large amounts of cash without supporting documentation of its legitimate source may be subject to secondary inspections and seizure of funds. In some cases, law enforcement may confiscate cash in excess of $10,000 until supporting documents are produced. So far, I have described the \"\"official\"\" position. However, reading between the lines, I think it is fair to say that in the current climate if you show up at an entry point with a suitcase full of a large amount of cash you would face considerable scrutiny, regardless of any supporting documentation you may present. If you fail to present supporting documentation, then I think your cash would certainly be seized. If you are a US resident, then you would be given the opportunity to obtain satisfactory documentation. If you did present documentation, then I think your cash would be held for as long as it would take to verify the validity of the documentation. Failure to present valid documentation would result in money laundering charges being brought against you and the matter would rest before the courts. If you are not a US resident, then failing to produce supporting documentation would mean your cash being seized and entry into the US would almost certainly be denied. You would then have to deal with the situation from outside of the US. If you did produce supporting documentation, then again I suspect the cash would be held for as long as it takes to verify the validity of the documentation. Whether or not you were allowed to enter the US would depend on what other documentation you possess.\"", "title": "" }, { "docid": "825156a90272a528d94fe4809b03d1ff", "text": "\"Since all the other answers thus far seem to downplay the risk (likelihood) of the money being seized, I figure I may as well make my comment an answer. Unless you happen to have your legal team travelling with you and your suitcase of cash, you should expect that you'll be questioned extensively, so that any sign of nervousness, inconsistency in your answers or anything you say that doesn't \"\"make sense\"\" to the officer will be used as an excuse to seize your money, and you'll learn an expensive lesson in civil asset forfeiture. The government will file a complaint against your money, leading to a ridiculously named case, such as United States v. $124,700 in U.S. Currency. Worth noting that while the outcome in this case was not in the government's favor, in the vast majority of cases, the government keeps the cash. Between 9/11 and 2014, U.S police forces have seized over 2.5 billion dollars in cash without search warrants or indictments and returned the money in less than 10% of cases. That last link is kind of a long read, but contains cases where people with completely legitimate money and documentation for their money had it seized anyway, and were only able to recover it after months or years in court.\"", "title": "" }, { "docid": "9cecaef577bdf6b7e09a8f6da5ee2d11", "text": "The $10,000 mark is not a ceiling in importing cash, but rather a point where an additional declaration needs to be made (Customs Form 4790). At 1 million, I suspect you might be in for a bit of an interview and delay. Here's an explanation of what happens when the declaration isn't made: https://www.cbp.gov/newsroom/local-media-release/failure-declare-results-seizure-24000-arrest-two", "title": "" }, { "docid": "d81ccba684d73402c54dbdbd18286fb3", "text": "Once you declare the amount, the CBP officials will ask you the source and purpose of funds. You must be able to demonstrate that the source of funds is legitimate and not the proceeds of crime and it is not for the purposes of financing terrorism. Once they have determined that the source and purpose is legitimate, they will take you to a private room where two officers will count and validate the amount (as it is a large amount); and then return the currency to you. For nominal amounts they count it at the CBP officer's inspection desk. Once they have done that, you are free to go on your way. The rule (for the US) is any currency or monetary instrument that is above the equivalent of 10,000 USD. So this will also apply if you are carrying a combination of GBP, EUR and USD that totals to more than $10,000.", "title": "" }, { "docid": "2afdb7895ff858324e1611105b470a98", "text": "\"Bad plan. This seems like a recipe for having your money taken away from you by CBP. Let me explain the biases which make it so. US banking is reliable enough for the common citizen, that everyone simply uses banks. To elaborate, Americans who are unbanked either can't produce simple identity paperwork; or they got an account but then got blacklisted for overdrawing it. These are problems of the poor, not millionaires. Outside of determined \"\"off the grid\"\" folks with political reasons to not be in the banking and credit systsm, anyone with money uses the banking system. Who's not a criminal, anyway. We also have strong laws against money laundering: turning cash (of questionable origin) into \"\"sanitized\"\" cash on deposit in a bank. The most obvious trick is deposit $5000/day for 200 days. Nope, that's Structuring: yeah, we have a word for that. A guy with $1 million cash, it is presumed he has no choice: he can't convert it into a bank deposit, as in this problem - note where she says she can't launder it. If it's normal for people in your country to haul around cash, due to a defective banking system, you're not the only one with that problem, and nearby there'll be a country with a good banking system who understands your situation. Deposit it there. Then retain a US lawyer who specializes in this, and follow his advice about moving the money to the US via funds transfer. Even then, you may have some explaining to do; but far less than with cash. (And keep in mind for those politically motivated off-the-financial-grid types, they're a bit crazy but definitely not stupid, live a cash life everyday, and know the law better than anybody. They would definitely consider using banks and funds transfers for the border crossing proper, because of Customs. Then they'll turn it into cash domestically and close the accounts.)\"", "title": "" } ]	[ { "docid": "0383a3d4efc2433af856ac82cdaa3e04", "text": "\"Do you guys know any options that are accessible to any global citizen? Prepaid and stored value cards are anonymous. For an arbitrary reason, the really anonymous ones only allow you to load $500 but there is no regulation that dictates this amount. In the USA, these cards are exempt from being declared at border crossings. Not because they look like credit cards, but because they are exempt by the US Treasury and Customs. The cons is that there are generally fees to use them. US DOJ has done research showing that some groups take advantage of the exemption moving upwards of $50,000 a day between borders, but Congress is fine with this exemption and the burden is always on the government to determine \"\"illicit origin\"\". Stigmatizing how money is moved is only a 30 year old phenomenon, but many free nations do not really have capital controls, they only care that you pay taxes and that the integrity of their stock markets are upheld. Aside from that there are no qualms about anonymity, except from your neighbors but they dont matter for a global citizen. In theory, the UK should have more flexibility in anonymity options, such as stored value cards with higher limits.\"", "title": "" }, { "docid": "db7a27bf0afb30d12a004f760578f6a8", "text": "\"is there anything I can do now to protect this currency advantage from future volatility? Generally not much. There are Fx hedges available, however these are for specialist like FI's and Large Corporates, traders. I've considered simply moving my funds to an Australian bank to \"\"lock-in\"\" the current rate, but I worry that this will put me at risk of a substantial loss (due to exchange rates, transfer fees, etc) when I move my funds back into the US in 6 months. If you know for sure you are going to spend 6 months in Australia. It would be wise to money certain amount of money that you need. So this way, there is no need to move back funds from Australia to US. Again whether this will be beneficial or not is speculative and to an extent can't be predicted.\"", "title": "" }, { "docid": "e99327023b757686a50f0f7be1c3a8c0", "text": "They don't track checks at all. If you make a cash transaction for an amount that exceeds the reporting limit (circa $10K), then a Currency Transaction Report will be filed with the US Department of the Treasury (not IRS, but close) about it. This is to detect and prevent money laundering.", "title": "" }, { "docid": "b3ccba376cef3f12a8bad4fc3558abc8", "text": "This may sound a little crazy but I would take $5K of that money and buy whiskey with it (Jack Daniel's would be my preference). My guess is that in 5 years that whiskey will be worth more than the $10K you put in the bank. I just can't see how the dollar survives the next 5 years without a major downward adjustment. If I'm wrong then you have a nice party and give whiskey for Christmas gifts. If I'm right at least you will have some savings instead of $15K of useless dollars. Here is my justification for converting your US dollars into tangible assets. Do you really think the money printing will ever stop?", "title": "" }, { "docid": "302477bcb2eda09a78915b86bcdbb8b0", "text": "Could you not just say that you had bought it when it was pennies on the dollar and made the millions that way? There isn't much of a transaction record, is there? I also just realized that I don't understand how taxes work in that situation. If you have a different currency from the U.S. Dollar, and it increases in value greatly, do you have to pay tax on that increased value relative to the U.S. dollar? They don't when it's minimal increases.", "title": "" }, { "docid": "6ce783c21c9bf1f0c28b45dbca5c4a8d", "text": "How much are we talking about here? My own experience (Switzerland->US, under $10K) was that the easiest way was just $100 bills. Alternatively, I just left a bunch in the Swiss bank, and used my ATM card to make withdrawals when needed. That worked for several years (I was doing contract work remotely for the Swiss employer, who paid into that account), until the bank had issues with the IRS (unrelated to me!) and couriered me a check for the balance.", "title": "" }, { "docid": "3640c3d8eb5ae32901be9fe97c340101", "text": "There's no law that prohibits a US citizen or US LPR from holding an account abroad, at least in a country that's not subject to some sort of embargo, so I don't see how it could affect your wife's chances of getting US citizenship when she's eligible. As mentioned by other posters, you'll have to file FBAR if the money you have in all your accounts abroad exceeds $10k at any point of the year and if the account pays any interest, you'll have to tell the IRS about the interest paid and (if applicable) taxes you paid on the interest income abroad.", "title": "" }, { "docid": "cf91d1943fd0ea2823261d687164c5fd", "text": "Since your question is very particular on the details, I'm assuming you did your research. Unfortunately you won't get a better answer here than what you've found on the Internet already. This is not a clear-cut situation as the situation you're describing has been a source to some confusion. Mainly, the question is whether the US bank account is a tangible asset or not. To the best of my knowledge, this has not yet been settled, so I suggest going to a professional tax adviser (EA/CPA licensed in the US) who'd advise you the best course of action. I think it would be safer to transfer the money directly from the foreign account to the US beneficiary (although even then, if the IRS decides to start digging, it may claim that you're essentially disguising a transfer from a US account, so I suggest talking to a professional before doing anything). In any case, the US recipient will need to report the gift (if it is $100K or more) using the form 3520 with his/her tax return.", "title": "" }, { "docid": "c12bc3175fa0e13e7583371e1891a8ba", "text": "In theory, when you obtained ownership of your USD cash as a Canadian resident [*resident for tax purposes, which is generally a quicker timeline than being resident for immigration purposes], it is considered to have been obtained by you for the CAD equivalent on that date. For example if you immigrated on Dec 31, 2016 and carried $10k USD with you, when the rate was ~1.35, then Canada deems you to have arrived with $13.5k CAD. If you converted that CAD to USD when the rate was 1.39, you would have received 13.9k CAD, [a gain of $400 to show as income on your tax return]. Receiving the foreign inheritances is a little more complex; those items when received may or may not have been taxable on that day. However whether or not they were taxable, you would calculate a further gain as above, if the fx rate gave you more CAD when you ultimately converted it. If the rate went the other way and you lost CAD-value, you may or may not be able to claim a loss. If it was a small loss, I wouldn't bother trying to claim it due to hassle. If it's a large loss, I would be very sure to research thoroughly before claiming, because something like that probably has a high chance of being audited.", "title": "" }, { "docid": "c64bdcc8417e0d806b606ffe2228e94b", "text": "A. Kindly avoid taking dollars in form of cash to india unless and until it is an emergency. Once the dollar value is in excess of $10,000, you need to declare the same with Indian customs at the destination. Even though it is not a cumbersome procedure, why unnecessarily undergo all sort of documentation and most importantly at all security checks, you will be asked questions on dollars and you need to keep answering. Finally safety issue is always there during the journey. B.There is no Tax on the amount you declare. You can bring in any amount. All you need is to declare the same. C. It is always better to do a wire transfer. D. Any transfer in excess of $14,000 from US, will atract gift tax as per IRS guidelines. You need to declare the same while filing your Income Tax in US and pay the gift tax accordingly. E. Once your fiance receives the money , any amount in excess of Rs 50,000 would be treated as individual income and he has to show the same under Income from other sources while filing the taxes. Taxes will be as per the slab he falls under. F.Only for blood relatives , this limit of 50,000 does not apply. G. Reg the Loan option, suggest do not opt for the same. Incase you want to go ahead, then pl ensure that you fully comply with IRS rules on Loans made to a foreign person from a US citizen or resident. The person lending the money must report the interest payment as income on his or her yearly tax return provided the loan has interest element. No deduction is allowed if the proceeds are used for personal or non-business purposes.In the case of no-interest loans, most people believe there is no taxable income because no interest is paid. The IRS views this seriously and the tax rules are astonishingly complex when it comes to no-interest loans. Even though no interest is paid to the lender, the IRS will treat the transaction as if the borrower paid interest at the applicable federal rate to the lender and the lender subsequently gifted the interest back to the borrower.The lender is taxed on the imaginary interest income and, depending on the amount, may also be liable for gift tax on the imaginary payment made back to the borrower. Hope the above claryfies your query. Since this involves taxation suggest you take an opinion from a Tax attorney and also ask your fiance to consult a Charted Accountant on the same. Regards", "title": "" }, { "docid": "8f02485a9df69d2c5f96f91ea78db1b1", "text": "\"I have heard that I can give 10k as a gift in cash for my aunt to take on the plane. Please don't, for her own safety. Don't know when was the last you've been to Russia, but that's not a place to walk around with $10K in cash in your pocket. For the rest, the 20k, I am not sure what is the best course of action. Would something like Western Union, Paypal or Bank Wire Transfer be the best course of action? Wire transfer would be the safest option. Would there be tax implications for me as well? Depends on where you are tax resident and where you are a citizen. Some countries have \"\"gift tax\"\", but most don't. If you're a US tax resident, then you're subject to US gift tax rules. Your gifts are taxable if they exceed $14K per year per person. So your $30K to your mom is taxable. But your $10K to your mom, $10K to your dad and $10K to your aunt is not. You cannot however control what they do with it.\"", "title": "" }, { "docid": "d6e23a040a11669cd162671a3ea1a597", "text": "This is a case where you sit down with an advisor or two. There are legal, and tax issues. When you deposit the cash, or buy a car with it, the large cash transaction will trigger a notice to the US Government. So they will eventually find out. Before you get to that point you need to know what obligations and consequences you will be facing. Because you don't know if it was a gift, or found money, or if the owner will be back looking for you to return it; therefore you need expert advice.", "title": "" }, { "docid": "bd6817e4cdc5230ba683aa08909bea15", "text": "I would certainly hope to make the transfer by wire - the prospect of popping cross the border with several million dollars in the trunk seems... ill fated. I suppose I'm asking what sort of taxes, duties, fees, limits, &c. would apply Taxes - None. It is your money, and you can transfer it as you wish. You pay taxes on the income, not on the fact of having money. Reporting - yes, there's going to be reporting. You'll report the origin of the money, and whether all the applicable taxes have been paid. This is for the government to avoid money laundering. But you're going to pay all the taxes, so for transfer - you'll just need to report (and maybe, for such an amount, actually show the tax returns to the bank). Fees - shop around. Fees differ, like any other product/service costs on the marketplace.", "title": "" }, { "docid": "c7cf03316171ccd1ef7f305ef2953a99", "text": "Sure; you can deposit cash. A few notes apply: Does the source of cash need to be declared ? If you deposit more than $10,000 in cash or other negotiable instruments, you'll be asked to complete a form called a Currency Transaction Report (here's the US Government's guidance for consumers about this form). There's some very important information in that guidance document about structuring, which is a fairly serious crime that you can commit if you break up your deposits to avoid reporting. Don't do this. The linked document gives examples. Also don't refuse to make your deposit and walk away when presented with a CTR form. In addition, you are also required to report to Customs and Border Protection when you bring more than $10,000 in or out of the country. If you are caught not doing so, the money may be seized and you could be prosecuted criminally. Many countries have similar requirements, often with different dollar amounts, so it's important to make sure you comply with their laws as well. The information from this reporting goes to the government and is used to enforce finance and tax laws, but there's nothing wrong or illegal about depositing cash as long as you don't evade the reporting requirements. You will not need to declare precisely where the cash comes from, but they will want the information required on the forms. Is it taxable ? Simply depositing cash into your bank account is not taxable. Receiving some forms of income, whether as cash or a bank deposit, is taxable. If you seem to have a large amount of unexplained cash income, it is possible an IRS audit will want an explanation from you as to where it comes from and why it isn't taxable. In short, if the income was taxable, you should have paid taxes on it whether or not you deposit it in a bank account. What is the limit of the deposit ? There is no government limit. An individual bank may have their own limit and/or may charge a fee for larger deposits. You could always call the bank and ask.", "title": "" }, { "docid": "8816a618963a106bc9a21f221dfce572", "text": "Please find out whether you are considered to be a tax resident of the US from the date that you received the permanent immigrant visa or from the date that you first enter the US on that visa. If the former, and you received the visa after April 30, you might be a part-year resident of India for Indian Income Tax purposes for the current tax year. You need to convert your bank accounts including Fixed Deposits (the FDs that you mention) to NRO accounts as soon as possible. You will need to keep at least one NRO account open for a year or more to receive the final interest payments on your FDs as well as the proceeds of cashing in the FDs, not to mention any refunds of Indian Income Tax that may be due to you for last year or the current year. Once you are done with all these, follow the procedures outlined in this excellent answer by @Dheer to transfer the money to your US account. At this point, you can close the NRO account if you wish. As PeterK's comment says, it is not a good idea to bring a large sum of cash with you unless you are really really paranoid about banking channels. Note that if you insist on bringing cash (whether it is INR or USD) or negotiable instruments (checks or bank drafts) with you when you land in the US, these will have to be declared on entry if the total exceeds US$ 10K. There is no limit to how much you can bring with you as long as you declare it. Transfers of your own money from India to the US is not taxable income to you in the US, and income tax will already have been paid/withheld on that money in India, and so there is no income tax liability in India either on the sum transferred.", "title": "" } ]	fiqa
783e4add320625219c451c000df70235	Are long-term bonds risky assets?	[ { "docid": "8d9ab81d5f86195c4cce1c5fd44ed92f", "text": "Bonds have multiple points of risk: This is part of the time value of money chapter in any finance course. Disclaimer - Duff's answer popped up as I was still doing the bond calculations. Similar to mine but less nerdy.", "title": "" }, { "docid": "db66be504a892bc3ea02c50fdb954cbc", "text": "\"In the quoted passage, the bonds are \"\"risky\"\" because you CAN lose money. Money markets can be insured by the FDIC, and thus are without risk in many instances. In general, there are a few categories of risks that affect bonds. These include: The most obvious general risk with long-term bonds versus short-term bonds today is that rates are historically low.\"", "title": "" }, { "docid": "9029326b9e5b19d848a42a55f34439f4", "text": "AAA bonds are safe, as far as the principal goes. If you buy long term bonds today (at very low rates) and the interest rate goes up to 10% in 5 years, the current value of the bonds will decrease. But if you hold the bonds till maturity, you will almost certainly (barring MBS scenarios) get the expected principal and interest on the bonds. If you decide to sell a long-term bond before it matures, it will probably be worth less than you paid for it if interest rates have risen since you bought it.", "title": "" }, { "docid": "a4d404b665c8b0e41c2f6c8b514fbc9a", "text": "\"In truth there is no such thing as a risk-free asset. That is why your textbook feels the need to add the qualifier \"\"for practical purposes,\"\" meaning that the risk of a money market account is so much lower than virtually any other asset class that it can reasonably be approximated as risk free. The main risk of any bond, short-term or long-term, is that its price may change before the maturity date. This could happen for one of many reasons, such as interest rate changes, creditworthiness, market risk tolerance, and so on. Thus you may lose money if you need to redeem your investment ahead of the scheduled maturity.\"", "title": "" }, { "docid": "25642445db62867fabedea609cea9f71", "text": "Long-term bonds -- any bonds, really -- can be risky for two main reasons: return on principal, or return of principal. The former is a problem if interest rates are low (which they are now in the US) because existing bonds will fall in price if interest rates rise. The second is a problem if the lender defaults: IOU nothing. No investment is riskless. Short-term bonds command a lower interest rate than long-term bonds (usually) because of their quicker maturity, but short-term bonds carry risk just like long-term bonds (though the interest rate risk is lower, sometimes quite a bit lower, than for long-term bonds).", "title": "" } ]	[ { "docid": "67a8f8a83db55a5a110890deeebbdcf3", "text": "\"You have a high risk tolerance? Then learn about exchange traded options, and futures. Or the variety of markets that governments have decided that people without high income are too stupid to invest in, not even kidding. It appears that a lot of this discussion about your risk profile and investing has centered around \"\"stocks\"\" and \"\"bonds\"\". The similarities being that they are assets issued by collections of humans (corporations), with risk profiles based on the collective decisions of those humans. That doesn't even scratch the surface of the different kinds of asset classes to invest in. Bonds? boring. Bond futures? craziness happening over there :) Also, there are potentially very favorable tax treatments for other asset classes. For instance, you mentioned your desire to hold an investment for over a year for tax reasons... well EVERY FUTURES TRADE gets that kind of tax treatment (partially), whether you hold it for one day or more, see the 60/40 rule. A rebuttal being that some of these asset classes should be left to professionals. Stocks are no different in that regards. Either educate yourself or stick with the managed 401k funds.\"", "title": "" }, { "docid": "7dec0fda4f7e40dbdf163ab81de3f0b1", "text": "\"Depends on your definition of \"\"secure\"\". The most \"\"secure\"\" investment from a preservation of principal point of view is a non-tradable, general obligation government bond. (Like a US or Canadian savings bond.) Why? There is no interest rate risk -- you can't lose money. The downside is that the rate is not so good. If you want returns and a reasonably high level of security, you need a diversified portfolio.\"", "title": "" }, { "docid": "488a2e2da0765eb148803ded8cdeccfb", "text": "Like @littleadv, I don't consider a mortgage on a primary residence to be a low-risk investment. It is an asset, but one that can be rather illiquid, depending on the nature of the real estate market in your area. There are enough additional costs associated with home-ownership (down-payment, insurance, repairs) relative to more traditional investments to argue against a primary residence being an investment. Your question didn't indicate when and where you bought your home, the type of home (single-family, townhouse, or condo) the nature of your mortgage (fixed-rate or adjustable rate), or your interest rate, but since you're in your mid-20s, I'm guessing you bought after the crash. If that's the case, your odds of making a profit if/when you sell your home are higher than they would be if you bought in the 2006/2007 time-frame. This is no guarantee of course. Given the amount of housing stock still available, housing prices could still fall further. While it is possible to lose money in all sorts of investments, the illiquid nature of real estate makes it a lot more difficult to limit your losses by selling. If preserving principal is your objective, money market funds and treasury inflation protected securities are better choices than your home. The diversification your financial advisor is suggesting is a way to manage risk. Not all investments perform the same way in a given economic climate. When stocks increase in value, bonds tend to decrease (and vice versa). Too much money in a single investment means you could be wiped out in a downturn.", "title": "" }, { "docid": "95c440a3ea760230e65be9f6b8d00d70", "text": "\"In general, yes. If interest rates go higher, then any existing fixed-rate bonds - and hence ETFs holding those bonds - become less valuable. The further each bond is from maturity, the larger the impact. As you suggest, once the bonds do mature, the fund can replace them at a market price, so the effect tails off. The bond market has a concept known as \"\"duration\"\" that helps reason about this effect. Roughly, it measures the average time from now to each payout of the bond, weighted by the payout. The longer the duration, the more the price will change for a given change in interest rates. The concept is just an approximation, and there are various slightly different ways of calculating it; but very roughly the price of a bond will reduce by a percentage equal to the duration times the increase in interest rates. So a bond with a duration of 5 years will lose 5% of its value for a 1% rise in interest rates (and of course vice-versa). For your second question, it really depends on what you're trying to achieve by diversifying - this might be best as a different question that gives more detail, as it's not very related to your first question. Short-term bonds are less risky. But both will lose value if the underlying company is in trouble. Gilts (government bonds) are less risky than corporate bonds.\"", "title": "" }, { "docid": "1f844c3721d14b0eb0bbbb2963e0852d", "text": "I researched quite a bit around this topic, and it seems that this is indeed false. Long ter asset growth does not converge to the compound interest rate of expected return. While it is true that standard deviations of annualized return decrease over time, because the asset value itself changes over time, the standard deviations of the total return actually increases. Thus, it is wrong to say that you can take increased risk because you have a longer time horizon. Source", "title": "" }, { "docid": "5833ec8d238cc8454f640e2e7dadd266", "text": "It has been hinted at in some other answers, but I want to say it explicitly: Volatility is not risk. Volatility is how much an investment goes up and down, risk is the chance that you will lose money. For example, stocks have relatively high volatility, but the risk that you will lose money over a 40 year period is virtually zero (in particular if you invest in index funds). Bonds, on the other hand, have basically no volatility (their cash flow is totally predictable if you trust the future of your government), but there is a significant risk that they will perform worse than stocks over a longer period. So, volatility equals risk only if you are day trading. A 401(k) is literally the opposite of that. For further reading: Never confuse risk and volatility Also, investing is not gambling. Gambling is bad because the odds are stacked against you. You need more than average luck to actually win and the longer you play, the more you will lose. Investing means buying productive capital that will produce further value. The odds are in your favor. Even if you do a moderately bad job at investing, the longer you stay, the more you will win.", "title": "" }, { "docid": "f6a4b614e25fe764d2a329c2265444da", "text": "\"Those who say a person should invest in riskier assets when young are those who equate higher returns with higher risk. I would argue that any investment you do not understand is risky and allows you to lose money at a more rapid rate than someone who understands the investment. The way to reduce risk is to learn about what you want to invest in before you invest in it. Learning afterward can be a very expensive proposition, possibly costing you your retirement. Warren Buffet told the story on Bloomberg Radio in late 2013 of how he read everything in his local library on investing as a teenager and when his family moved to Washington he realized he had the entire Library of Congress at his disposal. One of Mr. Buffett's famous quotes when asked why he doesn't invest in the tech sector was: \"\"I don't invest in what I do not understand.\"\". There are several major asset classes: Paper (stocks, bonds, mutual funds, currency), Commodities (silver, gold, oil), Businesses (creation, purchase or partnership as opposed to common stock ownership) and Real Estate (rental properties, flips, land development). Pick one that interests you and learn everything about it that you can before investing. This will allow you to minimize and mitigate risks while increasing the rewards.\"", "title": "" }, { "docid": "26319fad3c7c2643b6c4d66d4084a2d5", "text": "1) The risks are that you investing in financial markets and therefore should be prepared for volatility in the value of your holdings. 2) You should only ever invest in financial markets with capital that you can reasonably afford to put aside and not touch for 5-10 years (as an investor not a trader). Even then you should be prepared to write this capital off completely. No one can offer you a guarantee of what will happen in the future, only speculation from what has happened in the past. 3) Don't invest. It is simple. Keep your money in cash. However this is not without its risks. Interest rates rarely keep up with inflation so the spending power of cash investments quickly diminishes in real terms over time. So what to do? Extended your time horizon as you have mentioned to say 30 years, reinvest all dividends as these have been proven to make up the bulk of long term returns and drip feed your money into these markets over time. This will benefit you from what is known in as 'dollar cost averaging' and will negate the need for you to time the market.", "title": "" }, { "docid": "c372d42ad4cbdb97645e1f11384d9124", "text": "\"Some investors worry about interest rate risk because they Additional reason is margin trading which is borrowing money to invest in capital markets. Since margin trading includes minimum margin requirements and maintenance margin to protect lender \"\"such as a broker\"\" , a decrease in the value of bonds might trigger a threat of a margin call There are other reasons why investors care about interest rate risk such as spread trade investors who benefit from difference in short term/ long term interest rates. Such investors borrow short term loans -which enables them to pay low interest- and lend long term loans - which enables them to gain high interest-. Any disturbance between the interest rate spread between short term and long term bonds might affect investor's profit and might even lead to losses. In summary , it all depends on you investment objective and financial condition. You should consult with your financial adviser to help plan for your financial goals.\"", "title": "" }, { "docid": "1b807557ba137c1143736dc37981715b", "text": "I think your premise is slightly flawed. Every investment can add or reduce risk, depending on how it's used. If your ordering above is intended to represent the probability you will lose your principal, then it's roughly right, with caveats. If you buy a long-term government bond and interest rates increase while you're holding it, its value will decrease on the secondary markets. If you need/want to sell it before maturity, you may not recover your principal, and if you hold it, you will probably be subject to erosion of value due to inflation (inflation and interest rates are correlated). Over the short-term, the stock market can be very volatile, and you can suffer large paper losses. But over the long-term (decades), the stock market has beaten inflation. But this is true in aggregate, so, if you want to decrease equity risk, you need to invest in a very diversified portfolio (index mutual funds) and hold the portfolio for a long time. With a strategy like this, the stock market is not that risky over time. Derivatives, if used for their original purpose, can actually reduce volatility (and therefore risk) by reducing both the upside and downside of your other investments. For example, if you sell covered calls on your equity investments, you get an income stream as long as the underlying equities have a value that stays below the strike price. The cost to you is that you are forced to sell the equity at the strike price if its value increases above that. The person on the other side of that transaction loses the price of the call if the equity price doesn't go up, but gets a benefit if it does. In the commodity markets, Southwest Airlines used derivatives (options to buy at a fixed price in the future) on fuel to hedge against increases in fuel prices for years. This way, they added predictability to their cost structure and were able to beat the competition when fuel prices rose. Even had fuel prices dropped to zero, their exposure was limited to the pre-negotiated price of the fuel, which they'd already planned for. On the other hand, if you start doing things like selling uncovered calls, you expose yourself to potentially infinite losses, since there are no caps on how high the price of a stock can go. So it's not possible to say that derivatives as a class of investment are risky per se, because they can be used to reduce risk. I would take hedge funds, as a class, out of your list. You can't generally invest in those unless you have quite a lot of money, and they use strategies that vary widely, many of which are quite risky.", "title": "" }, { "docid": "c7b99052068ae7cb6abb83d7591cd932", "text": "Theoretically there is limited demand for risky investments, so higher-risk asset classes should outperform lower-risk asset classes over sufficiently long time periods. In practice, I believe this is true, but it could be several decades before a risky portfolio starts to outperform a more conservative one. Stocks are considered more risky than most assets. Small-cap stocks and emerging market stocks are particularly high-risk. I would consider low-fee ETFs in these areas, like VB or VWO. If you want to seek out the absolute riskiest investments, you could pick individual stocks of companies in dire financial situations, as Bank of America was a couple years ago. Most importantly, if you don't expect to need the money soon, I would maximize your contribution to tax-advantaged accounts since they will grow exponentially faster than taxable accounts. Over 50 years, a 401(k) or IRA will generally grow at least 50% more than a taxable account, maybe more depending on the tax-efficiency of your investments. Try to contribute the maximum ($17,500 for most people in 2014) if you can. If you can save more than that, I'd suggest contributing a Roth 401k rather than a traditional 401(k) - since Roth contributions are post-tax, the effective contribution limit is higher. Also contribute to a Roth IRA (up to $5,500 in 2014), using a backdoor Roth if necessary.", "title": "" }, { "docid": "5ae24f7eb0621e7c87284229bddaaa9f", "text": "The Barclay's 20+ Year Treasury Bond inception date was July 21, 2002. You aren't going to find treasury bond information going back to 1900 because Treasury Bills have only been issued since 1929. The U.S. Department of the Treasury will give you data back to 1990. There's a good article in the Globe and Mail which covers why you may want to buy bonds as part of your portfolio. The key is diversification. Historically, stocks have done better than bonds long-term, but when stocks fall, bonds tend to (though do not always) go up. If you are investing for 30 years, the risk of putting money into bonds is that you will not make as much money as if you had put the money into stocks. Historically (in the US or Canada), you'd have seen positive returns, just not as high as investing in the stock market. There are many investment strategies. I live in Canada and personally favour the one described in the Canadian Couch Potato, a passive index investment strategy where I invest my money in Canadian, U.S. and International equity (stock market mutual funds) and also in a Canadian bond fund. There are, of course, plenty of people who will tell you to take a radically different strategy with your investments.", "title": "" }, { "docid": "5d779cf9b522dace5934e0ee2a3dc591", "text": "\"These days almost all risky assets move together, so the most difficult criterion to match from your 4 will be \"\"not strongly correlated to the U.S. economy.\"\" However, depending on how you define \"\"strongly,\"\" you may want to consider the following: Be careful, you are sort of asking for the impossible here, so these will all be caveat emptor type assets. EDIT: A recent WSJ article talks about what some professional investors are doing to find uncorrelated bets. Alfredo Viegas, an emerging-markets strategist for boutique brokerage Knight Capital Group, is encouraging clients to bet against Israeli bonds. His theory: Investors are so focused on Europe that they are misjudging risks in the Middle East, such as a flare-up in relations between Israel and Iran, or greater conflict in Egypt and Syria. Once they wake up to those risks, Israeli bonds are likely to tumble, Mr. Viegas reasons. In the meantime, the investment isn't likely to be pushed one way or another by the European crisis, he says.\"", "title": "" }, { "docid": "7393244d6071c4d4a0a7a815cb8176b2", "text": "\"Bonds still definitely have a place in many passive portfolios. While it is true that interest rates have been unusually low, yields on reasonable passive bond exposures are still around 2-4%. This is significantly better than both recent past inflation and expected inflation both of which are near zero. This is reasonable if not great return, but Bonds continue to have other nice properties like relatively low risk and diversification of stock portfolios (the \"\"offset[ing] losses\"\" you mention in the OP). So to say that bonds are \"\"no longer a good idea\"\" is certainly not correct. One could say bonds may no longer be a good idea for some people that have a particularly high risk tolerance and very high return requirements. However, to some extent, that has always been true. It is worth remembering also that there is some compelling evidence that global growth is starting to broadly slow down and many people believe that future stock returns and, in general, returns on all investments will be lower. This is much much harder to estimate than bond returns though. Depending on who you believe, bond returns may actually look relatively better than the have in the past. Edit in response to comment: Corporate bond correlation with stocks is positive but generally not very strong (except for high-yield junk bonds) so while they don't offset stock volatility (negative correlation) they do help diversify a stock portfolio. Government bonds have essentially zero correlation so they don't really offset volatility as much as just not add any. Negative correlation assets are generally called insurance and you tend to have to pay for them. So there is no free lunch here. Assets that reduce risk cost money, assets that add little risk give less return and assets that are more risky tend to give more return in the long run but you can feel the pain. The mix that is right for you depends on a lot of things, but for many people that mix involves some corporate and government bonds.\"", "title": "" }, { "docid": "a3a90085114bcdc92d97809050fef1f2", "text": "I'm going to diverge from most of the opinions expressed here. It is common for financial advisors to assume that your portfolio should become less risky as you get older. Explanations for this involve hand-waving and saying that you can afford to lose money when young because you have time to make up for it later. However, the idea that portfolios should become less risky as you get older is not well-grounded in finance theory. According to finance theory, regardless of your age and wealth, returns are desirable and risk is undesirable. Your risk aversion is the only factor that should decide how much risk you put in your portfolio. Do people become more risk averse as they get older? Sometimes. Not always. In fact, there are theoretical reasons why people might want more aggressive portfolios as they age. For example: As people become wealthier they generally become less risk averse. Young people are not normally very wealthy. When you are young, most of your wealth is tied up in the value of your human capital. This wealth shifts into your portfolio as you age. Depending on your field, human capital can be extremely risky--much riskier than the market. Therefore to maintain anything like a constant risk profile over your life, you may want very safe investments when young. You mention being a hedge fund manager. If we enter a recession, your human capital will take a huge hit because you will have a hard time raising money or getting/keeping a job. No one will value your skills and your future career prospects will fall. You will not want the double whammy of large losses in your portfolio. Hedge fund managers are clear examples of people who will want a very safe personal portfolio during their early working years and may be willing to invest very aggressively in their later working and early retirement years. In short, the received wisdom that portfolios should start out risky and get safer as we age is not always, and perhaps not even usually, true. A better guide to how much risk you should have in your portfolio is how you respond to questions that directly measure your risk aversion. This questions ask things like how much you would pay to avoid the possibility of a 20% loss in your portfolio with a certain probability.", "title": "" } ]	fiqa
604b99ece47285b7da800d9c3235bd70	How could USA defaulting on its public debt influence the stock/bond market?	[ { "docid": "9c52167af80856de1ae5995c89bb1e1d", "text": "\"This is a speculative question and there's no \"\"correct\"\" answer, but there are definitely some highly likely outcomes. Let's assume that the United States defaults on it's debt. It can be guaranteed that it will lose its AAA rating. Although we don't know what it will drop to, we know it WILL be AA or lower. A triple-A rating implies that the issuer will never default, so it can offer lower rates since there is a guarantee of safety there.People will demand a higher yield for the lower perceived security, so treasury yield will go up. The US dollar, or at least forex rates, will almost certainly fall. Since US treasuries will no longer be a safe haven, the dollar will no longer be the safe currency it once was, and so the dollar will fall. The US stock market (and international markets) will also have a strong fall because so many institutions, financial or otherwise, invest in treasuries so when treasuries tumble and the US loses triple-A, investments will be hurt and the tendency is for investors to overreact so it is almost guaranteed that the market will drop sharply. Financial stocks and companies that invest in treasuries will be hurt the most. A notable exception is nations themselves. For example, China holds over $1 trillion in treasuries and a US default will hurt their value, but the Yuan will also appreciate with respect to the dollar. Thus, other nations will benefit and be hurt from a US default. Now many people expect a double-dip recession - worse than the 08/09 crisis - if the US defaults. I count myself a member of this crowd. Nonetheless, we cannot say with certainty whether or not there will be another recession or even a depression - we can only say that a recession is a strong possibility. So basically, let's pray that Washington gets its act together and raises the ceiling, or else we're in for bad times. And lastly, a funny quote :) I could end the deficit in 5 minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for reelection. - Warren Buffett\"", "title": "" }, { "docid": "49298734e5683df12355c7dbccf30bb4", "text": "\"The default scenario that we're talking about in the Summer of 2011 is a discretionary situation where the government refuses to borrow money over a certain level and thus becomes insolvent. That's an important distinction, because the US has the best credit in the world and still carries enormous borrowing power -- so much so that the massive increases in borrowing over the last decade of war and malaise have not affected the nation's ability to borrow additional money. From a personal finance point of view, my guess is that after the \"\"drop dead date\"\" disclosed by the Treasury, you'd have a period of chaos and increasing liquidity issues after government runs out of gimmicks like \"\"borrowing\"\" from various internal accounts and \"\"selling\"\" assets to government authorities. I don't think the markets believe that the Democrats and Republicans are really willing to destroy the country. If they are, the market doesn't like surprises.\"", "title": "" }, { "docid": "2e9a22e7b05f2ab58c4fc193e7c67187", "text": "Regarding the Summer of 2011 Crisis: There is NO reason that the United States cannot continue borrowing like it is just based on a particular ratio: Debt to GDP. The Debt to GDP ratio right now is around 100%, or 1:1. This means the US GDP is around $14 Trillion and its debt is also around $14 trillion. Other countries have higher debt:gdp ratios Japan - for instance - has a debt:gdp ratio of 220% Regarding a selloff of stocks, dollars and bonds: you have to realize that selling pressure on the dollar will make THE PRICE OF EVERYTHING increase. So commodities and stocks will skyrocket proportionally. The stockmarket can selloff faster than the dollar though. And both markets have circuit breakers that can attempt to curb quick selloffs. Effectiveness pending.", "title": "" } ]	[ { "docid": "b8f6e63d5633a6b93d55ac418d50aa71", "text": "Typically the debt is held by individuals, corporations and investment funds, not by other countries. In cases where substantial amounts are held by other countries, those countries are typically not in debt themselves (e.g. China has huge holdings of US Treasuries). If the debts were all cancelled, then the holders of the debt (as listed above) would lose out badly and the knock-on effects on the economy would be substantial. Also, governments that default tend to find it harder to borrow money again in the future.", "title": "" }, { "docid": "3f97d35bd94c664205c2929914af3cc9", "text": "Stocks, gold, commodities, and physical real estate will not be affected by currency changes, regardless of whether those changes are fast or slow. All bonds except those that are indexed to inflation will be demolished by sudden, unexpected devaluation. Notice: The above is true if devaluation is the only thing going on but this will not be the case. Unfortunately, if the currency devalued rapidly it would be because something else is happening in the economy or government. How these asset values are affected by that other thing would depend on what the other thing is. In other words, you must tell us what you think will cause devaluation, then we can guess how it might affect stock, real estate, and commodity prices.", "title": "" }, { "docid": "59f54cbaa67b1798e28fbcb031da4510", "text": "\"The term \"\"stock\"\" here refers to a static number as contrasted to flows, e.g. population vs. population growth. Stock, in this context, is not at all related to an equity instrument. Yes, annual refinance costs, interest rate payments etc. are what we should be looking at when assessing debt burden. Those are flows. That was my point when cautioning against naive debt GDP comparisons. Also, keep in mind that by borrowing in it's sovereign currency, the US has an enormous amount of monetary tools to handle the debt if it ever became a problem. Greece, by comparison, is at the mercy of the ECB, so they only have fiscal levers to pull. The interest expense does not strike me as especially concerning, but I'd be happy to verify BIS or IMF reports if you would like.\"", "title": "" }, { "docid": "f6828cfcacc79e64d02085f60c4e19b8", "text": "Just playing devil's advocate: A falling stock price impairs the firm's ability to raise equity capital efficiently. In these times, additional regulatory capital requirements continue to be levied on the banks, and they are faced with raising capital inefficiently, which may impair their ability to pay their debt, which may lead to a ratings downgrade.", "title": "" }, { "docid": "52ef53da2268a37f8563da3280b54011", "text": "Many of the major indices retreated today because of this news. Why? How do the rising budget deficits and debt relate to the stock markets? The major reason for the market retreating is the uncertainty regarding the US Dollar. If the US credit rating drops that will have an inflationary effect on the currency (as it will push up the cost of US Treasuries and reduce confidence in the USD). If this continues the loss of USD confidence could bring an end to the USD as the world's reserve currency which could also create inflation (as world banks could reduce their USD reserves). This can make US assets appear overvalued. Why is there such a large emphasis on the S&P rating? S&P is a large trusted rating agency so the market will respond to their analysis much like how a bank would respond to any change in your rating by Transunion (Consumer Credit Bureau) Does this have any major implications for the US stock markets today, in the short term and in July? If you are a day-trader I'm sure it does. There will be minor fluctuations in the market as soon as news comes out (either of its extension or any expected delays in passing that extension). What happens when the debt ceiling is reached? Since the US is in a deficit spending situation it needs to borrow more to satisfy its existing obligations (in short it pays its debt with more debt). As a result, if the debt ceiling isn't raised then eventually the US will be unable to pay its existing obligations. We would be in a default situation which could have devastating affects on the value of the USD. How hard the hit will depend on how long the default situation lasts (the longer we go without an increased ceiling after the exhaustion point the more we default on). In reality, Congress will approve a raise, but they will drag it out to the last possible minute. They want to appear as if they are against it, but they understand the catastrophic effects of not doing so.", "title": "" }, { "docid": "2a0966ecf561ff201a4d677734381662", "text": "Like all many branches of the economy, they do cross over at points. Private stock value increases pushes up tax revenue which in turn contributes to easing of national debt. The level of economic ignorance in this thread is astounding.", "title": "" }, { "docid": "6426db9ce08d2a187bfe55252ea18609", "text": "I imagine that it wouldn't affect consumer debt significantly. Individuals are separate entities from their government like how stockholders are separate entities from a corporation. It would probably make it harder for the country to raise money through bonds. Who wants to purchase bonds from a country that won't pay you back?", "title": "" }, { "docid": "74f16ca3b2338ee1f5d5880fedd1525f", "text": "It just occured to me that the larger the debt the easier it is for the Fed to strangle the economy, concentrate wealth even more, and choke off government spending on things other than debt service. It is a huge problem that the US government appears to be in a permanent structural deficit that gets bigger both during expansions AND contractions.", "title": "" }, { "docid": "25755e8dee8392ce566dbb40838b3561", "text": "\"So, I've read the article in question, \"\"Basically, It's Over\"\". Here's my opinion: I respect Charlie Munger but I think his parable misses the mark. If he's trying to convince the average person (or at least the average Slate-reading person) that America is overspending and headed for trouble, the parable could have been told better. I wasn't sure how to follow some of the analogies he was making, and didn't experience the clear \"\"aha\"\" I was hoping for. Nevertheless, I agree with his point of view, which I see as: In the long run, the United States is going to have serious difficulty in supporting its debt habit, energy consumption habit, and its currency. In terms of an investment strategy to protect oneself, here are some thoughts. These don't constitute a complete strategy, but are some points to consider as part of an overall strategy: If the U.S. is going to continue amassing debt fast, it would stand to reason it will become a worse credit risk, requiring it to pay higher interest rates on its debt. Long-term treasury bonds would decline as rates increase, and so wouldn't be a great place to be invested today. In order to pay the mounting debt and debt servicing costs, the U.S. will continue to run the printing presses, to inflate itself out of debt. This increase in the money supply will put downward pressure on the U.S. dollar relative to the currencies of better-run economies. U.S. cash and short-term treasuries might not be a great place to be invested today. Hedge with inflation-indexed bonds (e.g. TIPS) or the bonds of stronger major economies – but diversify; don't just pick one. If you agree that energy prices are headed higher, especially relative to U.S. dollars, then a good sector to invest a portion of one's portfolio would be world energy producing companies. (Send some of your money over to Canada, we have lots of oil and we're right next door :-) Anybody who has already been practicing broad, global diversification is already reasonably protected. Clearly, \"\"diversification\"\" across just U.S. stocks and bonds is not enough. Finally: I don't underestimate the ability of the U.S. to get out of this rut. U.S. history has impressed upon me (as a Canadian) two things in particular: it is highly capable of both innovating and of overcoming challenges. I'm keeping a small part of my portfolio invested in strong U.S. companies that are proven innovators – not of the \"\"financial\"\"-innovation variety – and with global reach.\"", "title": "" }, { "docid": "85f6aa6282ed7e40d4e2202216c9b296", "text": "US bond traders have begun a new trading day looking at higher prices for Treasury paper while Wall Street is set to open lower. The mood swing comes as the head of China’s central bank has summoned the spectre of a Minsky Moment. Hyman Minsky is a economist famed for his theory about the risk of a sudden collapse in asset prices triggered by excessive debt or credit growth. The recent surge in global equity and credit markets has been accompanied by a number of strategists warning of a Minsky scenario and that chorus has elevated in tone by Zhou Xiaochuan, the PBOC governor. He reportedly expressed concern that corporate and household debt are rising too quickly and said China need to defend itself from excessive optimism that could lead to a “Minsky Moment’’. Stocks in Hong Kong closed down 1.9 per cent, its biggest fall in two months, led by property companies, while havens such as US government bonds gained. The 10-year Treasury note yield has dipped to 2.31 per cent, while gold has rebounded from early losses to rise 0.4 per cent. The yen, another haven barometer has appreciated 0.4 per cent in value versus the dollar. S&P equity futures are now down 0.4 after the broad market closed at a record on Wednesday. Ian Lyngen at BMO Capital Markets notes: We’d be remiss in our assessment of the recent bid if we didn’t acknowledge that the initial downtrade in risk assets followed comments from PBOC governor Zhou citing the risk of a “Minsky Moment” for Chinese assets. This is the notion that exhausted gains in asset prices and credit growth lead to significant market collapses – also known as The Pessimists’ Delight. As today marks the 30th anniversary of the day that the Dow had its largest single-day selloff in history and Wednesday’s close above 23,000 set a new record of the index, Zhou’s comments seem very appropriately timed.", "title": "" }, { "docid": "175bbab1558d54ee3fe30bbff6fa8879", "text": "If you are actually referring to all the political rhetoric and posturing over the debt ceiling issue. That's a long ways from the US actually defaulting on paying debts. A lot of government offices might shut down, but I expect anyone holding US debt to be paid off. (they have the printing presses after all) If that's what you are referring to, based on the LAST time that the governement had to shut down because they didn't raise the debt ceiling, it won't be a big deal. Last time, no debt was defaulted on, a bunch of the less essential government offices shut down for a few days, and the stock market did a collective 'meh' over the whole thing. It was basically a non event. I've no reason to expect it will be different this time. (btw, where were all these republican budget cutters hiding when 10 years ago they started with a nearly balanced budget, and ended up blowing up the national debt by about 80% in 8 years time? (from roughly $6B to $11B) I wish they'd been screaming about the debt as much then as they are now. Not that there isn't ample blame to go around, and both sides have not been spending in ways that make a drunken sailor look like the paragon of a fiscal conservative, but to hear nearly any of them tell it, their party had nothing to do with taking us from a balanced budget to the highest burn rate ever while they were in control (with a giant financial crisis through in as pure 'bonus')", "title": "" }, { "docid": "637f9894595549c7a740ca88ecfd5fbc", "text": "\"Thanks for the article. A couple questions: - Is your basic investment premise that as defaults rise, investors will demand higher rates, and thus loans will become more expensive for borrowers? Why can't the lenders include a larger reserve to offset defaults (making loans less profitable for them?), or why doesn't this just wipe out the riskiest tranches of abs? Does it have to result in an implosion in supply? - \"\"Since 2009, car loans have exploded over $1.1 Trillion\"\"- wouldn't car loans increase significantly from the bottom of the Great Recession as the economy recovered? Also, the graph shows the billions of car loans. I think you'd have to look at an inflation adjusted loan origination, as cars do not cost the same today as they did 1970, so, you'd expect the total dollar value of loans to be much higher. - \"\"How many borrowers are using their cars as collateral for new debt?\"\" Are you asking how many are refinance their cars? I don't think this is a thing. Cars depreciate and most of the time, the value of the car is less than loan. People may be rolling over into a new car and loan but I don't think they are re-mortgaging their cars. I could be wrong but there has to be information available on this - \"\"We do this through purchasing long dated 1-2 year out-of-the-money PUT options on first order stocks\"\"- How do you know where the strike price on these stocks will be? If your very confident, you can sell a call above to offset the cost of the put. Or alternatively, why don't you buy a credit default swap on the abs tranches?\"", "title": "" }, { "docid": "3dec6527bd0a515914b6241198a5034c", "text": "\"When people (even people in the media) say: \"\"The stock market is up because of X\"\" or \"\"The stock market is down because of Y\"\", they are often engaging in what Nicolas Taleb calls the narrative falacy. They see the market has moved in one direction or another, they open their newspaper, pick a headline that provides a plausible reason for the market to move, and say: \"\"Oh, that is why the stock market is down\"\". Very rarely do statements like this actually come from research, asking people why they bought or sold that day. Sometimes they may be right, but it is usually just story telling. In terms of old fashioned logic this is called the \"\"post hoc, ergo proper hoc\"\" fallacy. Now all the points people have raised about the US deficit may be valid, and there are plenty of reasons for worrying about the future of the world economy, but they were all known before the S&P report, which didn't really provide the markets with much new information. Note also that the actual bond market didn't move much after hearing the same report, in fact the price of 10 year US Treasury bonds actually rose a tiny bit. Take these simple statements about what makes the market go up or down on any given day with several fistfuls of salt.\"", "title": "" }, { "docid": "f62aa109816414a75f7b2f8d110a475d", "text": "I don't know Australian law, but I will give my US perspective here. The custom in the US is for officers and directors to be indemnified by the corporation, and that LLCs have an even broader power to indemnify (even to remove the duty of loyalty!). Moreover, directors will typically be able to purchase D&O insurance to protect them from loss in the event of liability. For US corporations (not LLCs), the duty of care (prudence) requires that directors behave responsibly in weighing major decisions, and consult experts and specialists before coming to rash decisions. It usually becomes a court case in the context of a large public company in the midst of an acquisition event. The only people with standing (in the US) are shareholders. If all the other shareholders are directors, then it may be hard for them to blame you. Additionally, if you are concerned about the propriety of your actions, there may be sources to rely on. First, discussion with your fellow directors can be a helpful guide (though will not usually immunize you from any accusation of wrongdoing), and disclosure tends to cure almost any accusation of breaching the duty of loyalty. Second, boards often secure the advice of legal counsel, and sometimes bring on lawyers as members or will outright hire counsel for the board. Third, there may be services that will provide you with generic advice (e.g. UK Companies House and US-based IOD), which might set you at ease a little bit. I don't know the details of Australian law, as I say. But my sense of common law countries is that, like the US, they are primarily concerned about negligence (incompetently or imprudently neglecting to understand the business and make informed decisions), disloyalty (fraudulently engaging in self-interested transactions that either hurt the company or should have been offered to the company), and recklessness (not bothering to seek out information). As long as you are active, informed, engaged, and not engaging in secret deals outside the company (especially deals where either side is competing with the company), then that would be more than sufficient under the US standard. If you are concerned about liability, then inquire into indemnifications by the company (in the US, the company can usually pay all legal costs of directors), insurance, and legal counsel. I imagine your business partners are no more savvy than you are. My impression is you are overreacting to relatively rare and exotic expression of corporate law (at least in the US). But I'll close by repeating that I don't know Australian corporate law.", "title": "" }, { "docid": "764f0915779b6649c2953dc26dd52d87", "text": "No. Busts are very infrequent, and if an equity were illiquid enough to be affected, the bust cost would be enormous. For a liquid equity, the amount of busted volume is insignificant except during a flash crash or flash spike. Then it would be reasonable to redownload.", "title": "" } ]	fiqa
3ae896d98574381ae9a6686e3068a2b6	Are capitalization rate and net profit margin the same thing?	[ { "docid": "abf616c3123c474f8459d5c623759525", "text": "\"Capitalization rate and \"\"Net Profit margin\"\" are two different things. In Capitalization rate note that we are taking the \"\"total value\"\" in the denominator and in Net profit margin we are taking \"\"Revenue/Sales\"\". Capitalization Rate: Capitalization Rate = Yearly Income/Total Value For example (from Investopedia: ) if Stephane buys a property that will generate $125,000 per year and he pays $900,000 for it, the cap rate is: 125,000/900,000 = 13.89%. Net Profit margin: Net Profit margin = Net Profit/Revenue For example (from finance formulas): A company's income statement shows a net income of $1 million and operating revenues of $25 million. By applying the formula, $1 million divided by $25 million would result in a net profit margin of 4%. Although the formula is simplistic, applying the concept is important in that 4% of sales will result in after tax profit.\"", "title": "" }, { "docid": "3796346d54696bfa1a1766980aa57823", "text": "Both of these terms do refer to your profit; they're just different ways of evaluating it. First, your definition of capitalization rate is flipped. As explained here, it should be: On the other hand, as explained here: So cap rate is like a reverse unit cost approach to comparing two investments. If house A costs $1M and you'll make $50K (profit) from it yearly, and house B costs $1.33M and you'll make $65K (profit) from it yearly, then you can compute cap rates to see that A is a more efficient investment from the point of view of income vs. amount-of-money-you-have-stuck-in-this-investment-and-unavailable-for-use-elsewhere. Profit margin, on the other hand, cares more about your ongoing expenses than about your total investment. If it costs less to maintain property B than it does to maintain property A, then you could have something like: So B is a more efficient investment from the point of view of the fraction of your revenue you actually get to keep each year. Certainly you could think of the property's value as an opportunity cost and factor that into the net profit margin equation to get a more robust estimate of exactly how efficient your investment is. You can keep piling more factors into the equation until you've accounted for every possible facet of your investment. This is what accountants and economists spend their days doing. :-)", "title": "" } ]	[ { "docid": "398402f51ec457500408822627b1c4f2", "text": "Here's how capital gains are totaled: Long and Short Term. Capital gains and losses are either long-term or short-term. It depends on how long the taxpayer holds the property. If the taxpayer holds it for one year or less, the gain or loss is short-term. Net Capital Gain. If a taxpayer’s long-term gains are more than their long-term losses, the difference between the two is a net long-term capital gain. If the net long-term capital gain is more than the net short-term capital loss, the taxpayer has a net capital gain. So your net long-term gains (from all investments, through all brokers) are offset by any net short-term loss. Short term gains are taxed separately at a higher rate. I'm trying to avoid realizing a long term capital gain, but at the same time trade the stock. If you close in the next year, one of two things will happen - either the stock will go down, and you'll have short-term gains on the short, or the stock will go up, and you'll have short-term losses on the short that will offset the gains on the stock. So I don;t see how it reduces your tax liability. At best it defers it.", "title": "" }, { "docid": "f04c95fbe25c806a926f738494f09406", "text": "\"It makes sense if the NPV is positive. But what rate should you use at determining the NPV? A textbook might say \"\"market rate\"\".... and by definition the market rate to use in bond calculations like yours will mean that your NPV will be zero. How can this be? Well it's a bit of a circular definition. You take less capital to earn a higher return. The value of your capital spread over the period of the bond's maturity is the net difference... but the money in your pocket from selling the bond and not purchasing also has value. Banks and traders do this exact swap every day, many many times. The rate at which you can execute this swap is what defines the market rate. Therefore, by definition, the NPV will be zero. Now, this doesn't mean it's a bad idea for you. You can, on your own accord, decide the value you place on the capital versus the yield and make the decision. Do you expect rates to rise or fall? Do you expect higher or lower inflation? In reality you can form whatever opinion you like for your own circumstance, but the market is the net aggregation of formative opinion. You only get to decide whether or not you agree with the market.\"", "title": "" }, { "docid": "147628e0cbfaeda6aa42c92aa5b60353", "text": "\"Question - Why does Renn Tech limit capital from outside investors while also leveraging their positions 4-5X ? Wouldn't they rather gain more in fees than pay interest on the leverage? Quote: \"\"The investment paid off. Today the equities group accounts for the majority of Medallion’s profits, primarily using derivatives and leverage of four to five times its capital, according to documents filed with the U.S. Department of Labor. 4\"\" https://www.bloomberg.com/news/articles/2016-11-21/how-renaissance-s-medallion-fund-became-finance-s-blackest-box\"", "title": "" }, { "docid": "69c205cbf9bf56e0b9473160c3e8c9ba", "text": "Market Capitalization is the equity value of a company. It measures the total value of the shares available for trade in public markets if they were immediately sold at the last traded market price. Some people think it is a measure of a company's net worth, but it can be a misleading for a number of reasons. Share price will be biased toward recent earnings and the Earnings Per Share (EPS) metric. The most recent market price only reflects the lowest price one market participant is willing to sell for and the highest price another market participant is willing to buy for, though in a liquid market it does generally reflect the current consensus. In an imperfect market (for example with a large institutional purchase or sale) prices can diverge widely from the consensus price and when multiplied by outstanding shares, can show a very distorted market capitalization. It is also a misleading number when comparing two companies' market capitalization because while some companies raise the money they need by selling shares on the markets, others might prefer debt financing from private lenders or sell bonds on the market, or some other capital structure. Some companies sell preferred shares or non-voting shares along with the traditional shares that exist. All of these factors have to be considered when valuing a company. Large-cap companies tend to have lower but more stable growth than small cap companies which are still expanding into new markets because of their smaller size.", "title": "" }, { "docid": "5467dcadbea676578ee66dca23e951b4", "text": "\"I think it's easiest to illustrate it with an example... if you've already read any of the definitions out there, then you know what it means, but just don't understand what it means. So, we have an ice cream shop. We started it as partners, and now you and I each own 50% of the company. It's doing so well that we decide to take it public. That means that we will be giving up some of our ownership in return for a chance to own a smaller portion of a bigger thing. With the money that we raise from selling stocks, we're going to open up two more stores. So, without getting into too much of the nitty gritty accounting that would turn this into a valuation question, let's say we are going to put 30% of the company up for sale with these stocks, leaving you and me with 35% each. We file with the SEC saying we're splitting up the company ownership with 100,000 shares, and so you and I each have 35,000 shares and we sell 30,000 to investors. Then, and this depends on the state in the US where you're registering your publicly traded corporation, those shares must be assigned a par value that a shareholder can redeem the shares at. Many corporations will use $1 or 10 cents or something nominal. And we go and find investors who will actually pay us $5 per share for our ice cream shop business. We receive $150,000 in new capital. But when we record that in our accounting, $5 in total capital per share was contributed by investors to the business and is recorded as shareholder's equity. $1 per share (totalling $30,000) goes towards actual shares outstanding, and $4 per share (totalling $120,000) goes towards capital surplus. These amounts will not change unless we issue new stocks. The share prices on the open market can fluctuate, but we rarely would adjust these. Edit: I couldn't see the table before. DumbCoder has already pointed out the equation Capital Surplus = [(Stock Par Value) + (Premium Per Share)] * (Number of Shares) Based on my example, it's easy to deduce what happened in the case you've given in the table. In 2009 your company XYZ had outstanding Common Stock issued for $4,652. That's probably (a) in thousands, and (b) at a par value of $1 per share. On those assumptions we can say that the company has 4,652,000 shares outstanding for Year End 2009. Then, if we guess that's the outstanding shares, we can also calculate the implicit average premium per share: 90,946,000 ÷ 4,652,000 == $19.52. Note that this is the average premium per share, because we don't know when the different stocks were issued at, and it may be that the premiums that investors paid were different. Frankly, we don't care. So clearly since \"\"Common Stock\"\" in 2010 is up to $9,303 it means that the company released more stock. Someone else can chime in on whether that means it was specifically a stock split or some other mechanism... it doesn't matter. For understanding this you just need to know that the company put more stock into the marketplace... 9,303 - 4,652 == 4,651(,000) more shares to be exact. With the mechanics of rounding to the thousands, I would guess this was a stock split. Now. What you can also see is that the Capital Surplus also increased. 232,801 - 90,946 == 141,855. The 4,651,000 shares were issued into the market at an average premium of 141,855 ÷ 4,651 == $30.50. So investors probably paid (or were given by the company) an average of $31.50 at this split. Then, in 2011 the company had another small adjustment to its shares outstanding. (The Common Stock went up). And there was a corresponding increase in its Capital Surplus. Without details around the actual stock volumes, it's hard to get more exact. You're also only giving us a portion of the Balance Sheet for your company, so it's hard to go into too much more detail. Hopefully this answers your question though.\"", "title": "" }, { "docid": "02ef0274a4d40457956ad35df0119955", "text": "E.g. I buy 1 stock unit for $100.00 and sell it later for $150.00 => income taxes arise. Correct. You pay tax on your gains, i.e.: the different between net proceeds and gross costs (proceeds sans fees, acquisition costs including fees). I buy 1 stock unit for $150.00 and sell it later for $100.00 => no income taxes here. Not correct. The loss is deductible from other capital gains, and if no other capital gains - from your income (up to $3000 a year, until exhausted). Also, there are two different tax rate sets for capital gains: short term (holding up to 1 year) and long term (more than that). Short term capital gains tax matches ordinary income brackets, whereas long term capital gains tax brackets are much lower.", "title": "" }, { "docid": "352ae947ee14abf843efbfb223061a42", "text": "This would clear out a lot more. 1) Leverage is the act of taking on debt in lieu of the equity you hold. Not always related to firms, it applies to personal situations too. When you take a loan, you get a certain %age of the loan, the bank establishes your equity by looking at your past financial records and then decides the amount it is going to lend, deciding on the safest leverage. In the current action leverage is the whole act of borrowing yen and profiting from it. The leverage factor mentions the amount of leverage happening. 10000 yen being borrowed with an equity of 1000 yen. 2) Commercial banks: 10 to 1 -> They don't deal in complicated investments, derivatives except for hedging, and are under stricter controls of the government. They have to have certain amount of liquidity and can loan out the rest for business. Investment banks: 30 to 1 -> Their main idea is making money and trade heavily. Their deposits are limited by the amount clients have deposited. And as their main motive is to get maximum returns from the available amount, they trade heavily. Derivatives, one of the instruments, are structured on underlyings and sometimes in multiple layers which build up quite a bit of leverage. And all of the trades happen on margins. You don't invest $10k to buy $10k of a traded stock. You put in, maybe $500 to take up the position and borrow the rest of the amount per se. It improves liquidity in the markets and increases efficiency. Else you could do only with what you have. So these margins add up to the leverage the bank is taking on.", "title": "" }, { "docid": "25a5d41f82229dc1f28d077109784ca4", "text": "This essentially depends on how you prefer to measure your performance. I will just give a few simple examples to start. Let me know if you're looking for something more. If you just want to achieve maximum $ return, then you should always use maximum margin, so long as your expected return (%) is higher than your cost to borrow. For example, suppose you can use margin to double your investment, and the cost to borrow is 7%. If you're investing in some security that expects to return 10%, then your annual return on an account opened with $100 is: (2 * $100 * 10% - $100 * 7%) / $100 = 13% So, you see the expected return, amount of leverage, and cost to borrow will all factor in to your return. Suppose you want to also account for the additional risk you're incurring. Then you could use the Sharpe Ratio. For example, suppose the same security has volatility of 20%, and the risk free rate is 5%. Then the Sharpe Ratio without leverage is: (10% - 5%) / 20% = 0.25 The Sharpe Ratio using maximum margin is then: (13% - 5%) / (2 * 20%) = 0.2, where the 13% comes from the above formula. So on a risk-adjusted basis, it's better not to utilize margin in this particular example.", "title": "" }, { "docid": "84b5b8c8ef42cad5494a1aef39fc1fab", "text": "\"how can I get started knowing that my strategy opportunities are limited and that my capital is low, but the success rate is relatively high? A margin account can help you \"\"leverage\"\" a small amount of capital to make decent profits. Beware, it can also wipe out your capital very quickly. Forex trading is already high-risk. Leveraged Forex trading can be downright speculative. I'm curious how you arrived at the 96% success ratio. As Jason R has pointed out, 1-2 trades a year for 7 years would only give you 7-14 trades. In order to get a success rate of 96% you would have had to successful exploit this \"\"irregularity\"\" at 24 out of 25 times. I recommend you proceed cautiously. Make the transition from a paper trader to a profit-seeking trader slowly. Use a low leverage ratio until you can make several more successful trades and then slowly increase your leverage as you gain confidence. Again, be very careful with leverage: it can either greatly increase or decrease the relatively small amount of capital you have.\"", "title": "" }, { "docid": "8b15c9fd643cb2c2f0c419a99905e9ad", "text": "Capital is an Asset. Decreasing value of capital is the decreasing value of an asset. When you buy the forex asset * DR Forex Asset * CR Cash When you sell * DR Cash * CR Forex Asset The difference is now accounted for Here is how: Gains (and losses) are modifications to your financial position (Balance sheet). At the end of the period you take your financial performance (Profit and Loss) and put it into your balance sheet under equity. Meaning that afterwards your balance sheet is better or worse off (Because you made more money = more cash or lost it, whatever). You are wanting to make an income account to reflect the forex revaluation so at the end of the period it is reflected in profit then pushed into your balance sheet. Capital gains directly affect your balance sheet because they increase/decrease your cash and your asset in the journal entry itself (When you buy and sell it). If making money this way is actually how you make you make an income it is possible to make an account for it. If you do this you periodically revalue the asset and write off the changes to the revaluation account. You would do something like DR Asset CR Forex Revaluation account; depending on the method you take. Businesses mostly do this because if the capital gains are their line of business they will be taxed on it like it is income. For simplicity just account for it when you buy and sell the assets (Because you as an individual will only recognise a profit/loss when you enter and exit). Its easier to think about income and expenses are extensions of equity. Income increases your equity, expenses decrease it. This is how they relate to the accounting formula (Assets = Liabilities + Owners Equity)", "title": "" }, { "docid": "5b611488d1d23e35fd8b1e3ed248e14f", "text": "\"Asset management typically refers to the \"\"product\"\" group e.g. Mutual fund, etf, etc., like invesco offering qqq or some emerging market mutual fund. Capital management is more vague and can refer to a wide range of financial products and services including asset management and stuff like ptfl planning, wealth advisory etc. That said they are both used interchangeably and not like anyone would correct you if you used one vs the other...\"", "title": "" }, { "docid": "12226cbcd9d23ce4d27dc0efef65eece", "text": "Don't have access to a Bloomberg, Eikon ect terminal but I was wondering if those that do know of any functions that show say, the percentage of companies (in different Mcap ranges) held by differing rates institutionally. For example - if I wanted to compare what percentage of small cap companies' shares are 75% or more held by institutions relative to large cap companies what could I search in the terminal?", "title": "" }, { "docid": "ba7bf795e580e31b8c830138b431da26", "text": "The IRR is the Discount Rate r* that makes Net Present Value NPV(r)==0. What this boils down to is two ways of making the same kind of profitability calculation. You can choose a project with NPV(10%)>0, or you can choose based on IRR>10%, and the idea is you get to the same set of projects. That's if everything is well behaved mathematically. But that's not the end of this story of finance, math, and alphabet soup. For investments that have multiple positive and negative cash flows, finding that r becomes solving for the roots of a polynomial in r, so that there can be multiple roots. Usually people use the lowest positive root but really it only makes sense for projects where NPV(r)>0 for r<r and NPV(r)<0 for r>r. To try to help with your understanding, you can evaluate a real estate project with r=10%, find the sum future discounted cash flows, which is the NPV, and do the project if NPV>0. Or, you can take the future cash flows of a project, find the NPV as a function of the rate r, and find r where NPV(r)==0. That r is the IRR. If IRR=r*>10% and the NPV function is well behaved as above, you can also do the project. When we don't have to worry about multiple roots, the preceding two paragraphs will select the same identical sets of projects as meeting the 10% return requirement.", "title": "" }, { "docid": "64cea619996598815d7b5c3f25476352", "text": "If you want to see a more academic version of this look up Weighted Average Cost of Capital (WACC). It's a formula that tells you how much it costs for a company to raise $1 of capital whether it be through issuing bonds or stocks. One thing you learn is that there are times that if you take on loans (even if you don't need it) you can raise shareholder value and therefore the total company netvalue. The thought process is (as it states in the article above) that a company can issue debt for cheaper than issue shares and it will have extra cash which it can use to get a better return than its net effective interest rate. I tried to give an example but I only ended up rehashing what it says in the article. Anyhow look up WACC and you'll understand the fundamentals.", "title": "" }, { "docid": "fe9092bd89d9397b81899948937ce3bc", "text": "Shareholder's Equity consists of two main things: The initial capitalization of the company (when the shares were first sold, plus extra share issues) and retained earnings, which is the amount of money the company has made over and above capitalization, which has not been re-distributed back to shareholders. So yes, it is the firm's total equity financing-- the initial capitalization is the equity that was put into the company when it was founded plus subsequent increases in equity due to share issues, and retained earnings is the increase in equity that has occurred since then which has not yet been re-distributed to shareholders (though it belongs to them, as the residual claimants). Both accounts are credited when they increase, because they represent an increase in cash, that is debited, so in order to make credits = debits they must be credits. (It doesn't mean that the company has that much cash on hand, as the cash will likely be re-invested). Shareholder's Equity is neither an asset nor a liability: it is used to purchase assets and to reduce liabilities, and is simply a measure of assets minus liabilities that is necessary to make the accounting equation balance: Since the book value of stocks doesn't change that often (because it represents the price the company sold it for, not the current value on the stock market, and would therefore only change when there were new share issues), almost all changes in total assets or in total liabilities are reflected in Retained Earnings.", "title": "" } ]	fiqa
45e5be7f456df6eb235e85e48dd7ce65	If I have a home loan preapproval letter for x, can the seller know this without me explicitely telling them?	[ { "docid": "e315fc91c8c4152825de79bf564a253f", "text": "I will preface saying that I only have personal experience to go on (purchased home in KS earlier this year, and have purchased/sold a home in AR). You do not give the seller the document stating the amount you have been approved for. Your real estate agent (I recommend having one if you don't) will want to see it to make sure you will actually be able to purchase a house though. But the contract that is sent to the Seller states the total purchase price you are willing to pay and how much of that will be financed. Link to blank KS real estate contract shows what would be listed. Looks like it is from 2012 - it is similar to the one I had back in March, but not exactly the same format.", "title": "" }, { "docid": "a06533d7177634bb712fb080219b3f5b", "text": "The seller has a legitimate desire to know of your preapproval. I have two current anecdotes on this issue. As a realtor helping a client buy a home, I worked closely with buyer's bank, and got a pre-approval for the amount we were offering. When there was a counteroffer, and we were going to raise the price, the bank upped the numbers on the pre-approval letter. I have a property of my own I am trying to sell. I had a negotiated price, P&S, but no pre-approval from the buyer. The buyer of his home couldn't get a mortgage, and so far, the deal has fallen through. I agree with you, you don't want to signal you can afford more, nor show any emotion about how great that house is. That's just giving the seller a bargaining chip.", "title": "" } ]	[ { "docid": "ac5e3eceb0f3f7efed7542521895e212", "text": "I have gotten a letter of credit from my credit union stating the maximum amount I can finance. Of course I don't show the dealer the letter until after we have finalized the deal. I Then return in 3 business days with a cashiers check for the purchase price. In one case since the letter was for an amount greater then the purchase price I was able drive the car off the lot without having to make a deposit. In another case they insisted on a $100 deposit before I drove the car off the lot. I have also had them insist on me applying for their in-house loan, which was cancelled when I returned with the cashiers check. The procedure was similar regardless If I was getting a loan from the credit union, or paying for the car without the use of a loan. The letter didn't say how much was loan, and how much was my money. Unless you know the exact amount, including all taxes and fees,in advance you can't get a check in advance. If you are using a loan the bank/credit Union will want the car title in their name.", "title": "" }, { "docid": "44ed3942be87890d5e4010c63b93a91d", "text": "Pre-qualification is only a step above what you can do with a rate/payment calculator. They don't check your credit history and credit score; they don't ask for verification of your income; or verify that you have reported your debts correctly. They also don't guarantee the interest rate. But if you answer truthfully, and completely, and nothing else changes you have an idea of how much you can afford factoring in the down payment, and estimates of other fees, taxes and insurance. You can get pre-quaified by multiple lenders; then base your decision on rates and fees. You want to get pre-approved. They do everything to approve you. You can even lock in a rate. You want to finalize on one lender at that point because you will incur some fees getting to that point. Then knowing the maximum amount you can borrow including all the payments, taxes, insurance and fees; you can make an offer on a house. Once the contract is accepted you have a few days to get the appraisal and the final approval documents from the lender. They will only loan you the minimum of what you are pre-approved for and the appraisal minus down-payment. Also don't go with the lender recommended by the real estate agent or builder; they are probably getting a kick-back based on the amount of business they funnel to that company.", "title": "" }, { "docid": "a40bb98efec6409b70151dd126776cff", "text": "I'm assuming this is the US. Is this illegal? Are we likely to be caught? What could happen if caught? If you sign an occupancy affidavit at closing that says you intend to move in within 60-days, with no intention of doing so, then you'll be committing fraud, specifically mortgage/occupancy fraud, a federal crime with potential for imprisonment and hefty fines. In general, moving in late is not something that's likely to be noticed, if the lender is getting their money then they probably don't care. Renting it out prior to moving in seems much riskier, especially if you live in a city/state that requires rental licensing, or are depending on rental income to carry the mortgage. No idea how frequently people are caught/punished for this type of fraud, but it hardly seems worth finding out.", "title": "" }, { "docid": "8aa1956100046afa1ddbd28e63077008", "text": "\"Johnny. I recently bought my first home as well, and I have worked in the credit business (not mortgage), so I think I can answer some of your questions. Disclaimer first that I'm in NY, and home buying does vary from state to state. In my experience, pre-qual is not too different from pre-approval. Neither represents any real committment on the part of the bank (i.e. they can still deny approval at any point), and both are based on pulling your credit bureau and calculating ratios based on your stated (probably not documented) financial information. It's theoretically possible that a seller would choose a pre-approved buyer over a pre-qualified buyer, all other things being equal, but all other things are seldom equal. Remember also that you don't need to ultimately get a mortgage from the same bank that you use for the pre-qual. The pre-qual just shows that you are probably credit-worthy and serves to give you some credibility with sellers. Once you have an accepted offer and need to find a real mortgage, you can shop around for the best rate and best loan structure. Banks don't need to have pulled your credit to quote rates, but they will need to have a general idea of your FICO range. Once you find the bank you like with the best rate and actually apply for the loan, they will pull a hard bureau, and if your scores are different from what you said before, the rate may change, but within the same range, you'll generally be ok. Also, banks do not necessarily pull all 3 bureaus; they may only pull 1, as it costs them for each pull. 2 potential downsides to this approach: Also, make sure you have a mortgage/funding clause in your contract, as banks are unpredictable, and make sure you have a great real estate lawyer, not a legal \"\"factory\"\" - the extra few hundred $ are worth it. Don't overthink this credit stuff too much. Find a good house for a good price, and get a no-nonsense mortgage that you fully understand - no exotic stuff. Good luck!\"", "title": "" }, { "docid": "72f396dd0e43313f3988d6f4ea49d7cd", "text": "i think and what i understand when a house seller is asking for cash, thats means he is looking for a ready and quick buyer doesn't rely on mortgage and its long process. cash means a certified check for sure, but not physical money in suitcase!", "title": "" }, { "docid": "5623cd8647a22ac42e1b67e3040e4858", "text": "Lenders may sell your mortgage to other lenders for a fee. For example, your lender might sell your mortgage to the highest bidder who may want to purchase your mortgage by making a one time payment. For your lender that's a quick profit, for the new owner of your mortgage, that's long term returns for a one time fee. For your lender, that is forgoing long term returns for short term gains (and transfer of risk in case you default). (Very similar to how bonds work in a stock exchange!) What does this mean to you? Nothing. You will still keep making payments to your original lender. What does 'transfer of ownership has not been publicly recorded mean'? It means, when you are asked about ownership details regarding your mortgage, and this could be in tax forms or refinancing etc., you would enter your original lender's information and not Freddit Mac's! Pro-tip There are lots of scams based on this. You might receive an official looking letter in mail claiming your loan has been sold and you should start making payments to the new owner. DO NOT FALL FOR THIS! Call your original lender (use the phone number from your loan papers, not mail you received) and verify this information. And if this were to happen, your original lender would always inform you first. And hey, congrats on your new home! :)", "title": "" }, { "docid": "acd54039a93a99e6a45bd56d41b1e0a7", "text": "\"tl;dr: Your best course of action is probably to do a soft pull (check your own credit) and provide that to the lender for an unofficial pre-approval to get the ball rolling. The long of it: The loan officer is mostly correct, and I have recent personal evidence that corroborates that. A few months ago I looked into refinancing a mortgage on a rental property, and I allowed 3 different lenders to do a hard inquiry within 1 week of each other. I saw all 3 inquires appear on reports from each of the 3 credit bureaus (EQ/TU/EX), but it was only counted as a single inquiry in my score factors. But as you have suggested, this breaks down when you know that you won't be purchasing right away, because then you will have multiple hard inquiries at least a few months apart which could possibly have a (minor) negative impact on your score. However minor it is, you might as well try to avoid it if you can. I have played around with the simulator on myfico.com, and have found inquiries to have the following effect on your credit score using the FICO Score 8 model: With one inquiry, your scores will adjust as such: Two inquiries: Three inquiries: Here's a helpful quote from the simulator notes: \"\"Credit inquiries remain on your credit report for 2 years, but FICO Scores only consider credit inquiries from the past 12 months.\"\" Of course, take that with a grain of salt, as myfico provides the following disclaimer: The Simulator is provided for informational purposes only and should not be expected to provide accurate predictions in all situations. Consequently, we make no promise or guarantee with regard to the Simulator. Having said all that, in your situation, if you know with certainty that you will not be purchasing right away, then I would recommend doing a soft pull to get your scores now (check your credit yourself), and see if the lender will use those numbers to estimate your pre-approval. One possible downside of this is the lender may not be able to give you an official pre-approval letter based on your soft pull. I wouldn't worry too much about that though since if you are suddenly ready to purchase you could just tell them to go ahead with the hard pull so they can furnish an official pre-approval letter. Interesting Side Note: Last month I applied for a new mortgage and my score was about 40 points lower than it was 3 months ago. At first I thought this was due to my recent refinancing of property and the credit inquiries that came along with it, but then I noticed that one of my business credit cards had recently accrued a high balance. It just so happens that this particular business CC reports to my personal credit report (most likely in error but I never bothered to do anything about it). I immediately paid that CC off in full, and checked my credit 20 days later after it had reported, and my score shot back up by over 30 points. I called my lender and instructed them to re-pull my credit (hard inquiry), which they did, and this pushed me back up into the best mortgage rate category. Yes, I purposely requested another hard pull, but it shouldn't affect my score since it was within 45 days, and that maneuver will save me thousands in the long run.\"", "title": "" }, { "docid": "a99ef0c8cc1d1302d5e75e47d44c9610", "text": "In some cases, especially but not only for subprime loans, they are actually testing whether you will lie to them. (Discovered this when working on a loan origination applicatíon for car dealers -- they explicitly did not want us to autocomplete some values because that might remind applicants that answers would be checked.)", "title": "" }, { "docid": "af56924fef0ddd3fb86152b0c409ca7d", "text": "Many mortgages have a clause saying the bank will not sell the loan. You are acting like this is unheard of, but it is a standard checkbox on most bank's mortgages, where they either mark that they can sell it or they mark that they won't. So, it is common enough for it to be on their standard forms. (There are many sources of funding for banks for mortgages that explicitly prevent them from selling loans)", "title": "" }, { "docid": "191114aa87beae0c543c032e10e7c271", "text": "It might be worth talking to a mortgage broker, even if you don't actually end up doing business with them. Upfront Mortgage Brokers explained Finding an upfront broker near you In a nutshell, upfront brokers disclose what they are paid for their services openly and transparently. Many brokers don't, and you can't be too careful. But a consultation should be free. An experienced broker can help you to navigate the pros and cons mentioned by the other responders. Personally, I would never do business with a broker who can't/won't show me a rate sheet on the day of the lock. That's my personal acid test. You might be surprised by what the broker has to say regarding your situation. That was my experience, anyway.", "title": "" }, { "docid": "ded3d70b3f8d51e04d724454dfef41b7", "text": "\"I would not trust Zillow for an appraisal. The numbers I see on there vary a lot from real prices. I'm not sure I'd get a full appraisal either, as that means you \"\"know\"\" the value of the house and may be obliged to reveal it. I'd ask for the loan amount and see what the previous owner says.\"", "title": "" }, { "docid": "9bc64707f88aaa78053413758a34ecec", "text": "First, you are reading that document correctly, but it's not 78% of original mortgage. It is actually 78% of original home value. For example, if the home was valued at $100K when you bought it and you received a $90K loan, PMI must be removed when you owe $78K, not 78% of $90K. To make matters worse for the bank, they missed the required timing to drop PMI. I would print the document you referenced, cite the applicable portion, and tell them if they do not comply, you will report them for failure to comply. For example, I'm sure I am not the only one in this situation, and the FDIC will be eager to assess the huge fines they can collect from a bank that isn't operating within the law. Something like that.", "title": "" }, { "docid": "a12dc2b41b55d618c68e2edc37f26e08", "text": "Yes you did opt into it. When you applied and were approved for any loan or credit card the terms stated they would give your payment details to credit bureaus. You didn’t explicitly give an okay to Experian but by getting that credit card or loan, well, you pretty much did opt in.", "title": "" }, { "docid": "b941bee9339eba902aae32a50f75393e", "text": "Omg, the answer is easy. Tell the TRUTH, and nothing is fraud. Down payment gifts are SOP's, and every lender works with that. EACH lender has their own rules. Fannie May and Freddie Mac could care less, and FHA and VA backed loans allow for full gifting unless the buyer's credit is below the standard 620, then 3.5% must come from the buyer. Standard bank loans want to know the source of the down payment for ONE REASON ONLY: to know if the buyer is taking ON A NEW DEBT! The only thing you will need do is sign a legal document stating the entire down payment is a gift. That way the bank knows their lendee isn't owing a new substantial debt, and that there aren't two lenders on the house, because should she default, the bank will have to pay you back first off the resale. Get it? They just want to know how many hands are in the fire.", "title": "" }, { "docid": "dcd3f1bfd91b3e4ba23288497bd15f5b", "text": "\"Your mortgage terms are locked in; the servicer/new owner cannot change the terms without your consent, but the servicer can be more aggressive in taking action (as specified in your mortgage contract) against you. For example, if the mortgage agreement calls for penalties for missing a payment or making it late, your friendly neighborhood banker might waive the penalty if the payment is received a day late once (but perhaps not the second or the third time), but the servicer doesn't know you personally and does not care; you are hit with the penalty right away. If the payment was received a day late because of delays in the post office, too bad. If you used a bank bill payment service that \"\"guarantees\"\" on-time arrival, talk to the bank. All perfectly legal, and what you agreed to when you signed the contract. If you can set up electronic payments of your mortgage payments, you can avoid many of these hassles. If you are sending in more money than what is due each month, you should make sure that the extra money reduces the principal amount owed; easy enough if you are sending a physical check with a coupon that has an entry line for \"\"Extra payment applied to principal\"\" on it. But, the best mortgage contracts (from the bank's point of view) are those that say that extra money sent in applies to future monthly installments. That is, if you send in more than the monthly payment one month, you can send in a reduced payment next month; the bank will gladly hold the extra amount sent in this month and apply it towards next month's payment. So, read your mortgage document (I know, I know, the fine print is incomprehensible) to see how extra money is applied. Finally, re-financing your mortgage because you don't like the servicer is a losing proposition unless you can, somehow, ensure that your new bank will not sell your new mortgage to the same servicer or someone even worse.\"", "title": "" } ]	fiqa
f47ec78f8071ce6253e244f227643ab9	Unmarried couple buying home, what are the options in our case?	[ { "docid": "ef642c033a2f012d4e8c46a4ce66ec31", "text": "\"You've laid out several workable options. You might try going to mortgage broker and looking at what offers you get each way. I can say that it sounds like your partner will have a difficult time qualifying for a mortgage. That puts you on the first and third options. Forget about \"\"building equity.\"\" You cannot rely on the house you're living in to provide a return on investment. Housing is an expense, even if you own it outright. Keep that in mind when you consider taking from the stream of money contributing to your retirement. This link is to a blog which really clarifies the \"\"rent vs. own, which is better?\"\" question. The answer is, it depends on the individual and the location, and the blogger in the link explains how to answer that question for your situation. One of the key advantages of ownership is that it gives you freedom to modify the interior, exterior, and grounds (limited by local building codes of course.)\"", "title": "" }, { "docid": "1d298504aedaf9c53964353fee7c3c41", "text": "\"Personally I would advise only buying what you can afford without borrowing money, even if it means living in a tent. Financially, that is the best move. If you are determined to borrow money to buy a house, the person with income should buy it as sole owner. Split ownership will create a nightmare if any problems develop in the relationship. Split ownership has the advantage that it doubles the tax-free appreciation deduction from $250,000 to $500,000, but in your case my sense is that that is not a sufficient reason to risk dual ownership. Do not charge your \"\"partner\"\" rent. That is crazy.\"", "title": "" }, { "docid": "419c9242f195bf26a718bf4e307dc73d", "text": "You are thinking about this very well. With option one, you need to think about the 5 D's in the contract. What happens when one partner becomes disinterested, divorced (break up), does drugs (something illegal), dies or does not agree with decisions. One complication if you buy jointly, and decide to break up/move, on will the other partner be able to refinance? If not the leaving person will probably not be able to finance a new home as the banks are rarely willing to assume multiple mortgage risks for one person. (High income/large down payment not with standing.) I prefer the one person rents option to option one. The trouble with that is that it sounds like you are in better position to be the owner, and she has a higher emotional need to own. If she is really interested in building equity I would recommend a 15 year or shorter mortgage. Building equity in a 30 year is not realistic.", "title": "" } ]	[ { "docid": "2b1e020358eabd9b5de2ea5a749a6416", "text": "Is this a reasonable goal or will it be impossible to get a loan with my almost non-existent income? I know I can put estimated rental revenue as income, but I'm not sure if I would qualify. Banks typically only count rental income after you've been collecting it for two years, and at that point the banks will count 75% of it as income for loan qualification purposes. You'd have to qualify for the mortgage without the potential rental income. Currently that means a 43% debt (including proposed mortgage) to gross income ratio. Even if you qualify, you have to be prepared to handle repairs, HVAC/water-heater could fail on day 1, and tenants have a right to withhold rent if some repairs aren't made. You also have to be able to weather non-payment/eviction of a tenant. You could find a co-signor, maybe go in on a house with a friend, but there are risks and complications that can arise there if a party becomes unable to pay, or deciding how to split equity and expenses. If you had the income/capital to comfortably pull it off without tenants, then that'd be a great situation, college rentals tend to be lucrative (I'd recommend getting tenants with parental co-signers to reduce risk). If you qualify but would be in trouble quickly if one tenant stopped paying, or a major appliance needed to be replaced, then it's probably not worth the risk.", "title": "" }, { "docid": "e6bafc178dad29c3bf694d00227deaf5", "text": "\"If I were you, I would rent. Wait to buy a home. Here is why: When you say that renting is equal in cost to a 30-year mortgage, you are failing to consider several aspects. See this recent answer for a list of things that need to be considered when comparing buying and renting. You have no down payment. Between the two of you, you have $14,000, but this money is needed for both your emergency fund and your fiancée's schooling. In your words: \"\"we can’t reeaallllly afford a home.\"\" A home is a big financial commitment. If you buy a home before you are financially ready, it will be continuous trouble. If you need a cosigner, you aren't ready to buy a home. I would absolutely advise whoever you are thinking about cosigning for you not to do so. It puts them legally on the hook for a house that you can't yet afford. You aren't married yet. You should never buy something as big as a home with someone you aren't married to; there are just too many things that can go wrong. (See comments for more explanation.) Wait until you are married before you buy. Your income is low right now. And that is okay for now; you've been able to avoid the credit card debt that so many people fall into. However, you do have student loans to pay, and taking on a huge new debt right now would be potentially disastrous for you. Your family income will eventually increase when your fiancée gets her degree and gets a job, and at that time, you will be in a much better situation to consider buying a house. You need to move \"\"ASAP.\"\" Buying a house when you are in a hurry is a generally a bad idea. When you look for a home, you need to take some time looking so you aren't rushed into a bad deal that you will regret. Even if you decide you want to buy, you should first find a place to rent; then you can take your time finding the right house. To answer your question about escrow: When you own a house, two of the required expenses that you will have besides the mortgage payment are property taxes and homeowner's insurance. These are large payments that are only due once a year. The bank holding the mortgage wants to make sure that they get paid. So to help you budget for these expenses and to ensure that these expenses are paid, the bank will add these to your monthly mortgage payment, and set them aside in a savings account (called an escrow account). Then when these bills come due once a year, they are paid for out of the escrow account.\"", "title": "" }, { "docid": "5744b01b567c29e20c49561da9ab4613", "text": "Awesome info, this is what I was looking for. I live in FL so i will look into LLC laws. Is there a difference in obtaining loans for multi-unit properties, or any special requirements? This would be my first purchase so I'm trying to decide if I should start with a multi-unit or a large home. I read something about a first time home buyers and the FHA allowing one to put down less of an initial investment. Im assuming this is if you are actually going to be living in the home or property? Would it make sense to have separate entities for specific types of units? For example One separate corporation per multi-unit property, but have multiple single family homes under another single entity? Thanks for the help. *quick add-on, would you know how long the corporation would have had to exist before being able to obtain a loan? For example, would XYZ, LLC. have to have been around for 3 years prior to the loan, or could i just incorporate the month before going to the bank?", "title": "" }, { "docid": "d5e93075e5b363f36d9be5f797b3e6b3", "text": "In this case can the title of the home still be held by both? Yes, it is possible to have additional people on title that are not on the mortgage. Would the lender (bank) have any reservations about this since a party not on the mortgage has ownership of the property? Possibly, but there is a very simple way to avoid this. Clayton could simply purchase the home himself, and add Emma to the title after closing by recording a quitclaim deed. The lender can't stop that, and from their point of view it's actually better, since they have two people to go after in the case of default. (But despite it being better they often make it difficult to purchase Tip, when you have an attorney draft the quitclaim document, have them draft the reverse document too. (Emma relinquishing the property back to Clayton.) There is usually no extra charge for this and then you have it if you need it. For example, you may need to file the reverse forms if you want to refinance. As a side note, I agree with Grade 'Eh' Bacon's and Pete B.'s in recommending that Clayton and Emma do not do this. Once they are married the property will either be automatically jointly owned, or a spouse can be added to the title easily, and until they are married there are no pros but many cons to doing this. Reasons not to do it: As a side note, in a comment it was proposed: ...suppose Clayton loves Emma so much that he wants her name to be on the house... I understand the desire to do this from an emotional point of view, but realize this does not make sense from a financial point of view.", "title": "" }, { "docid": "669f6bb07efee1a77100075f82dd5da0", "text": "\"To quote Judge Judy: \"\"Our courts are not in the business of settling assets of couples who decide to play house\"\". This is one of the reasons we put off buying houses with a partner until we are married. The courts have rules for couples who marry, then split, but none for those who don't. In the scenerio you spelled out, you are at the mercy of your ex-boyfriend as far as getting your downpayment back. Legally, you are entitled to 50% of the funds remaining after the sale and expenses.\"", "title": "" }, { "docid": "5e7fd3d6131a25e21117682516430c28", "text": "\"Generally, banks will not lend to \"\"rental\"\" LLC's, you'll have to cosign the loan personally. So for that matter LLC has no benefit. Paul mentioned the \"\"due on sale\"\" clause that is present in most current mortgage contracts and may trigger a call on your mortgage. Talk to your bank about it, in some cases you may be able to convince them that the ownership didn't in fact changed (since the same people are full owners of the LLC), but they may not buy it. If your bank allows it, you can transfer it into LLC and still enjoy the limited liability as an owner, but if not - you can get liability protection via insurance policy. In some cases that may even be cheaper. Talk to your insurance agent. In any case, deciding which (if at all) entity to use is a legal issue. You should talk to an attorney licensed in your State. There may be some tax considerations also, so talk to your tax adviser. In many cases, married couple jointly owning real-estate can skip the general partnership tax returns, but not with LLC.\"", "title": "" }, { "docid": "d677a11a780b131bf2cfc25150b0f47e", "text": "This is something you should decide as part of entering a partnership with someone. Ideally before you make the initial purchase you have a detailed contract written up. If you have already bought the house and someone is now ready to move out the easiest thing to do is sell the house. If that is not an option, you'll have to decide on a plan together and then get it in writing.", "title": "" }, { "docid": "2d3841fc3f6ff1124683964bd1c14213", "text": "Because you're not married, its a partnership agreement, and unless there's a written contract, either the two of you agree on how to handle the home, or it's off to court you go. If you were both supposed to pay for the home, and he failed to for a a while, that would put him in breach of contract which I would think gives you a good position in court. On the other hand, if you are at all concerned about your safety from this louse, remember, he knows exactly where the house is.", "title": "" }, { "docid": "20066787147b6ee9c8164b361abcc108", "text": "The monthly payment difference isn't that great On a $300K loan, the 30 year monthly payment (at 4%) is $1432, the 15 year (at 3.5%) is $2145, that $712 per month, or 50% higher payment. $712 is the total utility or food bill for a couple. If that $1432 represents 25% of income (a reasonable number) then $2145 is over 35%. I'd rather use that money for something else and not obligate myself at the start of the mortgage. Given how little we save as a country, the $712 is best put into a matched 401(k) in the US or other retirement account if elsewhere.", "title": "" }, { "docid": "a201a3ed2c8235b382b7505053b28484", "text": "As I see it, there are 2 potential solutions - Joining with another person or 2, and buying a house with multiple bedrooms. I am in the US, and I've seen immigrants living in tight accommodations that would seem unacceptable to most of us. But, with the combined incomes, they were able to buy the house and quickly pay for it, and then buy another. $800/mo is about $5/hr. Below US minimum wage. Use your skills to take on additional work on line. A virtual assistant position can increase your income quite a bit. Keep in mind, as someone on the other side of the world, my advice may not be practical for you, these are just my thoughts.", "title": "" }, { "docid": "450c8ae1359a23cf337b1a1817dd9c03", "text": "What options do I have? Realistically? Get a regular full time job. Work at it for a year or so and then see about buying a house. That said, I recently purchased a decent home. I am self-employed and my income is highly erratic. Due to how my clients pay me, my business might go a couple months with absolutely no deposits. However, I've been at this for quite a few years. So, even though my business income is erratic, I pay myself regularly once a month. In order to close the deal with the mortgage company I had to provide 5 years worth of statements on my business AND my personal bank accounts. Also I had about a 30% down payment. This gave the bank enough info to realize that I could absolutely make the payments and we closed the deal. I'd say that if you have little to no actual financial history, don't have a solid personal income and don't have much of a down payment then you probably have no business buying a house at this point. The first time something goes wrong (water heater, ac, etc) you'll be in a world of trouble.", "title": "" }, { "docid": "ab70073559066739574932c249a0b03f", "text": "What do I need to know if I'm unemployed and need to take out a home loan to finance a litigious divorce? Which companies are best to shop around at? How do I present my self and situation? What harms or hurts my chances of getting a home loan? Is this the same hung as refinancing a house? Is there a website or article you can recommend about this?", "title": "" }, { "docid": "aef57fa4cc3eff2eaebc63a3feb09561", "text": "\"I don't think you've mentioned which State you're in. Here in Ontario, a person who is financially incapable can have their financial responsibility and authority removed, and assigned to a trustee. The trustee might be a responsible next of kin (as her ex, you would appear unsuitable: that being a potential conflict of interest); otherwise, it can be the Public Guardian and Trustee. It that happens, then the trustee handles the money; and handles/makes any contracts on behalf of (in the name of) the incapable person. The incapable person might have income (e.g. spousal support payments) and money (e.g. bank accounts), which the trustee can document in order to demonstrate credit-worthiness (or at least solvency). For the time being, the kids see it as an adventure, but I suspect, it will get old very fast. I hope you have a counsellor to talk with about your personal relationships (I've had or tried several and at least one has been extraordinarily helpful). You're not actually expressing a worry about the children being abused or neglected. :/ Is your motive (for asking) that you want her to have a place, so that the children will like it (being there) better? As long as your kids see it as an adventure, perhaps you can be happy for them. Perhaps (I don't know: depending on the people) too it's a good (or at least a better) thing that they are visiting with friends and relatives; and, a better conversational topic with those people might be how they show your children a good time (instead of your ex's money). One possible way I thought of co-signing is if a portion of child/spousal support goes directly to the landlord. I asked the Child Support Services (who deduct money from my paycheck monthly to pay support to my ex) and they told me that they are not authorized to do this. Perhaps (I don't know) there is some way to do that, if you have your ex's cooperation and a lawyer (and perhaps a judge). You haven't said what portions of your payments are for Child support, versus Spousal support (nor, who has custody, etc). If a large part of the support is for the children, then perhaps the children can rent the place. (/wild idea) Note that, in Ontario, there are two trusteeship decisions to make: 1) financial; and 2) personal care, which includes housing and medical. Someone can retain their own 'self-care' authority even if they're judged financially incapable (or vice versa if there's a personal-care or medical decision which they cannot understand). The technical language is, \"\"Mentally Incapable of Managing Property\"\" This term applies to a person who is unable to understand information that is relevant to making a decision or is unable to appreciate the reasonably foreseeable consequences of a decision or lack of decision about his or her property. Processes for certifying an individual as being mentally incapable of managing property are prescribed in the SDA (Substitute Decisions Act), and in the Mental Health Act.\"\" The Mental Heath Act is for medical emergencies (only); but Ontario has a Substitute Decisions Act as well. An intent of the law is to protect vulnerable people. People may also acquire and/or name their own trustee and/or guardian voluntarily: via a power of attorney, a living will, etc. I don't know: how about offering the landlord a year's rent in advance, or in trust? I guess that 1) a court order can determine/override/guarantee the way in which the child support payments are directed 2) it's easier to get that order/agreement if you and your ex cooperate 3) there are housing specialists in your neighborhood: They can buy housing instead of renting it. Or be given (gifted) housing to live in.\"", "title": "" }, { "docid": "068924eb9246321883828a7b0dcc2acc", "text": "\"I'll chime in here with the \"\"don't do it crowd.\"\" I think it's fraught with ugly possibilities. However, you may, for various reasons, decide to say, \"\"to hell with it, we'll make it work.\"\" If that is the case, treat it like a business transaction and not an emotional transaction. Work up a binding contract with your attorney for how the two of you will handle issues such as: Of absolutely critical importance is the bail-out clause: how will you handle it when one person says, \"\"Sayonara.\"\" None of this ensures a smooth road - god knows I wouldn't do it - but it could help protect your sanity and some of your investment down the road. Good luck.\"", "title": "" }, { "docid": "d90b5501dc00d0d5a1a79c878c6279d1", "text": "Several factors are considered in loans as significant as a home mortgage. I believe the most major factors are 1) Credit report, 2) Income, and 3) Employment status If you borrow jointly, all joint factors are included, not just the favorable ones. Some wrinkles this can cause may include: Credit Report - The second person on the loan may have poor credit or no credit. This can/will hurt your rate or even prevent them from being listed on the loan at all, which will also mean you can't include their income. In addition, there are future consequences: that any late payments, default, foreclosure, etc. will be listed on all borrower's reports. If you both have solid work history, great credit, and want to jointly own the home, then there shouldn't be any negatives. If this is not the case, compare both cases (fully, not just rates, as some agents could sneakily say you can get the same rate either way but then not tell you closing costs in one scenario are higher), and pick the one that is best overall. This is just information from my recollection so make sure to verify and ask plenty of questions, don't go forward on assumptions.", "title": "" } ]	fiqa
d437e062169e82aef1b1de21c6e403b3	Investment in mutual fund in India for long term goals	[ { "docid": "7615fbc682984a413c5fe421f61534ec", "text": "Buy only 'Direct' Plans, not regular. - Demat providers won't sell Direct plans, that you can do it through https://www.mfuindia.com Make sure expense ratio < 2.5% (With direct plans it will be much lesser) I hope these points will help you to take a better decision.", "title": "" }, { "docid": "6e7dd6fe932a88902d7ad3c1efd10deb", "text": "On reading couple of articles & some research over internet, I got to know about diversified investment where one should invest 70% in equity related & rest 30% in debt related funds Yes that is about right. Although the recommendation keeps varying a bit. However your first investment should not aim for diversification. Putting small amounts in multiple mutual funds may create paper work and tracking issues. My suggestion would be to start with an Index EFT or Large cap. Then move to balanced funds and mid caps etc. On this site we don't advise on specific funds. You can refer to moneycontrol.com or economictimes or quite a few other personal finance advisory sites to understand the top funds in the segments and decide on funds accordingly. PS: Rather than buying paper, buy it electronic, better you can now buy it as Demat. If you already have an Demat account it would be best to buy through it.", "title": "" } ]	[ { "docid": "0dbe36e7d333c6d096f12c3665f9261e", "text": "I think I have a better answer for this since I have been an investor in the stock markets since a decade and most of my money is either made through investing or trading the financial markets. Yes you can start investing with as low as 50 GBP or even less. If you are talking about stocks there is no restriction on the amount of shares you can purchase the price of which can be as low as a penny. I stared investing in stocks when I was 18. With the money saved from my pocket money which was not much. But I made investments on a regular period no matter how less I could but I would make regular investments on a long term. Remember one thing, never trade stock markets always invest in it on a long term. The stock markets will give you the best return on a long term as shown on the graph below and will also save you money on commission the broker charge on every transaction. The brokers to make money for themselves will ask you to trade stocks on short term but stock market were always made to invest on a long term as Warren Buffet rightly says. And if you want to trade try commodities or forex. Forex brokers will offer you accounts with as low as 25 USD with no commissions. The commission here are all inclusive in spreads. Is this true? Can the average Joe become involved? Yes anyone who wants has an interest in the financial markets can get involved. Knowledge is the key not money. Is it worth investing £50 here and there? Or is that a laughable idea? 50 GBP is a lot. I started with a few Indian Rupees. If people laugh let them laugh. Only morons who don't understand the true concept of financial markets laugh. There are fees/rules involved, is it worth the effort if you just want to see? The problem with today's generation of people is that they fear a lot. Unless you crawl you dont walk. Unless you try something you dont learn. The only difference between a successful person and a not successful person is his ability to try, fail/fall, get back on feet, again try untill he succeeds. I know its not instant money, but I'd like to get a few shares here and there, to follow the news and see how companies do. I hear that BRIC (brasil, russia, india and china) is a good share to invest in Brazil India the good thing is share prices are relatively low even the commissions. Mostly ROI (return on investment) on a long term would almost be the same. Can anyone share their experiences? (maybe best for community wiki?) Always up for sharing. Please ask questions no matter how stupid they are. I love people who ask for when I started I asked and people were generous enough to answer and so would I be.", "title": "" }, { "docid": "07bfc4bf7cdff666fb929873475d0159", "text": "Large companies whose shares I was looking at had dividends of the order of ~1-2%, such as 0.65%, or 1.2% or some such. My savings account provides me with an annual return of 4% as interest. Firstly inflation, interest increases the numeric value of your bank balance but inflation reduces what that means in real terms. From a quick google it looks like inflation in india is currently arround 6% so your savings account is losing 2% in real terms. On the other hand you would expect a stable company to maintain a similar value in real terms. So the dividend can be seen as real terms income. Secondly investors generally hope that their companies will not merely be stable but grow in value over time. Whether that hope is rational is another question. Why not just invest in options instead for higher potential profits? It's possible to make a lot of money this way. It's also possible to lose a lot of money this way. If your knowlage of money is so poor you don't even understand why people buy stocks there is no way you should be going near the more complicated financial products.", "title": "" }, { "docid": "2b59e313b2bc401e6df11ff9d5c37f02", "text": "Both are incorrect. What it says is if your fund value is 25,000 in first year; then this will earn 19.4% compound for 5 years. This is same as 142.5 absolute. The money invested in second year, will only earn for 4 years, compound interest of 19.4%. so on ... The 25000 invested last year only 19.4 for a year. The other aspect you are missing is when you pay 25,000; 4% goes towards charges. So you are only investing 24,000. Plus there is an amount towards life cover. Depending on age, around 1000 for one lacs. This means the investment is only 23000 or 23500. Generally it is not advised to buy ULIP. It is cheaper to buy term insurance plus mutual fund.", "title": "" }, { "docid": "60dbfff8b0fc19a14a628170f4c6aa8d", "text": "\"The question is asking for a European equivalent of the so-called \"\"Couch Potato\"\" portfolio. \"\"Couch Potato\"\" portfolio is defined by the two URLs provided in question as, Criteria for fund composition Fixed-income: Regardless of country or supra-national market, the fixed-income fund should have holdings throughout the entire length of the yield curve (most available maturities), as well as being a mix of government, municipal (general obligation), corporate and high-yield bonds. Equity: The common equity position should be in one equity market index fund. It shouldn't be a DAX-30 or CAC-40 or DJIA type fund. Instead, you want a combination of growth and value companies. The fund should have as many holdings as possible, while avoiding too much expense due to transaction costs. You can determine how much is too much by comparing candidate funds with those that are only investing in highly liquid, large company stocks. Why it is easier for U.S. and Canadian couch potatoes It will be easier to find two good funds, at lower cost, if one is investing in a country with sizable markets and its own currency. That's why the Couch Potato strategy lends itself most naturally to the U.S.A, Canada, Japan and probably Australia, Brazil, South Korea and possibly Mexico too. In Europe, pre-EU, any of Germany, France, Spain, Italy or the Scandinavian countries would probably have worked well. The only concern would be (possibly) higher equity transactions costs and certainly larger fixed-income buy-sell spreads, due to smaller and less liquid markets other than Germany. These costs would be experienced by the portfolio manager, and passed on to you, as the investor. For the EU couch potato Remember the criteria, especially part 2, and the intent as described by the Couch Potato name, implying extremely passive investing. You want to choose two funds offered by very stable, reputable fund management companies. You will be re-balancing every six months or a year, only. That is four transactions per year, maximum. You don't need a lot of interaction with anyone, but you DO need to have the means to quickly exit both sides of the trade, should you decide, for any reason, that you need the money or that the strategy isn't right for you. I would not choose an ETF from iShares just because it is easy to do online transactions. For many investors, that is important! Here, you don't need that convenience. Instead, you need stability and an index fund with a good reputation. You should try to choose an EU based fund manager, or one in your home country, as you'll be more likely to know who is good and who isn't. Don't use Vanguard's FTSE ETF or the equivalent, as there will probably be currency and foreign tax concerns, and possibly forex risk. The couch potato strategy requires an emphasis on low fees with high quality funds and brokers (if not buying directly from the fund). As for type of fund, it would be best to choose a fund that is invested in mostly or only EU or EEU (European Economic Union) stocks, and the same for bonds. That will help minimize your transaction costs and tax liability, while allowing for the sort of broad diversity that helps buy and hold index fund investors.\"", "title": "" }, { "docid": "e2264034eb9a7ad96ed4c5f0cbdc32db", "text": "All mutual funds disclose their investments, funds are large cap only or midcsp etc. So it depends on what funds you choose.", "title": "" }, { "docid": "fabea6350f01303b2b65be7350ad13c9", "text": "Also, when they mean SP500 fund - it means that fund which invests in the top 500 companies in the SP Index, is my understanding correct? Yes that is right. In reality they may not be able to invest in all 500 companies in same proportion, but is reflective of the composition. I wanted to know whether India also has a company similar to Vanguard which offers low cost index funds. Almost all mutual fund companies offer a NIFTY index fund, both as mutual fund as well as ETF. You can search for index fund and see the total assets to find out which is bigger compared to others.", "title": "" }, { "docid": "b677b2d0d99879a1ad3cf2e40d13b37a", "text": "Try this as a starter - my eBook served up as a blog (http://www.sspf.co.uk/blog/001/). Then read as much as possible about investing. Once you have money set aside for emergencies, then make some steps towards investing. I'd guide you towards low-fee 'tracker-style' funds to provide a bedrock to long-term investing. Your post suggests it will be investing over the long-term (ie. 5-10 years or more), perhaps even to middle-age/retirement? Read as much as you can about the types of investments: unit trusts, investment trusts, ETFs; fixed-interest (bonds/corporate bonds), equities (IPOs/shares/dividends), property (mortgages, buy-to-let, off-plan). Be conservative and start with simple products. If you don't understand enough to describe it to me in a lift in 60 seconds, stay away from it and learn more about it. Many of the items you think are good long-term investments will be available within any pension plans you encounter, so the learning has a double benefit. Work a plan. Learn all the time. Keep your day-to-day life quite conservative and be more risky in your long-term investing. And ask for advice on things here, from friends who aren't skint and professionals for specific tasks (IFAs, financial planners, personal finance coaches, accountants, mortgage brokers). The fact you're being proactive tells me you've the tools to do well. Best wishes to you.", "title": "" }, { "docid": "2b61c5a5c10181068fa87709c6c4ddf5", "text": "Just sticking to equities: If you are investing directly in a share/stock, depending on various factors, you may have picked up a winner or to your dismay a loser. Say you just have Rs 10,000/- to invest, which stock would you buy? If you don't know, then it’s better to buy a Mutual Fund. Now if you say you would buy a few of everything, then even to purchase say Rs 5000/- worth of each stock in the NIFTY Index [50 companies] you would require at least an investment of 250,000/-. When you are investing directly you always have to buy in whole numbers, i.e. you can't buy 1/2 share or 1.6 share of some stock. The way Mutual funds work is they take 10,000 from 250 people and invest in all the stocks. There are fund managers who's job is to pick good stocks, however even they cannot predict winners all the time. Normally a few of the picks become great winners, most are average, and a few are losers; this means that overall your returns are average VS if you had picked the winning stock. The essential difference between you investing on your own and via mutual funds are: It is good to begin with a Mutual Fund, and once you start understanding the stocks better you can invest directly into the equities. The same logic holds true for Debt as well.", "title": "" }, { "docid": "2c163002346e1c9b0d7922bbf4de10d4", "text": "I wrote about this a while back: http://blog.investraction.com/2006/10/mutual-funds-dividend-option-or-growth.html In short: Growth options of a mutual fund scheme don't pay out any money, they reinvest the dividend they receive. Dividend options pay out some money, at different intervals, based on the surplus they accumulate. In India, the options have very similar underlying portfolios, so HDFC Equity Fund (Growth) and HDFC Equity Fund (dividend) will have the same percentage allocation to each stock. Update: I also have a video you might want to see on the subject: http://www.youtube.com/watch?v=Bx8QtnccfZk", "title": "" }, { "docid": "5a9e3e301321b3674f2d82b887ba6c30", "text": "\"Comparing index funds to long-term investments in individual companies? A counterintuitive study by Jeremy Siegel addressed a similar question: Would you be better off sticking with the original 500 stocks in the S&P 500, or like an index fund, changing your investments as the index is changed? The study: \"\"Long-Term Returns on the Original S&P 500 Companies\"\" Siegel found that the original 500 (including spinoffs, mergers, etc.) would do slightly better than a changing index. This is likely because the original 500 companies take on a value (rather than growth) aspect as the decades pass, and value stocks outperform growth stocks. Index funds' main strength may be in the behavior change they induce in some investors. To the extent that investors genuinely set-and-forget their index fund investments, they far outperform the average investor who mis-times the market. The average investor enters and leaves the market at the worst times, underperforming by a few percentage points each year on average. This buying-high and selling-low timing behavior damages long-term returns. Paying active management fees (e.g. 1% per year) makes returns worse. Returns compound on themselves, a great benefit to the investor. Fees also compound, to the benefit of someone other than the investor. Paying 1% annually to a financial advisor may further dent long-term returns. But Robert Shiller notes that advisors can dissuade investors from market timing. For clients who will always follow advice, the 1% advisory fee is worth it.\"", "title": "" }, { "docid": "86c1bcb98e6af91a34fe1bf92c8b26c3", "text": "Like azam pointed out, fundamentally you need to decide if the money invested elsewhere will grow faster than the Interest you are paying on the loan. In India, the safe returns from Fixed Deposits is around 8-9% currently. Factoring taxes, the real rate of return would be around 6-7%. This is less than what you are paying towards interest. The PPF gives around 9% with Tax break [if there are no other options] and tax free interest, the real return can be as high as 12-14%. There is a limit on how much you can invest in PPF. However this looks higher than your average interest. The stock markets in long term [7 Years] averages give you around 15% returns, but are not predictable year to year. So the suggest from azam is valid, you would need to see what are the high rate of interest loans and if they accept early repayment, you should complete it ASAP. If there are loans that are less than average, say in the range of 7-8%, you can keep it and pay as per schedule.", "title": "" }, { "docid": "bab6ea73a159b162acf0efe1a8be6b24", "text": "\"The answer to your question depends very much on your definition of \"\"long-term\"\". Because let's make something clear: an investment horizon of three to six months is not long term. And you need to consider the length of time from when an \"\"emergency\"\" develops until you will need to tap into the money. Emergencies almost by definition are unplanned. When talking about investment risk, the real word that should be used is volatility. Stocks aren't inherently riskier than bonds issued by the same company. They are likely to be a more volatile instrument, however. This means that while stocks can easily gain 15-20 percent or more in a year if you are lucky (as a holder), they can also easily lose just as much (which is good if you are looking to buy, unless the loss is precipitated by significantly weaker fundamentals such as earning lookout). Most of the time stocks rebound and regain lost valuation, but this can take some time. If you have to sell during that period, then you lose money. The purpose of an emergency fund is generally to be liquid, easily accessible without penalties, stable in value, and provide a cushion against potentially large, unplanned expenses. If you live on your own, have good insurance, rent your home, don't have any major household (or other) items that might break and require immediate replacement or repair, then just looking at your emergency fund in terms of months of normal outlay makes sense. If you own your home, have dependents, lack insurance and have major possessions which you need, then you need to factor those risks into deciding how large an emergency fund you might need, and perhaps consider not just normal outlays but also some exceptional situations. What if the refrigerator and water heater breaks down at the same time that something breaks a few windows, for example? What if you also need to make an emergency trip near the same time because a relative becomes seriously ill? Notice that the purpose of the emergency fund is specifically not to generate significant interest or dividend income. Since it needs to be stable in value (not depreciate) and liquid, an emergency fund will tend towards lower-risk and thus lower-yield investments, the extreme being cash or the for many more practical option of a savings account. Account forms geared toward retirement savings tend to not be particularly liquid. Sure, you can usually swap out one investment vehicle for another, but you can't easily withdraw your money without significant penalties if at all. Bonds are generally more stable in value than stocks, which is a good thing for a longer-term portion of an emergency fund. Just make sure that you are able to withdraw the money with short notice without significant penalties, and pick bonds issued by stable companies (or a fund of investment-grade bonds). However, in the present investment climate, this means that you are looking at returns not significantly better than those of a high-yield savings account while taking on a certain amount of additional risk. Bonds today can easily have a place if you have to pick some form of investment vehicle, but if you have the option of keeping the cash in a high-yield savings account, that might actually be a better option. Any stock market investments should be seen as investments rather than a safety net. Hopefully they will grow over time, but it is perfectly possible that they will lose value. If what triggers your financial emergency is anything more than local, it is certainly possible to have that same trigger cause a decline in the stock market. Money that you need for regular expenses, even unplanned ones, should not be in investments. Thus, you first decide how large an emergency fund you need based on your particular situation. Then, you build up that amount of money in a savings vehicle rather than an investment vehicle. Once you have the emergency fund in savings, then by all means continue to put the same amount of money into investments instead. Just make sure to, if you tap into the emergency fund, replenish it as quickly as possible.\"", "title": "" }, { "docid": "0ef2333f4c4257d4aefca364d3906bda", "text": "What explains the most of the future returns of a portfolio is the allocation between asset classes. In the long term, stock investments are almost certain to return more than any other kinds of investments. For 40+ years, I would choose a portfolio of 100% stocks. How to construct the portfolio, then? Diversification is the key. You should diversify in time (don't put a large sum of money into your stock portfolio immediately; if you have a large sum to invest, spread it around several years). You should diversify based on company size (invest in both large and small companies). You should also diversify internationally (don't invest in just US companies). If you prefer to pick individual stocks, 20 very carefully selected stocks may provide enough diversification if you keep diversification in mind during stock picking. However, careful stock picking cannot be expected to yield excess returns, and if you pick stocks manually, you need to rebalance your portfolio occasionally. Thus, if you're lazy, I would recommend a mutual fund, or many mutual funds if you have difficulty finding a low-cost one that is internationally diversified. The most important consideration is the cost. You cannot expect careful fund selection to yield excess returns before expenses. However, the expenses are certain costs, so prefer low-cost funds. Almost always this means picking index funds. Avoid funds that have a small number of stocks, because they typically invest only in the largest companies, which means you fail to get diversification in company size. So, instead of Euro STOXX 50, select STOXX 600 when investing to the European market. ETFs may have lower costs than traditional mutual funds, so keep ETFs in mind when selecting the mutual funds in which to invest. For international diversification, do not forget emerging markets. It is not excessive to invest e.g. 20% to emerging markets. Emerging markets have a higher risk but they also have a higher return. A portfolio that does not include emerging markets is not in my opinion well diversified. When getting close to retirement age, I would consider increasing the percentage of bonds in the portfolio. This should be done primarily by putting additional money to bonds instead of selling existing investments to avoid additional taxes (not sure if this applies to other taxation systems than the Finnish one). Bond investments are best made though low-cost mutual funds as well. Keep bond investments in your local currency and risk-free assets (i.e. select US government bonds). Whatever you do, remember that historical return is no guarantee of future return. Actually, the opposite may be true: there is a mean reversion law. If a particular investment has returned well in the past, it often means its price has gone up, making it more likely that the price goes down in the future. So don't select a fund based on its historical return; instead, select a fund based on low costs. However, I'm 99% certain that over a period of 40 years, stocks will return better than other investments. In addition to fund costs, taxes are the other certain thing that will be deducted from your returns. Research what options you have to reduce the taxes you need to pay. 401-K was explained in another answer; this may be a good option. Some things recommended in other answers that I would avoid:", "title": "" }, { "docid": "0ca8c9cd5fd73338e945a55f35705d55", "text": "There aren't and for a good reason. The long term trend of INR against USD, GBP, EUR and other harder currencies is down. Given the inflation differential between these economies and India's, fund managers and investors should expect this to continue. Therefore, if you are invested for any reasonable length of time, you would expect the forex movements to add to your returns. Historically, this has been true of international funds run in India.", "title": "" }, { "docid": "bdcbdebfa75cc61181f0c0a5d5767a76", "text": "I think small sums invested regularly over long-term can do good for you, things to consider: I would go with an index fund and contribute there there regularly.", "title": "" } ]	fiqa
5c1793eeab23fe1bd2280d65aedb0400	Home Renovations are expensive.. Should I only pay cash for them?	[ { "docid": "d9b8abd78e3dd7d99c99b5fab751df55", "text": "Is it a safety thing? If the heat pump goes out you replace it immediately, if your floor looks bad but you aren't tripping, I would suggest saving. Use the extra time to find a great deal and educate yourself on your options. Maybe even take a class and learn to do it yourself. In these rough times, anything I can save for and pay cash I would. The exception is if you can finance with 0% interest for a period of time and you have enough money to pay that off. The last consideration I can think of is if you plan to sell the home soon? For that you might be getting more value than the loan and a real estate agent would be probably know best.", "title": "" }, { "docid": "6ea45300bb23e354de840d21835271d0", "text": "I agree with MrChrister about first considering how necessary the renovations are (is it a nice-to-have, or a need-to-have?), as well as the importance of consulting a Realtor, if you are selling your home, as they will advise you wisely. For instance, they might advise you to replace the linoleum with a neutral beige ceramic tile, as you would be assured a better resale value on your dollar spent, than if you were to replace the old linoleum with new linoleum (or laminate). There are many types of renovations that simply don't pay off, and others that do provide good return-on-investment (like intelligent kitchen and bathroom updates). I found this ROI grid at lendingmax.ca (which is pretty consistent with what I remember reading in the Toronto Star this spring): Top 10 Renovations ~ Average return on investment Painting and interior decorating = 73% Kitchen renovations = 72% Bathroom renovations = 68% Exterior painting = 65% Flooring upgrades = 62% Window/door replacement = 57% Family room addition = 51% Fireplace addition = 50% Basement renovation = 49% Furnace/heating updating = 48% If you are selling your home, and your Realtor has suggested improvements, they are probably necessary, and not doing them might serve as an impediment to quickly selling your home - so factor in the (potential) costs of carrying your home for additional weeks/months, or worse, overlapping mortage costs, if it takes your home longer to sell, and you end up owning two homes simultaneously for a bit. As far as your question (should you pay cash for renos or take out a loan), one factor to consider if you live in Canada is the Home Renovation Tax Credit, which applies to renos that take place until Feb 1, 2010, and can deduct up to $1,350. So if you have to do a reno and yours qualifies for this tax credit, and you won't have the cash before that deadline, factor in the cost of borrowing vs. the $1,350. Good luck!", "title": "" }, { "docid": "496fe734d76e547e1454ccf9b27b422e", "text": "I have a different take on this. If it would only take 3 months to save up to pay for it, line up the work now. Shop with your spouse to find the exact floor you want. By the time you hire the store to do the install, a month will have gone by, by the time the charge bill comes in, you'll be able to pay 2/3 off, and pay in full next month. Note: I see this was asked in December. For those carrying no debt at all, I'm not adverse to a purchase of this type getting partially floated on a credit card for a month or two. Not a pair of shoes, or golf clubs, but a kitchen floor? The $10 interest is worth it to not walk over a ripped up floor in your home.", "title": "" }, { "docid": "be890938a706654068b3fe6ac2d26e54", "text": "\"It depends on your situation. If your floor is broken, fix it. If you don't have $1,000 on hand, spend appropriately. It seems silly to be doing ROI calculations on the potential impact on resale value. It's sillier to blow money frivolously, whether you do so with cash or credit. I'm assuming that if you have a broken linoleum floor that the kitchen isn't new, so it doesn't make sense to install your \"\"dream tile\"\" into the kitchen. Skip the imported travertine or wood and buy some nice linoleum and hire a handyman to put it in or install it yourself. You can probably do this for $500-700. If you have longer term plans for the kitchen, get them on paper and figure out what exactly you want to do and when you'll be able to do it.\"", "title": "" }, { "docid": "19a5c1b6cfacdb7b8407acfbf381879d", "text": "I know that both Lowes and Home Depot (in Canada at least) will offer a 6 month deferred interest payment on all purchases over a certain dollar amount (IIRC, $500+), and sometimes run product specific 1 year deferred interest specials. This is a very effective way of financing renovations. Details: You've probably seen deferred interest -- It's very commonly used in furniture sales (No money down!!! No interest!!! Do not pay for 1 full year!!!) (Personally, I think it's a plot by the exclamation point manufacturers) It works like this: Typically, I manage these types of purchases by dividing the principal by 6, and then adding 5%, and paying that amount each month. Pay close attention to the end date, because you do not want to pay 22% interest on the entire amount. This also requires that you watch your card balance carefully. All payments are usually put to current purchases (i.e. those not under a plan) first, before they are applied to the plan balance. So if you are paying 250 a month on the new floor, and run up another $150 on paint, You need to pay the entire new balance, and then the $250 floor payment in order for it to be applied correctly. Also <shameless plug> http://diy.stackexchange.com </shameless plug> Consider doing it yourself.", "title": "" } ]	[ { "docid": "b1ae53e903a5955b47aa807081d4f512", "text": "You don't have to make the repairs, if they're just cosmetic. The insurance company doesn't care if your house looks good or not. On the other hand, if the repairs are structurally necessary to prevent water damage to the house, not making them may result in the company raising your rate or not renewing the policy due to the increased risk. You can try asking your agent if you can get a ruling on that now, before deciding whether to spend the money. And of course if you don't do it, they may not count this damage toward your deductible for future damage this year.", "title": "" }, { "docid": "ea3ea3129f15b84ea28c22db042b4d55", "text": "\"It very much comes down to question of semantics and your particular situation. Some people do not view a house (and most upgrades) as an investment, but rather an expense. I certainly agree that this is probably the case if you pay someone else to make the repairs and upgrades. However, if you are a serious DIYer, that may not be the case. Of course, if the house is a money pit and/or you were unfortunate to buy when prices where ridiculously high, you'll have a hard time making any money on this \"\"investment.\"\" To continue this game of semantics, you may also consider the value you extract from your home while you are living in it. On to the mortgage itself. Chances are that it is a long term, relatively low rate loan and that the interest is deductible. So, there are some disadvantages to paying it down early, even without early payment penalties. Paying down early on the principal is a disadvantage from a tax perspective. How much of a disadvantage hinges on the rate. Now, a debt is a liability on your personal balance sheet. It drags down any returns you may have from investing. However, a home lone is not generally subject to the cardinal rule of paying off your high interest debt before investing. It should not be relatively high and it pays for something necessary. It may be that any credit card debt you have may have paid for something considered necessary. However, with the relatively high interest rates, you have to question just how necessary any credit card debt really is. Not to mention that there is no tax advantage. So, it comes down to the fact that a home loan should be relatively low interest, paying for something you must have and that you hopefully have some tax advantage from the interest you pay on it.\"", "title": "" }, { "docid": "f1877663f1e751238a9a0105861d6747", "text": "\"Have you ever tried adding up all your mortgage payments over the years? That sum, plus all the money that you put as a down payment (including various fees paid at closing) plus all the repair and maintenance work etc) is the amount that you have \"\"invested\"\" in your house. (Yes, you can account for mortgage interest deductions if you like to lower the total a bit). Do you still feel that you made a good \"\"investment\"\"?\"", "title": "" }, { "docid": "adca10f72ab03c9efe930221c39dcd68", "text": "As a general rule of thumb, and assuming you have a choice, my advice is to pay cash for things things that depreciate, expenses, and consumables. Consider credit (even if you have cash) for things that will appreciate in value or generate cash flow. That is, use credit as leverage.", "title": "" }, { "docid": "4611b10dcda9bdcf2a448ddfd061e57b", "text": "http://www.consumerismcommentary.com/buying-house-with-cash/ It looks like you can, but it's a bad idea because you lack protection of a receipt, there's no record of you actually giving the money over, and the money would need to be counted - bill by bill - which increases time and likelihood of error. In general, paying large amounts in cash won't bring up any scrutiny because there's no record. How can the IRS scrutinize something that it can't know about? Of course, if you withdraw 200k from your bank account, or deposit 200k into it then the government would know and it would certainly be flagged as suspicious.", "title": "" }, { "docid": "83ca3111536cc207caff9c31882d4746", "text": "Don't buy a house as an investment; buy it if/because it's the housing you want to live in. Don't improve a house as an investment; improve it if/because that makes it more comfortable for you to live in it. It's a minor miracle when a home improvement pays back anything close to what it cost you, unless there are specific things that really need to be done (or undone), or its design has serious cosmetic or functional issues that might drive away potential buyers. A bit of websearching will find you much more realistic estimates of typical/average payback on home improvements. Remember that contractors are tempted to overestimate this. (The contractor I've used, who seems to be fairly trustworthy, doesn't report much more than 60% for any of the common renovations. And yes, that's really 60%, not 160%.)", "title": "" }, { "docid": "c2a5a0971e352bc083b87a6b8757baa0", "text": "A lot of people do this. For example, in my area nice townhouses go for about $400K, so if you have $80,000 you can buy one and rent it. Here are the typical numbers: So you would make $350 per month or $4,200 per year on $80,000 in capital or about 5% profit. What can go wrong: (1) The property does not rent and sits vacant. You must come up with $2100 in mortgage payments, taxes, and insurance every month without fail or default. (2) Unexpected expenses. A new furnaces costs over $5,000. A new roof costs $7,000. A new appliance costs $600 to $2000 depending on how upscale your property is. I just had a toilet fixed for a leaky plunger. It cost me $200. As you can see maintenance expenses can quickly get a lot higher than the $50 shown above... and not only that, if you fix things as cheaply as possible (as most landlords do), not only does that decrease the rentability of the property, but it causes stuff to break sooner. (3) Deadbeats. Some people will rent your property and then not pay you. Now you have a property with no income, you are spending $2100 per month to pay for it, AND you are facing steep attorney fees to get the deadbeats evicted. They can fight you in court for months. (4) Damage, wear and tear. Whenever a tenant turns over there is always a lot of broken or worn stuff that has to be fixed. Holes in the wall need to be patched. Busted locks, broken windows, non-working toilets, stains on the carpet, stuck doors, ripped screens, leaky showers, broken tiles, painting exterior trim, painting walls, painting fences, etc. You can spend thousands every time a tenant changes. Other caveats: Banks are much more strict about loaning to non home owners. You usually have to have reserve income. So, if you have little or no income, or you are stretched already, it will be difficult to get commercial loans. For example, lets say your take-home pay is $7,000 and you have no mortgage at all (you rent), then it is fine, the bank will loan you the money. But lets say you only have $5,000 in take home pay and you have an $1,800 mortgage on your own home. In that case it is very unlikely a bank will allow you to assume a 2nd mortgage on a rental property. The more you try to borrow, the more reserve income the bank will require. This tends to set a limit on how much you can leverage.", "title": "" }, { "docid": "0574b5b0f9213013d170ade61b82d319", "text": "Thinking of personal residence as investment is how we got the bubble and crash in housing prices, and the Great Recession. There is no guarantee that a house will appreciate, or even retain value. It's also an extremely illiquid item; selling it, especially if you're seeking a profit, can take a year or more. ' Housing is not guaranteed to appreciate constantly, or at all. Tastes change and renovations rarely pay for themselves. Things wear out and have costs. Neighborhoods change in popularity. Without rental income and the ability to write off some of the costs as business expense, it isn't clear the tax advantage closes that gap, especislly as the advantage is limited to the taxes upon your mortgage interest (by deducting that from AGI). If this is the flavor of speculation you want to engage in, fine, but I've seen people screw themselves over this way and wind up forced to sell a house for a loss. By all means hope your home will be profitable, count it as part of your net wealth... but generally Lynch is wrong here, or at best oversimplified. A house can be an investment (or perhaps more accurately a business), or your home, but -- unless you're renting out the other half of a duplex,which splits the difference -- trying to treat it as both is dangerous accounting.", "title": "" }, { "docid": "6d09b61ab6d61fdb6887e63da5e32dd0", "text": "In addition to the other answers, I think you would also need to account for the increased utility and maintenance costs on the more expensive house. Typically it is recommended to budget 1% to 4% the cost of the home per year for routine maintenance. While it likely won't cost that much every year, you will have those expensive items come up (e.g. roof, HVAC) that come up periodically. The larger house will also cost more to heat/cool. Depending on where you live could also have increased property taxes.", "title": "" }, { "docid": "b4876ec990aeffc73f930342475d27ef", "text": "\"As I understand your scenario, you paid the contractor twice for cabinets - Once by paying the $20k in cash on the original contract and once \"\"in-kind\"\" by providing the cabinets yourself. The $20k that you got from the contractor is not income to you, it's just a refund of your overpayment. I don't think you need to report that at all. Just make sure that you can document that the check that you got back from the contractor matches what you paid for the cabinets and keep that record.\"", "title": "" }, { "docid": "cf81a4ba6b9b12171f818ca09c08f24a", "text": "Yes. As a general case, insurance proceeds are repaying you for the damage that you have already incurred, not specifically for fixing anything. Since you have the legal right to sell the house as-is, without fixing it up at all, then you have the legal right to spend the insurance proceeds how you see fit. You can upgrade, downgrade, alter or replace your deck in any reasonable way... or do nothing. You should call your agent and make sure that there is nothing unusual in your policy, but this kind of homeowner decision - what materials or methods to fix damage to a home... is very normal and unremarkable, so your agent will probably reassure you and end the conversation without a second's thought.", "title": "" }, { "docid": "1018d9e6c1f99370dcffd85bd768bfaf", "text": "To your secondary question: Appropriately consider all estimated numbers involved with keeping the house compared to your closest estimate of what the home could sell for. Weigh out the pros and cons yourself as a stranger will not be able to 100% appreciate what you value and dislike. Remember to include insurances, taxes, HOA(s), and the actual mortgage payment. Depending on how you also plan to rent out the property, include whichever utilities you intend to cover (if any). There will also be costs for property management and upkeep as things will break overtime and tenants will not hesitate to get you (or your management) to fix them, either way that means you are paying. I would also keep in mind while homes typically appreciate in value there is a higher risk with tenants for the value to depreciate to damages and poor upkeep. There are increased legal risks to renting, so be sure you have properly vetted whichever management you are going with. In extreme circumstances you also could be required to retain an attorney to defend yourself again litigation because whichever management team you hire will most likely defend themselves and not include you in that umbrella. My family lives in the LA area as well and a judge refused to throw out an obvious frivolous suit when my parents attempted to rent out a house. The possible renters after signing the main paperwork never showed to finish a second set of documents for renting. Parents immediately declined to rent to these people as they missed something so important without any explanation and they sued claiming racism, emotional damages, and some other really crazy things despite my parents never having met them (first meeting was between property management and renters only). Personally and professionally, I would only suggest renting our the place and not selling if you can turn a profit after all the above mentioned costs. If renters are only paying to keep the property in the black you have yourself a non-earning asset which WILL be damaged over time and require repairs which will come out of your pocket. Also, while the property is unoccupied you also must remember it is not earning at that time. Much of this may sound obvious, overcautious, etc... I simply wish to provide my family's experience to help you in making your decisions. Best of luck with your endeavor. Edit: Also, you will be required to report all earned rental income on your taxes. They will fall under the Schedule E and possibly K-1 area. I would strongly recommend consulting with an actual accountant about the impacts to you.", "title": "" }, { "docid": "8a5910dfd7a8290d95d7df43662ed349", "text": "\"Good debt is very close to an oxymoron. People say student loans are \"\"good debt,\"\" but I beg to differ. The very same \"\"good debt\"\" that allowed me to get an education is the very same \"\"bad debt\"\" that doesn't allow me to take chances in my career - meaning, I would prefer to have a 'steady' job over starting a business. (That's my perogative, of course, but I am not willing to take that 'risk.' /endtangent @Harmanjd provided the two really good reason for using cash over borrowing. We have a tendency in this culture to find reasons to borrow. It is better for you to make a budget, based on what you want, and save up for it. Make a \"\"dream list\"\" for what you want, then add up the costs for everything. If that number makes your head hurt, start paring down on things you 'want.' Maybe you install just a wine cooler instead of a wine cooler and a beer tap, or vice-versa. And besides, if something comes up - you can always stop saving money for this project and deal with whatever came up and then resume saving when you're done. Or in the case of the kitchen, maybe you do it in stages: cabinets one year, countertops the next, flooring the year after that, and then the appliances last. You don't have to do it all at once. As someone who is working toward debt freedom, it feels nice whenever we have one less payment to budget for every month. Don't burden yourself to impress other people. Take your time, get bids for the things you can't (or won't) do yourself, and then make a decision that's best for your money.\"", "title": "" }, { "docid": "2ea4c5645f9501efe06d56633977f905", "text": "Keep in mind, there are times that house is in such bad shape that it's going to need 6 months of renovations, in which case you might ask the town if they are willing to reappraise a lower value until the work is completed. Keep in mind, you'll get a new appraisal when permitted (I mean pulling a permit from the town) work is done. I finished my basement and the town was eager to send the appraiser over even before work was fully complete.", "title": "" }, { "docid": "832437bac388e9144d8a839979a40ee4", "text": "I have had this happen a couple of times because of splits or sales of portions of the company. The general timeline was to announce how the split was to be handled; then the split; then a freeze in purchasing stock in the other company; then a freeze in sales; followed by a short blackout period; then the final transfers to funds/options/cash based on a mapping announced at the start of the process. You need to answer two questions: To determine if the final transactions will make the market move you have to understand how many shares are involved compared to the typical daily volume. There are two caveats: professional investors will be aware of the transaction date and can either ignore the employee transactions or try and take advantage of them; There may also be a mirroring set of transactions if the people left in the old company were awarded shares in your company as part of the sale. If you are happy with the default mapping then you can do nothing, and let the transaction happen based on the announced timeline. It is easy, and you don't have to worry about deadlines. If you don't like the default mapping then you need to know when the blackout period starts, so you don't end up not being able to perform the steps you want when you want. Timing is up to you. If the market doesn't like the acquisition/split it make make sense to make the move now, or wait until the last possible day depending on which part they don't like. Only you can answer that question.", "title": "" } ]	fiqa
13d5ceb618c55745ab58f5b38e54a409	Do banks give us interest even for the money that we only had briefly in our account?	[ { "docid": "f4e568fc53ff5d53ffd4f2074cb925a0", "text": "It depends on your bank's terms (which may in turn be influenced by laws and regulations), but most banks calculate interest on a per-day basis, so if you leave the money in the account for more than a day, it will generate interest. However, it will most likely be so little that you could make more money doing any kind of paid work in the time it took you to write this question...", "title": "" }, { "docid": "c60dde0bae237546b457df7b10b7b21c", "text": "Ditto @MichaelBorgwardt Just to get concrete: I just checked one bank in India and they say they are paying 4% on savings accounts. I don't know what you're getting or if 4% is typical in India, but it's at least an example. So if the bank pays interest based on average daily balance, and you left the money in the bank for a week, you'd get 4%/52 = .077%. So on Rs 95,000 that would be Rs 73. I live in the US where typical interest on a savings account today is about 1%. So an equivalent amount of money -- I think that would be about $1,500 -- would get 1/52 of 1%, or 29 cents. Don't leave the lights turned on while you do the calculations -- you'll spend more on the electricity than you make on the interest. :-) Addendum This suddenly reminds me ... I read a news story a few years ago about a man who was expecting a tax refund check from the IRS of a few hundred dollars, and when the check arrived it was for several million. Well obviously it was a mistake. But he came up with the clever idea: Deposit the check in an interest-bearing account. Promptly contact the IRS, inform them of the mistake, and ask how and where to go about returning the money. Hope that it takes at least a few days for them to figure everything out. Then keep the interest accumulated on the several-million dollars for the time that he had the money. And as he contacted them immediately about the error, they can't say he was trying to hide anything. It was a nice try, but it didn't work. They demanded he send them the interest as well as the principle.", "title": "" }, { "docid": "ef92c1f698fd5fa533b56b8173b2ba98", "text": "As mentioned in other answers the interest you make is negligible and the calculations would depend on the bank. In saying that the general trend is calculate daily, pay monthly. A typical scenario would be that every night at midnight the interest for your account at that point in time is calculated. This occurs every midnight and at the end of the month the sum of those calculations will be added to your account. You could have had several significant transactions pass through your account in one day although if the interest is calculated at a specific point in time some transactions may not contribute to any interest. These calculations are worth thinking about, even in circumstances of negligible returns, as it could assist when considering combining credit cards with home loan offset accounts so it is not a complete waste of time to understand how interest is calculated. The more you know ;)", "title": "" }, { "docid": "e0532cf8aba4e70d88b2af5a8db5b421", "text": "\"The other answers demonstrate that you'll receive a paltry amount of money in two days, by comparing to things like wages, the cost of electricity, etc. But the real point is you're incurring risk by paying late, in particular, the realistic risk of the post office messing up. That's not worth it, and it's this kind of overhead that people usually mess up when trying to optimize their finances. (More commonly, it's \"\"I can save 5 cents by doing this, but there's about a 400% chance I'm going to mess everything else up since I don't have infinite mental bandwidth). You asked a good and important question, but for your actual situation I must emphasize it's terrible personal finance to risk dropping your books for a superficial optimization.\"", "title": "" } ]	[ { "docid": "22f0bf466653652cd2727314a799604c", "text": "Very little, as you expected. The CD locks the rate in, meaning you get the rate for sure. The savings account can change any day, so it could fall below the CD's rate. Chances are small, obviously, but it is theoretically possible. If you pay attention, if this happens, you could simply moving it to a CD then (if it is still offered). People with little understanding that want 'security' might be suckered into buying a CD; or there could be versions offered where all the interest comes on the last day (so you delay taxes).", "title": "" }, { "docid": "eeac29631c2021c0a70d03a09c16d73b", "text": "Most 0% interest loans have quite high interest rates that are deferred. If you are late on a payment you are hit with all the deferred interest. They're banking on a percentage of customers missing a payment. Also, this is popular in furniture/car sales because it's a way to get people to buy who otherwise wouldn't, they made money on the item sale, so the loan doesn't have to earn them money (even though some will). Traditional banks/lenders do make money from interest and rely on that, they would have to rely on fees if interest were not permitted.", "title": "" }, { "docid": "033cc75052b075d066d1a2b1420dfe42", "text": "\"This will happen automatically when you open an interest-bearing account with a bank. You didn't think that banks just kept all that cash in a vault somewhere, did you? That's not the way modern banking works. Today (and for a long, long time) banks will keep only a small fraction of their deposits on hand (called the \"\"reserve\"\") to fund daily withdrawals and other operations. The rest they routinely lend out to other customers, which is how they pay for their operations (someone has to pay all those tellers, branch managers, loan officers) and pay interest on your deposits, as well as a profit for their owners (it's not a charity service). The fees charged for loan origination, as well as the difference between the loan interest rate and the deposit rate, make up the profit. Banks rarely hold their own loans. Instead, they will sell the loans in portfolios to investors, sometimes retaining servicing rights (they continue to collect the payments and pass them on) and sometimes not (the payments are now due to someone else). This allows them to make more loans. Banks may sometimes not have enough capital on hand. In this case, they can make inter-bank loans to meet their short-term needs. In some cases, they'll take those loans from a government central bank. In the US, this is \"\"The Fed\"\", or the Federal Reserve Bank. In the US, back around the late 1920's, and again in the 1980's some banks experienced a \"\"run\"\", or a situation where people lost confidence in the bank and wanted to withdraw their money. This caused the bank to have insufficient funds to support the withdrawals, so not everyone got their money. People panicked, and others wanted to take their money out, which caused the situation to snowball. This is how many banks failed. (In the '80s, it was savings-and-loans that failed - still a kind of \"\"bank\"\".) Today, we have the FDIC (Federal Deposit Insurance Corporation) to protect depositors. In the crashes in the early 2000's, many banks closed up one night and opened the next in a conservatorship, and then were literally doing business as a new bank without depositors (necessarily) even knowing. This protected the consumers. The bank (as a company) and its owners were not protected.\"", "title": "" }, { "docid": "c19193e24bda7e5901b24d261c9f47e6", "text": "What is much more likely is immediate or close to immediate investment. but this is exactly my point of contention with how they do things. I know for a fact that the money is immediately invested, which is why i find it wrong that interest for money collected in a given financial year is announced after the end of the next financial year. i was wondering if this was a common practice in other countries.", "title": "" }, { "docid": "818145ff77d44ceac220a0c1f13d4f20", "text": "NO. The legislation requires the landlord to deposit it in a bank. Check out pages 7-10 of the linked document. There is no mention of interest. The second clause, I believe, is probably for large landlords who hold hundreds of thousands of dollars of security. http://www.legislature.mi.gov/documents/publications/tenantlandlord.pdf Q4 Once collected, what must the landlord do with the security deposit? The landlord must either: a) Deposit the money with a regulated financial institution (e.g., bank), OR b) Deposit a cash bond or surety bond, to secure the entire deposit, with the Secretary of State. ( Note: If the landlord does this, he or she may use the money at any time, for any purpose.) The bond ensures that there is money available to repay the tenant’s security deposit", "title": "" }, { "docid": "b2df7330af4b3b2e7c527eca5d177db4", "text": "\"As to where the interest comes from: The same place it comes from in other kinds of savings accounts. The bank takes the money you deposit and invests it elsewhere, traditionally by lending it out to others (hence the concept of a \"\"savings and loan\"\" bank). They make a profit as long as the interest they give for \"\"borrowing\"\" from you, plus the cost of administering the savings accounts and loans, is less than the interest they charge for lending to others. No, they don't have to pay you interest -- but if they didn't, you'd be likely to deposit your funds at another bank which did. Their ideal goal is to pay as little as possible without losing depositors, while charging as much as possible without losing borrowers. (yeah, I know, typo corrected) Why do they get higher interest rate than they pay you? Mostly because your deposits and interest are essentially guaranteed, whereas the folks they're lending to may be late paying or default on those loans. As with any kind of investment, higher return requires more work and/or higher risk, plus (ususally) larger reserves so you can afford to ride out any losses that do occur.\"", "title": "" }, { "docid": "a3b002ea82cb6beda3efb0966543bceb", "text": "Maybe there's more to this story, because as written, your sister seems, well, a little irrational. Is it possible that the bank will try to cheat you and demand that you pay a loan again that you've already paid off? Or maybe not deliberately cheat you, but make a mistake and lose track of the fact that you paid? Sure, it's POSSIBLE. But if you're going to agonize about that, what about all the other possible ways that someone could cheat you? What if you go to a store, hand over your cash for the purchase, and then the clerk insists that you never gave him any cash? What if you buy a car and it turns out to be stolen? What if you buy insurance and when you have a claim the insurance company refuses to pay? What if someone you've never met or even heard of before suddenly claims that you are the father of her baby and demands child support? Etc etc. Realistically, banks are fanatical about record-keeping. Their business is pretty much all about record-keeping. Mistakes like this are very rare. And a big business like a bank is unlikely to blatantly cheat you. They can and do make millions of dollars legally. Why should they break the law and risk paying huge fines and going to prison for a few hundred dollars? They may give you a lousy deal, like charge you outrageous overdraft fees and pay piddling interest on your deposit, but they're not going to lie about how much you owe. They just don't. I suggest that you not live your life in fear of all the might-be's. Take reasonable steps to protect yourself and get on with it. Read contracts before you sign, even if the other person gets impatient while you sit there reading. ESPECIALLY if the other person insists that you sign without reading. When you pay off a loan, you should get a piece of paper from the bank saying the loan has been paid. Stuff this piece of paper in a filing cabinet and keep it for years and years. Get a copy of your credit report periodically and make sure that there are no errors on it, like incorrect loan balances. I check mine once every year or two. Some people advise checking it every couple of months. It all depends how nervous you are and how much time you want to spend on it. Then get on with your life. Has your sister had some bad experience with loans in the past? Or has she never borrowed money and she's just confused about how it works? That's why I wonder if there's more to the story, if there's some basis for her fears.", "title": "" }, { "docid": "fe2367bc66ba660ff22181fc1c964140", "text": "Most cooperative banks are insured upto Rs 1,00,000/- . It depends on what is the current status of the Bank and withdrawal of the funds would be based on the decision taken by the administrator. There maybe no interest payable, it would again be decided by the administrator.", "title": "" }, { "docid": "bccb983d14f6dd4cd56803b4fd88b12c", "text": "The Bank have risk. In goods, thrre are two profiles, essentially it can be convenient and hence the usage, pay off monthly or spending future earnings today for luxury. The way cash advance is seen, emergency, ran out of cash in foreign/remote location... Debit cards not working etc. One generally needs small amount of cash. The other segment is loss of income. Essentially I have run out of cash and I need to borrow. This is additional risk and hence is limited or curtailed.", "title": "" }, { "docid": "8beada6940fcd19d31b2e64fb168897f", "text": "If so, it seems to me that this system is rather error prone. By that I mean I could easily forget to make a wire some day and be charged interests while I actually have more than enough money on the check account to pay the debt. I have my back account (i.e. chequing account) and VISA account at/from the same bank (which, in my case, is the Royal Bank of Canada). I asked my bank to set up an automatic transfer, so that they automatically pay off my whole VISA balance every month, on time, by taking the money from my bank account. In that way I am never late paying the VISA so I never pay interest charges. IOW I use the VISA like a debit card; the difference is that it's accepted at some places where a debit card isn't (e.g. online, and for car rentals), and that the money is deducted from my bank account at the end of the month instead of immediately.", "title": "" }, { "docid": "20d5a4c007d0c1bcd5bb373e553d37f3", "text": "I don't think this is a French thing. It's like this everywhere. Banks always want people to open accounts of every type. A person with a checking account should be easy to sell on a savings account at the same institution. Given that it does not appear that they will have any chance to recover the money they spend to get customers to open these accounts (there are no fees and they have to pay out the interests, even if very small) Oh, they recover it. Banks make money by having deposits that they can use to lend out. They do pay interest on deposits, but not as much as they earn on your money. If they persuade you to have a savings account in addition to your checking account, then you might find it convenient and then move your money out of a different institution into their savings account. Or you might stop hoarding it under your mattress. Or whatever. More money in their accounts means more profit for them. I don't know whether banks make more profit per dollar in savings or checking accounts. I see banks pushing for both. I think they simply view more accounts as a good thing because it can lead to more total savings in their institution. That's how they make money.", "title": "" }, { "docid": "7b000a97892cc975d572e05f9af9505f", "text": "This is very much possible and happens quite a lot. In the US, for example, promotional offers by credit card companies where you pay no interest on the balance for a certain period are a very common thing. The lender gains a new customer on such a loan, and usually earns money from the spending via the merchant fees (specifically for credit cards, at least). The pro is obviously free money. The con is that this is usually for a short period of time (longest I've seen was 15 months) after which if you're not careful, high interest rates will be charged. In some cases, interest will be charged retroactively for the whole period if you don't pay off the balance or miss the minimum payment due.", "title": "" }, { "docid": "03eefa72a1390fb78982f750e40bfd7f", "text": "Yes. In the US these are called certificates of deposit or savings accounts. Every run-of-the-mill bank offers them. You give the bank money and in return they pay you an interest rate that is some fraction of or (negative) offset from the returns they expect to make from your money. Since most investments that a bank makes (say, loaning money to a local business) are themselves based on some multiple of or (positive) offset from the prime rate, in return the interest rate that they offer you is also mathematically based on the prime rate. You can find lists of banks offering the best returns on CDs or savings accounts at sites like BankRate.", "title": "" }, { "docid": "8d9a776d08c206dacd7cec3133072133", "text": "\"With (1), it's rather confusing as to where \"\"interest\"\" refers to what you're paying and where it refers to what you're being paid, and it's confusing what you expect the numbers to work out to be. If you have to pay normal interest on top of sharing the interest you receive, then you're losing money. If the lending bank is receiving less interest than the going market rate, then they're losing money. If the bank you've deposited the money with is paying more than the going market rate, they're losing money. I don't see how you imagine a scenario where someone isn't losing money. For (2) and (3), you're buying stocks on margin, which certainly is something that happens, but you'll have to get an account that is specifically for margin trading. It's a specific type of credit with specific rules, and you if you want to engage in this sort of trading, you should go through established channels rather than trying to convert a regular loan into margin trading. If you get a personal loan that isn't specifically for margin trading, and buy stocks with the money, and the stocks tank, you can be in serious trouble. (If you do it through margin trading, it's still very risky, but not nearly as risky as trying to game the system. In some cases, doing this makes you not only civilly but criminally liable.) The lending bank absolutely can lose if your stocks tank, since then there will be nothing backing up the loan.\"", "title": "" }, { "docid": "c79f69255b4e48d9fb7c0bd8fbbedcbe", "text": "\"I'm going to assume that by \"\"register the house in my name\"\" you mean that the house is legally yours. In that case there are a number of implications, tax and otherwise. You should also be very clear with your father about what happens when the house is sold. Do you give him back what he paid for it? Does he get all the value? What happens if the value has gone down? Some of this is down to Indian law, which I know nothing about. However all of these are red flags which you should consider before doing this. This is not legal advice in any jurisdiction.\"", "title": "" } ]	fiqa
b5e1297fbf6f0160e6e5fac6224cce11	Double-entry accounting: how to keep track of mortgage installments as expenses?	[ { "docid": "680f18bf6027e733e8d1925af9eb13b8", "text": "Understandably, it appears as if one must construct the flows oneself because of the work involved to include every loan variation. First, it would be best to distinguish between cash and accrued, otherwise known as the economic, costs. The cash cost is, as you've identified, the payment. This is a reality for cash management, and it's wise that you wish to track it. However, by accruals, the only economic cost involved in the payment is the interest. The reason is because the rest of the payment flows from one form of asset to another, so if out of a $1,000 payment, $100 is principal repayment, you have merely traded $100 of cash for $100 of house. The cash costs will be accounted for on the cash flow statement while the accrued or economic costs will be accounted on the income statement. It appears as if you've accounted for this properly. However, for the resolution that you desire, the accounts must first flow through the income statement followed next instead of directly from assets to liabilities. This is where you can get a sense of the true costs of the home. To get better accrual resolution, credit cash and debit mortgage interest expense & principal repayment. Book the mortgage interest expense on the income statement and then cancel the principal repayment account with the loan account. The principal repayment should not be treated as an expense; however, the cash payment that pays down the mortgage balance should be booked so that it will appear on the cash flow statement. Because you weren't doing this before, and you were debiting the entire payment off of the loan, you should probably notice your booked loan account diverging from the actual. This proper booking will resolve that. When you are comfortable with booking the payments, you can book unrealized gains and losses by marking the house to market in this statement to get a better understanding of your financial position. The cash flow statement with proper bookings should show how the cash has flowed, so if it is according to standards, household operations should show a positive flow from labor/investments less the amount of interest expense while financing will show a negative flow from principal repayment. Investing due to the home should show no change due to mortgage payments because the house has already been acquired, thus there was a large outflow when cash was paid to acquire the home. The program should give some way to classify accounts so that they are either operational, investing, or financing. All income & expenses are operational. All investments such as equities, credit assets, and the home are investing. All liabilities are financing. To book the installment payment $X which consists of $Y in interest and $Z in principal: To resolve the reduction in principal: As long as the accounts are properly classified, GnuCash probably does the rest for you, but if not, to resolve the expense: Finally, net income is resolved: My guess is that GnuCash derives the cash flow statement indirectly, but you can do the entry by simply: In this case, it happily resembles the first accrued entry, but with cash, that's all that is necessary by the direct method.", "title": "" }, { "docid": "5118f344d1af3a18c3adfa1c3264fd1f", "text": "If your mortgage is an interest only one then the full amount of the payment you make should be to an expense account perhaps called mortgage interest. If the mortgage is a repayment mortgage you need to split the amount of the payment between such an expense account called mortgage interest and between a liability account which is the amount of the loan. In practice I have not found it very easy to do all this as the actual amounts vary depending on number of days in the month and then there are occasional charges etc made by the mortgage company so some approximations seem to be needed unless one is to spend hours trying to get it exactly correct...... Steve", "title": "" }, { "docid": "000a4e01345164ec5682c16d5afc672b", "text": "The best thing for you to do will be to start using the Cash Flow report instead of the Income and Expense report. Go to Reports -> Income and Expense -> Cash Flow Once the report is open, open the edit window and open the Accounts tab. There, choose your various cash accounts (checking, saving, etc.). In the General tab, choose the reporting period. (And then save the report settings so you don't need to go hunting for your cash accounts each time.) GnuCash will display for you all the inflows and outflows of money, which appears to be what you really want. Though GnuCash doesn't present the Cash Flow in a way that matches United States accounting rules (with sections for operating, investing, and financial cash flows separated), it is certainly fine for your personal use. If you want the total payment to show up as one line on the Cash Flow report, you will need to book the accrual of interest and the payment to the mortgage bank as two separate entries. Normal entry for mortgage payments (which shows up as a line for mortgage and a line for interest on your Cash Flow): Pair of entries to make full mortgage payment show up as one line on Cash Flow: Entry #1: Interest accrual Entry #2: Full mortgage payment (Tested in GnuCash 2.6.1)", "title": "" }, { "docid": "4f7d9c6d9bd9a85810ebab48a59bacba", "text": "Because a paying down a liability and thus gaining asset equity is not technically an expense, GnuCash will not include it in any expense reports. However, you can abuse the system a bit to do what you want. The mortgage payment should be divided into principle, interest, and escrow / tax / insurance accounts. For example: A mortgage payment will then be a split transaction that puts money into these accounts from your bank account: For completeness, the escrow account will periodically be used to pay actual expenses, which just moves the expense from escrow into insurance or tax. This is nice so that expenses for a month aren't inflated due to a tax payment being made: Now, this is all fairly typical and results in all but the principle part of the mortgage payment being included in expense reports. The trick then is to duplicate the principle portion in a way that it makes its way into your expenses. One way to do this is to create a principle expense account and also a fictional equity account that provides the funds to pay it: Every time you record a mortgage payment, add a transfer from this equity account into the Principle Payments expense account. This will mess things up at some level, since you're inventing an expense that does not truly exist, but if you're using GnuCash more to monitor monthly cash flow, it causes the Income/Expense report to finally make sense. Example transaction split:", "title": "" } ]	[ { "docid": "268e69dc5931c26a823eba881d202228", "text": "Conceptually, the entries are: Yes. And since you're the sole owner, your basis will equal to the equity balance on the balance sheet. Keep in mind the book and tax basis will probably be different, so you may want to keep a separate calculation to track the tax basis. There is no journal additional journal entry for this. If you're using bookkeeping software, be sure to research its book-closing/closing entries feature, as it is handled differently depending on the software. For example Quickbooks doesn't explicitly close its books, but re-computes the balance sheet dynamically depending on the selected date range.", "title": "" }, { "docid": "e2556cddd3a3db377c1f4eef65198dbc", "text": "\"The official guide can be found here, but that can be a little in depth as well. To make good use of you need at least a little knowledge of double-entry bookkeeping. Double-entry bookkeeping, in accounting, is a system of bookkeeping so named because every entry to an account requires a corresponding and opposite entry to a different account. From Wikipedia Another way to think of it is that everything is an account. You'll need to set up accounts for lots of things that aren't accounts at your bank to make the double-entry system work. For example you'll need to set up various expense accounts like \"\"office supplies\"\" even though you'll never have a bank account by that name. Generally an imbalanced transfer is when you have a from or to account specified, but not both. If I have imbalanced transactions I usually work them from the imbalance \"\"account\"\", and work each transaction to have its appropriate tying account, at which point it will no longer be listed under imbalance.\"", "title": "" }, { "docid": "46bc1213fb52a6c9ecdc1047f6d59daa", "text": "For double entry bookkeeping, personal or small business, GnuCash is very good. Exists for Mac Os.", "title": "" }, { "docid": "2da0e37099545e4632ce50e5d86a6d22", "text": "\"A lot of financial software will calculate the value of operating leasess for you (bullet 2). E.g. Capital IQ, BB. What a lot of professionals do is \"\"reverse\"\" out EBITDA/EBIT etc. for: - non-recurring expenses (think big accounting changes, some impairments) - change operating expenses into capital leases to adjust the capital structure - occasionally change some operating expenses (e.g. options) because you are under the assumption if you take a company private that those expenses will not be relevant The whole point is simply to see the operating revenues/expenses of the firm\"", "title": "" }, { "docid": "bf7662a065b8944e12c197ad5175fda5", "text": "\"A few practical thoughts: A practical thing that helps me immensely not to loose important paperwork (such as bank statements, bills, payroll statement, all those statements you need for filing tax return, ...) is: In addition to the folder (Aktenordner) where the statements ultimately need to go I use a Hängeregistratur. There are also standing instead of hanging varieties of the same idea (may be less expensive if you buy them new - I got most of mine used): you have easy-to-add-to folders where you can just throw in e.g. the bank statement when it arrives. This way I give the statement a preliminary scan for anything that is obviously grossly wrong and throw it into the respective folder (Hängetasche). Every once in a while I take care of all my book-keeping, punch the statements, file them in the Aktenordner and enter them into the software. I used to hate and never do the filing when I tried to use Aktenordner only. I recently learned that it is well known that Aktenordner and Schnellhefter are very time consuming if you have paperwork arriving one sheet at a time. I've tried different accounting software (being somewhat on the nerdy side, I use gnucash), including some phone apps. Personally, I didn't like the phone apps I tried - IMHO it takes too much time to enter things, so I tend to forget it. I'm much better at asking for a sales receipt (Kassenzettel) everywhere and sticking them into a calendar at home (I also note cash payments for which I don't have a receipt as far as I recall them - the forgotten ones = difference ends up in category \"\"hobby\"\" as they are mostly the beer or coke after sports). I was also to impatient for the cloud/online solutions I tried (I use one for business, as there the archiving is guaranteed to be according to the legal requirements - but it really takes far more time than entering the records in gnucash).\"", "title": "" }, { "docid": "df9b83154409d75086d28fcae731b329", "text": "\"Ugh... yes, you have to tell us what information you have available. It would be a completely different answer if, for example, you had a balance sheet for a prior period and an income statement for the current period and had to estimate the working capital accounts. If you can't be bothered to \"\"want to give the problem\"\" nobody is going to be bothered to help you with it. Inventory days = days of COGS in inventory. (15 / 360 times cogs). AR is 35 days of sales in AR. 35/360* sales. Vendor credit is accounts payable -- 40 /360 * COGS. If your sales and COGs are given by operating cycle rather than annually, use 50 instead of 360. (for whatever reason, convention says use 360 instead of 365).\"", "title": "" }, { "docid": "5eeced770d8f07df301006a0c4e190ef", "text": "\"I don't know if this is \"\"valid\"\" from a bookkeeping/accounting standpoint, but I'm just trying to keep records for myself so this works for me unless someone has another suggestion. I created two Expense accounts for the HSA (Roth, etc would work the same way): (\"\"CY\"\" meaning current year.) When I make a $50 contribution, I enter the following splits: When you look at this in the Accounts tab, it shows the parent account with a zero balance (because the subaccount balance is positive and the parent account is negative). The subaccount has the balance accumulated so far; this lets me see the YTD contributions to my HSAs. At the end of the year I will make a closing transaction in the opposite direction (for whatever the total balance of the CY account is): This will zero-balance these two accounts. The only complication I see remaining is the issue of making contributions for the prior year during the January-April time frame. I don't generally make current-year contributions followed by prior-year contributions, so I can just wait to enter the closing transaction until I know I'm done with prior-year contributions.\"", "title": "" }, { "docid": "983b96518395d2dd077ddb166149f582", "text": "or just input it in my accounting software along with receipts, and then when I'm doing taxes this would go under the investment or loses (is it somewhere along that line)? Yes, this. Generally, for the long term you should have a separate bank account and charge card for your business. I started my business (LLC) by filing online, and paying a fee for a registration, and that makes it a business cost right? Startup cost. There are special rules about this. Talk to your tax adviser. For the amounts in question you could probably expense it, but verify.", "title": "" }, { "docid": "b5ac2c4ff3c5d1c545838bec51ac3bb8", "text": "\"Other responses have focused on getting you software to use, but I'd like to attempt your literal question: how are such transactions managed in systems that handle them? I will answer for \"\"double entry\"\" bookkeeping software such as Quicken or GnuCash (my choice). (Disclaimer: I Am Not An Accountant and accountants will probably find error in my terminology.) Your credit card is a liability to you, and is tracked using a liability account (as opposed to an asset account, such as your bank accounts or cash in your pocket). A liability account is just like an asset except that it is subtracted from rather than added to your total assets (or, from another perspective, its balance is normally negative; the mathematics works out identically). When you make a purchase using your credit card, the transaction you record transfers money from the liability account (increasing the liability) to the expense account for your classification of the expense. When you make a payment on your credit card, the transaction you record transfers money from your checking account (for example) to the credit card account, reducing the liability. Whatever software you choose for tracking your money, I strongly recommend choosing something that is sufficiently powerful to handle representing this as I have described (transfers between accounts as the normal mode of operation, not simply lone increases/decreases of asset accounts).\"", "title": "" }, { "docid": "79aab99d579d1d2115bdcaa91f224fb4", "text": "\"I'm a mathematician, not an accountant. But my feeling has been that the distinction between Asset and Liability is mainly a sign convention, and comes from a wish to avoid negative numbers. Suppose you take out a loan for $1000 and deposit the proceeds in your bank account. Under normal accounting conventions, your bank account is an Asset and the loan is a Liability. After the loan, Bank has a balance of 1000 and Loan has a balance of 1000. You can compute your net worth by adding all Assets and subtracting all Liabilities (so in this case your net worth remains 0). If you treat Loan as an Asset account, then after taking out the loan, you should give it a balance of -1000. Under this convention, you have lots of negative numbers to deal with everywhere, which I suspect early accountants would have found inconvenient. The Asset/Liability convention means you only need to deal with negative numbers in unusual situations (overdrawn bank account, overpaid loan, etc). Likewise, in theory you could treat Expense accounts as negative Income. But I'm not sure why you feel the need to reinvent the wheel by \"\"simplifying\"\" double-entry accounting like this. The standard conventions are not that complicated, and their major advantage is that they're standard: other people will be able to understand your books if they ever need to. (Say you want to hire somebody to do your taxes at some point: if your books are kept in your own idiosyncratic system, their job will be at best error-prone and at worst impossible.) It's a bit like a proposal to simplify English spelling: shur, a sistum waar yu rit lik this mit bee simplur in sum abstrakt sens, but if nobudee els can reed it eezulee, it izunt ackshyualee veree yusful.\"", "title": "" }, { "docid": "af8082def21f44a1b9f418f3c16c3302", "text": "\"Trying to figure out how much money you have available each day sounds like you're making this more complicated than it needs to be. Unless you're extremely tight and you're trying to squeeze by day by day, asking \"\"do I have enough cash to buy food for today?\"\" and so on, you're doing too much work. Here's what I do. I make a list of all my bills. Some are a fixed amount every month, like the mortgage and insurance premiums. Others are variable, like electric and heating bills, but still pretty predictable. Most bills are monthly, but I have a few that come less frequently, like water bills in my area come every 3 months and I have to pay property taxes twice a year. For these you have to calculate how much they cost each month. Like for the water bill, it's once every 3 months so I divide a typical bill by 3. Always round up or estimate a little high to be safe. Groceries are a little tricky because I don't buy groceries on any regular schedule, and sometimes I buy a whole bunch at once and other times just a few things. When groceries were a bigger share of my income, I kept track of what I spent for a couple of months to figure out an average per month. (Today I'm a little richer and I just think of groceries as coming from my spending money.) I allocate a percentage of my income for contributions to church and charities and count this just like bills. It's a good idea to put aside something for savings and/or paying down any outstanding loans every month. Then I add these up to say okay, here's how much I need each month to pay the bills. Subtract that from my monthly income and that's what I have for spending money. I get paid twice a month so I generally pay bills when I get paid. For most bills the due date is far enough ahead that I can wait the maximum half a month to pay it. (Worst case the bill comes the day after I pay the bills from this paycheck.) Then I keep enough money in my checking account to, (a) Cover any bills until the next paycheck and allow for the particularly large bills; and (b) provide some cushion in case I make a mistake -- forget to record a check or make an arithmetic error or whatever; and (c) provide some cushion for short-term unexpected expenses. To be safe, (a) should be the total of your bills for a month, or as close to that as you can manage. (b) should be a couple of hundred dollars if you can manage it, more if you make a lot of mistakes. If you've calculated your expenses properly and only spend the difference, keeping enough money in the bank should fall out naturally. I think it's a lot easier to try to manage your money on a monthly basis than on a daily basis. Most of us don't spend money every day, and we spend wildly different amounts from day to day. Most days I probably spend zero, but then one day I'll buy a new TV or computer and spend hundreds. Update in response to question What I do in real life is this: To calculate my available cash to spend, I simply take the balance in my checking account -- assuming that all checks and electronic payments have cleared. My mortgage is deducted from my checking every month so I post that to my checking a month in advance. I pay a lot of things with automatic charges to a credit card these days, so my credit card bills are large and can't be ignored. So subtract my credit card balances. Subtract my reserve amount. What's left is how much I can afford to spend. So for example: Say I look at the balance in my checkbook today and it's, say, $3000. That's the balance after any checks and other transactions have cleared, and after subtracting my next mortgage payment. Then I subtract what I owe on credit cards. Let's say that was $1,200. So that leaves $1,800. I try to keep a reserve of $1,500. That's plenty to pay my routine monthly bills and leave a healthy reserve. So subtract another $1,500 leaves $300. That's how much I can spend. I could keep track of this with a spreadsheet or a database but what would that gain? The amount in my checking account is actual money. Any spreadsheet could accumulate errors and get farther and farther from accurate values. I use a spreadsheet to figure out how much spending money I should have each month, but that's just to use as a guideline. If it came to, say, $100, I wouldn't make grandiose plans about buying a new Mercedes. If it came to $5,000 a month than buying a fancy new car might be realistic. It also tells me how much I can spend without having to carefully check balances and add it up. These days I have a fair amount of spending money so when, for example, I recently decided I wanted to buy some software that cost $100 I just bought it with barely a second thought. When my spending money was more like $100 a month, lunch at a fast food place was a big event that I planned weeks in advance. (Obviously, I hope, don't get stupid about \"\"small amounts\"\". If you can easily afford $100 for an impulse purchase, that doesn't mean that you can afford $100 five times a day every day.) Two caveats: 1. It helps to have a limited number of credit cards so you can keep the balances under control. I have two credit cards I use for almost everything, so I only have two balances to keep track of. I used to have more and it got confusing, it was easy to lose track of how much I really owed, which is a set up for getting in trouble.\"", "title": "" }, { "docid": "76e2f1493af491c6de3ccbfff6b5a825", "text": "What you're looking for is the 'Transaction Report'. When you're looking at the report (it comes up empty), open the options and click on the first tab 'Accounts'. Here you can highlight multiple source accounts in the top pane, and filter by the Expense accounts that you are interested in the bottom pane. Here's an example that goes over the process (there are many examples online, I just included the first one that came up in a search).", "title": "" }, { "docid": "b4510cf6016c180b947eab26ae6b837c", "text": "\"Here's a very basic MySQL query I put together that does what I want for income/expense report. Basically it reports the same info as the canned income/expense report, but limits it those income/expenses associated with a particular account (rental property, in my case). My main complaint is the output \"\"report\"\" is pretty ugly. And modifying for a different rental property requires changing the code (I could pass parameters etc). Again, the main \"\"issue\"\" in my mind with GnuCash income/expense report is that there is no filter for which account (rental property) you want income/expenses for, unless you set up account tree so that each rental property has its own defined incomes and expenses (i.e. PropertyA:Expense:Utility:electric). Hopefully someone will point me to a more elegant solution that uses the report generator built into GnuCash. THanks! SELECT a2.account_type , a4.name, a3.name, a2.name, SUM(ROUND(IF(a2.account_type='EXPENSE',- s2.value_num,ABS(s2.value_num))/s2.value_denom,2)) AS amt FROM ( SELECT s1.tx_guid FROM gnucash.accounts AS a1 INNER JOIN gnucash.splits AS s1 ON s1.account_guid = a1.guid WHERE a1.name='Property A' ) AS X INNER JOIN gnucash.splits s2 ON x.tx_guid = s2.tx_guid INNER JOIN gnucash.accounts a2 ON a2.guid=s2.account_guid INNER JOIN gnucash.transactions t ON t.guid=s2.tx_guid LEFT JOIN gnucash.accounts a3 ON a3.guid = a2.parent_guid LEFT JOIN gnucash.accounts a4 ON a4.guid = a3.parent_guid WHERE a2.name <> 'Property A' # get all the accounts associated with tx in Property A account (but not the actual Property A Bank duplicate entries. AND t.post_date BETWEEN CAST('2016-01-01' AS DATE) AND CAST('2016-12-31' AS DATE) GROUP BY a2.account_type ,a4.name, a3.name, a2.name WITH ROLLUP ; And here's the output. Hopefully someone has a better suggested approach!\"", "title": "" }, { "docid": "a74008f312d158040e8cebbef7e78c8e", "text": "How you should record the mortgage payments depends on if you are trying to achieve correct accounting, according to the standards, or if you are just tracking everything for you and your friends. If you're just keeping track for personal reasons, I'd suggest that you set up your check (or journal entry, your preference) how you'd like it to be recorded. Then, memorize that transaction. This allows you to use it as many times as you need to, without having to set it up each time. (Also note: there is no way to record a transaction that decreases cash and increases equity.) If you're trying to keep track of everything according to accounting standards, which it should be if you've set up an official business, then you have a lot more tracking to do with each payment. Mortgage payments technically do not affect the equity accounts of the owners. Each mortgage payment should decrease the bank balance, increase interest expense and decrease the mortgage balance, not to mention tracking any escrow account you may have. The equity accounts would be affected if the owners are contributing funds to the bank account, but equity would increase at the time the funds are deposited, not when the mortgage payments are made. Hope this helps!", "title": "" }, { "docid": "accc04f0a365fcdbee6fc05249bea151", "text": "A tax liability account is a common thing. In my own books I track US-based social insurance (Medicare and Social Security) using such an account. At the time I pay an employee, a tax liability is incurred, increasing my tax liability account; at the same time, on the other end of the double-entry, I increase a tax expense account. Notably, though, the US IRS does not necessarily require that the tax is paid at the time it is incurred. In my case I incur a liability twice a month, but I only have to pay the taxes quarterly. So, between the time of incurring and the time of remitting/paying, the amount is held in the tax liability account. At the time that I remit payment to the IRS, the transaction will decrease both my checking account and also, on the other end of the double-entry, my liability account. To answer your question in short, use an expense account for your other-side-account.", "title": "" } ]	fiqa
c9a9c830f0bdbfc2b90966e695933bda	Should I always pay my credit at the last day possible to maximize my savings interest?	[ { "docid": "5dc10522b67ce00ee6ecb2c628f3f768", "text": "If you have the ability to pay online with a guaranteed date for the transaction, go for it. My bank will let me pay a bill on the exact date i choose. When using the mail, of course, this introduces a level of risk. I asked about rates as the US currently has a near zero short term rate. At 3.6%, $10,000, this is $30/month or $1/day you save by delaying. Not huge, but better in your pocket than the bank's.", "title": "" }, { "docid": "c8f7a3ce6a223974c1913148af62ded8", "text": "\"To avoid nitpicks, i state up front that this answer is applicable to the US; Europeans, Asians, Canadians, etc may well have quite different systems and rules. You have nothing to worry about if you pay off your credit-card statement in full on the day it is due in timely fashion. On the other hand, if you routinely carry a balance from month to month or have taken out cash advances, then making whatever payment you want to make that month ASAP will save you more in finance charges than you could ever earn on the money in your savings account. But, if you pay off each month's balance in full, then read the fine print about when the payment is due very carefully: it might say that payments received before 5 pm will be posted the same day, or it might say before 3 pm, or before 7 pm EST, or noon PST, etc etc etc. As JoeTaxpayer says, if you can pay on-line with a guaranteed day for the transaction (and you do it before any deadline imposed by the credit-card company), you are fine. My bank allows me to write \"\"electronic\"\" checks on its website, but a paper check is mailed to the credit-card company. The bank claims that if I specify the due date, they will mail the check enough in advance that the credit-card company will get it by the due date, but do you really trust the USPS to deliver your check by noon, or whatever? Besides the bank will put a hold on that money the day that check is cut. (I haven't bothered to check if the money being held still earns interest or not). In any case, the bank disclaims all responsibility for the after-effects (late payment fees, finance charges on all purchases, etc) if that paper check is not received on time and so your credit-card account goes to \"\"late payment\"\" status. Oh, and my bank also wants a monthly fee for its BillPay service (any number of such \"\"electronic\"\" checks allowed each month). The BillPay service does include payment electronically to local merchants and utilities that have accounts at the bank and have signed up to receive payments electronically. All my credit-card companies allow me to use their website to authorize them to collect the payment that I specify from my bank account(s). I can choose the day, the amount, and which of my bank accounts they will collect the money from, but I must do this every month. Very conveniently, they show a calendar for choosing the date with the due date marked prominently, and as mhoran_psprep's comment points out, the payment can be scheduled well in advance of the date that the payment will actually be made, that is, I don't need to worry about being without Internet access because of travel and thus being unable to login to the credit-card website to make the payment on the date it is due. I can also sign up for AutoPay which takes afixed amount/minimum payment due/payment in full (whatever I choose) on the date due, and this will happen month after month after month with no further action necessary on my part. With either choice, it is up to the card company to collect money from my account on the day specified, and if they mess up, they cannot charge late payment fees or finance charge on new purchases etc. Also, unlike my bank, there are no fees for this service. It is also worth noting that many people do not like the idea of the credit-card company withdrawing money from their bank account, and so this option is not to everyone's taste.\"", "title": "" }, { "docid": "2ca347fac050ca750ec45c00d760fc40", "text": "Mostly ditto to Dillip Sarwate. Let me just add: I don't know how you're making your payments, whether through the biller's web site, your bank's web site, by mail, in person, etc. But whatever the mechanism, if there is a chance that waiting until the due date to pay may mean that you will miss the due date: don't. The cost of a late payment charge is likely to far exceed any interest you would collect on your savings. Bear in mind that we are talking pennies here. I don't know how much the monthly bills that we are discussing here come to. Say it's $3,000. I think that would be a lot for most people. You say you're getting 3.6% on your savings. So if, on the average, you pay a bill 2 weeks later than you might have, you're getting an extra 2 / 52 x 3.6% x $3,000 in interest, or $4 per month. I think the last time I paid a late fee on a credit card it was $35, so if you make one mistake every 8 months and end up getting a late fee it will outweigh any savings. Personally, I pay most of my bills through either my bank's web site or the biller's web site. I schedule all payments when I get a paycheck, and I generally try to schedule them for 1 week before the due date, so there's plenty of breathing room.", "title": "" } ]	[ { "docid": "1f0c4c9e61a59c3e3be09bbee6ad4897", "text": "I'm not asking if I should carry a balance to the end of the billing period and accrue interest Typically (I say typically because there may be some fringe outlier exception product that begins accruing interest immediately), if you're not carrying a balance already you will not be charged interest for carrying a balance during the billing period. You accrue a balance, you're issued a statement, if you pay the statement before the due date indicated you don't pay interest; even if your statement balance is less than the current actual balance on the account. If you carry a balance through that due date you begin to accrue interest. Not only on the balance carried but on all new charges as well. But as long as you consistently pay your statement balance before the statement due date you will not be charged any interest. As for a reason why you may want to take advantage of this, simply to ease the administration of your finances. You just don't need to touch the accounts that frequently to avoid interest charges. Sure you can let your money sit in an interest bearing account and earn a couple dollars a year but really, you just don't need to focus on your CC charges this frequently.", "title": "" }, { "docid": "088bc40143b1fd1c3a082150fd2b9a91", "text": "Credit cards are meant to be used so generally it doesn't hurt your credit score to use them. To top it off you even get an interest grace period so you don't have to rush home and pay balances as soon as they're charged. In general you accrue charges during your statement period, we'll call it September 1 through September 30. The statement due date is something like 20 days after the close of the statement period, so we'll call it October 20. As long as you habitually pay your entire statement balance by the due date you will never pay interest. You charge your laptop on September 3, it shows up on your statement as $1,300, you pay $1,300 on October 18, you pay no interest. However, if you pay $1,000 on October 18 leaving a $300 balance to be carried in to the next statement period (a carried balance) you will pay interest. Generally interest is calculated based on your average daily balance during the statement period, which is now be the October 1 to October 31 period. You'll notice that you didn't pay anything until the October 18, that means the entire $1,300 will be included in your average daily balance up to the 18th of the month. Add to that, anything else you charge on the card now will be included in your average daily balance for interest charge calculation purposes. The moral of the story is, use your card, and pay your entire statement balance before the due date. Now how much will this impact your credit score? It's tough to say. Utilization is not a bad thing until it's a big number. I've read that 70% utilization and over is really the point at which lenders will raise an eyebrow and under 30% is considered excellent. If you have one card and $1,300 is a significant portion of your available limit, then yes you should probably pay it down quickly. Spend six or so months using the card and paying it, then call your bank and ask for a credit line increase.", "title": "" }, { "docid": "d4d9b4643ff543beead589bc07cf7501", "text": "\"I think so. I am doing this with our furniture. It doesn't cost me any more money to pay right now than it will to pay over the course of 3 years, and I can earn interest on the money I didn't spend. But know this: they aren't offering 0%, they are deferring interest for 3 years. If you pay it off before then great, if you don't you will owe all the accumulated interest. The key with these is that you always pay it, and on time. Miss a payment and you get hosed. If you don't pay on time you will owe the interest that is being deferred. They will also be financing this through a third party (like a major bank) and that company is now \"\"doing business with you\"\" which means in the US they can call you and solicit new services. I am willing to deal with those trade offs though, plus, as you say, you can always pay it off. WHY THEY DO IT (what is in it for them...) A friend of mine works for a major bank that often finances these deals here is how they work. Basically, banks do this to generate leads for their divisions that do cold calls. If you are a high credit, high income customer you go to a classic bank and request cash, if you are building credit or have bad credit, you go to a \"\"financial services\"\" branch. If you tend to finance things like cars and furniture, you get more cold calls.\"", "title": "" }, { "docid": "a02953d7276dc71ac04d14269d15ff1c", "text": "Much money is made by creditors on the transaction value of a client in addition to interest value. Knowing that, I pay off all my cards every month, have never made a late payment, and get a number of offers every year for reward type cards. Don't ever be worried about paying off your card in full, just be sure you're using your card and that you pay on time, every time.", "title": "" }, { "docid": "6a5c235f65fc1356e1a56bb1815957f7", "text": "\"a link to this article grabbed my Interest as I was browsing the site for something totally unrelated to finance. Your question is not silly - I'm not a financial expert, but I've been in your situation several times with Carmax Auto Finance (CAF) in particular. A lot of people probably thought you don't understand how financing works - but your Car Loan set up is EXACTLY how CAF Financing works, which I've used several times. Just some background info to anyone else reading this - unlike most other Simple Interest Car Financing, with CAF, they calculate per-diem based on your principal balance, and recalculate it every time you make a payment, regardless of when your actual due date was. But here's what makes CAF financing particularly fair - when you do make a payment, your per-diem since your last payment accrued X dollars, and that's your interest portion that is subtracted first from your payment (and obviously per-diem goes down faster the more you pay in a payment), and then EVerything else, including Any extra payments you make - goes to Principal. You do not have to specify that the extra payment(S) are principal only. If your payment amount per month is $500 and you give them 11 payments of $500 - the first $500 will have a small portion go to interest accrued since the last payment - depending on the per-diem that was recalculated, and then EVERYTHING ELSE goes to principal and STILL PUSHES YOUR NEXT DUE DATE (I prefer to break up extra payments as precisely the amount due per month, so that my intention is clear - pay the extra as a payment for the next month, and the one after that, etc, and keep pushing my next due date). That last point of pushing your next due date is the key - not all car financing companies do that. A lot of them will let you pay to principal yes, but you're still due next month. With CAF, you can have your cake, and eat it too. I worked for them in College - I know their financing system in and out, and I've always financed with them for that very reason. So, back to the question - should you keep the loan alive, albeit for a small amount. My unprofessional answer is yes! Car loans are very powerful in your credit report because they are installment accounts (same as Mortgages, and other accounts that you pay down to 0 and the loan is closed). Credit cards, are revolving accounts, and don't offer as much bang for your money - unless you are savvy in manipulating your card balances - take it up one month, take it down to 0 the next month, etc. I play those games a lot - but I always find mortgage and auto loans make the best impact. I do exactly what you do myself - I pay off the car down to about $500 (I actually make several small payments each equal to the agreed upon Monthly payment because their system automatically treats that as a payment for the next month due, and the one after that, etc - on top of paying it all to principal as I mentioned). DO NOT leave a dollar, as another reader mentioned - they have a \"\"good will\"\" threshold, I can't remember how much - probably $50, for which they will consider the account paid off, and close it out. So, if your concern is throwing away free money but you still want the account alive, your \"\"sweet spot\"\" where you can be sure the loan is not closed, is probably around $100. BUT....something else important to consider if you decide to go with that strategy of keeping the account alive (which I recommend). In my case, CAF will adjust down your next payment due, if it's less than the principal left. SO, let's say your regular payment is $400 and you only leave a $100, your next payment due is $100 (and it will go up a few cents each month because of the small per-diem), and that is exactly what CAF will report to the credit bureaus as your monthly obligation - which sucks because now your awesome car payment history looks like you've only been paying $100 every month - so, leave something close to one month's payment (yes, the interest accrued will be higher - but I'm not a penny-pincher when the reward is worth it - if you left $400 for 1.5 years at 10% APR - that equates to about $50 interest for that entire time - well worth it in my books. Sorry for rambling a lot, I suck myself into these debates all the time :)\"", "title": "" }, { "docid": "0f87c0172005cce4fdc0e30b72e4f8a1", "text": "If the bank wants to close your account, they will do just that. Having a small ongoing balance isn't going to prompt them to keep it open. Typically, the risk is for a card with zero usage to be closed, as it's a cost to them to keep the account open, and it has no revenue. To avoid this, it's a good idea to use that card or cards for a regular purchase, say, gasoline. A non-impulse buy, and just pay in full to avoid interest. There's no need to keep a balance accruing interest. Keep in mind - A bill contains a month of charges. The bill for December is issued on the 31st, but due January 25th or so. When you pay it in full you do not have zero balance, you have the charges from January. This accomplishes your goal, will no interest.", "title": "" }, { "docid": "38765067a397d9b0e341b2b3e44ba294", "text": "\"Plenty! Following are just a few: For things like RESP and RRSP which have an \"\"end\"\" date; as you or your children age, you should be migrating to less speculative investments and more secure ones. When children are young, for example, you might be in a \"\"growth\"\" type fund. Later on, you would likely want to switch that to an \"\"income\"\" fund, which is also more conservative and less likely to lose principal. Are you getting the best benefit from your credit cards? Is there another card with benefits that you would get more \"\"back\"\" from using? Is that fee-based Air miles card worth it? Is cash-back better for you? If you have regular investment withdrawals, can you increase them? Do you like the plan they are going in to? Similarly look over any other long-term debt repayment. Student loans, car loans, mortgage. What is coming up this year, what is \"\"ending\"\". If, for example, car payment will end, how will you earmark that money, so it just does not disappear into general funds. While you could go over things like these more often, once a year should be plenty often to keep tabs and not obsess. Good Luck!\"", "title": "" }, { "docid": "2bcdda60f3b4d3e30dc4ab0a0479d764", "text": "\"Dave Ramsey would tell you to pay the smallest debt off first, regardless of interest rate, to build momentum for your debt snowball. Doing so also gives you some \"\"wins\"\" sooner than later in the goal of becoming debt free.\"", "title": "" }, { "docid": "47fb00c8ef165134dc0c437bddc54ebf", "text": "Ditto to Victor. The simple rule is: Pay the minimums on all so you don't get any late fees, etc, then pay off the highest interest rate loan first. A couple of special cases do come to mind: If one or more of these are credit cards, then, here in the U.S. at least, credit cards charge you interest on the average daily balance, unless you pay off the balance entirely, in which case you pay zero interest. So for example say you had two credit cards, both with 1% per month interest, with debt of $2000 and $1000. You have $1500 available. Ignoring minimum payments for the moment, if you put that $1500 against the larger balance, you would still pay interest on the full amount for the current month, or $30. But if you paid off the smaller and put the difference against the larger, then your interest for the current month would be only $15. (Either way, your interest for NEXT month would be the same -- 1% of the $1500 remaining balance or $15 -- assuming you couldn't pay off the other card.) If one or more of the loans are mortgage loans on which you are paying mortgage insurance, then when you get the balance below a certain point -- usually 80% of the original loan amount -- you no longer have to pay mortgage insurance premiums. Thus the amount you are paying on such premiums needs to be factored into the calculation. There may be other special cases. Those are the ones that I've run into.", "title": "" }, { "docid": "2141da6b860a33f040ec308bbd9ff0c3", "text": "This is a slightly different reason to any other answer I have seen here about irrationality and how being rationally aware of one's irrationality (in the future or in different circumstances) can lead you to make decisions which on the face of it seem wrong. First of all, why do people sometimes maintain balances on high-interest debt when they have savings? Standard advice on many money-management sites and forums is to withdraw the savings to pay down the debt. However, I think there is a problem with this. Suppose you have $5,000 in a savings account, and a $2,000 credit card balance. You are paying more interest on the credit card than you get from the savings account, and it seems that you should withdraw some money from the savings account, and pay off the cc. However, the difference between the two scenarios, other than the interest you lose by keeping the cc balance, is your motivation for saving. If you have a credit card balance of $2,000, you might be obliged to pay a minimum payment of $100 each month. If you have any extra money, you will be rewarded if you pay more in to the credit card, by seeing the balance go down and understanding that you will soon be free from receiving this awful bill each month. To maintain your savings goal, it's enough to agree with yourself that you won't do any new spending on the cc, or withdraw any savings. Now suppose that you decide to pay off the cc with the savings. There is now nothing 'forcing' you to save $100 each month. When you get to the end of the month, you have to motivate yourself that you will be adding spare cash to your $3,000 savings balance, rather than that you 'have to' pay down your cc. Yes, if you spend the spare cash instead of saving it, you get something in return for it. But it is possible that spending $140 on small-scale discretionary spending (things you don't need) actually gets you less for your money than paying the credit card company $40 interest and saving $100? You might even be tempted to start spending on your credit card again, knowing that you have a 0 balance, and that you 'can always pay it off out of savings'. It's easy to analogize this to a situation with two types of debt. Suppose that you have a $2,000 debt to your parents with no interest and a $2,000 loan at high interest, and you get a $2,000 windfall. Let's assume that your parents don't need the money in a hurry and aren't hassling you to pay them (otherwise you could consider the guilt or the hassle as a form of emotional interest rate). Might it not be better to pay your parents off? If you do, you are likely to keep paying off your loan out of necessity of making the regular payments. In 20 paychecks (or whatever) you might be debt free. If you pay off your loan, you lose the incentive to save. After 20 months you still owe your parents $2,000. I am not saying that this is always what makes sense. Just that it could make sense. Note that this is an opposite to the 'Debt Snowball' method. That method says that it's better to pay off small debts, because that way you have more free cash flow to pay off the larger debts. The above argues that this is a bad idea, because you might spend the increased cash flow on junk. It would be better to keep around as many things as possible which have minimum payments, because it restricts you to paying things rather than gives you the choice of whether to save or spend.", "title": "" }, { "docid": "c93a4e0bfe64a572b644d53a87028c0d", "text": "Typically the power of capitalized interest would work in your favor and you could carry the loan paying it down while investing the original sum which would earn interest. BUT you aren't going to get any sort of return to compare with 15% so pay off that loan immediately. Also contrary to popular belief (and reiterated here) paying off incurred balance on your credit card every month is responsible use of credit but it will not do much for your credit score. The score ultimately means your ability to pay your bills and most importantly your willingness to pay interest, i.e. revolving the borrowed money. At least in the consumer market where the product they want you to buy is paying monthly interest charges.", "title": "" }, { "docid": "6d74c157a41a9d5a8f0fb4c2a3cd6e00", "text": "It is COMPLETELY no use to pay earlier (during a billing cycle) to better your credit score! Your credit score gets affected ONLY once a month from each creditor, and that happens when they post your monthly statement. Thus, no matter what you do or pay and how many times a month or how many days earlier than your due date, it has NO EFFECT WHATSOEVER on your score. Anything you do will be reflected only after the statement. What you pay in between those two statements is irrelevant. So, as far as credit score goes IT DOESN'T MATTER. However, if you want to save on interest being charged, it is wise to pay as early as possible, so your balance is as low as possible for day-by-day calculation of your interest.", "title": "" }, { "docid": "4b27fe4787eb6e07ed71131bc7357766", "text": "\"There are other good answers to the general point that the essence of what you're describing exists already, but I'd like to point out a separate flaw in your logic: Why add more complications so that \"\"should I call this principal or interest\"\" actually makes a difference? Why's the point (incentive) for this? The incentive is that using excess payments to credit payments due in the future rather than applying it to outstanding principal is more lucrative for the lender. Since it's more lucrative and there's no law against it most (all) lenders use it as the default setting.\"", "title": "" }, { "docid": "902d883dc904b70b034cc564964afb21", "text": "\"Credit Cards typically charge interest on money you borrow from them. They work in one of two ways. Most cards will not charge you any interest if you pay the balance in full each month. You typically have around 25 days (the \"\"grace period\"\") to pay that off. If that's the case, then you will use your credit card without any cost to yourself. However, if you do not pay it in full by that point, then you will owe 19.9% interest on the balance, typically from the day you charged the payment (so, retroactively). You'll also immediately begin owing interest on anything else you charge - typically, even if you do then pay the next month the entire balance on time. It's typically a \"\"daily\"\" rate, which means that the annual rate (APR) is divided into its daily rate (think the APR divided by 365 - though it's a bit different than that, since it's the rate which would be 19.9% annualized when you realize interest is paid on interest). Say in your case it's 0.05% daily - that means, each day, 0.05% is added to your balance due. If you charged $1000 on day one and never made a payment (but never had to - ignore penalties here), you'd owe $1199 at the end of the year, paying $199 interest (19.9*1000). Note that your interest is calculated on the daily balance, not on your actual credit limit - if you only charge $100, you'd owe $19.90 interest, not $199. Also note that this simplifies what they're actually doing. They often use things like \"\"average daily balance\"\" calculations and such to work out actual interest charged; they tend to be similar to what I'm describing, but usually favor the bank a bit (or, are simpler to calculate). Finally: some credit cards do not have a grace period. In the US, most do, but not all; in other countries it may be less common. Some simply charge you interest from day one. As far as \"\"Standard Purchases\"\", that means buying services or goods. Using your credit card for cash advances (i.e., receiving cash from an ATM), using those checks they mail you, or for cash-like purchases (for example, at a casino), are often under a different scheme; they may have the same rate, or a different rate. They likely incur interest from the moment cash is produced (no grace period), and they may involve additional fees. Never use cash advances unless you absolutely cannot avoid it.\"", "title": "" }, { "docid": "50bd800bc724032df643034909cc34a6", "text": "\"The basic optimization rule on distributing windfalls toward debt is to pay off the highest interest rate debt first putting any extra money into that debt while making minimum payments to the other creditors. If the 5k in \"\"other debt\"\" is credit card debt it is virtually certain to be the highest interest rate debt. Pay it off immediately. Don't wait for the next statement. Once you are paying on credit cards there is no grace period and the sooner you pay it the less interest you will accrue. Second, keep 10k for emergencies but pretend you don't have it. Keep your spending as close as possible to what it is now. Check the interest rate on the auto loan v student loans. If the auto loan is materially higher pay it off, then pay the remaining 20k toward the student loans. Added this comment about credit with a view towards the OP's future: Something to consider for the longer term is getting your credit situation set up so that should you want to buy a new car or a home a few years down the road you will be paying the lowest possible interest. You can jump start your credit by taking out one or two secured credit cards from one of the banks that will, in a few years, unsecure your account, return your deposit, and leave no trace you ever opened a secured account. That's the route I took with Citi and Wells Fargo. While over spending on credit cards can be tempting, they are, with a solid payment history, the single most important positive attribute on a credit report and impact FICO scores more than other type of credit or debt. So make an absolute practice of only using them for things you would buy anyway and always, always, pay each monthly bill in full. This one thing will make it far easier to find a good rental, buy a car on the best terms, or get a mortgage at good rates. And remember: Credit is not equal to debt. Maximize the former and minimize the latter.\"", "title": "" } ]	fiqa
2665375ad7b865a332cf82b607df7a6d	How to build a U.S. credit history as a worker on a visa?	[ { "docid": "ab54c627df02f914213241c8098dd4bb", "text": "Credit is important for many reasons. Establishing credit is an important step and should be no challenge for someone who already has good habits. The same lessons and advice that you would find for a student to establish credit would be applicable to your case as well. Factors that influence credit score, Since you are already established in your home country (Australia), you probably have a credit card (and references) that you can provide for the first few challenges (renting a car, renting an apartment). Here are the steps, Your credit score should improve quickly as the first couple of credit cards and the installment loan show good payment history, low utilization, and gain some age. After 1-2 years, you should have a good score.", "title": "" }, { "docid": "953b47450cda011d6803d18a238445f0", "text": "When you start living in US, it doesn't actually matter what was your Credit history in another country. Your Credit History in US is tied to your SSN (Social Security Number), which will be awarded once you are in the country legally and apply for it. Getting an SSN also doesn't guarantee you nothing and you have to build your credit history slowly. Opening a Checking or Savings account will not help you in building a credit history. You need to have some type of Credit Account (credit card, car loan, mortgage etc.) linked to your SSN to start building your credit history. When you are new to US, you probably won't find any bank that will give you a Credit Card as you have no Credit history. One alternative is to apply for a secured credit card. A secured credit card is one you get by putting money or paying money to a bank and open a Credit Card against that money, thereby the bank can be secure that they won't lose any money. Once you have that, you can use that to build up your credit history slowly and once you have a good credit history and score, apply for regular Credit Card or apply for a car loan, mortgage etc. When I came to US 8 years ago, my Credit History was nothing, even though I had pretty good balance and credit history back in my country. I applied for secured credit card by paying $500 to a bank ( which got acquired by CapitalOne ), got it approved and used it for everything, for three years. I applied for other cards in the mean time but got rejected every time. Finally got approved for a regular credit card after three years and in one year added a mortgage and car loan, which helped me to get a decent score now. And Yes, a good Credit Score is important and essential for renting an apartment, leasing a car, getting a Credit Card etc. but normally your employer can always arrange for an apartment given your situation or you need to share apartment with someone else. You can rent a car without and credit score, but need a valid US / International Drivers license and a Credit Card :-) Best option will be to open a secured credit card and start building your credit. When your wife and family arrives, they also will be assigned individual SSN and can start building their credit history themselves. Please keep in mind that Credit Score and Credit History is always individual here...", "title": "" }, { "docid": "9e0b9a2e9015aeb08e040b219618558b", "text": "In the US, money talks and bullshit walks. You can skip any credit history requirement if you demonstrate your ability to pay in a very obvious way. Credit history is just a standardized way of weeding out people that cannot reliably pay, instead of having to listen to an individual's excuses about how the bank overdrafted their account five times while they were waiting for their friend to pay them back for bubble gum. If you can show up with a wad of cash, you can get the car, or the apartment, or the bank account without the troubles of everyone else. But you can begin building credit with a secured credit card pretty easily. This will be useful for things like utilities and sometimes jobs. Also, banks won't be opposed to giving you credit if you have a lot of money in an account with them. You should be able to maintain an exemption from all socioeconomic problems in the United States, solely due to your experience with money and assets.", "title": "" } ]	[ { "docid": "eb7a7cd5bd0ca3f03ebe2c68702097f3", "text": "\"In the other question, the OP had posted a screenshot (circa 2010) from Transunion with suggestions on how to improve the OP's credit score. One of these suggestions was to obtain \"\"retail revolving accounts.\"\" By this, they are referring to credit accounts from a particular retail store. Stores have been offering credit accounts for many years, and today, this usually takes the form of a store credit card. The credit card does not have the Visa or MasterCard logo on it, and is only valid at that particular store. (For example, Target has their own credit card that only works at Target stores.) The \"\"revolving\"\" part simply means that it is an open account that you can continue to make new charges and pay off, as opposed to a fixed retail financing loan (such as you might get at a high-end furniture store, where you obtain a loan for a single piece of furniture, and when it is paid off, the account is closed). The formula for credit scores are proprietary secrets. However, I haven't read anything that indicates that a store credit card helps your credit score more than a standard credit card. I suspect that Transunion was offering this tip in an attempt to give the consumer more ideas of how to add credit cards to their account that the consumer might not have thought of. But it is possible that buried deep in the credit score formula, there is something in there that gives you a higher score if you have a store credit card. As an aside, the OP in the other question had a credit score of 766 and was trying to make it higher. In my opinion, this is pointless. Remember that the financial services industry has an incentive to sell you as much debt as possible, and so all of their advice will point to you getting more credit accounts and getting more in debt.\"", "title": "" }, { "docid": "c01f6134cede65f12425fb5a39d1ce54", "text": "1) The easy way is to find a job and they will assign you an SSN. 2) Here's the hard way. If you're Canadian, open a TD Boarderless account in the U.S. Put a small investment into any investment that would generate some type of income, such as capital gain, dividends, interest and etc... Then you will need to file a US tax return to declare your income if you receive U.S. tax slips (although you're likely below the min filing requirement) at year end. To file a U.S. tax return, you may need what's called an ITIN or individual tax id number. With the ITIN, you can get credit from the US TD boarderless account (only). Consider getting a prepaid US credit card with the TD account to futher build credit at that specific bank. It's not much credit, but you do start with creating a history.", "title": "" }, { "docid": "b4da24f321fb782c3eadaf9e189c1c90", "text": "Is my understanding okay ? If so, it seems to me that this system is rather error prone. By that I mean I could easily forget to make a wire some day and be charged interests while I actually have more than enough money on the check account to pay the debt. Which is where the credit card company can add fees so you pay more and they make more money. Don't forget that in the credit case, you are borrowing money rather than using your own. Another thing that bothers me is that the credit card apparently has a rather low credit limit. If I wanted to buy something that costs $2500 but only have a credit limit of $1500, can I make a preemptive wire from my check account to the VISA account to avoid facing the limit ? If so, what is the point for the customer of having two accounts (and two cards for that matter...) ? If you were the credit card company, do you believe people should be given large limits first? There are prepaid credit cards where you could put a dollar amount on and it would reject if the balance gets low enough. Iridium Prepaid MasterCard would be an example here that I received one last year as I was involved in the floods in my area and needed access to government assistance which was given this way. Part of the point of building up a credit history is that this is part of how one can get the credit limits increased on cards so that one can have a higher limit after demonstrating that they will pay it back and otherwise the system could be abused. There may be a risk that if you prepay onto a credit card and then want to take back the money that there may be fees involved in the transaction. Generally, with credit cards the company makes money on the fees involved for transactions which may come from merchants or yourself as a cash advance on a credit card will be charged interest right away while if you buy merchandise in a store there may not be the interest charged right away.", "title": "" }, { "docid": "db6ab0b8e2dee288c1b67cff6ff26972", "text": "Don't do debt. After a few years (I forget how many) the bad history will have rolled off, but by then you will probably have no desire to go back into debt again. If you do want to build up a credit score, then at that point it's essentially the same as starting from scratch. However, from personal experience, once you've lived debt free for a few years you never want to get back on the debt wheel again. A credit score is the output of a behavioral model that indicates the chances that a bank will earn money from your business. Do things that earn the banks money and you will have a high credit score.", "title": "" }, { "docid": "80fbe8a7696a020cf9b413b76c940fb9", "text": "1. Read history (Money of the Mind, Lords of Finance, bios of volker/greenspan, Against the Gods, Monetary History of the US, Citibank 1812-1970, If There Were No Losses, Technological Revolutions and Financial Capital) 2. Learn Python 3. Take accounting classes 4. Learn about whatever interests you and figure out how to build a thesis around it. Don't forget step 1.", "title": "" }, { "docid": "13205a84955e1cc9da6c599458da163d", "text": "Department store cards will appear on your credit report and is often much easier to get approved for. All my friends that have applied for a Macy's card have always been approved. If you are new to the country, department store cards are a great way to build history. Target and Nordstroms are two other department stores to look at. Target is my first suggestion since they carry every day items and will be easy to consistently put charges on the card to build credit history.", "title": "" }, { "docid": "6605f0d1e1b5d93a94c0bb4af0b3ae50", "text": "Obviously the only way to have good credit is by owing money, and making payments as scheduled. To do this I would do everything I could to place all of your required expenses on a credit card. This can include paying rent, food, transportation, etc. These are all payments that you already make, but simply move then through a different payment vehicle. It sounds like at this time you may not have a credit card that allows you to do this, but I would watch out for those cards that come in via mail with all kinds of special deals. While you have not mentioned if you have any of this, make sure that you keep up with your past debt and negotiate repayment if needed. Once your credit improves, you should begin to see doors opening that are problems now.", "title": "" }, { "docid": "3cc6c9116769ff348070c66a1ed49129", "text": "\"A credit card is a way to borrow money. That's all. Sometimes the loans are very small - $5 - and sometimes they are larger. You can have a credit card with a company (bank or whatever) that you have no other relationship with. They're not a property of a bank account, they are their own thing. The card you describe sounds exactly like a debit card here, and you can treat your Canadian debit card like your French credit card - you pay for things directly from your bank account, assuming the money is in there. In Canada, many small stores take debit but not credit, so do be sure to get a debit card and not only a credit card. Now as to your specific concerns. You aren't going to \"\"forget to make a wire.\"\" You're going to get a bill - perhaps a paper one, perhaps an email - and it will say \"\"here is everything you charged on your credit card this month\"\" along with a date, which will be perhaps 21 days from the statement date, not the date you used the card. Pay the entire balance (not just the minimum payment) by that date and you'll pay no interest. The bill date will be a specific date each month (eg the 23rd) so you can set yourself a reminder to check and pay your bill once a month. Building a credit history has value if you want to borrow a larger amount of money to buy a car or a house, or to start a business. Unlike the US, it doesn't really have an impact on things like getting a job. If you use your card for groceries, you use it enough, no worries. In 5 years it is nice to look back and see \"\"never paid late; mostly paid the entire amount each month; never went over limit; never went into collections\"\" and so on. In my experience you can tell they like you because they keep raising your limit without you asking them to. If you want to buy a $2500 item and your credit limit is $1500 you could prepay $1000 onto the credit card and then use it. Or you could tell the vendor you'd rather use your debit card. Or you could pay $1500 on the credit card and then rest with your debit card. Lots of options. In my experience once you get up to that kind of money they'd rather not use a credit card because of the merchant fees they pay.\"", "title": "" }, { "docid": "f424b6101ae3d715402a19f6895b7ae4", "text": "Well I am kind of looking for a way to make it little bit more official if I can ... :D I have no toruble for paying taxes to US and anything ... Just don't want to spend 4000$ on 2 year VISA for a model that will stay in NYC for 3 weeks ... Doesn't make sense ...", "title": "" }, { "docid": "ae1ce4e2990ae39f7f75e036deba9f8d", "text": "It used to be quite easy for students to get credit cards. When I was in college in the early 1980s, credit card companies set up tables in the student center and offered low-limit cards along with free t-shirts on an almost daily schedule. The Credit CARD Act of 2009 made this much more difficult for banks. If you have a bank or credit union account, the first thing I would do is talk to them about getting a card. Some banks offer a VISA Student Card specifically for college students. My daughter was able to get one when she turned 18, just before starting college. The credit limit is very low ($200 for freshmen, increasing each year until the limit is $500 during senior year). After graduation, it converts to a regular VISA account with a limit that depends on post-graduation income and the now established 4 years of credit history. The VISA web site has a list of banks offering this type of card. Now I will give you the same unsolicited advice I gave my daughter, and the same advice I think most others here would give you. For building credit, this kind of card is excellent, but you should still use it very sparingly, and pay off the balance every month. Make it a hard rule to never pay interest on a credit card bill. I told her to charge perhaps one or two purchases totaling no more than $25-$50 each month, and pay them off as soon as the statement arrives. This is much easier if you have a deposit account at the same bank, since you will be able to pay the bill instantly on line. Have your employer direct deposit your paychecks into that bank account, if at all possible.", "title": "" }, { "docid": "322a5c40e4c81d952476c0acfbd4c64e", "text": "\"One of the factors of a credit score is the \"\"length of time revolving accounts have been established\"\". Having a credit card with any line of credit will help in this regard. The account will age regardless of your use or utilization. If you are having issues with credit limits and no credit history, you may have trouble getting financing for the purchase. You should be sure you're approved for financing, and not just that the financing option is \"\"available\"\" (potentially with the caveat of \"\"for well qualified borrowers\"\"). Generally, if you've gotten approved for financing, that will come in the form of another credit card account (many contracting and plumbing companies will do this in hopes you will use the card for future purchases) or a bank loan account (more common for auto and home loans). With the credit card account, you might be able to perform a balance transfer, but there are usually fees associated with that. For bank loan accounts, you probably can't pay that off with a credit card. You'll need to transfer money to the account via ACH or send in a check. In short: I wouldn't bet on paying with your current credit card to get any benefit. IANAL. Utilizing promotional offers, whether interest-free for __ months, no balance transfer fees, or whatever, and passing your debt around is not illegal, not fraudulent, and in many cases advised (this is a link), though that is more for people to distribute utilization across multiple cards, and to minimize interest accrued. Many people, myself included, use a credit card for purchasing EVERYTHING, then pay it off in full every month (or sometimes immediately) to reap the benefit of cash back rewards and other cardholder benefits. I've also made a major payment (tuition, actually) on a Discover card, and opened up a new Visa card with 18-months of no interest and no balance transfer fees to let the bill sit for 12 months while I finished school and got a job.\"", "title": "" }, { "docid": "49136c4aa863e265570541bc1bcd0c3a", "text": "K, welcome to Money.SE. You knew enough to add good tags to the question. Now, you should search on the dozens of questions with those tags to understand (in less than an hour) far more than that banker knows about credit and credit scores. My advice is first, never miss a payment. Ever. The advice your father passed on to you is nonsense, plain and simple. I'm just a few chapters shy of being able to write a book about the incorrect advice I'd heard bank people give their customers. The second bit of advice is that you don't need to pay interest to have credit cards show good payment history. i.e. if you choose to use credit cards, use them for the convenience, cash/rebates, tracking, and guarantees they can offer. Pay in full each bill. Last - use a free service, first, AnnualCreditReport.com to get a copy of your credit report, and then a service like Credit Karma for a simulated FICO score and advice on how to improve it. As member @Agop has commented, Discover (not just for cardholders) offers a look at your actual score, as do a number of other credit cards for members. (By the way, I wouldn't be inclined to discuss this with dad. Most people take offense that you'd believe strangers more than them. Most of the answers here are well documented with links to IRS, etc, and if not, quickly peer-reviewed. When I make a mistake, a top-rated member will correct me within a day, if not just minutes)", "title": "" }, { "docid": "12846ee71ec9c5769954964fdc8c2f01", "text": "\"Patience has never been my strong suit Unfortunately this is what you need to build up credit. The activities that increase your credit score are paying your bills on time and not using too much of the available credit that you do have. The rest (age of accounts, recent pulls, etc.) are short-term indicators that indicate changes in behavior that will make lenders pause and understand what the reasons behind the events are. Also keep in mind that your credit score shouldn't run your life. It should be a passive indicator of your financial habits - not something that you actively manipulate. Is there anything I can do to raise my score without having to take out a loan with interest? Pay your bills on time, and don't take out more credit than you need. You're already in the \"\"excellent\"\" category, so there's no reason to panic or try to manipulate it. Even if you temporarily dip below, if you need to make a big purchase (house), your loan-to-value and debt/income ratio will be much bigger factors in what interest rate you can get. As far as the BofA card goes, if you don't need it, cancel it. It might cause a temporary dip in your credit, but it will go away quickly, and you're better off not having credit cards that you don't need.\"", "title": "" }, { "docid": "a4643985f87ceba69f225ba73d64fec9", "text": "\"I took @littleadv 's recommendation that online apps only ask for citizenship due to post-9/11 legislation. I applied to 2 banks in person (one big, one small), and at the dealership. None of my in-person applications ever touched on the issue of citizenship. I even applied in person at the same bank that insta-rejected me online, and told them up front, \"\"I applied online but you rejected me because I'm not a permanent resident.\"\" The banker nodded, said \"\"that shouldn't matter here\"\", and continued processing my application. I did find it very hard to get a loan. I have a credit score in the \"\"excellent\"\" range, but have only 1 open credit card (for 5 years). Apparently, most lenders want to see more open credit before writing an auto loan. The big bank said outright \"\"We want to see 3-5 credit cards open\"\". However, the dealership did find a bank willing to extend me a loan. So: The most reliable way for a non-permanent resident alien to get an auto loan in the US is to avoid online applications. Also, if possible, establish a wide credit history before you try.\"", "title": "" }, { "docid": "1edabf71079db023da4aede27f2275c7", "text": "Probably not. If you were at a small company and asked such a question, you'd get advice and links to erisa or other case law, etc. it's safe to say that a Fortune 500 company such as IBM is going to have their facts in order, and not going to run afoul of the rules in these cases (vesting rules and takeover of other company). I was in a company that cancelled its pension program. Those of us with the required years got the option of a lump sum payout, those with less than 5 years had no vested value and got nothing. One month longer employment, in the case of a particular coworker, would have given him a lump sum worth nearly 6 months pay.", "title": "" } ]	fiqa
215bdf4235d634fee6008422229fb8b5	Comparing keeping old car vs. a new car lease	[ { "docid": "83d2ae00e3abfe7f86e32371aa6a4afb", "text": "Look at the basic cost of the lease. Option 1: keep the car for three years. Pay for repairs during that time then sell it for $7,000. Option 2: Sell the current car for $10,000. Lease a new car for three years. Assume no need for repairs during those three years. At the end of the three years return the car in return for $0. Cost of option 1 is $3000 plus repairs. Cost of Option 2 is 36 months x monthly lease cost. The first $83 of the monthly lease cost is to cover the $3000 fixed cost of option 1. The rest of the monthly lease cost is to cover the cost of repairs. Also remember that some leases have a initial down payment due at signing, and penalties for condition, and excess mileage. The lease company may also require a higher level of insurance for the lease to cover their investment if you have an accident. Plus If you fall in love with a different car two year from now, or your needs change you are locked in until the end of the lease period.", "title": "" }, { "docid": "4efbccc6cb586ee462049893dea8a984", "text": "Regarding the opportunity cost comparison, consider the following two scenarios assuming a three-year lease: Option A: Keep your current car for three years In this scenario, you start with a car that's worth $10,000 and end with a car that's worth $7,000 after three years. Option B: Sell your current car, invest proceeds, lease new car Here, you'll start out with $10,000 and invest it. You'll start with $10,000 in cash from the sale of your old car, and end with $10,000 plus investment gains. You'll have to estimate the return of your investment based on your investing style. Option C: Use the $10k from proceeds as down payment for new car In this scenario you'll get a reduction in finance charges on your lease, but you'll be out $10,000 at the end. Overall Cost Comparison To compare the total cost to own your current car versus replacing it with a new leased car, first look up the cost of ownership for your current car for the same term as the lease you're considering. Edmunds offers this research and calls it True Cost to Own. Specifically, you'll want to include depreciation, fuel, insurance, maintenance and repairs. If you still owe money you should also factor the remaining payments. So the formula is: Cost to keep car = Depreciation + Fuel + Insurance + Maintenance + Repairs On the lease side consider taxes and fees, all lease payments, fuel, and maintenance. Assume repairs will be covered under warranty. Assume you will put down no money on the lease and you will finance fees, taxes, title, and license when calculating lease payments. You also need to consider the cost to pay off your current car's loan if applicable. Then you should subtract the gains you expect from investing for three years the proceeds from the sale of your car. Assume that repairs will be covered under warranty. The formula to lease looks like: Lease Cost = Fuel + Insurance + Maintenance + Lease payments - (gains from investing $10k) For option C, where you use the $10k from proceeds as down payment for new lease, it will be: Lease Cost = Fuel + Insurance + Maintenance + Lease payments + $10,000 A somewhat intangible factor to consider is that you'll have to pay for body damage to a leased car at the end of the lease, whereas you are obviously free to leave damage unrepaired on your own vehicle.", "title": "" } ]	[ { "docid": "7059a7d0bfe3ad4e22effcd4c6298c90", "text": "I have a few recommendations/comments: The trick here is to make it clear to the dealer that you will not be getting a new car from them and their only hope of making some money is to sell you your own car. You need to be prepared to walk away and follow through. DON'T buy a new car from them even if you end up turning it in! They could still come back a day later and offer a deal. Leasing a new car every 3 years is not the best use of money. You have to really, really like that new car feeling every three years and be willing to pay a premium for it. If you're a car nut (like me) and want to spend money on a luxury car, it's far wiser to purchase a slightly used luxury vehicle, keep it for 8+ years, and that way you won't have a car payment half the time!", "title": "" }, { "docid": "c67a88c4227e0bf04bf2a770ce04fe61", "text": "When getting a car always start with your bank or credit union. They are very likely to offer better loan rate than the dealer. Because you start there you have a data point so you can tell if the dealer is giving you a good rate. Having the loan approved before going to the dealer allows you to negotiate the best deal for the purchase price for the car. When you are negotiating price, length of loan, down payment, and trade in it can get very confusing to determine if the deal is a good one. Sometimes you can also get a bigger rebate or discount because to the dealer you are paying cash. The general advice is that a lease for the average consumer is a bad deal. You are paying for the most expensive months, and at the end of the lease you don't have a car. With a loan you keep the car after you are done paying for it. Another reason to avoid the lease. It allows you to purchase a car that is two or three years old. These are the ones that just came off lease. I am not a car dealer, and I have never needed a work visa, but I think their concern is that there is a greater risk of you not being in the country for the entire period of the lease.", "title": "" }, { "docid": "3b4edaa73af0efe82cbb95c36722f852", "text": "I would like to add that from my own research, a pro to leasing over buying a new vehicle would be that with the lease the entire 7,500 federal incentive is applied directly to the lease, or so they say. If you buy a new car you get a 7,500 federal tax incentive also but if you dont have 7,500 bucks in taxes this wont be as much value. It doesn't sense to me to buy used since you dont get the tax incentive and also if you're in california the 2,500 rebate only applies to buying new or leasing 30 month or longer.", "title": "" }, { "docid": "067b00eeae4c7564c16d7388d5bed468", "text": "According to AutoTrader, there are many different reasons, but here are three: New cars have a better resale value and it's easier to predict its resale value in case you default on the loan and they repossess the car. Lenders that are through auto makers can use different incentives for getting you to buy a new car. Used car financing is usually through other banks. People with higher credit scores tend to buy new cars, and therefore can get a lower rate because of their higher credit score.", "title": "" }, { "docid": "5143aeb0b0a00bf3eeba177754bca3aa", "text": "\"Without the specifics of the contract, as well as the specifics of the country/state/city you're moving to, it's hard to say what's legal. But this also isn't law.se, so I'll answer this from the point of view of personal finance, and what you can/should do as next steps. Whenever paying an application fee or a deposit, you need to ensure that you have in writing exactly what you're applying for or putting a deposit in for. Whether this is an apartment, a car, or a loan, before any money changes hands, you need to get in writing exactly what you're putting that money to. So for a car, you'd want to have the complete specifications - make, model, year, color, extra packages, and any relevant loan information if applicable. You wouldn't just hand a dealer $2000 for \"\"a Toyota Camry\"\", you'd make sure it was specified which one, in writing, as well as the total you're expecting to pay. Same for an apartment: you should have, in writing (email is fine) the specific unit you are putting a deposit for, and the specific rate you'll be paying, and the length of time the lease is for. This is to avoid a common tactic: bait and switch, which is what it looks like you've run into. A company puts forth a \"\"nice\"\" model, everything looks good, you get far enough in that it seems like you're locked in - and then it turns out you're really getting a less nice model that's not as ideal as whatever you signed up for. Now if you want to get what you originally signed up for you need to pay extra - presumably \"\"something was wrong in the original ad\"\", or something like that. And all you can hear in the background is Darth Vader... \"\"I am altering the deal. Pray I don't alter it any further.\"\" So; what do you do when you've been bait-and-switched? The best thing to do is typically to walk away. Try to get your application fee back; you may or may not be able to, but it's worth a shot, and even if you cannot, walk away anyway. Someone who is going to bait-and-switch on you is probably not going to be a good landlord; my guess is that rent is going to keep going up beyond the level of the market, and you probably can kiss your security deposit goodbye. Second, if walking away isn't practical for whatever reason, you can find out what the local laws are. Some locations (though very few, sadly) require advertised prices to be accurate; particularly the fact that they re-advertised the unit again for the same rate suggests they are falling afoul of that. You can ask around, search the internet, or best yet talk to a lawyer who specializes in this sort of thing; some of them will be willing to at least answer a few questions for free (hoping to score your business for an easy, profitable lawsuit). Be aware that it's not exactly a good situation to be in, to be suing your landlord; second only to suing your employer, in my opinion, in terms of bad things to do while hoping to continue the relationship. Find an alternative as soon as you can if you go this route. In the future, pay a lot of attention to detail when making application fees. Often the application fee is needed before you get into too much detail - but pick a location that has reasonable application fees, and no extras. For example, in my area, it's typical to pay a $25 application fee, nonrefundable, to do the credit check and background check, and a refundable $100-$200 deposit to hold the unit while doing that; a place that asks for a non-refundable deposit is somewhere I'd simply not apply at all.\"", "title": "" }, { "docid": "46f295dd712175146f902bb3afbad09b", "text": "\"You are still paying a heavy price for the 'instant gratification' of driving (renting) a brand-new car that you will not own at the end of the terms. It is not a good idea in your case, since this luxury expense sounds like a large amount of money for you. Edited to better answer question The most cost effective solution: Purchase a $2000 car now. Place the $300/mo payment aside for 3 years. Then, go buy a similar car that is 3 years old. You will have almost $10k in cash and probably will need minimal, if any, financing. Same as this answer from Pete: https://money.stackexchange.com/a/63079/40014 Does this plan seem like a reasonable way to proceed, or a big mistake? \"\"Reasonable\"\" is what you must decide. As the first paragraph states, you are paying a large expense to operate the vehicle. Whether you lease or buy, you are still paying this expense, especially from the depreciation on a new vehicle. It does not seem reasonable to pay for this luxury if the cost is significant to you. That said, it will probably not be a 'big mistake' that will destroy your finances, just not the best way to set yourself up for long-term success.\"", "title": "" }, { "docid": "b49d0970285e5d57edafe60614d14bcf", "text": "Full payment is always better than auto-loan if you are prudent with finances. I.E if you take a loan, you are factoring the EMI hence your savings will remain as is. However if you manage well, you can buy the car with cash and at the same time put aside the notional EMI as savings and investments. The other factor to consider is what return your cash is giving. If this more than auto-loan interest rate post taxes, you should opt for loan. For example if auto-loan is 10% and you are getting a return of 15% after taxes on investment then loan is better. Company Car lease depends on terms. More often you get break on taxes on the EMI component. But you have to buy at the end of lease period and re-register the car in your name, so there is additional cost. Some companies give lease at very favourable rates. Plus if you leave the job lease has to be broken and it becomes more expensive.", "title": "" }, { "docid": "0811da7ac2144ef3ebc1e2d2b013f5fd", "text": "\"I strongly discourage leasing (or loans, but at least you own the car at the end of it) in any situation. it's just a bad deal, but that doesn't answer your question. Most new cars are \"\"loss leaders\"\" for dealerships. It's too easy to know what their costs are these days, so they make most of their money though financing. They might make a less than $500 on the sale of a new car, but if it's financed though them then they might get $2,000 - $4,000 commission/sale on the financing contract. Yes, it is possible and entirely likely that the advertised rate will only go to the best qualified lessees (possibly with a credit score about 750 or 800 or so other high number, for example). If the lessee meets the requirements then they won't deny you, they really want your business, but it is more likely to start the process and do all the paperwork for them to come back and say, \"\"Well, you don't qualify for the $99/month leasing program, but we can offer you the $199/month lease.\"\" (since that's the price you're giving from other dealerships). From there you just need to negotiate again. Note: Make sure you always do your research and negotiate the price of the car before talking about financing.\"", "title": "" }, { "docid": "83f722d2f398117aafd522e4bfb3384e", "text": "I think you are making this more complicated that it has to be. In the end you will end up with a car that you paid X, and is worth Y. Your numbers are a bit hard to follow. Hopefully I got this right. I am no accountant, this is how I would figure the deal: The payments made are irrelevant. The downpayment is irrelevant as it is still a reduction in net worth. Your current car has a asset value of <29,500>. That should make anyone pause a bit. In order to get into this new car you will have to finance the shortfall on the current car (29,500), the price of the vehicle (45,300), the immediate depreciation (say 7,000). In the end you will have a car worth 38K and owe 82K. So you will have a asset value of <44,000>. Obviously a much worse situation. To do this car deal it would cost the person 14,500 of net worth the day the deal was done. As time marched on, it would be more as the reduction in debt is unlikely to keep up with the depreciation. Additionally the new car purchase screen shows a payment of $609/month if you bought the car with zero down. Except you don't have zero down, you have -29,500 down. Making the car payment higher, I estamate 1005/month with 3.5%@84 months. So rather than having a hit to your cash flow of $567 for 69 more months, you would have a payment of about $1000 for 84 months if you could obtain the interest rate of 3.5%. Those are the two things I would focus on is the reduction in net worth and the cash flow liability. I understand you are trying to get a feel for things, but there are two things that make this very unrealistic. The first is financing. It is unlikely that financing could be obtained with this deal and if it could this would be considered a sub-prime loan. However, perhaps a relative could finance the deal. Secondly, there is no way even a moderately financially responsible spouse would approve this deal. That is provided there were not sigificant assets, like a few million. If that is the case why not just write a check?", "title": "" }, { "docid": "92f923e3727a7af46c38acb5c46bb1c7", "text": "You SHOULDN'T lease one if you are going to get an economy car, if you don't drive too much (<15K / year), and you want to hang on to the car for a long time. Otherwise, if you are a regular driver, driving a leased new quality car can be cost effective. Many cars now have bumper-to-bumper warranties that last as long as the lease (say 80K). So there is rarely any extra costs apart from regular maintenance. The sweet spot for most new cars is in the 5th, 6th, or 7th years, after they are paid off. But at that point, you may find you have maintenance bills that are approaching an average of $200 - $300 per month. In which case, a lease starts to look pretty good. I owned a 7 year old Honda Accord that cost only $80 less per month in maintenance than the new leased VW that replaced it. Haven't looked back after that. Into my 3rd car and 9th year of leasing.", "title": "" }, { "docid": "968b4cb1fc34aafd1f9a4bb0445e8ef4", "text": "\"This was a huge question for me when I graduated high school, should I buy a new or a used car? I opted for buying used. I purchased three cars in the span of 5 years the first two were used. First one was $1500, Honda, reliable for one year than problem after problem made it not worth it to keep. Second car was $2800, Subaru, had no problems for 18 months, then problems started around 130k miles, Headgasket $1800 fix, Fixed it and it still burnt oil. I stopped buying old clunkers after that. Finally I bought a Nissan Sentra for $5500, 30,000 miles, private owner. Over 5 years I found that the difference between your \"\"typical\"\" car for $1500 and the \"\"typical\"\" car you can buy for $5500 is actually a pretty big difference. Things to look for: Low mileage, one owner, recent repairs, search google known issues for the make and model based on the mileage of the car your reviewing, receipts, clean interior, buying from a private owner, getting a deal where they throw in winter tires for free so you already have a set are all things to look for. With that said, buying new is expensive for more than just the ticket price of the car. If you take a loan out you will also need to take out full insurance in order for the bank to loan you the car. This adds a LOT to the price of the car monthly. Depending on your views of insurance and how much you're willing to risk, buying your car outright should be a cheaper alternative over all than buying new. Save save save! Its very probably that the hassles of repair and surprise break downs will frustrate you enough to buy new or newer at some point. But like the previous response said, you worked hard to stay out of debt. I'd say save another grand, buy a decent car for $3000 and continue your wise spending habits! Try to sell your cars for more than you bought them for, look for good deals, buy and sell, work your way up to a newer more reliable car. Good luck.\"", "title": "" }, { "docid": "f64b356af646c6d4ba154440a0d05462", "text": "\"I usually recommend along these lines. If you are going to drive the same car for many years, then buy. Your almost always better to buy, and then drive a car for 10 years than to lease and replace it every 2 years. If you want a new car every two years then lease. You're usually better off leasing if you're going to replace the car before the auto loan is paid off or shortly there after. Also you can get \"\"more car\"\" for the same monthly money via leasing. I honestly would advise you to either buy out your lease, or buy a barely used car. Then drive it for as long as you can. Take the extra money you would spend and spend it on an awesome vacation or something. Also, if you're only driving 15 miles a day, then get a cheap, but solid car. Again, just my advice.\"", "title": "" }, { "docid": "13c784beb80c23267dd7392e8d5b5027", "text": "For a lease, your payment is a function of sale price minus residual value. If the car has a low residual value then the lease payments will be higher. If it has a high residual value then lease payments will be lower but the purchase price at the end of the lease will be higher (potentially even higher than the KBB of the car). There is no gaming the system. Whether you buy now or lease now and buy later, you will be paying for the entire car. Calculate the payments in both scenarios with appropriate interest rates/money factors, sale price, and residual value. This will demonstrate there is no free lunch to be had here. Also, don't forget that financing the vehicle after a three year lease will probably mean a higher interest rate than if you were to finance it all now. With a purchase now you will likely get more favorable financing terms and be able to talk them down on sale price. Leasing will not allow such flexibility generally. Tldr No, that's not how it works. If you plan on owning the car for the duration of a loan (e.g. 5 years) it will be cheaper to just finance now.", "title": "" }, { "docid": "64f9212da3a1b059f5771311c5862c51", "text": "Get rid of the lease and buy a used car. A good buy is an Audi because they are popular, high-quality cars. A 2007 Audi A4 costs about $7000. You will save a lot of money by dumping the lease and owning. Go for quality. Stay away from fad cars and SUVs which are overpriced for their value. Full sized sedans are the safest cars. The maintenance on a high-quality old car is way cheaper than the costs of a newer car. Sell the overseas property. It is a strong real estate market now, good time to sell. It is never good to have property far away from where you are. You need to have a timeline to plan investments. Are you going to medical school in one year, three years, five years? You need to make a plan. Every investment is a BUY and a SELL and you should plan for both. If your business is software, look for a revenue-generating asset in that area. An example of a revenue-generating asset is a license. For example, some software like ANSYS has license costs in the region of $30,000 annually. If you broker the license, or buy and re-sell the license you can make a good profit. This is just one example. Use your expertise to find the right vehicle. Make sure it is a REVENUE-GENERATING ASSET.", "title": "" }, { "docid": "e09a2ad6a58da909bc41f83bf55ba52e", "text": "Though non-resident Indians (NRIs) earn their living abroad, their obligation to file tax returns in India doesn't end. With the July 31 deadline for filing returns barely a month away, NRIs need to gear up to file their return if they have income in India that exceeds the basic exemption limit. How to Determine tax residency status: An NRI first needs to determine his tax residency status, that is, whether he falls in the category of resident or non-resident Indian (NRI) for tax purposes. While there may be no ambiguity regarding the status of an NRI who has lived abroad for a long time, those who have moved abroad recently or have returned to India after a long stay abroad need to ascertain their residency status properly.", "title": "" } ]	fiqa
9d4157de502c2da4d1f7eea7baae31c0	Building financial independence	[ { "docid": "1286da8a6b6708506c4ec2759ac83219", "text": "\"While I can appreciate you're coming from a strongly held philosophy, I disagree strongly with it. I do not have any 401k or IRA I don't like that you need to rely on government and keep the money there forever. A 401k and an IRA allows you to work within the IRS rules to allow your gains to grow tax free. Additionally, traditional 401ks and IRAs allow you to deduct income from your taxes, meaning you pay less taxes. Missing out on these benefits because the rules that established them were created by the IRS is very very misguided. Do you refuse to drive a car because you philosophically disagree with speed limits? I am planning on spending 20k on a new car (paying cash) Paying cash for a new car when you can very likely finance it for under 2% means you are loosing the opportunity to invest that money which can conservatively expect 4% returns annually if invested. Additionally, using dealership financing can often be additional leverage to negotiate a lower purchase price. If for some reason, you have bad credit or are unable to secure a loan for under 4%, paying cash might be reasonable. The best thing you have going for you is your low monthly expenses. That is commendable. If early retirement is your goal, you should consider housing expenses as a part of your overall plan, but I would strongly suggest you start investing that money in stocks instead of a single house, especially when you can rent for such a low rate. A 3 fund portfolio is a classic and simple way to get a diverse portfolio that should see returns in good years and stability in bad years. You can read more about them here: http://www.bogleheads.org/wiki/Three-fund_portfolio You should never invest in individual stocks. People make lots of money to professionally guess what stocks will do better than others, and they are still very often wrong. You should purchase what are sometimes called \"\"stocks\"\" but are really very large funds that contain an assortment of stocks blended together. You should also purchase \"\"bonds\"\", which again are not individual bonds, but a blend of the entire bond market. If you want to be very aggressive in your portfolio, go with 100-80% Stocks, the remainder in Bonds. If you are nearing retirement, you should be the inverse, 100-80% bonds, the remainder stocks. The rule of thumb is that you need 25 times your yearly expenses (including taxes, but minus pension or social security income) invested before you can retire. Since you'll be retiring before age 65, you wont be getting social security, and will need to provide your own health insurance.\"", "title": "" }, { "docid": "5b7c6c045d2c03f178cd96160cd32d98", "text": "For a young person with good income, 50k sitting in a savings account earning nothing is really bad. You're losing money because of inflation, and losing on the growth potential of investing. Please rethink your aversion to retirement accounts. You will make more money in the long run through lower taxes by taking advantage of these accounts. At a minimum, make a Roth IRA contribution every year and max it out ($5500/yr right now). Time is of the essence! You have until April 15th to make your 2014 contribution! Equities (stocks) do very well in the long run. If you don't want to actively manage your portfolio, there is nothing wrong (and you could do a lot worse) than simply investing in a low-fee S&P 500 index fund.", "title": "" }, { "docid": "09f617a19b176a24cbf9aba7eb01e74a", "text": "Another bit of advice specific to your scenario. Consider buying an ALMOST new car. Buying last year's model can knock a huge amount off the price and the car is going to still feel very new to you, especially if you buy from a dealer who has had it detailed.", "title": "" }, { "docid": "b0aa776a9b3efd7a2ab769f190a63fce", "text": "It's important to have both long term goals and milestones along the way. In an article I wrote about saving 15% of one's income, I offered the following table: This table shows savings starting at age 20 (young, I know, so shift 2 years out) and ending at 60 with 18-1/2 year's of income saved due to investment returns. The 18-1/2 results in 74% of one's income replaced at retirement if we follow the 4% rule. One can adjust this number, assuming Social Security will replace 30%, and that spending will go down in retirement, you might need to save less than this shows. What's important is that as a starting point, it shows 2X income saved by age 30. Perhaps 1X is more reasonable. You are at just over .5X and proposing to spend nearly half of that on a single purchase. Financial independence means to somehow create an income you can live on without the need to work. There are many ways to do it, but it usually starts with a high saving rate. Your numbers suggest a good income now, but maybe this is only recently, else you'd have over $200K in the bank. I suggest you read all you can about investments and the types of retirement accounts, including 401(k) (if you have that available to you), IRA, and Roth IRA. The details you offer don't allow me to get much more specific than this.", "title": "" } ]	[ { "docid": "ea4f6d41989081ee98b66fcdd1343613", "text": "Quality of life, success and happiness are three factors that are self define by each individual. Most of the time all three factors go hand by hand with your ability to generate wealth and save. Actually, a recent study showed that there were more happy families with savings than with expensive products (car, jewelry and others). These 3 factors, will be very difficult to maintain after someone commit such action. First, because you will fear every interaction with the origin of the money. Second, because every individual has a notion of wrong doing. Third, for the reasons that Jaydles express. Also, most cards, will call you and stop the cards ability to give money, if they see an abusive pattern. Ether, skipping your country has some adverse psychological impact in the family and individual that most of the time 100K is not enough to motivate such change. Thanks for reading. Geo", "title": "" }, { "docid": "8a29aaf3d8fdfa4d18400e2269a11401", "text": "\"The definition I use for financial independence is 99% confidence that, at a specific estimated spending rate per year (allowing for estimated inflation, and budgeting for likely medical emergencies, and taxes on taxable investments), the money will outlast me. This translates to needing an average annual return on investment which covers the average yearly spending. For my purposes, that works out to my relying on being able to draw only a 4% income from the money each year, which should give me good odds of the money not just being sufficient but being able to deliver that rate \"\"forever\"\". (Historically, average US stock market rate if return is around 8%.) That is overkill, if course, I could plan on the money just barely lasting past my 120th birthday or something of that sort, but the goal us to be pretty sure not only that I won't run out but that I will have some cash unexpected needs. Which in turn means that I estimate I need investments 1/.04 times the yearly spending estimate to declare the \"\"forever\"\" independence/retirement, or 25x the yearly. From that, I can calculate how much longer, at a given savings rate and rate of return, it'll take for me to reach that target. Obviously you need to adjust all these numbers to reflect your opinions/understanding if the market, your own needs, your priorities and expected maximum age, and the phase of Saturn's moons. But that's the basic rationale. Or you can pay a financial planner to give you this number, and a strategy for getting there, based on the numbers you give him or her plus some statistical analysis of the market's overall history.\"", "title": "" }, { "docid": "b272698e1679609d91d03ae6740f5359", "text": "I started my career over 10 years ago and I work in the financial sector. As a young person from a working class family with no rich uncles, I would prioritize my investments like this: It seems to be pretty popular on here to recommend trading individual stocks, granted you've read a book on it. I would thoroughly recommend against this, for a number of reasons. Odds are you will underestimate the risks you're taking, waste time at your job, stress yourself out, and fail to beat a passive index fund. It's seriously not worth it. Some additional out-of-the box ideas for building wealth: Self-serving bias is pervasive in the financial world so be careful about what others tell you about what they know (including me). Good luck.", "title": "" }, { "docid": "6435f24f13a0fde33b0d612aa3ee4b3d", "text": "Firstly, make sure annual income exceeds annual expenses. The difference is what you have available for saving. Secondly, you should have tiers of savings. From most to least liquid (and least to most rewarding): The core of personal finance is managing the flow of money between these tiers to balance maximizing return on savings with budget constraints. For example, insurance effectively allows society to move money from savings to stocks and bonds. And a savings account lets the bank loan out a bit of your money to people buying assets like homes. Note that the above set of accounts is just a template from which you should customize. You might want to add in an FSA or HSA, extra loan payments, or taxable brokerage accounts, depending on your cash flow, debt, and tax situation.", "title": "" }, { "docid": "64576ad5c580bb9cc5bb4692aa83267e", "text": "If your goal is to have a 400K net worth, in 11 years, and you invest 2144 the entire time you will need a rate of return of at least 6.4%. This is assuming that you have zero net worth now and it does not consider your house. Obviously the house will be worth some amount, and the mortgage balance will go down. However, it cannot really be calculated with the details provided. It seems like your risk tolerance is low. You may want to head over to Bogleheads.org and look into their asset allocation model. They typically site about a 7% compounded growth rate which will more than meet your goals. They probably have information for European investors that map to the funds that we use here in the US. Keep in mind, during this time you will likely receive raises, if you start out assuming you will hit the 400-500k mark, and stick to the plan, you will likely blow that goal away. Also keep in mind the three legs to wealth building: giving some, spending some, and investing some. Your question is addressing the investing portion make sure you are also enjoying your money by spending some on yourself; and, others benefit from your prosperity. Giving to causes you deem worthy is a key component to wealth building that is often overlooked by those interested in investing.", "title": "" }, { "docid": "4ee232426f873c73418bdcadf24765ed", "text": "The rule that I know is six months of income, stored in readily accessible savings (e.g. a savings or money market account). Others have argued that it should be six months of expenses, which is of course easier to achieve. I would recommend against that, partially because it is easier to achieve. The other issue is that people are more prone to underestimate their expenses than their income. Finally, if you base it on your current expenses, then budget for savings and have money left over, you often increase your expenses. Sometimes obviously (e.g. a new car) and sometimes not (e.g. more restaurants or clubs). Income increases are rarer and easier to see. Either way, you can make that six months shorter or longer. Six months is both feasible and capable of handling difficult emergencies. Six years wouldn't be feasible. One month wouldn't get you through a major emergency. Examples of emergencies: Your savings can be in any of multiple forms. For example, someone was talking about buying real estate and renting it. That's a form of savings, but it can be difficult to do withdrawals. Stocks and bonds are better, but what if your emergency happens when the market is down? Part of how emergency funds operate is that they are readily accessible. Another issue is that a main goal of savings is to cover retirement. So people put them in tax privileged retirement accounts. The downside of that is that the money is not then available for emergencies without paying penalties. You get benefits from retirement accounts but that's in exchange for limitations. It's much easier to spend money than to save it. There are many options and the world makes it easy to do. Emergency funds make people really think about that portion of savings. And thinking about saving before spending helps avoid situations where you shortchange savings. Let's pretend that retirement accounts don't exist (perhaps they don't in your country). Your savings is some mix of stocks and bonds. You have a mortgaged house. You've budgeted enough into stocks and bonds to cover retirement. Now you have a major emergency. As I understand your proposal, you would then take that money out of the stocks and bonds for retirement. But then you no longer have enough for retirement. Going forward, you will have to scrimp to get back on track. An emergency fund says that you should do that scrimping early. Because if you're used to spending any level of money, cutting that is painful. But if you've only ever spent a certain level, not increasing it is much easier. The longer you delay optional expenses, the less important they seem. Scrimping beforehand also helps avoid the situation where the emergency happens at the end of your career. It's one thing to scrimp for fifteen years at fifty. What's your plan if you would have an emergency at sixty-five? Or later? Then you're reducing your living standard at retirement. Now, maybe you save more than necessary. It's not unknown. But it's not typical either. It is far more common to encounter someone who isn't saving enough than too much.", "title": "" }, { "docid": "5a8e68ad5843b6d0ddcc14b8d75ff039", "text": "\"For allocation, there's rules of thumb. 120-age is the percentage some folks recommend for stock market (high risk) allocation. With the balance in bonds, and a bit of international fund to add some more diversity. However, everyone needs to determine how much risk they're willing to take, and what their horizon is. Once you figure out your allocation, determine how much of your surplus goes into investing, and how much goes into short term savings for your short term financial goals such as purchasing a home. I would highly recommend reading about \"\"Financial Independence, Retire Early\"\" (FIRE). Most of the articles I've seen on it were folks in the US, with the odd Canadian and Brit, but the principles should be able to work in the Netherlands with adjustment. The idea behind FIRE is that you adjust your lifestyle to minimize expenses and save as much of your income as possible. When the growth of your savings is > the amount you spend on a yearly basis, you've reached financial independence and can retire any time you wish. CD ladder is a good idea for your emergency fund, but CDs (at least in the US) usually pay around the same rate as inflation, give or take. A ladder would help you preserve your emergency fund.\"", "title": "" }, { "docid": "9d5a592bd8a7bc03d14a5595c15a73ad", "text": "\"Diversify between high risk, medium risks investments as well as \"\"safe\"\" ones like bonds authored directly from the EU. All in all you re much better off than lending money to the bank through a savings account for no more than 1% in interest rate(given the current NL situation). Congratulations on becoming financially independent(your investments covering your living expenses) in as low as 9-15years from now.\"", "title": "" }, { "docid": "8b3f1db667f6fef6484590e164986c9e", "text": "\"I'm afraid you have missed a few of the outcomes commonly faced by millions of Americans, so I would like to take a moment to discuss a wider range of outcomes that are common in the United States today. Most importantly, some of these happen before retirement is ever reached, and have grave consequences - yet are often very closely linked to financial health and savings. Not planning ahead long-term - 10-20+ years - is generally associated with not planning ahead even for the next few months, so I'll start there. The most common thing that happens is the loss of a job, or illness/injury that put someone out of work. 6 in 10 adults in the US have less than $500 in savings, so desperation can set in very quickly, as the very next paycheck will be short or missing. Many of these Americans have no other source of saved money, either, so it's not like they can draw on retirement savings, as they don't have that either. Even if they are able to get another job or recover enough to get back to work in a few weeks, this can set off a desperate cycle. Those who have lost their jobs to technical obsolescence, major economic downturns, or large economic changes are often more severely affected. People once making excellent, middle-class (or above) wages with full benefits find they cannot find work that pays even vaguely similarly. In the past this was especially common in heavy labor jobs like manufacturing, meat-packing, and so on, but more recently this has happened in financial sectors and real estate/construction during the 2008 economic events. The more resilient people had padding, switched careers, and found other options - the less resilient, didn't. Especially during the 1970s and 1980s, many people affected by large losses of earning potential became sufficiently desperate that they fell heavily (or lost their functioning status) into substance abuse, including alcohol and drugs (cocaine and heroine being especially popular in this segment of the population). Life disruption - made even more major by a lack of savings - is a key trigger to many people who are already at risk of issues like substance addiction, mental health, or any ongoing legal issues. Another common issue is something more simple, like loss of transportation that threatens their ability to hold their job, and a lack of alternatives available through support networks, savings, family, and public transit. If their credit is bad, or their income is new, they may find even disreputable companies turn them away, or even worse - the most disreputable companies welcome them in with high interest and hair-trigger repossession policies. The most common cycle of desperation I have seen usually starts with banking over-drafts, and its associated fees. People who are afraid and desperate start to make increasingly desperate, short-sighted choices, as tunnel-vision sets in and they are unable to consider longer-term strategy as they focus on holding on to what they have and survival. Many industries have found this set of people quite profitable, including high-interest \"\"check cashing\"\", payday loans, and title loans (aka legal loan sharks), and it is not rare that desperate people are encouraged to get on increasing cycles of loan amounts and fees that worsen their financial situation in exchange for short-term relief. As fees, penalties, and interest add up, they lose more and more of their already strained income to stay afloat. Banks that are otherwise reputable and fair may soon blacklist them and turn them away, and suddenly only the least reputable and most predatory places offer to help at all - usually with a big smile at first, and almost always with awful strings attached. Drugs and alcohol are often readily available nearby and their use can easily turn from recreational to addictive given the allure of the escapism it offers, especially for those made vulnerable by increasing stress, desperation, loss of hope, isolation, and fear. Those who have not been within the system of poverty and desperation often do not see just how many people actively work to encourage bad decision making, with big budgets, charm, charisma, and talent. The voices of reason, trying to act as beacons to call people to take care of themselves and their future, are all too easily drowned out in the roar of a smooth and enticing operation. I personally think this is one of the greatest contributions of the movement to build personal financial health and awareness, as so many great people find ever more effective ways of pointing out the myriad ways people try to bleed your money out of you with no real concern for your welfare. Looking out for your own well-being and not being taking in by the wide array of cons and bad deals is all too often fighting against a strong societal current - as I'm sure most of our regular contributors are all too aware! With increasing desperation often comes illegal maneuvers, often quite petty in nature. Those with substance abuse issues often start reselling drugs to others to try to cover lost income or \"\"get ahead\"\", with often debilitating results on long-term earning potential if they get caught (which can include cost barriers to higher education, even if they do turn their life around). I think most people are surprised by how little and petty things can quickly cycle out of control. This can include things like not paying minor parking or traffic tickets, which can snowball from the $10-70 range into thousands of dollars (due to non-payment often escalating and adding additional penalties, triggering traffic stops for no other reason, etc.), arrest, and more. The elderly are not exempt from this system, and many of America's elderly spend their latter years in prison. While not all are tied to financial desperation as I've outlined above, a deeper look at poverty, crime, and the elderly will be deeply disturbing. Some of these people enter the system while young, but some only later in life. Rather than homelessness being something that only happens after people hit retirement, it often comes considerably earlier than that. If this occurs, the outcome is generally quite a bit more extreme than living off social security - some just die. The average life expectancy of adults who are living on the street is only about 64 years of age - only 2 years into early retirement age, and before full retirement age (which could of course be increased in the next 10-20 years, even if life expectancy and health of those without savings don't improve). Most have extremely restricted access to healthcare (often being emergency only), and have no comforts of home to rest and recuperate when they become ill or injured. There are many people dedicated to helping, yet the help is far less than the problem generally, and being able to take advantage of most of the help (scheduling where to go for food, who to talk to about other services, etc) heavily depends on the person not already suffering from conditions that limit their ability to care for themselves (mental conditions, mobility impairments, etc). There is also a shockingly higher risk of physical assault, injury, and death, depending on where the person goes - but it is far higher in almost every case, regardless. One of the chief problems in considering only retirement savings, is it assumes that you'll only have need for the savings and good financial health once you reach approximately the age of 62 (if it is not raised before you get there, which it has been multiple times to-date). As noted above, if homelessness occurs and becomes longstanding before that, the result is generally shortened lifespan and premature death. The other major issue of health is that preventative care - from simple dentistry to basic self-care, adequate sleep and rest, a safe place to rejuvenate - is often sacrificed in the scrambling to survive and limited budget. Those who develop chronic conditions which need regular care are more severely affected. Diabetic and injury-related limb loss, as one example, are far more likely for those without regular support resources - homeless, destitute, or otherwise. Other posters have done a great job in pointing out a number of the lesser-known governmental programs, so I won't list them again. I only note the important proviso that this may be quite a bit less in total than you think. Social Security on average pays retired workers $1300 a month. It was designed to avoid an all-too-common occurrence of simple starvation, rampant homelessness, and abject poverty among a large number of elderly. No guarantee is made that you won't have to leave your home, move away from your friends and family if you live in an expensive part of the country, etc. Some people get a bit more, some people get quite a bit less. And the loss of family and friend networks - especially to such at-risk groups - can be incredibly damaging. Note also that those financially desperate will be generally pushed to take retirement at the minimum age, even though benefits would be larger and more livable if they delayed their retirement. This is an additional cost of not having other sources of savings, which is not considered by many. Well, yes, many cannot retire whether they want to or not. I cannot find statistics on this specifically, but many are indeed just unable to financially retire without considerable loss. Social Security and other government plans help avoid the most desperate scenarios, but so many aspects of aging is not covered by insurance or affordable on the limited income that aging can be a cruel and lonely process for those with no other financial means. Those with no savings are not likely to be able to afford to regularly visit children and grandchildren, give gifts on holidays, go on cruises, enjoy the best assistive care, or afford new technological devices to assist their aging (especially those too new and experimental to be covered by the insurance plans they have). What's worse - but most people do not plan for either - is that diminished mental and physical capacity can render many people unable to navigate the system successfully. As we've seen here, many questions are from adult children trying to help their elderly parents in retirement, and include aging parents who do not understand their own access to social security, medicaid/medicare, assistive resources, or community help organizations. What happens to those aging without children or younger friend networks to step in and help? Well, we don't really have a replacement for that. I am not aware of any research that quantifies just how many in the US don't take advantage of the resources they are fully qualified to make use of and enjoy, due to a lack of education, social issues (feeling embarrassed and afraid), or inability to organize and communicate effectively. A resource being available is not very much help for those who don't have enough supportive resources to make use of it - which is very hard to effectively plan for, yet is exceedingly common. Without one's own independent resources, the natural aging and end of life process can be especially harsh. Elderly who are economically and food insecure experience far heightened incidence of depression, asthma, heart attack, and heart failure, and a host of other maladies. They are at greater risk for elder-abuse, accidental death, life-quality threatening conditions developing or worsening, and more. Scare-tactics aren't always persuasive, and they do little to improve the lives of many because the people who need to know it most generally just don't believe it. But my hope here is that the rather highly educated and sophisticated audience here will see a little more of the harsher world that their own good decisions, good fortune, culture, and position in society shields them from experiencing. There is a downside to good outcomes, which is that it can cause us to be blind to just how extremely different is the experience of others. Not all experience such terrible outcomes - but many hundreds of thousands in the US alone - do, and sometimes worse. It is not helpful to be unrealistic about this: life is not inherently kind. However, none of this suggests that being co-dependent or giving up your own financial well-being is necessary or advised to help others. Share your budgeting strategies, your plans for the future, your gentle concerns, and give of your time and resources as generously as you can - within your own set budgets and ensuring your own financial well-being. And most of all - do not so easily give up on your family and friends, and count them as life-long hopeless ne'er-do-wells. Let's all strive to be good, kind, honest, and offer non-judgmental support and advice to the best of our ability to the people we care about. It is ultimately their choice - restricted by their own experiences and abilities - but need not be fate. People regularly disappoint, but sometimes they surprise and delight. Take care of yourself, and give others the best chance you can, too.\"", "title": "" }, { "docid": "489d1e134de0835ce9a4167d33cb6f26", "text": "Chances are since college is your next likely step I would recommend saving up for it. Start building an emergency fund. Recommended $1,000 minimum. To start building your credit rating (when 18) get a low interest low limit credit. Pay off the balance every month. Starting to build your credit rating now can save you hundreds of thousands when buying a house over the course of paying it off. ie. cheaper interest rate. As for investing, the sooner you can get started the better. Acquire preferred/stocks/bonds/REITs/ETFs/etc that pay you to own them (they pay you dividends monthly/quarterly/etc). Stick with solid stocks that have a history of consistently increasing their dividends over time and that are solid companies. I personally follow the work/advice of Derek Foster. He's not a professional but he retired at 34. His first book (Stop working - Here's how you can) is great and recommend it to anyone who is looking to get started. Also check out Ramit Sethi's blog I Will Teach You to be Rich. He focuses on big wins which save you a lot over the long term. He's also got some great advice for students as well. Best of luck!", "title": "" }, { "docid": "fd9a78556b28bf71945b4aadc1528b6d", "text": "Certainly reading the recommended answers about initial investing is a great place to start and I highly recommend reading though that page for sure, but I also believe your situation is a little different than the one described as that person has already started their long-term career while you are still a couple years away. Now, tax-advantaged accounts like IRAs are amazingly good places to start building up retirement funds, but they also lock up the money and have a number of rules about withdrawals. You have fifteen thousand which is a great starting pot of money but college is likely to be done soon and there will likely be a number of expenses with the transition to full-time employment. Moving expenses, first month's rent, nursing exams, job search costs, maybe a car... all of this can be quite a lot especially if you are in a larger city. It sounds like your parents are very helpful though which is great. Make sure you have enough money for that transition and emergency expenses first and if there is a significant pool beyond that then start looking at investments. If you determine now is the best time to start than then above question is has great advice, but even if not it is still well worth taking some time to understand investing through that question, my favorite introduction book on the subject and maybe even a college course. So when you land that first solid nursing job and get situated you can start taking full advantage of the 401K and IRAs.", "title": "" }, { "docid": "6691ca2c034ab6b8013f2822f920b404", "text": "Financial literacy for individuals is the instruction and comprehension of different money related issues. This subject concentrates on the capacity to manage personal finance matters in a productive way, and it incorporates the information of settling on suitable choices about individual finance, for example, insurance premiums, educational fees, real estate investments, tax planning, retirement saving, budget management and so on. Let's have a look at the importance of Financial Literacy in an Individual's life so that it can become a source of inspiration for you. Inspiration and financial literacy for individuals enable people to end up plainly independent with the goal that they can accomplish budgetary solidness. The individuals who comprehend the subject ought to have the capacity to answer a few inquiries concerning buys, for example, regardless of whether a thing is required, whether it is reasonable, and whether it a benefit or a risk. Financial literacy for individuals shows the practices and states of mind a man has about cash that is connected to his everyday life. Financial literacy demonstrates how an individual settles on monetary choices. This attitude can enable a man to build up a money related guide to distinguish what he procures, what he spends and what he owes. The absence of financial education can prompt owing a lot of obligation and settle on poor monetary choices. For instance, the preferences or drawbacks of settled and variable loan costs are ideas that are less demanding to comprehend and settle on educated choices about in the event that you have monetary proficiency abilities. Monetary proficiency training ought to likewise incorporate hierarchical abilities, consumer rights, innovation and worldwide financial matters in light of the fact that the condition of the worldwide economy incredibly influences the U.S. Economy. As per the saying of one of the renowned actor cum producer, Lucille Bell, 'Keeping busy and making optimism a way of life can restore your faith in yourself'. Yes, the current market trend has proved this inspirational quote to a true extent. Investing money into trading and financial market is a hard nut to crack and it requires a thought-provoking financial inspiration for individuals. To earn handsome money, you need to become smart enough to understand the market behavior, market flows and all the associated ups and downs. Now, you are confused. No, you don't need to hold an MBA degree or become a financial expert to learn lucrative investing skills. Wealth Generators is there for you to make you learn all the essentials techniques required to make your hard earned money provide you with the best output which you can never imagine. Yes, optimism and the smart skills are the two pivotal ways to get success over the curvature of the financial twisting. We are considered to be one stop financial inspirations for individuals who wish to earn money by making smart investments. It all has become possible due to years of research and development of our financial veterans and their innovative attitude in developing financial tools. The amalgamation of the computer, communication technologies and our educational financial tools have lowered the risk of investments. With a commitment and optimistic approach, you can earn good money in no time, if you have proper market knowledge. Our experts have done extensive research and they are always updated with the latest insights of the trading and investment markets. We believe that your solid financial inspiration to save your expenses and turning them into handsome profits can make you a wealthy person. So, if you are really willing it, Wealth Generators is there for you, the ultimate source of your financial inspiration.", "title": "" }, { "docid": "a87e909ce967530a0f83baa6241eedd0", "text": "\"I can understand your nervousness being 40 and no retirement savings. Its understandable especially given your parents. Before going further, I would really recommend the books and seminars on Love and Respect. The subject matter is Christian based, but it based upon a lot of secular research from the University of Washington and some other colleges. It sounds like to me, this is more of a relationship issue than a money issue. For the first step I would focus on the positive. The biggest benefit you have is: Your husband is willing to work! Was he lazy, there would be a whole different set of issues. You should thank him for this. More positives are that you don't have any credit card debt, you only have one car payment (not two), and that you are paying additional payments on each. I'd prefer that you had no car payment. But your situation is not horrible. So how do you improve your situation? In my opinion getting your husband on board would be the first priority. Ask him if he would like to get the car paid off as fast as possible, or, building an emergency fund? Pick one of those to focus on, and do it together. Having an emergency fund of 3 to 6 months of expense is a necessary precursor to investing, anyway so you from the limited info in your post you are not ready to pour money into your 401K. Have you ever asked what his vision is for his family financially? Something like: \"\"Honey you care for us so wonderfully, what is your vision for me and our children? Where do you see us in 5, 10 and 20 years?\"\" I cannot stress enough how this is a relationship issue, not a math issue. While the problems manifests themselves in your balance sheet they are only a symptom. Attempting to cure the symptom will likely result in resentment for both of you. There is only one financial author that focuses on relationships and their effect on finances: Dave Ramsey. Pick up a copy of The Total Money Makeover, do something nice for him, and then ask him to read it. If he does, do something else nice for him and then ask him what he thinks.\"", "title": "" }, { "docid": "e32fa977d20156bc3c089162770bd973", "text": "\"It's a spin on the phrase \"\"making your money work for you\"\". before sending your money off to do the heavy lifting, you'll want to have an emergency savings account of about six months of living expenses stored in cash. Basically, he is saying before you start to invest make sure you have sufficient emergency savings.\"", "title": "" }, { "docid": "15b788b4c1659b1bb97b9e014bb2e216", "text": "You're off to a great start. Here are the steps I would take: 1.) Pay off any high-interest debt. 2.) Keep six to twelve months in a highly liquid emergency fund. If the banks aren't safe, also consider having one or two months of cash or cash-equivalents on the premises. 3.) Rent a larger apartment, if possible, until you've saved more. The cost of the land and construction will consume a very large portion of your net worth. Given the historical political instability in that region, mentioned by the previous comments, I would hesitate to put such a large percentage of your wealth in to real estate. 4.) Get a brokerage account that's insured and well known. If you're willing to take the five percent hit to move assets offshore, then consider Vanguard. I'm not sure if they'll give you an account but they're generally acknowledged as an amazing broker in the US with low fees and amazing funds. Five percent (12,500) is worth it in my opinion. As you accumulate more wealth, you can stop moving cash overseas and keep a larger mix domestically. 5.) Invest in your business and yourself even more. As far as finding new investment opportunities, I would go through the list of all the typical major asset classes and consider the pros and cons: fixed-income, stocks, currencies, real estate / REITs, own a small business, commodities etc.,", "title": "" } ]	fiqa
f8b4ef8858a68995bf713cc0aabce92e	How to calculate average drawdown of a trading system?	[ { "docid": "2cfadf29419115e8121eb3e8d6a98577", "text": "First of all, I think I'll clear off some confusion in the topic. The Sterling Ratio is a very simple investment portfolio measurement that fits nicely to the topic of personal finance, although not so much to a foreign exchange trading system. The Sterling Ratio is mainly used in the context of hedge funds to measure its risk-reward ratio for long term investments. To do so, it has been adapted to the following in order to appear more like the Sharpe Ratio: I Suppose this is why you question the Average Largest Draw-down. I'll come back to that later. It's original definition, suggested by the company Deane Sterling Jones, is a little different and perhaps the one you should use if you want to measure your trading system's long term risk-reward ratio, which is as followed: Note: Average Annual Draw-down has to be negative on the above-mentioned formula. This one is very simple to calculate and the one to use if you want to measure any portfolio's long-term results, such an example of a 5 or 10 years period and calculate the average of each years largest drawdown. To answer @Dheer's comment, this specific measurement can also be used in personal investments portfolio, which is considered a topic related to personal finance. Back to the first one, which answers your question. It's used in most cases in investment strategies, such as hedging, not trading systems. By hedging I mean that in these cases long term investments are made in anti-correlated securities to obtain a diversified portfolio with a very stable growth. This one is calculated normally annually because you rely on the Annual Risk-Free Rate. Having that in mind I think you can guess that the Average Largest Drawdown is the average between the Largest/Maximum Drawdown from each security in the portfolio. And this doesn't make sense in a trading system. Example: If you have invested in 5 different securities where we calculated the Largest Draw-down for each, such as represented in the following array: MaxDD[5] = { 0.12, 0.23, 0.06, 0.36, 0.09 }, in this case your Average Largest Draw-down is the average(MaxDD) that equals 0.172 or 17,2% If your portfolio's annual return is 15% and the Risk-free Rate is 10%, your Sterling Ratio SR = (0.15 - 0.10)/0.172, which result to 0.29. The higher the rate better is the risk-reward ratio of your portfolio. I suggest in your case to only use the original Sterling Ratio to calculate your long-term risk-reward, in any other case I suggest looking at the Sharpe and Sortino ratios instead.", "title": "" } ]	[ { "docid": "49c7ca8ddf2d9862e4ba39a7514faf02", "text": "This paper makes the rounds every so often and I HATE IT VERY MUCH. No one has EVER EVER EVER estimated standard deviation by taking an average of abs deviations, because that would be stupid, further, realized vol is a very different beast than implied vol. AND FURTHER, the models are fitted to the data, rather than fighting the tape and fitting the data to the models. Most people working with these instruments are trying to figure out the prices of unknown derivatives based on known derivatives - the models just help interpret findings and estimate what's necessary to hedge a position.", "title": "" }, { "docid": "5a9a5dcc1532513df50baedcb611b3ce", "text": "Thanks for the answer/comments! The time-based method was something we mooted and something I almost went with. But just to wrap this up, the method we settled on was this: Every time there is an entry or exit into the fund, we divvy out any unrealised market profits/losses according to each person's profit share (based on % of the asset purchased at buy-in) JUST BEFORE the entry/exit. These realised profits are then locked in for those particpants, and then the unrealised profits/loss counter starts at zero, we do a fresh recalculation of shareholding after the entry/exit, and then we start again. Hope this helps anyone with the same issue!", "title": "" }, { "docid": "54de8f950e5eb26faf4845ac8f2c2bc7", "text": "From your question, I am guessing that you are intending to have stoploss buy order. is the stoploss order is also a buy order ? As you also said, you seems to limit your losses, I am again guessing that you have short position of the stock, to which you are intending to place a buy limit order and buy stoploss order (stoploss helps when when the price tanks). And also I sense that you intend to place buy limit order at the price below the market price. is that the situation? If you place two independent orders (one limit buy and one stoploss buy). Please remember that there will be situation where two orders also get executed due to market movements. Add more details to the questions. it helps to understand the situation and others can provide a strategic solution.", "title": "" }, { "docid": "e302b03f30b9eddbdda22282b45ba6e9", "text": "Not directly an answer to your question, but somewhat related: There are derivatives (whose English name I sadly don't know) that allow to profit from breaking through an upper or alternatively a lower barrier. If the trade range does not hit either barrier you lose. This kind of derivative is useful if you expect a strong movement in either direction, which typically occurs at high volume.", "title": "" }, { "docid": "c04be15b6800d5c5717ebe50622497f3", "text": "\"You can't do this automatically; you want to understand whether the drop is from a short-term high. is likely to be a short-term low, or reflects an actual change in how folks expect the company to do in the future. Having said that, some people do favor a strategy which resembles this, betting on what are known as \"\"the dogs of the Dow\"\" in the assumption that they're well trusted but not as strongly sought and therefore perhaps not bid up as strongly. I have no opinion on it; I'm just mentioning it for comparison.\"", "title": "" }, { "docid": "3dccc75bc4b29bf2cb80a8c9dff15b95", "text": "\"My answer is Microsoft Excel. Google \"\"VBA for dummies\"\" (seriously) and find out if your brokerage offers an 'API'. With a brief understanding of coding you can get a spreadsheet that is live connected to your brokers data stream. Say you have a spreadsheet with the 1990 value of each in the first two columns (cells a1 and b1). Maybe this formula could be the third column, it'll tell you how much to buy or sell to rebalance them. then to iterate the rebalance, set both a2 and b2 to =C1 and drag the formula through row 25, one row for each year. It'll probably be a little more work than that, but you get the idea.\"", "title": "" }, { "docid": "ee39ed06924306cf76f2b97018a28957", "text": "If you are looking to go long (buy) you would use bid prices as this is what you will be matched against for your order to be executed and a trade to go through. If you are looking to go short (sell) you would use the ask prices as this is what you will be matched against for your order to be executed and a trade go through. In your analysis you could use either this convention or the midpoint of the two prices. As FX is very liquid the bid and ask prices would be quite close to each other, so the easiest way to do your analysis is to use the convention I listed above.", "title": "" }, { "docid": "6f5601bc847b9b759754505aebe97c44", "text": "Unfortunately I believe there is not a good answer to this because it's not a well posed problem. It sounds like you are looking for a theoretically sound criteria to decide whether to sell or hold. Such a criteria would take the form of calculating the cost of continuing to hold a stock and comparing it to the transactions cost of replacing it in your portfolio. However, your criteria for stock selection doesn't take this form. You appear to have some ad hoc rules defining whether you want the stock in your portfolio that provide no way to calculate a cost of having something in your portfolio you don't want or failing to have something you do want. Criteria for optimally rebalancing a portfolio can't really be more quantitative than the rules that define the portfolio.", "title": "" }, { "docid": "5dbdf8bbab4037d67d97d061a67bd2ff", "text": "Have you actually read the Wikipedia article? To calculate the DJIA, the sum of the prices of all 30 stocks is divided by a divisor, the Dow Divisor. The divisor is adjusted in case of stock splits, spinoffs or similar structural changes, to ensure that such events do not in themselves alter the numerical value of the DJIA. Early on, the initial divisor was composed of the original number of component companies; which made the DJIA at first, a simple arithmetic average. The present divisor, after many adjustments, is less than one (meaning the index is larger than the sum of the prices of the components). That is: DJIA = sum(p) / d where p are the prices of the component stocks and d is the Dow Divisor. Events such as stock splits or changes in the list of the companies composing the index alter the sum of the component prices. In these cases, in order to avoid discontinuity in the index, the Dow Divisor is updated so that the quotations right before and after the event coincide: DJIA = sum(p_old) / d_old = sum(p_new) / d_new The Dow Divisor was 0.14602128057775 on December 24, 2015.[40] Presently, every $1 change in price in a particular stock within the average, equates to a 6.848 (or 1 ÷ 0.14602128057775) point movement. Knowing the old prices, new prices (e.g. following a split), and old divisor, you can easily compute the new divisor... Edit: Also, the detailed methodology is published by SP Indices (PDF). Edit #2: For simplicity's sake, assume the DJIA is an index that contains 4 stocks, with a price of $100.00 each. One of the stocks splits 2:1, meaning the new price/share is $50.00. Plugging the numbers into the above equation, we can determine the new Dow Divisor: 400 / 4 = 350 / d => d = 3.5", "title": "" }, { "docid": "e92ac07181ef0abaf52cbf9cc6fbdab6", "text": "Simple math: 50-25=25, hence decline from 50 to 25 is a 50% decline (you lose half), while an advance from 25 to 50 is 100% gain (you gain 100%, double your 25 to 50). Their point is that if you have more upswings than downswings - you'll gain more on long positions during upswings than on short positions during downswings on average. Again - simple math.", "title": "" }, { "docid": "a38877baeb397e6c9892d20f6f17f828", "text": "\"First, I would like to use a better chart. In my opinion, a close of day line chart obscures a lot of important information. Here is a daily OHLC log chart: The initial drop from the 1099.23 close on Oct 3 was to 839.8 intraday, to close at 899.22 on Oct 10. After this the market was still very volatile and reached a low of 747.78 on Nov 20, closing only slightly higher than this. It traded as high as 934.70 on Jan 6, 2009, but the whole period of Nov 24 - Feb 13 was somewhat of a trading range of roughly 800-900. Despite this, the news reports of the time were frequently saying things like \"\"this isn't going to be a V shaped recovery, it is going to be U shaped.\"\" The roughly one week dip you see Feb 27 - Mar 9 taking it to an intraday low of 666.79 (only about 11% below the previous low) on first glance appears to be just a continuation of the previous trend. However... The Mar 10 uptrend started with various news articles (such as this one) which I recall at the time suggested things like reinstating the parts of the Glass–Steagall Act of 1933 which had been repealed by the Gramm–Leach–Bliley Act. Although these attempts appear to have been unsuccessful, the widespread telegraphing of such attempts in the media seemed to have reversed a common notion which I saw widespread on forums and other places that, \"\"we are going to be in this mess forever, the market has nowhere to go but down, and therefore shorting the market is a good idea now.\"\" I don't find the article itself, but one prominent theme was the \"\"up-tick\"\" rule on short selling: source From this viewpoint, then, that the last dip was driven not so much by a recognition that the economy was really in the toilet (as this really was discounted in the first drop and at least by late November had already been figured into the price). Instead, it was sort of the opposite of a market top, where now you started seeing individual investors jump on the band-wagon and decide that now was the time for a foray into selling (short). The fact that the up-tick rule was likely to be re-instated had a noticeable effect on halting the final slide.\"", "title": "" }, { "docid": "60c9eac57d227944f7dd9dfc37899a80", "text": "\"First, to mention one thing - better analysis calls for analyzing a range of outcomes, not just one; assigning a probability on each, and comparing the expected values. Then moderating the choice based on risk tolerance. But now, just look at the outcome or scenario of 3% and time frame of 2 days. Let's assume your investable capital is exactly $1000 (multiply everything by 5 for $5,000, etc.). A. Buy stock: the value goes to 103; your investment goes to $1030; net return is $30, minus let's say $20 commission (you should compare these between brokers; I use one that charges 9.99 plus a trivial government fee). B. Buy an call option at 100 for $0.40 per share, with an expiration 30 days away (December 23). This is a more complicated. To evaluate this, you need to estimate the movement of the value of a 100 call, $0 in and out of the money, 30 days remaining, to the value of a 100 call, $3 in the money, 28 days remaining. That movement will vary based on the volatility of the underlying stock, an advanced topic; but there are techniques to estimate that, which become simple to use after you get the hang of it. At any rate, let's say that the expected movement of the option price in this scenario is from $0.40 to $3.20. Since you bought 2500 share options for $1000, the gain would be 2500 times 2.8 = 7000. C. Buy an call option at 102 for $0.125 per share, with an expiration 30 days away (December 23). To evaluate this, you need to estimate the movement of the value of a 102 call, $2 out of the money, 30 days remaining, to the value of a 102 call, $1 in the money, 28 days remaining. That movement will vary based on the volatility of the underlying stock, an advanced topic; but there are techniques to estimate that, which become simple to use after you get the hang of it. At any rate, let's say that the expected movement of the option price in this scenario is from $0.125 to $ 1.50. Since you bought 8000 share options for $1000, the gain would be 8000 times 1.375 = 11000. D. Same thing but starting with a 98 call. E. Same thing but starting with a 101 call expiring 60 days out. F., ... Etc. - other option choices. Again, getting the numbers right for the above is an advanced topic, one reason why brokerages warn you that options are risky (if you do your math wrong, you can lose. Even doing that math right, with a bad outcome, loses). Anyway you need to \"\"score\"\" as many options as needed to find the optimal point. But back to the first paragraph, you should then run the whole analysis on a 2% gain. Or 5%. Or 5% in 4 days instead of 2 days. Do as many as are fruitful. Assess likelihoods. Then pull the trigger and buy it. Try these techniques in simulation before diving in! Please! One last point, you don't HAVE to understand how to evaluate projected option price movements if you have software that does that for you. I'll punt on that process, except to mention it. Get the general idea? Edit P.S. I forgot to mention that brokers need love for handling Options too. Check those commission rates in your analysis as well.\"", "title": "" }, { "docid": "99e5bcf4aa4f5b980f89b5af7feb571b", "text": "You can make a rough calculation of the annual turnover rate of stocks by calculating the institutional investors holding of that stock. Institutional investors are the only firms that are required to provide such data. The good this is they usually make the lion share of trading activity. On the other hand, this task might proof arduous A different ratio that could be used as a substitute Share Turnover which is calculated as: Share Turnover gives the number of shares traded as a fraction of the number of shares outstanding. For example, if you compare the results of stock turnover for three companies and the results came as follows: Company A-share turnover: 1.5 Times Company B share turnover: 3 times Company C share turnover: 0.3 times From the results, we can conclude that for a particular period, company C had the least activity and the number of shares traded for that period was only a small fraction of the shares outstanding while other traders of company C hold most shares and never trade them. If you make a cross sectional analysis of a list of businesses you intend to invest in, you could figure which one has the least number of rapidity in the shares traded.", "title": "" }, { "docid": "f40ce647ec1934ec570d35784baa2775", "text": "James Roth provides a partial solution good for stock picking but let's speed up process a bit, already calculated historical standard deviations: Ibbotson, very good collection of research papers here, examples below Books", "title": "" }, { "docid": "3ffd7588e47bdcfbf842058ec577af8f", "text": "\"Answering this question is weird, because it is not really precise in what you mean. Do you want all stocks in the US? Do you want a selection of stocks according to parameters? Do you just want a cool looking graph? However, your possible misuse of the word derivative piqued my interest. Your reference to gold and silver seems to indicate that you do not know what a derivative actually is. Or what it would do in a portfolio. The straightforward way to \"\"see\"\" an efficient frontier is to do the following. For a set of stocks (in this case six \"\"randomly\"\" selected ones): library(quantmod) library(fPortfolio) library(PerformanceAnalytics) getSymbols(c(\"\"STZ\"\", \"\"RAI\"\", \"\"AMZN\"\", \"\"MSFT\"\", \"\"TWX\"\", \"\"RHT\"\"), from = \"\"2012-06-01\"\", to = \"\"2017-06-01\"\") returns <- NULL tickerlist <- c(\"\"STZ\"\", \"\"RAI\"\", \"\"AMZN\"\", \"\"MSFT\"\", \"\"TWX\"\", \"\"RHT\"\") for (ticker in tickerlist){ returns <- cbind(returns, monthlyReturn(Ad(eval(as.symbol(ticker))))) } colnames(returns) <- tickerlist returns <- as.timeSeries(returns) frontier <- portfolioFrontier(returns) png(\"\"frontier.png\"\", width = 800, height = 600) plot(frontier, which = \"\"all\"\") dev.off() minvariancePortfolio(returns, constraints = \"\"LongOnly\"\") Portfolio Weights: STZ RAI AMZN MSFT TWX RHT 0.1140 0.3912 0.0000 0.1421 0.1476 0.2051 Covariance Risk Budgets: STZ RAI AMZN MSFT TWX RHT 0.1140 0.3912 0.0000 0.1421 0.1476 0.2051 Target Returns and Risks: mean Cov CVaR VaR 0.0232 0.0354 0.0455 0.0360 https://imgur.com/QIxDdEI The minimum variance portfolio of these six assets has a mean return is 0.0232 and variance is 0.0360. AMZN does not get any weight in the portfolio. It kind of means that the other assets span it and it does not provide any additional diversification benefit. Let us add two ETFs that track gold and silver to the mix, and see how little difference it makes: getSymbols(c(\"\"GLD\"\", \"\"SLV\"\"), from = \"\"2012-06-01\"\", to = \"\"2017-06-01\"\") returns <- NULL tickerlist <- c(\"\"STZ\"\", \"\"RAI\"\", \"\"AMZN\"\", \"\"MSFT\"\", \"\"TWX\"\", \"\"RHT\"\", \"\"GLD\"\", \"\"SLV\"\") for (ticker in tickerlist){ returns <- cbind(returns, monthlyReturn(Ad(eval(as.symbol(ticker))))) } colnames(returns) <- tickerlist returns <- as.timeSeries(returns) frontier <- portfolioFrontier(returns) png(\"\"weights.png\"\", width = 800, height = 600) weightsPlot(frontier) dev.off() # Optimal weights out <- minvariancePortfolio(returns, constraints = \"\"LongOnly\"\") wghts <- getWeights(out) portret1 <- returns%%wghts portret1 <- cbind(monthprc, portret1)[,3] colnames(portret1) <- \"\"Optimal portfolio\"\" # Equal weights wghts <- rep(1/8, 8) portret2 <- returns%%wghts portret2 <- cbind(monthprc, portret2)[,3] colnames(portret2) <- \"\"Equal weights portfolio\"\" png(\"\"performance_both.png\"\", width = 800, height = 600) par(mfrow=c(2,2)) chart.CumReturns(portret1, ylim = c(0, 2)) chart.CumReturns(portret2, ylim = c(0, 2)) chart.Drawdown(portret1, main = \"\"Drawdown\"\", ylim = c(-0.06, 0)) chart.Drawdown(portret2, main = \"\"Drawdown\"\", ylim = c(-0.06, 0)) dev.off() https://imgur.com/sBHGz7s Adding gold changes the minimum variance mean return to 0.0116 and the variance stays about the same 0.0332. You can see how the weights change at different return and variance profiles in the picture. The takeaway is that adding gold decreases the return but does not do a lot for the risk of the portfolio. You also notice that silver does not get included in the minimum variance efficient portfolio (and neither does AMZN). https://imgur.com/rXPbXau We can also compare the optimal weights to an equally weighted portfolio and see that the latter would have performed better but had much larger drawdowns. Which is because it has a higher volatility, which might be undesirable. --- Everything below here is false, but illustrative. So what about the derivative part? Let us assume you bought an out of the money call option with a strike of 50 on MSFT at the beginning of the time series and held it to the end. We need to decide on the the annualized cost-of-carry rate, the annualized rate of interest, the time to maturity is measured in years, the annualized volatility of the underlying security is proxied by the historical volatility. library(fOptions) monthprc <- Ad(MSFT)[endpoints(MSFT, \"\"months\"\")] T <- length(monthprc) # 60 months, 5 years vol <- sd(returns$MSFT)sqrt(12) # annualized volatility optprc <- matrix(NA, 60, 1) for (t in 1:60) { s <- as.numeric(monthprc[t]) optval <- GBSOption(TypeFlag = \"\"c\"\", S = s, X = 50, Time = (T - t) / 12, r = 0.001, b = 0.001, sigma = vol) optprc[t] <- optval@price } monthprc <- cbind(monthprc, optprc) colnames(monthprc) <- c(\"\"MSFT\"\", \"\"MSFTCall50\"\") MSFTCall50rets <- monthlyReturn(monthprc[,2]) colnames(MSFTCall50rets) <- \"\"MSFTCall50rets\"\" returns <- merge(returns, MSFTCall50rets) wghts <- rep(1/9, 9) portret3 <- returns%%wghts portret3 <- cbind(monthprc, portret3)[,3] colnames(portret3) <- \"\"Equal weights derivative portfolio\"\" png(\"\"performance_deriv.png\"\", width = 800, height = 600) par(mfrow=c(2,2)) chart.CumReturns(portret2, ylim = c(0, 4.5)) chart.CumReturns(portret3, ylim = c(0, 4.5)) chart.Drawdown(portret2, main = \"\"Drawdown\"\", ylim = c(-0.09, 0)) chart.Drawdown(portret3, main = \"\"Drawdown\"\", ylim = c(-0.09, 0)) dev.off() https://imgur.com/SZ1xrYx Even though we have a massively profitable instrument in the derivative. The portfolio analysis does not include it because of the high volatility. However, if we just use equal weighting and essentially take a massive position in the out of the money call (which would not be possible in real life), we get huge drawdowns and volatility, but the returns are almost two fold. But nobody will sell you a five year call. Others can correct any mistakes or misunderstandings in the above. It hopefully gives a starting point. Read more at: https://en.wikipedia.org/wiki/Modern_portfolio_theory https://en.wikipedia.org/wiki/Option_(finance) The imgur album: https://imgur.com/a/LoBEY\"", "title": "" } ]	fiqa
c12d2c836b5c88fbb94038cafd29635a	Long term investment for money	[ { "docid": "34fa1c0372a591cd7d912f9c0ae06f61", "text": "I'd open the Roth IRA account and fund for 2015 and 2016. For the very long term, I'd learn about index funds, specifically a low cost S&P mutual fund or ETF.", "title": "" }, { "docid": "d6153164b7170b645d40c4449f890c9b", "text": "I know of no way to answer your question without 'spamming' a particular investment. First off, if you are a USA citizen, max out your 401-K. Whatever your employer matches will be an immediate boost to your investment. Secondly, you want your our gains to be tax deferred. A 401-K is tax deferred as well as a traditional IRA. Thirdly, you probably want the safety of diversification. You achieve this by buying an ETF (or mutual fund) that then buys individual stocks. Now for the recommendation that may be called spamming by others : As REITs pass the tax liability on to you, and as an IRA is tax deferred, you can get stellar returns by buying a mREIT ETF. To get you started here are five: mREITs Lastly, avoid commissions by having your dividends automatically reinvested by using that feature at Scottrade. You will have to pay commissions on new purchases but your purchases from your dividend Reinvestment will be commission free. Edit: Taking my own advice I just entered orders to liquidate some positions so I would have the $ on hand to buy into MORL and get some of that sweet 29% dividend return.", "title": "" }, { "docid": "0ef2333f4c4257d4aefca364d3906bda", "text": "What explains the most of the future returns of a portfolio is the allocation between asset classes. In the long term, stock investments are almost certain to return more than any other kinds of investments. For 40+ years, I would choose a portfolio of 100% stocks. How to construct the portfolio, then? Diversification is the key. You should diversify in time (don't put a large sum of money into your stock portfolio immediately; if you have a large sum to invest, spread it around several years). You should diversify based on company size (invest in both large and small companies). You should also diversify internationally (don't invest in just US companies). If you prefer to pick individual stocks, 20 very carefully selected stocks may provide enough diversification if you keep diversification in mind during stock picking. However, careful stock picking cannot be expected to yield excess returns, and if you pick stocks manually, you need to rebalance your portfolio occasionally. Thus, if you're lazy, I would recommend a mutual fund, or many mutual funds if you have difficulty finding a low-cost one that is internationally diversified. The most important consideration is the cost. You cannot expect careful fund selection to yield excess returns before expenses. However, the expenses are certain costs, so prefer low-cost funds. Almost always this means picking index funds. Avoid funds that have a small number of stocks, because they typically invest only in the largest companies, which means you fail to get diversification in company size. So, instead of Euro STOXX 50, select STOXX 600 when investing to the European market. ETFs may have lower costs than traditional mutual funds, so keep ETFs in mind when selecting the mutual funds in which to invest. For international diversification, do not forget emerging markets. It is not excessive to invest e.g. 20% to emerging markets. Emerging markets have a higher risk but they also have a higher return. A portfolio that does not include emerging markets is not in my opinion well diversified. When getting close to retirement age, I would consider increasing the percentage of bonds in the portfolio. This should be done primarily by putting additional money to bonds instead of selling existing investments to avoid additional taxes (not sure if this applies to other taxation systems than the Finnish one). Bond investments are best made though low-cost mutual funds as well. Keep bond investments in your local currency and risk-free assets (i.e. select US government bonds). Whatever you do, remember that historical return is no guarantee of future return. Actually, the opposite may be true: there is a mean reversion law. If a particular investment has returned well in the past, it often means its price has gone up, making it more likely that the price goes down in the future. So don't select a fund based on its historical return; instead, select a fund based on low costs. However, I'm 99% certain that over a period of 40 years, stocks will return better than other investments. In addition to fund costs, taxes are the other certain thing that will be deducted from your returns. Research what options you have to reduce the taxes you need to pay. 401-K was explained in another answer; this may be a good option. Some things recommended in other answers that I would avoid:", "title": "" }, { "docid": "252851bb2da3621d7ad059dcc0ae87fb", "text": "\"Say you have $15,000 of capital to invest. You want to put the majority of your capital into low risk investments that will yield positive gains over the course of your working career. $5,000: Government bonds and mutual funds, split how you want. $9,500: Low risk, trusted companies with positive historical growth. If the stock market is very unfamiliar for you, I recommend Google Finance, Yahoo Finance, and Zack's to learn about smart investments you can make. You can also research the investments that hedge fund managers and top investors are making. Google \"\"Warren Buffett or Carl Icahn portfolio\"\", and this will give you an idea of stocks you can put your money into. Do not leave your money into a certain company for more than 25 years. Rebalance your portfolio and take the gains when you feel you need them. You have no idea when to take your profits now, but 5 years from now, you will be a smart and experienced investor. A safe investment strategy to start is to put your money into an ETF that mimics the S&P 500. Over the past 20 years, the S&P 500 has yielded gains of about 270%. During the financial crisis a few years back, the S&P 500 had lost over 50% of its value when it reached its low point. However, from when it hit rock bottom in 2009, it has had as high percentage gains in six years as it did in 12 years from 1995 to 2007, which about 200%. The market is very strong and will treat your money well if you invest wisely. $500: Medium - High risk Speculative Stocks There is a reason this category accounts for only approximately 3% of your portfolio. This may take some research on the weekend, but the returns that may result can be extraordinary. Speculative companies are often innovative, low priced stocks that see high volatility, gains or losses of more than 10% over a single month. The likelihood of your $500 investment being completely evaporated is very slim, but if you lose $300 here, the thousands invested in the S&P 500, low risk stocks, government bonds, and mutual funds will more than recuperate the losses. If your pick is a winner, however, expect that the $500 investment could easily double, triple, or gain even more in a single year or over the course of just a few, perhaps, 2-4 years will see a very large return. I hope this advice helps and happy investing! Sending your money to smart investments is the key to financial security, freedom, and later, a comfortable retirement. Good luck, Matt McLaughlin\"", "title": "" }, { "docid": "a9a364385b7cd1efc9c1bbe8b0eb5ff3", "text": "I recommend you two things: I like these investments because they are not high risk. I hope this helps.", "title": "" } ]	[ { "docid": "a1c94491cc27aa9195b884d40836d527", "text": "\"You've laid out a strategy for deciding that the top of the market has passed and then realizing some gains before the market drops too far. Regardless of whether this strategy is good at accomplishing its goal, it cannot by itself maximize your long-term profits unless you have a similar strategy for deciding that the bottom of the market has passed. Even if you sell at the perfect time at the top of the market, you can still lose lots of money by buying at the wrong time at the bottom. People have been trying to time the market like this for centuries, and on average it doesn't work out all that much better than just plopping some money into the market each week and letting it sit there for 40 years. So the real question is: what is your investment time horizon? If you need your money a year from now, well then you shouldn't be in the stock market in the first place. But if you have to have it in the market, then your plan sounds like a good one to protect yourself from losses. If you don't need your money until 20 years from now, though, then every time you get in and out of the market you're risking sacrificing all your previous \"\"smart\"\" gains with one mistimed trade. Sure, just leaving your money in the market can be psychologically taxing (cf. 2008-2009), but I guarantee that (a) you'll eventually make it all back (cf. 2010-2014) and (b) you won't \"\"miss the top\"\" or \"\"miss the bottom\"\", since you're not doing any trading.\"", "title": "" }, { "docid": "92c9301f6148be2b3f14b088581243d3", "text": "Just to clarify Short Team Goals & Long Term Goals... Long Term goals are for something in future, your retirement fund, Children’s education etc. Short Term goals are something in the near future, your down payment for car, house, and holiday being planned. First have both the long and short terms goals defined. Of Couse you would need to review both these goals on a ongoing basis... To meet the short term goals you would need to make short term investments. Having arrived at a short term goal value, you would now need to make a decision as to how much risk you are willing [also how much is required to take] to take in order to meet your goal. For example if you goal is to save Rs 100,000 by yearend for the car, and you can easily set aside Rs 8,000 every month, you don't really need to take a risk. A simple Term / Fixed Deposit would suffice you to meet your goal. On the other hand if you can only save Rs 6,000 a year, then you would need to invest this into something that would return you around 35%. You would now need to take a risk. Stocks market is one option, there are multiple types of trades [day trades, shorts, options, regular trades] that one can do ... however the risk can wipe out even your capital. As you don't know these types of investments, suggest you start with dummy investing using quite a few free websites, MoneyControl is one such site, you get pseudo money and can buy sell and see how things actually move. This should teach you something about making quick gains or losses without actually gaining or loosing real money. Once you reach some confidence level, you can start trading using real money by opening a trading account almost every other bank in India offers online trading linked to bank account. Never lose sight of risk appetite, and revise if every now and then. When you don't have dependents, you can easily risk money for potential bumper, however after you have other commitments, you may want to tone down... Edit: http://moneybhai.moneycontrol.com/moneybhai-rules.html is one such site, there are quite a few others as well that offer you to trade on virtual money. Try this for few months and you will understand whether you are making right decissions or not.", "title": "" }, { "docid": "5247db998a4f01acf8bf2c77b04a6b9a", "text": "\"Invest in productive assets and by that I mean companies. Edit: I'll elaborate on \"\"productive assets\"\": any asset that produces something; whether it produces cash or a commodity, you'll automatically accumulate more of its byproduct in the future. The rest is self explanatory\"", "title": "" }, { "docid": "1f844c3721d14b0eb0bbbb2963e0852d", "text": "I researched quite a bit around this topic, and it seems that this is indeed false. Long ter asset growth does not converge to the compound interest rate of expected return. While it is true that standard deviations of annualized return decrease over time, because the asset value itself changes over time, the standard deviations of the total return actually increases. Thus, it is wrong to say that you can take increased risk because you have a longer time horizon. Source", "title": "" }, { "docid": "7cb850e4b3a69b8ba068c19cf2fc4a80", "text": "\"One thing that's often overlooked is that cash reserves are also a long-term investment. Anything can be a long-term investment if it's expected to appreciate or pay interest/dividends. So it's not either/or. Stocks are but one way to do long-term investments. Having said that, taking on less debt for a consumer good is never a bad idea. Your primary residence is a consumer good, regardless of those who would say that \"\"your home is your biggest investment.\"\" So, there's my vote for a larger down-payment. Beyond that, a couple of outside-the-box comments:\"", "title": "" }, { "docid": "245d7664f18dd83101533a35444a1138", "text": "Yes it is viable as long term!! BUT... The average yearly return for the Nasdaq-100 for the last 20 years is 15%!! If you subtract the financing cost for the CFD (my broker is 4%) it gives you about 11%. You can add 1% dividend yield to that. That's 12% return!! As you earn more you can compound in more contracts. Make sure you keep your buffer. Soon enough you can have a very large exposure. The market right now is in euphoria. But a Trump impeachment can be very dangerous thing.. Happy investing!!", "title": "" }, { "docid": "8cc00e61174d102fff008e8fa1aad7fa", "text": "\"For a two year time frame, a good insured savings account or a low-cost short-term government bond fund is most likely the way I would go. Depending on the specific amount, it may also be reasonable to look into directly buying government bonds. The reason for this is simply that in such a short time period, the stock market can be extremely volatile. Imagine if you had gone all in with the money on the stock market in, say, 2007, intending to withdraw the money after two years. Take a broad stock market index of your choice and see how much you'd have got back, and consider if you'd have felt comfortable sticking to your plan for the duration. Since you would likely be focused more on preservation of capital than returns during such a relatively short period, the risk of the stock market making a major (or even relatively minor) downturn in the interim would (should) be a bigger consideration than the possibility of a higher return. The \"\"return of capital, not return on capital\"\" rule. If the stock market falls by 10%, it must go up by 11% to break even. If it falls by 25%, it must go up by 33% to break even. If you are looking at a slightly longer time period, such as the example five years, then you might want to add some stocks to the mix for the possibility of a higher return. Still, however, since you have a specific goal in mind that is still reasonably close in time, I would likely keep a large fraction of the money in interest-bearing holdings (bank account, bonds, bond funds) rather than in the stock market. A good compromise may be medium-to-high-yield corporate bonds. It shouldn't be too difficult to find such bond funds that can return a few percentage points above risk-free interest, if you can live with the price volatility. Over time and as you get closer to actually needing the money, shift the holdings to lower-risk holdings to secure the capital amount. Yes, short-term government bonds tend to have dismal returns, particularly currently. (It's pretty much either that, or the country is just about bankrupt already, which means that the risk of default is quite high which is reflected in the interest premiums demanded by investors.) But the risk in most countries' short-term government bonds is also very much limited. And generally, when you are looking at using the money for a specific purpose within a defined (and relatively short) time frame, you want to reduce risk, even if that comes with the price tag of a slightly lower return. And, as always, never put all your eggs in one basket. A combination of government bonds from various countries may be appropriate, just as you should diversify between different stocks in a well-balanced portfolio. Make sure to check the limits on how much money is insured in a single account, for a single individual, in a single institution and for a household - you don't want to chase high interest bank accounts only to be burned by something like that if the institution goes bankrupt. Generally, the sooner you expect to need the money, the less risk you should take, even if that means a lower return on capital. And the risk progression (ignoring currency effects, which affects all of these equally) is roughly short-term government bonds, long-term government bonds or regular corporate bonds, high-yield corporate bonds, stock market large cap, stock market mid and low cap. Yes, there are exceptions, but that's a resonable rule of thumb.\"", "title": "" }, { "docid": "b18dfb2f980c7c6e0d47ae978440fba3", "text": "\"The definition you cite is correct, but obscure. I prefer a forward looking definition. Consider the real investment. You make an original investment at some point in time. You make a series of further deposits and withdrawals at specified times. At some point after the last deposit/withdrawal, (the \"\"end\"\") the cash value of the investment is determined. Now, find a bank account that pays interest compounded daily. Possibly it should allow overdrafts where it charges the same interest rate. Make deposits and withdrawals to/from this account that match the investment payments in amount and date. At the \"\"end\"\" the value in this bank account is the same as the investment. The bank interest rate that makes this happen is the IRR for the investment...\"", "title": "" }, { "docid": "c299930bb1943ea6460fcb344aecc6e6", "text": "How can I use $4000 to make $250 per month for the rest of my life? This means the investment should generate close to 6.25% return per month or around 75% per year. There is no investment that gives this kind of return. The long term return of stock market is around 15-22% depending on the year range and country.", "title": "" }, { "docid": "798575a817d64f67b98a243772f5378a", "text": "First of all, make sure you have all your credit cards paid in full -the compounding interests on those can zero out returns on any of your private investments. Fundamentally, there are 2 major parts of personal finance: optimizing the savings output (see frugal blogs for getting costs down, and entrepreneur sites for upping revenues), and matching investment vehicles to your particular taste of risk/reward. For the later, Fool's 13 steps to invest provides a sound foundation, by explaining the basics of stocks, indexes, long-holding strategy, etc. A full list Financial instruments can be found on Wikipedia; however, you will find most of these to be irrelevant to your goals listed above. For a more detailed guide to long-term strategies on portfolio composition, I'd recommend A Random Walk Down Wall Street: The Time-tested Strategy for Successful Investing. One of the most handy charts can be found in the second half of this book, which basically outlines for a given age a recommended asset allocation for wealth creation. Good luck!", "title": "" }, { "docid": "23e3c409e1db5b21d412f0ca4e4f846b", "text": "\"The stock market may not grow \"\"forever\"\". There will be growth in the stock market, though. The stock market is a positive-sum game, since it is driven in large part by the profits earned by the companies. This doesn't mean that any individual stock will go up forever, it doesn't mean that any given index will go up forever, and it doesn't mean there won't be periods when the market as a whole drops. But it is reasonable to expect that long-term investing in the market as a whole will continue to return profits that reflect the success of companies invested in. Historically, that return has averaged about 8%; future results may be different and exact results will depend on exactly when and how you invest. Re \"\"what about Japan, which has been flat over 30 years\"\": Market being flat doesn't mean individual companies may not be growing strongly. Picking stocks may become more important, and we might need to relearn to focus on dividends rather than being so monomaniacal about growth (dividends are not reflected in the indices, please note), but there will be money to be made. How much, and how much effort is required to get it, and whether the market offers the best available bets, deponent sayeth not. Past results are no guarantee of future returns, and your results may be better or worse than average. You should be diversified into bonds and such anyway, rather than only in the stock market.\"", "title": "" }, { "docid": "b8c496b8418a2435236fe53580cbf46f", "text": "\"Another important commodity necessary to life is money, which is why when vast sums of it go missing or get locked into long-term investments into which one was grossly misled, it's very upsetting. One such long-term investment is Zurich Vista, which the OP is intimately familiar with. Another type of fund into which money can strangely disappear, is the now ubiquitous \"\"off-shore fund\"\". One should also be very wary of land-banking schemes that boast of high rates of return (15%-20%) and short maturation dates (4-5 years).\"", "title": "" }, { "docid": "9b06e7307088dc7210864a5d44d88371", "text": "I am understanding the OP to mean that this is for an emergency fund savings account meant to cover 3 to 6 months of living expenses, not a 3-6 month investment horizon. Assuming this is the case, I would recommend keeping these funds in a Money Market account and not in an investment-grade bond fund for three reasons:", "title": "" }, { "docid": "b677b2d0d99879a1ad3cf2e40d13b37a", "text": "Try this as a starter - my eBook served up as a blog (http://www.sspf.co.uk/blog/001/). Then read as much as possible about investing. Once you have money set aside for emergencies, then make some steps towards investing. I'd guide you towards low-fee 'tracker-style' funds to provide a bedrock to long-term investing. Your post suggests it will be investing over the long-term (ie. 5-10 years or more), perhaps even to middle-age/retirement? Read as much as you can about the types of investments: unit trusts, investment trusts, ETFs; fixed-interest (bonds/corporate bonds), equities (IPOs/shares/dividends), property (mortgages, buy-to-let, off-plan). Be conservative and start with simple products. If you don't understand enough to describe it to me in a lift in 60 seconds, stay away from it and learn more about it. Many of the items you think are good long-term investments will be available within any pension plans you encounter, so the learning has a double benefit. Work a plan. Learn all the time. Keep your day-to-day life quite conservative and be more risky in your long-term investing. And ask for advice on things here, from friends who aren't skint and professionals for specific tasks (IFAs, financial planners, personal finance coaches, accountants, mortgage brokers). The fact you're being proactive tells me you've the tools to do well. Best wishes to you.", "title": "" }, { "docid": "32e71fb321d39a1fceb84c0481f32a5c", "text": "Put £50 away as often as possible, and once it's built up to £500, invest in a stockmarket ETF. Repeat until you retire.", "title": "" } ]	fiqa
dcfb2a50841875faa697138d94ad633d	Ways to establish credit history for international student	[ { "docid": "8fbab1cfcd794289936e20efb54c2f83", "text": "I would like to establish credit history - have heard it's useful to gain employment and makes it easy to rent an apartment? Higher credit scores will make it easier with landlords, that's true. As to employment - they do background checks, which means that they usually won't like bad things, but won't care about the good things or no things (they'll know you're a foreigner anyway). Is it safe to assume that this implies I have no history whatsoever? Probably, but you can verify pulling through AnnualCreditReport, don't go around giving your personal information everywhere. Is taking out a secured loan the only way for me? No, but it's one of the easiest. Better would be getting a secured Credit Card, not loan. For loan you'll have to pay interest, for a credit card (assuming you pay off all your purchases immediately) you will only pay the credit card fees (for secured credit cards they charge ~$20-100 yearly fees, so do shop around, the prices vary a lot!). If you're using it wisely, after a year it will be converted to a regular credit card and the collateral will be returned to you with interest (which is actually very competitive, last I heard it was around 2%, twice as much as the online savings accounts). As to a secured loan - you'll be paying 4% to CU for your own money. Doesn't make any sense at all for me. For credit cards you'll at least get some value for your money - convenience, additional fraud protection, etc. The end result will be the same. Usually the credit starts to build up after ~6-12 months (that's why after a year your secured CC will be converted to a regular one). Make sure to have the statement balance in the range of 10-30% of your credit limit, to get the best results. Would it make much better sense to wait till I get a job (then I would have a fixed monthly salary and can apply for a regular CC directly) You can apply, but you'll probably be rejected. As I mentioned in another answer elsewhere, the system in the US is such that you're unable to get credit if you don't already have credit. Which is kindof a magic circle, which you can break with the secured credit card as the least costly solution.", "title": "" }, { "docid": "2dd5be2dd8fe231b5ca85513873d09ec", "text": "I would like to post a followup after almost a quarter. littleadv's advice was very good, and in retrospect exactly what I should have done to begin with. Qualifying for a secured credit card is no issue for people with blank credit history, or perhaps for anyone without any negative entries in their credit history. Perhaps, cash secured loans are only useful for those who really have so bad a credit history that they do not qualify for any other secured credit, but I am not sure. Right now, I have four cash secured credit cards and planning to maintain a 20% utilization ratio across all of them. Perhaps I should update this answer in 1.5 years!", "title": "" }, { "docid": "e50361fe6b086a1d16438a064a7cc265", "text": "I think you should try to talk with the credit union at your campus first, they may have offer you a credit card even you don't have any credit history.", "title": "" }, { "docid": "c1f1bd2ee9a6d2caf9bfec545571ff8c", "text": "I came to US as an international student several years ago, and I have also experienced the same situation like most of the international students in finding ways to build credit history. Below I list out some possible approaches you may want to consider: I. Get a student job at campus (recommended) I think the best way is to get a student job in university, say a teaching assistant or student helper. In this case, you can be provided with a social security number and start to build your own credit history. II. Get credit card You can also consider to apply for a credit card. There are indeed some financial institutions that can provide credit cards for international students with no or limited credit scores requirement, say Discover and Bank of America. However, it is relatively hard to get approved, simply because hey may put more restriction in other aspects. For example, you may be required to keep sufficient bank balance above several thousand dollars during a period of time, or you should prove that you have relatives with citizenship in US who can provide your financial aid if needed. III. Apply for a loan (recommended) Getting a loan product is another alternative to get out of this difficult situation, but most of people don’t realize that. There are some FinTech start-ups in United States that specifically focus on international students’ loan financing. One representative example is Westbon (Westbon ), an online lending company that specializes in providing car loan for international students with no SSN or credit history. I once used their loan product to finance a Honda Accord, and Westbon reported my loan transaction records to US credit bureau during my repayment process. Later when I officially got my SSN number, I found my credit history has been automatically synchronized and I don’t have to start from all over again. It never be an easy journey for international students to build credit history in United States. What approach you should make really depends on you own situation. I hope the information above can be useful and good luck for your credit journey!", "title": "" }, { "docid": "4248acc7fc94e58e4871fe016df185da", "text": "There's an excellent new service called SelfScore that offers US credit cards to international students. They work with students without a credit history and even without an SSN by using other qualifying factors such as major, financial resources in their home country, and employability upon graduation. Worth clarifying: it's neither a secured credit card nor a prepaid card. It's a proper US credit card with no annual fees and a relatively low APR designed to help students build US credit. The spending limit is relatively small but that probably doesn't matter for just building a credit history.", "title": "" } ]	[ { "docid": "a20d9562e99742ffa112be51363bb7c9", "text": "If I use my credit card on my ITIN and behave like a good guy (paying everything on time), will it create history for my SSN next year or will I have to start from scratch? Yes, you'll keep your history, it will be reported on your SSN when you update your creditors with it. I have an option of using a secured card v/s an unsecured one. Which one is better from the view of my credit history? The one which you don't have to pay for. Consider the value of money you're using for the secured card, and all the fees and interest you expect to pay. Unless you're planning on a mortgage in the next couple of years, there's no rush with the credit. It is definitely not worth paying money for.", "title": "" }, { "docid": "d4b52b0c13dd806ac5f96114ba0c7cd6", "text": "Good credit is calculated (by many lenders) by taking your FICO score which is calculated based upon what is in your credit report. Building credit generally means building up your FICO score. Your FICO score is impacted my many factors, one small one of which is your utilization ratio of your installment loans like student loans. This is the ratio of the current balance to your original balance. To improve your score (slightly) you would want a lower ratio. I would recommend paying your student loan down to 75% ratio as fast as you can and then you can go back to $50/month. A much better way to improve your FICO score is to have revolving credit. Your student loans are not revolving, they are installment loans. Therefore, you should open at least one credit card (assuming you currently have none) right away. The longer you have had a credit card open, the better your FICO score gets. Your revolving credit utilization ratio is way more important than your installment loan ratio. Therefore, to maximize your FICO, try to never have more than 10% utilization on your revolving credit report to the credit bureaus each month. Only the current month's ratio affects your score at any given moment. You can ensure you don't go above 10% by paying your balance before the statement cuts each month to get it below 10% way before any payment would be due. (You should always pay your remaining credit card statement balance in full each month by the due date after the statement cuts to avoid any interest charges.) Note that there is a slight FICO advantage to having at least one major bank credit card instead of just only credit union credit cards. Also, never let all your revolving credit report a zero balance in a month, you must always have at least $1 reporting to the credit bureaus on at least one of your open credit cards or your FICO score will take a big negative hit. If you cannot get a normal credit card, go to a credit union and find one that offers secured credit cards, or a bank that does. A secured credit card is where you place a deposit with the bank that they hold and give you a credit limit to match your security. Ideally it would be a card that graduates to unsecured after your demonstrate good history with them. For example, the Navy Federal Credit Union secured card unsecures for many people. I also believe the Wells Fargo Bank credit card (you can join if there is a family member who served or a roomate who did) also will unsecure. The reason you want it to unsecure and not be forced to open a new account to get an unsecured account is that you want your average age and oldest age of open revolving credit accounts to be as high as possible as this is another impact on your FICO score. Credit unions that anyone can join include, Digital Federal Credit Union, the Pentagon Federal Credit Union (which offers a secured card that does not graduate), and The State Department Federal Credit Union (also offers secured card that I think does not graduate). One other method to boost your FICO score is to get added as an authorized user on one of your parent's credit cards that has been open a long time. Not all lenders will report such an authorized user, however, ones that are known to do so are: Bank of America, Citi Bank, and Capital One. It is a good sign that it will report if they ask for the social security number of the authorized user. However, note that the Authorized User addition can have no impact if the lender is using one of the newer versions of the FICO scoring model, only the older versions reward you for the age of accounts for which you are an authorized user. A very long term boost is to open your first American Express card underwritten directly by Amex such as their Zync card which is pretty easy to get. The advantage of American express is that they remember the date your first credit card was opened with them and if you open new accounts in the future they will back date the date of their opening to match the date your first card was opened. If you let your membership lapse, be sure to record the account number and date opened in your personal files so that you can help them locate it again if you reopen as they can have trouble if it has been on the order of ten years or more. Finally, note that the number of accounts opened in the last twelve months is a small negative mark on your score (along with number of inquiries), so if you open a lot of accounts all at once, in addition to bringing down your average age of accounts, you will also get dinged for how many were opened in the last year.", "title": "" }, { "docid": "f00758a8e973c9613c82d04f248c9dd3", "text": "\"The other option apart from the above which I feel is quite good is \"\"Travel Card\"\" [also called Forex Card] issued in USD. These cards are like prepaid debit cards. They are available from almost quite a few Indian Banks like HDFC / ICICI / UTI. The limit for students is around 100 K USD per year. http://www.hdfcbank.com/personal/cards/prepaid_cards/forexplus_card/pre_forex_elg.htm The card can be reloaded by any amount [i think the minimum is USD 100] by visiting the Branch or certain Forex agents. There loading fee is INR 75. The Fx is typical Card Rate prevailing on the day. In US this card can be used as a credit card for almost everything [I have used this without any hassel]. Avoid using the card for blocking anything [at Hotel for room booking, or initial block at car rentals]. Although its mentioned that there is a withdrawl fees, i was never charged anything for withdrawls. The card comes with an internet based login to monitor account balance and transactions. Any unused funds can be withdrawn in India. The payment will be make in INR.\"", "title": "" }, { "docid": "07a8e5710dceceec0f5f187e0a021a6f", "text": "The negative effects of multiple hard inquiries in a short span of time don't stack, they're treated as a single inquiry (and inquiries aren't that bad anyway, the only ding you by a few points). The bigger problem here is the other reason your bank gave you - Too many overdrawn accounts. If you don't believe you currently have any overdrawn accounts, you need to pull your credit report now and make sure it's accurate. Maybe there's a mistake on your credit, maybe you're a victim of identity theft. That said, 1.5 years isn't really very long in credit terms for managing to keep your record clean, so maybe your credit just needs a few more years to heal. But definitely pull your credit report to rule out the worst possibilities.", "title": "" }, { "docid": "28d8fb25f927be0346124fa6b356d346", "text": "You could conceivably open a few accounts. For example, a bank account and a credit card account. Then the accounts will be older when evaluated for credit when you return. This would look better than opening fresh accounts later. But don't expect a big difference in score. And you'll be stuck with those accounts in the future, otherwise you lose the benefit. I wouldn't worry about maintaining balances now. You can wait until you come back. Occasional purchases may be helpful. What they really want to see is a regular and sustained use of accounts without missing payments or overextending. But if you're not going to be here, you can't really do that. Note that good credit scores are based on seven years of data, preferably a lot of it. Opening a few accounts can't substitute for that, even if you put balances on them. If you're not here, you won't be paying rent or utilities. You won't have a proven payment history on the most common accounts. If money were no object, you could do something like purchase a house or condo that you could rent out, utilities included. That would build up a payment history. But if money were no object, you probably wouldn't be worried about your credit score. It's more practical to just live normally and be sure that you always live within your means so that you don't experience negative credit events. You might think about why you want a good credit score. Is it to borrow a lot of money? You might be able to spend money to achieve that. Is it to save money on future borrowing? If it costs money now, how much will you save total? Opening accounts now that you won't really use until you return is about the only thing that you can do that won't cost you money. Perhaps put a balance on the bank account--at least you'll get that money back some day. Maintaining a balance on the credit cards would cost you money in interest charges, and you don't really benefit from an improved credit score until you use your credit. So the interest fees aren't really buying you anything.", "title": "" }, { "docid": "ddfbfd39ee526adc9d0f4d5bf220a1e8", "text": "How is it more difficult? All you have to do if you are legit staying for at least 2 years is just get a cosigner. Also if they really did care, they would find all of us that did it, and collect the debt, and therefore it wouldn't be such a deterrence to give E2 guys visas. They would actually profit off it with the interests, lates fees, ect. They would WANT you to leave without paying. So if they dont care, whats the big deal?", "title": "" }, { "docid": "2b18fb5a8c31d7f4df58b2b5e06a885d", "text": "\"I will disagree with the other answers. The idea that there is some to establish a \"\"credit history\"\" is largely a myth propagated by loaners who see it as positive propaganda to increase the numbers of their prospective customers. You will find some people who claim they were rejected for a card because they had no \"\"credit history,\"\" but in every case what these people are not telling you is they also had no income (were students, house wives, or others with no steady income). Anyone who has income can get a credit card or other line of credit regardless of their \"\"credit history.\"\" Even people who have gone bankrupt can get credit cards if they have proven income. If your answer to this is that \"\"you have no income, but still want a credit card\"\", I would advise you to re-read that sentence several times and think carefully about it. I have never had a credit card and never missed having one, except when trying to rent cars which was somewhat complex and annoying to do in the 2005-2010 time period without a credit card. Credit cards have a number of disadvantages: I definitely agree with those who will tell you credit cards are convenient, they are, but for someone who wants to be financially prudent and build wealth they are unnecessary and unwise. If you don't believe me, read \"\"The Total Money Makeover\"\" by David Ramsey, one of the most famous and best-selling books ever written on personal finance. He actually will give you much better and detailed reasons to avoid CCs than me. After all, who am I, just some dumb rich schmuck with lots of money and no debt and a happy life. Comment on Culture I think it is pretty funny we have a lot of spendthrift Americans in this thread basically telling the OP to get lots of credit cards as soon as possible. If you asked the same question in Japan you would get completely different answers and votes. In Japan its hard to even use credit cards. The people there are much more responsible financially than Americans; the average Japanese person has much higher wealth than a person with the same income in the United States. One of the reasons for this, among many, is that the average Japanese person does not use credit cards. A Japanese person, if you translated this question for them, would think the whole thing a typical example of how foolish Americans are.\"", "title": "" }, { "docid": "00b6bde49e1b1a7faf3b2b014491a62f", "text": "I got a credit card as a student with no income, not even a part time job. They called me, I agreed to one thing and they did another and now I have an old credit history. They don't do this anymore. But technically, student loan debt is unsecured?", "title": "" }, { "docid": "879a2f9d08d157b5b6885499455c88a8", "text": "Generally, banks will report your loan to at least one (if not all three) credit bureaus - although that is not required by law. The interest you're paying, in addition to your insurance isn't justifiable for building credit. I would recommend paying the car off and then perhaps applying for a secure credit card if you are worried about being rejected. Of course, since you have very little credit, applying for an unsecured card and getting rejected won't hurt you in the long run. If you are rejected, you can always go for a secured credit card the second time. As I mentioned in my comments, it's better to show 6 months of on-time payments than to have no payment history at all. So if your goal is to secure an apartment near campus, I'm sure you're already a step ahead of the other students.", "title": "" }, { "docid": "c0a73935bc6dc247beaced5699dbfe8b", "text": "The SCHUFA explicitly says on their website that their scoring system is a secret. However, if your goal is to be credit-worthy for example to get financing for a house or a car or whatever, just pay any loans and your credit card back on time and you'll be fine. There is no need to build a credit history. I just got a mortgage on a new house without any real credit history. I have one credit card which I only use on vacations because some countries don't take my debit card, and I always put money on it before I use it, so I've technically never borrowed money from a bank at all. My banker looked at my SCHUFA with me and we saw that there was nothing in there except for the credit card, which has a 500€ limit and if I maxed it out, the monthly interest would be 6,80€ so he added that 6,80€ to my expenses calculation and that was it. If you're having trouble getting a loan and you don't know why, you can ask the SCHUFA for the data they have on you and you can correct any mistakes they might have made. Sometimes, especially when you have the same full name and birth date as somebody else, the SCHUFA does get things mixed up and you have to sort it out.", "title": "" }, { "docid": "9c874ef74bab9f06158c5ad1e9c6b530", "text": "\"1. Your oldest active credit agreement is not very old This is fairly straight forward. If you've not been exposed to borrowing for a reasonable length of time, people won't want to lend you money. They have no reason to have any confidence in your ability to repay them. As other said, it's pretty much a case of proving yourself by being good with credit over a period of time. 2. You have no active credit card accounts Credit reference agencies have to consider a variety of factors for a variety of purposes. Notably, they will be used for credit cards, unsecured loans, mortgages, and secured loans such as vehicle finance applications. These all have varying types of customer, and some will be inherently more risky than others. For instance, someone with a mortgage on a home is far more likely to make payments because they would be homeless without, however someone with a finance agreement on a car is relatively less likely to make those payments because all they stand to lose is their car. Consider that the most fruitful information the lender will get is a score and some breakdown of how it's generated, it's a very general understanding of your history. For that reason, having a wide variety of credit is very important. A good variety of credit to have would be one secured loan (e.g car finance) to get started, as well as at least one revolving unsecured credit account (e.g a credit card), and later on in your \"\"credit life\"\" an unsecured fixed term loan (e.g a loan for something which has nothing secured against it). I say the above reluctantly, because that's how I increased my credit score from 450 to 999 - first step was the car finance where in 3 months or so I changed from 450 to around 600, with a credit card I was approaching 900, and once I had an unsecured loan for 8 months I hit 999 - now I have all of the above plus a competitive mortgage and remain at 999. Whether each is mandatory to maintain 999 is debatable but based on personal experience, it seems reasonable.\"", "title": "" }, { "docid": "9410aac2831c33bba5318245fae862a3", "text": "\"As a person who has had several part time assistants in the past I will offer you a simple piece of advise that should apply regardless of what country the assistant is located. If you have an assistant, personal or business, virtual or otherwise, and you don't trust that person with this type of information, get a different assistant. An assistant is someone who is supposed to make your life easier by off loading work. Modifying your records before sending them every month sounds like you are creating more work for yourself not less. Either take the leap of faith to trust your assistant or go somewhere else. An assistant that you feel you have to edit crucial information from is less than useful. That being said, there is no fundamental reason to believe that an operation in the Philippines or anywhere else is any more or less trustworthy than an operation in your native country. However, what is at issue is the legal framework around your relationship and in particular your recourse if something goes wrong. If you and your virtual assistant are both located in the US you would have an easier time collecting damages should something go wrong. I suggest you evaluate your level of comfort for risk vs. cost. If you feel that the risk is too high to use an overseas service versus the savings, then find someone in the states to do this work. Depending on your needs and comfort you might want to seek out a CPA or other licensed/bonded professional. Yes the cost might be higher however you might find that it is worth it for your own piece of mind. As a side note you might even consider finding a local part-time assistant. This can often be more useful than a virtual assistant and may not cost as much as you think. If you can live without someone being bonded. (or are willing to pay for the bonding fee) yourself, depending on your market and needs you may be able to find an existing highly qualified EA or other person that wants some after hours work. If you are in a college town, finance, accounting or legal majors make great assistants. They will usually work a couple hours a week for \"\"beer money\"\", they have flexible schedules and are glad to have something pertinent to their degree to put on their resume when they graduate. Just be prepared to replace them every few years as they move on to real jobs.\"", "title": "" }, { "docid": "6605f0d1e1b5d93a94c0bb4af0b3ae50", "text": "Obviously the only way to have good credit is by owing money, and making payments as scheduled. To do this I would do everything I could to place all of your required expenses on a credit card. This can include paying rent, food, transportation, etc. These are all payments that you already make, but simply move then through a different payment vehicle. It sounds like at this time you may not have a credit card that allows you to do this, but I would watch out for those cards that come in via mail with all kinds of special deals. While you have not mentioned if you have any of this, make sure that you keep up with your past debt and negotiate repayment if needed. Once your credit improves, you should begin to see doors opening that are problems now.", "title": "" }, { "docid": "37e08839cdf11b0ddd69897437b1b0ad", "text": "Something I'd like to plant firmly into your mind - If you're able to save up enough money to buy the things you want outright, credit will be of little use to you. Many people find once they've accumulated very good credit scores by use of good financial habits, that they rarely end up using credit, and get little out of having a 'great' credit score compared to an 'average' credit score. Of course, a lot of that would depend on your financial situation, but it's something to keep in mind. As stated by others, and documented widely online, you don't need to make payments on a loan or carry a card balance to build your credit history. Check your credit on a popular site, such as Credit Karma (No affiliation). There, you'll see a detailed breakdown of the different areas of your credit profile that matter; things like: The best thing I could recommend is get a credit line or credit card, and use it responsibly. Carrying a balance will waste money on interest, much like the car payment. Just having it and not over-using it (Or not using it at all) will 'build' your credit history. Of course, some institutions may close your account after X number of years of inactivity. With this in mind, I'd say it's safe to pay off the car loan. Read your agreement and make sure there aren't early termination / early payment fees for this. Edit: There have been notes in the comments section's of question/answer's here about concerns with getting apartment. My two cents here: Most apartments I've seen check your credit for negative marks. Having no credit history, and thus never missing a payment or having a judgement made against you, will likely be enough to get you into most normal-quality apartments, assuming the rest of your application / profile is in order, like: - Good references, if asked for them - At least 2.5x rent payment in gross income etc, things like that. If they really think you're a risk, they may ask for a larger deposit (Though I'm sure in some areas there may be restrictions on whether they can do this, or how much they can do it) and still let you rent there.", "title": "" }, { "docid": "08779e8c2ebc378095806f40072fea64", "text": "Well, I know why the Rabobank in the Netherlands does it. I can go back around one year and a half with my internet banking. But I can only go further back (upto 7 years) after contacting the bank and paying €5,- per transcript (one transcript holds around a month of activities). I needed a year worth of transcripts for my taxes and had to cough up more than €50. EDIT It seems they recently changed their policy in a way that you can request as many transcripts as you like for a maximum cost of €25,- so the trend to easier access is visible.", "title": "" } ]	fiqa
3fbb0b648ec1aec765890cf93c10b8f4	what are the downsides of rolling credit card debt in this fashion	[ { "docid": "c0006b477dc623d202925d93f3c5a9ab", "text": "Assuming you can get keep getting credit cards like this forever, you open yourself up to risk in short term losses. Stock/bond prices fluctuate. If you need to pay the money back for some reason (at the end of the 15 months) your investment may be less than the 5,000 you started with.", "title": "" }, { "docid": "8c66ce8d997d62bae165e91035fd1a86", "text": "Awesome, you are a math guy. Very good for you. In theory, what you are proposing, should work out great as the math works out great. However have you taken a economics or finance coursework? The math that they do in these class will leave a most math guys uncomfortable with the imprecision even when one is comfortable with chaos theory. Personal finance is worse. If it were about math things like reverse mortgages, payday lenders, and advances on one income tax returns would not exist. The risk derived from the situation you describe is one born out of behavior. Sometimes it is beyond control of the person attempting your scheme. Suppose one of these happen: In my opinion the market is risky enough without borrowing money in order to invest. Its one thing to not pay extra principle to a mortgage in order to put that money in play in the market, it is another thing to do what you are suggesting. While their may be late fees associated with a mortgage payment, a fixed rate mortgage will not change if you late on payment(s). On these balance transfer CC schemes they will jack your rate up for any excuse possible. I read an article that the most common way to end up with a 23%+ credit card was to start out with a 0% balance transfer. One thing that is often overlooked is that the transfer fee paid jacks up the stated rate of the card. In the end, get out of consumer debt, have an emergency fund, then start investing. Building a firm financial foundation is the best way to go about it. Without one it will be difficult to make headway. With one your net worth will increase faster then you imagined possible.", "title": "" } ]	[ { "docid": "e95591e12f9841befb74793226d7dc3a", "text": "Sometimes there are credit cards that offer a (promotional) 0% APR on transfers with no transfer fees. It can be a good option to move the money to one of these if you're disciplined enough to keep hacking away at the debt before the APR jumps.", "title": "" }, { "docid": "c66ba9f4f3ff61ebd2e8c6b23ade1366", "text": "One of the more subtle disadvantages to large credit card purposes purchases (besides what the other answer mentions), is that it makes you less prepared for emergencies. If you carry a large balance on your credit card with the idea that your income can easily handle the payments to beat the no-interest period, you never know when you'll have an unexpected emergency and you'll end up having to pay less, miss the deadline and end up paying huge interest. Even if you are fastidious about saving and budgeting, what if your family comes under a large financial burden (just as one possible example)?", "title": "" }, { "docid": "c4c73d42a968f194ea662dec8eeda100", "text": "The main risk I see to this plan is with a late payment to your credit card. For a variety of reasons, some outside your control, you could end up with a late payment on the CC and a +18% interest rate making your arbitrage attempts unprofitable. You sense that this is risky, and it derives from placing short-term risk on a long term asset. Your interest rate is high for the current market. What kind of things can you do reduce that rate? What kind of things can you do to reduce your principle? Those kind of things represent far less risk and accomplish the same goal.", "title": "" }, { "docid": "880f2c7c40a2285522e04a73a6407f52", "text": "I think you'd be adding the transaction fee each time, so let's say it's 3% or minimum $10, your balance would be almost $580 by November. Unless for some reason you have a permanent no balance transfer fee card or the two cards let you pay bills without charging a cash fee of some sort.", "title": "" }, { "docid": "e8a2434e4e41ba2a70e1dd06ac106b53", "text": "The one big drawback I know is when you take the mortgage credit, your credit ability is calculated, and from that sum all of your credits are subtracted, and credit limit on credit card counts as credit... I don't know if it is worldwide praxis, but at least it is the case in Poland.", "title": "" }, { "docid": "7477a59bf676d005a08d35b199b330ef", "text": "They don't do anything you can't do yourself and they charge you money for it. And of course the only way they manage to negotiate the debt down is by not paying it for a while in the first place, have it referred to collections and then negotiating with the collectors. At that time, your credit rating (if you care about that at all) will have suffered a lot more damaged than it is from a few late payments. I would address the issue as to why you end up paying late first - it sounds to me like you're cutting the time left to pay to the bone and this turned around and bit you in the you-know-where. In case you are able to pay but not organised enough to do it on time, find a way to remind yourself to pay the bill a few days early for peace of mind. That won't do anything about the 28% interest but those might serve as an additional motivation to pay the debt off faster. Once you're back to showing regular on-time payments on your credit record, you might want to investigate transferring the balance to a cheaper card or negotiate the interest down (or both). If you genuinely can't pay after you've taken care of the essentials (food, shelter, transportation) then you don't need a third party to stop paying the credit card bill, you can do that yourself.", "title": "" }, { "docid": "9ea9a62265fcf4949947d15397964d13", "text": "\"The only way to \"\"roll\"\" debt into a home purchase is to have sufficient down payment. Under the \"\"new\"\" lending rules that took effect in Canada earlier this year, you must have at least 5% of the purchase price as a down payment. If you have $60,000 in additional debt, the total amount of mortgage still cannot be greater than 95% of the purchase price. Below is an example. Purchase price of home $200,000. Maximum mortgage $190,000 (95% of purchase price) Total outside debt $60,000 That means the mortgage (other than the current debt of $60k) can only be $130,000 This means you would need a down payment of $70,000. Also keep in mind that I have not included any other legal fees, real estate commissions, etc in this example. Since it is safe to assume that you do not have $70k available for a down payment, renting and paying down the debt is likely the better route. Pay off the credit card(s) first as they have the higher interest amount. Best of luck!\"", "title": "" }, { "docid": "ba5e72b09d215ff8acab3310262b3c2c", "text": "I just want to stress one point, which has been mentioned, but only in passing. The disadvantage of a credit card is that it makes it very easy to take on a credit. paying it off over time, which I know is the point of the card. Then you fell into the trap of the issuer of the card. They benefit if you pay off stuff over time; that's why taking up a credit seems to be so easy with a credit (sic) card. All the technical aspects aside, you are still in debt, and you never ever want to be so if you can avoid it. And, for any voluntary, non-essential, payment, you can avoid it. Buy furniture that you can pay off in full right now. If that means only buying a few pieces or used/junk stuff, then so be it. Save up money until you can buy more/better pieces.", "title": "" }, { "docid": "7b000a97892cc975d572e05f9af9505f", "text": "This is very much possible and happens quite a lot. In the US, for example, promotional offers by credit card companies where you pay no interest on the balance for a certain period are a very common thing. The lender gains a new customer on such a loan, and usually earns money from the spending via the merchant fees (specifically for credit cards, at least). The pro is obviously free money. The con is that this is usually for a short period of time (longest I've seen was 15 months) after which if you're not careful, high interest rates will be charged. In some cases, interest will be charged retroactively for the whole period if you don't pay off the balance or miss the minimum payment due.", "title": "" }, { "docid": "de2025b241f8fe7e14defc87ce78a3fd", "text": "\"One key point that other answers haven't covered is that many credit cards have a provision where if you pay it off every month, you get a grace period on the interest. Interest doesn't accrue at all unless you rollover a non-zero balance. But if you do, you pay interest on the average balance, not the rolled-over balance, for the entire month. You have to ask yourself what you are trying to accomplish with your credit history? Are you trying to maximize your \"\"buying power\"\" (really, leverage)? Or are you trying to make sure that you get the best terms on a moderately sized loan (house mortgage, car note)? As JohnFx and losthorse already noted, it's in the banker's best interest to maximize the profit they make off of you. Of course, that is not in your best interest. Keeping a credit card balance from month to month definitely feeds the greedy nature of the financing beast. And makes them willing to take more risks, because the returns are also higher. But those returns cost you. If you are planning to get sensible loans in the future, that you can comfortably afford, you won't need a maxed credit score. You won't get the largest loan amounts, but because you are doing the sensible thing and making a large down payment, the risk is also very low and you'll find lenders willing to give you a low interest rate. Because even though the reward is lower than the compulsive purchaser who pays an order of magnitude more in financing fees, the return/risk ratio is still very favorable to the bank. Don't play the game that maximizes their return. That happens when you have a loan of maximum size, high interest rate, and struggle to make payments, end up missing a couple and paying late fees, or request forbearance which compounds the interest. Play to minimize risk.\"", "title": "" }, { "docid": "104ae8a9ec8b6b78961094e0cd95e102", "text": "If you had a CC issuer that allowed you to do bill-pay this way, I suspect the payment would be considered a cash advance that will trigger a fee and a pretty egregious cash advance specific interest rate. It's not normal for a credit payment portal to accept a credit card as payment. If you were able to do this as a balance transfer, again there would be fees to transfer the balance and you would not earn any rewards from the transferred balance. I think it's important to note that cash back benefits are effectively paid by merchant fees. You make a $100 charge, the merchant pays about $2.50 in transaction fee, you're credited with about $1 of cash back (or points or whatever). Absent a merchant transaction and the associated fee there's no pot of money from which to apply cash back rewards.", "title": "" }, { "docid": "007e22a9f926be047351fa6ff6a02a9c", "text": "Although this scheme is likely to get shut down rather quickly by either your broker or credit card company some points you seem to have missed out on. Properly timed you should be able to get ~55 days of grace period (30 day billing cycle + 25 day grace period) assuming you pay everything off every month and charge immediately following the statement date. You will need to avoid certain card issuers that code all transactions with financial institutions as cash advances (Citibank in paticular). If it is possible it would be in your best interest to lower cash advance limits to 0 to avoid any chance of cash advance fees. If your credit card attempts to process it as a cash advance the transaction will just be declined and you won't be out anything. Otherwise one cash advance fee will eat several months worth of profits. As far as investments with guaranteed principal goes the only thing you can realistically do is money market accounts and maybe treasury notes. Anything else and the short term price fluctuation may leave you high and dry. If this scheme were to work you would be much better off attempting to get rewards for the purchases than anything you could invest in. If you used a 2% card and churned it every month you would be looking at a 24% return on credit card rewards. Even 1% rewards gives you a 12% annual return which is going to beat anything you could invest the money in.", "title": "" }, { "docid": "c5842630c474f5e2c8e1c18dced303d8", "text": "\"As Dheer has already told you in his answer, your plan is perfectly legal, and there are no US tax issues other than making sure that you report all the interest that you earn in all your NRE accounts (not just this one) as well as all your NRO accounts, stock and mutual fund dividends and capital gains, rental income, etc to the IRS and pay appropriate taxes. (You do get a credit from the IRS for taxes paid to India on NRO account income etc) You also may also need to report the existence of accounts if the balance exceeds $10K at any time etc. But, in addition to the foreign exchange conversion risk that Dheer has pointed out to you, have you given any thought to what is going to happen with that credit card? That 0% interest balance of $5K does not mean an interest-free loan 0f $5K for a year (with $150 service charge on that transaction). Instead, consider the following. If you use the card for any purchases, then after the first month, your purchases will be charged interest from the day that you make them till the day they are paid off: there is no 25-day grace period. The only way to avoid this is to pay off the full balance ($5K 0% interest loan PLUS $150 service charge as well as any other service charges, annual fees etc PLUS all purchases PLUS any interest) shown on the first monthly statement that you receive after taking that loan. If you choose this option, then, in effect, have taken a $5K loan for only about 55 days and have paid 3% interest (sorry, I meant to write) service fee for the privilege. If you don't use the card for any purchases at all, then the first monthly statement will show a statement balance of $5130 and (most likely) a minimum required payment of $200. By law, the minimum required payment is all interest charged for that month($0) PLUS all service fees charged during that month ($150) PLUS 1% of the rest ($50). Well, actually the law says something like \"\"a sufficient fraction of the balance to ensure that a person making the required minimum payment each month can pay off the debt in a reasonable time\"\" and most credit card companies choose 1% as the sufficient fraction and 108 months as a reasonable time. OK, so you pay the $200 and feel that you have paid off the service fee and $50 of that 0% interest loan. Not so! If you make the required minimum payment, the law allows that amount to be be applied to any part of the balance owing. It is only the excess over the minimum payment that the law says must be applied to the balance being charged the highest rate. So, you have paid off $200 of that $5K loan and still owe the service fee. The following month's statement will include interest on that unpaid $150. In short, to leave only the 0% balance owing, you have to pay $350 that first month so that next month's statement balance will be $4800 at 0%. The next month's required minimum payment will be $48, and so on. In short, you really need to keep on top of things and understand how credit-card payments really work in order to pull off your scheme successfully. Note also that the remaining part of that 0% interest balance must be paid off by the end of the period or else a humongous rate of interest will be applied retroactively from Day One, more than enough to blow away all that FD interest. So make sure that you have the cash handy to pay it off in timely fashion when it comes due.\"", "title": "" }, { "docid": "ba50b477039636eafcbf36f884184668", "text": "This is pretty simple in theory, harder to do in practice. You will be surprised how quickly the debt will disappear. Doing these things will work, I know from experience.", "title": "" }, { "docid": "bc0868f993b2fbc3bd7ab7251dc90b69", "text": "I do this, and as you say the biggest downside is not having a separate account for your savings. If you're the type of person who struggles with restraint this is not for you. On the other hand this type of account gives more interest than any other type of US Checking or Savings account I've seen, so you will benefit from the interest.", "title": "" } ]	fiqa
6dde0a1582c7a51c71b48b21ed7b0b0e	For a car loan, how much should I get preapproved for?	[ { "docid": "30f16531b7454d3d187e72c0f44fc93f", "text": "\"—they will pull your credit report and perform a \"\"hard inquiry\"\" on your file. This means the inquiry will be noted in your credit report and count against you, slightly. This is perfectly normal. Just don't apply too many times too soon or it can begin to add up. They will want proof of your income by asking for recent pay stubs. With this information, your income and your credit profile, they will determine the maximum amount of credit they will lend you and at what interest rate. The better your credit profile, the more money they can lend and the lower the rate. —that you want financed (the price of the car minus your down payment) that is the amount you can apply for and in that case the only factors they will determine are 1) whether or not you will be approved and 2) at what interest rate you will be approved. While interest rates generally follow the direction of the prime rate as dictated by the federal reserve, there are market fluctuations and variances from one lending institution to the next. Further, different institutions will have different criteria in terms of the amount of credit they deem you worthy of. —you know the price of the car. Now determine how much you want to put down and take the difference to a bank or credit union. Or, work directly with the dealer. Dealers often give special deals if you finance through them. A common scenario is: 1) A person goes to the car dealer 2) test drives 3) negotiates the purchase price 4) the salesman works the numbers to determine your monthly payment through their own bank. Pay attention during that last process. This is also where they can gain leverage in the deal and make money through the interest rate by offering longer loan terms to maximize their returns on your loan. It's not necessarily a bad thing, it's just how they have to make their money in the deal. It's good to know so you can form your own analysis of the deal and make sure they don't completely bankrupt you. —is that you can comfortable afford your monthly payment. The car dealers don't really know how much you can afford. They will try to determine to the best they can but only you really know. Don't take more than you can afford. be conservative about it. For example: Think you can only afford $300 a month? Budget it even lower and make yourself only afford $225 a month.\"", "title": "" } ]	[ { "docid": "a19a12381407a53ef09ec1a7fdea9e04", "text": "I'd pay cash. Car loans are amortized, so sometimes you can get upside-down on the loan between 18-30 months because you are pre-paying interest. This can get you into trouble if you get into an accident. Given the low rate and the type of car you're buying, you're probably fine either way.", "title": "" }, { "docid": "1e3057c1fc6c4cd285ff605bf4f2e8ef", "text": "Yes. I've spoken to mortgage officers from various banks who will do conventional loans with anything as low as 3.5% down, however there are many more restrictions (e.g., normally you can borrow funds from a parent or relative for a down payment, in this case that was prohibited). If you are already pre-approved, then your approval letter should state the specifics you need to adhere to. If you would like to modify that (e.g. put a smaller amount down), then you could still get the loan, but your pre-approval won't be valid. I would recommend speaking with your lender (and perhaps with a few others as well) about the new home you are looking at.", "title": "" }, { "docid": "d4fcfcb0038f0f3aa19f98a535bdf044", "text": "The .9% looks great, but it's not as relevant as the cost of the car itself. There are those who believe that one should never own a new car, that the first X years/miles of a car's life are the most expensive. The real question is how your budget is allocated. Is the car payment a small sliver or a large slice? How big is the housing wedge?", "title": "" }, { "docid": "acd54039a93a99e6a45bd56d41b1e0a7", "text": "\"tl;dr: Your best course of action is probably to do a soft pull (check your own credit) and provide that to the lender for an unofficial pre-approval to get the ball rolling. The long of it: The loan officer is mostly correct, and I have recent personal evidence that corroborates that. A few months ago I looked into refinancing a mortgage on a rental property, and I allowed 3 different lenders to do a hard inquiry within 1 week of each other. I saw all 3 inquires appear on reports from each of the 3 credit bureaus (EQ/TU/EX), but it was only counted as a single inquiry in my score factors. But as you have suggested, this breaks down when you know that you won't be purchasing right away, because then you will have multiple hard inquiries at least a few months apart which could possibly have a (minor) negative impact on your score. However minor it is, you might as well try to avoid it if you can. I have played around with the simulator on myfico.com, and have found inquiries to have the following effect on your credit score using the FICO Score 8 model: With one inquiry, your scores will adjust as such: Two inquiries: Three inquiries: Here's a helpful quote from the simulator notes: \"\"Credit inquiries remain on your credit report for 2 years, but FICO Scores only consider credit inquiries from the past 12 months.\"\" Of course, take that with a grain of salt, as myfico provides the following disclaimer: The Simulator is provided for informational purposes only and should not be expected to provide accurate predictions in all situations. Consequently, we make no promise or guarantee with regard to the Simulator. Having said all that, in your situation, if you know with certainty that you will not be purchasing right away, then I would recommend doing a soft pull to get your scores now (check your credit yourself), and see if the lender will use those numbers to estimate your pre-approval. One possible downside of this is the lender may not be able to give you an official pre-approval letter based on your soft pull. I wouldn't worry too much about that though since if you are suddenly ready to purchase you could just tell them to go ahead with the hard pull so they can furnish an official pre-approval letter. Interesting Side Note: Last month I applied for a new mortgage and my score was about 40 points lower than it was 3 months ago. At first I thought this was due to my recent refinancing of property and the credit inquiries that came along with it, but then I noticed that one of my business credit cards had recently accrued a high balance. It just so happens that this particular business CC reports to my personal credit report (most likely in error but I never bothered to do anything about it). I immediately paid that CC off in full, and checked my credit 20 days later after it had reported, and my score shot back up by over 30 points. I called my lender and instructed them to re-pull my credit (hard inquiry), which they did, and this pushed me back up into the best mortgage rate category. Yes, I purposely requested another hard pull, but it shouldn't affect my score since it was within 45 days, and that maneuver will save me thousands in the long run.\"", "title": "" }, { "docid": "ff0eb373e33424d8d23565b07f33a629", "text": "Does the full time PHD student extend to 70-80 hours/week or more? If not, can you pick up an extra job to aid with living expenses? Also, whose name is the debt in? Is your wife paying to avoid the black mark on her credit record or her mother's? Basically what it looks like to me is that you guys currently have a car you cannot afford and that her mother doesn't seem to be able to afford either, at a ridiculous interest rate on top. Refinancing might be an option but at a payoff amount of 12k you're upside down even when it comes to the KBB retail value. I'm somewhat allergic to financing a deprecating asset (especially at a quick back of the envelope calculation suggests that she's already paid them around $18k if you are indeed three years into the loan). What I would be tempted to do in your situation is to attempt to negotiate a lower payoff to see if they're willing to settle for less and give you clean title to the car - worst thing they can say is no, but you might be able to get the car for a little less than the $12k, then preferably use your emergency money to pay off the car and put it up for sale. Use some of the money to buy her a cheaper car for, say, $4k-$5k (or less if you're mechanically inclined) and put the rest back into your emergency fund. The problem I see with refinancing it would be that it looks like you're underwater from a balance vs retail value perspective so you might have a problem finding someone to refinance it with you throwing some of your emergency money at it in the first place.", "title": "" }, { "docid": "e346a7e245bbe83d9c2932a8ed22b985", "text": "Here is a simple way to analyze the situation. Go to your bank or credit union website and use their loan calculator with their current real interest rates and down payment requirements. Enter the rate, and number of years. Enter different values for the loan amount to get the monthly payment to the level you want ($400). Today for my credit union, the max loan would be about $9,500. Keep in mind there may be taxes, registration fees, and down payment on top of this. Jump ahead two years. The loan is paid off, the car is owned free and clear. You will be able to sell it and get some money in your pocket. If you go for a longer term loan to keep the payments under your goal the issue is that in two years you might be upside down on the loan. The car may be worth less than the remaining balance on the loan. Your equity would be negative.", "title": "" }, { "docid": "8785bed1c0db891da8bbb9ac28373e9d", "text": "The problem is that the reason you find out may be that you are at the car dealer, picked out a car, and getting ready to sign the loan papers with your supposedly good credit, and you are denied for late payment on loans you didn't know you have. Or debt collectors start hounding you. Or you credit card interest rates go up. Or you are charged more for your insurance because you are seen as a bad credit risk. Or you can't rent an apartment. The list is almost endless. It can takes many months and hours spent on the phone to fix these things.", "title": "" }, { "docid": "df0f9dcc3f2e3e400580e37731a7e6f6", "text": "GetApproved Motor Finance is trusted in Australia to provide a convenient, fast & low cost service to obtain car finance in Perth. They help you compare car loan & provide low rate car insurance. Jeremy Hughes Perth is a founder of GetApproved Finance, a online car lending provider. Jeremy is a good entrepreneur with skills in Business Planning, Strategic Planning, Marketing Strategy, Consumer Financing etc.", "title": "" }, { "docid": "fefd8a210ced706b82098af84e1c8d3b", "text": "Considering I'm putting 30% down and having my father cosign is there any chance I would be turned down for a loan on a $100k car? According to BankRate, the average credit score needed to buy a new car is 714, but they also show average interest rates at 6.39% for new-car loans to people with credit scores in the 601-660 range. High income certainly helps offset credit score to some extent. Not every bank/dealership does things the same way. Being self-employed you'd most likely be required to show 2 years of tax returns, and they'd use those as a basis for your income rather than whatever you have made recently. If using a co-signer, their income matters. Another key factor is debt to income ratio, if too much of someone's income is already spoken for by other debts a lender will shy away. So, yes, there's a chance, given all the information we don't know and the variability with lender policies, that you could be turned down for a car loan. How should I go about this? If you're set on pursuing the car loan, just go talk to some lenders. You'll want to shop around for a good rate anyway, so no need to speculate just go find out. Include the dealership as a potential financing option, they can have great rates. Personally, I'd get a much cheaper car. Your insurance premium on a 100k car will be quite high due to your age. You might be rightly confident in your earning potential, but nothing is guaranteed, situations can change wildly in short order. A new car is not a good investment or a value-retaining asset, so why bother going into debt for one if you don't have to? If you buy something in cash now, you could upgrade in a few years without financing if your earning prediction holds and would save quite a bit in car insurance and interest over the years between.", "title": "" }, { "docid": "6d651fd9c2cecbe2d92941c92c58e408", "text": "With new cars it's usually the other way around: finance at a low APR or get cash back when you buy it outright. With used cars you usually don't know how much they have invested in the car, so it's more difficult to know how low they're willing to go. Regardless, I do think it's odd that they would knock 2K off the price if you finance with them, but not if you pay cash. The only reason they would do that is if they intend to make at least 2K in interest over the life of the loan, but they have no way of guaranteeing you won't refi. Therefore, I suspect they are bluffing and would probably close the deal if you wrote them a check (or put the cash on the table) for 2K less. However, if they won't budge and will only knock off 2K if you finance, you could finance and pay it off in full a week later. Just make sure they don't have any hidden origination fees or pay-off-early fees.", "title": "" }, { "docid": "9db9532178ba35de15a402f67b59a31a", "text": "I had a similar situation when I was in college. The difference was that the dealer agreed to finance and the bank they used wanted a higher interest rate from me because of my limited credit history. The dealer asked for a rate 5 percentage points higher than what they put on the paperwork. I told them that I would not pay that and I dropped the car off at the lot with a letter rescinding the sale. They weren't happy about that and eventually offered me financing at my original rate with a $1000 discount from the previously agreed-upon purchase price. What I learned through that experience is that I didn't do a good-enough job of negotiating the original price. I would suggest that your son stop answering phone calls from the dealership for at least 1 week and drive the car as much as possible in that time. If the dealer has cashed the check then that will be the end of it. He owes nothing further. If the dealer has not cashed the check, he should ask whether they prefer to keep the check or if they want the car with 1000 miles on the odometer. This only works if your son keeps his nerve and is willing to walk away from the car.", "title": "" }, { "docid": "63a66872b150c43b121c5b604dc88e39", "text": "\"I somewhat agree to Alex B's post. I was a finance manager for 7 years both prime and sub-prime(special)(in other words bad). The parts he's 100% right on. Hit up you local credit union then your bank. Get your financing done first if you can. Now 690 credit score is one of 3 bureaus, not all banks and lending institutions use all three or the same one. Also the score isn't everything. That could be good or bad. The 2-3% range is normally for the 720+ crowd unless its a manufacture. (GM, Ford, so on) With rates capping out at around 30% depending on state laws. However 690 should not be 19% on a new or late model car. At 690 at 19% you would have be going for a 70,000+ mile 6 year or older car if I had to guess. Assuming you have no BK's and repos. Some times dealerships have to pay banks to get people financed. Its hidden in the cost and they by law are not allowed to tell you about it because it cannot be passed on to you. However the banks don't just fund any crazy amount of money either say like 115% of book and that it. That is where and why they want that big down payment because that is used to off set the finance amount and what you pay. Making the dealership money. and i can go on and on and on... But you should always try to get the funding prior. Your credit union won't charge the hidden fees and they only care about your down payment to see that you are making a commitment. If you are buying used. Save out 1500 for future repairs and tires and such. Don't buy paint protectant and such. If you finance thru the dealership and put less than 20% down DO buy Gap Insurance but thats it. I can go on and on but I won't. Feel free to ask though. And to answer your original only question with not context. \"\"Is there any reason not to put a 35% down payment on a car?\"\" Yes if the money is better served paying off credit cards or long term mortgage, assuming you don't need the write off.\"", "title": "" }, { "docid": "6f1053ceda7ea5537d3cd9d4d5efc044", "text": "First of all, think of anyone you know in your circle locally who may have gotten a mortgage recently. Ask him, her, or them for a recommendation on what brokers they found helpful and most of all priced competitively. Second of all, you may consider asking a real estate agent. Note that this is generally discouraged because agents sometimes (and sometimes justifiably) get a bad reputation for doing anything to get themselves the highest commission possible, and so folks want to keep the lender from knowing the agent. Yet if you have a reputable, trustworthy agent, he or she can point you to a reputable, trustworthy broker who has been quoting your agent's other clients great rates. Third of all, make sure to check out the rates at places you might not expect - for example, any credit unions you or your spouse might have access to. Credit unions often offer very competitive rates and fees. After you have 2-3 brokers lined up, visit them all within a short amount of time (edit courtesy of the below comments, which show that 2 weeks has been quoted but that it may be less). The reason to visit them close together is that in the pre-approval process you will be getting your credit hard pulled, which means that your score will be dinged a bit. Visiting them all close together tells the bureaus to count all the hits as one new potential credit line instead of a couple or several, and so your score gets dinged less. Ask about rates, fees (they are required by law to give you what is called a Good Faith Estimate of their final fees), if pre-payment of the loan is allowed (required to re-finance or for paying off early), alternative schedules (such as bi-weekly or what a 20 year mortgage rate might be), the amortization schedule for your preferred loan, and ask for references from past clients. Pick a broker not only who has the best rates but also who appears able to be responsive if you need something quickly in order to close on a great deal.", "title": "" }, { "docid": "76384f87eaa0952d8425ce9d84c3dd45", "text": "\"You have figured out most of the answers for yourself and there is not much more that can be said. From a lender's viewpoint, non-immigrant students applying for car loans are not very good risks because they are going to graduate in a short time (maybe less than the loan duration which is typically three years or more) and thus may well be leaving the country before the loan is fully paid off. In your case, the issue is exacerbated by the fact that your OPT status is due to expire in about one year's time. So the issue is not whether you are a citizen, but whether the lender can be reasonably sure that you will be gainfully employed and able to make the loan payments until the loan is fully paid off. Yes, lenders care about work history and credt scores but they also care (perhaps even care more) about the prospects for steady employment and ability to make the payments until the loan is paid off. Yes, you plan on applying for a H1-B visa but that is still in the future and whether the visa status will be adjusted is still a matter with uncertain outcome. Also, these are not matters that can be explained easily in an on-line application, or in a paper application submitted by mail to a distant bank whose name you obtained from some list of \"\"lenders who have a reliable track record of extending auto loans to non-permanent residents.\"\" For this reason, I suggested in a comment that you consider applying at a credit union, especially if there is an Employees' Credit Union for those working for your employer. If you go this route, go talk to a loan officer in person rather than trying to do this on the phone. Similarly, a local bank,and especially one where you currently have an account (hopefully in good standing), is more likely to be willing to work with you. Failing all this, there is always the auto dealer's own loan offers of financing. Finally, one possibility that you might want to consider is whether a one-year lease might work for you instead of an outright purchase, and you can buy a car after your visa issue has been settled.\"", "title": "" }, { "docid": "1d7a9f474c7febfeb6d52e5333e4c82e", "text": "The car company loans you money at 1 or 2% because it is part of the incentive to get you to buy the car. Car company transactions are complex involving the manufacturer, the dealership, and the financing part of the car company. Not to mention Rebates, the used car transaction, and the leasing department. If they don't offer you a loan then the profit from that part of transaction is lost to an outside company. The better loan rates from the manufacturer are only with shorter term loans and without the rebate. That is why some suggest that you get the rebate, and then go to a credit union for the loan for lowest overall cost and greatest flexibility. The advertised rates are also only for the customers with great credit scores and the room in their clash flow to pay off the loan in a year or two. If you don't fit in that category, the rates will be higher.", "title": "" } ]	fiqa
a23d04a21849f27c4f61619698661abf	Can mortgage insurance replace PMI?	[ { "docid": "63a0b36e5ad147eb3561b4832c43e36d", "text": "\"PMI IS Mortgage insurance. It stands for \"\"Private Mortgage Insurance\"\". This guy is just trying to get you to buy it from him instead of whoever you have it with now. Your lender would always be on the policy since it is an insurance policy they hold (and you pay for) that protects them from you defaulting on the loan. Don't think of it as insurance for you in case you can't pay. If that should happen, your credit would still be trashed, the bank just wouldn't be out the money. You don't really get any benefit at all from it. It is just the way a bank can mitigate the risk of giving out large loans. This is why people are keen to drop it as soon as possible. The whole thing about keeping the house in your estate after you die makes me think he is trying to sell you a different type of insurance called Mortgage Life Insurance. PMI isn't typically about that type of situation. Your estate will go into probate to work out your debts if you die and my understanding is that PMI doesn't usually pay out in that situation. If this is what he is selling, buying such a policy would be on top of your PMI insurance payment, not instead of it. Be forewarned, personal finance experts usually consider mortgage life insurance to be a ripoff. If you want to protect against the risk of your heirs losing the house because they can't make the payments, you are better off with Term Life Insurance. However, don't worry that they will inherit your debt on the house unless they are on the loan. If they don't want the house, they won't be obliged to make payments on it (unless they want to keep it). It won't affect their credit if they just walk away and let the bank have the house after you die unless they are on the note. Here is an article (in two parts) with a pretty good treatment of the issue of choosing your own PMI policy: \"\"Give Buyers Freedom to Choose Mortgage Insurance\"\" Part 1 Part 2\"", "title": "" } ]	[ { "docid": "26d1fa0919c5d0cd9e23e44fd94ee05e", "text": "yeah, i get that it's not optional. just sucks that nothing has changed substantially since i closed on the loan 11 months ago (same PMI, same HO, essentially the same property taxes) and now i have to pay more. seems like the closing docs could have taken into account timing of those payments so that i primed the pump with enough from the beginning.", "title": "" }, { "docid": "ade1a70a1ee0761e9bad174726ff779e", "text": "\"I've heard that the bank may agree to a \"\"one time adjustment\"\" to lower the payments on Mortgage #2 because of paying a very large payment. Is this something that really happens? It's to the banks advantage to reduce the payments in that situation. If they were willing to loan you money previously, they should still be willing. If they keep the payments the same, then you'll pay off the loan faster. Just playing with a spreadsheet, paying off a third of the mortgage amount would eliminate the back half of the payments or reduces payments by around two fifths (leaving off any escrow or insurance). If you can afford the payments, I'd lean towards leaving them at the current level and paying off the loan early. But you know your circumstances better than we do. If you are underfunded elsewhere, shore things up. Fully fund your 401k and IRA. Fill out your emergency fund. Buy that new appliance that you don't quite need yet but will soon. If you are paying PMI, you should reduce the principal down to the point where you no longer have to do so. That's usually more than 20% equity (or less than an 80% loan). There is an argument for investing the remainder in securities (stocks and bonds). If you itemize, you can deduct the interest on your mortgage. And then you can deduct other things, like local and state taxes. If you're getting a higher return from securities than you'd pay on the mortgage, it can be a good investment. Five or ten years from now, when your interest drops closer to the itemization threshold, you can cash out and pay off more of the mortgage than you could now. The problem is that this might not be the best time for that. The Buffett Indicator is currently higher than it was before the 2007-9 market crash. That suggests that stocks aren't the best place for a medium term investment right now. I'd pay down the mortgage. You know the return on that. No matter what happens with the market, it will save you on interest. I'd keep the payments where they are now unless they are straining your budget unduly. Pay off your thirty year mortgage in fifteen years.\"", "title": "" }, { "docid": "224cb615b8a4f5c87aa56f006339a9b0", "text": "Fire insurance, as you have discovered, is a complete ripoff. Most people pay fire insurance all their lives with no benefit whatsoever, and those such as yourself who are lucky enough to get a payout find that it is completely insufficient to replace their loss. I once computed the actual beneficial net present financial value of my fire insurance policy and it came out to $40 per month. The cost was $800 per month. That is typical. Homeowners pay $500 to $800 per year for something that is worth $30 to $50 per year. Ironically banks would actually make more money from mortgages if they did not require mortgagees to buy insurance, but nevertheless they insist on it. It is not about logic, but about fear and irrationality. When I paid off my mortgage and gained ownership of my home the first thing I did was cancel my fire insurance. I now invest the money I would have wasted on insurance, making money instead of losing it. Being compelled to throw money down the toilet on fire insurance is one of the hidden costs of a homeowners mortgage in the United States. In your situation, the main option is to borrow the money to rebuild the house using the land as collateral, if the land is valuable enough. Of course, you still owe the money for your original mortgage on your now (non-existent) home. So, to get a home, you will have to have the income to service two mortgages. A loan officer at a reputable bank can tell you whether you have the income necessary to support two mortgages. If you were maxed out on your original mortgage, then you may not have enough income and you are screwed. In that case you will have to go back to renting and gradually paying off your old mortgage. (If it were me, I would sue the insurance company pro se as a way to get the necessary money to rebuild the home, because insurance companies roll over like a $20 hooker when they get sued. Juries hate insurance companies. But I am unusual in that I love courtrooms and suing people. Most people are terrified of courtrooms though, so it may not be an option for you.)", "title": "" }, { "docid": "48d4de19ca33dd97959802d8aa37a1c6", "text": "The issue is should you get one large policy or several smaller policies. Multiple polices have flexibility becasue if the need goes away you can drop the policy. The problem with multiple small policies is that there is overhead that you pay for multiple times. Assume that you want 100K coverage and are age x. That policy will cost you a certain amount based on a base amount plus a percentage of the coverage. The percentage is based on age, sex, smoking, health. If you double the coverage the price doesn't double becasue the base amount is constant. This base amount covers the cost of setting up your policy and maintaining the records and billing. Keep in mind that the coverage you are asking about is not the mortgage insurance the lender makes you purchase when you have a small down payment. You are asking about a policy to cover your debts and still provide money for survivors. Go with your current agent company and ask them to run the numbers: new additional policy, increasing amount of current policy. Go with what meets your needs. Buying a house is one of those life events where you should review your insurance and retirement needs, and adjust accordingly.", "title": "" }, { "docid": "2cfb8d79463385c8ed145db074ecd84b", "text": "\"Probably not, though there are a few things to be said for understanding what you are doing here. Primerica acts as an independent financial services firm and thus has various partners that specialize in various financial instruments and thus there may exist other firms that Primerica doesn't use that could offer better products. Now, how much do you want to value your time as it could take more than a few months to go through every possible insurance firm and broker to see what rate you could get for the specific insurance you want. There is also the question of what constitutes best here. Is it paying the minimal premiums before getting a payout? That would be my interpretation though this requires some amazing guesswork to know when to start paying a policy to pay out so quickly that the insurance company takes a major loss on the policy. Similarly, there are thousands of mutual funds out there and it is incredibly difficult to determine which ones would be best for your situation. How much risk do you want to take? How often do you plan to add to it? What kind of accounts are you using for these investments, e.g. IRAs or just regular taxable accounts? Do tax implications of the investments matter? Thus, I'd likely want to suggest you consider this question: How much trust do you have that this company will work well for you in handling the duty of managing your investments and insurance needs? If you trust them, then buy what they suggest. If you don't, then buy somewhere else but be careful about what kind of price are you prepared to pay to find the mythical \"\"best\"\" as those usually only become clear in hindsight. When it comes to trusting a company in case, there are more than a few factors I'd likely use: Questions - How well do they answer your questions or concerns from your perspective? Do you feel that these are being treated with respect or do you get the feeling they want to say, \"\"What the heck are you thinking for asking that?\"\" in a kind of conceited perspective. Structure of meeting - Do you like to have an agenda and things all planned out or are you more of the spontaneous, \"\"We'll figure it out\"\" kind of person? This is about how well do they know you and set things up to suit you well. Tone of talk - Do you feel valued in having these conversations and working through various exercises with the representative? This is kind of like 1 though it would include requests they have for you. Employee turnover - How long has this person been with Primerica? Do they generally lose people frequently? Are you OK with your file being passed around like a hot potato? Not that it necessarily will but just consider the possibility here. Reputation can be a factor though I'd not really use it much as some people can find those bad apples that aren't there anymore and so it isn't an issue now. In some ways you are interviewing them as much as they are interviewing you. There are more than a few companies that want to get a piece of what you'll invest, buy, and use when it comes to financial products so it may be a good idea to shop around a little.\"", "title": "" }, { "docid": "0dc497d277202eaf06f2613555187913", "text": "\"I read the linked article as gef05 did, it states that the bank must stop charging PMI. But. My understanding is different. I understood that the requirement to remove PMI at sub 80 loan to value only occurred after the natural amortization time had passed. For example, you buy a $100K home, you will be at 80% LTV the day you owe 80K. This date can be calculated at the closing as you know your numbers by then. There's nothing stopping you from asking the bank to stop charging PMI sooner, but I believe they already have an end date in mind. Besides the appraisal request, what exactly did they give as the reason they won't cancel PMI? Edit - I just re-read the link. The line \"\"you show that the value of the property hasn't gone down\"\" makes the bank's appraisal request reasonable, IMHO.\"", "title": "" }, { "docid": "a5711d12602cfcbaf9d52c641416cb4d", "text": "\"Fundamentals: Then remember that you want to put 20% or more down in cash, to avoid PMI, and recalculate with thatmajor chunk taken out of your savings. Many banks offer calculators on their websites that can help you run these numbers and figure out how much house a given mortgage can pay for. Remember that the old advice that you should buy the largest house you can afford, or the newer advice about \"\"starter homes\"\", are both questionable in the current market. =========================== Added: If you're willing to settle for a rule-of-thumb first-approximation ballpark estimate: Maximum mortgage payment: Rule of 28. Your monthly mortgage payment should not exceed 28 percent of your gross monthly income (your income before taxes are taken out). Maximum housing cost: Rule of 32. Your total housing payments (including the mortgage, homeowner’s insurance, and private mortgage insurance [PMI], association fees, and property taxes) should not exceed 32 percent of your gross monthly income. Maximum Total Debt Service: Rule of 40. Your total debt payments, including your housing payment, your auto loan or student loan payments, and minimum credit card payments should not exceed 40 percent of your gross monthly income. As I said, many banks offer web-based tools that will run these numbers for you. These are rules that the lending industy uses for a quick initial screen of an application. They do not guarantee that you in particular can afford that large a loan, just that it isn't so bad that they won't even look at it. Note that this is all in terms of mortgage paymennts, which means it's also affected by what interest rate you can get, how long a mortgage you're willing to take, and how much you can afford to pull out of your savings. Also, as noted, if you can't put 20% down from savings the bank will hit you for PMI. Standard reminder: Unless you explect to live in the same place for five years or more, buying a house is questionable financially. There is nothing wrong with renting; depending on local housing stock it may be cheaper. Houses come with ongoung costs and hassles rental -- even renting a house -- doesn't. Buy a house only when it makes sense both financially and in terms of what you actually need to make your life pleasant. Do not buy a house only because you think it's an investment; real estate can be a profitable business, but thinking of a house as simultaneously both your home and an investment is a good way to get yourself into trouble.\"", "title": "" }, { "docid": "c660aa77d34da2bf069924c305d831ea", "text": "\"I am going to respond to a very thin sliver of what's going on. Skip ahead 4 years. When buying that house, is it better to have $48K in the bank but a $48K student loan, or to have neither? That $48K may very well be what it would take to put you over the 20% down payment threshhold thus avoiding PMI. Banks let you have a certain amount of non-mortgage debt before impacting your ability to borrow. It's the difference between the 28% for the mortgage, insurance and property tax, and the total 38% debt service. What I offer above is a bit counter-intuitive, and I only mention it as you said the house is a priority. I'm answering as if you asked \"\"how do I maximize my purchasing power if I wish to buy a house in the next few years?\"\"\"", "title": "" }, { "docid": "9f2487f643a187dfc1e4bd144bd1b541", "text": "If the child can take over the life insurance when they wish to get a mortgage or have their own children, there may be a case for buying insurance for the child in the event that your child's health is not good enough for them to get cover at that time. However I don’t think this type of insurance is worth having.", "title": "" }, { "docid": "1d141ce8a573675facfabe058a4d18a1", "text": "In such a situation, is there any reason, financial or not, to NOT pay as many points as mortgage seller allows? I can think of a few reasons not to buy points, in the scenario you described: If interest rates decrease you could be better off refinancing to a lower rate than buying points now. If buying points reduced your down payment below 20% then the PMI would more than offset the benefit of having purchased points. Your situation changes and you aren't able to stay in the home as long as planned. That said, current interest rates are pretty low, so I'd probably gamble on them not getting too much lower anytime soon. I also assume that if you can afford as many points as they allow, that you wouldn't have to dip below 20% down payment even with points. Edit: Others have mentioned that it's important to note opportunity cost when calculating the benefit of purchasing points, I agree, you wouldn't want to buy points at a rate that saved you less than you could earn elsewhere. Personally, I've not seen a points scenario that didn't yield more benefit than market average returns, but that could be due to my market, or just coincidence, you should definitely calculate the benefit for your scenario and shop for a good lender. Don't forget that points are tax deductible in the year paid when calculating their benefit.", "title": "" }, { "docid": "42ea5f7d18bb26c23438d6b9b3c31ad8", "text": "Can you take 2 loans -- an 80% and an 8% loan? Same payments as doing PMI, but the 8% can be paid off in pretty short order and drop payments significantly.", "title": "" }, { "docid": "c6389ebc57dc4d089781c906ebc2a5a8", "text": "\"As the answer above states, future inflation mitigates \"\"unwise\"\" for a longer term mortgage, at least in financial-only terms. But consider that, if you lose your ability to make payments for long enough time ANYTIME during term, the lending institution has a right to repossess, leaving you with NOTHING or worse for all the maintenance you've had to do. You can never know, but eleven years into my mortgage, I lost enough of my income for just long enough time to have to sell for just enough to pay the remainder of the mortgage and walk away with empty pockets. To help clarify understanding even better, contrast the 30-yr mortgage with the other extreme: save up and own from day one. When I did the math a few years ago, buying with a 30-year mortgage would cost cumulatively almost 3 times the real house value in mortgage payments with never the freedom to suspend payments when I might need to. Being a freedom-loving American, I determined to buy a house with cash. DON'T FORGET that mortgageable properties are over-priced just because buyers less wise than you are so willing to borrow to buy them, so I decided to buy some fixer-upper that no bank would lend on. I found such a fixer-upper, paid cash, never have to worry about repossession by a lender, can continue to save up for my dream home which I'll own a lot sooner, and will have a nice increase in house value while I fix it up to help get me there, and NO INSURANCE PAYMENTS to some insurer who'll tell me what I can't do with MY property. Let the next buyer of your fixed-up, paid-off house pay YOU the over-priced amount they are willing to pay just because THEY can get that 30-year mortgage, and you enjoy the freedom to dream and adjust your budget to the needs of the moment and end up with a house in 30 years (15, more realistically) that is 2.5 times more valuable. And keep from fighting with your spouse over finances in the meantime.\"", "title": "" }, { "docid": "f225d65a2aee4618d33e468bb0ff6024", "text": "The key to understanding a mortgage is to look at an amortization schedule. Put in 100k, 4.5% interest, 30 years, 360 monthly payments and look at the results. You should get roughly 507 monthly P&I payment. Amortization is only the loan portion, escrow for taxes and insurance and additional payments for PMI are extra. You'll get a list of all the payments to match the numbers you enter. These won't exactly match what you really get in a mortgage, but they're close enough to demonstrate the way amortization works, and to plan a budget. For those terms, with equal monthly payments, you'll start paying 74% interest from the first payment. Each payment thereafter, that percentage drops. The way this is all calculated is through the time value of money equations. https://en.wikipedia.org/wiki/Time_value_of_money. Read slowly, understand how the equations work, then look at the formula for Repeating Payment and Present Value. That is used to find the monthly payment. You can validate that the formula works by using their answer and making a spreadsheet that has these columns: Previous balance, payment, interest, new balance. Each line represents a month. Calculate interest as previous balance * APR/12. Calculate new balance as previous balance minus payment plus interest. Work through all this for a 1 year loan and you will understand a lot better.", "title": "" }, { "docid": "f2b857dc7e119160aeab8bb78001daa0", "text": "Generally, paying down your mortgage is a bad idea. Mortgages have very low interest rates and the interest is tax deductable. If you have a high interest mortgage, or PMI, you might consider it, but otherwise, your money is better off in some sort of index fund. On the other hand, if your choices are paying down a mortgage or blowing your money on hookers and booze, by all means do the mortgage. Typical priorities are: Dave Ramsey has a more detailed plan.", "title": "" }, { "docid": "d6cb5fce32e9e7c61fa18d1a6025112a", "text": "For Option 2 - do you really think you can guarantee an average return of 8% here. Historical returns are no guarantee of future returns. Even if you could get higher returns for option 2 than the interest rate on the mortgage, are you able to cover all the additional fees with the PMI in placing such a low down payment? The wiser choice in my opinion would be to chose option 1.", "title": "" } ]	fiqa
b69aba6c30988ff69fc703049cb5272b	Timing between loans and applying for a new credit card	[ { "docid": "255f77421bfb1ed51c87e966015ae910", "text": "There were several areas where the mortgage and car loan have affected your credit. The mortgage had the following impacts, The car loan (purchased shortly after the house) had the following impacts, You did not mention your payment history, but since you had an 800 prior to the house purchase, we can assume that your payment history is current (nothing late). You did not mention your credit utilization, but you want to keep your utilization low (various experts suggest 10%, 20% and 30% as thresholds). The down payment on the house likely drained your available funds, and replacing the car may have also put stress on your funds. And when you buy a house, often there are additional expenses that further strain budgets. My guess is that your utilization percentage has increased. My suggestion would be to reduce your utilization ratio on your revolving accounts. And since you have plenty of credit lines, you might want to payoff the car. Your Chase card has a good age, which helps with age of credit, and though you will find experts that say you should only have 2-4 revolving accounts (credit cards), other experience shows that having accounts with age on them is a good thing. And having a larger number of accounts does not cause problems (unless you have higher utilization or you miss payments). You did not mention whether the Chase card has any fees or expenses, as that would be a reason to either negotiate with Chase to reduce or eliminate the fees, or to cancel the card. Have you checked your credit report for errors? You can get a free report from each of the three bureaus once per year.", "title": "" } ]	[ { "docid": "34d633282f0e3a21679c224f05219a83", "text": "Utilization is near real-time. What that means is that what is reported is what is taken in terms of debt-to-income (DTI) ratios. When a mortgage broker pulls your credit, they will pull the latest balances with the minimum payments. This is what is taken to determine DTI along with your gross monthly income. If you do not pay your account in full before the statement date, then you more than likely will have to wait an additional statement cycle before it reports to the credit bureaus. Therefore, your utilization is dynamic and the history of your utilization month-to-month is not recorded forever. Only the current balance. What is maintained and reported is your payment history. So you want to never be late if you want to be approved anytime soon for a mortgage. A lower DTI will not help your interest rate. As long as you stay away from the maximum DTI for the mortgage vehicle you are attempting to be approved for (VA, FHA, Conventional, etc), then your DTI should not be a concern. If you are borderline at the time of underwriting, you can take the opportunity and pay off the balances. The mortgage company can then do what is called a credit supplement which entails contacting those lenders where you have proven you have a zero balance and manually input the zero balance cards, that have not yet reported to the bureaus, in your final application to the mortgage company for underwriting approval.", "title": "" }, { "docid": "c2bc1b4f5d84a8887f49785aa4c89002", "text": "Except for the fact that canceling credit cards will hurt your credit, either by increasing your utilization ratio or decreasing the length of your credit lines if you cancel the oldest card, which makes it that much harder to get the good interest rates available on other loans.", "title": "" }, { "docid": "93cfc7f27a3b137773cb171345b602eb", "text": "I doubt it. If you have a good track record with your car loan, that will count for a lot more than the fact that you don't have it anymore. When you look for a house, your debt load will be lower without the car loan, which may help you get the mortgage you want. Just keep paying your credit card bills on time and your credit rating will improve month by month.", "title": "" }, { "docid": "b1ec5b1cd6585ec8dbb45a4727ef590f", "text": "First, before we talk about anything having to do with the credit score, we need the disclaimer that the exact credit score formulas are proprietary secrets that have not been revealed. Therefore, all we have to go on are broad generalities that FICO has given us. That having been said, the credit card debt utilization portion of your score generally has at least two components: an overall utilization, and a per-card utilization. Your overall utilization is taken by adding up all your credit card debt and all your credit limits and dividing. Using your numbers above, you are sitting at about 95%. The per-card utilization is the individual utilization of each card. Your five cards range in utilization from 69% to 100%. Paying one card over another has no affect on your overall utilization, but obviously will change the per-card utilization of the one you pay first. So, to your question: Is it better on the credit score to have one low-util card and one high-util card, or to have two medium-util cards? I haven't read anything that definitively answers this question. Here is my advice to you: The big problem you have is the debt, not the credit score. Your credit card debt should be treated like an emergency that needs to be taken care of as quickly as you possibly can. Instead of trying to optimize your credit score, you should be trying to minimize the number of days until all of your credit cards are completely paid off. The credit score will take care of itself once you get your financial situation back on track. There is debate about the order in which one should pay off their debts, but the fact of the matter is that the order is not as significant as the intensity at which you pay them all off. Dedicate yourself to getting rid of the debts as fast as possible, and it won't matter much which order they get paid off in. Finally, to answer your question, I recommend that you attack the card debt one at a time instead of trying to pay them off evenly. Not because it will optimize your credit score, but because it will help you focus your debt-reduction energy as you work on resolving your debt emergency. Fortunately, the credit utilization portion of the credit score has no history, so once you pay all of these off, the utilization portion of your score will get better immediately, and the path you took to get there will be irrelevant. After the credit cards are completely paid off, and you have resolved never to spend money that you don't have again, it is time to work on the student loans....", "title": "" }, { "docid": "3758baa568ae3cedb49f4c33837012cb", "text": "If the billing cycle is 2 to 3 months, it would mean Banks have to give credit for a longer period and it makes the entire business less profitable as well as more risky compared to the Monthly billing cycle. For example the current monthly billing cycle with a date say of 14th, means if you swipe your card on 1st day, one would effectively get a credit for 30+14, around 44 days. If you swipe on last day, one would get a credit for 14 days. On an average 22 days of credit. If we make this 3 months, the credit period would increase on an average (90+14)/2, 52 days. From a risk point of view, on monthly cycle if there is non-payment its flagged much earlier compared to a 3 months cycle. On offering different dates, shop around. In the older times the cycles were different, however with individuals having several cards, and trying to optimize every purchase to maximize credit period. Quite a few banks have streamlined it to monthly cycle. Shop around and some banks should be able to offer you different dates.", "title": "" }, { "docid": "dc21ff450a0a0809f018f1758627b97f", "text": "\"Sometimes when you are trying to qualify for a loan, the lender will ask for proof of your account balances and costs. Your scheme here could be cause for some questions: \"\"why are you paying $20-30k to your credit card each month, is there a large debt you haven't disclosed?\"\". Or perhaps \"\"if you lost your job, would you be able to afford to continue to pay $20-30k\"\". Of course this isn't a real expense and you can stop whenever you want, but still as a lender I would want to understand this fully before loaning to someone who really does need to pay $20-30k per month. Who knows this might hiding some troublesome issues, like perhaps a side business is failing and you're trying to keep it afloat.\"", "title": "" }, { "docid": "4e18a3c6cbff373b8ab0f583250150a6", "text": "A friend of mine has two credit cards. He has specifically arranged with the card issuers so that the billing cycles are 15 days out of sync. He uses whichever card has more recently ended its billing cycle, which gives him the longest possible time between purchase and the due date to avoid interest.", "title": "" }, { "docid": "4827d53c590fe2fcba407f202adb3835", "text": "Your priorities should be: If you end up with additional debt from, say, credit cards, you should probably try to get rid of that first, as it's almost certainly at a higher interest rate than a subsidized student loan. Because you actually have a grace period, I assume these are Federally subsidized loans. Note that there are alternative payment plans available if you are unemployed/underemployed that you should take advantage of, if need be. See Income-based Repayment and related pages for details.", "title": "" }, { "docid": "f00d60fd18e51707b25dbad4667ba28b", "text": "See the accepted answer for this question. What effect will credit card churning for frequent flyer miles have on my credit score? This does not directly answer 'how often...' that you asked, but it states that the answerer opens 5-15 accounts per year. So the answer to your question is, as often as you want, as long as you manage your account ages. The reason for this is that there are two factors in opening a new account that affect your credit card score. One is average age of accounts. The other is credit inquiries. That answerer, with FICO in high 700s, sees about a 5% swing based on new cards and closing old ones. You'll have to manage average age of accounts. I assume this is done by keeping some older ones open to prop up the average, and by judiciously closing the churn accounts. Finally, if you choose to engage in churning, and you intend to apply for a large loan and want a good credit score, simply pause the account open/close part of the churn a couple of months ahead of time. Your score should recover from the temporary hits of the inquiries. The churning communities really do have how to guides which discuss the details of this. Key phrase: credit card churning.", "title": "" }, { "docid": "e7cbcdb950e3d7d98704510e40c5d6cb", "text": "Yes, as long as you are responsible with the payments and treat it as a cash substitute, and not a loan. I waited until I was 21 to apply for my first credit card, which gave me a later start to my credit history. That led to an embarrassing credit rejection when I went to buy some furniture after I graduated college. You'd think $700 split into three interest-free payments wouldn't be too big of a risk, but I was rejected since my credit history was only 4 months long, even though I had zero late payments. So I ended up paying cash for the furniture instead, but it was still a horrible feeling when the sales rep came back to me and quietly told me my credit application had been denied.", "title": "" }, { "docid": "798cff6a3a52fef325e5808244302d46", "text": "Reading Great Lakes' page How Payments Are Applied, I think you are probably correct about how the payments are applied: Interest first, minimum on each loan next, then any extra is applied to the highest interest loan. If I were you, I would make one payment a month, and I would make that payment as large as I possibly could. Trying to make more than one payment in a month is too complicated (and you aren't sure exactly how those payments get credited), and saving up for a big payment every few months is pointless and will cost you interest.", "title": "" }, { "docid": "796d659bd696e4d858e82c00f4d4d961", "text": "No, because of the balance transfer fees, which could be 4%. Unless of course you get a deal for 12 months of no payment, and you pay it back in 12 months, in which case a 4% annual interest rate is much less than a loan! At that point you are gambling that you will be responsible with the payments, and the card company is taking the opposite bet.", "title": "" }, { "docid": "0d0741eee12de03a7beb55b8a9fe3b40", "text": "Set up a meeting with the bank that handles your business checking account. Go there in person and bring your business statements: profit and loss, balance sheet, and a spreadsheet showing your historical cash flow. The goal is to get your banker to understand your business and your needs and also for you to be on a first-name basis with your banker for an ongoing business relationship. Tell them you want to establish credit and you want a credit card account with $x as the limit. Your banker might be able to help push your application through even with your credit history. Even if you can't get the limit you want, you'll be on your way and can meet again with your banker in 6 or 12 months. Once your credit is re-established you'll be able to shop around and apply for other rewards cards. One day you might want a line of credit or a business loan. Establishing a relationship with your banker ahead of time will make that process easier if and when the time comes. Continue to meet with him or her at least annually, and bring updated financial statements each time. If nothing else, this process will help you analyze your business, so the process itself is useful even if nothing comes of it immediately.", "title": "" }, { "docid": "18127088510ed511e14029a376fff64e", "text": "A) The Credit Rating Agencies only look at the month-end totals that are on your credit card, as this is all they ever get from the issuing bank. So a higher usage frequency as described would not make any direct difference to your credit rating. B) The issuing bank will know if you use the credit with the higher frequency, but it probably has little effect on your limit. Typically, after two to three month, they reevaluate your credit limit, and it could go up considerably if you never overdrew (and at this time, it could indirectly positively affect your credit rating). You could consider calling the issuing bank after two month and try to explain the history a bit and get them to increase the limit, but that only makes sense if your credit score has recovered. Your business paperwork could go a long way to convince someone, if you do so well now. C) If your credit rating is still bad, you need to find out why. It should have normalized to a medium range with the bad historic issues dropped.", "title": "" }, { "docid": "c23a1e24ab98e5bdc93c4eaa97a24cd2", "text": "It may or may not be a good idea to borrow money from your family; there are many factors to consider here, not the least of which is what you would do if you got in serious financial trouble and couldn't make your scheduled payments on the loan. Would you arrange with them to sell the property ASAP? Or could they easily manage for a few months without your scheduled payments if it were necessary? A good rule of thumb that some people follow when lending to family is this: don't do it unless you're 100% OK with the possibility that they might not pay you back at all. That said, your question was about credit scores specifically. Having a mortgage and making on-time payments would factor into your score, but not significantly more heavily than having revolving credit (eg a credit card) and making on time payments, or having a car loan or installment loan and making on time payments. I bought my house in 2011, and after years of paying the mortgage on time my credit score hasn't changed at all. MyFico has a breakdown of factors affecting your credit score here: http://www.myfico.com/crediteducation/whatsinyourscore.aspx. The most significant are a history of on-time payments, low revolving credit utilization (carrying a $4900 balance on a card with a $5000 limit is bad, carrying a $10 balance on the same card is good), and overall length of your credit history. As to credit mix, they have this to say: Types of credit in use Credit mix determines 10% of my FICO Score The FICO® Score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. It's not necessary to have one of each, and it's not a good idea to open credit accounts you don’t intend to use. The credit mix usually won’t be a key factor in determining your FICO Score—but it will be more important if your credit report does not have a lot of other information on which to base a score. Have credit cards – but manage them responsibly Having credit cards and installment loans with a good payment history will raise your FICO Score. People with no credit cards tend to be viewed as a higher risk than people who have managed credit cards responsibly.", "title": "" } ]	fiqa
72cd8eaf92775ccad43222cbf4f1e5f2	Get car loan w/ part time job as student with no credit, no-cosigner but no expenses	[ { "docid": "556dfadb5cf3e316cfebe3430444715d", "text": "Instead of going to the dealership and not knowing if you will be able to get a loan or what the interest rate might be, go to a local credit union or bank first, before you go car shopping, and talk to them about what you would need for your loan. If you can get approval for a loan first, then you will know how much you can spend, and when it comes time for negotiation with the dealer, he won't be able to confuse you by changing the loan terms during the process. As far as the dealer is concerned, it would be a cash transaction. That having been said, I can't recommend taking a car loan. I, of course, don't know you or your situation, but there are lots of good reasons for buying a less expensive car and doing what you can to pay cash for it. Should you choose to go ahead with the loan, I would suggest that you get the shortest loan length that you can afford, and aim to pay it off early.", "title": "" }, { "docid": "25165446ba66ac50fff2c85cdaff029d", "text": "Ben already covered most of this in his answer, but I want to emphasize the most important part of getting a loan with limited credit history. Go into a credit union or community bank and talk to the loan officer there in person. Ask for recommendations on how much they would lend based on your income to get the best interest rate that they can offer. Sometimes shortening the length of the loan will get you a lower rate, sometimes it won't. (In any case, make sure you can pay it off quickly no matter the term that you sign with.) Each bank may have different policies. Talk to at least two of them even if the first one offers you terms that you like. Talking to a loan officer is valuable life experience, and if you discuss your goals directly with them, then they will be able to give you feedback about whether they think a small loan is worth their time.", "title": "" } ]	[ { "docid": "54df40bf61e056d37576ccc99111fa4c", "text": "So many answers here are missing the mark. I have a $100k mortgage--because that isn't paid off, I can't buy a car? That's really misguided logic. You have a reasonably large amount of college debt and didn't mention any other debt-- It's a really big deal what kind of debt this is. Is it unsecured debt through a private lender? Is it a federal loan from the Department of Education? Let's assume the worst possible (reasonable) situation. You lose your job and spend the next year plus looking for work. This is the boat numerous people out of college are in (far far far FAR more than the unemployment rates indicate). Federal loans have somewhat reasonable (indentured servitude, but I digress) repayment strategies; you can base the payment on your current income through income-based and income-continent repayment plans. If you're through a private lender, they still expect payment. In both cases--because the US hit students with ridiculous lending practices, your interest rates are likely 5-10% or even higher. Given your take-home income is quite large and I don't know exactly the cost of living where you live--you have to make some reasonable decisions. You can afford a car note for basically any car you want. What's the worst that happens if you can't afford the car? They take it back. If you can afford to feed yourself, house yourself, pay your other monthly bills...you make so much more than the median income in the US that I really don't see any issues. What you should do is write out all your monthly costs and figure out how much unallocated money you have, but I'd imagine you have enough money coming in to finance any reasonable new or used car. Keep in mind new will have much higher insurance and costs, but if you pick a good car your headaches besides that will be minimal.", "title": "" }, { "docid": "28a5ebedc1fc73c4189e58ac6d0ede89", "text": "There is no need to get an auto loan just to try and affect your credit score. It is possible to have a score over 800 without any sort of auto loan. If you can afford to pay for the vehicle up front that is the better option. Even with special financing incentives it is better to pay up front if you can. Yes it is possible to use the funds to make more if you finance with a silly low interest rate, however it's also possible to lose a job or have some other financial disaster happen and need that money for something else making it more difficult to make the payment. It may be just me but I find the peace of mind not having the payment to be worth a lot.", "title": "" }, { "docid": "11692d59ac54be45ba7425bb06463446", "text": "The only reason to lend the money in this scenario is cashflow. But considering you buy a $15000 car, your lifestyle is not super luxurious, so $15000 spare cash is enough.", "title": "" }, { "docid": "5e68a7f16bbbafd367c5aa932c0fa551", "text": "The short answer is that you can use student loans for living expenses. Joe provides a nice taxonomy of loans. I would just add that some loans are not only guaranteed, but also subsidized. Essentially the Government buys down the rate of the loan. The mechanics are that a financial aid package might consist of grants, work study (job), subsidized, and guaranteed loans. One can turn down one or more of the elements of the package. All will be limited in some form. The work study will have a maximum number of hours and generally has low pay. Many find better deals working in the businesses surrounding the college or starting their own services type business. The grants rarely cover the full cost of tuition and books. The loans will both be limited in amount. It mainly depends on what you qualify for, and generally speaking the lower the income the more aid one qualifies for. Now some students use all their grant, all their loan money and buy things that are not necessary. For example are you going to live in the $450/month dorm, or the new fancy apartments that are running $800/month? Are you going to use the student loan money to buy a car? Will it be a new BMW or a 8 year old Camary? I see this first hand as I live near a large university. The pubs are filled with college students, not working, but drinking and eating every night. Many of them drive very fancy cars. The most onerous example of this is students at the military academies. Attendees have their books and tuition completely paid for. They also receive a stipend, and more money can be earned over the summer. They also all qualify for a 35K student loan in their junior year. Just about every kid, takes this loan. Most of those use the money to buy a car. I know a young lady who did exactly that, and so did many of her friends. So kids with a starting pay of 45K also start life with a 35K. Buying a nice car in the military is especially silly as they cannot drive it while deployed and they are very likely to be deployed. At least, however, they are guaranteed a starting job with a nice starting pay, and upward potential. College kids who behave similarly might not have it as good. Will they even find work? Will the job have the ability to move up? How much security is in the job? One might say that this does not apply to engineers and such, but I am working with a fellow with a computer science degree who cannot find a job and has not worked in the past 6 months. This even though the market is super hot right now for computer engineers. So, in a word, be very careful what you borrow.", "title": "" }, { "docid": "879a2f9d08d157b5b6885499455c88a8", "text": "Generally, banks will report your loan to at least one (if not all three) credit bureaus - although that is not required by law. The interest you're paying, in addition to your insurance isn't justifiable for building credit. I would recommend paying the car off and then perhaps applying for a secure credit card if you are worried about being rejected. Of course, since you have very little credit, applying for an unsecured card and getting rejected won't hurt you in the long run. If you are rejected, you can always go for a secured credit card the second time. As I mentioned in my comments, it's better to show 6 months of on-time payments than to have no payment history at all. So if your goal is to secure an apartment near campus, I'm sure you're already a step ahead of the other students.", "title": "" }, { "docid": "1ea20ce7f1895fe2a39306fe60eef5e3", "text": "You have asked about getting a loan, the issue is that you don't have collateral to offer up in exchange for the loan, you also don't have a regular source of income. Getting a low level job, even one not related to your major will provide income. Getting a not-so-perfect job related to your major will allow your to sustain yourself, and provide experience that can help you find the perfect job. The time from application to interview to offer letter to start date can be measured in months. This is even with positions you are perfect for. Since it can take months to get started in a new job you should focus on something that you can get started right away. This type of job will have a shorter time frame for the interview cycle. You may feel overqualified for the jobs based on the fact you just graduated from college but this was the type of job you should have had to bridge you from school to the job you want. Regarding the end goal of getting the perfect job, you might have to refocus your efforts. When you had time and money you could afford to be picky about company, location and salary. Now that money is in short supply you will need to change your standards. Keep in mind it is not just an issue about being able to travel to job interviews, it is also about needing a way to afford food, and health insurance. Go back to your college campus and talk to the career counselors they can help your with your resume, and give job search advice. They may also have contacts that can help you find a position with a good local company or even a national company. They may even know of companies that need employees for just a few months to fill a need.", "title": "" }, { "docid": "032d7d2e8659102e57df1c6678760cea", "text": "An auto title loans are typically utilized by those that wish to obtain a funding with bad credit rating or no credit in any way. An auto-mobile title lending frequently called a vehicle title lending or merely title funding as well as pink slip funding’s. You merely should have a vehicle that is paid off or nearly paid off and also you could make use of the auto title as security to obtain the cash money you require, enabling you to continue driving your vehicle while paying your loan. Get Auto Car Title Loans North Hollywood CA and nearby cities Provide Car Title Loans, Auto Title Loans, Mobile Home Title Loans, RV/Motor Home Title Loans, Big Rigs Truck Title Loans, Motor Cycle Title Loans, Online Title Loans Near me, Bad Credit Loans, Personal Loans, Quick cash Loans Contact Us: Get Auto Car Title Loans North Hollywood CA 11604 Sylvan St # 7, North Hollywood, CA 91606 424-343-2256 nhautoloans@gmail.com http://getautotitleloans.com/car-and-auto-title-loans-north-hollywood-ca/", "title": "" }, { "docid": "de45ba78caece33cee1171e59931e8ce", "text": "maybe everyone who has responded needs to look closer at the income base repayment plan for student loans. What this means is he payment does not even cover his interest rate so each month he makes his payment the loan grows, does not decrease. This is not a simple interest loan which is irritating because car dealerships do not even use a non-simple interest loan any longer. So, well your suggestions are well intended what is your suggestion now knowing that his monthly payments is not reducing his loan but actually his loan is growing exponentially each month. I also like the comment where the average student loan is $30,000, I would like to know in what state that is. That may work for a community college or a student who is reliant on parents to supplement their income so they can go to classes, however for someone who is working and going to school that person must opt out for night classes and online classes which definitely increases the cost of your classes. Right now the cost per credit hour is in the $550- 585 range.", "title": "" }, { "docid": "8d280f9654cc7e6f9132494b19bc1d4f", "text": "Not long after college in my new job I bought a used car with payments, I have never done that since. I just don't like having a car payment. I have bought every car since then with cash. You should never borrow money to buy a car There are several things that come into play when buying a car. When you are shopping with cash you tend to be more conservative with your purchases look at this Study on Credit card purchases. A Dunn & Bradstreet study found that people spend 12-18% more when using credit cards than when using cash. And McDonald's found that the average transaction rose from $4.50 to $7.00 when customers used plastic instead of cash. I would bet you if you had $27,000 dollars cash in your hand you wouldn't buy that car. You'd find a better deal, and or a cheaper car. When you finance it, it just doesn't seem to hurt as bad. Even though it's worse because now you are paying interest. A new car is just insanity unless you have a high net worth, at least seven figures. Your $27,000 car in 5 years will be worth about $6500. That's like striking a match to $340 dollars a month, you can't afford to lose that much money. Pay Cash If you lose your job, get hurt, or any number of things that can cost you money or reduce your income, it's no problem with a paid for car. They don't repo paid for cars. You have so much more flexibility when you don't have payments. You mention you have 10k in cash, and a $2000 a month positive cash flow. I would find a deal on a 8000 - 9000 car I would not buy from a dealer. Sell the car you have put that money with the positive cash flow and every other dime you can get at your student loans and any other debt you have, keep renting cheap keep the college lifestyle (broke) until you are completely out of debt. Then I would save for a house. Finally I would read this Dave Ramsey book, if I would have read this at your age, I would literally be a millionaire by now, I'm 37. Don't buy from a dealer Find a private sale car that you can get a deal on, pay less than Kelly Blue Book. Pay a little money $50 - 75 to have an automotive technician to check it out for you and get a car fax, to make sure there are no major problems. I have worked in the automotive industry for 20 + years and you rarely get a good deal from a dealer. “Everything popular is wrong.” Oscar Wilde", "title": "" }, { "docid": "be2d7fa01fe5a2e48f5e6a4a268f77ab", "text": "\"You are co-signer on his car loan. You have no ownership (unless the car is titled in both names). One option (not the best, see below) is to buy the car from him. Arrange your own financing (take over his loan or get a loan of your own to pay him for the car). The bank(s) will help you take care of getting the title into your name. And the bank holding the note will hold the title as well. Best advice is to get with him, sell the car. Take any money left after paying off the loan and use it to buy (cash purchase, not finance) a reliable, efficient, used car -- if you truly need a car at all. If you can get to work by walking, bicycling or public transit, you can save thousands per year, and perhaps use that money to start you down the road to \"\"financial independence\"\". Take a couple of hours and research this. In the US, we tend to view cars as necessary, but this is not always true. (Actually, it's true less than half the time.) Even if you cannot, or choose not to, live within bicycle distance of work, you can still reduce your commuting cost by not financing, and by driving a fuel efficient vehicle. Ask yourself, \"\"Would you give up your expensive vehicle if it meant retiring years earlier?\"\" Maybe as many as ten years earlier.\"", "title": "" }, { "docid": "c04766bd3dd7726caf75ff1eeab53a63", "text": "\"Your use of the term \"\"loan\"\" is confusing, what you're proposing is to open a new card and take advantage of the 0% APR by carrying a balance. The effects to your credit history / score will be the following:\"", "title": "" }, { "docid": "f0f27d3d497769d2b2fda5a0d8869bff", "text": "If you have no credit history but you have a job, buying an inexpensive used car should still be doable with only a marginally higher interest rate on the car. This can be offset with a cosigner, but it probably isn't that big of a deal if you purchase a car that you can pay off in under a year. The cost of insurance for a car is affected by your credit score in many locations, so regardless you should also consider selling your other car rather than maintaining and insuring it while it's not your primary mode of transportation. The main thing to consider is that the terms of the credit will not be advantageous, so you should pay the full balance on any credit cards each month to not incur high interest expenses. A credit card through a credit union is advantageous because you can often negotiate a lower rate after you've established the credit with them for a while (instead of closing the card and opening a new credit card account with a lower rate--this impacts your credit score negatively because the average age of open accounts is a significant part of the score. This advice is about the same except that it will take longer for negative marks like missed payments to be removed from your report, so expect 7 years to fully recover from the bad credit. Again, minimizing how long you have money borrowed for will be the biggest benefit. A note about cosigners: we discourage people from cosigning on other people's loans. It can turn out badly and hurt a relationship. If someone takes that risk and cosigns for you, make every payment on time and show them you appreciate what they have done for you.", "title": "" }, { "docid": "79febff37005fe840f1be5912c0f914c", "text": "\"You say Also I have been the only one with an income in our household for last 15 years, so for most of our marriage any debts have been in my name. She has a credit card (opened in 1999) that she has not used for years and she is also a secondary card holder on an American Express card and a MasterCard that are both in my name (she has not used the cards as we try to keep them only for emergencies). This would seem to indicate that the dealer is correct. Your wife has no credit history. You say that you paid off her student loans some years back. If \"\"some years\"\" was more than seven, then they have dropped off her credit report. If that's the most recent credit activity, then she effectively has none. Even if you get past that, note that she also doesn't have any income, which makes her a lousy co-signer. There's no real circumstance where you couldn't pay for the car but she could based on the historical data. She would have to get a job first. Since they had no information on her whatsoever, they probably didn't even get to that.\"", "title": "" }, { "docid": "63792b296af0765c2debb64c8e9bc54d", "text": "A traditional bank is not likely to give you a loan if you have no source of income. Credit card application forms also ask for your current income level and may reject you based on not having a job. You might want to make a list of income and expenses and look closely at which expenses can be reduced or eliminated. Use 6 months of your actual bills to calculate this list. Also make a list of your assets and liabilities. A sheet that lists income/expenses and assets/liabilities is called a Financial Statement. This is the most basic tool you'll need to get your expenses under control. There are many other options for raising capital to pay for your monthly expenses: Sell off your possessions that you no longer need or can't afford Ask for short term loan help from family and friends Advertise for short term loan help on websites such as Kijiji Start a part-time business doing something that you like and people need. Tutoring, dog-walking, photography, you make the list and pick from it. Look into unemployment insurance. Apply as soon as you are out of work. The folks at the unemployment office are willing to answer all your questions and help you get what you need. Dip into your retirement fund. To reduce your expenses, here are a few things you may not have considered: If you own your home, make an appointment with your bank to discuss renegotiation of your mortgage payments. The bank will be more interested in helping you before you start missing payments than after. Depending on how much equity you have in your home, you may be able to significantly reduce payments by extending the life of the mortgage. Your banker will be impressed if you can bring them a balance sheet that shows your assets, liabilities, income and expenses. As above, for car payments as well. Call your phone, cable, credit card, and internet service providers and tell them you want to cancel your service. This will immediately connect you to Customer Retention. Let them know that you are having a hard time paying your bill and will either have to negotiate a lower payment or cancel the service. This tactic can significantly reduce your payments. When you have your new job, there are some things you can do to make sure this doesn't happen again: Set aside 10% of your income in a savings account. Have it automatically deducted from your income at source if you can. 75% of Americans are 4 weeks away from bankruptcy. You can avoid this by forcing yourself to save enough to manage your household finances for 3 - 6 months, a year is better. If you own your own home, take out a line of credit against it based on the available equity. Your bank can help you with that. It won't cost you anything as long as you don't use it. This is emergency money; do not use it for vacations or car repairs. There will always be little emergencies in life, this line of credit is not for that. Pay off your credit cards and loans, most expensive rate first. Use 10% of your income to do this. When the first one is paid off, use the 10% plus the interest you are now saving to pay off the next most expensive card/loan. Create a budget you can stick to. You can find a great budget calculator here: http://www.gailvazoxlade.com/resources/interactive_budget_worksheet.html Note I have no affiliation with the above-mentioned site, and have a great respect for this woman's ability to teach people about how to handle money.", "title": "" }, { "docid": "4874af977160f3a38caa439a8163e5d8", "text": "The only time it makes sense to take out a loan is: The drawbacks of these 2 points are: Otherwise it's better to pay for the car up front. You have not mentioned whether you need the car to earn income. A car will incur other costs such as insurance and maintenance.", "title": "" } ]	fiqa

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